REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is entered into as of
April __, 2000, between XxxxxxxXxxxxxxxxx.xxx, Inc., a Delaware corporation with
offices at 0000 Xxxxxxxxx Xxxxxxxxx, Xxx Xxxx, Xxxxxxxxxx 00000 (the "Company")
and Xxxxxxx Associates, L.P., a Delaware limited partnership, and Westgate
International, L.P., a Cayman Islands limited partnership (individually and
collectively, the "Investor").
W I T N E S S E T H:
Whereas, pursuant to that certain Securities Purchase Agreement, dated on
or about the date hereof, by and between the Company and the Investor (the
"Purchase Agreement"), the Company has agreed to sell and issue to the Investor,
and the Investor has agreed to purchase from the Company, an aggregate of 4,000
shares, Liquidation Preference $1,000 each, of the Company's Series B Cumulative
Convertible Preferred Stock (the "Preferred Shares") subject to the terms and
conditions set forth therein, and Warrants (the "Warrants") to purchase shares
of the Company's Common Stock, par value $0.001 per share (the "Common Stock")
subject to the terms and conditions set forth therein; and
Whereas, the Purchase Agreement contemplates that the Preferred Shares will
be convertible into shares (the "Common Shares") of Common Stock pursuant to the
terms and conditions set forth in the Certificate of Designations for the
Preferred Shares (the "Certificate"); and
Now, Therefore, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Purchase Agreement and
this Agreement, the Company and the Investors agree as follows:
1. Certain Definitions. Capitalized terms used herein and not otherwise
defined shall have the meaning ascribed thereto in the Purchase Agreement or the
Certificate. As used in this Agreement, the following terms shall have the
following respective meanings:
"Closing" and "Closing Date" shall have the meanings ascribed to such terms
in the Purchase Agreement.
"Commission" or "SEC" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Holder" and "Holders" shall include the Investor and any transferee or
transferees of the Preferred Shares, Warrants, Common Shares or Registrable
Securities which have not been sold to the public to whom the registration
rights conferred by this Agreement have been transferred in compliance with this
Agreement and the Purchase Agreement.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean: (i) the Common Shares or other
securities issued or issuable to each Holder or its permitted transferee or
designee upon conversion of the Preferred Shares or exercise of the Warrants;
(ii) securities issued or issuable upon any stock split, stock dividend,
recapitalization or similar event with respect to such Common Shares; and (iii)
any other security issued as a dividend or other distribution with respect to,
in exchange for or in replacement of the securities referred to in the preceding
clauses.
"Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, reasonable fees and disbursements of counsel to Holders
(using a single counsel selected by a majority in interest of the Holders) for a
review of the Registration Statement and related documents, and the expense of
any special audits incident to or required by any such registration (but
excluding the compensation of regular employees of the Company, which shall be
paid in any event by the Company).
"Registration Statement" shall have the meaning set forth in Section 2(a)
herein.
"Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Securities Act" or "Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for Holders not included within "Registration
Expenses".
2. Registration Requirements. The Company shall use its best efforts to
effect the registration of the Registrable Securities (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale) and in all
states reasonably requested by the Holder. Such best efforts by the Company
shall include, without limitation, the following:
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(a) The Company shall, as expeditiously as possible after the Closing Date:
i) But in any event within 75 days of the Closing, prepare and file a
registration statement with the Commission pursuant to Rule 415 under the
Securities Act on Form S-3 under the Securities Act (or in the event that
the Company is ineligible to use such form, such other form as the Company
is eligible to use under the Securities Act provided that such other form
shall be converted into an S-3 as soon as Form S-3 becomes available to the
Company) covering resales by the Holders of the Registrable Securities and
no other securities ("Registration Statement"), which Registration
Statement, to the extent allowable under the Securities Act and the rules
promulgated thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the
Preferred Shares and exercise of the Warrants. The number of shares of
Common Stock initially included in such Registration Statement shall be no
less than the sum of two times the number of Common Shares that are then
issuable upon conversion of the Preferred Shares and the number of shares
issuable upon exercise of the Warrants (assuming full conversion or
exercise, respectively, at the then applicable Conversion Price (as defined
in the Certificate) or Exercise Price (as defined in the Warrant). Nothing
in the preceding sentence will limit the Company's obligations to reserve
shares of Common Stock pursuant to Section 3.7 of the Purchase Agreement.
Thereafter the Company shall use its best efforts to cause such
Registration Statement and other filings to be declared effective as soon
as possible, and in any event prior to 135 days following the Closing Date.
Without limiting the foregoing, the Company will promptly respond to all
SEC comments, inquiries and requests, and shall request acceleration of
effectiveness at the earliest possible date. The Company shall provide the
Holders reasonable opportunity to review any such Registration Statement or
amendment or supplement thereto prior to filing.
ii) Prepare and file with the SEC such amendments and supplements to
such Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to comply with the provisions of
the Act with respect to the disposition of all securities covered by such
Registration Statement and notify the Holders of the filing and
effectiveness of such Registration Statement and any amendments or
supplements.
iii) Furnish to each Holder such numbers of copies of a current
prospectus conforming with the requirements of the Act, copies of the
Registration Statement, any amendment or supplement thereto and any
documents incorporated by reference therein and such other documents as
such Holder may reasonably require in order to facilitate the disposition
of Registrable Securities owned by such Holder.
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iv) Register and qualify the securities covered by such Registration
Statement under the securities or "Blue Sky" laws of all domestic
jurisdictions; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions.
v) Notify each Holder immediately of the happening of any event (but
not the substance or details of any such events unless specifically
requested by a Holder) as a result of which the prospectus (including any
supplements thereto or thereof) included in such Registration Statement, as
then in effect, includes an untrue statement of material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing, and use its best efforts to promptly update and/or correct such
prospectus.
vi) Notify each Holder immediately of the issuance by the Commission
or any state securities commission or agency of any stop order suspending
the effectiveness of the Registration Statement or the threat or initiation
of any proceedings for that purpose. The Company shall use its best efforts
to prevent the issuance of any stop order and, if any stop order is issued,
to obtain the lifting thereof at the earliest possible time.
vii) Permit counsel to the Holders to review the Registration
Statement and all amendments and supplements thereto within a reasonable
period of time (but not less than 5 full Trading Days (as defined in the
Certificate)) prior to each filing, and shall not file any document in a
form to which such counsel reasonably objects and will not request
acceleration of the Registration Statement without prior notice to such
counsel. viii) List the Registrable Securities covered by such Registration
Statement with all securities exchange(s) and/or markets on which the
Common Stock is then listed and prepare and file any required filings with
the Nasdaq National Market and Pacific Exchange or any exchange or market
where the Common Shares are traded.
ix) Take all steps necessary to enable Holders to avail themselves of
the prospectus delivery mechanism set forth in Rule 153 (or successor
thereto) under the Act.
(b) Set forth below in this Section 2(b) are (I) events that may arise that
the Investors consider will interfere with the full enjoyment of their rights
under this Agreement, the Purchase Agreement, the Warrants and the Certificate
(the "Interfering Events"), and (II) certain remedies applicable in each of
these events.
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Paragraphs (i) through (iv) of this Section 2(b) describe the Interfering
Events, provide a remedy to the Investors if an Interfering Event occurs and
provide that the Investors may require that the Company repurchase outstanding
Preferred Shares and Warrants at a specified price if certain Interfering Events
are not timely cured.
Paragraph (v) provides, inter alia, that if default adjustments required as
the remedy in the case of certain of the Interfering Events are not provided
when due, the Company may be required by the Investors to redeem outstanding
Preferred Shares and Warrants at a specified price.
Paragraph (vi) provides, inter alia, that the Investors have the right to
specific performance.
The preceding paragraphs in this Section 2(b) are meant to serve only as an
introduction to this Section 2(b), are for convenience only, and are not to be
considered in applying, construing or interpreting this Section 2(b). i) Delay
in Effectiveness of Registration Statement.
(A) In the event that such Registration Statement has not been
declared effective within 135 days from the Closing Date, or the Company at
any time fails to issue unlegended Registrable Securities as required by
Article VI of the Purchase Agreement, then the Company shall pay each
Holder a Monthly Delay Payment (as defined below) for each 30-day period
(or portion thereof) that effectiveness of the Registration Statement is
delayed or failure to issue such unlegended Registrable Securities
persists. In addition to the foregoing, if the Registration Statement has
not been declared effective within 210 days after the Closing Date, then
each Holder shall have the right to sell, at any time after the 210th day
after the Closing Date, any or all of its Preferred Shares and Warrants to
the Company for consideration (the "Mandatory Repurchase Price") equal to
(I) for the Preferred Shares, the greater of (x) 125% of the Liquidation
Preference of all such Preferred Shares being sold to the Company, or (y)
the Liquidation Preference for the Preferred Shares being sold to the
Company divided by the then applicable Conversion Price multiplied by the
greater of the last closing price of the Common Stock on (i) the date a
Holder exercises its option pursuant to this Section 2(b) to require
repurchase of Preferred Shares or (ii) the date on which the event
triggering Holder's remedies under this Section 2(b) first occurred, in
each case payable in cash and (II) for the Warrants, 125% of the product of
(a) the difference between the greater of clauses (i) or (ii) above and the
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exercise price of the Warrants, multiplied by (b) the number of Warrants
being sold to the Company, payable in cash.
(B) As used in this Agreement, a "Monthly Delay Payment" shall be a
cash payment equal to 1% of the Liquidation Preference of the Preferred
Shares held by a Holder for the first 30-day period (or portion thereof)
that the specified condition in this Section 2(b) has not been fulfilled or
the specified deficiency has not been remedied, 2% of such Liquidation
Preference for the next 30-day period (or portion thereof) that the
specified condition in this Section 2(b) has not been fulfilled or the
specified deficiency has not been remedied, and 3% of such Liquidation
Preference thereafter for each subsequent 30-day period (or portion
thereof) that the specified condition in this Section 2(b) has not been
fulfilled or the specified deficiency has not been remedied (prorated in
each case as appropriate). Payment of the Monthly Delay Payments and
Mandatory Repurchase Price shall be due and payable from the Company to
such Holder within 5 business days of demand therefor. Without limiting the
foregoing, if cash payment of the Mandatory Repurchase Price is not made
within such 5 business day period, the Holder may revoke and withdraw its
election to cause the Company to make such mandatory purchase at any time
prior to its receipt of such cash. At the option of the Holder, Monthly
Delay Payments may be added to the Liquidation Preference of the Preferred
Shares held by it.
(C) Notwithstanding the foregoing, there shall be excluded from the
calculation of the number of days that the Registration Statement has not
been declared effective the delays which are solely attributable to delays
in the Investor providing information required for the Registration
Statement.
(ii) No Listing; Premium Price Redemption for Delisting of Class of Shares.
(A) In the event that the Company fails, refuses or for any other
reason is unable to cause the Registrable Securities covered by the
Registration Statement to be listed with the Pacific Exchange and the
Nasdaq National Market or one of the other Approved Markets (as defined in
the Purchase Agreement) at all times during the period ("Listing Period")
from the earlier of the effectiveness of the Registration Statement and the
135th day following the Closing Date until such time as the registration
period specified in Section 5 terminates, then the Company shall provide to
each Holder a Monthly Delay Payment, for each 30 day period or portion
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thereof during which such listing is not in effect. In addition to the
foregoing, following the 10th day that such listing is not in effect, each
Holder shall have the right to sell to the Company any or all of its
Preferred Shares and Warrants at the Mandatory Repurchase Price. The
provisions of Section 2(b)(i)(B) shall apply to this Section 2(b)(ii)(A).
(B) In the event that shares of Common Stock of the Company are not
listed on any of the Approved Markets at all times following the Closing
Date, or are otherwise suspended from trading and remain unlisted or
suspended for 3 consecutive days, then the Company shall provide to each
Holder a Monthly Delay Payment for each 30-day period or portion thereof
(appropriately prorated) during which such listing is not in effect. In
addition to the foregoing, following the 5th day that the shares are not so
listed or are otherwise suspended, at the option of each Holder and to the
extent such Holder so elects, each Holder shall have the right to sell to
the Company the Preferred Shares and the Warrants held by such Holder, in
whole or in part, for the Mandatory Repurchase Price on the terms set forth
in Section 2(b)(i)(B) above.
(iii) Blackout Periods. In the event any Holder's ability to sell
Registrable Securities under the Registration Statement is suspended for more
than (i) five (5) consecutive days or (ii) twenty (20) days in any calendar year
("Suspension Grace Period"), including without limitation by reason of any
suspension or stop order with respect to the Registration Statement or the fact
that an event has occurred as a result of which the prospectus (including any
supplements thereto) included in such Registration Statement then in effect
includes an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing (a "Blackout"), then the
Company shall provide to each Holder a Monthly Delay Payment for each 30-day
period or portion thereof (appropriately prorated) from and after the expiration
of the Suspension Grace Period, on the terms set forth in Section 2(b)(i)(B)
above. In addition, at any time following the expiration of the Suspension Grace
Period if the Blackout continues for more than five (5) additional consecutive
days, a Holder shall have the right to sell to the Company its Preferred Shares
and/or Warrants in whole or in part for the Mandatory Repurchase Price on the
terms set forth in Section 2(b)(i)(B) above.
(iv) Redemption for Conversion Deficiency. In the event that the Company
does not have a sufficient number of Common Shares available to satisfy the
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Company's obligations to any Holder upon receipt of a Conversion Notice (as
defined in the Certificate) or exercise of the Warrants or is otherwise unable
or unwilling for any reason to issue such Common Shares (other than failure of
the Holder to comply with the conversion notice and delivery requirements of
Section 5 of the Certificate) (each, a "Conversion/Exercise Deficiency") in
accordance with the terms of the Certificate, Purchase Agreement and Warrants
for any reason after receipt of a Conversion Notice or exercise notice from any
Holder, then:
(A) The Company shall provide to each Holder a Monthly Delay Payment
for each 30-day period or portion thereof (appropriately prorated)
following the Conversion/Exercise Deficiency on all outstanding Preferred
Shares and Warrants, on the terms set forth in Section 2(b)(i)(B) above.
(B) At any time five days after the commencement of the running of the
first 30-day period described above in clause (A) of this paragraph (iv),
at the request of any Holder, the Company promptly shall purchase from such
Holder, for the Mandatory Repurchase Price and on the terms set forth in
Section 2(b)(i)(B) above, any and all outstanding Preferred Shares and/or
Warrants, if the failure to issue Common Shares results from the lack of a
sufficient number thereof and shall purchase all of such Holder's Preferred
Shares and/or Warrants (or such portion requested by such Holder) for such
consideration and on such terms if the failure to issue Common Shares
results from any other cause, or is without cause.
(C) The Holder shall have the right to withdraw any request for
redemption hereunder at any time prior to its receipt of the Mandatory
Repurchase Price.
(v) Mandatory Purchase Price for Defaults.
(A) The Company acknowledges that any failure, refusal or inability by
the Company to perform the obligations described in the foregoing
paragraphs (i) through (iv) will cause the Holders to suffer damages in an
amount that will be difficult to ascertain, including without limitation
damages resulting from the loss of liquidity in the Registrable Securities
and the additional investment risk in holding the Preferred Shares,
Warrants and Registrable Securities. Accordingly, the parties agree, after
consulting with counsel, that it is appropriate to include in this
Agreement the foregoing provisions for Monthly Delay Payments and mandatory
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redemptions in order to compensate the Holders for such damages. The
parties acknowledge and agree that the Monthly Delay Payments and mandatory
redemptions set forth above represent the parties' good faith effort to
quantify such damages and, as such, agree that the form and amount of such
payments and mandatory redemptions are reasonable and will not constitute a
penalty.
(B) In the event that the Company fails to pay any Monthly Delay
Payment within 5 business days of demand therefor, each Holder shall have
the right to sell to the Company any or all of its Preferred Shares and/or
Warrants at the Mandatory Repurchase Price on the terms set forth in
Section 2(b)(i)(B) above.
(C) The Holder shall have the right to withdraw any request for
redemption hereunder at any time prior to its receipt of the Mandatory
Repurchase Price.
(vi) Cumulative Remedies. The Monthly Delay Payments and mandatory
purchases provided for above are in addition to and not in lieu or limitation of
any other rights the Holders may have at law, in equity or under the terms of
the Certificate, the Purchase Agreement, the Warrants and this Agreement,
including without limitation the right to monetary contract damages and specific
performance. Each Holder shall be entitled to specific performance of any and
all obligations of the Company in connection with the registration rights of the
Holders hereunder.
(vii) Remedies for Registrable Securities. In any case in which a Holder of
Preferred Shares and/or Warrants has the right to cause the purchase of its
securities under this Section 2(b), it shall also have the right to cause the
purchase of the Registrable Securities that it owns, in whole or in part at the
Holder's option, as follows: such shares shall be purchased at a price ("Common
Purchase Price") equal to the Mandatory Repurchase Price of the Preferred Shares
which were converted into Common Shares or Warrants which were exercised for
Common Shares.
In the case in which a Holder of Preferred Shares or Warrants would have
the right to receive Monthly Delay Payments with respect to Preferred Shares or
Warrants under Section 2(b), it shall also have the right to receive payments
with respect to Registrable Securities owned by it in an amount at the rate of
the Monthly Delay Payments that would have applied to the Preferred Shares or
Warrants converted into or exercised for Common Shares had such Preferred Shares
or Warrants not been converted or exercised.
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(c) If the Holder(s) intend to distribute the Registrable Securities by
means of an underwriting, the Holder(s) shall so advise the Company. Any such
underwriting may only be administered by nationally or regionally recognized
investment bankers reasonably satisfactory to the Company.
(d) The Company shall enter into such customary agreements for secondary
offerings (including a customary underwriting agreement with the underwriter or
underwriters, if any) and take all such other reasonable actions reasonably
requested by the Holders in connection therewith in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into and whether
or not the Registrable Securities are to be sold in an underwritten offering:
i) make such representations and warranties to the Holders and the
underwriter or underwriters, if any, in form, substance and scope as are
customarily made by issuers to underwriters in secondary offerings;
ii) cause to be delivered to the sellers of Registrable Securities and
the underwriter or underwriters, if any, opinions of independent counsel to
the Company, on and dated as of the effective day (or in the case of an
underwritten offering, dated the date of delivery of any Registrable
Securities sold pursuant thereto) of the Registration Statement, and within
ninety (90) days following the end of each fiscal year thereafter, which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the Holders and the underwriter(s), if any, and their
counsel and covering, without limitation, such matters as the due
authorization and issuance of the securities being registered and
compliance with securities laws by the Company in connection with the
authorization, issuance and registration thereof and other matters that are
customarily given to underwriters in underwritten offerings, addressed to
the Holders and each underwriter, if any;
iii) cause to be delivered, 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), and at the beginning of each fiscal year following a year during
which the Company's independent certified public accountants shall have
reviewed any of the Company's books or records, a "comfort" letter from the
Company's independent certified public accountants addressed to each
underwriter, if any, stating that such accountants are independent public
accountants within the meaning of the Securities Act and the applicable
published rules and regulations thereunder, and otherwise in customary form
and covering such financial and accounting matters as are customarily
covered by letters of the independent certified public accountants
delivered in connection with secondary offerings; such accountants shall
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have undertaken in each such letter to update the same during each such
fiscal year in which such books or records are being reviewed so that each
such letter shall remain current, correct and complete throughout such
fiscal year; and each such letter and update thereof, if any, shall be
reasonably satisfactory to such underwriters;
iv) if an underwriting agreement is entered into, the same shall
include customary indemnification and contribution provisions to and from
the underwriters and procedures for secondary underwritten offerings; and
v) deliver such documents and certificates as may be reasonably
requested by the Holders of the Registrable Securities being sold or the
managing underwriter or underwriters, if any, to evidence compliance with
clause (i) above and with any customary conditions contained in the
underwriting agreement, if any.
(e) The Company shall make available for inspection by the Holders,
representative(s) of all the Holders together, any underwriter participating in
any disposition pursuant to a Registration Statement, and any attorney or
accountant retained by any Holder or underwriter, all financial and other
records customary for purposes of the Holders' due diligence examination of the
Company and review of any Registration Statement, all SEC Documents (as defined
in the Purchase Agreement) filed subsequent to the Closing, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such representative, underwriter, attorney or accountant in connection with such
Registration Statement, provided that such parties agree to keep such
information confidential.
(f) Subject to Section 2(b) above, the Company may suspend the use of any
prospectus used in connection with the Registration Statement only in the event,
and for such period of time as, such a suspension is required by the rules and
regulations of the Commission. The Company will use its best efforts to cause
such suspension to terminate at the earliest possible date.
(g) The Company shall file a Registration Statement with respect to any
newly authorized and/or reserved Registrable Securities consisting of Common
Shares described in clause (i) of the definition of Registrable Securities
within five (5) business days of any stockholders meeting authorizing same and
shall use its best efforts to cause such Registration Statement to become
effective within sixty (60) days of such stockholders meeting. If the Holders
become entitled, pursuant to an event described in clause (ii) and (iii) of the
definition of Registrable Securities, to receive any securities in respect of
Registrable Securities that were already included in a Registration Statement,
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subsequent to the date such Registration Statement is declared effective, and
the Company is unable under the securities laws to add such securities to the
then effective Registration Statement, the Company shall promptly file, in
accordance with the procedures set forth herein, an additional Registration
Statement with respect to such newly Registrable Securities. The Company shall
use its best efforts to (i) cause any such additional Registration Statement,
when filed, to become effective under the Securities Act, and (ii) keep such
additional Registration Statement effective during the period described in
Section 5 below and cause such Registration Statement to become effective within
30 days of that date that the need to file the Registration Statement arose. All
of the registration rights and remedies under this Agreement shall apply to the
registration of such newly reserved shares and such new Registrable Securities,
including without limitation the provisions providing for default payments and
mandatory redemptions contained herein.
3. Expenses of Registration. All Registration Expenses in connection with
any registration, qualification or compliance with registration pursuant to this
Agreement shall be borne by the Company, and all Selling Expenses of a Holder
shall be borne by such Holder.
4. Registration on Form S-3. The Company shall use its best efforts to
remain qualified for registration on Form S-3 or any comparable or successor
form or forms, or in the event that the Company is ineligible to use such form,
such form as the Company is eligible to use under the Securities Act, provided
that if such other form is used, the Company shall convert such other form to a
Form S-3 as soon as the Company becomes so eligible.
5. Registration Period. In the case of the registration effected by the
Company pursuant to this Agreement, the Company shall keep such registration
effective until the later of (a) the date on which all the Holders have
completed the sales or distribution described in the Registration Statement
relating thereto or, if earlier, until such Registrable Securities may be sold
by the Holders under Rule 144(k) (provided that the Company's transfer agent has
accepted an instruction from the Company to such effect), or (b) the third (3rd)
anniversary of the Closing Date.
6. Indemnification.
(a) Company Indemnity. The Company will indemnify each Holder, each of its
officers, directors, agents and partners, and each person controlling each of
the foregoing, within the meaning of Section 15 of the Securities Act and the
rules and regulations thereunder with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls, within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made,
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or any violation by the Company of the Securities Act or any state securities
law or in either case, any rule or regulation thereunder applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will reimburse each
Holder, each of its officers, directors, agents and partners, and each person
controlling each of the foregoing, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to a Holder to the extent that any such claim, loss, damage, liability
or expense arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by such Holder or the
underwriter (if any) therefor and stated to be specifically for use therein. The
indemnity agreement contained in this Section 6(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent will
not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally and not jointly, if
Registrable Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, agents and partners, and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, each other Holder (if any), and each of their officers, directors
and partners, and each person controlling such other Holder(s) against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statement therein not misleading in light of the circumstances under which they
were made, and will reimburse the Company and such other Holder(s) and their
directors, officers and partners, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein, and provided that the maximum
amount for which such Holder shall be liable under this indemnity shall not
exceed the net proceeds received by such Holder from the sale of the Registrable
Securities pursuant to the registration statement in question. The indemnity
agreement contained in this Section 6(b) shall not apply to amounts paid in
settlement of any such claims, losses, damages or liabilities if such settlement
is effected without the consent of such Holder (which consent shall not be
unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under this Section 6
(the "Indemnified Party") shall give notice to the party required to provide
13
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim in any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at its own expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 6 except to the extent
that the Indemnifying Party is materially and adversely affected by such failure
to provide notice. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such non-privileged information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with the defense of such claim and litigation resulting therefrom.
7. Contribution. If the indemnification provided for in Section 6 herein is
unavailable to the Indemnified Parties in respect of any losses, claims, damages
or liabilities referred to herein (other than by reason of the exceptions
provided therein), then each such 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, claims, damages or liabilities as
between the Company on the one hand and any Holder on the other, in such
proportion as is appropriate to reflect the relative fault of the Company and of
such Holder in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand and
of any Holder on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder.
In no event shall the obligation of any Indemnifying Party to contribute
under this Section 7 exceed the amount that such Indemnifying Party would have
been obligated to pay by way of indemnification if the indemnification provided
for under Section 6(a) or 6(b) hereof had been available under the
circumstances.
The Company and the Holders agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Holders or the underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately
14
preceding paragraphs shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of any Holder, the net proceeds received by such Holder from the sale of
Registrable Securities pursuant to the registration statement in question or
(ii) in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such Holder or
underwriter 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.
8. Survival. The indemnity and contribution agreements contained in
Sections 6 and 7 and the representations and warranties of the Company referred
to in Section 2(d)(i) shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement or the Purchase Agreement or
any underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company, and (iii) the consummation
of the sale or successive resales of the Registrable Securities.
9. Information by Holders. Each Holder shall furnish to the Company such
information regarding such Holder and the distribution and/or sale proposed by
such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities as so provided
by such Investor shall be included without alteration in the Registration
Statement covering the Registrable Securities and shall not be changed without
written consent of such Holder.
10. Replacement Certificates. The certificate(s) representing the Common
Shares held by any Investor (or then Holder) may be exchanged by such Investor
(or such Holder) at any time and from time to time for certificates with
different denominations representing an equal aggregate number of Common Shares,
as reasonably requested by such Investor (or such Holder) upon surrendering the
same. No service charge will be made for such registration or transfer or
exchange. Upon receipt by the Corporation of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of any certificate representing
the Preferred Shares or the Warrants, or the underlying Common Shares of any of
the foregoing, and, in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it, or upon surrender and cancellation of such
certificate if mutilated, the Corporation will make and deliver a new
certificate of like tenor and dated as of such cancellation at no charge to the
holder.
11. Transfer or Assignment. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Investor by
15
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Preferred Shares, Warrants or Registrable Securities, and all
other rights granted to the Investor by the Company hereunder may be transferred
or assigned to any transferee or assignee of any Preferred Shares, Warrants or
Registrable Securities; provided in each case that the Company must be given
written notice by the Investor at the time of or within a reasonable time after
said transfer or assignment, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned; and provided further that the
transferee or assignee of such rights agrees in writing to be bound by the
registration provisions of this Agreement.
12. Miscellaneous.
(a) Remedies. The Company and the Investor acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their 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 and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) Jurisdiction. Each of the Company and the Investor (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court, the New York State courts and other courts of the United States sitting
in the Borough of Manhattan, New York County, New York State for the purposes of
any suit, action or proceeding arising out of or relating to this Agreement and
(ii) hereby waives, and agrees not to assert in any such suit action or
proceeding, any claim that it is not personally subject to the jurisdiction of
such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper. The
Company and the Investor consent to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this paragraph shall affect or limit any right to serve process in any other
manner permitted by law.
(c) Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing by facsimile, mail or personal delivery and
shall be effective upon actual receipt of such notice. The addresses for such
communications shall be:
16
to the Company:
XxxxxxxXxxxxxxxxx.xxx, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Ramy El-Batrawi
with a copy to:
Nida & Xxxxxxx, LLP
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxxx
to the Investor:
Xxxxxxx Associates, L.P.
c/o Stonington Management Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000 and (000) 000-0000
Attention: Xxxxx Xxxxx
and
Westgate International, L.P.
c/o Stonington Management Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000 and (000) 000-0000
Attention: Xxxxx Xxxxx
with a copy to:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 212-986-8866
Attention: Xxxxxxx X. Xxxxxxx
17
Any party hereto may from time to time change its address for notices by giving
at least five days' written notice of such changed address to the other parties
hereto.
(d) Indemnity. Each party shall indemnify each other party against any
loss, cost or damages (including reasonable attorney's fees) incurred as a
result of such parties' breach of any representation, warranty, covenant or
agreement in this Agreement, including, without limitation, any enforcement of
this indemnity.
(e) Waivers. No waiver by any party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right accruing to
it thereafter. The representations and warranties and the agreements and
covenants of the Company and each Investor contained herein shall survive the
Closing.
(f) Execution in Counterpart. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
(g) Signatures. Facsimile signatures shall be valid and binding on each
party submitting the same.
(h) Entire Agreement; Amendment. This Agreement, together with the Purchase
Agreement, the Certificate, the Warrants and the agreements and documents
contemplated hereby and thereby, contains the entire understanding and agreement
of the parties, and may not be amended, modified or terminated except by a
written agreement signed by the Company plus the Holders of 75% of the Preferred
Shares issued under the Purchase Agreement to that date; provided that for the
purposes of this Section 12(h) the Holders of Common Shares still entitled to
registration rights under this Agreement will be deemed to still be Holders of
that number of Preferred Shares which were converted into such number of Common
Shares issued upon conversion which are still held by them.
(i) Governing Law. This Agreement and the validity and performance of the
terms hereof shall be governed by and construed in accordance with the laws of
the State of New York applicable to contracts executed and to be performed
entirely within such state, except to the extent that the law of the State of
Delaware regulates the Company's issuance of securities.
(j) Jury Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY.
(k) Titles. The titles used in this Agreement are used for convenience only
and are not to be considered in construing or interpreting this Agreement.
18
(l) No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any party.
[Signature Page Follows]
19
In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
XXXXXXXXXXXXXXXXX.XXX, INC.
By: ______________________________
Name: Ramy El-Batrawi
Title: President
WESTGATE INTERNATIONAL, L.P.
By: MARTLEY INTERNATIONAL, INC., as
attorney-in-fact
By: ____________________________
Name: Xxxx X. Xxxxxx
Title: President
XXXXXXX ASSOCIATES, L.P.
By:______________________________
Name: Xxxx X. Xxxxxx
Title: General Partner
