Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of October 24, 2003, by and among SteelCloud, Inc., a
Virginia corporation (the "Company"), and the purchasers signatory hereto (each
such purchaser, a "Purchaser" and collectively, the "Purchasers").
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:
"Advice" shall have the meaning set forth in Section 6(d).
"Common Stock" means the common stock of the Company, $0.001
par value per share.
"Effectiveness Date" means, with respect to the initial
Registration Statement required to be filed hereunder, the earlier of
(a) the 90th calendar day following the date of the Purchase Agreement,
and (b) the fifth Trading Day following the date on which the Company
is notified by the Commission that the Registration Statement will not
be reviewed or is no longer subject to further review and comments.
"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Event" shall have the meaning set forth in Section 2(b).
"Filing Date" means, with respect to the Registration
Statement required to be filed hereunder, the 30th calendar day
following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
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"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes
any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Securities covered by the Registration
Statement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.
"Registrable Securities" means all of the Shares and the
Warrant Shares, together with any shares of Common Stock issued or
issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing.
"Registration Statement" means the registration statements
required to be filed hereunder, including (in each case) the
Prospectus, amendments and supplements to the registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be
incorporated by reference in the registration statement.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Common Stock issued pursuant to
the Purchase Agreement.
"Warrants" means the Warrants issued pursuant to the Purchase
Agreement.
"Warrant Shares" shall mean the shares of Common Stock issued
upon exercise of the Warrants.
2. Registration.
(a) On or prior to the Filing Date, the Company shall prepare
and file with the Commission the Registration Statement covering the
resale of all of the Registrable Securities for an offering to be made
on a continuous basis pursuant to Rule 415. The Registration Statement
required hereunder shall be on Form S-3 (except if the Company is not
then eligible to register for resale the Registrable Securities on Form
S-3, in which case the Registration shall be on another appropriate
form in accordance herewith). The Registration Statement required
hereunder shall contain (except if otherwise directed by the Holders)
substantially the "Plan of Distribution" attached hereto as Annex A.
Subject to the terms of this Agreement, the Company shall use its
commercially reasonable efforts to cause the Registration Statement to
be declared effective under the Securities Act as promptly as possible
after the filing thereof, but in any event not later than the
Effectiveness Date, and shall use its commercially reasonable efforts
to keep the Registration Statement continuously effective under the
Securities Act until the date when all Registrable Securities covered
by the Registration Statement have been sold or may be sold without
volume restrictions pursuant to Rule 144(k) as determined by the
counsel to the Company pursuant to a written opinion letter to such
effect, addressed and acceptable to the Company's transfer agent and
the affected Holders (the "Effectiveness Period").
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(b) If: (i) a Registration Statement is not filed on or prior
to the Filing Date (if the Company files a Registration Statement
without affording Bonanza Capital Master Fund Ltd., which is hereby
designated Holders' special counsel solely for the purposes expressly
set forth in this Agreement ("Holders' Counsel"), the opportunity to
review and comment on the same as required by Section 3(a), the Company
shall not be deemed to have satisfied this clause (i)), or (ii) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act, within
five Trading Days of the date that the Company is notified (orally or
in writing, whichever is earlier) by the Commission that a Registration
Statement will not be "reviewed," or is not subject to further review,
or (iii) prior to the date when such Registration Statement is first
declared effective by the Commission, the Company fails to file a
pre-effective amendment and otherwise respond in writing to comments
made by the Commission in respect of such Registration Statement within
10 Trading Days after the receipt of comments by or notice from the
Commission that such amendment is required in order for a Registration
Statement to be declared effective, or (iv) a Registration Statement
filed or required to be filed hereunder is not declared effective by
the Commission on or before the Effectiveness Date, or (v) after a
Registration Statement is first declared effective by the Commission,
it ceases for any reason to remain continuously effective as to all
Registrable Securities for which it is required to be effective, or the
Holders are not permitted to utilize the Prospectus therein to resell
such Registrable Securities, for in any such case 15 consecutive days
but no more than an aggregate of 25 consecutive days during any 12
month period (which need not be consecutive Trading Days)(any such
failure or breach being referred to as an "Event," and for purposes of
clause (i) or (iv) the date on which such Event occurs, or for purposes
of clause (ii) the date on which such five Trading Day period is
exceeded, or for purposes of clause (iii) the date which such 10
Trading Day period is exceeded, or for purposes of clause (v) the date
on which such 15 or 25 day period, as applicable, is exceeded being
referred to as "Event Date"), then in addition to any other rights the
Holders may have hereunder or under applicable law, the Company shall
pay to each Holder an amount in cash, as liquidated damages and not as
a penalty, equal to 1.5% of the aggregate purchase price paid by such
Holder pursuant to the Purchase Agreement for any Registrable
Securities then held by such Holder on each monthly anniversary of each
such Event Date (if the applicable Event shall not have been cured by
such date) until the applicable Event is cured. Notwithstanding
anything herein to the contrary, if an Event specified in clause (iv)
has occurred and the Company has filed the Registration Statement
required hereunder within 10 Trading Days of the Closing Date, then the
liquidated damages set forth in the previous sentence of this Section
2(b) shall be reduced to 1.0% of the aggregate purchase price paid by
such Holder pursuant to the Purchase Agreement for any Registrable
Securities then held by such Holder on each monthly anniversary of each
such Event Date (if such Event shall not have been cured by such date)
until such Event is cured. If the Company fails to pay any liquidated
damages pursuant to this Section in full within seven days after the
date payable, the Company will pay interest thereon at a rate of 15%
per annum (or such lesser maximum amount that is permitted to be paid
by applicable law) to the Holder, accruing daily from the date such
liquidated damages are due until such amounts, plus all such interest
thereon, are paid in full; provided, however, that the Company's
obligations pursuant to this Section 2(b) shall cease to accrue on the
date upon which such Registrable Securities may be sold under Rule
144(k) in the reasonable opinion of Company Counsel (provided that the
Company's transfer agent has accepted an instruction from the Company
to such effect). The liquidated damages pursuant to the terms hereof
shall apply on a daily pro-rata basis for any portion of a month prior
to the cure of an Event. Notwithstanding the foregoing, if the Event
occurs solely by reason of the failure of any Holder to provide such
information as (i) the Company may reasonably request from such Holder
to be included in the Registration Statement or (ii) the Commission or
Nasdaq may request in connection with such Registration Statement
(which request was provided to the Holder in writing), the Company
shall not be required to pay said amounts to any of the Holders.
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3. Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall:
(a) Not less than five Trading Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or
supplement thereto, the Company shall, (i) furnish to Holders' Counsel
copies of all such documents proposed to be filed which documents will
be subject to the review of Holders' Counsel, and (ii) cause its
officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of Holders' Counsel, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company
shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of
the Registrable Securities shall reasonably object in good faith,
provided that the Company is notified of such objection in writing no
later than 5 Trading Days after Holders' Counsel has been so furnished
copies of such documents.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and
the Prospectus used in connection therewith as may be necessary to keep
the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in
order to register for resale under the Securities Act all of the
Registrable Securities; (ii) cause the related Prospectus to be amended
or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond
as promptly as reasonably possible to any comments received from the
Commission with respect to the Registration Statement or any amendment
thereto and, as promptly as reasonably possible, upon request, provide
Holders' Counsel true and complete copies of all correspondence from
and to the Commission relating to the Registration Statement; and (iv)
comply in all material respects with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration
Statement as so amended or in such Prospectus as so supplemented.
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(c) Notify Holders' Counsel of Registrable Securities to be
sold as promptly as reasonably possible and (if requested by any such
Person) confirm such notice in writing promptly following the day
(i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B)
when the Commission notifies the Company whether there will be a
"review" of the Registration Statement and whenever the Commission
comments in writing on the Registration Statement (the Company shall
upon request provide true and complete copies thereof and all written
responses thereto to each of Holders' Counsel); and (C) with respect to
the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any
other Federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or
supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission or any
other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement covering any
or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for
sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (v) of the occurrence of any event or
passage of time that makes the financial statements included in the
Registration Statement ineligible for inclusion therein or any
statement made in the Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the
case of the Registration Statement or the Prospectus, as the case may
be, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(d) Use commercially reasonable efforts to avoid the issuance
of, or, if issued, obtain the withdrawal of (i) any order suspending
the effectiveness of the Registration Statement, or (ii) any suspension
of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest
practicable moment.
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(e) Furnish to each Holder, without charge, at least one
conformed copy of the Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference to the
extent requested by such Person, and all exhibits to the extent
requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents
with the Commission.
(f) Promptly deliver to each Holder, without charge, as many
copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons
may reasonably request in connection with resales by the Holder of
Registrable Securities. Subject to the terms of this Agreement, the
Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto,
except after the giving on any notice pursuant to Section 3(c).
(g) Prior to any resale of Registrable Securities by a Holder,
use its commercially reasonable efforts to register or qualify or
cooperate with the selling Holders in connection with the registration
or qualification (or exemption from the Registration or qualification)
of such Registrable Securities for the resale by the Holder under the
securities or Blue Sky laws of such jurisdictions within the United
States as any Holder reasonably requests in writing, to keep each the
Registration or qualification (or exemption therefrom) effective during
the Effectiveness Period and to do any and all other acts or things
reasonably necessary to enable the disposition in such jurisdictions of
the Registrable Securities covered by the Registration Statement;
provided, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified,
subject the Company to any material tax in any such jurisdiction where
it is not then so subject or file a general consent to service of
process in any such jurisdiction.
(h) If requested by the Holders, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be delivered to a transferee
pursuant to the Registration Statement, which certificates shall be
free, to the extent permitted by the Purchase Agreement, of all
restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any such Holders may
reasonably request.
(i) Upon the occurrence of any event contemplated by Section
3(c)(v), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered,
neither the Registration Statement nor such Prospectus will contain 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, in light of the circumstances under which they were made, not
misleading. If the Company notifies the Holders in accordance with
clauses (ii) through (v) of Section 3(c) above to suspend the use of
the use of any Prospectus until the requisite changes to such
Prospectus have been made, then the Holders shall suspend use of such
Prospectus. The Company will use its best efforts to ensure that the
use of the Prospectus may be resumed as promptly as is practicable. The
Company shall be entitled to exercise its right under this Section 3(i)
to suspend the availability of a Registration Statement and Prospectus,
subject to the payment of liquidated damages pursuant to Section 2(b),
for a period not to exceed 60 days (which need not be consecutive days)
in any 12 month period.
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(j) Comply with all applicable rules and regulations of the
Commission.
(k) The Company may require each Holder to furnish to the
Company a certified statement as to the number of shares of Common
Stock beneficially owned by such Holder and, if required by the
Commission, the person thereof that has voting and dispositive control
over the Shares. During any periods that the Company is unable to meet
its obligations hereunder with respect to the registration of the
Registrable Securities solely because any Holder fails to furnish such
information within three Trading Days of the Company's request, any
liquidated damages that are accruing at such time shall be tolled and
any Event that may otherwise occur solely because of such delay shall
be suspended, until such information is delivered to the Company.
4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Holders.
5. Indemnification
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(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, the officers, directors, agents and employees of
each of them, each Person who controls any such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of each
such controlling Person, to the fullest extent permitted by applicable
law, from and against any and all losses, claims, damages, liabilities,
costs (including, without limitation, reasonable attorneys' fees) and
expenses (collectively, "Losses"), as determined by a court of
competent jurisdiction in a final judgment not subject to appeal or
review, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in the Registration Statement,
any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of
or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent,
that (i) such untrue statements or omissions or alleged untrue
statements or omissions are based upon information regarding such
Holder furnished in writing to the Company by such Holder for use
therein, or to the extent that such information relates to such Holder
or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such
Holder or Holders' Counsel for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement
thereto (it being understood that the Holder has approved Annex A
hereto for this purpose) or (ii) in the case of an occurrence of an
event of the type specified in Section 3(c)(ii)-(v), the use by such
Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or
defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(d). The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of
which the Company is aware in connection with the transactions
contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall,
notwithstanding any termination of this Agreement, severally and not
jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act), and the directors, officers, agents or employees
of such controlling Persons, to the fullest extent permitted by
applicable law, from and against all Losses, as incurred, to the extent
arising out of or based upon: (x) such Holder's failure to comply with
the prospectus delivery requirements of the Securities Act or (y) as
determined by a court of competent jurisdiction in a final judgment not
subject to appeal or review, any untrue or alleged untrue statement of
a material fact contained in any Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of
or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were
made) not misleading (i) to the extent, but only to the extent, that
such untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company for inclusion in the
Registration Statement or such Prospectus or (ii) to the extent, but
only to the extent that (1) such untrue statements or omissions or
alleged untrue statements or omissions are based upon information
regarding such Holder furnished in writing to the Company by such
Holder for use therein, or to the extent that such information relates
to such Holder or such Holder's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in
writing by such Holder or Holders' Counsel for use in the Registration
Statement, such Prospectus or such form of Prospectus or any amendment
or supplement thereto (it being understood that the Holder has approved
Annex A hereto for this purpose) or (2) the use by such Holder of an
outdated or defective Prospectus after the Company has notified such
Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in
Section 6(d). In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
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(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "Indemnified Party"), such Indemnified Party shall
promptly notify the Person from whom indemnity is sought (the
"Indemnifying Party") in writing, and the Indemnifying Party shall have
the right to assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations
or liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further
review) that such failure shall have prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless: (1) the
Indemnifying Party has agreed in writing to pay such fees and expenses;
(2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded
parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel
that a conflict of interest is likely to exist if the same counsel were
to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party
in writing that it elects to employ separate counsel at the expense of
the Indemnifying Party, the Indemnifying Party shall not have the right
to assume the defense thereof and the reasonable fees and expenses of
one separate counsel shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any settlement
of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party,
effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on
claims that are the subject matter of such Proceeding.
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Subject to the terms of this Agreement, all reasonable fees
and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with
this Section) shall be paid to the Indemnified Party, as incurred,
within ten Trading Days of written notice thereof to the Indemnifying
Party; provided, that the Indemnified Party shall promptly reimburse
the Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is not
entitled to indemnification hereunder, determined based upon the
relative faults of the parties.
(d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of
public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses,
in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission of a material fact, has been taken or made
by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the
limitations set forth in this Agreement, any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection
with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided
for in this Section was available to such party in accordance with its
terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined
by pro rata allocation or by any other method of allocation that does
not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this
Section 5(d), no Holder shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the proceeds
actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages
that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission,
except in the case of fraud by such Holder.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties
may have to the Indemnified Parties.
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6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder
or the Company, as the case may be, in addition to being entitled to
exercise all rights granted by law and under this Agreement, including
recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Company and each Holder agree that
monetary damages would not provide adequate compensation for any losses
incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action
for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Piggyback on Registrations. Except as set forth on
Schedule 6(b) attached hereto, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant
hereto) may include securities of the Company in the Registration
Statement other than the Registrable Securities, and the Company shall
not after the date hereof enter into any agreement providing any such
right to any of its security holders. Except as set forth in the SEC
Reports and Disclosure Schedules of the Purchase Agreement, no Person
has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company. The Company shall not
file any other registration statement until after the Effective Date
other than amendments to its registration statement on Form S-1,
Registration Statement Number 333-36022.
(c) Compliance. Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act
as applicable to it in connection with sales of Registrable Securities
pursuant to the Registration Statement.
(d) Discontinued Disposition. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a
notice from the Company of the occurrence of any event of the kind
described in Section 3(c), such Holder will forthwith discontinue
disposition of such Registrable Securities under the Registration
Statement until such Holder's receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of
any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration
Statement. The Company may provide appropriate stop orders to enforce
the provisions of this paragraph.
(e) Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement
covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of
others under the Securities Act of any of its equity securities, other
than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or
business or equity securities issuable in connection with the stock
option or other employee benefit plans, then the Company shall send to
each Holder a written notice of such determination and, if within
fifteen days after the date of such notice, any such Holder shall so
request in writing, the Company shall include in such registration
statement all or any part of such Registrable Securities such Holder
requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights; provided, that, the
Company shall not be required to register any Registrable Securities
pursuant to this Section 6(e) that are eligible for resale pursuant to
Rule 144(k) promulgated under the Securities Act or that are the
subject of a then effective Registration Statement
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(f) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified
or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in writing
and signed by the Company and each Holder of the then outstanding
Registrable Securities. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of certain Holders and that does
not directly or indirectly affect the rights of other Holders may be
given by Holders of all of the Registrable Securities to which such
waiver or consent relates.
(g) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be made
in accordance with the provisions of the Purchase Agreement.
(h) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder. Each
Holder may assign their respective rights hereunder in the manner and
to the Persons as permitted under the Purchase Agreement.
(i) Execution and Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be
deemed to be an original and, all of which taken together shall
constitute one and the same Agreement. In the event that any signature
is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as
if such facsimile signature were the original thereof.
(j) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be
determined with the provisions of the Purchase Agreement.
(k) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
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(m) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(n) Independent Nature of Purchasers' Obligations and Rights.
The obligations of each Purchaser hereunder are several and not joint
with the obligations of any other Purchaser hereunder, and no Purchaser
shall be responsible in any way for the performance of the obligations
of any other Purchaser hereunder. Nothing contained herein or in any
other agreement or document delivered at any closing, and no action
taken by any Purchaser pursuant hereto or thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such
obligations or the transactions contemplated by this Agreement. Each
Purchaser shall be entitled to protect and enforce its rights,
including without limitation the rights arising out of this Agreement,
and it shall not be necessary for any other Purchaser to be joined as
an additional party in any proceeding for such purpose.
*************************
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IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
STEELCLOUD, INC.
By:
--------------------------------------
Name: Xxxxx Xxxxxx
Title: Executive Vice President - Finance
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
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[SIGNATURE PAGE OF HOLDERS TO RRA]
BONANZA CAPITAL MASTER FUND LTD.
By:
--------------------------------------
Name:
Title:
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
15
[SIGNATURE PAGE OF HOLDERS TO RRA]
[PURCHASER]
By:
--------------------------------------
Name:
Title:
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ANNEX A
Plan of Distribution
The Selling Stockholders (the "Selling Stockholders") of the common
stock ("Common Stock") of SteelCloud, Inc. (the "Company") and any of their
pledgees, assignees and successors-in-interest may, from time to time, sell any
or all of their shares of Common Stock on any stock exchange, market or trading
facility on which the shares are traded or in private transactions. These sales
may be at fixed or negotiated prices. The Selling Stockholders may use any one
or more of the following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o settlement of short sales entered into after the date of this
prospectus;
o broker-dealers may agree with the Selling Stockholders to sell
a specified number of such shares at a stipulated price per
share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders may from time to time pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act
amending the list of Selling Stockholders to include the pledgee, transferee or
other successors in interest as Selling Stockholders under this prospectus.
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The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The Selling Stockholders have
informed the Company that it does not have any agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock.
The Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the shares. The Company has agreed
to indemnify the Selling Stockholders against certain losses, claims, damages
and liabilities, including liabilities under the Securities Act.
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