REGISTRATION RIGHTS AGREEMENT
Dated as of April 2, 1998
relating to
450,000 Common Stock Purchase Warrants
by and between
Creditrust Corporation
and
Xxxxxx, Xxxxx Xxxxx, Incorporated
Boenning & Scattergood, Inc.,
as Placement Agent
and the Initial Holders of the Company's
Senior Subordinated Notes, 1998 Series
This Registration Rights Agreement (the "Agreement") is made
and entered into as of April 2, 1998, by and between Creditrust Corporation, a
Maryland corporation (the "Company"), Ferris, Baker, Xxxxx Incorporated, and
Boenning & Scattergood, Inc. (collectively, the "Placement Agent"), who will act
as the Company's exclusive placement agent in connection with the private
placement (the "Private Placement") by the Company pursuant to Regulation D
under the Securities Act of 1933, as amended, of $5,000,000 in Units, each Unit
consisting of $100,000 in principal amount of Senior Subordinated Notes, 1998
Series (the "Notes") and 9,000 common stock purchase warrants (the "Warrants"),
and the initial Holders of the Units. In order to induce the Placement Agent and
the Holders to enter into the Senior Secured Note Series 1998 and Common Stock
Warrant Purchase Agreement (the "Purchase Agreement"), the Company has agreed to
provide the registration rights set forth in this Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Commission: The Securities and Exchange Commission.
Common Stock: The Common Stock, $0.01 par value per share, of the
Company.
Effectiveness Target Date: As defined in Section 4.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Holder: As defined in Section 2(b) hereof.
NASD: National Association of Securities Dealers, Inc.
Offering Memorandum: The Offering Memorandum, dated March 30, 1998, and
all amendments and supplements thereto, relating to the Units.
Person: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
Preliminary Prospectus: As defined in Section 3(e).
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Prospectus: The prospectus included in the Shelf Registration
Statement, as amended or supplemented by any Prospectus Supplement with respect
to the terms of the offering of any portion of the Transfer Restricted
Securities (as defined herein) covered by the Shelf Registration Statement and
by all other amendments and supplements to the prospectus, including
post-effective amendments, and all material which may be incorporated by
reference into such prospectus.
Prospectus Supplement: As defined in Section 4(b).
Registration Expenses: As defined in Section 5(a).
Shelf Registration Statement: As defined in Section 3(a) hereof.
Transfer Restricted Securities: Each share of Common Stock of the
Company issuable upon exercise of a Warrant held by a Holder who has agreed
(provided that the Company's controlling stockholder and chief executive officer
has similarly agreed) with the underwriter for the Company's initial public
offering to a lock-up following such initial public offering of up to 180 days,
as determined by such underwriter in consultation with the Company, until each
such share (i) has been effectively registered under the Securities Act and
disposed of in accordance with the effective Shelf Registration Statement
covering it, (ii) is distributed to the public pursuant to Rule 144 or (iii) may
be sold or transferred pursuant to Rule 144(k) (or any similar provisions then
in force) under the Securities Act or otherwise.
Underwriter: Any underwriter, placement agent, selling broker, dealer
manager, qualified independent underwriter or similar securities industry
professional.
Underwritten Registration or Underwritten Offering: An offering in
which securities of the Company are sold to an Underwriter or with the
assistance of such Underwriter for reoffering to the public on a firm commitment
or best efforts basis.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be
a holder of Transfer Restricted Securities (each, a "Holder") whenever such
Person owns Transfer Restricted Securities.
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SECTION 3. SHELF REGISTRATION
(a) Filing of Registration Statement. The Company shall use its best
efforts to file or cause to be filed with the Commission concurrently with or
promptly after completion of an initial public offering of the Company's Common
Stock, a shelf registration statement pursuant to Rule 415 (as may then be
amended) under the Act (the "Shelf Registration Statement") on Form S-1 or Form
S-3, if the use of such form is then available and as determined by the Company,
to cover resale of Transfer Restricted Securities by the Holders thereof who
shall have timely provided the information required pursuant to Section 3(e)
hereof. The Company shall use its reasonable best efforts to cause such Shelf
Registration Statement to be declared effective by the Commission on or prior to
120 days after the closing of such initial public offering. The Company shall
use its reasonable best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended to the extent necessary to
ensure that it is available for resales of Transfer Restricted Securities until
the second anniversary of the initial public offering (or such later time as the
Transfer Restricted Shares would become freely tradeable, assuming net exercise,
under Rule 144(k) of the Act, or any successor provision thereto (as further
described in Section 4 below)); provided that the Company shall not be obligated
to keep the Shelf Registration Statement effective as to any period with respect
to which the Company has received a written opinion, which has been furnished to
and is reasonably acceptable to the Placement Agent, from the Company's counsel,
Piper & Marbury L.L.P., or other counsel designated by the Company and
reasonably acceptable to the Placement Agent ("Company Counsel"), to the effect
that the Transfer Restricted Securities can be freely offered and sold in the
public markets without the continued effectiveness of the Shelf Registration
Statement. The Company further agrees to use its reasonable best efforts to
prevent the happening of any event that would cause the Shelf Registration
Statement to contain any 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 or to be not effective and usable for resale of the
Transfer Restricted Securities during the period that such Shelf Registration
Statement is required to be effective and usable.
Upon the occurrence of any event that would cause the Shelf
Registration Statement (i) to contain any 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 or (ii) to be not effective and usable for
resale of Transfer Restricted Securities during the period that such Shelf
Registration Statement is required to be effective and usable, the Company upon
knowledge of such an event, shall as promptly as practicable file an amendment
to the Shelf Registration Statement, in the case of clause (i), correcting any
such misstatement or omission, and in the case of either clause (i) or (ii), use
its best efforts to cause such amendment to be declared effective and such Shelf
Registration Statement to become usable as soon as practicable thereafter.
Notwithstanding anything to the contrary in this Section 3, subject to
compliance with Sections 4 and 5(b), if applicable, the Company may prohibit
offers and sales of Transfer Restricted Securities pursuant to the Shelf
Registration Statement at any time if (A), in the judgment of the
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Company's Board of Directors, acting with the advice of counsel experienced in
securities laws matters, the Board of Directors determine that (i) the Company
is in possession of material non-public information, (ii) such prohibition is
necessary in order to avoid a requirement to disclose such material non-public
information and (iii) disclosure of such material non-public information would
be materially adverse to the best interests of the Company and its stockholders
or (B) the Company has made a public announcement relating to an acquisition or
business combination transaction including the Company and/or one or more of its
subsidiaries (i) that is material to the Company and its subsidiaries taken as a
whole and (ii) the Board of Directors of the Company determines in good faith
that offers and sales of Transfer Restricted Securities pursuant to the Shelf
Registration Statement prior to the consummation of such transaction (or such
earlier date as the Board of Directors shall determine) would be materially
adverse to the best interests of the Company and its stockholders or (C) (i) the
Company has received any request by the Commission or any other federal or state
governmental authority for amendments or supplements to a Shelf Registration
Statement or related Prospectus or for additional information, (ii) the
Commission or any other federal or state governmental authority has issued any
stop order suspending the effectiveness of a Registration Statement or the
initiation or threatening of any proceedings for that purpose, (iii) the Company
has received any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Transfer Restricted
Securities for sale in any jurisdiction or the initiation or threatening of any
proceedings for such purpose, (iv) advised by counsel to the Company experienced
in securities laws matters, upon the existence of any fact or happening of any
event which makes any statement of a material fact in such Registration
Statement or related Prospectus untrue or which would require the making of any
changes in the Registration Statement or Prospectus in order that, in the case
of the Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and that in the case
of the Prospectus, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, and (v) upon advice of counsel to the Company
experienced in securities laws matters, the Company has determined that a
post-effective amendment to a Registration Statement would be appropriate (the
period during which any such prohibition of offers and sales of Transfer
Restricted Securities pursuant to the Shelf Registration Statement is in effect
pursuant to clause (A), (B) or (C) of this subparagraph (a) is referred to
herein as a "Suspension Period"). A Suspension Period shall commence on and
include the date on which the Company provides written notice to Holders of
Transfer Restricted Securities covered by the Shelf Registration Statement that
offers and sales of Transfer Restricted Securities cannot be made thereunder in
accordance with this Section 3 and shall end three business days after the
earlier to occur of (x) the date on which such material information is disclosed
to the public or ceases to be material or the Company is able to so comply with
its disclosure obligations and Commission requirements or (y) 25 days after
written notice is provided by the Company to the Holders of such Suspension
Period. Each notice shall state to the extent, if any, as is practicable, an
estimate of the expected duration of the Suspension Period.
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(b) Underwritten Offering. If the Holders of a majority of the
outstanding Transfer Restricted Securities so elect (with holders of Common
Stock constituting Transfer Restricted Securities being deemed to be Holders of
the aggregate amount of Warrants exercised for purposes of such calculation), an
offering of Transfer Restricted Securities pursuant to the Shelf Registration
Statement may be effected in the form of an Underwritten Offering. Such election
shall be evidenced by a written notice (the "Underwriting Notice") delivered to
the Company. The Holders of the Transfer Restricted Securities to be registered
shall pay all underwriting discounts and commissions of such Underwriters, and
the Company shall be obligated to pay all expenses described in Section 5 below.
(c) Selection of Underwriters. If any of the Transfer Restricted
Securities covered by the Shelf Registration Statement are to be sold in an
Underwritten Offering, the Underwriter(s) that will administer the offering will
be selected by the Holders of a majority of the outstanding Transfer Restricted
Securities (with holders of Common Stock constituting Transfer Restricted
Securities being deemed to be Holders of the aggregate amount of Warrants
exercised for purposes of such calculation); provided, however, that such
Underwriter(s) shall be reasonably satisfactory to the Company.
(d) Lock-up by Holder. Each Holder of Transfer Restricted Securities
agrees, upon the request of the Underwriter(s) in any Underwritten Offering, not
to effect any sale or distribution of securities of the Company of the same
class as the securities included in such Shelf Registration Statement, for a
period of up to 180 days beginning on the date any such Underwritten Offering
made pursuant to such Shelf Registration Statement commences, to the extent
timely notified in writing by such Underwriter(s).
(e) Selling Holder Information. No Holder of Transfer Restricted
Securities may include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless such Holder (a "Selling
Holder" or collectively, the "Selling Holders") furnishes to the Company in
writing, within 10 business days after receipt of a request therefor, such
information as the Company may reasonably request for use in connection with any
Shelf Registration Statement or Prospectus or preliminary Prospectus (a
"Preliminary Prospectus") included therein. All information provided to the
Company by any Holder shall be accurate and complete in all material respects.
After the first such request for information by the Company, it shall be the
sole responsibility of each Holder to notify the Company of any change of
address or change of ownership of the Transfer Restricted Securities of such
Holder.
SECTION 4. REGISTRATION PROCEDURES
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(a) Filing of Registration Statement. Concurrently with or promptly
(i.e., within 60 days) after completion of an initial public offering, the
Company shall prepare and file with the Commission a Shelf Registration
Statement relating to the registration on Form S-1 or Form S-3, if the use of
such form is then available and as determined by the Company, for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof and shall include all financial statements
required to be included or incorporated by reference therein. The Company shall
take such action as may be reasonably necessary so that (i) the Shelf
Registration Statement and any amendment thereto and any Prospectus forming a
part thereof and any supplement or amendment thereto complies in all material
respects with the Act and the rules and regulations thereunder, (ii) the
Registration and any amendment thereto (in either case, other than with respect
to written information furnished to the Company by or on behalf of any Holder
specifically for inclusion therein) does not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make any statement therein not misleading and (iii) the Prospectus
and any supplement thereto (in either case, other than with respect to such
information from Holders), does not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
The Company agrees to make any filings required to be made with the
NASD and use its reasonable best efforts to cause such Shelf Registration
Statement to become effective and approved by such governmental agencies or
authorities as may be necessary to enable the Selling Holders to consummate the
disposition of such Transfer Restricted Securities; provided, however, that
before filing a Shelf Registration Statement or any Prospectus, or any
amendments or supplements thereto, the Company will furnish to the Placement
Agent, each Selling Holder who may have requested the same in writing and the
Underwriter(s), if any, copies of all such documents proposed to be filed
(except that the Company shall not be required to furnish any exhibits to such
documents, including those incorporated by reference, unless so requested by the
Placement Agent, Selling Holder or Underwriter in writing), and the Company will
not file any Shelf Registration Statement or amendment thereto or any Prospectus
or any supplement thereto to which (i) the Placement Agent or the
Underwriter(s), if any, shall reasonably object or (ii) if there are no
Underwriters, the Placement Agent or the Holders of a majority of the
outstanding Transfer Restricted Securities shall reasonably object (with holders
of Common Stock constituting Transfer Restricted Securities being deemed to be
Holders of the aggregate amount of Warrants exercised for purposes of such
calculation), in each such case within ten business days after the receipt
thereof. The Placement Agent, Holder or Underwriter, if any, shall be deemed to
have reasonably objected to such filing if the Shelf Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be filed
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading which misstatement or omission is specifically identified to the
Company in writing within such ten business days.
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(b) Amendments and Supplements. The Company agrees to prepare and file
with the Commission such amendments and post-effective amendments to the Shelf
Registration Statement as may be necessary to keep the Shelf Registration
Statement effective for the applicable period set forth in Section 3(a) hereof;
cause the Prospectus to be supplemented by any required supplement thereto (a
"Prospectus Supplement"), and as so supplemented to be filed pursuant to Rule
424 under the Act, and to comply with the applicable provisions of Rules 424 and
430A under the Act in a timely manner; and comply with the provisions of the Act
with respect to the disposition of all securities covered by such Shelf
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth in
such Shelf Registration Statement, Prospectus or Prospectus Supplement.
(c) Filings of Amendments or Supplements in Connection with
Underwritten Offerings. The Company agrees, if requested in writing by the
Selling Holders of Transfer Restricted Securities, or if the Transfer Restricted
Securities are being sold in an Underwritten Offering, the Underwriter(s) of
such Underwritten Offering, promptly incorporate in the Prospectus, any
Prospectus Supplement or post-effective amendment to the Shelf Registration
Statement such information as the Underwriters and/or the Selling Holders of
Transfer Restricted Securities agree should be included therein relating to the
plan of distribution of the Transfer Restricted Securities, including, without
limitation, information with respect to the amount of Warrants and/or the number
of shares of Common Stock being sold to such Underwriter(s), the purchase price
being paid therefor and any other terms with respect to the offering of the
Transfer Restricted Securities to be sold in such offering; and make all
required filings of such Prospectus, Prospectus Supplement or post-effective
amendment as soon as practicable after the Company is notified of the matters to
be incorporated in such Prospectus, Prospectus Supplement or post-effective
amendment.
(d) Communication with Securities Exchange Commission; Notice of
Requirement to Amend or Supplement. The Company agrees to advise the Placement
Agent, the Underwriter(s), if any, and Selling Holders promptly and, if
requested by such Persons, to confirm such advice in writing, (i) when the
Prospectus or any Prospectus Supplement or post-effective amendment to the Shelf
Registration Statement has been filed, and, with respect to the Shelf
Registration Statement or any post-effective amendment thereto, when the same
has become effective, (ii) of any request by the Commission for amendments to
the Shelf Registration Statement or amendments or supplements to the Prospectus
or for additional information relating thereto, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the Shelf
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted Securities
for offering or sale in any jurisdiction, or the initiation of any proceeding
for any of the preceding purposes, (iv) if at any time the representations and
warranties of the Company contemplated by paragraph (m)(i) below cease to be
true and correct, and (v) of the existence of any fact and the happening of any
event that makes any statement of a material fact made in the Shelf Registration
Statement, the Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the
8
making of any additions to or changes in the Shelf Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at any
time the Commission shall issue any stop order suspending the effectiveness of
the Shelf Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities under state
securities or Blue Sky laws, the Company shall use its reasonable best efforts
to obtain the withdrawal or lifting of such order at the earliest possible time.
(e) Copies of Documents Incorporated by Reference in Registration
Statement. The Company agrees promptly following the filing of any document that
is to be incorporated by reference into the Shelf Registration Statement or the
Prospectus subsequent to the initial filing of the Shelf Registration Statement,
provide copies of such document (excluding exhibits, unless specifically
requested by the Placement Agent or a Selling Holder in writing) to the
Placement Agent and each Selling Holder who may have requested the same in
writing.
(f) Copies of Registration Statement and Amendments. The Company agrees
to furnish to the Placement Agent, each Selling Holder and each of the
Underwriter(s), if any, without charge, at least one copy of the Shelf
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference therein and
all exhibits (excluding exhibits to documents incorporated by reference therein
unless requested by such Placement Agent, Selling Holder or Underwriter).
(g) Copies of Preliminary Prospectus and Prospectus. The Company agrees
to deliver to the Placement Agent, each Selling Holder and each of the
Underwriter(s), if any, without charge, as many copies of any Preliminary
Prospectus and the Prospectus and any amendments or supplements thereto as such
Persons may reasonably request; the Company consents to the use of any
Preliminary Prospectus and the Prospectus and any amendments or supplements
thereto by each of the Selling Holders and each of the Underwriter(s), if any,
in connection with the public offering and the sale of the Transfer Restricted
Securities covered by any Preliminary Prospectus and the Prospectus or any
amendments or supplements thereto; provided that such use of the Preliminary
Prospectus or Prospectus, and such offering and sale, conform to the Plan of
Distribution set forth in the Prospectus and comply with all applicable laws.
(h) Blue Sky. The Company agrees, prior to any public offering of
Transfer Restricted Securities, to cooperate with the Selling Holders, the
Underwriter(s), if any, and their respective counsel in general by effecting the
registration and qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions as the Selling Holders or
Underwriter(s) may request and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdiction of the Transfer
Restricted Securities covered by the Shelf Registration Statement; provided,
however, that the Company shall not be required (i) to register or qualify as a
foreign corporation where it is not now so qualified or (ii) to take any action
that would subject it to the
9
service of process in suits, other than as to matters and transactions relating
to the Shelf Registration Statement, in any jurisdiction where it is not now so
subject.
(i) Certificates. The Company agrees to cooperate with the Selling
Holders and the Underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to be sold
and not bearing any restrictive legends; and enable such Transfer Restricted
Securities to be in such denominations and registered in such names as the
Selling Holders or the Underwriter(s), if any, may request at least two business
days prior to any sale of Transfer Restricted Securities.
(j) Other Government Agencies. The Company agrees to use its best
efforts to cause the Transfer Restricted Securities covered by the Shelf
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof or the Underwriter(s), if any, to consummate the disposition of
such Transfer Restricted Securities, subject to the proviso contained in clause
(h) above.
(k) Post-Effective Amendments or Supplements to Update. The Company
agrees to, if any fact or event contemplated by clause (d)(ii) through (v) above
shall exist or have occurred, prepare a post-effective amendment or supplement
to the Shelf Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading.
(l) Undertakings in Connection with Underwritten Offerings. The Company
agrees to, in connection with an Underwritten Registration, enter into such
agreements (including an underwriting agreement) and take all such other actions
in connection therewith as may reasonably be required in order to expedite or
facilitate the disposition of the Transfer Restricted Securities pursuant to the
Registration Agreement (including without limitation, providing in a supplement
or post-effective amendment, such information relating to the plan of
distribution as is necessary, information concerning the purchase price being
paid and such other information with respect to the offering as may be
reasonably requested), and (i) make such representations and warranties to the
Selling Holders and the Underwriter(s), in form, substance and scope as they may
reasonably request and as are customarily made by issuers to Underwriters in
Underwritten Offerings and covering matters, including, but not limited to,
those set forth in the Purchase Agreement; (ii) obtain opinions of counsel for
the Company and updates thereof in customary form and covering matters
reasonably requested by the Underwriter(s) of the type customarily covered in
legal opinions to Underwriters in connection with Underwritten Offerings
addressed to each Selling Holder and the Underwriter requesting the same and
covering the matters as may be reasonably requested by such Selling Holders and
Underwriters; (iii) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the Selling
Holders of Transfer
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Restricted Securities and the Underwriters requesting the same, such letters to
be in customary form and covering matters of the type customarily covered in
"cold comfort" letters to Underwriters in connection with Underwritten
Offerings; (iv) set forth in full or incorporate by reference in the
underwriting agreement the indemnification provisions and procedures of Section
6 hereof with respect to all parties to be indemnified pursuant to said Section;
and (v) deliver such documents and certificates as may be reasonably requested
by the Selling Holders of the Transfer Restricted Securities being sold or the
Underwriter(s) of such Underwritten Offering to evidence compliance with clause
(i) above and with any customary conditions contained in the underwriting
agreement entered into by the Company pursuant to this clause (m). The above
shall be done at or prior to each closing under such underwriting agreement, as
and to the extent required thereunder.
(m) Due Diligence. The Company agrees to make available at reasonable
times and in a reasonable manner to a representative of the Holders of the
Transfer Restricted Securities, any Underwriter participating in any disposition
pursuant to such Shelf Registration Statement and any attorney or accountant
retained by such Selling Holders or any of the Underwriters, representatives of
the Company for discussion of customary due diligence matters, and furnish such
documents and financial and other information as may be reasonably requested by
such persons in connection with such due diligence; provided, however, that such
representatives, attorneys or accountants shall agree to keep confidential
(which agreement shall be confirmed in writing in advance to the Company if the
Company shall so request) all information, records or documents made available
to such persons which are not otherwise available to the general public unless
disclosure of such records, information or documents is required by court or
administrative order (of which the Company shall have been given prior notice
and an opportunity to defend) after the exhaustion of all appeals therefrom, and
to use such information obtained pursuant to this provision only in connection
with the transaction for which such information was obtained, and not for any
other purpose.
(n) Compliance with Rules and Regulations. The Company agrees to
otherwise use its reasonable best efforts to comply with all applicable rules
and regulations of the Commission, and make generally available to its security
holders, as soon as practicable, in a regular filing on Form 10-Q or Form 10-K,
a consolidated earnings statement, which consolidated earnings statement shall
satisfy the provisions of Section 11(a) of the Act, for the twelve-month period
(i) commencing at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to Underwriters in a firm commitment or best efforts
Underwritten Offering or (ii) if not sold to Underwriters in such an offering,
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the Shelf Registration Statement.
(o) Listing, Etc. The Company agrees to cause all Transfer Restricted
Securities covered by the Shelf Registration Statement to be listed on each
securities exchange or quotation system on which similar securities issued by
the Company are then listed if requested by the Holders of a majority of the
outstanding Transfer Restricted Securities (with holders of Common Stock
constituting Transfer Restricted Securities being deemed to be Holders of the
aggregate amount of
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Warrants exercised for purposes of such calculation) or the Underwriters, if
any; cause the securities covered by the Shelf Registration Statement to be
rated with the appropriate rating agencies, if so requested by the Holders of a
majority in aggregate amount of such securities then outstanding or the
Underwriters.
(p) NASD. The Company agrees to cooperate and assist in any filings
required to be made with the NASD and in the performance of any due diligence
investigation by any Underwriter (including any "qualified independent
Underwriter" that is required to be retained in accordance with the rules and
regulations of the NASD).
(q) Agreements of Holders. Each Holder as to which any Shelf
Registration Statement is being effected agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading or necessary to cause such Shelf Registration Statement not to omit a
material fact with respect to such Holder necessary in order to make the
statements therein not misleading.
Each Holder agrees by acquisition of such Transfer Restricted
Securities that, upon receipt of any notice from the Company of the existence of
any fact of the kind described in Section 4(d)(v) hereof (an "Amendment
Notice"), such Holder will forthwith discontinue disposition of Transfer
Restricted Securities until such Holder's receipt of (i) copies of the
supplemented or amended Prospectus contemplated by Section 4(k) hereof, or until
counsel for the Company shall have determined that such disclosure is not
required due to subsequent events, (ii) notice in writing from the Company that
the use of the Prospectus may be resumed, and (iii) copies of any additional or
supplemental filings with respect to the Prospectus. If so directed by the
Company, each Holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Holder's possession, of
the Prospectus covering such Transfer Restricted Securities current at the time
of receipt of such notice. In the event Company shall give any such notice, the
time period regarding the effectiveness of the Shelf Registration Statement set
forth in Section 3(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 4(d)(v) hereof to and including the date when each Selling Holder
covered by such Shelf Registration Statement shall have received the copies of
the supplemented or amended Prospectus contemplated by Section 4(k) hereof or
shall have received the Advice and any additional or supplemental filings with
respect to the Prospectus.
SECTION 5. REGISTRATION EXPENSES
(a) Expenses of Company. All expenses incident to the Company's
performance of or compliance with this Agreement (the "Registration Expenses")
will be borne by the Company, regardless of whether a Shelf Registration
Statement becomes effective, including without limitation:
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(i) all registration and filing fees and expenses (including
filings made with the NASD);
(ii) fees and expenses of compliance with federal securities
or state blue sky laws;
(iii) expenses of printing (including, without limitation,
expenses of printing or engraving certificates for the Transfer Restricted
Securities in a form eligible for deposit with Depository Trust Company and of
printing the Prospectus and any Preliminary Prospectus), messenger and delivery
services and telephone;
(iv) fees and disbursements of counsel for the Company and for
the Holders of the Transfer Restricted Securities (subject to the provisions of
Section 5(b) hereof);
(v) fees and disbursements of all independent certified public
accountants of the Company (including the expenses of any special audit and
"cold comfort" letters required by or incidental to the preparation and filing
of a Shelf Registration Statement and Prospectus and the disposition of Transfer
Restricted Securities); and
(vi) fees and expenses of listing the Transfer Restricted
Securities on any securities exchange or quotation system in accordance with
Section 4(o) hereof.
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, rating
agency fees and the fees and expenses of any Person, including special experts,
retained by the Company. The Company shall not be responsible for commissions,
fees and discounts of brokers, dealers and agents. The Holders of Transfer
Restricted Securities shall bear the expense of any broker's commission or
Underwriter's discount or commission.
(b) Counsel to Holders. In connection with the Shelf Registration
Statement, the Company will reimburse the Holders of Transfer Restricted
Securities being registered pursuant to such Shelf Registration Statement for
the reasonable fees and disbursements of not more than one counsel chosen by the
Holders of a majority of the outstanding Transfer Restricted Securities (with
holders of Common Stock constituting Transfer Restricted Securities being deemed
to be Holders of the aggregate amount of Warrants exercisable for purposes of
such calculation) which fees and disbursements shall not exceed $10,000 in the
aggregate.
Notwithstanding the provisions of this Section 5(b), each Holder of
Transfer Restricted Securities shall pay all Registration Expenses to the extent
required by applicable law, and if the Shelf Registration Statement is to be
effected in the form of an Underwritten Offering, the discounts and commissions
of the Underwriters.
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SECTION 6. INDEMNIFICATION
(a) Company Indemnification. The Company agrees to indemnify and hold
harmless (i) the Placement Agent, (ii) each Holder, (iii) each person, if any,
who controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) the Placement Agent or any Holder (any of the persons referred to
in this clause (iii) being hereinafter referred to as a "controlling person")
and (iv) the respective officers, directors, partners, employees,
representatives and agents of the Placement Agent or any Holder or any
controlling person (any person referred to in clause (i), (ii), (iii) or (iv)
may hereinafter be referred to as a "Non-Company Indemnitee"), to the fullest
extent lawful, from and against any and all losses, claims, damages,
liabilities, reasonable expenses and judgments arising out of or based on any
untrue statement or alleged untrue statement of a material fact contained in the
Shelf Registration Statement, Prospectus or Preliminary Prospectus (or any
amendments or supplements thereto), including any document incorporated by
reference therein, or arising out of or based on any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except, with respect to
any Non-Company Indemnitee, insofar as such losses, claims, damages,
liabilities, expenses or judgments (1) are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon information
furnished in writing to the Company by such Non-Company Indemnitee expressly for
use therein (which shall include written information provided by such
Non-Company Indemnitee pursuant to Section 3(e) herein expressly for use
therein), or (2) with respect to any Preliminary Prospectus, result from the
fact that such Non-Company Indemnitee sold Transfer Restricted Securities to a
person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the final Prospectus, as amended or
supplemented, if the Company shall have previously furnished copies thereof to
such Non-Company Indemnitee in accordance with this Agreement and the final
Prospectus, as amended or supplemented, would have corrected such untrue
statement or omission. The indemnification in this subsection (a) shall be in
addition to any liability which the Company may have at common law or otherwise.
The Company also agrees to indemnify or contribute to losses of, as
provided in Section 6(d), any underwriters of Transfer Restricted Securities
registered under the Shelf Registration Statement, their officers and directors
and each Person, if any, who controls any such underwriter (within the meaning
of the Act) on substantially the same basis as that of the indemnification of
the Holders provided in this Section 6(a) and shall, if requested by any Holder,
enter into an underwriting agreement reflecting such agreement, as provided in
Section 4(l) hereof.
(b) Indemnification Procedures. In case any action shall be brought
against any Non-Company Indemnitee, based upon the Shelf Registration Statement,
Prospectus, or Preliminary Prospectus (or any amendments or supplements
thereto), and with respect to which indemnity may be sought against the Company,
such Non-Company Indemnitee shall promptly notify the Company
14
in writing and the Company shall assume the defense thereof, including the
employment of counsel and payment of all fees and expenses; provided, however,
that the omission so to notify the Company shall not relieve the Company from
any liability that it may have to any Non-Company Indemnitee (except to the
extent that the Company is materially prejudiced or otherwise forfeits
substantive rights or defenses by reason of such failure). Such Non-Company
Indemnitee shall have the right to employ separate counsel in any such action
and participate in the defense thereof, but the fees and expenses of counsel
shall be paid by such Non-Company Indemnitee, unless (i) the employment of such
counsel shall have been specifically authorized in writing by the Company, (ii)
the Company shall have failed to assume the defense and employ counsel or (iii)
the named parties to any such action (including any impleaded parties) include
both such Non-Company Indemnitee and the Company and it would be inappropriate
for the same counsel to represent such Non-Company Indemnitee and the Company
(in which case the Company shall not have the right to assume the defense of
such action on behalf of such Non-Company Indemnitee, it being understood,
however, that the Company shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) for the Non-Company Indemnitees, which firm shall be
designated in writing by the Non-Company Indemnitees and shall be subject to the
Company's approval, not to be unreasonably withheld, and whose fees and expenses
reasonably incurred shall be reimbursed as they are incurred). The Company shall
not be liable for any settlement of any such action effected without the written
consent of the Company, which consent shall not be unreasonably withheld or
delayed, and if settled with the written consent of the Company, the Company
agrees to indemnify and hold harmless any Non-Company Indemnitee from and
against any amounts payable pursuant to such written consent in connection with
such settlement. The Company shall not, without the prior written consent of
such Non-Company Indemnitee, effect any settlement of any pending or threatened
proceeding in respect of which such Non-Company Indemnitee is or could have been
a party and indemnity could have been sought hereunder by such Non-Company
Indemnitee, unless such settlement includes an unconditional release of such
Non-Company Indemnitee from all liability on claims that are the subject matter
of such proceeding.
(c) Indemnification by Holder. Each Holder of Transfer Restricted
Securities agrees to indemnify and hold harmless (i) the Company, (ii) the
Placement Agent, (iii) each other Holder, (iv) any person controlling (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the
Company, the Placement Agent and each other Holder and (v) the respective
officers, directors, partners, employees, representatives and agents of each of
the parties referred to in clauses (i), (ii), (iii) and (iv), to the same extent
as the foregoing indemnity from the Company to each of the Non-Company
Indemnitees, but only with respect to claims and actions based on information
relating to such Holder that was furnished in writing by such Holder expressly
for use in the Shelf Registration Statement or Prospectus (or any amendment or
supplement thereto) (including without limitation the information provided in
writing by a Holder pursuant to Section 3(e) expressly for use therein). In no
event shall the liability of any Holder hereunder be greater in amount than the
dollar
15
amount of the net proceeds received by such Holder upon the sale of the Transfer
Restricted Securities giving rise to such indemnification obligation.
(d) Contribution. If the indemnification provided for in this Section 6
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to herein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities and judgments 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 hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party, on the one hand, and the indemnified party, on
the other hand, shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
indemnifying party, on the one hand, or the indemnified party, on the other
hand, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The indemnity and
contribution obligations of each indemnifying party set forth herein shall be in
addition to any liability or obligation such indemnifying party may otherwise
have to any Indemnified Party, including under this Agreement.
The Company, the Placement Agent and each Holder of Transfer Restricted
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 6(d) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The losses,
claims, damages, liabilities or judgments of an indemnified party referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim prior to the indemnifying party's assumption of the defense
thereof or subsequent thereto to the extent permitted by the second sentence of
Section 6(b) hereof. Notwithstanding the provisions of this Xxxxxxx 0, xxxx of
the Holders shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the total amount of net process received by such
Holder with respect to the sale of Transfer Restricted Securities exceeds the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 6(d) are several in
proportion to the respective principal amount of Units held by each of the
Holders hereunder and not joint.
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SECTION 7. RULE 144
Rule 144. The Company shall use commercially reasonable efforts to file
the reports required to be filed by it under the Act and the Exchange Act in a
timely manner and covenants that it will take such further action as any Holder
of Transfer Restricted Securities may reasonably request, all to the extent
required from time to time, to enable such Holder to sell securities without
registration under the Act within the limitation of the exemptions provided by
Rule 144.
SECTION 8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Offering hereunder unless
such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on
the basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements, (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements,
lock-up letters and other documents required under the terms of such
underwriting arrangements and (c) furnishes the Company in writing information
in accordance with Section 3(e) and agrees to indemnify and hold harmless the
Company, its directors, its officers who sign the Registration Statement and any
person controlling the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act to the extent contemplated by Section 6(c).
SECTION 9. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering in accordance with Section 3(b) herein.
In any such Underwritten Offering, the Underwriter(s) that will administer the
offering will be selected by the Holders of the Transfer Restricted Securities
included in such offering in the manner specified in Section 3(b); provided,
however, that such Underwriters must be reasonably satisfactory to the Company.
SECTION 10. MISCELLANEOUS
(a) Remedies. Each party 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 to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not on or after the
date of this Agreement enter into any agreement with respect to its securities
that is inconsistent with the rights
17
granted to the Holders of Transfer Restricted Securities in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders of Transfer Restricted Securities hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of the
Company's securities under any other agreements in effect on the date hereof.
(c) 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 a
majority of the outstanding Transfer Restricted Securities (with holders of
Common Stock constituting Transfer Restricted Securities being deemed to be
Holders of the aggregate amount of Warrants exercised for purposes of such
calculation). Notwithstanding the foregoing, a waiver or consent to departure
from the provisions hereof that relates exclusively to the rights of Holders of
Transfer Restricted Securities whose securities are being sold pursuant to such
Shelf Registration Statement and that does not directly or indirectly affect the
rights of other Holders of Transfer Restricted Securities shall be valid only
with the written consent of Holders of at least 66-2/3% of the Transfer
Restricted Securities being sold, in each case calculated in accordance with the
provisions of Section 3(b).
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder of Transfer Restricted Securities, at the
address for such Holder set forth in the records of the Company or the Company's
transfer agent; and
(ii) if to the Company or the Placement Agent, 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.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder of Transfer Restricted Securities unless and to the extent
such successor or assign acquired Transfer Restricted Securities from such
Holder; and provided further that nothing herein
18
shall be deemed to permit any assignment, transfer or any disposition of
Transfer Restricted Securities in violation of the terms of the Purchase
Agreement. If any transferee of any Holder shall acquire Transfer Restricted
Securities, in any manner, whether by operation of law or otherwise, such
Transfer Restricted Securities shall be held subject to all of the terms of this
Agreement and by taking and holding such Transfer Restricted Securities such
person shall be conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement and such Person shall be
entitled to receive the benefits hereof.
(f) 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.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO THE
CONFLICTS OF LAW RULES THEREOF.
(i) 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.
(j) Entire Agreement. This Agreement together with all documents and
agreements referred to herein 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 securities
sold pursuant to the Purchase Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
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IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.
CREDITRUST CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
BOENNING & SCATTERGOOD, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
---------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title:
XXXXXX, XXXXX XXXXX,
INCORPORATED
By: /s/ Xxxxxx Xxxx
---------------------------------
Name: Xxxxxx Xxxx
Title:
INVESTOR:
Name:
---------------------------------
By:
---------------------------------
Title:
---------------------------------
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