Exhibit 10.24
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
March 21st, 1997, by and among Ancor Communications, Incorporated, a corporation
duly incorporated and existing under the laws of the State of Minnesota
("Company"), Dunwoody Brokerage Services, Inc., a Georgia corporation
("Dunwoody") and the subscribers (hereinafter referred to as "Subscribers") to
the Company's offering ("Offering") of up to Nine Million Dollars ($9,000,000)
of Series B Convertible Preferred Stock (the "Preferred Stock") pursuant to the
Regulation D Subscription Agreement between the Company and each of the
Subscribers ("Subscription Agreement").
1. Definitions. For purposes of this Agreement:
(a) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933 (the "Act"), and
pursuant to Rule 415 under the Act or any successor rule, and the declaration or
ordering of effectiveness of such registration statement or document;
(b) For purposes hereof, the term "Registrable Securities" means the
shares of the Company's Common Stock together with any capital stock issued in
replacement of, in exchange for or otherwise in respect of such Common Stock
(the "Common Stock"), issuable or issued upon (i) conversion of the Preferred
Stock, (ii) exercise of the warrants to purchase Common Stock to be issued to
the Subscribers in connection with the Offering (the "Subscriber Warrants") and
(iii) exercise of the Warrant to purchase Common stock issued to Dunwoody in
connection with the Offering (the "Placement Agent Warrant", together with the
Subscriber Warrants, collectively referred to as the "Warrants"), by Dunwoody or
any subsequent Holder of the Warrant or portion thereof.
Notwithstanding the above:
1. Common Stock which would otherwise be deemed to be Registrable
Securities shall not constitute Registrable Securities if those shares
of Common Stock may be resold in a public transaction without volume
limitations without registration under the Act, including without
limitation, pursuant to Rule 144 under the Act; and
2. any Registrable Securities resold in a public transaction shall
cease to constitute Registrable Securities.
(c) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock which have been
issued or are issuable upon conversion of the Preferred Stock and exercise of
the then outstanding Warrants at the time of such determination;
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(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any permitted assignee thereof;
(e) The term "Initiating Holders" means (i) one or more holders of
Registrable Securities obtained or obtainable upon conversion of at least Fifty
(50) shares of Preferred Stock; and
(f) The term "Due Date" means the date which is five (5) months after
the Last Closing (as defined in the Subscription Agreement) of the Offering.
EXHIBIT B
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2. REQUIRED REGISTRATION.
(a) The Company shall use its best efforts to file, within sixty (60)
days after the Last Closing of the Offering and shall in any event file, within
ninety (90) days after the Last Closing of the Offering, a registration
statement ("Registration Statement") on Form S-3 (or other suitable form, at the
Company's discretion, but subject to the reasonable approval of Subscribers),
covering the resale of all shares of Registrable Securities then outstanding or
issuable upon conversion of all then outstanding Preferred Stock or upon
exercise of the Warrants. Such Registration Statement shall initially cover the
number of shares issuable upon exercise of the Placement Agent Warrant plus at
least Three Million Five Hundred Thousand (3,500,000) shares of Common Stock and
shall cover, to the extent allowed by applicable law, such additional
indeterminate number of shares of Common Stock as are required to effect
conversion of the Preferred Stock due to fluctuations in the price of the
Company's Common Stock. The Company shall use best efforts to have the
Registration Statement declared effective as soon as possible. In the event that
the Company determines, which determination shall be made by the Company within
five (5) business days after the last business day of each month after the Due
Date or is notified at any time by a Holder, that the Registration Statement
does not cover a sufficient number of shares of Common Stock to effect the
resales of a number of shares of Common Stock equal to one hundred twenty five
percent (125%) of the number of shares of Common Stock issuable to each
Subscriber upon conversion of all outstanding Preferred Stock then eligible for
conversion, at the Assumed Conversion Price (as defined in the Subscription
Agreements) then in effect (based upon the average closing price of the
Company's Common Stock for the twenty (20) trading days prior to such
calculation) and upon exercise of all the outstanding Warrants (a "Registration
Shortfall"), the Company shall, within five (5) business days, amend the
Registration Statement or file a new Registration Statement (an "Amended" or
"New" Registration Statement, respectively), as appropriate, to add such number
of additional shares as would be necessary to effect the resales of a number of
shares of Common Stock equal to one hundred fifty percent (150%) of the number
of shares of Common Stock issuable to each Subscriber upon conversion of all
outstanding Preferred Stock then eligible for conversion, at the Assumed
Conversion Price (as defined in the Subscription Agreement) then in effect
(based upon the average closing price of the Company's Common Stock for the
twenty (20) trading days prior to such calculation) and upon exercise of all the
outstanding Warrants. If the Registration Statement is not filed within ninety
(90) days after the Last Closing of the Offering, Company shall pay the
Subscribers an amount equal to one and one-half percent (1 1/2%) per month of
the aggregate amount of outstanding Preferred Stock held by Subscriber, accruing
daily until the Registration Statement is filed, payable in Common Stock, as set
forth below ("Late Filing Payment"). If the Registration Statement is not
declared effective by the Due Date, or if any Amended or New Registration
Statement required to be filed hereunder is not declared effective within three
(3) calendar months of the date it is required to be filed, the Company shall
pay the Subscribers an amount equal to one and one-half percent (1 1/2%) per
month of the aggregate amount of outstanding Preferred Stock held by Subscriber,
accruing daily until the Registration Statement or a registration statement
filed pursuant to Section 3 of this Agreement is declared effective (the "Late
Registration Payment"). Any Late Filing Payment or Late Registration Payment
shall be payable in Common Stock, as follows:
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Upon conversion of each share of Preferred Stock, the Company shall issue
to the Subscriber the number of shares of Common Stock determined as set
forth in Section 5(a) of the Certificate of Designation, plus an additional
number of shares of Common Stock attributable to such share of Preferred
Stock (the "Additional Shares") determined as set forth below:
Additional Shares = Late Registration Payment + Late Filing Payment
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Conversion Price
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; provided that, if the Registration Statement is not declared effective within
two (2) months after the Due Date, or if any Amended or New Registration
Statement required to be filed hereunder is not effective within four (4) months
of the date it is required to be filed, any Late Filing Payment or Late
Registration Payment not previously paid in Additional Shares shall be payable,
in cash by a cashiers check, at the option of the Holder (upon written request
of such Holder, referred to as a "Cash Payment Request"), no later than ten (10)
days after the end of (i) the month in which the Company receives the Holder's
Cash Payment Request and (ii) any subsequent month(s) for which such amounts
accrue (unless the Holder notifies the Company otherwise, in writing). With
respect to the Preferred Stock, "Conversion Price" has the definition ascribed
to it in the Certificate of Designation.
Such Additional Shares shall also be deemed "Registrable Securities" as defined
herein. The Company covenants to use its best efforts to use Form S-3 for the
registration required by this Section during all applicable times contemplated
by this Agreement.
(b) The Registration Statement shall be prepared as a "shelf"
registration statement under Rule 415, and shall be maintained effective until
all Registrable Securities cease to exist.
(c) The Company represents that it is presently eligible to effect the
registration contemplated hereby on Form S-3 and will use its best efforts to
continue to take such actions as are necessary to maintain such eligibility.
3. Piggyback Registration. If the Registration Statement described
in Section 2 is not effective by the Due Date, and if (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holders) any of its Common Stock under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely for the sale of securities to participants in a Company stock plan or a
registration on Form S-4 promulgated under the Act or any successor or similar
form registering stock issuable upon a reclassification, upon a business
combination involving an exchange of securities or upon an exchange offer for
securities of the issuer or another entity), the Company shall, at such time,
promptly give each Holder written notice of such registration (a "Piggyback
Registration Statement"). Upon the written request of each Holder given by fax
within ten (10) days after mailing of such notice by the Company, the Company
shall cause to be included in such registration statement under the Act all of
the Registrable Securities that each such Holder has requested to be registered
("Piggyback Registration") to the extent such inclusion does not violate the
registration rights of any other securityholder of the company granted prior to
the date hereof; nothing herein shall prevent the Company from withdrawing or
abandoning the registration statement prior to its effectiveness. The election
of initiating Holders to participate in a Piggyback Registration Statement shall
not impact the amount payable to investors pursuant to Section 2(a) herein
except that the Late Registration Payment shall cease to accrue as of the date
of effectiveness of the Piggyback Registration Statement.
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4. Limitation on Obligations to Register.
(a) In the case of a Piggyback Registration on an underwritten public
offering by the Company, if the managing underwriter determines and advises in
writing that the inclusion in the registration statement of all Registrable
Securities proposed to be included would interfere with the successful marketing
of the securities proposed to be registered by the Company, then the number of
such Registrable Securities to be included in the registration statement, to the
extent such Registrable Securities may be included in such Piggyback
Registration Statement shall be allocated among all Holders who had requested
Piggyback Registration pursuant to the terms hereof, in the proportion that the
number of Registrable Securities which each such Holder, including Dunwoody,
seeks to register bears to the total number of Registrable Securities sought to
be included by all Holders, including Dunwoody.
(b) In the event the Company believes that shares sought to be
registered under Section 2 or Section 3 by Holders do not constitute
"Registrable Securities" by virtue of Section 1(b) of this Agreement, and the
status of those shares as Registrable Securities is disputed, the Company shall
provide, at its expense, an Opinion of Counsel, reasonably acceptable to the
Holders of the Securities at issue (and satisfactory to the Company's transfer
agent to permit the sale and transfer) that those securities may be sold
immediately, without volume limitation, without registration under the Act, by
virtue of Rule 144 or similar provisions.
5. Obligations of the Company. Whenever required under this
Agreement to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Securities and Exchange Commission
("SEC") a registration statement with respect to such Registrable Securities and
use its best efforts to cause such registration statement to become effective.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders of
the Registrable Securities covered by such registration statement, provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
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(e) 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.
(f) As promptly as practicable after becoming aware of such event,
notify each Holder of Registrable Securities of the happening of any event of
which the Company has knowledge, as a result of which the prospectus included in
the registration statement, as then in effect, includes an 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, in light of the circumstances under
which they were made, not misleading, and subject to Section 6 use its best
efforts promptly to prepare a supplement or amendment to the registration
statement to correct such untrue statement or omission, and deliver a number of
copies of such supplement or amendment to each Holder as such Holder may
reasonably request.
(g) Provide Holders with written notice of the date that a
registration statement registering the resale of the Registrable Securities is
declared effective by the SEC, and the date or dates when the Registration
Statement is no longer effective.
(h) Provide Holders and their representatives the opportunity to
conduct a reasonable due diligence inquiry of Company's pertinent financial and
other records and make available its officers, directors and employees for
questions regarding such information as it relates to information contained in
the registration statement.
(i) Provide Holders and their representatives the opportunity to
review the registration statement and all amendments thereto a reasonable period
of time prior to their filing with the SEC if so requested by Holder in writing.
6. Black Out. In the event that, during the time that the
Registration Statement is effective, the Company reasonably determines, based
upon advice of counsel, that due to the existence of material non-public
information, disclosure of such material non-public information would be
required to make the statements contained in the Registration Statement not
misleading, and the Company has a bona fide business purpose for preserving as
confidential such material non-public information, the Company shall have the
right to suspend the effectiveness of the Registration Statement, and no Holder
shall be permitted to sell any Registrable Securities pursuant thereto, until
such time as such suspension is no longer advisable; provided, however, that
such time shall not exceed a period of one hundred twenty (120) days. As soon
as such suspension is no longer advisable, the Company shall, if required,
promptly, but in no event later than the date the Company files any documents
with the Securities and Exchange Commission ("SEC") referencing such material
information, file with the SEC an amendment to the Registration Statement
disclosing such information and use its best efforts to have such amendment
declared effective as soon as possible.
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In the event the effectiveness of the Registration Statement is
suspended by the Company pursuant hereto, the Company shall promptly notify all
Holders whose securities are covered by the Registration Statement of such
suspension, and shall promptly notify each such Holder as soon as the
effectiveness of the Registration Statement has been resumed. The Company shall
be entitled to effect no more than one such suspension during the one (1) year
period following the Last Closing.
7. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
regard to each selling Holder that such selling Holder shall furnish to the
Company such information regarding Holder, the Registrable Securities held by
it, and the intended method of disposition of such securities as shall be
required to effect the registration of its Registrable Securities or to
determine that registration is not required pursuant to Rule 144 or other
applicable provision of the Act.
8. Expenses. All expenses other than underwriting discounts and
commissions and fees and expenses of counsel to the selling Holders incurred in
connection with registrations, filings or qualifications pursuant hereto,
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Company, shall be borne by the Company.
9. Indemnification. In the event any Registrable Securities are
included in a Registration Statement or a Piggyback Registration statement under
this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the officers and directors of each Holder, any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements or
omissions: (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, and the Company will reimburse each such Holder, officer
or director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 9(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, officer, director, underwriter or
controlling person.
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(b) To the extent permitted by law, each selling Holder, severally
and not jointly, will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
person, if any, who controls the Company within the meaning of the Act, any
underwriter and any other Holder selling securities in such registration
statement or any of its directors or officers or any person who controls such
Holder, against any losses, claims, damages, or liabilities (joint or several)
to which the Company or any such director, officer, controlling person, or
underwriter or controlling person, or other such Holder or director, officer or
controlling person may become subject, under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon any statement or
omission in each case to the extent (and only to the extent) that such statement
or omission is made in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration
statement; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company and any such director, officer, controlling
person, underwriter or controlling person, other Holder, officer, director, or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonably incurred fees and
expenses of one such counsel to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential conflicting
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
9, but the omission so to deliver written notice to the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 9.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 9 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and each Holder agree to
contribute to the aggregate claims, losses, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Company and one or more of
the Holder
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may be subject in such proportion as is appropriate to reflect the relative
fault of the Company and the Holders in connection with the statements or
omissions which resulted in such Losses. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by the Company or by the Holders. The Company and the
Holders agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation which does
not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 10(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 9,
each person who controls a Holder of Registrable Securities within the meaning
of either the Securities Act or the Exchange Act and each director, officer,
partner, employee and agent of a Holder shall have the same rights to
contribution as such holder, and each person who controls the Company within the
meaning of either the Act or the Exchange Act and each director of the Company,
and each officer of the Company who has signed the registration statement, shall
have the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).
(e) The obligations of the Company and Holders under this Section 9
shall survive the redemption and conversion, if any, of the Preferred Stock, the
completion of any offering of Registrable Securities in a Registration Statement
under this Agreement, and otherwise.
10. Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration, the
Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
11. Amendment of Registration Rights. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of
a majority of the Registrable Securities provided that the amendment treats all
Holders equally. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each Holder, each future Holder, and the
Company.
12. Notices. All notices required or permitted under this Agreement
shall be made in writing signed by the party making the same, shall specify the
section under this Agreement pursuant to which it is given, and shall be
addressed if to (i) the Company at: Ancor Communications, Incorporated, 0000
Xxxx Xxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxxx, 00000 Telephone No. (000) 000-0000,
Facsimile No. (000) 000-0000 and (ii) the Holders at their
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respective last address as the party as shown on the records of the Company. Any
notice, except as otherwise provided in this Agreement, shall be made by fax and
shall be deemed given at the time of transmission of the fax.
13. Termination. This Agreement shall terminate on the date all
Registrable Securities cease to exist; but without prejudice to (i) the parties'
rights and obligations arising from breaches of this Agreement occurring prior
to such termination (ii) other indemnification obligations under this Agreement.
14. Assignment. No assignment, transfer or delegation, whether by
operation of law or otherwise, of any rights or obligations under this Agreement
by the Company or any Holder, respectively, shall be made without the prior
written consent of the majority in interest of the Holders or the Company,
respectively; provided that the rights of a Holder may be transferred to a
subsequent holder of the Holder's Registrable Securities (provided such
transferee shall provide to the Company, together with or prior to such
transferee's request to have such Registrable Securities included in a Piggyback
Registration, a writing executed by such transferee agreeing to be bound as a
Holder by the terms of this Agreement); and provided further that the Company
may transfer its rights and obligations under this Agreement to a purchaser of
all or a substantial portion of its business if the obligations of the Company
under this Agreement are assumed in connection with such transfer, either by
merger or other operation of law (which may include without limitation a
transaction whereby the Registrable Securities are converted into securities of
the successor in interest) or by specific assumption executed by the transferee.
15. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Minnesota applicable to agreements
made in and wholly to be performed in that jurisdiction, except for matters
arising under the Act or the Securities Exchange Act of 1934, which matters
shall be construed and interpreted in accordance with such laws.
16. Execution in Counterparts Permitted. This Agreement may be
executed in any number of counterparts, each of which shall be enforceable
against the parties actually executing such counterparts, and all of which
together shall constitute one (1) instrument.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of this
20th day of March, 1997.
ANCOR COMMUNICATIONS, INCORPORATED
By:
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Xxxxxxx X. X'Xxxx, President
Address: Ancor Communications, Incorporated
0000 Xxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Telephone No. (000) 000-0000
Facsimile No. (000) 000-0000
DUNWOODY BROKERAGE SERVICES, INC.
By:
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Xxxxxx X. Xxxxxxx, President
Address: 0000 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
INVESTOR(S)
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Investor's Name
By:
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(Signature)
Address:
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