EXHIBIT 10.25
FORM OF REGISTRATION RIGHTS AGREEMENT BETWEEN
INCOMNET, INC. AND PURCHASERS OF SERIES A
CONVERTIBLE PREFERRED STOCK
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT")is made and
entered into as of September 27, 1996, by and among Incomnet Inc., a California
corporation (the "COMPANY"), and ______________________________(the
"PURCHASER").
This Agreement is made pursuant to the Convertible Preferred Stock
Purchase Agreement, dated as of September 27, 1996 by and among the Company and
the Purchaser (the "PURCHASE AGREEMENT"). The execution of this Agreement is a
condition to the closing of the transactions contemplated by the Purchase
Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"ADVICE" shall have meaning set forth in SECTION 4(o).
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "CONTROL," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "AFFILIATED," "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"BLACKOUT" shall have the meaning set forth in SECTION 3(b).
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
California generally are authorized or required by law or other government
actions to close.
"CLOSING DATE" shall have the meaning set forth in the Purchase
Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's Common Stock, no par value.
"EFFECTIVENESS DATE" means the 75th day following the Closing Date.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in SECTION
2(a).
"EVENT" shall have the meaning set forth in SECTION 5.
"EVENT DATE" shall have the meaning set forth in SECTION 5.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FILING DATE" means the 30th day following the Closing Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in SECTION 7(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in SECTION 7(c).
"LOSSES" shall have the meaning set forth in SECTION 7(a).
"CALIFORNIA COURTS" shall have the meaning set forth in SECTION 9(i).
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under to 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.
"REGISTRABLE SECURITIES" means the shares of Series A Preferred
purchased by the Purchaser pursuant to the Purchase Agreement and the shares of
Common Stock into which such shares of Series A Preferred are convertible
pursuant to the Purchase Agreement.
"REGISTRATION STATEMENT" means the registration statement,
contemplated by SECTION 2(a), including the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
"RULE 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 144A" means Rule 144A promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation
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hereafter adopted by the Commission having substantially the same effect as such
Rule.
"RULE 158" means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPECIAL COUNSEL" means any special counsel to the Holders, for which
the Holders will be reimbursed by the Company pursuant to SECTION 5.
"UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
2. SHELF REGISTRATION
(a) On or prior to the Filing Date, the Company shall prepare and
file with the Commission a "shelf" Registration Statement covering all
Registrable Securities (which Registrable Securities shall include 560,000
shares of Common Stock or such other number of shares agreed to by the parties
to the Purchase Agreement) for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form [S-3] or
another appropriate form permitting registration of Registrable Securities for
resale by the Holders in the manner or manners designated by them (including,
without limitation, public or private sales and one or more underwritten
offerings). The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
practicable after the filing thereof, but in any event prior to the
Effectiveness Date, and to keep such Registration Statement continuously
effective under the Securities Act until the date which is three years after the
Closing Date or such earlier date when all Registrable Securities covered by
such Registration Statement have been sold or may be sold pursuant to Rule
144(A) as determined by the counsel to the Company pursuant to a written opinion
letter, addressed to the Holders, to such effect (the "EFFECTIVENESS PERIOD");
PROVIDED, HOWEVER, that the Company shall not be deemed to have used its best
efforts to keep the Registration Statement effective during the Effectiveness
Period if it voluntarily takes any action that would result in the Holders not
being able to sell the Registrable Securities covered by such Registration
Statement during the Effectiveness Period, unless such action is required under
applicable law or the Company has filed a post-effective amendment to the
Registration Statement and the Commission has not declared it effective or
except as otherwise permitted by SECTION 3(a).
(b) If the Holders of a majority of the Registrable Securities so
elect, an offering of Registrable Securities pursuant to the Registration
Statement may be effected in the form of an underwritten offering. In such
event, and if the managing underwriters advise the Company and such Holders in
writing that in their opinion the amount of Registrable Securities proposed to
be sold in such offering exceeds the amount of Registrable Securities which can
be sold in such offering, there shall be included in such underwritten offering
the amount of such Registrable Securities which in the opinion of such managing
underwriters can be sold, and such
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amount shall be allocated PRO RATA among the Holders proposing to sell
Registrable Securities in such underwritten offering.
(c) If any of the Registrable Securities are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority of the Registrable Securities included in such offering. No Holder
may participate in any underwritten offering hereunder unless such Person (i)
agrees to sell its Registrable Securities on the basis provided in any
underwriting agreements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such arrangements.
3. HOLD-BACK AGREEMENTS
(a) RESTRICTIONS ON PUBLIC SALE BY THE HOLDERS. Subject to paragraph
(b) of this SECTION 3, the Purchaser hereby understands and agrees that the
registration rights of the Purchaser pursuant to this Agreement and its ability
to offer and sell Registrable Securities pursuant to the Registration Statement
are limited by the provisions of the immediately following sentence. If the
Company determines in its good faith judgment that the filing of the
Registration Statement in accordance with SECTION 2 or the use of any Prospectus
would require the disclosure of material information which the Company has a
bona fide business purpose for preserving as confidential or the disclosure of
which would impede the Company's ability to consummate a significant
transaction, upon written notice of such determination by the Company, the
rights of the Purchaser to offer, sell, or distribute any Registrable Securities
pursuant to the Registration Statement or to require the Company to take action
with respect to the registration or sale of any Registrable Securities pursuant
to the Registration Statement (including any action contemplated by SECTION 4)
will for up to 60 days in any 12-month period be suspended until the date upon
which the Company notifies the Holders in writing that suspension of such rights
for the grounds set forth in this SECTION 3(a) is no longer necessary; PROVIDED
that there may be no such further suspension after the initial twelve-month
period in which such suspension has occurred.
(b) LIMITATION ON BLACKOUTS. Notwithstanding anything contained
herein to the contrary, the aggregate number of days (whether or not
consecutive) during which the Company may delay the effectiveness of the
Registration Statement or prevent offerings, sales or distributions by the
Purchaser pursuant to paragraph (a) above or the last paragraph of SECTION 4
(collectively, a "BLACKOUT") shall in no event exceed 90 days during any
12-month period and no Blackout may continue in consecutive 12 month periods.
4. REGISTRATION PROCEDURES
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission within the time period set
forth in SECTION 2 a Registration Statement on Form S-3 in accordance with the
method or methods of distribution thereof as specified by the Holders, and cause
the Registration Statement to become effective and remain effective as provided
herein; PROVIDED, HOWEVER, that not less than [5] Business Days prior to the
filing of the Registration Statement or any related Prospectus or any amendment
or supplement thereto (including any document that would be incorporated or
deemed to be incorporated therein by reference), the Company shall (i) furnish
to the Holders,
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their Special Counsel and any managing underwriters, copies of all such
documents proposed to be filed, which documents (other than those incorporated
or deemed to be incorporated by reference) will be subject to the review of such
Holders, their Special Counsel and such managing underwriters, and (ii) cause
its officers and directors, counsel and independent certified public accountants
to respond to such inquiries as shall be necessary, in the opinion of respective
counsel to such Holders and such underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities, their Special Counsel, or any managing underwriters, shall
reasonably object on a timely basis.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective for the
applicable time period; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; (iii) respond as promptly as
practicable to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto; and (iv) comply with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration Statement as so
amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold, their
Special Counsel and any managing underwriters immediately (and, in the case of
(i)(A) below, not less than [5] days prior to such filing) and (if requested by
any such Person) confirm such notice in writing no later than one Business Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed
and, (B) with respect to the Registration Statement or any post-effective
amendment when the same has become effective; (ii) of any request by the
Commission or any other Federal or state governmental authority for amendments
or supplements to the Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (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; and (vi) of the occurrence of any event that makes
any statement made in the Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the Registration Statement
or the Prospectus, as the case may be, 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 light of the
circumstances under which they were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of the
Registration Statement or (ii) any
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suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest practicable
moment.
(e) If requested by any managing underwriter or the Holders of a
majority of the Registrable Securities to be sold in connection with an
underwritten offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as such
managing underwriters and such Holders reasonably agree should be included
therein 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 shall not be
required to take any action pursuant to this SECTION 4(e) that would, in the
opinion of counsel for the Company, violate applicable law.
(f) Furnish to each Holder, their Special Counsel and any managing
underwriters, without charge, at least one executed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and any
managing underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders, any
underwriters 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
of such jurisdictions within the United States as any Holder or underwriter
requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and to do any and
all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by a Registration
Statement; PROVIDED, HOWEVER, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(i) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall be free of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such managing underwriters or
Holders may request at least two Business Days prior to any sale of Registrable
Securities.
(j) Upon the occurrence of any event contemplated by SECTION
4(c)(vi), as promptly as practicable, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any
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document incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered, neither the
Registration Statement nor such Prospectus will 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.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on each securities
exchange or market, if any, on which similar securities issued by the Company
are then listed.
(l) 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 any managing underwriters and the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities, and whether or not an underwriting
agreement is entered into, (i) make such representations and warranties to such
Holders and such underwriters as are customarily made by issuers to underwriters
in underwritten public offerings, and confirm the same if and when requested;
(ii) obtain and deliver copies thereof to each Holder and the managing
underwriters, if any, of opinions of counsel to the Company and updates thereof
addressed to each selling Holder and each such underwriter, in form, scope and
substance reasonably satisfactory to any such managing underwriters and Special
Counsel to the selling Holders covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may be
reasonably requested by such Special Counsel and underwriters; (iii) immediately
prior to the effectiveness of the Registration Statement, and, in the case of an
underwritten offering, at the time of delivery of any Registrable Securities
sold pursuant thereto, obtain and deliver copies to the Holders and the managing
underwriters, if any, of "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent 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 each selling Holder and each of the underwriters, if
any, in form and substance as are customary in connection with underwritten
offerings; (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
selling Holders and the underwriters, if any, than those set forth in SECTION 7
(or such other provisions and procedures acceptable to the managing
underwriters, if any, and holders of a majority of Registrable Securities
participating in such underwritten offering; and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority of the
Registrable Securities being sold, their Special Counsel and any managing
underwriters to evidence the continued validity of the representations and
warranties made pursuant to clause 4(l)(i) above and to evidence compliance with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
(m) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any disposition
of Registrable Securities, and any attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statement; PROVIDED, HOWEVER, that any information that is
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determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential by
such Persons, unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not bound by a
confidentiality agreement.
(n) Comply with all applicable rules and regulations of the
Commission and make generally available to its securityholders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any 12-month period (or 90 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 statement shall cover said 12-month period, or
end shorter periods as is consistent with the requirements of Rule 158.
(o) Provide a CUSIP number for all Registrable Securities, not later
than the effective date of the Registration Statement.
The Company may require each selling Holder to furnish to the Company
such information regarding the distribution of such Registrable Securities as is
required by law to be disclosed in the Registration Statement and the Company
may exclude from such registration the Registrable Securities of any such Holder
who unreasonably fails to furnish such information within a reasonable time
after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (i) the inclusion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the
ownership by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such ownership does not imply that such
Holder will assist in meeting any future financial requirements of the Company,
or (ii) if such reference to such Holder by name or otherwise is not required by
the Securities Act or any similar Federal statute then in force, the deletion of
the reference to such Holder in any amendment or supplement to the Registration
Statement filed or prepared subsequent to the time that such reference ceases to
be required.
Each Purchaser covenants and agrees that (i) it will not offer or sell
any Registrable Securities under the Registration Statement until it has
received copies of the Prospectus as then amended or supplemented as
contemplated in SECTION 4(g) and notice from the Company that such Registration
Statement and any post-effective amendments thereto have become effective as
contemplated by SECTION 4(c) and (ii) the Purchaser and its officers, directors
or Affiliates, if any, will comply with the prospectus delivery requirements of
the Securities Act as applicable to them in connection with sales of Registrable
Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in
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SECTION 4(c)(ii), 4(c)(iii), 4(c)(iv), 4(c)(v) or 4(c)(vi), such Holder will
forthwith discontinue disposition of such Registrable Securities until such
Holder's receipt of the copies of supplemented Prospectus and/or amended
Registration Statement contemplated by SECTION 4(i), or until it is advised
in writing (the "ADVICE") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement.
5. LIQUIDATED DAMAGES. The Company acknowledges and agrees
that the Holders will suffer damages, and that it would not be feasible to
ascertain the extent of such damages with precision, if the Company fails to
fulfill its obligations hereunder and (a) a Registration Statement is not
filed with the Commission on or prior to the Filing Date, (b) a Registration
Statement is not declared effective by the Commission on or prior to the
Effectiveness Date or (c) a Registration Statement is filed and declared
effective but thereafter ceases to be effective at any time during the
Effectiveness Period without being succeeded within 30 days by a subsequent
Registration Statement filed with and declared effective by the Commission
(any such failure being hereinafter referred to as an "EVENT", and for
purposes of clauses (a) and (b) the date on which such Event occurs, or for
purposes of clause (c) the date on which such 30-day limit is exceeded, being
hereinafter referred to as an "EVENT DATE").
Upon the occurrence of an Event, the Company agrees to
decrease the Conversion Price applicable to a conversion of Series A
Preferred in accordance with Section 5(d)(i) of the Certificate of
Designation by three percent (3%) per month for each of the first three
months after each Event Date. Commencing on the fourth month after an Event
Date, the three percent (3%) monthly penalty shall be paid to the Holder in
cash. Such increase in discount and/or payment in cash, as the case may be,
shall be paid as liquidated damages, and not as a penalty, to each Holder;
PROVIDED, that such liquidated damages will, in each case, cease to accrue
(subject to the occurrence of another Event) on the date in which the
applicable Registration Statement is no longer subject to an order suspending
the effectiveness thereof or Proceedings relating thereto or a subsequent
Shelf Registration is declared effective.
The Company shall notify each Holder within ten days of each
Event and Event Date. The Company shall pay the liquidated damage due on the
Registrable Securities to each Holder of record as at the Event Date on the
third Business Day of each month in which such liquidated damages shall
accrue by check delivered to the address for notice of such Holder set forth
herein.
6. Registration Expenses
(a) All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be
borne by the Company whether or not the Registration Statement is filed or
becomes effective and whether or not any Registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses referred to in
the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and
expenses (A) with respect to filings required to be made with the National
Association of Securities Dealers, Inc. and (B) in compliance with state
securities or Blue Sky laws (including, without limitation, disbursements of
counsel for the underwriters or Holders 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 Holders of a
majority of Registrable Securities may designate,
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not to exceed a total of $5,000)), (ii) printing expenses including, without
limitation, expenses of printing certificates for Registrable Securities and
of printing prospectuses if the printing of prospectuses is requested by the
managing underwriters, if any, or by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and Special Counsel for the Holders (subject to the
provisions of SECTION 6(b)), (v) fees and disbursements of all independent
certified public accountants referred to in SECTION 4(l)(iii) (including,
without limitation, the expenses of any special audit and "cold comfort"
letters required by or incident to such performance), (vi) Securities Act
liability insurance, if the Company so desires such insurance, and (vii) fees
and expenses of all other Persons retained by the Company in connection with
the consummation of the transactions contemplated by this Agreement. In
addition, the Company shall be responsible for all of its internal expenses
incurred in connection with the consummation of the transactions contemplated
by this Agreement (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 Registrable Securities on any securities exchange on
which similar securities issued by the Company are then listed.
(b) In connection with the Registration
Statement, the Company shall reimburse the Holders for the reasonable fees
and disbursements of one firm of attorneys chosen by the Holders of a
majority of the Registrable Securities, to a maximum of $5,000.00, except in
the event of unforeseeable circumstances.
7. Indemnification
(a) Indemnification by the Company. The Company
shall, notwithstanding termination of this Agreement and without limitation
as to time, indemnify and hold harmless each Holder, the officers, directors,
agents, brokers, investment advisors and employees of each of them, each
Person who controls any such Holder (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 each such controlling Person, to the
fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and attorneys' fees) and expenses (collectively,
"LOSSES"), as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in the Registration Statement,
any Prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to
any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or form of prospectus or supplement
thereto, in light of the circumstances under which they were made) not
misleading, except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by or on behalf of such Holder
expressly for use therein, which information was reasonably relied on by the
Company for use therein or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form
of Prospectus or in any amendment or supplement thereto. The Company shall
notify the Holders promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the transactions
contemplated by this Agreement.
(b) INDEMNIFICATION BY HOLDERS. In connection
with the Registration
10
Statement, each Holder shall furnish to the Company in writing such
information as the Company reasonably requests for use in connection with the
Registration Statement or any Prospectus and agrees, jointly and not
severally, to indemnify and hold harmless the Company, their directors,
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, to the fullest extent permitted by applicable law, from
and against all Losses (as determined by a court of competent jurisdiction in
a final judgment not subject to appeal or review) arising solely out of or
based solely upon any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus, or arising
solely out of or based solely 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 contained in any information so furnished in writing by such
Holder to the Company specifically for inclusion in the Registration
Statement or such Prospectus and that such imformation was reasonably relied
upon by the Company for use in the Registration Statement, such Prospectus or
such form of prospectus or to the extent that such information relates to such
Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such
form of Prospectus. In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the proceeds
received by such Holder upon the sale of the Registrable Securities giving
rise to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"INDEMNIFIED PARTY"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to the Indemnified Party and the payment
of all fees and expenses incurred in connection with defense thereof;
provided that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant
to this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified
Party or Parties unless: (1) the Indemnifying Party has agreed to pay such fees
and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the
named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified
Party and the Indemnifying Party (in which case, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ separate
counsel at the expense of the Indemnifying Party, the Indemnifying Party
shall not have the right to assume the defense thereof and such counsel shall
be at the expense of the Indemnifying Party). The Indemnifying Party shall not
be liable for any settlement of any such Proceeding effected without its
written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect
of which any Indemnified Party
11
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within 10
Business Days of written notice thereof to the Indemnifying Party (regardless
of whether it is ultimately determined that an Indemnified Party is not
entitled to indemnification hereunder; PROVIDED, that the Indemnifying Party
may require such Indemnified Party to undertake to reimburse all such fees and
expenses to the extent it is finally judicially determined that such
Indemnified Party is not entitled to indemnification hereunder).
(d) CONTRIBUTION. If a claim for indemnification under SECTION 7(a) or
7(b) is unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section
would apply by its terms (other than by reason of exceptions provided in this
Section), then each 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 Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party 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 and Indemnified
Party shall 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 omissions or alleged omission of a material fact, has been
taken or made by, or relates 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 shall be deemed to include, subject to the limitations set forth
in SECTION 7(c), any attorneys' or other fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification provided
for in this Section was available to such party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this SECTION 7(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 provisions of this SECTION 7(d), the Purchaser
shall not be required to contribute, in the aggregate, any amount in excess
of the amount by which the proceeds actually received by the Purchaser from
the sale of the Registrable Securities subject to the Proceeding exceeds the
amount of any damages that the Purchaser 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.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
8. Rule 144
The Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act in a timely manner and, if at
any time the Company is not required to
12
file such reports, they will, upon the request of any Holder, make publicly
available other information so long as necessary to permit sales of its
securities pursuant to Rule 144. The Company further covenants that it will
take such further action as any Holder may reasonably request, all to the
extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144. Upon the request of any Holder, the
Company shall deliver to such Holder a written certification of a duly
authorized officer as to whether it has complied with such requirements.
9. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would not
provide adequate compensation for any losses 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 shall waive the defense that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Except as specifically set forth
in Schedule 3.1 to the Purchase Agreement, none of the Company nor any of its
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as set specifically forth in Schedule 3.1 to the
Purchase Agreement, none of the Company nor any of its subsidiaries has
previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person. Without limiting the
generality of the foregoing, without the written consent of the Holders of a
majority of the then outstanding Registrable Securities, the Company shall
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 in all respects to the prior rights in full of the
Holders set forth herein, and are not otherwise in conflict or inconsistent
with the provisions of this Agreement.
(c) ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with
the Exhibits, Annexes and Schedules hereto, contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, oral or written, with respect to such
matters.
(d) 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 same shall be in writing and signed by
the Company and the Holders of at least a majority of the then outstanding
Registrable Securities; PROVIDED, HOWEVER, that, for the purposes of this
sentence, Registrable Securities that are owned, directly or indirectly, by
the Company, or an Affiliate of the Company are not deemed outstanding.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights
of other Holders may be given by Holders of at least a majority of the
Registrable Securities to which such waiver or consent relates; PROVIDED,
HOWEVER, that the provisions of this sentence may not be amended, modified,
or supplemented
13
except in accordance with the provisions of the immediately preceding
sentence.
(e) NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to
have been received (a) upon hand delivery (receipt acknowledged) or delivery
by telex (with correct answer back received), telecopy or facsimile (with
transmission confirmation report) 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 second business day following
the date of mailing by express courier service, fully prepaid, addressed to
such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If to the Company:
Incomnet, Inc.
00000 Xxxxxxx Xxxx. #0000
Xxxxxxxx Xxxxx, XX 00000
With Copies to:
Xxxx X. Xxxxxxxxxx
Wilshire Palisades Bldg.
0000 Xxxxx Xxx. #000
Xxxxx Xxxxxx, XX 00000
If to the Purchaser:
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each
of the parties and shall inure to the benefit of each Holder. The Company
may not assign its rights or obligations hereunder without the prior written
consent of each Holder.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(h) GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL. This Agreement shall be governed by and construed in accordance with
the laws of the State of California, without regard to principles of
conflicts of law. The Company hereby irrevocably submits to the jurisdiction
of any California state court or any federal court sitting in the state of
California collectively, the "CALIFORNIA COURTS") in respect of any
Proceeding arising out of or relating to this Agreement, and irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, jurisdiction of the California Courts. The Company
irrevocably
14
waives to the fullest extent it may effectively do so under applicable law
any objection that it may now or hereafter have to the laying of the venue of
any such Proceeding brought in any California Court and any claim that any
such Proceeding brought in any California Court has been brought in an
inconvenient forum. Nothing herein shall affect the right of any Holder to
serve process in any manner permitted by law or to commence legal proceedings
or otherwise proceed against the company in any other jurisdiction.
(i) CUMULATIVE REMEDIES. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(j) SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their reasonable 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 that may be hereafter declared
invalid, illegal, void or unenforceable.
(k) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(l) SHARES HELD BY THE COMPANY AND ITS AFFILIATES. Whenever the consent
or approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its
Affiliates (other than the Purchaser or transferees or successors or assigns
thereof if such persons are deemed to be Affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Incomnet, Inc.
By:/s/Xxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
Title: President and CEO
Purchaser
By_____________________________________
