1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of June 29,
2001, by and between Diebold, Incorporated, an Ohio corporation (or its
designees, successors or assigns, "Stockholder"), and Global Election Systems
Inc., a corporation organized under the laws of the Province of British
Colombia, Canada (the "Company").
RECITALS
The parties hereto have entered into a Bridge Loan Agreement which
contemplates, among other things, the execution and delivery of this Agreement
by the parties hereto.
Now, therefore, in consideration of the foregoing and the mutual covenants
and agreements herein contained, the parties hereto hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms have
the following meanings when used herein with initial capital letters:
(a) Advice: As defined in Section 4 hereof.
(b) Common Stock: The common stock, with no par value per share, of the
Company.
(c) Loan Agreement: The Bridge Loan Agreement, dated as of June 29, 2001,
by and among the Company, Global Elections Systems, Inc., a Delaware
corporation, Stockholder and other indirect or direct subsidiaries of the
Company.
(d) Losses: As defined in Section 6 hereof.
(e) Prospectus: The prospectus included in the Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
(f) Registrable Securities: All shares of Common Stock acquired by
Stockholder or any of its Affiliates or any of their respective successors or
assigns (including all shares of Common Stock issued upon exercise of the
Warrant (as defined in the Loan Agreement) or upon conversion of the Loan (as
defined in the Loan Agreement) and any shares of Common Stock that may be
received by any such
2
Person (x) as a result of a stock dividend or stock split of the Common Stock or
(y) on account of the Common Stock in a recapitalization or other transaction
involving the Company) upon the respective original issuance thereof, and at all
times subsequent thereto, and all other shares of Common Stock that are
beneficially owned by any such Person, until, in the case of any such security,
(i) it is effectively registered under the Securities Act and disposed of in
accordance with the Registration Statement, (ii) it is saleable by the holder
thereof pursuant to Rule 144(k) without any volume limitation applicable
thereto, or (iii) it is distributed to the public pursuant to Rule 144.
(g) Registration Expenses: As defined in Section 5 hereof.
(h) Registration Statement: The registration statement of the Company under
the Securities Act and the related Prospectus and, if necessary, the preliminary
prospectus and (final) prospectus required under the securities legislation of
the applicable Canadian provinces that covers the Registrable Securities
pursuant to the provisions of this Agreement, and all amendments and supplements
thereto (including post-effective amendments), all exhibits and all material
incorporated by reference or deemed to be incorporated by reference therein.
(i) Rule 144: Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
(j) SEC: The Securities and Exchange Commission.
(k) Securities Act: The Securities Act of 1933, as amended.
(l) Underwritten registration or underwritten offering: A distribution
registered pursuant to the Securities Act in which securities of the Company are
sold to an underwriter for reoffering to the public.
2. Number of Registrable Securities. Whenever a number or percentage of
Registrable Securities is to be determined hereunder, each then-outstanding
other equity security that is exercisable to purchase, convertible into, or
exchangeable for shares of Common Stock of the Company will be deemed to be
equal to the number of shares of Common Stock for which such other equity
security (or the security into which such other equity security is then
convertible) is then so purchasable, convertible, exchangeable or exercisable.
3. Registration by the Company.
(a) Filing and Effectiveness. The Company will file a Registration
Statement with the SEC (and if required, the Canadian securities regulatory
authorities in the applicable Canadian province) registering all of the
Registrable Securities under and in accordance with the provisions of the
Securities Act (and any requisite Canadian provincial securities legislation)
upon the earlier to occur of (i) 30 calendar days after discussions relating to
a potential acquisition of the Company have terminated or (ii) 120 calendar days
following the date hereof, and will use reasonable commercial efforts
2
3
to cause the Registration Statement to be declared effective by the SEC, or
receipts to be issued by applicable Canadian provincial securities regulatory
authorities, as the case may be, as soon as practicable thereafter, and in any
event, within 60 calendar days, of the date of filing such Registration
Statement (the "Outside Effectiveness Date"). In the event that the SEC does not
declare the Registration Statement effective by the Outside Effectiveness Date,
the Company will pay to Stockholder monthly liquidated damages until the SEC
declares the Registration Statement effective. At the end of the first month
following the Outside Effectiveness Date, liquidated damages will equal 1% of
the aggregate amount invested by Stockholder in the Registrable Securities.
Thereafter, the amount of such monthly liquidated damages will increase one half
percent per month to a maximum of 2% of the aggregate amount invested by
Stockholder in the Registrable Securities. The Company shall pay in cash in
immediately available funds such liquidated damages to Stockholder by the fifth
business day of the month following the month (or a portion thereof) in which
such damages were incurred.
The Company will keep the Registration Statement filed in respect of the
Registrable Securities effective for a period ending on the earlier of the
second anniversary of the date hereof or such shorter period that will terminate
when all Registrable Securities have been sold pursuant to such Registration
Statement. Stockholder will be permitted to withdraw Registrable Securities from
the Registration Statement at any time prior to the effective date of such
registration.
(b) Registration of Securities other than Registrable Securities. Without
the written consent of the Stockholder, the Company will not grant to any person
the right to request the Company to register any securities of the Company under
the Securities Act unless the rights so granted are subject to the prior rights
of Stockholder set forth herein, and, if exercised, would not otherwise conflict
or be inconsistent with the provisions of, this Agreement.
4. Registration Procedures. In connection with the Company's registration
obligations pursuant to Section 3 hereof, the Company will effect the
registration to permit the sale of such Registrable Securities in accordance
with the intended method or methods of disposition thereof, and pursuant thereto
the Company will as expeditiously as possible:
(a) Prepare and file with the SEC and, if necessary, the applicable
Canadian provincial securities regulatory authorities a Registration Statement
or Registration Statements on Form S-3 (or another form if Form S-3 is not
available), with such supplemental Canadian disclosure as may be required, under
the Securities Act or applicable Canadian provincial securities legislation, as
the case may be, for the sale of the Registrable Securities by Stockholder
(including, without limitation, distributions in connection with transactions
with broker-dealers or others for the purpose of hedging Registrable Securities,
involving possible sales, short sales, options, pledges or other transactions
which may require delivery and sale to broker-dealers or others of Registrable
Securities), and cause the Registration Statement to become effective and remain
effective as provided herein; provided, however, that before filing the
3
4
Registration Statement or Prospectus or any amendments or supplements thereto
(including documents that would be incorporated or deemed to be incorporated
therein by reference) the Company will furnish to Stockholder, its counsel and
such underwriters, copies of all such documents proposed to be filed, which
documents will be subject to the review of Stockholder, its counsel and such
underwriters. Notwithstanding Section 3(a), the Company will not file any
Registration Statement or amendment thereto or any Prospectus or any supplement
thereto (including such documents which, upon filing, would be incorporated or
deemed to be incorporated by reference therein) to which Stockholder, its
counsel or the managing underwriter, if any, shall reasonably object on a timely
basis.
(b) Prepare and file with the SEC and applicable Canadian provincial
securities regulatory authorities such amendments and post-effective amendments
to the Registration Statement as may be necessary to keep such Registration
Statement continuously effective for the applicable period specified in Section
3; cause the related Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 (or any
similar provisions then in force) under the Securities Act; and comply with the
provisions of the Securities Act and applicable Canadian provincial securities
legislation with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended methods of disposition by Stockholder set forth in the Registration
Statement as so amended or to such Prospectus as so supplemented.
(c) Notify Stockholder, its counsel and the managing underwriters, if any,
promptly, and (if requested by any such person) confirm such notice in writing,
(i) when a Prospectus or any Prospectus supplement or post-effective amendment
has been filed, and, with respect to the Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the SEC or any other federal, state or foreign governmental authority
for amendments or supplements to the Registration Statement or related
Prospectus or for additional information, (iii) of the issuance by the SEC or
any other federal, state or foreign governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose, (iv) if at any time the representations and
warranties of the Company contained in any agreement contemplated by Section
4(m) hereof (including any underwriting agreement) cease to be true and correct,
(v) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (vi) of the occurrence of any
event which makes any statement made in the Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or which requires the making of any
changes in the Registration Statement, Prospectus or documents so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and, in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated or is necessary to make
the statements therein, in light of the
4
5
circumstances under which they were made, not misleading, and (vii) of the
Company's reasonable determination that a post-effective amendment to the
Registration Statement would be appropriate.
(d) Use every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement, or the lifting of
any suspension of the qualification (or exemption from qualification) of any of
the Registrable Securities for sale in any jurisdiction, at the earliest
possible moment.
(e) If requested by the managing underwriters, if any, or Stockholder, (i)
promptly incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriters, if any, and Stockholder agree should
be included therein as may be required by applicable law and (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment; provided, however, that the Company will not be required to take any
actions under this Section 4(e) that are not, in the opinion of counsel for the
Company, in compliance with applicable law.
(f) Furnish to Stockholder, its counsel and each managing underwriter, if
any, without charge, at least one conformed copy of the Registration Statement
and any post-effective amendment thereto, including financial statements (but
excluding schedules, all documents incorporated or deemed incorporated therein
by reference and all exhibits, unless requested in writing by Stockholder, its
counsel or such managing underwriter).
(g) Deliver to Stockholder, its counsel and the underwriters, if any,
without charge, as many copies of the Prospectus or Prospectuses relating to the
Registrable Securities (including each preliminary prospectus) and any amendment
or supplement thereto as such persons may reasonably request; and the Company
hereby consents to the use of such Prospectus or each amendment or supplement
thereto by Stockholder and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by such Prospectus or
any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, to register or
qualify or cooperate with Stockholder, the underwriters, if any, and their
respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or blue sky laws (or their
Canadian equivalents) of such jurisdictions within the United States and Canada
as Stockholder or underwriter reasonably requests in writing to the extent such
registration or qualification would be required taking into account Canadian or
U.S. federal securities laws; keep each such registration or qualification (or
exemption therefrom) effective during the period such Registration Statement is
required to be kept effective and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdiction of the Registrable
Securities covered by the Registration Statement; provided, however that the
Company will not be
5
6
required to (i) qualify generally to do business in any jurisdiction in which it
is not then so qualified or (ii) take any action that would subject it to
general service of process in any such jurisdiction in which it is not then so
subject.
(i) Cooperate with Stockholder and the managing underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates will not bear any
restrictive legends; and enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriters, if any,
shall request at least two business days prior to any sale of Registrable
Securities to the underwriters.
(j) Use reasonable efforts to cause the Registrable Securities covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities within the United States and Canada except
as may be required solely as a consequence of the nature of Stockholder's
business, in which case the Company will cooperate in all reasonable respects
with the filing of the Registration Statement and the granting of such approvals
as may be necessary to enable Stockholder or the underwriters, if any, to
consummate the disposition of the Registrable Securities.
(k) Upon the occurrence of any event contemplated by Section 4(c)(vi) or
4(c)(vii) hereof, prepare a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to Stockholder, such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(l) Use its best efforts to cause all Registrable Securities covered by the
Registration Statement to be listed on each securities exchange on which similar
securities issued by the Company are listed on the date hereof.
(m) In the event of an underwritten offering, enter into such agreements
(including an underwriting agreement in form, scope and substance as is
customary in underwritten offerings) and take all such other actions in
connection therewith (including those reasonably requested by Stockholder or
those reasonably requested by the managing underwriters) in order to expedite or
facilitate the disposition of the Registrable Securities and in such connection,
(i) make such representations and warranties to the underwriters, if any, with
respect to the business of the Company and its subsidiaries, the Registration
Statement, Prospectus and documents incorporated by reference or deemed
incorporated by reference, if any, in each case, in form, substance and scope as
are customarily made by issuers to underwriters in underwritten offerings and
confirm the same if and when requested; (ii) obtain opinions of counsel to the
Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriters, if
any, and Stockholder) addressed to Stockholder and each of the underwriters, if
any, covering
6
7
the matters customarily covered in opinions requested in underwritten offerings
and such other matters as may be reasonably requested by Stockholder and
underwriters, including without limitation the matters referred to in Section
4(m)(i) hereof; (iii) use its best efforts to obtain "comfort" letters and
updates thereof from the independent certified public accountants of the Company
(and, if necessary, any other certified public accountants of any subsidiary of
the Company or of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included in the
Registration Statement), addressed to Stockholder and each of the underwriters,
if any, such letters to be in customary form and covering matters of the type
customarily covered in "comfort" letters in connection with underwritten
offerings; and (iv) deliver such documents and certificates as may be requested
by Stockholder, its counsel and the managing underwriters, if any, to evidence
the continued validity of the representations and warranties of the Company and
its subsidiaries made pursuant to clause (i) above and to evidence compliance
with any customary conditions contained in the underwriting agreement or similar
agreement entered into by the Company. The foregoing actions will be taken in
connection with each closing under such underwriting or similar agreement as and
to the extent required thereunder.
(n) Make available for inspection by a representative of Stockholder, any
underwriter participating in any disposition of Registrable Securities, and any
attorney or accountant retained by Stockholder or underwriter, all financial and
other records, pertinent corporate documents and properties of the Company and
its subsidiaries, and cause the officers, directors and employees of the Company
and its subsidiaries to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with the
Registration Statement; provided, however, that any records, information or
documents that are designated by the Company in writing as confidential at the
time of delivery of such records, information or documents will be kept
confidential by such persons unless (i) such records, information or documents
are in the public domain or otherwise publicly available, (ii) disclosure of
such records, information or documents is required by court or administrative
order or is necessary to respond to inquires of regulatory authorities, or (iii)
disclosure of such records, information or documents, in the opinion of counsel
to such person, is otherwise required by law (including, without limitation,
pursuant to the requirements of the Securities Act or its Canadian equivalent if
applicable).
(o) Comply with all applicable rules and regulations of the SEC and
Canadian provincial securities legislation and make generally available to its
security holders earning statements satisfying the provisions of Section 11(a)
of the Securities Act and Rule 158 thereunder (or any similar rule promulgated
under the Securities Act or its Canadian provincial equivalents if applicable)
no later than 45 calendar days after the end of any 12-month period (or 90
calendar days after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm commitment or best efforts
underwritten offering, and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company, after
the effective date of the Registration Statement, which statements shall cover
said 12-month period.
7
8
(p) Cooperate with any reasonable request by Stockholder, including by
ensuring participation by the executive management of the Company in road shows,
so long as such participation does not materially interfere with the operation
of the Company's business.
The Company may require Stockholder to furnish to the Company such
information regarding the distribution of the Registrable Securities as the
Company may, from time to time, reasonably request in writing and the Company
may exclude from such registration the Registrable Securities of any seller who
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
Stockholder will be deemed to have agreed by virtue of its acquisition
of such Registrable Securities that, upon receipt of any notice from the Company
of the occurrence of any event of the kind described in Section 4(c)(ii),
4(c)(iii), 4(c)(v), 4(c)(vi) or 4(c)(vii) hereof, Stockholder will forthwith
discontinue disposition of the Registrable Securities covered by the
Registration Statement or Prospectus (a "Black-Out") until Stockholder's receipt
of the copies of the supplemented or amended Prospectus contemplated by Section
4(k) hereof, or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus. In the event the Company
shall give any such notice, the time period prescribed in Section 3(a) hereof
will be extended by the number of days during the time period from and including
the date of the giving of such notice to and including the date when Stockholder
shall have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 4(k) hereof or (y) the Advice.
5. Registration Expenses. All Registration Expenses will be borne by the
Company whether or not the Registration Statement becomes effective.
"Registration Expenses" will mean all fees and expenses incident to the
performance of or compliance with this Agreement by the Company, including,
without limitation, (i) all registration and filing fees (including without
limitation fees and expenses (x) with respect to filings required to be made
with the National Association of Securities Dealers, Inc. (or its Canadian
equivalent, if necessary) and (y) of compliance with securities or "blue sky"
laws (including without limitation fees and disbursements of counsel for the
underwriters or Stockholder in connection with "blue sky" qualifications of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as the managing
underwriters, if any, or Stockholder may designate)), (ii) printing expenses
(including without limitation expenses of printing certificates for Registrable
Securities in a form eligible for deposit with The Depository Trust Company and
of printing prospectuses if the printing of prospectuses is requested by
Stockholder included in the Registration Statement), (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company
and Stockholder, (v) fees and disbursements of all independent certified public
accountants referred to in Section 4(m)(iii) hereof (including the expenses of
any special audit and "comfort" letters required by or incident to such
performance), (vi) fees and expenses of any "qualified
8
9
independent underwriter" or other independent appraiser participating in an
offering pursuant to Section 3 of Schedule E to the By-laws of the National
Association of Securities Dealers, Inc. (or its Canadian equivalent, if
applicable), (vii) Securities Act (or its Canadian equivalent, if applicable)
liability insurance if the Company so desires such insurance, (viii) all fees
and expenses in listing the Registrable Securities pursuant to Section 4(e), and
(ix) fees and expenses of all other persons retained by the Company, provided,
however, that Registration Expenses will not include underwriting discounts and
commissions relating to the offer and sale of Registrable Securities, all of
which shall be borne by Stockholder. In addition, the Company will pay its
internal expenses (including without limitation all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the listing
of the securities to be registered on any securities exchange on which similar
securities issued by the Company are then listed as of the date hereof and the
fees and expenses of any person, including special experts, retained by the
Company.
6. Indemnification.
(a) Indemnification by the Company. The Company will, without limitation as
to time, indemnify and hold harmless, to the fullest extent permitted by law,
Stockholder, its officers, directors and agents and employees, each person who
controls Stockholder (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers, directors, agents and
employees of any such controlling person, from and against all losses, claims,
damages, liabilities, costs (including without limitation the reasonable costs
of investigation and attorneys' fees) and expenses (collectively, "Losses"), as
incurred, arising out of or based upon any untrue or alleged untrue statement of
a material fact contained in the Registration Statement, Prospectus or form of
Prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as the same are based
solely upon information furnished in writing to the Company by Stockholder or
any underwriter expressly for use therein; provided, however, that the Company
will not be liable to the extent that any such Losses arise out of or are based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any preliminary prospectus if either (A) (i) Stockholder failed
to send or deliver a copy of the Prospectus with or prior to the delivery of
written confirmation of the sale by Stockholder of a Registrable Security to the
person asserting the claim from which such Losses arise and (ii) the Prospectus
would have corrected in all material respects such untrue statement or alleged
untrue statement or such omission or alleged omission; or (B) such untrue
statement or alleged untrue statement, omission or alleged omission is corrected
in all material respects in an amendment or supplement to the Prospectus
previously furnished by or on behalf of the Company with copies of the
Prospectus as so amended or supplemented, and Stockholder thereafter fails to
deliver such Prospectus as so amended or supplemented prior to or concurrently
with the sale of a Registrable Security to the person asserting the claim from
which such Losses arise.
9
10
The rights of Stockholder hereunder will not be exclusive of the rights
of any holder of Registrable Securities under any other agreement or instrument
of any holder of Registrable Securities to which the Company is a party. Nothing
in such other agreement or instrument will be interpreted as limiting or
otherwise adversely affecting Stockholder hereunder and nothing in this
Agreement will be interpreted as limiting or otherwise adversely affecting
Stockholder's rights under any such other agreement or instrument, provided,
however, that no Indemnified Party will be entitled hereunder to recover more
than its indemnified Losses.
(b) Indemnification by Stockholder. In connection with the Registration
Statement Stockholder will furnish to the Company in writing such information as
the Company reasonably requests for use in connection with the Registration
Statement or Prospectus and will indemnify, to the fullest extent permitted by
law, the Company, its directors and officers, agents and employees, each person
who controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling persons, from and against all Losses arising out
of or based upon (i) any disposition of Registrable Securities after receiving
notice of a Black-Out and prior to receiving Advice under Section 5 that use of
the Prospectus may be resumed or (ii) any untrue statement of a material fact
contained in the Registration Statement, Prospectus or preliminary prospectus or
arising out of or based upon any omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, to
the extent, but only to the extent, that such untrue statement or omission is
finally judicially determined by a court to have been contained in any
information so furnished in writing by Stockholder to the Company expressly for
use in such Registration Statement or Prospectus and was relied upon by the
Company in the preparation of the Registration Statement, Prospectus or
preliminary prospectus. In no event will the liability of Stockholder hereunder
be greater in amount than the dollar amount of the proceeds (net of payment of
all expenses and underwriter's discounts and commissions) received by
Stockholder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any person shall become
entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party
shall give prompt notice to the party from which such indemnity is sought (the
"Indemnifying Party") of any claim or of the commencement of any action or
proceeding with respect to which such Indemnified Party seeks indemnification or
contribution pursuant hereto; provided, however, that the failure to so notify
the Indemnifying Party will not relieve the Indemnifying Party from any
obligation or liability except to the extent that the Indemnifying Party has
been prejudiced materially by such failure. All reasonable fees and expenses
(including any fees and expenses incurred in connection with investigating or
preparing to defend such action or proceeding) will be paid to the Indemnified
Party, as incurred, within five calendar days of written notice thereof to the
Indemnifying Party upon receipt of an undertaking to repay such amount if it is
ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder. The Indemnifying Party will not consent to entry of
any judgment or enter into any settlement or otherwise seek to terminate any
action or proceeding in which
10
11
any Indemnified Party is or could be a party and as to which indemnification or
contribution could be sought by such Indemnified Party under this Section 6,
unless such judgment, settlement or other termination includes as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release, in form and substance reasonably satisfactory to
the Indemnified Party, from all liability in respect of such claim or litigation
for which such Indemnified Party would be entitled to indemnification hereunder.
(d) Contribution. If the indemnification provided for in this Section 6 is
unavailable to an Indemnified Party under Section 6(a) or 6(b) hereof in respect
of any Losses or is insufficient to hold such Indemnified Party harmless, then
each applicable Indemnifying Party, in lieu of indemnifying such Indemnified
Party, will, jointly and severally, contribute to the amount paid or payable by
such Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party or
Indemnifying Parties, on the one hand, and such Indemnified Party, on the other
hand, in connection with the actions, statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The relative
fault of such Indemnifying Party or Indemnifying Parties, on the one hand, and
such Indemnified Party, on the other hand, will be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or related to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses will be deemed to include any reasonable legal or other fees or
expenses incurred by such party in connection with any action or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provision of this Section 6(d), an Indemnifying Party that
is a selling holder of Registrable Securities will not be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities sold by such Indemnifying Party and distributed to the
public (net of any related expenses) exceeds the amount of any damages which
such Indemnifying Party has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
The indemnity, contribution and expense reimbursement obligations of
the Company hereunder will be in addition to any liability the Company may
otherwise have hereunder, under the Loan Agreement, the Warrant or otherwise.
The provisions of this Section 6 will survive any termination of this Agreement.
11
12
7. Rules 144 and 144A. The Company will use reasonable commercial efforts
to file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner, and will cooperate with Stockholder (including
without limitation by making such representations as any such holder may
reasonably request), all to the extent required from time to time to enable
Stockholder to sell Registrable Securities without registration under the
Securities Act within the limitations of the exemptions provided by Rules 144
and 144A (including, without limitation, the requirements of Rule 144A(d)(4)).
Upon the request of Stockholder, the Company will deliver to Stockholder a
written statement as to whether it has complied with such filing requirements.
8. Underwritten Registrations. If any of the Registrable Securities covered
by the Registration are to be sold in an underwritten offering, the investment
banker or investment bankers and manager or managers that will manage the
offering will be selected by Stockholder; provided that such investment banker
or manager shall be reasonably satisfactory to the Company.
9. Miscellaneous.
(a) Remedies. In the event of a breach by the Company of its obligations
under this Agreement, Stockholder, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of any of the provisions of this Agreement and hereby
further agrees that, in the event of any action for specific performance in
respect of such breach, it will waive the defense that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. The Company has not, as of the date hereof,
and will not, on or after the date hereof, enter into any agreement with respect
to its securities which conflicts with the rights granted to Stockholder in this
Agreement or otherwise conflicts with the provisions hereof. This Agreement will
be deemed to be an independent agreement and no limitation or restriction
contained in this Agreement will be deemed to conflict with, limit or restrict
the rights of Stockholder under this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of Stockholder.
(d) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing and will be deemed given (i) when made, if
made by hand delivery, (ii) upon confirmation, if made by fax, or (iii) one
business day after being deposited with a reputable next-day courier, postage
prepaid, to the parties as follows:
12
13
(x) if to the Company, in accordance with Section 8.7 of the Loan
Agreement, or at such other address, notice of which is given to
Stockholder in accordance with the provisions of this Section 9(d);
(y) if to the Stockholder, in accordance with Section 8.7 of the Loan
Agreement, or at such other address, notice of which is given to the
Company in accordance with the provisions of Section 9(d).
(e) Owner of Registrable Securities. The Company will maintain, or will
cause its registrar and transfer agent to maintain, a stock book with respect to
the Series A Preferred and the Common Stock, in which all transfers of
Registrable Securities of which the Company has received notice will be
recorded. The Company may deem and treat the person in whose name Registrable
Securities are registered in the stock book of the Company as the owner thereof
for all purposes, including without limitation the giving of notices under this
Agreement.
(f) Successors and Assigns. This Agreement will inure to the benefit of and
be binding upon the successors and permitted assigns of each of the parties. The
Company may not assign its rights or obligations hereunder without the prior
written consent of Stockholder. Stockholder may assign the rights and
obligations under this Agreement to any subsequent holder of the Registrable
Securities. Notwithstanding the foregoing, no transferee will have any of the
rights granted under this Agreement (i) until such transferee shall have
acknowledged its rights and obligations hereunder by a signed written statement
of such transferee's acceptance of such rights and obligations or (ii) if the
transferor notifies the Company in writing on or prior to such transfer that the
transferee shall not have such rights.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed will be deemed to be an original and all of which taken
together will constitute one and the same instrument.
(h) Headings. The headings in this Agreement are for convenience of
reference only and will not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.
(j) Jurisdiction; Consent to Service of Process.
(A) Each party hereby irrevocably and unconditionally submits, for
itself and its property, to the exclusive jurisdiction of any New York
state court located in the Borough of Manhattan, City of New York or the
United States District Court for the Southern District of New York (each, a
"New York Court"), and any appellate court from any such court, in any
suit, action or proceeding arising out of or relating to this Agreement, or
for recognition or enforcement of any
13
14
judgment resulting from any such suit, action or proceeding, and each party
hereby irrevocably and unconditionally agrees that all claims in respect of
any such suit, action or proceeding may be heard and determined in the New
York Court.
(B) It will be a condition precedent to each party's right to bring
any such suit, action or proceeding that such suit, action or proceeding,
in the first instance, be brought in the New York Court (unless such suit,
action or proceeding is brought solely to obtain discovery or to enforce a
judgment), and if each such court refuses to accept jurisdiction with
respect thereto, such suit, action or proceeding may be brought in any
other court with jurisdiction; provided that the foregoing will not apply
to any suit, action or proceeding by a party seeking indemnification or
contribution pursuant to this Agreement or otherwise in respect of a suit,
action or proceeding against such party by a thirty party if such suit,
action or proceeding by such party seeking indemnification or contribution
is brought in the same court as the suit, action or proceeding against such
party.
(C) No party may move to (i) transfer any such suit, action or
proceeding from the New York Court to another jurisdiction, (ii)
consolidate any such suit, action or proceeding brought in a New York Court
with a suit, action or proceeding in another jurisdiction, or (iii) dismiss
any such suit, action or proceeding brought in a New York Court for the
purpose of bringing the same in another jurisdiction.
(D) Each party hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, (i) any objection
which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in a New
York Court, (ii) the defense of an inconvenient forum to the maintenance of
such suit, action or proceeding in any such court, and (iii) the right to
object, with respect to such suit, action or proceeding, that such court
does not have jurisdiction over such party. Each party irrevocably consents
to service of process in any manner permitted by law.
(k) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein will remain in full force and effect and will in
no way be affected, impaired or invalidated, and the parties hereto will use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
(l) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and is intended to be a complete and exclusive
statement
14
15
of the agreement and understanding of the parties hereto in respect of the
registration rights granted by the Company with respect to the Registrable
Securities. This Agreement supersedes all prior agreements and understandings
among the parties with respect to such registration rights.
(m) Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party, as determined by the court, will be entitled
to recover reasonable attorneys' fees in addition to any other available remedy.
[Signature page follows]
15
16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
GLOBAL ELECTION SYSTEMS INC.
By: /s/ XXXXX XXXXXXXXX
-------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Secretary and Vice President-
Acquisitions and Mergers
XXXXXXX, INCORPORATED
By: /s/ XXXXXXX X. XXXXXXX
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President and
Chief Financial Officer
16
