Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT, dated as of June 30, 1999,
between Applied Digital Solutions, Inc., a Missouri corporation ("ADS"), and
Xxxxxxxxxxx.xxx, Inc., a Delaware corporation (the "Company").
On the date hereof, Universal Commodities Corp. ("UCC") is
merging with and into the Company (the "Merger"), pursuant to which ADS, as a
shareholder of UCC will be issued shares of Common Stock (as defined below). In
connection with the Merger, and in consideration for their participation
therein, the Company has agreed to grant to ADS certain rights with respect to
their ownership of shares of the Company's common stock as set forth herein.
If ADS desires to sell shares of Common Stock (whether prior
to, concurrently with or following any registration and offering by the Company
of shares of its capital stock to the public (an "Offering")), it may be
necessary to register such shares under the Securities Act (as defined below).
Accordingly, the parties hereto agree as follows:
1. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"Commission" means the Securities and Exchange Commission or
any other Federal agency at the time administering the Securities Act.
"Common Stock" means any shares of common stock, par value
$.0001 per share, of the Company, now or hereafter authorized to be issued, and
any and all securities of any kind whatsoever of the Company which may be
exchanged for or converted into Common Stock, any and all securities of any kind
whatsoever of the Company which may be issued on or after the date hereof in
respect of, in exchange for, or upon conversion of shares of Common Stock
pursuant to a merger, consolidation, stock split, stock dividend,
recapitalization of the Company or otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such similar Federal statute.
"Person" means a corporation, an association, a partnership,
an organization, a business, a trust, an individual, or any other entity or
organization, including a government or political subdivision or an
instrumentality or agency thereof.
"Registrable Securities" means (i) any shares of Common Stock
owned by ADS, whether prior or subsequent to the effectiveness of this
Agreement, and (ii) any Common Stock issued with respect to the Common Stock
referred to in clause (i) by way of a stock dividend, stock split or reverse
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or otherwise. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities (a) when a registration
statement with respect to the sale of such securities shall have become
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effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) when such securities
shall have been otherwise transferred, new certificates for them not bearing a
legend restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not require registration of them
under the Securities Act, or (c) when such securities shall have been sold as
permitted by, and in compliance with, the Securities Act. Any certificate
evidencing the Registrable Securities shall bear a legend stating that the
securities have not been registered under the Securities Act and setting forth
or referring to the restrictions on transferability and sale of the securities.
"Registration Expenses" means all expenses incident to the
registration and disposition of the Registrable Securities pursuant to Section 2
hereof, including, without limitation, all registration, filing and applicable
national securities exchange fees, all fees and expenses of complying with state
securities or blue sky laws (including fees and disbursements of counsel to the
underwriters or ADS in connection with "blue sky" qualification of the
Registrable Securities and determination of their eligibility for investment
under the laws of the various jurisdictions), all word processing, duplicating
and printing expenses, all messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of "cold comfort" letters or any special
audits required by, or incident to, such registration, all fees and
disbursements of underwriters (other than underwriting discounts and
commissions), all transfer taxes, and the fees and expenses of counsel to ADS;
provided, however, that Registration Expenses shall exclude, and ADS shall pay,
underwriting discounts and commissions in respect of the Registrable Securities
being registered.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act shall include a reference to the
comparable section, if any, of any such similar Federal statute.
2. Registration Under Securities Act, etc.
2.1 Registration on Request.
(a) Request. At any time or from time to time
after the six month anniversary of the closing of an initial public offering of
Common Stock, ADS shall have the right to require the Company to effect the
registration under the Securities Act of all or part of the Registrable
Securities, by delivering a written request therefor to the Company specifying
the number of shares of Registrable Securities and the intended method of
distribution. The Company shall (i) as expeditiously as possible (but in any
event within 90 days of receipt of a written request), use its best efforts to
effect the registration under the Securities Act (including by means of a shelf
registration pursuant to Rule 415 under the Securities Act if so requested in
such request and if the Company is then eligible to use such a registration) of
the Registrable Securities which the Company has been so requested to register
by ADS, for distribution in accordance with the intended method of distribution
set forth in the written request delivered by ADS, and (ii) if requested, obtain
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acceleration of the effective date of then registration statement relating to
such registration.
(b) Registration of Other Securities. Whenever
the Company shall effect a registration pursuant to this Section 2.1, no
securities other than Registrable Securities shall be included among the
securities covered by such registration unless ADS shall have consented in
writing to the inclusion therein of such other securities, which consent may be
subject to terms and conditions determined by ADS in its sole discretion;
provided, however, that ADS shall not unreasonably refuse to consent to the
inclusion of securities pursuant to "incidental registration" rights or "request
registration" rights granted to any other Person pursuant to a registration
rights agreement entered into with the Company on or before the date hereof.
(c) Registration Statement Form. Registrations
under this Section 2.1 shall be on such appropriate registration form of the
Commission as shall be selected by the Company and as shall be reasonably
acceptable to ADS. The Company agrees to include in any such registration
statement all information which, in the opinion of counsel to ADS and counsel to
the Company, is necessary or desirable to be included therein.
(d) Expenses. The Company shall pay all
Registration Expenses in connection with and registration requested pursuant to
this Section 2.1.
(e) Effective Registration Statement. A
registration requested pursuant to this Section 2.1 shall not be deemed to have
been effected (including for purposes of paragraph (h) of this Section 2.1) (i)
unless a registration statement with respect thereto has become effective and
has been kept continuously effective for a period of at least 120 days (or such
shorter period which shall terminate when all the Registrable Securities covered
by such registration statement have been sold pursuant thereto), (ii) if after
it has become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason not attributable to ADS and has not thereafter
become effective, or (iii) if the conditions to closing specified in the
underwriting agreement, if any, entered into in connection with such
registration are not satisfied or waived.
(f) Selection of Underwriters. The underwriters
of each underwritten offering of the Registrable Securities so to be registered
shall be selected by ADS.
(g) Right to Withdraw. If the managing
underwriter of any underwritten offering shall advise ADS that the Registrable
Securities covered by the registration statement cannot be sold in such offering
within a price range acceptable to ADS, then ADS shall have the right to notify
the Company in writing that it has determined that the registration statement be
abandoned or withdrawn, in which event the Company shall abandon or withdraw
such registration statement. In the event of such abandonment or withdrawal,
such request shall not be counted for purposes of the requests for registration
to which ADS is entitled pursuant to this Section 2.1.
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(h) Limitations on Registration on Request. ADS
shall be entitled to require the Company to effect, and the Company shall be
required to effect, seven registrations pursuant to this Section 2.1, provided,
however, that the aggregate offering value of the shares to be registered
pursuant to any such registration shall be at least $10,000,000 unless ADS then
own shares with an aggregate value less than $10,000,000 (in which case such
lesser number of shares may be registered) and provided further that ADS shall
not request the registration of, and the Company shall not be obliged to effect
the registration of, a number of shares in excess of one-third of the shares
held by ADS on the day following the initial public offering of Common Stock
(adjusted for any stock splits, stock dividends or similar events).
(i) Postponement. The Company shall be entitled
once in any six-month period to postpone for a reasonable period of time (but
not exceeding 90 days) (the "Postponement Period") the filing of any
registration statement required to be prepared and filed by it pursuant to this
Section 2.1 if (x) the Company determines, in its reasonable judgment, that such
registration and offering would materially interfere with any material
financing, corporate reorganization or other material transaction involving the
Company or any subsidiary, or would require premature disclosure thereof, and
promptly gives ADS written notice of such determination, containing a general
statement of the reasons for such postponement and an approximation of the
anticipated delay, or (y) the Company filed, within 90 days preceding the
registration request, a registration statement pursuant to which ADS sold, or
had the right to sell, shares of Common Stock. Notwithstanding the foregoing,
the Company shall be entitled to postpone (for only so long as necessary) the
filing of any registration statement required to be prepared and filed by it
pursuant to this Section 2.1 if it is prohibited from doing so pursuant to
another registration rights agreement between the Company and another
stockholder of the Company entered into on or prior to the date hereof. If the
Company shall postpone the filing of a registration statement, ADS shall have
the right to withdraw the request for registration by giving written notice to
the Company at any time and, in the event of such withdrawal, such request shall
not be counted for purposes of the requests for registration to which ADS is
entitled pursuant to this Section 2.1.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If
the Company at any time proposes to register any of its securities under the
Securities Act by registration on Form X-0, X-0 or S-3 or any successor or
similar form(s) (except registrations on any such Form or similar form(s) solely
for registration of securities in connection with an employee benefit plan or
dividend reinvestment plan or a merger or consolidation), whether or not for
sale for its own account, it will each such time give prompt written notice to
ADS of its intention to do so and of ADS's rights under this Section 2.2. Upon
the written request of ADS (which request shall specify the maximum number of
Registrable Securities intended to be disposed of by ADS), made as promptly as
practicable and in any event within 30 days after the receipt of any such notice
(15 days if the Company states in such written notice or gives telephonic notice
to ADS, with written confirmation to follow promptly thereafter, stating that
(i) such registration will be on Form S-3 and (ii) such shorter period of time
is required because of a planned filing date), the Company shall use its best
efforts to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by ADS; provided,
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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 shall give written notice of such determination and its
reasons therefor to ADS and (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 any obligation of the Company to
pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of ADS to request that such registration be effected as a
registration under Section 2.1 and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable Securities,
for the same period as the delay in registering such other securities. No
registration effected under this Section 2.2 shall relieve the Company of its
obligation to effect any registration upon request under Section 2.1. The
Company will pay all Registration Expenses in connection with any registration
of Registrable Securities requested pursuant to this Section 2.2.
(b) Right to Withdraw. ADS shall have the right
to withdraw its request for inclusion of its Registrable Securities in any
registration statement pursuant to this Section 2.2 at any time prior to the
execution of an underwriting agreement with respect thereto by giving written
notice to the Company of its request to withdraw.
(c) Priority in Incidental Registrations. If
the managing underwriter of any underwritten offering shall inform the Company
by letter of its belief that the number of Registrable Securities requested to
be included in such registration, when added to the number of other securities
to be offered in such registration, would materially adversely affect such
offering, then the Company shall include in such registration, to the extent of
the number and type which the Company is so advised can be sold in (or during
the time of) such offering without so materially adversely affecting such
offering (the "Section 2.2 Sale Amount"), (i) all of the securities proposed by
the Company to be sold for its own account; and (ii) thereafter, to the extent
the Section 2.2 Sale Amount is not exceeded, the Registrable Securities
requested by ADS to be included in such registration pursuant to Section 2.2(a);
and any other securities of the Company requested to be included in such
registration by any holder thereof as a result of the exercise of such holder's
right to cause such securities to be so registered (reducing any such request on
a pro rata basis, as necessary, to not exceed the Section 2.2 Sale Amount).
(d) Plan of Distribution. Any participation by
holders of Registrable Securities in a registration by the Company shall be in
accordance with the Company's plan of distribution, provided that ADS, if it is
selling in such registration, shall have the right to select the co-managing
underwriter.
2.3 Registration Procedures. If and whenever the
Company is required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Sections 2.1 and
2.2 hereof, the Company shall as expeditiously as possible:
(a) prepare and file with the Commission as soon as
practicable the requisite registration statement to effect
such registration (and shall include all financial statements
required by the Commission to be filed therewith) and
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thereafter use its best efforts to cause such registration
statement to become effective; provided, however, that before
filing such registration statement (including all exhibits) or
any amendment or supplement thereto or comparable statements
under securities or blue sky laws of any jurisdiction, the
Company shall furnish such documents to ADS and each
underwriter participating in the offering of the Registrable
Securities and their respective counsel, which documents will
be subject to the review and comments of ADS, each underwriter
and their respective counsel; and provided, further, however,
that the Company may discontinue any registration of its
securities which are not Registrable Securities at any time
prior to the effective date of the registration statement
relating thereto;
(b) notify ADS of the Commission's requests for
amending or supplementing the registration statement and the
prospectus, and prepare and file with the Commission such
amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by
such registration statement for such period as shall be
required for the disposition of all of such Registrable
Securities in accordance with the intended method of
distribution thereof; provided, that except with respect to
any such registration statement filed pursuant to Rule 415
under the Securities Act, such period need not exceed 120
days;
(c) furnish, without charge, to ADS and each
underwriter such number of conformed copies of such
registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such
number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed
under Rule 424 under the Securities Act, in conformity with
the requirements of the Securities Act, and such other
documents, as ADS and such underwriters may reasonably
request;
(d) use its best efforts (i) to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such securities or blue sky laws
of such States of the United States of America where an
exemption is not available and as ADS or any managing
underwriter shall reasonably request, (ii) to keep such
registration or qualification in effect for so long as such
registration statement remains in effect, and (iii) to take
any other action which may be reasonably necessary or
advisable to enable ADS to consummate the disposition in such
jurisdictions of the securities to be sold by ADS, except that
the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not but for the requirements
of this subsection (d) be obligated to be so qualified or to
consent to general service of process in any such
jurisdiction;
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(e) use its best efforts to cause all Registrable
Securities covered by such registration statement to be
registered with or approved by such other federal or state
governmental agencies or authorities as may be necessary in
the opinion of counsel to the Company and counsel to ADS to
consummate the disposition of such Registrable Securities;
(f) furnish to ADS and each underwriter, if any,
participating in the offering of the securities covered by
such registration statement, a signed counterpart of (i) an
opinion of counsel for the Company, and (ii) a "comfort"
letter signed by the independent public accountants who have
certified the Company's financial statements included or
incorporated by reference in such registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein)
and, in the case of the accountants' comfort letter, with
respect to events subsequent to the date of such financial
statements, as are customarily covered in opinions of issuer's
counsel and in accountants' comfort letters delivered to the
underwriters in underwritten public offerings of securities
(and dated the dates such opinions and comfort letters are
customarily dated) and, in the case of the legal opinion, such
other legal matters, and, in the case of the accountants'
comfort letter, such other financial matters, as ADS, or the
underwriters, may reasonably request;
(g) promptly notify ADS and each managing underwriter,
if any, participating in the offering of the securities
covered by such registration statement (i) when such
registration statement, any pre-effective amendment, the
prospectus or any prospectus supplement related thereto or
post-effective amendment to such registration statement has
been filed, and, with respect to such registration statement
or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission for
amendments or supplements to such registration statement or
the prospectus related thereto or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement 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 of any of the Registrable
Securities for sale under the securities or blue sky laws of
any jurisdiction or the initiation of any proceeding for such
purpose; (v) at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result
of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements
therein not misleading, in the light of the circumstances
under which they were made, and in the case of this clause
(v), at the request of ADS, promptly prepare and furnish to
ADS and each managing underwriter, if any, participating in
the offering of the Registrable Securities, a reasonable
number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter
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delivered to the purchasers of such securities, such
prospectus shall not include 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 not
misleading in the light of the circumstances under which they
were made; and (vi) at any time when the representations and
warranties of the Company contemplated by Section 2.4(a) or
(b) hereof cease to be true and correct;
(h) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve
months beginning with the first full calendar month after the
effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder, and
promptly furnish to ADS a copy of any amendment or supplement
to such registration statement or prospectus;
(i) provide and cause to be maintained a transfer agent
and registrar (which, in each case, may be the Company) for
all Registrable Securities covered by such registration
statement from and after a date not later than the effective
date of such registration;
(j) (i) use its best efforts to cause all Registrable
Securities covered by such registration statement to be listed
on the principal securities exchange on which similar
securities issued by the Company are then listed (if any), if
the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (ii) if no similar
securities are then so listed, use its best efforts to (x)
cause all such Registrable Securities to be listed on a
national securities exchange or (y) failing that, secure
designation of all such Registrable Securities as a National
Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ") "national market system security" within the
meaning of Rule 11Aa2-1 of the Commission or (z) failing that,
to secure NASDAQ authorization for such shares and, without
limiting the generality of the foregoing, to arrange for at
least two market makers to register as such with respect to
such shares with the National Association of Securities
Dealers, Inc.;
(k) deliver promptly to counsel to ADS and each
underwriter, if any, participating in the offering of the
Registrable Securities, copies of all correspondence between
the Commission and the Company, its counsel or auditors and
all memoranda relating to discussions with the Commission or
its staff with respect to such registration statement;
(l) use its best efforts to obtain the withdrawal of
any order suspending the effectiveness of the registration
statement;
(m) provide a CUSIP number for all Registrable
Securities, no later than the effective date of the
registration statement; and
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(n) make available its employees and personnel and
otherwise provide reasonable assistance to the underwriters
(taking into account the needs of the Company's businesses) in
their marketing of Registrable Securities.
The Company may require ADS to furnish the Company with such information
regarding ADS and the distribution of the Registrable Securities as the Company
may from time to time reasonably request in writing.
ADS agrees that upon receipt of any notice from the Company of
the happening of any event of the kind described in paragraph (g)(iii) or (v) of
this Section 2.3, ADS will, to the extent appropriate, discontinue its
disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until, in the case of paragraph (g)(v)
of this Section 2.3, its receipt of the copies of the supplemented or amended
prospectus contemplated by paragraph (g)(v) of this Section 2.3 and, if so
directed by the Company, will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in its possession, of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice. If the disposition by ADS of its securities is
discontinued pursuant to the foregoing sentence, the Company shall extend the
period of effectiveness of the registration statement by the number of days
during the period from and including the date of the giving of notice to and
including the date when ADS shall have received copies of the supplemented or
amended prospectus contemplated by paragraph (g)(v) of this Section 2.3; and, if
the Company shall not so extend such period, ADS's request pursuant to which
such registration statement was filed shall not be counted for purposes of the
requests for registration to which ADS is entitled pursuant to Section 2.1
hereof.
2.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If
requested by the underwriters for any underwritten offering by ADS pursuant to a
registration requested under Section 2.1, ADS shall enter into a customary
underwriting agreement with a managing underwriter or underwriters selected by
ADS. Such underwriting agreement shall be satisfactory in form and substance to
ADS and shall contain such representations and warranties by, and such other
agreements on the part of, the Company and such other terms as are generally
prevailing in agreements of that type, including, without limitation, customary
provisions relating to indemnification and contribution. ADS shall be party to
such underwriting agreement and may, at its option, require that any or all of
the representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made to
and for the benefit of ADS and that any or all of the conditions precedent to
the obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of ADS. ADS shall not be required to
make any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding ADS,
its ownership of and title to the Registrable Securities, and its intended
method of distribution; and any liability of ADS to any underwriter or other
person under such underwriting agreement shall be limited to liability arising
from breach of its representations and warranties and shall be limited to an
amount equal to the proceeds (net of expenses and underwriting discounts and
commissions) that it derives from such registration.
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(b) Incidental Underwritten Offerings. In the
case of a registration pursuant to Section 2.2 hereof, if the Company shall have
determined to enter into any underwriting agreements in connection therewith,
all of the Registrable Securities to be included in such registration shall be
subject to such underwriting agreements. ADS may, at its option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of ADS and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of ADS. ADS shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding ADS, its ownership of and title to the Registrable Securities, and its
intended method of distribution; and any liability of ADS to any underwriter or
other Person under such underwriting agreement shall be limited to liability
arising from breach of its representations and warranties and shall be limited
to an amount equal to the proceeds (net of expenses and underwriting discounts
and commissions) that it derives from such registration.
2.5 Preparation; Reasonable Investigation. In
connection with the preparation and filing of each registration statement under
the Securities Act pursuant to this Agreement, the Company will give ADS (if it
participates in such registration statement), its underwriters, if any, and
their respective counsel, accountants and other representatives and agents the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and give each of them such access to
its books and records and such opportunities to discuss the business of the
Company with its officers and employees and the independent public accountants
who have certified its financial statements, and supply all other information
reasonably requested by each of them, as shall be necessary or appropriate, in
the opinion of ADS and such underwriters' respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
2.6 Indemnification.
(a) Indemnification by the Company. The Company
agrees that in the event of any registration of any securities of the Company
under the Securities Act pursuant hereto, the Company shall, and hereby does,
indemnify and hold harmless ADS, its respective partners, officers, directors,
agents and affiliates and each other Person who participates as an underwriter
in the offering or sale of such securities, against any losses, claims, damages,
or liabilities, joint or several, to which ADS or any such officer, director,
partner, agent or affiliate or underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities, joint or several (or actions or proceedings, whether commenced or
threatened, in respect thereof), arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, (ii) any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, or (iii) any violation by
the Company of any federal, state or common law rule or regulation applicable to
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the Company and relating to action required of or inaction by the Company in
connection with any such registration, and the Company shall reimburse ADS and
each such director, officer partner, agent or affiliate and underwriter Person
for any legal or any other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, liability, action or
proceeding; provided that the Company shall not be liable in any such case to
ADS or any such partner, agent, or affiliate to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by or on behalf of ADS,
specifically stating that it is for use in the preparation thereof; and
provided, further, that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense (i)
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by or on behalf of such
Person or (ii) arises out of such Person's failure to send or give a copy of the
final prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force regardless of any
investigation made by or on behalf of ADS or any such director, officer,
partner, agent, affiliate or underwriter and shall survive the transfer of such
securities by ADS.
(b) Indemnification by ADS. As a condition to
including any Registrable Securities in any registration statement, the Company
shall have received an undertaking reasonably satisfactory to it from ADS so
including any Registrable Securities to indemnify and hold harmless (in the same
manner and to the same extent as set forth in paragraph (a) of this Section 2.6)
the Company, and each director of the Company, each officer of the Company and
each other Person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, but only to the extent such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company through an
instrument duly executed by ADS specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement; provided, however, that
the liability of such indemnifying party under this Section 2.6(b) shall be
limited to the amount of proceeds (net of expenses and underwriting discounts
and commissions) received by such indemnifying party in the offering giving rise
to such liability. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Company or any such
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director, officer or controlling Person and shall survive the transfer of such
securities by ADS.
(c) Notices of Claims, etc. Promptly after
receipt by an indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding subsections of this
Section 2.6, such indemnified party shall, if a claim in respect thereof is to
be made against an indemnifying party, give written notice to the latter of the
commencement of such action or proceeding; provided, however, that the failure
of any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subsections of this
Section 2.6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice, and shall not relieve the
indemnifying party from any liability which it may have to the indemnified party
otherwise than under this Section 2.6. In case any such action or proceeding is
brought against an indemnified party, the indemnifying party shall be entitled
to participate therein and, unless in the opinion of outside counsel to the
indemnified party a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any such action
or proceeding include both the indemnified party and the indemnifying party and
if in the opinion of outside counsel to the indemnified party there may be legal
defenses available to such indemnified party and/or other indemnified parties
which are different from or in addition to those available to the indemnifying
party, the indemnified party or parties shall have the right to select separate
counsel to defend such action or proceeding on behalf of such indemnified party
or parties, provided, however, that the indemnifying party shall be obligated to
pay for only one counsel for all indemnified parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by the indemnified party of such counsel, the
indemnifying party shall not be liable to such indemnified party for any legal
expenses subsequently incurred by the latter in connection with the defense
thereof other than reasonable costs of investigation (unless the first proviso
in the preceding sentence shall be applicable). No indemnifying party shall be
liable for any settlement of any action or proceeding effected without its
written consent. No indemnifying party shall, without the consent of the
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.
(d) Contribution. If the indemnification
provided for in this Section 2.6 shall for any reason be held by a court to be
unavailable to an indemnified party under subsection (a) or (b) hereof in
respect of any loss, claim, damage or liability, or any action in respect
thereof, then, in lieu of the amount paid or payable under subsection (a) or (b)
hereof, the indemnified party and the indemnifying party under subsection (a) or
(b) hereof shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating the same), (i) in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand, and the
indemnified party on the other, which resulted in such loss, claim, damage or
12
liability, or action in respect thereof, with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations, or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law or if the allocation provided in this clause (ii) provides a greater amount
to the indemnified party than clause (i) above, in such proportion as shall be
appropriate to reflect not only the relative fault but also the relative
benefits received by the indemnifying party and the indemnified party from the
offering of the securities covered by such registration statement as well as any
other relevant equitable considerations. The parties hereto agree that it would
not be just and equitable if contributions pursuant to this Section 2.6(d) were
to be determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to in the
preceding sentence of this Section 2.6(d). 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. In addition, no Person shall be obligated to
contribute hereunder any amounts in payment for any settlement of any action or
claim effected without such Person's consent, which consent shall not be
unreasonably withheld. Notwithstanding anything in this subsection (d) to the
contrary, no indemnifying party (other than the Company) shall be required to
contribute any amount in excess of the proceeds (net of expenses and
underwriting discounts and commissions) received by such party from the sale of
the Registrable Securities in the offering to which the losses, claims, damages
or liabilities of the indemnified parties relate.
(e) Other Indemnification. Indemnification and
contribution similar to that specified in the preceding subsections of this
Section 2.6 (with appropriate modifications) shall be given by the Company and
ADS with respect to any required registration or other qualification of
securities under any federal, state or blue sky law or regulation of any
governmental authority other than the Securities Act. The indemnification
agreements contained in this Section 2.6 shall be in addition to any other
rights to indemnification or contribution which any indemnified party may have
pursuant to law or contract and shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any indemnified
party and shall survive the transfer of any of the Registrable Securities by
ADS.
(f) Indemnification Payments. The
indemnification and contribution required by this Section 2.6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or expense, loss, damage or liability
is incurred.
2.7 Unlegended Certificates. In connection with
the offering of any Registrable Securities registered pursuant to this Section
2, the Company shall (i) facilitate the timely preparation and delivery to ADS
and the underwriters, if any, participating in such offering, of unlegended
certificates representing ownership of such Registrable Securities being sold in
such denominations and registered in such names as requested by ADS or such
underwriters and (ii) instruct any transfer agent and registrar of such
Registrable Securities to release any stop transfer orders with respect to any
such Registrable Securities.
2.8 Limitation on Sale of Securities. The Company
hereby agrees that if it shall previously have received a request for
registration pursuant to Section 2.1 or 2.2 hereof, and if such previous
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registration shall not have been withdrawn or abandoned, the Company shall not
effect any public or private offer, sale or distribution of its securities or
effect any registration of any of its equity securities under the Securities Act
(other than a registration on Form S-8 or any successor or similar form which is
then in effect), whether or not for sale for its own account, until a period of
90 days (or such shorter period as ADS shall be advised by their managing
underwriter) shall have elapsed from the effective date of such previous
registration, and the Company shall so provide in any registration rights
agreements hereafter entered into with respect to any of its securities..
2.9 No Required Sale. Nothing in this Agreement
shall be deemed to create an independent obligation on the part of ADS to sell
any Registrable Securities pursuant to any effective registration statement.
3. Rule 144. The Company shall take all actions reasonably
necessary to enable holders of Registrable Securities to sell such securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144, or (b) any similar rule or regulation
hereafter adopted by the Commission including, without limiting the generality
of the foregoing, filing on a timely basis all reports required to be filed by
the Exchange Act. Upon the request of ADS, the Company will deliver to ADS a
written statement as to whether it has complied with such requirements.
4. Amendments and Waivers. This Agreement may be amended,
modified or supplemented only by written agreement of the party against whom
enforcement of such amendment, modification or supplement is sought.
5. Adjustments. In the event of any change in the
capitalization of the Company as a result of any stock split, stock dividend,
reverse split, combination, recapitalization, merger, consolidation, or
otherwise, the provisions of this Agreement shall be appropriately adjusted. The
Company agrees that it shall not effect or permit to occur any combination or
subdivision of shares which would adversely affect the ability of ADS to include
any Registrable Securities in any registration contemplated by this Agreement or
the marketability of such Registrable Securities in any such registration.
6. Notice. All notices and other communications hereunder
shall be in writing and, unless otherwise provided herein, shall be deemed to
have been given when received by the party to whom such notice is to be given at
its address set forth below, or such other address for the party as shall be
specified by notice given pursuant hereto:
(a) If to ADS, to it at:
000 Xxxxx Xxxx Xxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
Attention: President
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(b) If to the Company, to it at:
000 Xxxxxxx Xx.
Xxxxxxx Xxxx, XX 00000
Attention: President
7. Assignment; Third Party Beneficiaries. This Agreement shall
be binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and permitted assigns. This Agreement may
not be assigned by the Company. ADS may, at its election, at any time or from
time to time, assign its rights under this Agreement, in whole or in part, to
any purchaser of shares of Common Stock held by it.
8. Remedies. The parties hereto agree that money damages or
other remedy at law would not be sufficient or adequate remedy for any breach or
violation of, or a default under, this Agreement by them and that, in addition
to all other remedies available to them, each of them shall be entitled to an
injunction restraining such breach, violation or default or threatened breach,
violation or default and to any other equitable relief, including without
limitation specific performance, without bond or other security being required.
In any action or proceeding brought to enforce any provision of this Agreement
(including the indemnification provisions thereof), the successful party shall
be entitled to recover reasonable attorneys' fees in addition to its costs and
expenses and any other available remedy.
9. No Inconsistent Agreements. The Company will not, on or
after the date of this Agreement, enter into any agreement with respect to its
securities which is inconsistent with the rights granted to ADS in this
Agreement or otherwise conflicts with the provisions hereof, other than any
customary lock-up agreement with the underwriters in connection with any
Offering effected hereunder, pursuant to which the Company shall agree not to
register for sale, and the Company shall agree not to sell or otherwise dispose
of, Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, for a specified period (not to exceed 180 days)
following such Offering. The Company has not previously entered into any
agreement with respect to its securities granting any registration rights to any
Person. The rights granted to ADS hereunder do not in any way conflict with and
are not inconsistent with any other agreements to which the Company is a party
or by which it is bound.
11. Descriptive Headings. The descriptive headings of the
several sections and paragraphs of this Agreement are inserted for reference
only and shall not control or otherwise affect the meaning hereof.
12. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights and obligations of the parties
hereto shall be governed by, the laws of the Delaware, without giving effect to
the conflicts of law principles thereof. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of Delaware and the United States of America located in the County
of New Castle for any action or proceeding arising out of or relating to this
Agreement and the transactions contemplated hereby (and agrees not to commence
any action or proceeding relating thereto except in such courts), and further
agrees that service of any process, summons, notice or document by U.S.
registered mail to its respective address set forth in Section 6 hereof shall be
effective service of process for any action or proceeding brought against it in
any such court. Each of the parties hereto hereby irrevocably and
15
unconditionally waives any objection to the laying of venue of any action or
proceeding arising out of this Agreement or the transactions contemplated hereby
in the courts of Delaware or the United States of America located in the County
of New Castle, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
13. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
14. Invalidity of Provision. The invalidity or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of this Agreement, including
that provision, in any other jurisdiction. If any restriction or provision of
this Agreement is held unreasonable, unlawful or unenforceable in any respect,
such restriction or provision shall be interpreted, revised or applied in a
manner that renders it lawful and enforceable to the fullest extent possible
under law.
15. Further Assurances. Each party hereto shall do and perform
or cause to be done and performed all further acts and things and shall execute
and deliver all other agreements, certificates, instruments, and documents as
any other party hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
16. Entire Agreement; Effectiveness. This Agreement
constitutes the entire agreement, and supersedes all prior agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their respective officers thereunto duly
authorized.
XXXXXXXXXXX.XXX, INC.
By: ______________________________
Name:
Title:
APPLIED DIGITAL SOLUTIONS
By: ______________________________
Name:
Title:
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