Exhibit 10.7
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REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into on November 10, 2004, by and between Return on Investment
Corporation, a corporation organized under the laws of the State of Delaware,
with its principal place of business located at 0000 Xxxxxxx Xxxxx Xxxxxxxxx,
Xxxxx 000, Xxxxxxxx, Xxxxxxx (the "Company"), and Oceanus Value Fund, L.P., R
Capital II, Ltd., Xxxxxxxxxxx X. Xxxxxx, Granite Hill Capital Ventures LLC, OM
Capital, LLC and Xxxx Xxxxx Blankfort (collectively, the "Buyers"). This
Agreement supercedes and replaces the Registration Rights Agreement between the
Company and the Buyers dated August 18, 2004, which is hereby deemed terminated.
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Buyers hereby agree as
follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
shall have the meanings given such terms in the Securities Purchase Agreement
entered into between the Company and the Buyers dated concurrently herewith (the
"Securities Purchase Agreement"). As used in this Agreement, the following terms
shall have the specified meanings:
"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 "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Blackout Period" shall have the meaning set forth in Section 2(c).
"Board" shall have the meaning set forth in Section 2(c).
"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 City of
New York or the State of New York are authorized or required by law or other
government actions to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's $0.01 par value common stock.
"Effectiveness Date" means the date which is one hundred twenty (120)
days after the Filing Date.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Event" shall have the meaning set forth in Section 8(c).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means the earlier of (i) May 1, 2005 or (ii) ninety (90)
days after the Company's sale or other divestiture (whether by merger or
otherwise) of all or substantially all of the stock or assets of GO Software,
Inc.
"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 6(c).
"Indemnifying Party" shall have the meaning set forth in Section 6(c).
"Losses" shall have the meaning set forth in Section 6(a).
"OTC Bulletin Board" shall mean the over-the-counter electronic
bulletin board market.
"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 a 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 under the Securities Act), as amended or
supplemented by any prospectus supplement,
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with respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Registrable Securities" means (i) the shares of Common Stock issuable
upon the exercise of the Warrants and/or the Existing Warrants (collectively,
the "Warrant Shares"), (ii) any shares issuable upon any stock split, stock
dividend, recapitalization or similar event with respect to the or Warrant
Shares and (iii) any other dividend or other distribution with respect to,
conversion or exchange of, or in replacement of, the Warrant Shares.
"Registration Statement" means each registration statement provided for
in Section 2 hereof, including (in each case) the Prospectus, any amendments and
supplements to such registration statement or Prospectus (including pre- and
post-effective amendments), all exhibits thereto, and all material incorporated
by reference in such registration statement.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same effect as such Rule.
"Rule 158" means Rule 158 under 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 under 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.
2. Registration.
(a) Required Registration. On or prior to the Filing Date, the Company
shall prepare and file with the Commission a Registration Statement covering all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Company shall use its commercially reasonable efforts to cause
the Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to the
Effectiveness Date (except where the Company's audited
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financial statements are stale, in which case by the earlier of 90 days after
the Effectiveness Date or the date that current audited financial statements
have been filed by the Company as part of a Form 10-KSB), and, subject to
Section 2(c) below, to keep such Registration Statement continuously effective
under the Securities Act until such date as is the earlier of (i) the date when
all Registrable Securities covered by such Registration Statement have been sold
or (ii) the two-year anniversary of the last issuance of Warrants under the
Securities Purchase Agreement (the "Effectiveness Period"). If at any time
during the Effectiveness Period (i) the maximum number of Warrant Shares exceeds
(A) the number of shares of Common Stock initially registered in respect of the
Warrant Shares minus (B) the number of Warrant Shares, if any, already sold
pursuant to the Registration Statement and (ii) such excess exists for a period
of more than ten (10) Business Days in any thirty (30) day period, the Company
shall be required to file an amendment to the Registration Statement or an
additional Registration Statement with respect to such excess shares within ten
(10) Business Days after such conditions have been met (except where the
Company's audited financial statements are stale, in which case within 100
calendar days after such conditions have been met), and the Company shall
thereafter use its commercially reasonable efforts to cause such amendment or
additional Registration Statement to be declared effective by the Commission as
soon as possible, but in no event later than ninety (90) days after filing.
(b) Shelf Registration. No later than thirty (30) days after becoming
eligible to file a registration statement for a secondary or resale offering of
the Registrable Securities on Form S-3, the Company shall prepare and file with
the Commission such documentation as is necessary to allow all remaining
Registrable Securities to thereafter be sold on a continuous basis under Rule
415 pursuant to a "shelf" Registration Statement on Form S-3. Notwithstanding
anything to the contrary contained herein, at no time during the Effectiveness
Period shall any of the Registrable Securities cease being registered.
(c) Delay in Filing, Effectiveness or Use. Anything in this Agreement
to the contrary notwithstanding, if (i) there is material non-public information
regarding the Company which the Company's Board of Directors (the "Board")
reasonably determines not to be in the Company's best interest to disclose and
which the Company is not otherwise required to disclose or (ii) there is a
significant business opportunity (including, but not limited to, the acquisition
or disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction, available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose and which the Company would be required to disclose in
the Registration Statement,
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then, upon written notice to each Holder, the Company may postpone or suspend
the filing, effectiveness or use of a Registration Statement for a period not to
exceed 30 consecutive days; provided, however, that the Company may not postpone
or suspend its obligations under Section 2(a) for more than 60 days in the
aggregate during any 12 month period (each, a "Blackout Period").
(d) Piggy-Back Registrations.
(i) If at any time when there is not an effective Registration
Statement covering the Registrable Securities, the Company shall decide to
prepare and file with the Commission a Registration Statement relating to an
offering for its own account of any of its equity securities or the account of
other holders of any of its equity securities, other than on Form S-4 or Form
S-8 (or their then equivalents relating to equity securities to be issued solely
in connection with the acquisition of an entity or business, or equity
securities issuable in connection with stock option or other employee benefit
plans), the Company shall send to each Holder written notice of such decision.
If, within thirty (30) days after receipt of such notice, a Holder does not
request in writing to the Company that some or all of such Holder's Registrable
Securities be removed from such Registration Statement, then the Company shall
cause the registration under the Securities Act of all Registrable Securities
which are held by each Holder subject to the Company's right to exclude a Holder
as set forth below; provided, however, that if at any time after giving written
notice of its intention to register any securities and prior to the effective
date of the Registration Statement filed in connection with such registration,
the Company shall determine for any reason not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to each Holder and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay expenses in accordance with Section 5 hereof) and (ii) in
the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities being registered pursuant to this Section
2(d) for the same period as the delay in registering such other securities. The
foregoing notwithstanding, the Company shall not be required to register any
Registrable Securities pursuant to this Section 2(d) that are eligible for sale
pursuant to Rule 144(k).
(ii) In the case of an underwritten public offering, if the
managing underwriter(s) should reasonably object to the inclusion of the
Registrable Securities in such Registration Statement, then if the Company,
after consultation with the managing underwriter(s), should reasonably
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determine that the inclusion of the Registrable Securities would materially
adversely affect the offering contemplated in such Registration Statement, and
based on such determination recommends inclusion in such Registration Statement
of fewer or none of the Registrable Securities of a Holder, then (A) if the
Company after consultation with the underwriter(s) recommends the inclusion of
fewer Registrable Securities, the number of Registrable Securities of the
Holders included in such Registration Statement shall be reduced pro-rata among
such Holders (based upon the number of Registrable Securities requested to be
included in the registration), or (B) none of the Registrable Securities of the
Holders shall be included in such Registration Statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities; provided, however, that if securities are being offered
for the account of other Persons as well as the Company, such reduction shall
not represent a greater fraction of the number of Registrable Securities
intended to be offered by the Holders than the fraction of similar reductions
imposed on such other Persons (other than the Company).
3. Registration Procedures. In connection with the Company's
registration obligations under Section 2 above, the Company shall:
(a) Initial Filing. With respect to its obligations under Section 2(a),
prepare and file with the Commission on or prior to the Filing Date, a
Registration Statement on Form SB-2 (or, if the Company is not then eligible to
register for resale the Registrable Securities on that Form, such registration
shall be on another appropriate form in accordance herewith) in accordance with
the method or methods of distribution thereof specified by the Holders in
writing (unless otherwise directed by the Holders in writing), and use its
commercially reasonable efforts to cause the Registration Statement to become
effective and remain effective as provided herein; provided, however, that not
less than five (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 therein by reference), the
Company shall (i) furnish to each Holder copies of all such documents proposed
to be filed, which documents (other than those incorporated by reference) will
be subject to the review of each Holder and (ii) at the request of a Holder,
cause the Company's officers, directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of counsel to such Holder, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file a Registration Statement or any such Prospectus or any amendments or
supplements thereto to which a Holder or any counsel therefor shall reasonably
object in writing within three (3) Business Days of their receipt thereof.
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(b) Amendments. With respect to its obligations under Section 2(a), use
its commercially reasonable efforts to (i) prepare and file with the Commission
such amendments, including post-effective amendments, as may be necessary to
keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period, and prepare and file with
the Commission such amendments to the Registration Statement and/or additional
Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities, (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) under the Securities Act, (iii) respond as promptly as
possible to any comments received from the Commission with respect to a
Registration Statement or any amendment thereto and as promptly as possible
provide to each Holder true and complete copies of all correspondence from and
to the Commission relating to the Registration Statement or amendment and (iv)
comply in all material respects 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 each Holder thereof set forth in
such Registration Statement as so amended or in such Prospectus as so
supplemented.
(c) Related Matters. Notify each Holder of Registrable Securities to be
sold and any counsel therefor as promptly as possible (and, in the case of
clause (i)(A) below, not less than five (5) Business Days prior to such filing)
(i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to a Registration Statement is proposed to be filed, (B) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement and (C) with respect to a 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 a Registration Statement or Prospectus or for
additional information, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of a Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose, (iv) 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 (v) of the occurrence of any
event that makes any statement made in a Registration Statement or Prospectus or
any
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document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires any revisions to a Registration
Statement, Prospectus or other documents so that, in the case of such
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 the light of the circumstances under which they were made, not misleading.
(d) Withdrawal and Suspension. With respect to its obligations under
Section 2(a), use its commercially reasonable efforts to avoid the issuance of,
or, if issued, at the earliest practicable time obtain the withdrawal of, (i)
any order suspending the effectiveness of the Registration Statement or (ii) any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction.
(e) Incorporation of Certain Matters. If requested by the Holders of a
majority in interest of the Registrable Securities, (i) promptly incorporate in
a Prospectus supplement or post-effective amendment to a Registration Statement
such information as the Company reasonably agrees 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 therein.
(f) Copies. To the extent requested by any Holder, provide to each
Holder and any counsel therefor, without charge, at least one conformed copy of
each Registration Statement and each amendment thereto (including financial
statements and schedules, documents incorporated or deemed to be incorporated
therein by reference, and all exhibits), such documents to be provided promptly
after their filing with the Commission.
(g) Delivery. Promptly deliver to each Holder and any counsel therefor,
without charge, as many copies of the Prospectus or Prospectuses and each
amendment or supplement thereto as they may reasonably request; and the Company
hereby consents to the use of each such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with the offer
and sale of the Registrable Securities covered by such Prospectus and any
amendment or supplement thereto.
(h) Blue Sky Matters. (A) Prior to any public offering of Registrable
Securities, use its commercially reasonable efforts to register or qualify or
cooperate with the selling Holders and any counsel therefor in connection with
the registration or qualification (or exemption from such registration or
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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 reasonably requests in writing and (B) keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
(if applicable) and perform or do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of those 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) Preparation of Certificates. Cooperate with each Holder to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to a Registration Statement, which
certificates shall be free of all restrictive legends, and cause such
certificates to be in such denominations and registered in such names as each
Holder may request at least two (2) Business Days prior to any sale of
Registrable Securities.
(j) Misrepresentation. Subject to Section 2(c) above, upon the
occurrence of any event contemplated by Section 3(c)(v), as promptly as
possible, prepare a supplement or amendment, including a post-effective
amendment, to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, neither such 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 the light
of the circumstances under which they were made, not misleading.
(k) Listing and Quotation. Use its commercially reasonable efforts to
cause all Registrable Securities relating to a Registration Statement to be
quoted on the OTC Bulletin Board and any securities exchange, quotation system
or other market on which similar securities issued by the Company are then
listed or quoted as and when required pursuant to the Securities Purchase
Agreement.
(l) Rule 158. Comply in all material respects with all applicable rules
and regulations of the Commission and make generally available to its security
holders an earnings statement satisfying the provisions of Section
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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) commencing on the first day of the first fiscal quarter
of the Company after the effective date of the Registration Statement.
4. Additional Matters.
(a) Holder Information. In connection with a Registration Statement,
each selling Holder shall be required to furnish to the Company information
regarding such Holder and 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 fails to furnish such information within a reasonable time prior to the
filing of such Registration Statement or any supplemented Prospectus and/or
amended Registration Statement.
(b) Reference to Holder. If a Registration Statement refers to any
Holder by name as the holder of any securities of the Company, then such Holder
shall have the right to require the deletion of the reference to such Holder in
any amendment or supplement to the Registration Statement that is filed
subsequent to the time that such reference ceases to be required by the
Securities Act or any similar federal statute then in force.
(c) Holder Covenants. Each Holder covenants and agrees that (i) it will
not sell any Registrable Securities under a Registration Statement until it has
received copies of the Prospectus as then amended or supplemented as
contemplated in Section 3(g) and notice from the Company that such Registration
Statement and any post-effective amendments thereto have become effective as
contemplated by Section 3(c) and (ii) it and its officers, directors and
Affiliates, if any, will comply with the prospectus delivery requirements of the
Securities Act as applicable to them in connection with the sale of Registrable
Securities pursuant to such Registration Statement.
(d) Discontinuance. Each Holder agrees by its acquisition of
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in clauses (ii) through (v) of
Section 3(c) or suspension of the use of the Registration Statement pursuant to
Section 2(c) hereof, such Holder will immediately discontinue disposition of
such Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(j), or until it is advised in writing 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.
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5. Registration Expenses 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 a Registration Statement is filed or becomes
effective and whether or not any Registrable Securities are sold pursuant to a
Registration Statement. Such fees and expenses 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 by or with the
OTC Bulletin Board and each securities exchange, quotation system or other
market on which Registrable Securities are required hereby to be listed or
quoted, (B) with respect to filings required to be made with the Commission and
(C) in compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel for each Holder in
connection with Blue Sky qualifications of the Registrable Securities and any
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the Holders of a majority of Registrable
Securities may designate)), (ii) printing expenses (including, without
limitation, expenses of printing certificates for the Registrable Securities and
of printing Prospectuses, if the printing of Prospectuses is requested 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 a single counsel for the Holders,
(v) Securities Act liability insurance, if the Company so desires such insurance
and (vi) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement, including, without limitation, the Company's independent public
accountants (including any costs associated with the delivery by independent
public accountants of a comfort letter or comfort letters). 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, and the fees and expenses incurred in connection with the
listing or quoting of the Registrable Securities on the OTC Bulletin Board or
any securities exchange, quotation system or other market on which Registrable
Securities are required to be listed or quoted.
6. Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, defend, indemnify and hold harmless each
Holder, each officer, director, manager, owner, agent and employee of each
Holder, each Person who controls any Holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and each officer,
director, manager, owner, agent and employee of each
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such controlling Person, to the fullest extent permitted by applicable law, from
and against any and all losses, claims, damages, liabilities, reasonable costs
(including, without limitation, costs of investigation, preparation and
attorneys' fees actually incurred) and expenses (collectively, "Losses"), as
incurred, arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in a Registration Statement or any Prospectus or
any amendment or supplement thereto, 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
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that (i)
such untrue statements or omissions are based solely upon information regarding
such Holder which was furnished in writing to the Company by such Holder
expressly for use therein, (ii) 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 for use in the
Registration Statement or such Prospectus or in any amendment or supplement
thereto or (iii) the use by such Holder of an outdated or defective prospectus
(without any Company provided supplement correcting such outdated or defective
prospectus) after the Company has notified such Holder in writing that such
prospectus is suspended from use, outdated or defective. 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. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of an Indemnified
Party and shall survive the transfer of Registrable Securities by a Holder.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, defend, indemnify and hold harmless the Company, the Company's
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 incurred, arising solely out of or based solely upon any
untrue statement of a material fact contained in a Registration Statement, any
Prospectus or any amendment or supplement thereto, 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 (in the case of any Prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that (i) such
untrue statement or omission is contained in or omitted from any information so
furnished in writing
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by such Holder to the Company specifically for inclusion in such Registration
Statement or such Prospectus or an amendment or supplement thereto, (ii) 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 such Registration Statement or
such Prospectus or any amendment or supplement thereto or (iii) the use by such
Holder of an outdated or defective prospectus (without any Company provided
supplement correcting such outdated or defective prospectus) after the Company
has notified such Holder in writing that such prospectus is suspended from use,
outdated or defective. Notwithstanding anything to the contrary contained
herein, a Holder shall be liable under this Section 6(b) for only that amount
which does not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement.
(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: (i) the Indemnifying Party
has agreed in writing to pay such fees and expenses, (ii) the Indemnifying Party
shall have failed promptly to assume the defense of such Proceeding following
receipt of notice and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding or (iii) the named parties to any such
Proceeding (including any impleaded parties) include both the Indemnified Party
and the Indemnifying Party, and the Indemnified Party shall have been advised by
counsel that a conflict of interest is likely to exist if the same counsel were
to represent both the Indemnified Party and the Indemnifying Party (in which
case, if the 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
13
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 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 thirty (30) Business Days of written
notice thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that the Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require the Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that the Indemnified Party is not entitled to
indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 6(a) or
6(b) is unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), 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 omission 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 as a result of any Losses shall be deemed
to include, subject to the limitations set forth in Section 6(c), any reasonable
attorneys' or other reasonable fees or expenses incurred in connection with any
Proceeding to the extent there would have been indemnification for such fees or
expenses if the indemnification provided in this Section was available in
accordance with its terms. Notwithstanding anything to the contrary contained
herein, a Holder shall be liable or required to contribute under this Section
6(d) for only such amount as does not exceed the net proceeds to such Holder as
a result of the
14
sale of Registrable Securities pursuant to the Registration Statement. The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in this paragraph. No Person guilty of fraudulent
misrepresentation (within the meaning provided in 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 an Indemnifying Party may have to
an Indemnified Party.
7. Rule 144. As long as any Holder owns any Warrant Shares, the Company
agrees to timely file (or obtain extensions in respect thereof and file within
the applicable extension period) all reports required to be filed by the Company
pursuant to Section 13 or 15(d) of the Exchange Act. In addition, as long as any
Holder owns any Warrant Shares, if the Company is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act, it will prepare and furnish
to each Holder and make publicly available in a timely fashion the information
specified in Rule 144(c)(2). The Company further agrees that it will take such
further action as any Holder may reasonably request to the extent required from
time to time to enable each Holder to sell Warrant Shares without registration
under the Securities Act within the limitation of the exemption provided by Rule
144, including providing any legal opinions of counsel to the Company referred
to in the Securities Purchase Agreement. 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 the foregoing
requirements.
8. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or any Holder of
any of their obligations under this Agreement, each non-breaching party, in
addition to being entitled to exercise all rights granted by law or 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 agree 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. The Company and the Buyers also acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement or the Securities Purchase Agreement were not performed in
accordance with their
15
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement or the Securities Purchase
Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) No Inconsistent Agreements. Neither the Company nor any of its
Affiliates has, as of the date hereof, entered into and currently in effect, nor
shall the Company or any of its Affiliates 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 each Holder in this Agreement or
otherwise conflicts with the provisions hereof, except for registration rights
provisions disclosed in a Schedule to the Securities Purchase Agreement or in
the SEC Documents (as defined in the Securities Purchase Agreement). Except for
registration rights provisions disclosed in a Schedule to the Securities
Purchase Agreement or in the SEC Documents, neither the Company nor any of its
Affiliates has previously entered into any agreement currently in effect
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 each Holder and are not otherwise in conflict with the provisions of
this Agreement. The foregoing notwithstanding, this Section 8(b) shall not
prohibit the Company from entering into any agreements concerning the
registration of securities on Form S-8 or Form S-4.
(c) Failure to File Registration Statement and Other Events. The
Company and the Buyers agree that the Holders will suffer damages if the
Registration Statement required by Section 2(a) above is not filed on or prior
to the Filing Date and not declared effective by the Commission on or prior to
the Effectiveness Date and maintained in the manner contemplated herein during
the Effectiveness Period, or if certain other events occur. The Company and the
Buyers further agree that it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, subject to the Company's suspension
rights as set forth in Section 2(c) hereof, if (i) a required Registration
Statement is not filed on or prior to the Filing Date, or is not declared
effective by the Commission on or prior to the Effectiveness Date (or in the
event an additional Registration Statement is filed because the actual number of
Warrant Shares exceeds the number of shares of Common Stock initially registered
is not filed and declared effective within the time periods set forth in Section
2(a)), (ii) a required Registration Statement is filed
16
with and declared effective by the Commission but thereafter ceases to be
effective as to all Registrable Securities at any time prior to the expiration
of the Effectiveness Period, without being succeeded immediately by a subsequent
Registration Statement filed with and declared effective by the Commission,
(iii) trading in the Common Stock shall be suspended or if the Common Stock
ceases to be quoted on the OTC Bulletin Board for any reason for more than sixty
(60) days in the aggregate or (iv) the exercise rights of a Holder are suspended
by the Company (any such circumstance, failure or breach being referred to as an
"Event"), the Company shall pay to each Holder in cash as liquidated damages for
such failure, and not as a penalty, an amount equal to 2% of the original
principal amount of the Notes issued to such Holder for each thirty (30) day
period until the applicable Event has been cured, which shall be pro rated for
periods of less than thirty (30) days (the "Periodic Amount"). Subject to a
Holder's right to add such Periodic Amount on to the principal amount of a Note
(as provided in the Note), payments to be made pursuant to this Section 8(c)
shall be due and payable immediately upon demand in immediately available funds.
The parties agree that the Periodic Amount represents a reasonable estimate on
the part of the parties, as of the date of this Agreement, of the amount of
damages that may be incurred by a Holder if a Registration Statement is not
filed on or prior to the Filing Date or has not been declared effective by the
Commission on or prior to the Effectiveness Date and maintained in the manner
contemplated herein during the Effectiveness Period or if any other Event as
described herein has occurred.
(d) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, shall not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof shall not be
given, unless the same shall be in writing and signed by the Company and the
applicable Holder. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates generally to
the rights of the 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, waived,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(e) Notices. Any and all communications required or permitted to be
provided hereunder shall be in writing and shall be deemed given and effective
as provided in Section 8(f) of the Securities Purchase Agreement. The addresses
for such communications shall be as provided in Section 8(f) of the Securities
Purchase Agreement or such other address or addresses as any party may most
recently have designated in writing to the other parties hereto.
17
(f) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. The Company may not assign this Agreement or any of its
rights or obligations hereunder without the prior written consent of the
Holders. The Buyers may assign their rights hereunder in the manner and to the
Persons as permitted herein or in the Securities Purchase Agreement.
(g) Assignment of Registration Rights. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the Warrants, the Existing Warrants and/or the Registrable
Securities if: (i) the Holder agrees in writing with the transferee or assignee
to assign such rights and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (A) the name and address of such transferee or assignee and (B) the
securities with respect to which such registration rights are being transferred
or assigned, (iii) following such transfer or assignment the further disposition
of such securities by the transferee or assignees is restricted under the
Securities Act and applicable state securities laws, (iv) at or before the time
the Company receives the written notice contemplated by clause (ii) of this
Section, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions of this Agreement and (v) such transfer shall
have been made in accordance with the applicable requirements of the Securities
Purchase Agreement. In addition, each Holder shall have the right to assign its
rights hereunder to any other Person with the prior written consent of the
Company, which consent shall not be unreasonably withheld. The rights to
assignment shall apply to the Holders and to their subsequent successors and
assigns.
(h) 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) such document with the same force and
effect as if such facsimile signature were the original thereof.
(i) Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Georgia without
18
regard to the principles of conflict of laws. The parties hereto agree that a
final, non-appealable judgment in any suit or proceeding with respect to this
Agreement shall be conclusive and may be enforced in other jurisdictions by suit
on such judgment or in any other lawful manner.
(j) Cumulative Remedies. No provision of this Agreement providing for
any specific remedy to a party shall be construed to limit such party to the
specific remedy described, and that any other remedy that would otherwise be
available to such party at law or in equity shall also be available. The parties
also intend that the rights and remedies hereunder be cumulative, so that
exercise of any one or more of such rights or remedies shall not preclude the
later or concurrent exercise of any other rights or remedies.
(k) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(l) Headings; Interpretation. The headings of this Agreement are for
convenience of reference and shall not form a part of, or affect the
interpretation of, this Agreement. As used herein, (i) the neuter gender
includes the masculine or feminine and the singular number includes the plural,
and vice versa, as the context may require and (ii) unless the context clearly
requires otherwise, the words "herein," "hereunder" and "hereby," shall refer to
this entire Agreement and not only to the Section or paragraph in which such
word appears. If any date specified herein falls upon a Saturday, Sunday or
public or legal holidays, the date shall be construed to mean the next Business
Day following such Saturday, Sunday or public or legal holiday. Each party
intends that this Agreement be deemed and construed to have been jointly
prepared by the parties. As a result, the parties agree that any uncertainty or
ambiguity existing herein shall not be interpreted against either of them.
(m) Attorney's Fees. If any party to this Agreement shall bring any
action for relief against the other arising out of or in connection with this
Agreement, in addition to all other remedies to which the prevailing party may
be entitled, the losing party shall be required to pay to the prevailing party a
reasonable sum for attorney's fees and costs incurred in bringing such action
and/or enforcing any judgment granted therein, all of which shall be deemed to
have accrued upon the commencement of such action and shall be paid whether or
not such action is prosecuted to judgment. Any judgment or order entered in such
action shall contain a specific provision providing for the recovery of
attorney's fees and costs incurred in enforcing such judgment. For the purposes
of this Section, attorney's fees shall include, without limitation, fees
incurred with respect to the following: (i) post-judgment motions, (ii) contempt
proceedings, (iii) garnishment, levy and debtor and third party debtor and third
party examinations, (iv) discovery and (v) bankruptcy litigation.
19
(n) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized persons as of the date first
written above.
RETURN ON INVESTMENT CORPORATION
By:_____________________
Chief Financial Officer
By:_____________________
Secretary
OCEANUS VALUE FUND, L.P.
By: Oceanus Asset Management, L.L.C.,
General Partner
By:_____________________
Name: Xxxx X. Xxxxxxx
Title: Member
--------------------------------
XXXXXXXXXXX X. XXXXXX
--------------------------------
XXXX XXXXX BLANKFORT
R CAPITAL II, LTD.
By:_____________________________
Name: Xxxxxx X. Xxxxxxx
Title: Executive Vice President
OM CAPITAL, LLC
By:_____________________________
Name: Niranjan (Xxxx) Xxxxxxxxx
Title: President
GRANITE HILL CAPITAL VENTURES LLC
By:_____________________________
Name: Xxxxxxxx X. Xxxxx
Title: President
