Exhibit 10.2
INVESTOR'S RIGHTS AGREEMENT
by and among
VELOCITYHSI, INC.
and
BANC OF AMERICA MORTGAGE CAPITAL CORPORATION
Dated as of April 23, 2001
This Investor's Rights Agreement (this "Agreement"), dated as of April 23,
2001, is made by and between VelocityHSI, Inc., a Delaware corporation (the
"Company"), and Banc of America Mortgage Capital Corporation (the "Investor").
Whereas, the Investor has agreed to purchase from the Company, and the
Company has agreed to sell to the Investor, shares of the Company's Series A
Preferred Stock (the "Series A Preferred Stock") on the terms and conditions set
forth in that certain Series A Convertible Preferred Stock Purchase Agreement,
of even date herewith, by and between the Company and the Investor (the
"Securities Purchase Agreement"); and
Whereas, the parties to the Securities Purchase Agreement intend for the
Investor to be granted certain registration rights, all as more fully set forth
herein.
Now Therefore, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1 Registration Under Securities Act, Etc.
1.1 Registration on Request.
(a) Request. At any time on or after April 23, 2002 and from time to
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time thereafter upon the written request of Holders (the "Initiating Holders")
of not less than the Required Number of Shares that the Company effect the
registration under the Securities Act of all or part of such Initiating Holders'
Registrable Securities (provided that the Company shall not be obligated to
register less than the Required Number of Shares pursuant to such request), the
Company will promptly give written notice of such requested registration to all
registered Holders, and thereupon the Company will use reasonable commercial
efforts to effect the registration under the Securities Act of:
(i) the Registrable Securities (representing not less than the
Required Number of Shares) which the Company has been so requested to
register by such Initiating Holders, and
(ii) all other Registrable Securities which the Company has been
requested to register by the Holders thereof (such Holders together with
the Initiating Holders are hereinafter referred to as the "Selling
Holders") by written request given to the Company within 20 days after the
giving of such written notice by the Company, all to the extent required to
permit the disposition of the Registrable Securities so to be registered.
(b) Registration of Other Securities. Whenever the Company shall
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effect a registration pursuant to this Section 1.1 in connection with an
underwritten offering by one or more Selling Holders, no securities other than
Registrable Securities shall be included among the securities covered by such
registration unless (i) the managing underwriter of such offering shall have
advised each Selling Holder to be covered by such registration in writing that
the inclusion of such other securities would not adversely affect such offering
or (ii) the Selling Holders of not less than a majority of all Registrable
Securities to be covered by such registration shall have consented in writing to
the inclusion of such other securities.
(c) Registration Statement Form. Registrations under this Section 1.1
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shall be on such appropriate registration form of the Commission as shall be
selected by the Company.
(d) Expenses. The Selling Holders of any Registrable Securities will
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pay the Registration Expenses in connection with any registration requested
pursuant to this Section 1.1, each Selling Holder in its pro rata share.
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(e) Effective Registration Statement. A registration requested
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pursuant to this Section 1.1 shall not be deemed to have been effected:
(i) unless a registration statement with respect thereto has
become effective,
(ii) if after it has become effective, such registration is
interfered with by any stop order, injunction or other order or requirement
of the Commission or other governmental agency or court for any reason not
attributable to the Selling Holders and such registration has not
thereafter become effective, or
(iii) if the conditions to closing specified in the underwriting
agreement, if any, entered into in connection with such registration are
not satisfied or waived, other than by reason of a failure on the part of
the Selling Holders.
(f) Selection of Underwriters. The underwriter or underwriters of
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each underwritten offering of the Registrable Securities shall be selected by
the mutual agreement of the Company and the Selling Holders of a majority of the
Registrable Securities so to be registered.
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(g) Underwritten Offering; Priority in Requested Registration. . If
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requested by the underwriters for any underwritten offering by Holders pursuant
to a registration requested under this Section 1.1, the Company will enter into
an underwriting agreement with such underwriters for such offering, such
agreement to be reasonably satisfactory in substance and form to the Company,
each such Holder and the underwriters and to contain such representations and
warranties by the Company and such other terms as are generally prevailing in
agreements of that type, including, without limitation, indemnities to the
effect and to the extent provided in Section 1.8. The Holders of the Registrable
Securities proposed to be distributed by such underwriters will cooperate with
the Company in the negotiation of the underwriting agreement. Such Holders of
the Registrable Securities to be distributed by such underwriters shall be
parties to such underwriting agreement. Any such Holder shall not be required to
make any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
Holder, such Holder's Registrable Securities, such Holder's intended method of
distribution and any other representations required by law. If the managing
underwriter of any underwritten offering shall advise the Company in writing
(with a copy to each Selling Holder) that, in its opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering within a price range acceptable to the
Selling Holders of a majority of the Registrable Securities requested to be
included in such registration, the Company will include in such registration, to
the extent of the number which the Company is so advised can be sold in such
offering, Registrable Securities requested to be included in such registration,
pro rata among the Selling Holders on the basis of the percentage of the
Registrable Securities of such Selling Holders requested so to be registered. In
connection with any such registration to which this Section 1.1(g) is
applicable, no securities other than Registrable Securities shall be covered by
such registration.
(h) Limitations on Registration on Request. Notwithstanding anything
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in this Section 1.1 to the contrary, the Company shall not be required to
effect, in the aggregate pursuant to this Section 1.1, without regard to the
Holder making such request, more than two registrations during any twelve month
period.
1.2 Incidental Registration.
(a) Right to Include Registrable Securities. If the Company proposes
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at any time to register any of its securities under the Securities Act by
registration on Forms X-0, X-0 or S-3 or any successor or similar form(s)
(except registrations on such Forms or similar form(s) solely for registration
of securities in connection with an employee benefit plan or dividend
reinvestment plan or a merger, reorganization, or consolidation, or a
registration in connection with an Initial Public Offering where no shares are
being sold by any Person other than the Company), whether or not for sale for
its own account, it will, each such time give prompt written notice to all
registered Holders of its intention to do so and of such Holders' rights under
this Section 1.2. Upon the written request of any such Holder (a "Requesting
Holder") made as promptly as practicable and in any event within 20 days after
the receipt of any such notice (10 days if the Company states in such written
notice or gives telephonic notice to all registered Holders, with written
confirmation to follow promptly thereafter, that (i) such registration will be
on Form S-3 and (ii) such shorter period of time is required because of a
planned filing date) (which request shall specify the Registrable Securities
intended to be disposed of by such
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Requesting Holder), the Company will use its reasonable commercial efforts to
effect the registration under the Securities Act of all Registrable Securities
which the Company has been so requested to register by the Requesting Holders
thereof; provided, that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Requesting Holder and (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from any obligation of
the Company to pay the Registration Expenses in connection therewith), without
prejudice, however, to the rights of any Holder or Holders entitled to do so to
request that such registration be effected as a registration under Section 1.1
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities, for the same period as the
delay in registering such other securities being included in such registration.
No registration effected under this Section 1.2 shall relieve the Company of its
obligation to effect any registration upon request under Section 1.1. The
Company will pay all Registration Expenses in connection with registration of
Registrable Securities requested pursuant to this Section 1.2.
(b) Underwritten Offering; Priority in Incidental Registrations. If the
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Company proposes to register any of its securities as contemplated by this
Section 1.2 and such securities are to be distributed through one or more
underwriters, all Holders proposing to distribute their securities through such
underwriting shall (together with the Company as provided in Subsection 1.4(e))
enter into an underwriting agreement in usual and customary form with the
underwriter or underwriters selected for such underwriting. The Company shall
not be required under Section 1.2(a) to include any of the Holders' securities
in such underwriting unless they accept the terms of the underwriting as
customarily agreed upon between the Company and the underwriters selected by it,
and then only in such quantity as the underwriters determine in their sole
discretion will not jeopardize the success of the offering by the Company.
Notwithstanding the provisions of Section 1.2(a) hereof, if the managing
underwriter of any underwritten offering shall inform the Company (or, in the
case of a secondary offering, the selling stockholders initiating such offering)
of its belief that the number or type of Registrable Securities requested to be
included in such registration would materially adversely affect such offering,
then the Company will include in such registration, to the extent of the number
and type which the Company is (or the selling stockholders initiating such
offering are) so advised can be sold in (or during the time of) such offering,
first, all securities proposed by the Company (or, in the case of a secondary
offering, the selling stockholders initiating such offering) to be sold for its
(or their) own account, and second, such Registrable Securities and any other
securities of the Company requested to be included in such registration, pro
rata among all such holders on the basis of the estimated gross proceeds of the
securities of such holders requested to be so included. Notwithstanding the
foregoing provisions of this Section 1.2, the Company need not include any
Registrable Securities of any such Requesting Holder in an underwritten offering
of the Company's securities if the inclusion of such Requesting Holder's
securities, in the opinion of the managing underwriter for such offering by the
Company, might adversely affect such offering by the Company. Any such Holder
shall not be required to make any representations or warranties to or agreement
with the Company or the underwriters other than representations, warranties or
agreements regarding such Holder, such Holder's Registrable Securities, such
Holder's intended method of distribution and any other representations required
by law.
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(c) Underwritten Offering; Selection of Managing Underwriter. The
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managing underwriter of any underwritten offering pursuant to this Section 1.2
shall be selected by the Company at its sole discretion.
1.3 Form S-3 Registration.
If the Company shall receive from any Holder or Holders of not less than
520,750 shares of the Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 with respect to all or a part of
the Registrable Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration to all
other Holders; and
(b) use reasonable commercial efforts to effect such registration on
Form S-3 as soon as practicable of such Holder's or Holders' Registrable
Securities specified in such request, together with the Registrable Securities
of any other Holder or Holders joining in such request as are specified in a
written request given within twenty (20) days after mailing of such notice by
the Company; provided, however, that the Company shall not be obligated to
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effect any such registration pursuant to this Section 1.3 (i) if Form S-3 is not
available for the registration of the Registrable Securities, (ii) if the
Company has, within the twelve-month period preceding the date of such request,
already effected two registrations on Form S-3 for the Holders pursuant to this
Section 1.4, (iii) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration or any related qualification or
compliance; or (iv) during the period ending one hundred eighty (180) days after
the effective date of a registration statement subject to Section 1.2.
(c) Subject to the foregoing and to the provisions of Section 1.7,
the Company shall file a registration statement covering the Registrable
Securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders.
(d) The substantive provisions of Section 1.2(b) shall apply to the
registration if it relates to an underwritten offering. The Company will
pay all Registration Expenses in connection with registration of
Registrable Securities requested pursuant to this Section 1.3.
1.4 Registration Procedures.
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If and whenever the Company is required to effect the registration of any
Registrable Securities under the Securities Act as provided in Section 1.1, 1.2
or 1.3, the Company will as expeditiously as possible:
(a) in the case of a registration pursuant to Section 1.1, 1.2 or
1.3, prepare and (as soon as practicable, and in any event within 75 days in the
case of Form S-1 or S-2 and 30 days in the case of a registration requested on
Form S-3 after the end of the period within which requests for registration may
be given to the Company) file with the Commission the requisite registration
statement to effect such registration and thereafter use reasonable commercial
efforts to cause such registration statement to become effective; provided, that
the Company may
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discontinue any registration of its securities which are not Registrable
Securities (and, under the circumstances specified in Section 1.2(a), its
securities which are Registrable Securities) at any time prior to the effective
date of the registration statement relating thereto;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such registration statement
for such period as shall be required for the disposition of all of such
Registrable Securities, provided, that in the case of a registration pursuant to
Section 1.1, 1.2 or 1.3, such period need not exceed 90 days;
(c) furnish to each seller of Registrable Securities covered by such
registration statement, such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus contained in
such registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act, and
such other documents, as such seller may reasonably request;
(d) use reasonable commercial efforts:
(i) to register or qualify all Registrable Securities and
other securities covered by such registration statement under such other
securities or blue sky laws of such states of the United States of America
where an exemption is not available and as the sellers of Registrable
Securities covered by such registration statement shall reasonably request;
(ii) to keep such registration or qualification in effect for so
long as such registration statement remains in effect; and
(iii) to take any other action which may be reasonably necessary
or advisable to enable such sellers to consummate the disposition in such
jurisdictions of the securities to be sold by such sellers, except that the
Company shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would
not but for the requirements of this subdivision (d) be obligated to be so
qualified or to consent to general service of process in any such
jurisdiction;
(e) to cause all Registrable Securities covered by such registration
statement to be registered with or approved by such other federal or state
governmental agencies or authorities as may be necessary in the opinion of
counsel to the Company and counsel to the seller or sellers thereof to
consummate the disposition of such Registrable Securities;
(f) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement;
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(g) notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, in the judgment of the Company,
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, in the light of the circumstances under which they were made,
and at the request of any such seller promptly prepare and furnish to it a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, in the judgment of the Company, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made;
(h) otherwise use its reasonably commercial efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first full calendar month after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 promulgated
thereunder, and promptly furnish to each such seller of Registrable Securities a
copy of any amendment or supplement to such registration statement or
prospectus;
(i) provide and cause to be maintained a transfer agent and registrar
(which, in each case, may be the Company) for all Registrable Securities covered
by such registration statement from and after a date not later than the
effective date of such registration; and
(j) use reasonable commercial efforts to list all Registrable
Securities covered by such registration statement on any national securities
exchange or national quotations system on which Registrable Securities of the
same class covered by such registration statement are then listed.
The Company may require each seller of Registrable Securities as to which
any registration is being effected to furnish the Company in writing as promptly
as reasonably practicable such information regarding such seller and the
distribution of such securities as the Company may from time to time reasonably
request in writing.
Each Holder agrees that upon receipt of any notice from the Company of the
happening of any event of the kind described in subdivision (h) of this Section
1.4, such Holder will forthwith discontinue such Holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (h) of this
Section 1.4 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such Holder's possession, of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
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1.5 Limitations, Conditions and Qualifications to Obligations Under
Registration Covenants.
The obligation of the Company to use its reasonable commercial efforts to
cause the Registrable Securities to be registered under the Securities Act is
subject to the following limitations, conditions and qualifications.
(a) The Company shall be entitled to postpone or suspend for a
reasonable period of time (but not exceeding 180 days, in the case of a
registration pursuant to Section 1.1, 1.2 or 1.3 the filing of any registration
statement otherwise required to be prepared and filed by it pursuant to Section
1.1, if the Company determines, in its reasonable judgment, that such
registration and offering (i) would interfere with any financing, acquisition,
merger, consolidation, material joint venture, corporate reorganization or other
material transaction involving the Company or any of its Affiliates, or (ii)
would require premature disclosure of any of the foregoing transactions (or of
the existence of negotiations, discussions or pending proposals with respect
thereto) or of any pending or threatened litigation, claim, assessment or
governmental investigation which would be material to the Company, or any other
event which the Company (in the judgment of management of the Company) has a
bona fide business purpose for keeping confidential and the nondisclosure of
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which in the registration statement might cause the registration statement to
fail to comply with applicable disclosure requirements, provided, however, that
the Company: (i) promptly gives the Holders requesting registration thereof
pursuant to Section 1.1 written notice of such delay or suspension and (ii) may
not delay or suspend the registration statement for such reason more than twice
in any twelve (12) month period or three times in any twenty-four (24) month
period or for more than one hundred eighty (180) days at any time. If the
Company shall so postpone the filing of a registration statement, such Holders
of Registrable Securities requesting registration thereof pursuant to Section
1.1 shall have the right to withdraw the request for registration by giving
written notice to the Company within 30 days after receipt of the notice of
postponement and, in the event of such withdrawal, such request shall not be
counted for purposes of the requests for registration to which Holders are
entitled pursuant to Section 1.1 hereof. Upon receipt of any notice from the
Company of the happening of any event during the period the registration
statement is effective which is of a type specified herein or as a result of
which the registration statement or related prospectus contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statement therein, in light of the
circumstances under which they were made not misleading, the Holders agree that
they will immediately discontinue offers and sales of the Registrable Securities
under the registration statement until they receive copies of a supplemental or
amended prospectus that corrects the misstatements or omissions and receive
notice that any post-effective amendment has become effective. If so directed by
the Company, the Holders will deliver to the Company any copies of the
prospectus covering the Registrable Securities in their possession at the time
of receipt of such notice. In the event the Company shall give notice of the
happening of an event of the kind described in this Section 1.7(a), the Company
shall extend the period during which the affected registration statement is
required to be maintained pursuant to this Agreement by the number of days
during the period from and including the date of the giving of notice pursuant
to this Section 1.7(a) to the date when the Company shall make available a
prospectus supplemented or amended to conform with the requirements of the
Securities Act.
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(b) If all reports required to be filed by the Company pursuant to
the Exchange Act have not been filed by the required date without regard to any
extension, or if the consummation of any business combination by the Company has
occurred or is probable for purposes of Rule 3-05 or Article 11 of Regulation S-
X under the Securities Act, upon written notice thereof by the Company to the
Holders, the rights of the Holders to offer, sell or distribute any Registrable
Securities pursuant to any registration statement or to require the Company to
take action with respect to the registration of any Registrable Securities
pursuant to this Agreement shall be suspended until the date on which the
Company has filed such reports or obtained and filed the financial information
required by Rule 3-05 or Article 11 of Regulation S-X to be included or
incorporated by reference, as applicable, in the registration statement and the
Company shall notify the Holders as promptly as practicable when such suspension
is no longer required.
(c) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities. The
Company shall have no obligation with respect to any registration requested
pursuant to this Agreement if, as a result of the application of the preceding
sentence, the number of shares of the Registrable Securities to be included in
the registration does not equal or exceed the number of shares required to
originally trigger the Company's obligation to initiate such registration.
(d) The Company shall not be obligated to effect the registration of
Registrable Securities of any Holder pursuant to Section 1.1, 1.2 or 1.3 unless
such Holder consents to reasonable conditions imposed by the Company, including
without limitation:
(i) conditions prohibiting the sale of shares by such Holder
until the registration shall have been effective for a specified period of
time;
(ii) conditions requiring such Holder to comply with all
prospectus delivery requirements of the Securities Act and with all anti-
stabilization, anti-manipulation and similar provisions of Section 10 of
the Exchange Act and any rules issued thereunder by the Commission, and to
furnish to the Company information about sales made in such public
offering;
(iii) conditions prohibiting such Holder from effecting the sale
of shares upon receipt of telegraphic or written notice from the Company
(until further notice) given to permit the Company to correct or update a
registration statement or prospectus; and
(iv) conditions requiring that at the end of the period during
which the Company is obligated to keep the registration statement effective
under Section 1.3(b), such Holder shall discontinue sales of shares
pursuant to such registration statement upon receipt of notice from the
Company of its intention to remove from registration the shares covered by
such registration statement that remain unsold, and requiring such Holder
to
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notify the Company of the number of Registrable Securities registered that
remain unsold promptly upon receipt of notice from the Company.
(e) Holders shall use their reasonable best efforts to effect as wide
a distribution of such Registrable Securities as reasonably practicable, and in
no event shall any sale of Registrable Securities be made knowingly to (i) any
Person (including its Affiliates) or (ii) any Persons or entities which are to
the knowledge of such Holders (or to the knowledge of any underwriter for such
Holders) part of any "group" within the meaning of Regulation 13D of the
Exchange Act which includes such purchaser or any of its Affiliates that, after
giving effect to such sale, would beneficially own securities representing more
than 5% of the aggregate voting power of all outstanding voting securities of
the Company. The Holders of such Registrable Securities shall secure the
agreement of their underwriter or underwriters, if any, for such offering to
comply with the foregoing.
1.6 Hold-back Agreement.
In the case of any underwritten public offering by the Company of shares of
Common Stock, each Holder agrees not to effect any disposition (other than a
disposition of Registrable Securities under such underwritten public offering or
a bona fide pledge or a disposition to an Affiliate of such Holder who agrees to
be bound by the provisions of this paragraph) (a "Disposition") of any
Registrable Securities, and not to effect any such Disposition of any other
equity security of the Company or of any security convertible into or
exchangeable or exercisable for any equity security of the Company (in each
case, other than as part of such underwritten public offering) during the 15
days prior to, and during the 90-day period (or such longer period as may be
reasonably requested by the underwriter of such offering) beginning on, the
effective date of such registration statement (except as apart of such
registration); provided that each Holder has received written notice of such
registration at least 15 days prior to such effective date.
1.7 Indemnification.
(a) Indemnification by the Company. In the event of any registration
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of any securities of the Company under the Securities Act, the Company will, and
hereby does, indemnify and hold harmless, in the case of any registration
statement filed pursuant to Section 1.1, 1.2 or 1.3 each seller of any
Registrable Securities covered by such registration statement, its directors,
officers, partners, agents and Affiliates and each other Person who participates
as an underwriter in the offering or sale of such securities and each other
Person, if any, who controls such seller or any such underwriter within the
meaning of the Securities Act (a "Controlling Person"), insofar as losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, and the Company will
reimburse such seller and each such director, officer, partner, agent or
affiliate, underwriter and Controlling Person for any legal or any other
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expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument executed by or on behalf of such
seller or underwriter, as the case may be, specifically stating that it is for
use in the preparation thereof; and provided further, that the Company shall not
be liable to any seller of Registrable Securities or any Person who participates
as an underwriter in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such seller's or Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus so long as such final prospectus, and any amendments or
supplements thereto, have been furnished to such seller or underwriter. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such seller or any such director, officer, partner,
agent or affiliate or Controlling Person and shall survive the transfer of such
securities by such seller.
(b) Indemnification by the Sellers. As a condition to including any
------------------------------
Registrable Securities in any registration statement, the Company shall have
received an undertaking satisfactory to it from the prospective seller of such
Registrable Securities, to indemnify and hold harmless (in the same manner and
to the same extent as set forth in subdivision (a) of this Section 1.9) the
Company, and each director of the Company, each officer of the Company, the
Company's agents and Affiliates and each other Person, if any, who controls the
Company within the meaning of the Securities Act (a "Company Controlling
Person"), with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
seller specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; provided, however, that the liability of
such indemnifying party under this Section 1.9(b) shall be limited to the amount
of net proceeds received by such indemnifying party in the offering giving rise
to such liability. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Company or any such
director, officer or Company Controlling Person and shall survive the transfer
of such securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
----------------------
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 1.9, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the
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commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 1.9, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties is reasonably likely to exist in respect of such claim, the indemnifying
party shall be entitled to participate in and, to assume the defense thereof,
jointly with any other indemnifying party similarly notified to the extent that
it may wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties arises in respect of such claim after the assumption of the defense
thereof and the indemnified party notifies the indemnifying party of such
indemnified party's judgment and the basis therefor. No indemnifying party shall
be liable for any settlement of any action or proceeding effected without its
written consent, which consent shall not be unreasonably withheld. No
indemnifying party shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation.
(d) Contribution. If the indemnification provided for in this Section
------------
1.9 shall for any reason be held by a court to be unavailable to an indemnified
party under subparagraph (a) or (b) hereof in respect of any loss, claim, damage
or liability, or any action in respect thereof, then, in lieu of the amount paid
or payable under subparagraph (a) or (b) hereof, the indemnified party and the
indemnifying party under subparagraph (a) or (b) hereof shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as is appropriate to reflect the relative fault of the Company
and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claims, damage or liability,
or action in respect thereof, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company and such prospective sellers from the offering of the securities
covered by such registration statement. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Such prospective sellers' obligations to
contribute as provided in this subparagraph (d) are several in proportion to the
relative value of their respective Registrable Securities covered by such
registration statement and not joint. In addition, no Person shall be obligated
to contribute hereunder any amounts in payment for any settlement of any action
or claim effected without such Person's consent, which consent shall not be
unreasonably withheld.
(e) Other Indemnification. Indemnification and contribution similar
---------------------
to that specified in the preceding subdivisions of this Section 1.9 (with
appropriate modifications) shall
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be given by the Company and each seller of Registrable Securities with respect
to any required registration or other qualification of securities under any
Federal or state law or regulation of any governmental authority other than the
Securities Act.
(f) Indemnification Payments. The indemnification and contribution
------------------------
required by this Section 1.9 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred. In any case in which
it shall be judicially determined that a party is not entitled to
indemnification or contribution, any payments previously received by such party
hereunder shall be promptly reimbursed.
(g) Conflict with Underwriting Agreement. Notwithstanding the
------------------------------------
foregoing, to the extent that the provisions on indemnification and contribution
contained in the underwriting agreement entered into in connection with the
underwritten sale of Registrable Securities effected pursuant to a registration
statement filed pursuant hereto are in conflict with the foregoing provisions,
the provisions in the underwriting agreement shall control.
2 Definitions.
As used herein, unless the context otherwise requires, the following terms
have the following respective meanings (capitalized terms used but not defined
herein having the meanings set forth in the Securities Purchase Agreement):
"Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to the comparable section, if any, of any such similar
Federal statute.
"Holder" means any holder of Registrable Securities.
"Person" means a corporation, an association, a partnership, an
organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 1, including, without limitation, all
registration, filing and fees of the National Association of Securities Dealers,
Inc., all listing fees, all fees and expenses of complying with securities or
blue sky laws (including, without limitation, reasonable fees and disbursements
of counsel for the underwriters in connection with blue sky qualifications of
the Registrable Securities), all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of "cold comfort" letters required by or incident to
13
such performance and compliance, any fees and disbursements of underwriters
(including, without limitation, fees and expenses of counsel to the
underwriters) customarily paid by issuers or sellers of securities; provided,
however, that Registration Expenses shall exclude, and the sellers of the
Registrable Securities being registered shall pay fees and disbursements of
counsel representing the Holders, underwriters' or brokers' fee, discounts and
commissions and transfer taxes in respect of the Registrable Securities being
registered.
"Registrable Securities" means (i) the shares of Common Stock, Series A
Preferred Stock and the shares of Common Stock issuable upon conversion of the
Series A Preferred Stock held or otherwise acquired by the Investor (including
by way of issuance upon exercise or conversion of any warrants or other
securities) and (ii) any Common Stock of the Company issuable or issued with
respect to the Common Stock, the Series A Preferred Stock and/or warrants or
other securities referred to in clause (i) by way of a merger, consolidation,
stock split, stock dividend, recapitalization of the Company or similar
transaction. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) they shall have been sold
as permitted by, and in compliance with, Rule 144 (or successor provision)
promulgated under the Securities Act, (c) the shares are held by a Holder who is
not an affiliate of the Company within the meaning of Rule 144 (a "Rule 144
Affiliate") and may be sold pursuant to Rule 144(k), (d) the shares are held by
a Holder who is a Rule 144 Affiliate and all the shares may be sold pursuant to
Rule 144 within a period of three months in accordance with volume limitation
set forth in Rule 144(e)(1), (e) they shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer under
the Securities Act shall have been delivered by the Company and subsequent
public distribution of them shall not require registration of them under the
Securities Act, or (f) they shall have ceased to be outstanding.
"Required Number of Shares" means Registrable Securities representing a
total of 729,050 shares of Common Stock, subject to adjustment as provided in
Section 11.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933, as amended, shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
3 Rule 144.
The Company shall take all actions reasonably necessary to enable Holders
of Common Stock or Series A Preferred Stock to sell such securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission including, without limiting the generality of the foregoing,
filing on a timely basis all reports required to be filed by the Exchange Act.
Upon the request of any Holder of Common Stock or Series A Preferred Stock, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
14
4 Amendments and Waivers.
This Agreement may be amended with the consent of the Company and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the Holders of
at least a majority of the outstanding Registrable Securities issued under the
Securities Purchase Agreement.
Each beneficial owner of any Registrable Securities at the time or
thereafter outstanding shall be bound by any consent authorized by this Section
4, whether or not such Registrable Securities shall have been marked to indicate
such consent.
5 Nominees for Beneficial Owners.
In the event that any Registrable Securities are held by a nominee for the
beneficial owner thereof, the beneficial owner thereof may, at its election in
writing delivered to the Company, be treated as the Holder of such Registrable
Securities for purposes of any request or other action by any Holder or Holders
pursuant to this Agreement or any determination of any number or percentage of
Registrable Securities held by any Holder or Holders contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
6 Notices.
All communications provided for hereunder shall be sent by courier or other
overnight delivery service, shall be effective upon receipt, and shall be
addressed as follows:
(a) if to the Investor, at such address as the Investor shall have
furnished to the Company in writing;
(b) if to any other Holder, at the address that such Holder shall
have furnished to the Company in writing, or, until any such other Holder so
furnishes to the Company an address, then to and at the address of the last
Holder of such Registrable Securities who has furnished an address to the
Company; or
(c) if to the Company, addressed to it at VelocityHSI, Inc., 0000
Xxxxx Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxx Xxxxx, XX 00000, Attention:
Xxxxxxx X. Xxxxxxx, or at such other address as the Company shall have furnished
to each Holder at the time outstanding.
7 Assignment; Calculation of Interests in Registrable Securities.
(a) This Agreement shall be binding upon and inure the benefit of and
be enforceable by the parties hereto and, with respect to the Company, its
respective successors and assigns and, with respect to the Investor, any
beneficial owner who acquires at least 200,000 shares of any Registrable
Securities, subject to the provisions respecting the minimum number or
proportion of shares of Registrable Securities required in order to be entitled
to certain rights, or take certain actions, contained herein.
15
(b) All references to Registrable Securities shall be calculated as
if all shares of Series A Preferred Stock had been converted into shares of
Common Stock as of the date of such calculation; provided, that any proportion
of the Registrable Securities necessary to be determined in connection with a
specific registration shall be calculated based upon the number of Registrable
Securities participating in such registration only (assuming any shares of
Series A Preferred Stock had been converted into shares of Common Stock.)
(c) Descriptive Headings. The descriptive headings of the several
--------------------
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
8 Descriptive Headings.
The descriptive headings of the several sections and paragraphs of this
Agreement are inserted for reference only and shall not limit or otherwise
affect the meaning hereof.
9 Governing Law; Consent to Jurisdiction.
This Agreement shall be governed by and construed in accordance with the
laws of the State of California (as permitted by Section 1646.5 of the
California Civil Code or any similar successor provision) without giving effect
to any choice of law rule that would cause the application of the laws of any
jurisdiction other than the internal laws of the State of California to the
rights and duties of the parties. Each of the parties hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of California and of the United States of America, in each
case located in the County of San Francisco, for any action, proceeding or
investigation in any court or before any governmental authority ("litigation")
arising out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any litigation relating thereto except in
such courts), and further agrees that service of any process, summons, notice or
document by U.S. Registered Mail to its respective address set forth in this
Agreement shall be effective service of process for any litigation brought
against it in any such court. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any litigation
arising out of this Agreement or the transactions contemplated hereby in the
courts of the State of California or the United States of America, in each case
located in the County of San Francisco, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such litigation brought in any such court has been brought in an
inconvenient forum. Each of the parties irrevocably and unconditionally waives,
to the fullest extent permitted by applicable law, any and all rights to trial
by jury in connection with any litigation arising out of or relating to this
Agreement or the transactions contemplated hereby.
10 No Inconsistent Agreements.
The Company will not hereafter enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the Holders in this
Agreement unless such securities are senior to the Series A Preferred Stock.
Notwithstanding the foregoing, any agreement entered into by the Company in
connection with the issuance of securities on parity with the Series A Preferred
Stock under which the Company grants substantially similar rights
16
to those rights granted to the Holders under this Agreement will not be deemed
to be "inconsistent" under this Section 10.
11 Recapitalizations, etc.
In the event that any capital stock or other securities are issued in
respect of, in exchange for, or in substitution of, any Registrable Securities
by reason of any reorganization, recapitalization, reclassification, merger,
consolidation, spin-off, partial or complete liquidation, stock dividend, split-
up, sale of assets, distribution to stockholders or combination of the shares of
Registrable Securities or any other change in the Company's capital structure,
appropriate adjustments shall be made in this Agreement so as to fairly and
equitably preserve, to the extent practicable, the original rights and
obligations of the parties hereto under this Agreement. At the request of the
Selling Holders of a majority of Registrable Securities in connection with any
registration pursuant to Section 1.1 hereof, the Company will effect such
adjustments to the outstanding Common Stock, by way of stock split or stock
dividend as the Selling Holders may reasonably request to facilitate the
registration and sale of the Common Stock.
12 Attorneys' Fees.
In any action or proceeding brought to enforce any provision of this
Agreement, or where any provision hereof is validly asserted as a defense, the
prevailing party to such action or proceeding shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
13 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all such counterparts shall together constitute
one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Investor's Rights
Agreement to be executed and delivered by their respective officers thereunto
duly authorized as of the date first above written.
VELOCITYHSI, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
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Name: Xxxxxxx X. Xxxxxxx
Title: President and CEO
BANC OF AMERICA MORTGAGE CAPITAL CORPORATION
By: /s/ Xxxxxxx Xxxx
------------------------------------
Name: Xxxxxxx Xxxx
Title: Vice President
