EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is entered into as of
April 19, 2000, between Microware Systems Corporation, a Iowa corporation, with
offices at 0000 X.X. 000xx Xxxxxx, Xxx Xxxxxx, Xxxx 00000 (the "Company"), and
Xxxxxxx Associates, L.P., a Delaware limited partnership, and Westgate
International, L.P., a Cayman Islands limited partnership (individually and
collectively, the "Investor").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Securities Purchase Agreement, dated
on or about the date hereof, by and between the Company and the Investor (the
"Purchase Agreement"), the Company has agreed to sell and issue to the Investor,
and the Investor has agreed to purchase from the Company, (i) an aggregate of
3,500 shares, Liquidation Preference $1,000 each, of the Company's Series I
Cumulative Convertible Preferred Stock (the "Preferred Shares"), which will be
convertible into shares (the "Common Shares") of the Company's Common Stock, no
par value per share (the "Common Stock"), pursuant to the terms and conditions
set forth in the Certificate of Designations for the Preferred Shares (the
"Certificate"), (ii) Warrants (the "Warrants") to purchase Common Shares, and
(iii) options (the "Options") to purchase Common Shares, in each case subject to
the terms and conditions set forth in the Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the Purchase
Agreement and this Agreement, the Company and the Investor agree as follows:
1. CERTAIN DEFINITIONS. Capitalized terms used herein and not
otherwise defined shall have the meaning ascribed thereto in the Purchase
Agreement or the Certificate. As used in this Agreement, the following terms
shall have the following respective meanings:
"Closing" and "Closing Date" shall have the meanings ascribed to such
terms in the Purchase Agreement.
"Commission" or "SEC" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Holder" and "Holders" shall include the Investor and any transferee or
transferees of the Preferred Shares, Warrants, Options, Common Shares or
Registrable Securities which have not been sold to the public, to whom the
registration rights conferred by this Agreement have been transferred in
compliance with this Agreement and the Purchase Agreement.
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The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean: (i) the Common Shares or other
securities issued or issuable to each Holder or its permitted transferee or
designee upon conversion of the Preferred Shares, exercise of the Warrants or
exercise of the Options; (ii) securities issued or issuable upon any stock
split, stock dividend, recapitalization or similar event with respect to such
Common Shares; and (iii) any other security issued as a dividend or other
distribution with respect to, in exchange for or in replacement of the
securities referred to in the preceding clauses.
"Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, reasonable fees and disbursements of counsel to Holders
(using a single counsel selected by a majority in interest of the Holders) for
review of the Registration Statement and related documents, and the expense of
any special audits incident to or required by any such registration (but
excluding the compensation of regular employees of the Company, which shall be
paid in any event by the Company).
"Registration Statement" shall have the meaning set forth in Section
2(a) herein.
"Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Securities Act" or "Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for Holders not included within "Registration
Expenses".
2. REGISTRATION REQUIREMENTS. The Company shall use its best
efforts to effect the registration of the Registrable Securities (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act) as would permit or facilitate the sale or distribution
of all the Registrable Securities in the manner (including manner of sale) and
in all states reasonably requested by the Holder. Such best efforts by the
Company shall include, without limitation, the following:
(a) The Company shall, as expeditiously as possible after
the Closing Date:
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i) But in any event within 45 days of the Closing,
prepare and file a registration statement with the
Commission pursuant to Rule 415 under the Securities Act
on Form S-3 under the Securities Act (or in the event that
the Company is ineligible to use such form, such other
form as the Company is eligible to use under the
Securities Act) covering resales by the Holders of the
Registrable Securities and no other securities except for
Common Stock held by Motorola, Inc. ("Registration
Statement"), which Registration Statement, to the extent
allowable under the Securities Act and the rules
promulgated thereunder (including Rule 416), shall state
that such Registration Statement also covers such
indeterminate number of additional shares of Common Stock
as may become issuable upon conversion of the Preferred
Shares, exercise of the Warrants and exercise of the
Options. The number of shares of Common Stock initially
included in such Registration Statement shall be no less
than the sum of two times the number of Common Shares that
are then issuable upon conversion of the Preferred Shares,
exercise of the Warrants and exercise of the Options
(assuming full conversion or exercise, respectively, at
the then applicable Conversion Price (as defined in the
Certificate) or exercise price under the Warrants or
Options, as the case may be). Nothing in the preceding
sentence will limit the Company's obligations to reserve
shares of Common Stock pursuant to Section 3.7 of the
Purchase Agreement. Thereafter the Company shall use its
best efforts to cause such Registration Statement and
other filings to be declared effective as soon as
possible, and in any event prior to 90 days following the
Closing Date. Without limiting the foregoing, the Company
will promptly respond to all SEC comments, inquiries and
requests, and shall request acceleration of effectiveness
at the earliest possible date. The Company shall provide
the Holders reasonable opportunity to review any such
Registration Statement or amendment or supplement thereto
prior to filing.
ii) 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 and
notify the Holders of the filing and effectiveness of such
Registration Statement and any amendments or supplements.
iii) Furnish to each Holder such numbers of copies
of a current prospectus conforming with the requirements
of the Act, copies of the Registration Statement, any
amendment or supplement thereto and any documents
incorporated by reference therein and such other documents
as such Holder may reasonably require in order to
facilitate the disposition of Registrable Securities owned
by such Holder.
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iv) Register and qualify the securities covered by
such Registration Statement under the securities or "Blue
Sky" laws of all domestic jurisdictions; 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.
v) Notify each Holder immediately of the happening
of any event (but not the substance or details of any such
events unless specifically requested by a Holder) as a
result of which the prospectus (including any supplements
thereto or thereof) included in such Registration
Statement, as then in effect, includes an untrue statement
of material fact or omits to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances then existing, and use its best efforts to
promptly update and/or correct such prospectus.
vi) Notify each Holder immediately of the issuance
by the Commission or any state securities commission or
agency of any stop order suspending the effectiveness of
the Registration Statement or the threat or initiation of
any proceedings for that purpose. The Company shall use
its best efforts to prevent the issuance of any stop order
and, if any stop order is issued, to obtain the lifting
thereof at the earliest possible time.
vii) Permit counsel to the Holders to review the
Registration Statement and all amendments and supplements
thereto within a reasonable period of time (but not less
than 5 full Trading Days (as defined in the Certificate))
prior to each filing, and shall not file any document in a
form to which such counsel reasonably objects and will not
request acceleration of the Registration Statement without
prior notice to such counsel.
viii) List the Registrable Securities covered by
such Registration Statement with all securities
exchange(s) and/or markets on which the Common Stock is
then listed and prepare and file any required filings with
the Nasdaq National Market or any exchange or market where
the Common Shares are traded.
ix) Take all steps necessary to enable Holders to
avail themselves of the prospectus delivery mechanism set
forth in Rule 153 (or successor thereto) under the Act.
(b) Set forth below in this Section 2(b) are (I) events
that may arise that the Investors consider will interfere with the full
enjoyment of their rights under this Agreement, the Purchase Agreement, the
Warrants, the Options and the Certificate (the
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"Interfering Events"), and (II) certain remedies applicable in each of these
events.
Paragraphs (i) through (iv) of this Section 2(b)
describe the Interfering Events, provide a remedy to the Investors if an
Interfering Event occurs, and provide that the Investors may require that the
Company repurchase outstanding Preferred Shares, Warrants and Options at a
specified price if certain Interfering Events are not timely cured.
Paragraph (v) provides, inter alia, that if default
adjustments required as the remedy in the case of certain of the Interfering
Events are not provided when due, the Company may be required by the Investors
to redeem outstanding Preferred Shares, Warrants and Options at a specified
price.
Paragraph (vi) provides, inter alia, that the
Investors have the right to specific performance.
The preceding paragraphs in this Section 2(b) are
meant to serve only as an introduction to this Section 2(b), are for convenience
only, and are not to be considered in applying, construing or interpreting this
Section 2(b).
(i) DELAY IN EFFECTIVENESS OF REGISTRATION STATEMENT.
(A) In the event that such Registration
Statement has not been declared effective within 90
days from the Closing Date, or the Company at any
time fails to issue unlegended Registrable Securities
as required by Article VI of the Purchase Agreement,
then the Company shall pay each Holder a Monthly
Delay Payment (as defined below) for each 30 day
period (or portion thereof) that effectiveness of the
Registration Statement is delayed or failure to issue
such unlegended Registrable Securities persists. In
addition to the foregoing, if the Registration
Statement has not been declared effective within 180
days after the Closing Date, then each Holder shall
have the right to sell, at any time after the 180th
day after the Closing Date (which 180th day shall be
extended with respect to such Holder by 1 day for
each day that any delay is caused by such Holder, its
counsel or the underwriter selected by such Holder,
failing to timely take action or provide information
as required hereunder), any or all of its Preferred
Shares, Warrants and Options to the Company for
consideration (the "Mandatory Repurchase Price")
equal to (I) for the Preferred Shares, the greater of
(x) 125% of the Liquidation Preference of all such
Preferred Shares being sold to the Company, or (y)
the Liquidation Preference for the Preferred Shares
being sold to the Company divided by the then
applicable Conversion Price multiplied by the greater
of the last closing price of the Common Stock on (i)
the
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date a Holder exercises its option pursuant to
this Section 2(b) to require repurchase of Preferred
Shares or (ii) the date on which the event triggering
Holder's remedies under this Section 2(b) first
occurred, in each case payable in cash, (II) for the
Warrants, 125% of the product of (a) the difference
between the greater of clauses (i) or (ii) above and
the exercise price of the Warrants, multiplied by (b)
the number of Warrants being sold to the Company,
payable in cash, and (III) for the Options, 125% of
the product of (a) the difference between the greater
of clauses (i) or (ii) above and the exercise price
of the Options, multiplied by (b) the number of
Options being sold to the Company, payable in cash.
(B) As used in this Agreement, a "Monthly
Delay Payment" shall be a cash payment equal to 1% of
the Liquidation Preference of the Preferred Shares
held by a Holder for the first 30 day period (or
portion thereof) that the specified condition in this
Section 2(b) has not been fulfilled or the specified
deficiency has not been remedied, 2% of such
Liquidation Preference for the next 30 day period (or
portion thereof) that the specified condition in this
Section 2(b) has not been fulfilled or the specified
deficiency has not been remedied, and 3% of such
Liquidation Preference thereafter for each subsequent
30 day period (or portion thereof) that the specified
condition in this Section 2(b) has not been fulfilled
or the specified deficiency has not been remedied,
prorated for any partial months. Payment of the
Monthly Delay Payments and Mandatory Repurchase Price
shall be due and payable from the Company to such
Holder within 5 business days of demand therefor.
Without limiting the foregoing, if cash payment of
the Mandatory Repurchase Price is not made within
such 5 business day period, the Holder may revoke and
withdraw its election to cause the Company to make
such mandatory purchase at any time prior to its
receipt of such cash. At the option of the Holder,
Monthly Delay Payments may be added to the
Liquidation Preference of the Preferred Shares held
by it.
(ii) NO LISTING; PREMIUM PRICE REDEMPTION FOR DELISTING OF
CLASS OF SHARES.
(A) In the event that the Company fails,
refuses or for any other reason is unable to cause
the Registrable Securities covered by the
Registration Statement to be listed with Nasdaq
National Market or one of the other Approved Markets
(as defined in the Purchase Agreement) at all times
during the period ("Listing Period") from the earlier
of the effectiveness of the Registration Statement
and the 90th day following the Closing Date until
such time as the registration period specified in
Section 5 terminates,
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then the Company shall provide to each Holder a
Monthly Delay Payment, for each 30 day period or
portion thereof during which such listing is not
in effect. In addition to the foregoing, following
the 10th day that such listing is not in effect,
each Holder shall have the right to sell to the
Company any or all of its Preferred Shares,
Warrants and Options at the Mandatory Repurchase
Price. The provisions of Section 2(b)(i)(B) shall
apply to this Section 2(b)(ii)(A).
(B) In the event that shares of Common Stock
of the Company are not listed on any of the Approved
Markets at all times following the Closing Date, or
are otherwise suspended from trading and remain
unlisted or suspended for 3 consecutive days, then
the Company shall provide to each Holder a Monthly
Delay Payment for each 30 day period or portion
thereof during which such listing is not in effect.
In addition to the foregoing, following the 5th day
that the shares are not so listed or are otherwise
suspended, at the option of each Holder and to the
extent such Holder so elects, each Holder shall have
the right to sell to the Company the Preferred
Shares, the Warrants and the Options held by such
Holder, in whole or in part, for the Mandatory
Repurchase Price on the terms set forth in Section
2(b)(i)(B) above.
(iii) BLACKOUT PERIODS. In the event any Holder's ability
to sell Registrable Securities under the Registration
Statement is suspended for more than (i) five (5)
consecutive days or (ii) twenty (20) days in any
calendar year ("Suspension Grace Period"), including
without limitation by reason of any suspension or
stop order with respect to the Registration Statement
or the fact that an event has occurred as a result of
which the prospectus (including any supplements
thereto) included in such Registration Statement then
in effect includes an untrue statement of material
fact or omits to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading in light of the circumstances
then existing (a "Blackout"), then the Company shall
provide to each Holder a Monthly Delay Payment for
each 30 day period or portion thereof from and after
the expiration of the Suspension Grace Period, on the
terms set forth in Section 2(b)(i)(B) above. In
addition, at any time following the expiration of the
Suspension Grace Period if the Blackout continues for
more than five (5) additional consecutive days, a
Holder shall have the right to sell to the Company
its Preferred Shares, Options and/or Warrants in
whole or in part for the Mandatory Repurchase Price
on the terms set forth in Section 2(b)(i)(B) above.
(iv) REDEMPTION FOR CONVERSION DEFICIENCY. In the event
that the
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Company does not have a sufficient number of
Common Shares available to satisfy the Company's
obligations to any Holder upon receipt of a
Conversion Notice (as defined in the Certificate)
or exercise of the Warrants or exercise of the
Options or the Company is otherwise unable or
unwilling for any reason to issue such Common
(each, a "Conversion/Exercise Deficiency") in
accordance with the terms of the Certificate,
Purchase Agreement, Warrants and Options for any
reason after receipt of a Conversion Notice or
exercise notice from any Holder, then:
(A) The Company shall provide to each Holder
a Monthly Delay Payment for each 30 day period or
portion thereof following the Conversion/Exercise
Deficiency on all outstanding Preferred Shares,
Options and Warrants, on the terms set forth in
Section 2(b)(i)(B) above.
(B) At any time five days after the
commencement of the running of the first 30-day
period described above in clause (A) of this
paragraph (iv), at the request of any Holder, the
Company promptly shall purchase from such Holder, for
the Mandatory Repurchase Price and on the terms set
forth in Section 2(b)(i)(B) above, any and all
outstanding Preferred Shares, Options and/or
Warrants, if the failure to issue Common Shares
results from the lack of a sufficient number thereof
and shall purchase all of such Holder's Preferred
Shares, Options and/or Warrants (or such portion
requested by such Holder) for such consideration and
on such terms if the failure to issue Common Shares
results from any other cause, or is without cause.
(v) MANDATORY PURCHASE PRICE FOR DEFAULTS.
(A) The Company acknowledges that any
failure, refusal or inability by the Company to
perform the obligations described in the foregoing
paragraphs (i) through (iv) will cause the Holders to
suffer damages in an amount that will be difficult to
ascertain, including without limitation damages
resulting from the loss of liquidity in the
Registrable Securities and the additional investment
risk in holding the Preferred Shares, Options,
Warrants and Registrable Securities. Accordingly, the
parties acknowledge that they have consulted with
their respective counsel and agree that it is
appropriate to include in this Agreement the
foregoing provisions for Monthly Delay Payments and
mandatory redemptions in order to compensate the
Holders for such damages. The parties acknowledge and
agree that the Monthly Delay Payments and mandatory
redemptions set forth above represent the parties'
good faith effort to quantify such damages and, as
such,
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agree that the form and amount of such payments
and mandatory redemptions are reasonable and will
not constitute a penalty.
(B) In the event that the Company fails to
pay any Monthly Delay Payment within 5 business days
of demand therefor, each Holder shall have the right
to sell to the Company any or all of its Preferred
Shares, Options and/or Warrants at the Mandatory
Repurchase Price on the terms set forth in Section
2(b)(i)(B) above.
(C) The Holder shall have the right to
withdraw any request for redemption hereunder at any
time prior to its receipt of the Mandatory Repurchase
Price.
(vi) CUMULATIVE REMEDIES. The Monthly Delay
Payments and mandatory purchases provided for above are in
addition to and not in lieu or limitation of any other
rights the Holders may have at law, in equity or under the
terms of the Certificate, the Purchase Agreement, the
Warrants, the Options and this Agreement, including
without limitation the right to monetary contract damages
and specific performance. Each Holder shall be entitled to
specific performance of any and all obligations of the
Company in connection with the registration rights of the
Holders hereunder. Each Monthly Delay Payment provided for
herein in the foregoing clauses shall be in addition to
each other Monthly Delay Payment.
REMEDIES FOR REGISTRABLE SECURITIES. In any case in
which a Holder of Preferred Shares, Options and/or
Warrants has the right to cause the purchase of its
securities under this Section 2(b), it shall also have the
right to cause the Company to purchase the Registrable
Securities that such Holder owns, in whole or in part at
the Holder's option, at a purchase price equal to 125% of
the product of (a) the greater of the last closing price
of the Common Stock on (i) the date a Holder exercises its
option pursuant to this Section 2(b) or (ii) the date on
which the event triggering Holder's remedies under this
Section 2(b) first occurred, multiplied by (b) the number
of Registrable Securities being sold to the Company,
payable in cash.
In the case in which a Holder of Preferred Shares, Options
or Warrants would have the right to receive Monthly Delay
Payments with respect to Preferred Shares, Options or
Warrants under Section 2(b), it shall also have the right
to receive payments with respect to Registrable Securities
owned by it in an amount at the rate of the Monthly Delay
Payments that would have applied to the Preferred Shares,
Options or Warrants converted into or exercised for Common
Shares had such
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Preferred Shares, Options or Warrants not been converted
or exercised.
(c) If the Holder(s) intend to distribute the Registrable
Securities by means of an underwriting, the Holder(s) shall so advise the
Company. Any such underwriting may only be administered by nationally or
regionally recognized investment bankers reasonably satisfactory to the Company.
(d) The Company shall enter into such customary agreements
for secondary offerings (including a customary underwriting agreement with the
underwriter or underwriters, if any) and take all such other reasonable actions
reasonably requested by the Holders in connection therewith in order to expedite
or facilitate the disposition of such Registrable Securities. Whether or not an
underwriting agreement is entered into and whether or not the Registrable
Securities are to be sold in an underwritten offering, the Company shall:
i) make such representations and warranties to
the Holders and the underwriter or underwriters, if any, in
form, substance and scope as are customarily made by issuers
to underwriters in secondary offerings;
ii) cause to be delivered to the sellers of
Registrable Securities and the underwriter or underwriters, if
any, opinions of independent counsel to the Company, on and
dated as of each effective day (or in the case of an
underwritten offering, dated the date of delivery of any
Registrable Securities sold pursuant thereto) of the
Registration Statement, and within ninety (90) days following
the end of each fiscal year thereafter, which counsel and
opinions (in form, scope and substance) shall be reasonably
satisfactory to the Holders and the underwriter(s), if any,
and their counsel and covering, without limitation, such
matters as the due authorization and issuance of the
securities being registered and compliance with securities
laws by the Company in connection with the authorization,
issuance and registration thereof and other matters that are
customarily given to underwriters in underwritten offerings,
addressed to the Holders and each underwriter, if any;
iii) cause to be delivered, immediately prior to
the effectiveness of the Registration Statement (and, in the
case of an underwritten offering, at the time of delivery of
any Registrable Securities sold pursuant thereto), and at the
beginning of each fiscal year following a year during which
the Company's independent certified public accountants shall
have reviewed any of the Company's books or records, a
"comfort" letter from the Company's independent certified
public accountants addressed to the Holders and each
underwriter, if any, stating that such accountants are
independent public accountants within the meaning of the
Securities Act and the applicable published rules and
regulations thereunder, and otherwise in customary form and
covering such financial and accounting matters as are
customarily covered by letters of the
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independent certified public accountants delivered in
connection with secondary offerings; such accountants shall
have undertaken in each such letter to update the same
during each such fiscal year in which such books or records
are being reviewed so that each such letter shall remain
current, correct and complete throughout such fiscal year;
and each such letter and update thereof, if any, shall be
reasonably satisfactory to the Holders;
iv) if an underwriting agreement is entered into,
the same shall include customary indemnification and
contribution provisions to and from the underwriters and
procedures for secondary underwritten offerings; and
v) deliver such documents and certificates as may
be reasonably requested by the Holders of the Registrable
Securities being sold or the managing underwriter or
underwriters, if any, to evidence compliance with clause (i)
above and with any customary conditions contained in the
underwriting agreement, if any.
(e) The Company shall make available for inspection by the
Holders, representative(s) of all the Holders together, any underwriter
participating in any disposition pursuant to a Registration Statement, and any
attorney or accountant retained by any Holder or underwriter, all financial and
other records customary for purposes of the Holders' due diligence examination
of the Company and review of any Registration Statement, all SEC Documents (as
defined in the Purchase Agreement) filed subsequent to the Closing, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such representative, underwriter, attorney or accountant in connection
with such Registration Statement, provided that such parties agree to keep such
information confidential.
(f) Subject to Section 2(b) above, the Company may suspend
the use of any prospectus used in connection with the Registration Statement
only in the event, and for such period of time as, such a suspension is required
by the rules and regulations of the Commission. The Company will use its best
efforts to cause such suspension to terminate at the earliest possible date.
(g) The Company shall file a Registration Statement with
respect to any newly authorized and/or reserved Registrable Securities
consisting of Common Shares described in clause (i) of the definition of
Registrable Securities within five (5) business days of any stockholders meeting
authorizing same and shall use its best efforts to cause such Registration
Statement to become effective within sixty (60) days of such stockholders
meeting. If the Holders become entitled, pursuant to an event described in
clause (ii) and (iii) of the definition of Registrable Securities, to receive
any securities in respect of Registrable Securities that were already included
in a Registration Statement, subsequent to the date such Registration Statement
is declared effective, and the Company is unable under the securities laws to
add such securities to the then effective Registration Statement, the Company
shall promptly file, in accordance with the
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procedures set forth herein, an additional Registration Statement with
respect to such newly Registrable Securities. The Company shall use its best
efforts to (i) cause any such additional Registration Statement, when filed,
to become effective under the Securities Act, and (ii) keep such additional
Registration Statement effective during the period described in Section 5
below and cause such Registration Statement to become effective within 45
days of that date that the need to file the Registration Statement arose. All
of the registration rights and remedies under this Agreement shall apply to
the registration of such newly reserved shares and such new Registrable
Securities, including without limitation the provisions providing for default
payments and mandatory redemptions contained herein.
3. EXPENSES OF REGISTRATION. All Registration Expenses in
connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses of a Holder shall be borne by such Holder.
4. REGISTRATION ON FORM S-3. The Company shall use its
best efforts to remain qualified for registration on Form S-3 or any comparable
or successor form or forms, or in the event that the Company is ineligible to
use such form, such form as the Company is eligible to use under the Securities
Act.
5. REGISTRATION PERIOD. In the case of the registration
effected by the Company pursuant to this Agreement, the Company shall keep such
registration effective until the earlier of (a) the date on which all the
Holders have completed the sales or distribution of all Registrable Securities
described in the Registration Statement relating thereto, and (b) the sixth
(6th) anniversary of the Closing Date.
6. INDEMNIFICATION.
(a) COMPANY INDEMNITY. The Company will indemnify each
Holder, each of its officers, directors, agents and partners, and each person
controlling each of the foregoing, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls, within
the meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, 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 in light of the circumstances under which
they were made, or any violation by the Company of the Securities Act or any
state securities law or in either case, any rule or regulation thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse each Holder, each
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of its officers, directors, agents and partners, and each person controlling
each of the foregoing, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any such
case to a Holder to the extent that any such claim, loss, damage, liability
or expense arises out of or is based on any untrue statement or omission
based upon written information furnished to the Company by such Holder or the
underwriter (if any) therefor and stated to be specifically for use therein.
The indemnity agreement contained in this Section 6(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 will not be unreasonably withheld).
(b) HOLDER INDEMNITY. Each Holder will, severally and not
jointly, if Registrable Securities held by it are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors, officers, agents and partners, and
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder, each other Holder (if any), and each of their officers,
directors and partners, and each person controlling such other Holder(s) against
all claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any such registration statement, prospectus,
offering circular or other document, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statement therein not misleading in light of the circumstances under which
they were made, and will reimburse the Company and such other Holder(s) and
their directors, officers and partners, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
and defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein, and provided that the maximum
amount for which such Holder shall be liable under this indemnity shall not
exceed the net proceeds received by such Holder from the sale of the Registrable
Securities pursuant to the registration statement in question. The indemnity
agreement contained in this Section 6(b) shall not apply to amounts paid in
settlement of any such claims, losses, damages or liabilities if such settlement
is effected without the consent of such Holder (which consent shall not be
unreasonably withheld).
(c) PROCEDURE. Each party entitled to indemnification
under this Section 6 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim in any litigation resulting
Page 14
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting therefrom,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at its own expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 6 except to the
extent that the Indemnifying Party is materially and adversely affected by
such failure to provide notice. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. Each Indemnified Party shall furnish
such non-privileged information regarding itself or the claim in question as
an Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with the defense of such claim and
litigation resulting therefrom.
7. CONTRIBUTION. If the indemnification provided for in
Section 6 herein is unavailable to the Indemnified Parties in respect of any
losses, claims, damages or liabilities referred to herein (other than by reason
of the exceptions provided therein), then each such 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 or
liabilities as between the Company on the one hand and any Holder on the other,
in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of any Holder on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder.
In no event shall the obligation of any Indemnifying Party
to contribute under this Section 7 exceed the amount that such Indemnifying
Party would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
The Company and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Holders or the underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraphs. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraphs 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. Notwithstanding the provisions of this section, no Holder or
underwriter shall be required to contribute any amount in excess of the amount
by which (i) in the case of any Holder,
Page 15
the net proceeds received by such Holder from the sale of Registrable
Securities pursuant to the registration statement in question or (ii) in the
case of an underwriter, the total price at which the Registrable Securities
purchased by it and distributed to the public were offered to the public
exceeds, in any such case, the amount of any damages that such Holder or
underwriter 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
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
8. SURVIVAL. The indemnity and contribution agreements
contained in Sections 6 and 7 and the representations and warranties of the
Company referred to in Section 2(d)(i) shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement or the
Purchase Agreement or any underwriting agreement, (ii) any investigation made
by or on behalf of any Indemnified Party or by or on behalf of the Company,
and (iii) the consummation of the sale or successive resales of the
Registrable Securities.
9. INFORMATION BY HOLDERS. Each Holder shall furnish to the
Company such information regarding such Holder and the distribution and/or
sale proposed by such Holder as the Company may reasonably request in writing
and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement. The intended
method or methods of disposition and/or sale (Plan of Distribution) of such
securities as so provided by such Investor shall be included without
alteration in the Registration Statement covering the Registrable Securities
and shall not be changed without written consent of such Holder.
10. REPLACEMENT CERTIFICATES. The certificate(s)
representing the Common Shares held by any Investor (or then Holder) may be
exchanged by such Investor (or such Holder) at any time and from time to time
for certificates with different denominations representing an equal aggregate
number of Common Shares, as reasonably requested by such Investor (or such
Holder) upon surrendering the same. No service charge will be made for such
registration or transfer or exchange. Upon receipt by the Corporation of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any certificate representing the Preferred Shares, Options or the
Warrants, or the underlying Common Shares of any of the foregoing, and, in the
case of loss, theft or destruction, of indemnity reasonably satisfactory to it,
or upon surrender and cancellation of such certificate if mutilated, the
Corporation will make and deliver a new certificate of like tenor and dated as
of such cancellation at no charge to the holder.
11. TRANSFER OR ASSIGNMENT. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The rights granted to the
Investors by the Company under this Agreement to cause the Company to
register Registrable Securities may be transferred or assigned (in whole or
in part) to a transferee or assignee of Preferred Shares, Options, Warrants
or Registrable Securities, and all other rights granted to the
Page 16
Investors by the Company hereunder may be transferred or assigned to any
transferee or assignee of any Preferred Shares, Options, Warrants or
Registrable Securities; provided in each case that the Company must be given
written notice by the such Investor at the time of or within a reasonable
time after said transfer or assignment, stating the name and address of said
transferee or assignee and identifying the securities with respect to which
such registration rights are being transferred or assigned; and provided
further that the transferee or assignee of such rights agrees in writing to
be bound by the registration provisions of this Agreement.
12. MISCELLANEOUS.
(a) REMEDIES. The Company and the Investor acknowledge
and agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.
(b) JURISDICTION. Each of the Company and the Investor (i)
hereby irrevocably submits to the exclusive jurisdiction of the United States
District Court, the New York State courts and other courts of the United States
sitting in New York County, New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement and (ii) hereby waives,
and agrees not to assert in any such suit action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. The Company and the Investor consent
to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this paragraph shall affect or
limit any right to serve process in any other manner permitted by law.
(c) NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
to the Company:
Microware Systems Corporation
0000 X.X. 000xx Xxxxxx
Xxx Xxxxxx, Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxxxx X. Xxxxxx, President & CEO
Page 17
With a copy to:
X'Xxxxxx & Xxxxxx
000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Arthur Don, Esq.
to the Investor:
c/o Stonington Management Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000 and (000) 000-0000
Attention: Mr. Xxxxx Xxxxx
WITH COPIES TO:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Any party hereto may from time to time change its address for notices by giving
at least five days' written notice of such changed address to the other parties
hereto.
(d) INDEMNITY. Each party shall indemnify each other party
against any loss, cost or damages (including reasonable attorney's fees)
incurred as a result of such parties' breach of any representation, warranty,
covenant or agreement in this Agreement, including, without limitation, any
enforcement of this indemnity.
(e) WAIVERS. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter. The representations and warranties and
the agreements and covenants of the Company and each Investor contained herein
shall survive the Closing.
(f) EXECUTION IN COUNTERPART. This Agreement may be
executed in two or more counterparts, all of which shall be considered one and
the same agreement, it being understood that all parties need not sign the same
counterpart.
Page 18
(g) SIGNATURES. Facsimile signatures shall be valid and
binding on each party submitting the same.
(h) ENTIRE AGREEMENT; AMENDMENT. This Agreement, together
with the Purchase Agreement, the Certificate, the Warrants, the Options and the
agreements and documents contemplated hereby and thereby, contains the entire
understanding and agreement of the parties, and may not be amended, modified or
terminated except by a written agreement signed by the Company plus the Holders
of two-thirds of the Preferred Shares issued under the Purchase Agreement to
that date; provided that for the purposes of this Section 12(h) the Holders of
Common Shares still entitled to registration rights under this Agreement will be
deemed to still be Holders of that number of Preferred Shares which were
converted into such number of Common Shares issued upon conversion which are
still held by them.
(i) GOVERNING LAW. This Agreement and the validity and
performance of the terms hereof shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts executed and to
be performed entirely within such state, except to the extent that the law of
the State of Iowa regulates the Company's issuance of securities.
(j) JURY TRIAL. EACH PARTY HERETO WAIVES THE RIGHT TO A
TRIAL BY JURY.
(k) TITLES. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
(l) NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction will be applied against
any party.
* * * *
[SIGNATURE PAGE FOLLOWS]
Page 19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
MICROWARE SYSTEMS CORPORATION
By:/s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
WESTGATE INTERNATIONAL, L.P.
By: MARTLEY INTERNATIONAL, INC., as
attorney-in-fact
By: /s/ Xxxx X. Xxxxxx
Name: Xxxx X. Xxxxxx
Title: President
XXXXXXX ASSOCIATES, L.P.
By: /s/ Xxxx X. Xxxxxx
Name: Xxxx X. Xxxxxx
Title: General Partner
