1
EXHIBIT 10.17
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
March 5, 2001, is made and entered into by and between PracticeWorks, Inc., a
Delaware corporation (the "Company"), and Crescent International Ltd., an entity
organized and existing under the laws of Bermuda (the "Investor").
WHEREAS, the Company and the Investor have entered into that certain
Stock Purchase Agreement, dated as of March 5, 2001 (the "Stock Purchase
Agreement"), pursuant to which (i) the Company will issue to the Investor, and
the Investor shall purchase, 100,000 shares of Series C Convertible Preferred
Stock, par value $.01 per share, of the Company (the "Preferred Stock") and (ii)
the Company shall issue to the Investor a warrant, exercisable from time to time
until September 28, 2003 (the "Warrant") for the purchase of a number of shares
of Common Stock at a price described in such Warrant; and
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investor's agreement to enter into the Stock Purchase Agreement, the Company
has agreed to provide the Investor with certain registration rights as described
herein;
NOW, THEREFORE, in consideration of the premises, representations,
warranties, covenants and agreements contained herein and in the Stock Purchase
Agreement and in the Warrant, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, intending to be legally
bound hereby, the parties hereto agree as follows (capitalized terms used herein
and not defined herein shall have the respective meanings ascribed to them in
the Stock Purchase Agreement):
ARTICLE I
REGISTRATION RIGHTS
Section 1.1. REGISTRATION STATEMENTS.
a. Filing of Registration Statement. The Company shall register
for resale all Conversion Shares issued or issuable to the Investor upon
conversion of the Preferred Stock and all Warrant Shares issued or issuable upon
full exercise of the Warrant. Subject to the terms and conditions of this
Agreement, the Company shall effect such registration in the manner provided
below. The Company shall file with the SEC on or before the end of a 385
calendar day period immediately following the Closing Date, a registration
statement (the "Registration Statement") on such form promulgated by the SEC for
which the Company qualifies, that counsel for the Company shall deem appropriate
and which form shall be available for the sale of all Conversion Shares issued
or issuable pursuant to the terms of the Certificate of Designations and the
Stock Purchase Agreement and all Warrant Shares issued or issuable upon full
exercise of the Warrant, in accordance with the intended method of distribution
of such securities. The aggregate number
2
of shares to be registered under the Registration Statement shall be equal to
(i) $5,000,000 divided by the Minimum Conversion Price (as such term is defined
in the Certificate of Designations) plus (ii) the number of Warrant Shares.
b. Effectiveness of the Registration Statement. The following
conditions for effectiveness shall apply to the Registration Statement required
to be filed by the Company with the SEC pursuant to paragraph (a) above, without
limiting the Company's obligation to file such Registration Statement. The
Company shall use its best efforts to have the Registration Statement declared
effective by the SEC in no event later than 14 calendar months after the Closing
Date. The Company shall ensure that the Registration Statement and any
amendments thereto remain in effect for a period ending on the date all
Registrable Securities issued or issuable to the Investor pursuant to the
Certificate of Designations, the Stock Purchase Agreement and the Warrant may be
sold by the Investor without registration and without any time, volume or manner
limitations pursuant to Rule 144(k) (or any similar provision then in effect)
under the Securities Act; provided that such period shall be extended one day
for each day after the applicable Effective Date that any Registration Statement
covering Registrable Securities is not effective during the period such
Registration Statement is required to be effective pursuant to this Agreement;
and provided further that the Company shall not be required to ensure that any
Registration Statement covering Registrable Securities remain in effect for such
period if the shares registered thereunder shall have become freely tradable
pursuant to Rule 144(k) of the Securities Act as such Rule may be amended from
time to time, or have otherwise been sold.
c. Failure to Obtain or Maintain Effectiveness of Registration
Statements.
(i) In the event the Company fails for any reason to
obtain the effectiveness of the Registration Statement within the time period
set forth in Section 1.1(b) (a "Tardy Registration Statement"), or in the event
that the Company fails for any reason to maintain the effectiveness of the
Registration Statement (or the underlying prospectus) covering Registrable
Securities for the time period set forth in Section 1.1(b) (an "Ineffective
Registration Statement" together with a Tardy Registration Statement, a "Failed
Registration Statement"), (unless the Registrable Securities covered by such
Registration Statement shall have become freely tradable pursuant to Rule 144(k)
of the Securities Act or have been otherwise sold) then, in either event, an
amount equal to two percent (2.0%) of the aggregate purchase price of all of the
Registrable Securities covered by any such Failed Registration Statement then
held by the Investor for each calendar month and for each portion of a calendar
month, pro rata (the "Failed Registration Statement Fee"), during any period of
such ineffectiveness (an "Ineffective Period"), shall become due and payable to
Investor.
(ii) If Failed Registration Statement Fees accrue with
respect to any Ineffective Registration Statement, payment of such Failed
Registration Statement Fees shall be made on the first Trading Day after the
earlier to occur of (1) the expiration of the applicable Ineffective Period and
(2) the last day of each calendar month during an Ineffective Period.
d. Failure to Register Sufficient Number of Shares. If the number
of Conversion Shares and Warrant Shares included in the Registration Statement
is insufficient to permit the conversion in full of the Preferred Stock or the
exercise in full of the Warrant (such deficit in the
2
3
number of shares is referred to herein as the "Deficit Shares"), then (i) the
Company shall immediately amend such Registration Statement (or file a new
Registration Statement) to cover the Deficit Shares (such amended or new
Registration Statement is referred to herein as a "Deficit Shares Registration
Statement") and (ii) the Company shall pay to the Investor in immediately
available funds into an account designated by the Investor an amount equal to
1.5% of the product of (x) the number of Deficit Shares multiplied by (y) the
Closing Bid Price (as such term is term is defined in the Certificate of
Designations) of the Common Stock on the applicable Effective Date, for each
calendar month and for each portion of a calendar month, pro rata, during the
period from the Effective Date of the applicable Registration Statement to the
Effective Date of the applicable Deficit Shares Registration Statement.
e. Liquidated Damages. The Company and the Investor hereby
acknowledge and agree that the sums payable under subsections 1.1(c) and 1.1(d)
hereof shall constitute liquidated damages and not penalties. The parties
further acknowledge that (i) the amount of loss or damages likely to be incurred
is incapable or is difficult to estimate precisely, (ii) the amounts specified
in such subsections bear a reasonable proportion and are not plainly or grossly
disproportionate to the probable loss likely to be incurred in connection with
any failure by the Company to obtain or maintain the effectiveness of the
Registration Statement, (iii) one of the reasons for the Company and the
Investor reaching an agreement as to such amounts was the uncertainty and cost
of litigation regarding the question of actual damages, and (iv) the Company and
the Investor are sophisticated business parties and have been represented by
sophisticated and able legal and financial counsel and negotiated this Agreement
at arm's length.
f. Piggyback Registrations. If, at any time prior to the
Effective Date of the Registration Statement filed pursuant to Section 1.1(a) of
this Agreement, the Company shall determine to register for sale with the SEC
any of its Common Stock or securities convertible into, or exchangeable or
exercisable for, shares of its Common Stock other than for resale by the
Investor (a "Piggyback Registration"), the Company shall give the Investor
written notice thereof (a "Notice of Piggyback Registration") 30 calendar days
prior to the filing of a registration statement relating to such Piggyback
Registration, which notice shall include a description of (i) the intended
method of distribution of such Common Stock and such other securities, (ii) the
number of shares of Common Stock and such other securities the Company intends
to register, and (iii) such other Persons who will or have a right to
participate in the Piggyback Registration. Upon the written request of the
Investor made within 20 days after receipt of a Notice of Piggyback Registration
(which request shall specify the Registrable Securities intended to be disposed
of by the Investor and the intended method of distribution thereof), the Company
shall include in the registration statement relating to such Piggyback
Registration all Registrable Securities that the Company has been so requested
to register by the Investor. If the Piggyback Registration for which the Company
gives a Notice of Piggyback Registration is a registered public offering
involving an underwriting, and the underwriters selected by the Company advise
the Company in writing that marketing factors require a limitation on the number
of shares of Common Stock or other securities to be underwritten, the Company
shall reduce the number of shares of Common Stock or other securities included
in such registration (1) first, by reducing the number of shares of Common Stock
or other securities to be registered for resale by all Persons other than the
Investor and other than Ceramco, Inc., a Delaware corporation ("Ceramco"),
allocated among such Persons in accordance with the priorities then existing
among the Company and such Persons and (2) second, by reducing on a pro rata
basis the
3
4
number of shares of Registrable Securities requested to be included by the
Investor and Ceramco. Any other shares of Common Stock, Registrable Securities,
or other securities of the Company so excluded shall be withdrawn from and shall
not be included in such Piggyback Registration.
g. Holdback Provisions. If, at any time after the Effective Date
of the Registration Statement filed pursuant to Section 1.1(a) of this
Agreement, the Company shall, in connection with either an underwritten or
non-underwritten public offering, determine to register for sale with the SEC
any of its Common Stock or securities convertible into, or exchangeable or
exercisable for, shares of its Common Stock other than for resale by the
Investor (a "Post-Effective Public Offering"):
(i) the Company shall give the Investor written notice
thereof (a "Notice of Post-Effective Public Offering") at least 20 calendar
days' prior to the filing of a registration statement relating to such
Post-Effective Public Offering, which notice shall include a description of the
intended method of distribution of such Common Stock and other securities, the
number of shares of Common Stock and any other securities the Company intends to
register, and such other Persons who will, or have a right to, participate in
such Post-Effective Public Offering;
(ii) if requested in writing by the Investor within 10
calendar days after receipt of a Notice of Post-Effective Public Offering, the
Company shall include, or if such Post-Effective Public Offering is an
underwritten offering of securities the Company shall use its best efforts to
cause the underwriters selected by the Company to include, in such
Post-Effective Public Offering such number of Registrable Securities requested
in writing by the Investor, and the Company will make any filings and amendments
or supplements to any registration statement necessary to effect the foregoing;
(iii) if the underwriters selected by the Company advise
the Company in writing or the Company determines that marketing factors require
a limitation on the number of shares of Common Stock or any other securities to
be offered, the Company shall reduce the number of shares of Common Stock or any
other securities included in such registration (1) first, by reducing the number
of shares of Common Stock or any other securities to be registered for resale by
all Persons other than the Investor, allocated among such Persons in accordance
with the priorities then existing among the Company and such Persons and (2)
second, by reducing the number of shares of Registrable Securities requested to
be included by the Investor. Any other shares of Common Stock, Registrable
Securities, or other securities of the Company so excluded shall be withdrawn
from and shall not be included in such Post-Effective Public Offering.
(iv) Upon receipt of a Notice of Post-Effective Public
Offering, the Investor agrees not to effect any public sale of the Conversion
Shares or the Warrant Shares, other than through the proposed Post-Effective
Public Offering, during the 30 day period beginning on the effective date of the
registration statement relating to such Post-Effective Public Offering
("Holdback Period"), only if and to the extent requested in writing by the
underwriter or the Company; provided that the foregoing shall not in any way
limit the Investor's right to sell any Registrable Securities prior to the
effective date of such registration statement;
4
5
provided, further, that if the giving of a Notice of Post-Effective Public
Offering would cause the aggregate length of all Holdback Periods, together with
all Blackout Periods (defined below), in any twelve calendar month period to
exceed 120 calendar days, then the applicable Holdback Period shall be shortened
(but to no less than zero days) to avoid any such excess.
ARTICLE II
REGISTRATION PROCEDURES
Section 2.1. FILINGS; INFORMATION. The Company will effect the
registration of the Registrable Securities in accordance with the intended
methods of disposition thereof as furnished to the Company by any proposed
seller of such Registrable Securities. Without limiting the foregoing, the
Company in each such case will do the following as expeditiously as possible,
but in no event later than the deadline, if any, prescribed therefor in this
Agreement:
a. The Company shall (i) prepare and file with the SEC the
Registration Statement covering the shares as described in subsection 1.1(a)
above; (ii) use its best efforts to cause such filed Registration Statement to
become and remain effective (pursuant to Rule 415 under the Securities Act or
otherwise) for the period prescribed by Section 1.1(b); (iii) prepare and file
with the SEC such amendments and supplements to the Registration Statement and
the prospectus used in connection therewith as may be necessary to keep the
Registration Statement effective for the time period prescribed by Section
1.1(b); and (iv) comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by the Registration Statement
during such period in accordance with the intended methods of disposition by the
Investor set forth in the Registration Statement.
b. The Company shall file all necessary amendments to the
Registration Statement in order to effectuate the purpose of this Agreement, the
Stock Purchase Agreement, the Certificate of Designations and the Warrant.
c. Five Trading Days prior to filing the Registration Statement
or prospectus, or any amendment or supplement thereto (excluding amendments
deemed to result from the filing of documents incorporated by reference
therein), the Company shall deliver to the Investor and one firm of counsel
representing the Investor, in accordance with the notice provisions of Section
4.8, copies of such Registration Statement as proposed to be filed, together
with exhibits thereto, which documents will be subject to review and comment by
the Investor and such counsel, and thereafter deliver to the Investor and such
counsel, in accordance with the notice provisions of Section 4.8, such number of
copies of such Registration Statement, each amendment and supplement thereto (in
each case including all exhibits thereto), the prospectus included in such
Registration Statement (including each preliminary prospectus) and such other
documents or information as the Investor or counsel reasonably may request in
order to facilitate the disposition of the Registrable Securities.
d. The Company shall deliver, in accordance with the notice
provisions of Section 4.8, to each broker as directed by the Investor such
number of conformed copies of such Registration Statement and of each amendment
and supplement thereto (in each case including
5
6
all exhibits and documents incorporated by reference), such number of copies of
the prospectus contained in such Registration Statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 promulgated under the Securities Act relating to the
Registrable Securities, and such other documents, as may be reasonably requested
to facilitate the disposition of the Registrable Securities.
e. After the filing of each Registration Statement, the Company
shall promptly notify the Investor of any stop order issued or threatened by the
SEC in connection therewith and take all commercially reasonable actions
required to prevent the entry of such stop order or to remove it if entered.
f. The Company shall use its best efforts to (i) register or
qualify the Registrable Securities under such other securities or blue sky laws
of such jurisdictions in the United States as the Investor reasonably (in light
of its intended plan of distribution) may request, and (ii) cause the
Registrable Securities to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary by
virtue of the business and operations of the Company and do any and all other
acts and things that may be reasonably necessary or advisable to enable the
Investor to consummate the disposition of the Registrable Securities; provided,
however, that the Company will not be required to qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this paragraph (f), subject itself to taxation in any such jurisdiction,
or consent or subject itself to general service of process in any such
jurisdiction.
g. The Company shall immediately notify the Investor, but in no
event later than two (2) business days by facsimile and by overnight courier,
upon the occurrence of any of the following events in respect of the
Registration Statement or related prospectus in respect of an offering of
Registrable Securities: (i) receipt of any request for additional information by
the SEC or any other federal or state governmental authority during the period
of effectiveness of the Registration Statement for amendments or supplements to
the Registration Statement or related prospectus; (ii) the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (iii) receipt 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; (iv) the happening of any event
that makes any statement made in such Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related 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
that in the case of the related prospectus, 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, in the light of the
circumstances under which they were made, not misleading; (v) the declaration by
the SEC of the effectiveness of the Registration Statement; and (vi) the
Company's reasonable determination that a post-effective amendment to the
Registration Statement would be appropriate, and the Company promptly shall make
available to the Investor any such supplement or amendment to the related
prospectus.
6
7
h. The Company shall enter into customary agreements and take
such other actions as are reasonably required in order to expedite or facilitate
the disposition of such Registrable Securities (whereupon the Investor, at its
option, may require that any or all of the representations, warranties and
covenants of the Company also be made to and for the benefit of the Investor).
i. The Company shall make available to the Investor (and will
deliver to Investor's counsel), subject to restrictions imposed by the United
States government or any agency or instrumentality thereof, copies of all
correspondence between the SEC and the Company, concerning the Registration
Statement, and also will make available for inspection by the Investor and any
attorney, accountant or other professional retained by the Investor
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company (collectively, the "Records")
as shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers and employees to supply all
information reasonably requested by any Inspectors in connection with any
Registration Statement. Records that the Company determines, in good faith, to
be confidential and that it notifies the Inspectors are confidential shall not
be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or (ii) the disclosure or release of such Records is requested or
required pursuant to oral questions, interrogatories, requests for information
or documents or a subpoena or other order from a court of competent jurisdiction
or other process; provided, however, that prior to any disclosure or release
pursuant to clause (ii), the Inspectors shall provide the Company with prompt
notice of any such request or requirement so that the Company may seek an
appropriate protective order or waive such Inspectors' obligation not to
disclose such Records; and, provided, further, that if failing the entry of a
protective order or the waiver by the Company permitting the disclosure or
release of such Records, the Inspectors, upon advice of counsel, are compelled
to disclose such Records, the Inspectors may disclose that portion of the
Records that counsel has advised the Inspectors that the Inspectors are
compelled to disclose. The Investor agrees that information obtained by it
solely as a result of such inspections (not including any information obtained
from a third party who, insofar as is known to the Investor after reasonable
inquiry, is not prohibited from providing such information by a contractual,
legal or fiduciary obligation to the Company) shall be deemed confidential and,
if material non-public information, the Investor shall not while in possession
of such information engage in market transactions in the securities of the
Company or its Affiliates unless and until such information is made generally
available to the public. The Investor further agrees that, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, it
will give notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of the Records deemed
confidential.
j. To the extent required by law or reasonably necessary to
effect a sale of Registrable Securities in accordance with prevailing business
practices at the time of any sale of Registrable Securities pursuant to the
Registration Statement, the Company shall deliver to the Investor a signed
counterpart, addressed to the Investor, of (1) an opinion or opinions of counsel
to the Company and (2) a comfort letter or comfort letters from the Company's
independent public accountants, each in customary form and covering such matters
of the type customarily
7
8
covered by opinions of comfort letters, as the case may be, as the Investor
therefor reasonably requests.
k. The Company otherwise shall comply with all applicable rules
and regulations of the SEC, including, without limitation, compliance with
applicable reporting requirements under the Exchange Act.
l. The Company shall appoint a transfer agent and registrar for
all of the class that includes the Registrable Securities covered by the
Registration Statement not later than the Effective Date of the Registration
Statement.
m. The Company may require the Investor to furnish promptly in
writing to the Company such information as may be legally required in connection
with any registration including, without limitation, all such information as may
be requested by the SEC or the National Association of Securities Dealers, Inc.
(the "NASD"). The Investor agrees to provide such information requested in
connection with any registration within ten Trading Days after receiving such
written request, and the Company shall not be responsible for any delays in
obtaining or maintaining the effectiveness of a Registration Statement caused by
the Investor's failure to timely provide such information. Each seller of
Registrable Securities shall notify the Company as promptly as practicable of
any inaccuracy or change in information previously furnished by such seller to
the Company or of the occurrence of any event, in either case as a result of
which any prospectus relating to the Registrable Securities contains or would
contain an untrue statement of a material fact regarding such seller or its
intended method of disposition of such Registrable Securities or omits to state
any material fact regarding such seller or such seller's intended method of
disposition of such Registrable Securities required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and promptly furnish to the Company
any additional information required to correct and update any previously
furnished information or required so that such prospectus shall not contain,
with respect to such seller or the disposition of such Registrable Securities,
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 the light
of the circumstances under which they were made, not misleading.
Section 2.2. REGISTRATION EXPENSES.
a. In connection with the Registration Statement, the Company
shall pay all registration expenses incurred in connection with the registration
thereunder (the "Registration Expenses"), including, without limitation: (i) all
registration, filing, securities exchange listing and fees required by the NASD,
(ii) all registration, filing, qualification and other fees and expenses of
compliance with securities or blue sky laws (including reasonable fees and
disbursements of its counsel in connection with blue sky qualifications of the
Registrable Securities required hereby), (iii) all of the Company's word
processing, duplicating, printing, messenger and delivery expenses, (iv) the
Company's internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
(v) the fees and expenses incurred by the Company in connection with the listing
of the Registrable Securities, (vi) reasonable fees and disbursements of counsel
for the Company and, subject to paragraph (b) below, the Investor, and customary
fees and expenses for independent certified public accountants retained by the
Company (including the expenses of any special audits or comfort letters or
costs associated with the delivery by independent
8
9
certified public accountants of such special audit(s) or comfort letter(s)
requested pursuant to Section 2.1(j) hereof), (vii) the fees and expenses of any
special experts retained by the Company in connection with such registration,
(viii) premiums and other costs of policies of insurance purchased at the
discretion of the Company against liabilities arising out of any public offering
of the Registrable Securities being registered, and (ix) any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities, but such registration expenses shall specifically exclude
underwriting fees, discounts, transfer taxes or commissions, if any,
attributable to the sale of Registrable Securities, which shall be payable by
each holder of Registrable Securities pro rata on the basis of the number of
Registrable Securities of each such holder that are included in a registration
under this Agreement.
b. In addition, the Company shall pay all reasonable fees and
expenses of counsel for the Investor incurred in connection with the review of
and assistance in preparation of the Registration Statement, unless a greater
amount is required due to the nature of the review performed by Investor's
counsel or the extent of assistance provided by Investor's counsel (an estimate
of such greater fees and expenses of such firm of counsel to the Investor shall
be provided to the Company prior to the undertaking of such counsel's additional
review or assistance) provided that such fees shall be applied toward the
$50,000 maximum set forth in Section 10.1(b) of the Stock Purchase Agreement.
Section 2.3. BLACKOUT PERIOD. Upon receipt of a written notice from the
Company stating that an event of the kind described in Section 2.1(g)(iv) has
occurred and the number of calendar days following the date of the notice on or
before which the Company shall deliver a supplemented or amended prospectus
contemplated by Section 2.1(g)(iv) (such number of days set forth in such
notice, the "Delivery Period"), the Investor shall discontinue the Investor's
offer of the Registrable Securities pursuant to the Registration Statement
relating to such Registrable Securities until the Investor shall have received
copies of the supplemented or amended prospectus contemplated by Section
2.1(g)(iv) (the number of calendar days from and including the date of delivery
of such notice until delivery of such prospectuses, the "Blackout Period") and,
if so directed by the Company, will deliver to the Company (at the Company's
expense) all copies other than permanent file copies then in the Investor's
possession of the prospectus relating to such Registrable Securities at the time
of receipt of such notice. The Company may not deliver more than two such
notices during any twelve calendar month period. The Company shall set the
length of each Delivery Period such that the following sum shall not exceed 120
calendar days: (x) the number of days in all prior Blackout Periods in the
twelve calendar month period ending on the last day of such proposed Delivery
Period, plus (y) the number of days in all Holdback Periods in the twelve
calendar month period ending on the last day of such proposed Delivery Period,
plus (z) the number of days in such proposed Delivery Period. If the Company
shall fail to deliver a supplemented or amended prospectus contemplated by
Section 2.1(g)(iv) before the expiration of the applicable Delivery Period, the
Company shall pay to the Investor an amount equal to two percent (2.0%) per
calendar month (pro rated for portions thereof) of the aggregate purchase price
of all Registrable Securities beginning on the first day following expiration of
the applicable Delivery Period and ending on the expiration date of the
applicable Blackout Period (the "Blackout Fee"). The Company shall pay Blackout
Fees on the first Trading Day after the earlier to occur of (1) the expiration
of the
9
10
applicable Blackout Period and (2) the last day of each calendar month during a
Blackout Period. In the event that the Investor uses a prospectus in connection
with the offering and sale of any of the Registrable Securities covered by such
prospectus, the Investor will use only the latest version of such prospectus
provided by the Company to the Investor.
ARTICLE III
INDEMNIFICATION AND CONTRIBUTION
Section 3.1. INDEMNIFICATION.
a. The Company agrees to indemnify and hold harmless the
Investor, its partners, Affiliates, officers, directors, employees and duly
authorized agents, and each Person or entity, if any, who controls the Investor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, together with the partners, Affiliates, officers, directors,
employees and duly authorized agents of such controlling Person or entity
(collectively, the "Investor Controlling Persons"), from and against any and all
losses, claims, damages, liabilities, costs and expenses (including, without
limitation, any and all reasonable attorneys' fees and disbursements and costs
and expenses of investigating and defending any such claim and any and all
amounts paid in settlement of, any action, suit or proceeding between any of the
indemnified parties and any indemnifying parties or between any indemnified
party and any third party, or otherwise, or any claim asserted) (collectively,
"Damages"), joint or several, and any action or proceeding in respect thereof to
which the Investor, its partners, Affiliates, officers, directors, employees and
duly authorized agents, and any Investor Controlling Person, becomes subject to
under the Securities Act, the Exchange Act or other federal or state statutory
law or regulation, at common law or otherwise, as and when incurred, insofar as
such Damages (or actions or proceedings in respect thereof) (i) arise out of, or
are based upon, any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement, or in any preliminary prospectus,
final prospectus, summary prospectus, documents filed under the Exchange Act and
deemed to be incorporated by reference into any Registration Statement,
application or other document executed by or on behalf of the Company or based
on written information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Registrable Securities under the securities
or blue sky laws thereof or filed with the SEC, amendment or supplement relating
to the Registrable Securities or (ii) arise out of, or are 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, and
shall reimburse the Investor, its partners, Affiliates, officers, directors,
employees and duly authorized agents, and each such Investor Controlling Person,
for any legal and other expenses reasonably incurred by the Investor, its
partners, Affiliates, officers, directors, employees and duly authorized agents,
or any such Investor Controlling Person, as incurred, in investigating or
defending or preparing to defend against any such Damages or actions or
proceedings; provided, however, that the Company shall not be liable to the
extent that any such Damages arise out of the Investor's failure to send or give
a copy of the final prospectus or supplement at or prior to the written
confirmation of the sale of Registrable Securities to the persons asserting an
untrue statement or alleged untrue statement or omission or alleged omission at
or prior to the written confirmation of the sale of Registrable Securities to
such person if such statement or omission was corrected in such final prospectus
or supplement, and provided that the Investor had been obligated under
applicable law to deliver such final prospectus or supplement to such person;
provided, further,
10
11
that the Company shall not be liable to the extent that any such Damages arise
out of or are based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such Registration Statement, or any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by the Investor or any other person who participates as a seller
or as an underwriter in the offering or sale of such securities, in either case,
in any questionnaire or other request by the Company, or otherwise specifically
stating that it is for use in the preparation thereof, provided that such
written information furnished to the Company by the Investor, or any other
person who participates as a seller or as an underwriter in the offering or sale
of such securities, is not materially altered by the Company.
b. The Investor agrees to indemnify and hold harmless the
Company, its Affiliates, officers, directors, employees, and duly authorized
agents, and each Person or entity, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
together with the Affiliates, officers, directors, employees and duly authorized
agents of such controlling Person or entity (collectively, the "Company
Controlling Persons") from and against any Damages, joint or several, and any
action in respect thereof to which the Company, its Affiliates, officers,
directors, employees, and duly authorized agents, and any Company Controlling
Person becomes subject to under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise, as and
when incurred, insofar as such Damages (or actions or proceedings in respect
thereof) arise out of an untrue statement or alleged untrue statement or
omission or alleged omission made in a Registration Statement, or any
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by the Investor in any questionnaire or other request by the
Company, or otherwise specifically stating that it is for use in the preparation
thereof; provided, however, that such written information furnished to the
Company by the Investor is not materially altered by the Company.
Notwithstanding the foregoing, the Investor shall in no event be required to
indemnify the Company for any amount in excess of the amount by which the total
price at which the Registrable Securities of the Investor were sold to the
public (less underwriting discounts and commissions) exceeds the amount actually
paid by the Investor under the Stock Purchase Agreement for such Registrable
Securities sold to the public.
c. All claims for indemnification shall be asserted and resolved
as set forth in Section 9.2 of the Stock Purchase Agreement, except that for the
purposes of claims for indemnification pursuant to this Agreement the last
sentence of Section 9.2(a)(i) of the Stock Purchase Agreement shall read as
follows: "Notwithstanding the foregoing, the Indemnified Party may take over the
control of the defense or settlement of a Third Party Claim at any time if it
irrevocably waives its right to indemnity under Section 9.1 of this Agreement
and contribution under Section 3.4 of the Registration Rights Agreement with
respect to such Third Party Claim."
Section 3.2. ARBITRATION. Any controversy, claim or dispute arising out
of or in connection with this Agreement, including any question regarding its
existence, validity, interpretation, breach, or termination, shall be referred
to and finally resolved in accordance with Section 9.3 of the Stock Purchase
Agreement.
11
12
Section 3.3. OTHER INDEMNIFICATION. Indemnification similar to that
specified in the preceding paragraphs of this Article III (with appropriate
modifications) shall be given by the Company with respect to any required
registration or other qualification of securities under any federal or state law
or regulation of any governmental authority other than the Securities Act. The
provisions of this Article III shall be in addition to any other rights to
indemnification, contribution or other remedies which an Indemnified Party may
have pursuant to law, equity, contract or otherwise.
Section 3.4. CONTRIBUTION. If the indemnification and reimbursement
obligations provided for in any section of this Article III is unavailable or
insufficient to hold harmless the Indemnified Parties in respect of any Damages
referred to herein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Damages as between the Company on the one
hand and the Investor or seller on the other, in such proportion as is
appropriate to reflect the relative fault of the Company and of the Investor or
seller in connection with such statements or omissions, as well as other
equitable considerations. The relative fault of the Company on the one hand and
of the Investor or seller on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Investor agree that it would not be just and
equitable if contribution pursuant to this Section 3.4 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of the
Damages referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 3.4, the Investor or seller shall in no event be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities of the Investor were sold to the public (less
underwriting discounts and commissions) and less the amount actually paid by the
Investor under the Stock Purchase Agreement for such Registrable Securities sold
to the public exceeds the amount of any damages which the Investor 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) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
ARTICLE IV
MISCELLANEOUS
Section 4.1. OUTSTANDING REGISTRATION RIGHTS. The Company represents
and warrants to the Investor that, except as set forth on Schedule 4.1 included
in the Company Disclosure Letter attached hereto, there is not in effect on the
date hereof any agreement by the
12
13
Company pursuant to which any holders of securities of the Company have a right
to cause the Company to register or qualify such securities under the Securities
Act or any securities or blue sky laws of any jurisdiction. The Company hereby
covenants and agrees that until 60 calendar days after the Registration
Statement has been declared effective by the SEC it will not, without the prior
written consent of the Investor, enter into or amend any agreement by the
Company pursuant to which any holders of securities of the Company have a right
to cause the Company to register or qualify securities under the Securities Act
or any securities or blue sky laws of any jurisdiction; provided, however, that
the foregoing shall not apply to (i) a Sale to a Third Party (as such terms are
defined in the Stock Purchase Agreement) for which the Investor has elected not
to exercise its right of first refusal pursuant to Section 6.12 of the Stock
Purchase Agreement or (ii) in connection with an acquisition of another entity
or assets related to the Company's current or future business.
Section 4.2. TERM. The registration rights provided to the holders of
Registrable Securities hereunder shall terminate at such time as all Registrable
Securities have been issued and have ceased to be Registrable Securities.
Notwithstanding the foregoing, paragraph (c) of Section 1.1, Article III,
Section 4.8, and Section 4.9 shall survive the termination of this Agreement.
Section 4.3. RULE 144. If the Company is required to file reports under
the Exchange Act, the Company will file in a timely manner, information,
documents and reports in compliance with the Securities Act and the Exchange Act
and, at its expense, promptly will take such further action as holders of
Registrable Securities reasonably may request to enable such holders of
Registrable Securities to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule
144 under the Securities Act ("Rule 144"), as such Rule may be amended from time
to time, or (b) any similar rule or regulation hereafter adopted by the SEC. If
at any time the Company is not required to file such reports, it will, at its
expense, forthwith upon the written request of any holder of Registrable
Securities who intends to make a sale under Rule 144, make available adequate
current public information with respect to the Company within the meaning of
paragraph (c)(2) of Rule 144 or such other information as necessary to permit
sales pursuant to Rule 144. Upon the request of the Investor, the Company will
deliver to the Investor a written statement, signed by the Company's principal
financial officer, as to whether it has complied with such requirements. This
Section 4.3 shall terminate at the same time as the registration rights as
provided in Section 4.2.
Section 4.4. CERTIFICATE. The Company will, at its expense, promptly
upon the request of any holder of Registrable Securities, deliver to such holder
a certificate, signed by the Company's principal financial officer, stating (a)
the Company's name, address and telephone number (including area code), (b) the
Company's Internal Revenue Service identification number, (c) the Company's SEC
file number, (d) the number of shares of each class of stock outstanding as
shown by the most recent report or statement published by the Company, and (e)
whether the Company has filed the reports required to be filed under the
Exchange Act for a period of at least ninety (90) days prior to the date of such
certificate and in addition has filed the most recent annual report required to
be filed thereunder.
13
14
Section 4.5. AMENDMENT AND MODIFICATION. Any provision of this
Agreement may be waived, provided that such waiver is set forth in a writing
executed by both parties to this Agreement. 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 the
holders of a majority of the then outstanding Registrable Securities.
Notwithstanding the foregoing, the waiver of any provision hereof with respect
to a matter that relates exclusively to the rights of holders of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and does not directly or indirectly affect the rights of other holders of
Registrable Securities may be given by holders of at least a majority of the
Registrable Securities being sold by such holders; provided that the provisions
of this sentence may not be amended, modified or supplemented except in
accordance with the provisions of the immediately preceding sentence. No course
of dealing between or among any Person having any interest in this Agreement
will be deemed effective to modify, amend or discharge any part of this
Agreement or any rights or obligations of any person under or by reason of this
Agreement.
Section 4.6. SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. The Investor
may assign its rights under this Agreement to any subsequent holder of the
Registrable Securities, provided that the Company shall have the right to
require any holder of Registrable Securities to execute a counterpart of this
Agreement and agree to be bound by the provisions of this Agreement as a
condition to such holder's claim to any rights hereunder. This Agreement,
together with the Stock Purchase Agreement, the Certificate of Designations, the
Warrant and the exhibits and schedules to such agreements together set forth the
entire agreement and understanding between the parties as to the subject matter
hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
Section 4.7. SEVERABILITY. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall not be affected except to the extent necessary
to delete such illegal, invalid or unenforceable provision unless that provision
held invalid shall substantially impair the benefits of the remaining portions
of this Agreement.
Section 4.8. NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and shall be (i) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (ii) delivered by reputable air courier
service with charges prepaid, or (iii) transmitted by hand delivery, telegram or
facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the third business day
following the date of mailing by express courier
14
15
service, fully prepaid, addressed to such address, or upon actual receipt of
such mailing, whichever shall first occur. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
PracticeWorks, Inc.
0000 Xxx Xxxxxxxx, Xxxxx 000
Attention: Xxxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx III
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Investor:
Crescent International Ltd.
c/o GreenLight (Switzerland) SA
00, xx Xxxxx-Xxxxx
0000 Xxxxxx, Xxxxxxxx
Xxxxxxxxxxx
Attention: Xxx Xxxx/Maxi Brezzi
Telephone: x00 00 000 00 00
Facsimile: x00 00 000 00 00
with a copy (which shall not constitute notice) to:
Xxxxxxxx Chance Xxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party hereto may from time to time change its address or facsimile
number for notices under this Section 4.8 by giving at least 10 days' prior
written notice of such changed address or facsimile number to the other
party hereto.
15
16
Section 4.9. GOVERNING LAW. This Agreement shall be construed under
the laws of the State of New York.
Section 4.10. HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this Agreement,
nor shall they affect their meaning, construction or effect.
Section 4.11. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute one and the same instrument.
Section 4.12. FURTHER ASSURANCES. Each party shall cooperate and take
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
Section 4.13. ABSENCE OF PRESUMPTION. This Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted.
Section 4.14. REMEDIES. In the event of a breach or a threatened breach
by any party to this Agreement of its obligations under this Agreement, any
party injured or to be injured by such breach will be entitled to specific
performance of its rights under this Agreement or to injunctive relief, in
addition to being entitled to exercise all rights provided in this Agreement and
granted by law. The parties agree that the provisions of this Agreement shall be
specifically enforceable, it being agreed by the parties that the remedy at law,
including monetary damages, for breach of any such provision may be inadequate
compensation for any loss.
16
17
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
CRESCENT INTERNATIONAL LTD.
By: /s/ Xxx Xxxx /s/ Maxi Brezzi
---------------------------------------------
Xxx Xxxx Maxi Brezzi
Authorized Signatories
PRACTICEWORKS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxx
Chairman
