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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 13,
1998, is entered into by and between TOWNE SERVICES, INC., a Georgia corporation
(the "Company"), and CAPITAL APPRECIATION PARTNERS, L.P., a Georgia limited
partnership ("Investor").
RECITALS:
The Company and Investor have entered into a Stock Purchase
Agreement, dated as of March 13, 1998 (the "Purchase Agreement"), that provides
for the sale by the Company to Investor of 15,000 shares of Series A Preferred
Stock of the Company (the "Series A Preferred"), which shares are convertible
into shares of common stock of the Company (the "Common Stock"), and in
connection therewith Investor is to receive certain registration rights in
respect of the Common Stock issuable upon conversion of the Series A Preferred.
The execution of this Agreement is a condition to the Closing under the Purchase
Agreement.
In consideration of the foregoing and the mutual terms and
provisions of this Agreement, the parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following
terms shall have the following respective meanings:
(a) "Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute enacted hereafter, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect from time to
time;
(b) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Act;
(c) The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Act and the declaration or ordering of
effectiveness of such registration statement by the Commission;
(d) "Registrable Securities" shall mean (i) shares of Common
Stock issued or issuable upon conversion of the Series A Preferred, (ii) shares
of Common Stock held of record by Investor, and (iii) any Common Stock issued as
a dividend or other distribution with respect to, or in exchange or in
replacement of, the foregoing;
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(e) "Holder" shall mean Investor if Investor holds Registrable
Securities and any other person holding Registrable Securities to whom these
registration rights have been transferred pursuant to Section 14 of this
Agreement; provided, however, that any person who acquires any of the
Registrable Securities in a distribution pursuant to a registration statement
filed by the Company under the Act or pursuant to a sale under Rule 144 under
the Act shall not be considered a Holder;
(f) "1934 Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute enacted hereafter, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time; and
(g) All other capitalized terms used herein but not otherwise
defined shall have the meanings ascribed to them in the Purchase Agreement.
2. Demand Registration. If the Company shall receive a written
request (specifying that it is being made pursuant to this Section 2) from the
Holders of at least fifty percent (50%) of the Registrable Securities that the
Company file a registration statement under the Act covering the registration
for offer and sale of at least 25% of the Registrable Securities, and provided
the Company has completed a public offering of the Common stock registered with
the Commission on Form X-0, XX-0 or SB-2 or any successor form (an "Initial
Public Offering"), then the Company shall promptly notify in writing all other
Holders of such request. Within 20 calendar days after such notice has been sent
by the Company, any other Holder may give written notice to the Company of its
intent to include its Registrable Securities in the registration, which notice
shall specify the number of shares to be included. As soon as practicable after
the expiration of such 20-day period, the Company shall use its best efforts to
cause all Registrable Securities that Holders have requested be registered to be
registered under the Act.
3. Piggyback Registration. Subject to Section 9, if at any
time the Company proposes to register any of its securities under the Act,
either for its own account or for the account of other holders of Common Stock,
in connection with the public offering of such securities solely for cash, on a
registration form that would also permit the registration of Registrable
Securities, the Company shall, with respect to any registration, including an
Initial Public Offering, promptly give each Holder written notice of such
proposal. Upon the written request of any Holder given within 20 days after
mailing of any such notice by the Company, the Company shall use its best
efforts to cause to be included in such registration under the Act all the
Registrable Securities that each such Holder has requested be registered.
4. [Intentionally Omitted.]
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5. Obligations of the Company. Whenever required under this
Agreement to use its best efforts to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Commission a registration
statement covering such Registrable Securities and use its best efforts to cause
such registration statement to be declared effective by the Commission as
expeditiously as possible and to keep such registration effective until the
earlier of (i) the date when all Registrable Securities covered by the
registration statement have been sold or (ii) 180 days from the effective date
of the registration statement; provided, that before filing a registration
statement or prospectus or any amendments or supplements thereto, the Company
will furnish to each Holder of Registrable Securities covered by such
registration statement and the underwriters, if any, copies of all such
documents proposed to be filed (excluding exhibits, unless any such person shall
specifically request exhibits), which documents will be subject to the review of
such Holders and underwriters, and the Company will not file such registration
statement or any amendment thereto or any prospectus or any supplement thereto
(including any documents incorporated by reference therein) with the Commission
if (i) the Holders of a majority of the Registrable Securities covered by such
registration statement or the underwriters, if any, shall reasonably object to
such filing or (ii) information in such registration statement or prospectus
concerning a particular selling Holder has changed and such Holder or the
underwriters, if any, shall reasonably object.
(b) Prepare and file with the Commission such amendments and
post-effective amendments to such registration statement as may be necessary to
keep such registration statement effective during the period referred to in
Section 5(a) and to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement, and cause
the prospectus to be supplemented by any required prospectus supplement, and as
so supplemented to be filed with the Commission pursuant to Rule 424 under the
Act.
(c) Furnish to the selling Holders such numbers of copies of
such registration statement, each amendment thereto, the prospectus included in
such registration statement (including each preliminary prospectus), each
supplement thereto and such other documents as they may reasonably request in
order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
Registrable Securities under such other securities laws of such jurisdictions as
shall be reasonably requested by any selling Holder and do any and all other
acts and things which may be reasonably necessary or advisable to enable such
selling Holder to consummate the disposition of the Registrable Securities owned
by such Holder in such jurisdictions; provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to
transact business or to file a general consent to service of process in any such
states or jurisdictions; and provided further that (anything in this Agreement
to the contrary notwithstanding with respect to the bearing of
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expenses) if any jurisdiction in which the Registrable Securities shall be
qualified shall require that expenses incurred in connection with the
qualification of the Registrable Securities in that jurisdiction be borne by
selling shareholders, then such expenses shall be payable by the selling Holders
pro rata, to the extent required by such jurisdiction.
(e) Promptly notify each selling Holder of such Registrable
Securities at any time when a prospectus relating thereto is required to be
delivered under the Act of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading and, at the request of any such Holder, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading.
(f) Provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement.
(g) Enter into such customary agreements (including
underwriting agreements in customary form for a primary offering) and take all
such other actions as the Holders of a majority of the Registrable Securities
being sold or the underwriters, if any, reasonably request in order to expedite
or facilitate the disposition of such Registrable Securities (including, without
limitation, effecting a stock split or a combination of shares).
(h) Make available for inspection by any selling Holder of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by any such selling Holder or underwriter, all financial and
other records, pertinent corporate documents and properties of the Company, and
cause the officers, directors, employees and independent accountants of the
Company to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement.
(i) Promptly notify the Holders of Registrable Securities and
the underwriters, if any, of the following events and (if requested by any such
person) confirm such notification in writing: (i) the filing of the prospectus
or any prospectus supplement and the registration statement and any amendment or
post-effective amendment thereto and, with respect to the registration statement
or any post-effective amendment thereto, the declaration of the effectiveness of
such documents, (ii) any requests by the Commission for amendments or
supplements to the registration
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statement or the prospectus or for additional information, (iii) the issuance or
threat of issuance by the Commission of any stop order suspending the
effectiveness of the registration statement or the initiation of any proceedings
for that purpose and (iv) the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or threat of initiation of any
proceeding for such purpose.
(j) Make every reasonable effort to prevent the entry of any
order suspending the effectiveness of the registration statement and obtain at
the earliest possible moment the withdrawal of any such order, if entered.
(k) If reasonably requested by any underwriter or a selling
Holder of Registrable Securities in connection with any underwritten offering,
promptly incorporate in a prospectus supplement or post-effective amendment such
information as the underwriters and the Holders of a majority of the Registrable
Securities being sold agree should be included therein relating to the sale of
the Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and any other terms
of the underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering, and make all required filings of such
prospectus supplement or post-effective amendment promptly after being notified
of the matters to be incorporated in such prospectus supplement or
post-effective amendment.
(l) Prior to the filing of any document which is to be
incorporated by reference into the registration statement or the prospectus
(after the initial filing of the registration statement with the Commission),
(i) promptly provide copies of such document to counsel for the selling Holders
of the Registrable Securities and the counsel for the underwriters, if any, (ii)
make representatives of the Company available for discussion of such document
and (iii) make such changes in such document prior to the filing thereof as
counsel for such Holders or underwriters may reasonably request.
(m) Cooperate with the selling Holders of Registrable
Securities and the underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends, and enable such Registrable Securities to
be in such lots and registered in such names as the underwriters may request at
least two business days prior to any delivery of Registrable Securities to the
underwriters.
(n) Provide a CUSIP number for all Registrable Securities not
later than the effective date of the registration statement.
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(o) Prior to the effectiveness of the registration statement
and any post-effective amendment thereto and at each closing of an underwritten
offering, (i) make such representations and warranties to the selling Holders of
such Registrable Securities and the underwriters, if any, with respect to the
Registrable Securities and the registration statement as are customarily made by
issuers to underwriters in primary underwritten offerings; (ii) obtain opinions
of counsel to the Company and updates thereof (which counsel and which opinions
shall be reasonably satisfactory to the underwriters, if any, and to the Holders
of a majority of the Registrable Securities being sold) addressed to each
selling Holder and the underwriters, if any, covering the matters customarily
covered in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by such Holders and underwriters or their
counsel; (iii) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the selling
Holders of Registrable Securities and the underwriters, if any, such letters to
be in customary form and covering matters of the type customarily covered in
"cold comfort" letters by underwriters in connection with primary underwritten
offerings; and (iv) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority of the Registrable Securities being sold
and by the underwriters, if any, to evidence compliance with clause (i) above
and with any customary conditions contained in the underwriting agreement or
other agreement entered into by the Company.
(p) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally available
to its security holders earnings statements satisfying the provisions of Section
11(a) of the Act, no later than 45 days after the end of any 12-month period (or
90 days, if such period is a fiscal year) (i) commencing at the end of any
fiscal quarter in which Registrable Securities are sold to underwriters in a
firm or best efforts underwritten offering, or (ii) if not sold to underwriters
in such an offering, beginning with the first month of the first fiscal quarter
of the Company commencing after the effective date of the registration
statement, which statements shall cover such 12-month periods.
6. Furnish Information. It shall be a condition precedent to
the obligations of the Company (a) to take any action pursuant to this Agreement
that the Holders shall furnish to the Company such information regarding them,
the Registrable Securities held by them, and the intended method of disposition
of such Registrable Securities as the Company shall reasonably request and as
shall be required in connection with the action to be taken by the Company and
(b) to cause any registration pursuant to this Agreement to have become
effective for the Holders to have exercised their rights of conversion with
respect to any Registrable Securities proposed to be registered.
7. Suspension of Disposition of Registrable Securities. Each
selling Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any
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notice from the Company of the happening of any event of the kind described in
Section 5(e) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities until such Holder's receipt of copies of a supplemented
or amended prospectus contemplated by Section 5(e) hereof, or until it is
advised in writing (the "Advice") by the Company that the use of the prospectus
may be resumed, and has received copies of any additional or supplemental
filings which are incorporated by reference in the prospectus, and, if so
directed by the Company, such Holder will deliver to the Company (at the expense
of the Company) all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the time periods mentioned in Section 5(a) hereof shall be
extended by the number of days during the period from and including the date of
the giving of such notice pursuant to Section 5(e) hereof to and including the
date when each selling Holder of Registrable Securities shall have received the
copies of the supplemented or amended prospectus contemplated by Section 5(e)
hereof or the Advice.
8. Expenses of Registration. All expenses incurred in
connection with a registration pursuant to Sections 2 and 3 (excluding
underwriters' discounts and commissions), including, without limitation all
registration and qualification fees, printing and accounting fees, fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel chosen by the Holders of a majority of the
Registrable Securities being registered shall be borne by the Company; provided,
however, that the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 2 if the registration request
is subsequently withdrawn, unless the Holders agree to forfeit their right to a
demand registration pursuant to Section 2; and provided further that if there
has been a material adverse change in the business or prospects of the Company
after the date of any demand for registration made pursuant to Section 2, which
change has caused such request to be withdrawn, then the Holders shall not be
required to pay any of the expenses for such registration and shall retain the
right to require the Company to register Registrable Securities pursuant to
Section 2.
9. Underwriting Requirements; Priorities.
(a) The Company and the Holders of a majority of the
Registrable Securities included in any registration under Section 2 shall
mutually agree on the selection of the investment banker(s) and manager(s) to
administer the offering, if any. The Company will not include in any
registration under Section 2 any securities that are not Registrable Securities
without the written consent of the Holders of a majority of the Registrable
Securities requesting such registration. If other securities are permitted to be
included in a registration under Section 2 which is an underwritten offering and
the managing underwriters advise the Company in writing that in their opinion
the number of Registrable Securities and other securities requested to be
included exceeds the number of Registrable Securities and other securities that
can be sold at the desired price in such offering, the
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Company will include in such registration (i) first, prior to the inclusion of
any securities that are not Registrable Securities, the number of Registrable
Securities requested to be included which in the opinion of such underwriters
can be sold, pro rata among the respective Holders on the basis of the amount of
Registrable Securities owned and (ii) second, all other securities permitted to
be included in such registration.
(b) The Company will have the right to select the investment
banker(s) and manager(s) to administer any offering to which Section 3 is
applicable, subject to the approval of the Holders of a majority of the
Registrable Securities included in such registration, which approval will not be
unreasonably withheld. If a registration under Section 3 is an underwritten
primary registration on behalf of the Company, and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold at the desired price in such offering, the Company will include in such
registration (i) first, the securities the Company proposes to sell, (ii)
second, the Registrable Securities requested to be included in such registration
by the Holders and, if applicable, the securities requested to be included in
such registration by Sirrom Investments, Inc. (or any successor in interest),
pursuant the Stock Purchase Warrant dated December 18, 1997, on a pro rata among
the Holders thereof and Sirrom Investments, Inc. (or its successor in interest)
on the basis of the number of shares requested to be registered and (iii) third,
all other securities requested to be included in such registration. If a
registration under Section 3 is an underwritten secondary registration on behalf
of holders of securities of the Company other than a registration demanded by a
Holder under Section 2 (or is a combined primary offering by the Company and
secondary offering by the Company's stockholders) and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number that can be
sold at the desired price in such offering, the Company will include in such
registration (i) first, the securities requested to be included therein by the
Holders requesting such registration and by other holders of Company securities
with contractual registration rights, pro rata among the holders of such
securities on the basis of the number of shares as requested to be included
therein, and (ii) second, other securities requested to be included in such
registration, including securities to be sold for the account of the Company.
(c) No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's securities on the
basis provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the term of such underwriting arrangements.
(d) After the date of this Agreement, the Company shall not
grant to any holder of securities of the Company any registration rights having
a priority greater than those
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granted hereunder without the prior written consent of the Holders of a majority
of the outstanding shares of Series A Preferred.
10. Termination of the Company's Obligations.
(a) The Company shall have no further obligations pursuant to
Section 2 with respect to any request or requests made by any Holder after the
Company has effected one registration pursuant to Section 2 in which the
registration statement has remained effective for at least 180 days or has
become effective and all Registrable Securities covered thereby have been sold
pursuant thereto.
(b) [INTENTIONALLY OMITTED.]
(c) The Company shall not be obligated under Sections 2 or 3
hereof to register or include in any registration Registrable Securities that
any Holder has requested to be registered if the Company shall furnish such
Holder with a written opinion of counsel reasonably satisfactory to such Holder,
that all Registrable Securities that such Holder holds may be publicly offered,
sold and distributed without registration under the Act pursuant to Rule 144
promulgated by the Commission under the Act (without recourse to clause (k)
thereof).
11. Reports Under the 1934 Act. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the Commission that may at any time permit a
Holder to sell securities of the Company to the public without registration, the
Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times subsequent to 90 days after
the effective date of the first registration statement covering an underwritten
public offering filed under the Act by the Company;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Act and the 1934 Act at
any time after it is subject to such registration requirements; and
(c) furnish to any Holder so long as such Holder owns any of
the Registrable Securities forthwith upon request a written statement by the
Company that it has complied with the reporting requirements of Rule 144 (at any
time after 90 days after the effective date of said first registration statement
filed by the Company), and of the Act and the 1934 Act (at any time after it has
become subject to such reporting requirements), a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents so
filed by the Company as may be reasonably requested by any Holder in availing
any Holder of any rule or regulation of the Commission permitting the selling of
any such securities without registration.
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12. Lockup Agreement.
(a) Each Holder agrees in connection with any registration of
its Registrable Securities, upon the request of the underwriters managing any
underwritten offering of the Company' securities, not to sell, make any short
sale of, pledge, grant any option for the purchase of or otherwise dispose of
any Registrable Securities (other than those included in the registration)
without the prior written consent of the Company or such underwriters, as the
case may be, during such period provided for in the underwriting agreement for
such offering, provided that all officers, directors and any person or entity
that holds a percentage of the Company's outstanding capital stock equal to or
greater than the percentage held by such Holder also agrees to such restriction.
(b) The Company agrees in connection with any registration of
Registrable Securities (i) not to effect any public sale or distribution of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the restriction period referred to in
Section 12(a) (except as part of such underwritten registration or pursuant to
registrations on Form S-8 or any successor form), unless the underwriters
managing the registered public offering otherwise agree, and (ii) to use best
efforts to cause each holder of at least 5% (on a fully diluted basis) of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, purchased from the Company at any time after
the date of this Agreement (other than in a registered public offering) to agree
not to effect any sale or distribution of any such securities during such period
(except as part of such underwritten registration, if otherwise permitted),
unless the underwriters managing the registered public offering otherwise agree.
13. Certain Limitations in Connection with Future Grants of
Registration Rights. From and after the date of this Agreement, the Company
shall not enter into any agreement with any holder or prospective holder of any
securities of the Company providing for the granting to such holder of
registration rights unless such agreement:
(a) includes the equivalent of Section 12 of this Agreement as
a term;
(b) includes a provision that, in the case of a registration
involving an underwritten offering under Section 2, protects the Holders if
marketing factors require a limitation on the number of securities to be
included in an underwriting in the manner contemplated by Section 9 of this
Agreement;
(c) is otherwise not inconsistent with the rights granted to
the Holders of Registrable Securities in this Agreement; and
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(d) is approved by the Holders of at least a majority of the
Registrable Securities then outstanding.
14. Transfer of Registration Rights. The Holder may transfer
the rights under this Agreement in whole or in part at any time to any
subsidiary, partner or other affiliate of the Holder and, with the consent of
the Company (which consent shall not be unreasonably withheld, conditioned or
delayed), to any other party; provided, the Holder shall give the Company
written notice at the time of such transfer stating the name and address of the
transferee and identifying the securities with respect to which the rights under
this Agreement are being assigned; and, provided further, no transfer shall
increase the obligations of the Company under this Agreement.
15. Indemnification. In the event any Registrable Securities
are included in a registration statement under this Agreement:
(a) To the full extent permitted by law, the Company will, and
hereby does indemnify and hold harmless each Holder requesting or joining in a
registration, each director, officer, partner, employee, or agent for such
Holder, any underwriter (as defined in the Act) for such Holder, and each
person, if any, who controls such Holder or underwriter within the meaning of
the Act, against any losses, claims, damages or liabilities, joint or several,
to which they may become subject under the Act and applicable state securities
laws insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based on any untrue or alleged untrue
statement of any material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein in light of the circumstances under which they were made or
necessary to make the statements therein not misleading or arise out of any
violation by the Company of any rule or regulation promulgated under the Act
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration; and will reimburse each such
person or entity for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 15(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 shall not be unreasonably withheld)
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in connection with such registration statement, preliminary prospectus,
final prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by or on behalf of any such Holder, underwriter or
controlling person.
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(b) To the full extent permitted by law, each Holder
requesting or joining in a registration under this Agreement will indemnify and
hold harmless the Company, each of its directors, each of its officers who have
signed the registration statement, each person, if any, who controls the Company
within the meaning of the Act, and any underwriter for the Company (within the
meaning of the Act), each other selling Holder and each person, if any, who
controls such other selling Holder within the meaning of Section 15 of the Act
against any losses, claims, damages or liabilities, joint or several, to which
the Company or any such director, officer, controlling person or underwriter may
become subject, under the Act and applicable state securities laws, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or arise out of or are based upon the 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, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in such registration statement, preliminary or final prospectus, or
amendments or supplements thereto, in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer,
controlling person or underwriter in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 15(b) 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 such Holder (which consent shall
not be unreasonably withheld).
In no event shall the liability of any selling Holder of
Registrable Securities hereunder be greater than the dollar amount of the
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Promptly after receipt by an indemnified party under this
Section 15 of notice of the commencement of any action or knowledge of a claim
that would, if asserted, give rise to a claim for indemnity hereunder, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 15, notify the indemnifying party in
writing of the commencement thereof or knowledge thereof and the indemnifying
party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties. The failure to notify an indemnifying party
promptly of the commencement of any such action or of the knowledge of any such
claim, if prejudicial to his ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party
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under this Section 15, but the omission so to notify the indemnifying party will
not relieve him of any liability that he may have to any indemnified party
otherwise than under this Section.
16. Remedies. In addition to being entitled to exercise all
rights provided in this Agreement and the Purchase Agreement as well as all
rights granted by law, including recovery of damages, each Holder of Registrable
Securities will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees not to raise the defense in any action for
specific performance that a remedy at law would be adequate.
17. Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority of the outstanding Registrable Securities, voting
together as a single class.
18. Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by personal delivery, by
nationally recognized overnight courier (with charges prepaid) or by telecopy
(with telephone confirmation) as follows:
(a) if to a Holder of Registrable Securities, at the most
current address given by such Holder to the Company in accordance with the
provisions of this Section 18, which address initially is, with respect to
Investor, the address set forth in the Purchase Agreement, with a copy (which
shall not constitute notice) to Investor's respective counsel as identified
therein; and
(b) if to the Company, initially at its address set forth in
the Purchase Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 18, with a copy (which
shall not constitute notice) to the Company's counsel as identified therein.
All such notices and communications shall be deemed to have
been duly given or made when personally delivered, the day of guaranteed
delivery by such overnight courier service or when transmitted to the specified
telecopy number and confirmed by telephone, in each case addressed to the
respective parties as set forth above.
19. Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
20. Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
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21. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia.
22. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
23. Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Company Stock. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
24. Parties Benefited. Nothing in this Agreement, express or
implied, is intended to confer upon any third party any rights, remedies,
obligations or liabilities.
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The parties have executed this Registration Rights Agreement as of the
date first above written.
TOWNE SERVICES, INC.
By: /s/ Xxxxx X. Xxxxxxxx, Xx.
-----------------------------------
Name:
Title:
CAPITAL APPRECIATION PARTNERS, L.P.
By: CAPITAL APPRECIATION MANAGEMENT
COMPANY, L.L.C., Its General Partner
By: /s/ Xxxxx X. Xxxxx
-----------------------------
Name: Xxxxx X. Xxxxx
Title: Managing Member
