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EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, dated as of May 2, 2000
(this "AGREEMENT"), by and between XxxXxxx.xxx Inc., a Minnesota corporation,
with principal executive offices located at 0000 Xxxxxxxxx Xxxxx, Xxxxx 000,
Xxxxxx, XX 00000 (the "COMPANY"), and The Shaar Fund Ltd. (the "INITIAL
INVESTOR").
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement dated as of May 2, 2000, by and between the
Initial Investor and the Company (the "SECURITIES PURCHASE AGREEMENT"), the
Company has agreed to issue and sell to the Initial Investor (i) 600,000 shares
of Series G 10% Convertible Preferred Stock, par value $.01 per share (the
"PREFERRED SHARES") which, upon the terms of and subject to the conditions of
the Company's Certificate of Designation of Series G 10% Convertible Preferred
Stock (the "CERTIFICATE OF DESIGNATION"), are convertible into shares of the
Company's common stock, par value $.01 per share (the "COMMON STOCK") and (ii)
Common Stock Purchase Warrants (the "WARRANTS") to purchase shares of Common
Stock; and
WHEREAS, to induce the Initial Investor to execute and deliver
the Securities Purchase Agreement, the Company has agreed to provide with
respect to the Common Stock issued or issuable in lieu of cash dividend payments
on the Preferred Shares, upon conversion of the Preferred Shares and exercise of
the Warrants certain registration rights under the Securities Act;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. DEFINITIONS
(a) As used in this Agreement, the following terms shall
have the meanings:
(i) "AFFILIATE," of any specified Person means any
other Person who directly, or indirectly through one or more
intermediaries, is in control of, is controlled by, or is under common
control with, such specified Person. For purposes of this definition,
control of a Person means the power, directly or indirectly, to direct
or cause the direction of the management and policies of such Person
whether by contract, securities, ownership or otherwise; and the terms
"CONTROLLING" and "CONTROLLED" have the respective meanings correlative
to the foregoing.
(ii) "CLOSING DATE" means the date and time of the
issuance and sale of the Preferred Shares and the Warrants.
(iii) "COMMISSION" means the Securities and Exchange
Commission.
(iv) "CURRENT MARKET PRICE" on any date of
determination means the closing bid price of a share of the Common
Stock on such day as reported on the Nasdaq SmallCap Market ("NASDAQ");
provided, if such security is not listed or admitted to trading on the
Nasdaq, as reported on the principal national security exchange or
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quotation system on which such security is quoted or listed or admitted
to trading, or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, the closing bid price
of such security on the over-the-counter market on the day in question
as reported by Bloomberg LP, or a similar generally accepted reporting
service, as the case may be.
(v) "EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended, and the rules and regulations of the Commission
thereunder, or any similar successor statute.
(vi) "INVESTOR" means each of the Initial Investors
and any transferee or assignee of Registrable Securities which agrees
to become bound by all of the terms and provisions of this Agreement in
accordance with Section 8 hereof.
(vii) "PERSON" means any individual, partnership,
corporation, limited liability company, joint stock company,
association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
(viii) "PROSPECTUS" means the prospectus (including,
without limitation, any preliminary prospectus and any final prospectus
filed pursuant to Rule 424(b) under the Securities Act, including any
prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in
reliance on Rule 430A under the Securities Act) included in the
Registration Statement, 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 by
all other amendments and supplements to such prospectus, including all
material incorporated by reference in such prospectus and all documents
filed after the date of such prospectus by the Company under the
Exchange Act and incorporated by reference therein.
(ix) "PUBLIC OFFERING" means an offer registered with
the Commission and the appropriate state securities commissions by the
Company of its Common Stock and made pursuant to the Securities Act.
(x) "REGISTRABLE SECURITIES" means the Common Stock
issued or issuable (i) in lieu of cash dividend payments on the
Preferred Shares, (ii) upon conversion or redemption of the Preferred
Shares or (iii) upon exercise of the Warrants; provided, however, a
share of Common Stock shall cease to be a Registrable Security for
purposes of this Agreement when it no longer is a Restricted Security.
(xi) "REGISTRATION STATEMENT" means a registration
statement of the Company filed on an appropriate form under the
Securities Act providing for the registration of, and the sale on a
continuous or delayed basis by the holders of, all of the Registrable
Securities pursuant to Rule 415 under the Securities Act, including the
Prospectus contained therein and forming a part thereof, any amendments
to such registration statement and supplements to such Prospectus, and
all exhibits to and other material incorporated by reference in such
registration statement and Prospectus.
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(xii) "RESTRICTED SECURITY" means any share of Common
Stock issued or issuable in lieu of cash dividend payments on the
Preferred Shares, upon conversion or redemption of the Preferred Shares
or exercise of the Warrants except any such share that (i) has been
registered pursuant to an effective registration statement under the
Securities Act and sold in a manner contemplated by the prospectus
included in such registration statement, (ii) has been transferred in
compliance with the resale provisions of Rule 144 under the Securities
Act (or any successor provision thereto) or is transferable pursuant to
paragraph (k) of Rule 144 under the Securities Act (or any successor
provision thereto), or (iii) otherwise has been transferred and a new
share of Common Stock not subject to transfer restrictions under the
Securities Act has been delivered by or on behalf of the Company.
(xiii) "SECURITIES ACT" means the Securities Act of
1933, as amended, and the rules and regulations of the Commission
thereunder, or any similar successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement.
2. REGISTRATION
(a) Filing and Effectiveness of Registration Statement. The
Company shall prepare and file with the Commission not later than 60 days after
the Closing Date, a Registration Statement relating to the offer and sale of the
Registrable Securities and shall use its best efforts to cause the Commission to
declare such Registration Statement effective under the Securities Act as
promptly as practicable but in no event later than 150 days after the Closing
Date, assuming for purposes hereof a Conversion Price under the Certificate of
Designation of $1.00 per share. The Company shall promptly (and, in any event,
no more than 24 hours after it receives comments from the Commission), notify
the Buyer when and if it receives any comments from the Commission on the
Registration Statement and promptly forward a copy of such comments, if they are
in writing, to the Buyer. At such time after the filing of the Registration
Statement pursuant to this Section 2(a) as the Commission indicates, either
orally or in writing, that it has no further comments with respect to such
Registration Statement or that it is willing to entertain appropriate requests
for acceleration of effectiveness of such Registration Statement, the Company
shall promptly, and in no event later than two business days after receipt of
such indication from the Commission, request that the effectiveness of such
Registration Statement be accelerated within 48 hours of the Commission's
receipt of such request. The Company shall not include any other securities in
the Registration Statement relating to the offer and sale of the Registrable
Securities. The Company shall notify the Initial Investor by written notice that
such Registration Statement has been declared effective by the Commission within
24 hours of such declaration by the Commission.
(b) REGISTRATION DEFAULT. If the Registration Statement
covering the Registrable Securities required to be filed by the Company pursuant
to Section 2(a), is not (i) filed with the Commission within 60 days after the
Closing Date or (ii) declared effective by the Commission within 150 days after
the Closing Date (either of which, without duplication, an "INITIAL DATE"), then
the Company shall make the payments to the Initial Investor as provided in
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the next sentence as liquidated damages and not as a penalty. The amount to be
paid by the Company to the Initial Investor shall be determined as of each
Computation Date (as defined below), and such amount shall be equal to 2% (the
"LIQUIDATED DAMAGE RATE") of the Purchase Price (as defined in the Securities
Purchase Agreement) from the Initial Date to the first Computation Date and for
each Computation Date thereafter, calculated on a pro rata basis to the date on
which the Registration Statement is filed with (in the event of an Initial Date
pursuant to clause (i) above) or declared effective by (in the event of an
Initial Date pursuant to clause (ii) above) the Commission (the "PERIODIC
AMOUNT") provided, however, that in no event shall the liquidated damages be
less than $25,000; provided, further, however, that if the Registration
Statement is not declared effective by the Commission within 210 days after the
Initial Date set forth in clause (ii) above, then the Liquidated Damage Rate
shall increase to 3%; provided, further, however, that the Liquidated Damage
Rate shall increase by 1% for each 30 day period after the 210th day after the
Initial Date set forth in clause (ii) above that the Registration Statement is
not declared effective by the Commission. The full Periodic Amount shall be paid
by the Company to the Initial Investor by wire transfer of immediately available
funds within three days after each Computation Date.
As used in this Section 2(b), "COMPUTATION DATE" means the
date which is 30 days after the Initial Date and, if the Registration Statement
required to be filed by the Company pursuant to Section 2(a) has not theretofore
been declared effective by the Commission, each date which is 30 days after the
previous Computation Date until such Registration Statement is so declared
effective.
(c) ELIGIBILITY FOR USE OF FORM S-3. The Company agrees that
Registration Statement on Form S-3 it shall file all reports and information
required to be filed by it with the Commission in a timely manner and take all
such other action so as to maintain such eligibility for the use of such form.
(d) ADDITIONAL REGISTRATION STATEMENT. In the event the
Current Market Price declines to $1.50 per share or less and each time
thereafter that the Current Market Price declines by 10% (each such date, a
"DECLINE DATE"), the Company shall, to the extent required by the Securities Act
(because the additional shares were not covered by the Registration Statement
filed pursuant to Section 2(a)), as reasonably determined by the Initial
Investor, file an additional Registration Statement with the Commission for such
additional number of Registrable Securities as would be issuable upon conversion
of the Preferred Shares and exercise of the Warrants (the "ADDITIONAL
REGISTRABLE SECURITIES") in addition to those previously registered, assuming
(x) with respect to the first Additional Registration Statement, a Conversion
Price of $.50 per share and (y) with respect to each succeeding Additional
Registration Statement, a Conversion Price of 10% less than the Conversion Price
assumed with respect to the immediately preceding Additional Registration
Statement. The Company shall, to the extent required by the Securities Act, as
reasonably determined by the Initial Investor, prepare and file with the
Commission not later than the 30th day thereafter, a Registration Statement
relating to the offer and sale of such Additional Registrable Securities and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but not
later than 60 days thereafter. The Company shall not include any other
securities in the Registration Statement relating to the offer and sale of such
Additional Registrable Securities.
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If the Additional Registration Statement is not (i) filed with
the Commission within 30 days after the Decline Date or (ii) declared effective
by the Commission within 90 days after the Decline Date (either of which,
without duplication, an "ADDITIONAL REGISTRATION DATE"), then the Company shall
make the payments to the Initial Investor at the Liquidated Damage Rate from the
Additional Registration Date to the first Additional Computation Date and for
each Additional Computation Date thereafter, calculated on a pro rata basis to
the date on which the Additional Registration Statement is filed with (in the
event of an Additional Registration Date pursuant to clause (i) above) or
declared effective by (in the event of an Additional Registration Date pursuant
to clause (ii) above) the Commission (the "ADDITIONAL PERIODIC AMOUNT")
provided, however, that in no event shall the liquidated damages be less than
$25,000; provided, further, however, that if the Additional Registration
Statement is not declared effective by the Commission within 120 days after the
Additional Registration Date set forth in clause (ii) above, then the Liquidated
Damage Rate shall increase to 3%; provided, further, however, that the
Liquidated Damage Rate shall increase by 1% for each 30 day period after the
120th day after the Additional Registration Date set forth in clause (ii) above
that the Additional Registration Statement is not declared effective by the
Commission. The full Additional Periodic Amount shall be paid by the Company to
the Initial Investor by wire transfer of immediately available funds within
three days after each Additional Computation Date.
As used in this Section 2(d), "ADDITIONAL COMPUTATION DATE"
means the date which is 30 days after the Additional Registration Date and, if
the Additional Registration Statement required to be filed by the Company
pursuant to this Section 2(d) has not theretofore been declared effective by the
Commission, each date which is 30 days after the previous Additional Computation
Date until such Additional Registration Statement is so declared effective.
(e) (i) If the Company proposes to register any of its
warrants, Common Stock or any other shares of common stock of the Company under
the Securities Act (other than a registration (A) on Form S-8 or S-4 or any
successor or similar forms, (B) relating to Common Stock or any other shares of
common stock of the Company issuable upon exercise of employee share options or
in connection with any employee benefit or similar plan of the Company or (C) in
connection with a direct or indirect acquisition by the Company of another
Person or any transaction with respect to which Rule 145 (or any successor
provision) under the Securities Act applies), whether or not for sale for its
own account, it will each such time, give prompt written notice at least 20 days
prior to the anticipated filing date of the registration statement relating to
such registration to each Investor, which notice shall set forth such Investor's
rights under this Section 2(e) and shall offer such Investor the opportunity to
include in such registration statement such number of Registrable Securities as
such Investor may request. Upon the written request of any Investor made within
10 days after the receipt of notice from the Company (which request shall
specify the number of Registrable Securities intended to be disposed of by such
Investor), the Company will use its best efforts to effect the registration
under the Securities Act of all Registrable Securities that the Company has been
so requested to register by each Investor, to the extent requisite to permit the
disposition of the Registrable Securities so to be registered; provided,
however, that (A) if such registration involves a Public Offering, each Investor
must sell its Registrable Securities to any underwriters selected by the Company
with the consent of such Investor on the same terms and conditions as apply to
the Company and (B) if, at any time
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after giving written notice of its intention to register any Registrable
Securities pursuant to this Section 2 and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register such Registrable Securities, the
Company shall give written notice to each Investor and, thereupon, shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration. The Company's obligations under this Section 2(e) shall
terminate on the date that the registration statement to be filed in accordance
with Section 2(a) is declared effective by the Commission.
(ii) If a registration pursuant to this Section 2(e) involves
a Public Offering and the managing underwriter thereof advises the Company that,
in its view, the number of shares of Common Stock, Warrants or other shares of
Common Stock that the Company and the Investors intend to include in such
registration exceeds the largest number of shares of Common Stock or Warrants
(including any other shares of Common Stock or Warrants of the Company) that can
be sold without having an adverse effect on such Public Offering (the "MAXIMUM
OFFERING SIZE"), the Company will include in such registration only such number
of shares of Common Stock or Warrants, as applicable, as does not exceed the
Maximum Offering Size, and the number of shares in the Maximum Offering Size
shall be allocated among the Company, the Investors and any other sellers of
Common Stock or Warrants in such Public Offering ("THIRD-PARTY SELLERS"), first,
pro rata among the Company and any Third-Party Sellers, and second, pro rata
among the Investors, in each case on the basis of the relative number of shares
of Common Stock or Warrants originally proposed to be offered for sale under
such registration by each of the Investors, the Company and the Third-Party
Sellers, as the case may be. If as a result of the proration provisions of this
Section 2(e)(ii), any Investor is not entitled to include all such Registrable
Securities in such registration, such Investor may elect to withdraw its request
to include any Registrable Securities in such registration. With respect to
registrations pursuant to this Section 2(e), the number of securities required
to satisfy any underwriters' over-allotment option shall be allocated among the
Company, the Investors and any Third Party Seller pro rata on the basis of the
relative number of securities offered for sale under such registration by each
of the Investors, the Company and any such Third Party Sellers before the
exercise of such over-allotment option.
3. OBLIGATIONS OF THE COMPANY
In connection with the registration of the Registrable
Securities, the Company shall:
(a) Promptly (i) prepare and file with the Commission such
amendments (including post-effective amendments) to the Registration Statement
and supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Investors for resales of the Registrable
Securities for a period of five years from the date on which the Registration
Statement is first declared effective by the Commission (the "EFFECTIVE TIME")
or such shorter period that will terminate when all the Registrable Securities
covered by the Registration Statement have been sold pursuant thereto in
accordance with the plan of distribution provided in the Prospectus, transferred
pursuant to Rule 144 under the Securities Act or otherwise transferred
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in a manner that results in the delivery of new securities not subject to
transfer restrictions under the Securities Act (the "REGISTRATION PERIOD") and
(ii) take all lawful action such that each of (A) the Registration Statement and
any amendment thereto does not, when it becomes effective, 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, not misleading and
(B) the Prospectus forming part of the Registration Statement, and any amendment
or supplement thereto, does not at any time during the Registration Period
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing provisions of this Section 3(a), the Company may,
during the Registration Period, suspend the use of the Prospectus for a period
not to exceed 60 days (whether or not consecutive) in any 12-month period if the
Board of Directors of the Company determines in good faith that because of valid
business reasons, including pending mergers or other business combination
transactions, the planned acquisition or divestiture of assets, pending material
corporate developments and similar events, it is in the best interests of the
Company to suspend such use, and prior to or contemporaneously with suspending
such use the Company provides the Investors with written notice of such
suspension, which notice need not specify the nature of the event giving rise to
such suspension. At the end of any such suspension period, the Company shall
provide the Investors with written notice of the termination of such suspension;
(b) During the Registration Period, comply with the provisions
of the Securities Act with respect to the Registrable Securities of the Company
covered by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement;
(c) (i) Prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and the distribution
or delivery of any Prospectus (including any supplements thereto), provide (A)
draft copies thereof to the Investors and reflect in such documents all such
comments as the Investors (and their counsel) reasonably may propose and (B) to
the Investors a copy of the accountant's consent letter to be included in the
filing and (ii) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel identified to the
Company, (A) promptly after the same is prepared and publicly distributed, filed
with the Commission, or received by the Company, one copy of the Registration
Statement, each Prospectus, and each amendment or supplement thereto, and (B)
such number of copies of the Prospectus and all amendments and supplements
thereto and such other documents, as such Investor may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
Investor;
(d) (i) Register or qualify the Registrable Securities covered
by the Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in such jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions
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reasonably necessary or advisable to qualify the Registrable Securities for sale
in such jurisdictions; provided, however, that the Company shall not be required
in connection therewith or as a condition thereto to (A) qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (B) subject itself to general taxation in any such
jurisdiction or (C) file a general consent to service of process in any such
jurisdiction;
(e) As promptly as practicable after becoming aware of such
event, notify each Investor of the occurrence of any event, as a result of which
the Prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension;
(g) Cause all the Registrable Securities covered by the
Registration Statement to be listed on the principal national securities
exchange, and included in an inter-dealer quotation system of a registered
national securities association, on or in which securities of the same class or
series issued by the Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
registration statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts, as the case may be, as the
Investors reasonably may request and registered in such names as the Investor
may request; and, within three business days after a registration statement
which includes Registrable Securities is declared effective by the Commission,
deliver and cause legal counsel selected by the Company to deliver to the
transfer agent for the Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such registration statement) an
appropriate instruction and, to the extent necessary, an opinion of such
counsel;
(j) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of their Registrable
Securities in accordance with the intended methods therefor provided in the
Prospectus which are customary under the circumstances;
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(k) Make generally available to its security holders as soon
as practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(l) In the event of an underwritten offering, promptly include
or incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
(m) (i) Make reasonably available for inspection by Investors,
any underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material nonpublic information shall be kept
confidential by such Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided, further, that, if the foregoing inspection and information
gathering would otherwise disrupt the Company's conduct of its business, such
inspection and information gathering shall, to the maximum extent possible, be
coordinated on behalf of the Investors and the other parties entitled thereto by
one firm of counsel designed by and on behalf of the majority in interest of
Investors and other parties;
(n) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;
(o) In connection with any underwritten offering, obtain
opinions of counsel to the Company (which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the managers) addressed to
the underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of
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the opinion and as of the Effective Time of the Registration Statement or most
recent post-effective amendment thereto, as the case may be, the absence from
the Registration Statement and the Prospectus, including any documents
incorporated by reference therein, of an untrue statement of a material fact or
the omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, subject to customary
limitations);
(p) In connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public accountants of
the Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(q) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any; and
(r) In the event that any broker-dealer registered under the
Exchange Act shall be an "AFFILIATE" (as defined in Rule 2729(b)(1) of the rules
and regulations of the National Association of Securities Dealers, Inc. (the
"NASD RULES") (or any successor provision thereto)) of the Company or has a
"CONFLICT OF INTEREST" (as defined in Rule 2720(b)(7) of the NASD Rules (or any
successor provision thereto)) and such broker-dealer shall underwrite,
participate as a member of an underwriting syndicate or selling group or assist
in the distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "QUALIFIED INDEPENDENT UNDERWRITER" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 6 hereof, and (C) providing
such information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.
4. OBLIGATIONS OF THE INVESTORS
In connection with the registration of the Registrable
Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding
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itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. As least seven days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify each Investor of
the information the Company requires from each such Investor (the "REQUESTED
INFORMATION") if such Investor elects to have any of its Registrable Securities
included in the Registration Statement. If at least two business days prior to
the anticipated filing date the Company has not received the Requested
Information from an Investor (a "NON-RESPONSIVE INVESTOR"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor and have no further obligations to the Non-Responsive
Investor;
(b) Each Investor by its acceptance of the Registrable
Securities agrees to cooperate with the Company in connection with the
preparation and filing of the Registration Statement hereunder, unless such
Investor has notified the Company in writing of its election to exclude all of
its Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in Section 3(e)
or 3(f), it shall immediately discontinue its disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(e) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
5. EXPENSES OF REGISTRATION
All expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printing and engraving fees,
accounting fees, and the fees and disbursements of counsel for the Company, and
the reasonable fees of one firm of counsel to the holders of a majority in
interest of the Registrable Securities, not to exceed $20,000 per Registration
Statement, shall be borne by the Company.
6. INDEMNIFICATION AND CONTRIBUTION
(a) The Company shall indemnify and hold harmless each
Investor and each underwriter, if any, which facilitates the disposition of
Registrable Securities, and each of their respective officers and directors and
each person who controls such Investor or underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act (each such
person being sometimes hereinafter referred to as an "INDEMNIFIED PERSON") from
and against any losses, claims, damages or liabilities, joint or several, to
which such Indemnified Person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
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or an omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, not misleading,
or arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Prospectus or an omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company hereby agrees to
reimburse such Indemnified Person for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; provided, however, that the
Company shall not be liable to any such Indemnified Person in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the case
of the occurrence of an event of the type specified in Section 3(e), the use by
the Indemnified Person of an outdated or defective Prospectus after the Company
has provided to such Indemnified Person an updated Prospectus correcting the
untrue statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage or liability.
(b) INDEMNIFICATION BY THE INVESTORS AND UNDERWRITERS. Each
Investor agrees, as a consequence of the inclusion of any of its Registrable
Securities in a Registration Statement, and each underwriter, if any, which
facilitates the disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company, its
directors (including any person who, with his or her consent, is named in the
Registration Statement as a director nominee of the Company), its officers who
sign any Registration Statement and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, against any losses, claims, damages or liabilities to
which the Company or such other persons may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in such Registration
Statement or Prospectus or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in light of the circumstances under
which they were made, in the case of the Prospectus), not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
holder or underwriter expressly for use therein; provided, however, that no
Investor or underwriter shall be liable under this Section 6(b) for any amount
in excess of the net proceeds paid to such Investor or underwriter in respect of
shares sold by it, and (ii) reimburse the Company for any legal or other
expenses incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred.
(c) NOTICE OF CLAIMS, ETC. Promptly after receipt by a party
seeking indemnification pursuant to this Section 6 (an "INDEMNIFIED PARTY") of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "CLAIM"), the
Indemnified Party promptly shall notify the party against whom indemnification
pursuant to this Section 6 is being sought (the "INDEMNIFYING PARTY") of the
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commencement thereof; but the omission to so notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees, costs
and expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnified Party shall not, without the prior written consent of
the Indemnifying Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that does
not include an unconditional release of the Indemnifying Party from all
liabilities with respect to such Claim or judgment.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 6 is unavailable to or insufficient to hold harmless an Indemnified
Person under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
each Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), 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 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
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if the Investors or any 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 this Section 6(d).
The amount paid or payable by an Indemnified
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Party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such Indemnified Party in connection
with investigating or defending any such action or claim. 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. The obligations of the Investors
and any underwriters in this Section 6(d) to contribute shall be several in
proportion to the percentage of Registrable Securities registered or
underwritten, as the case may be, by them and not joint.
(e) Notwithstanding any other provision of this Section 6, in
no event shall any (i) Investor be required to undertake liability to any person
under this Section 6 for any amounts in excess of the dollar amount of the
proceeds to be received by such Investor from the sale of such Investor's
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act and (ii)
underwriter be required to undertake liability to any Person hereunder for any
amounts in excess of the aggregate discount, commission or other compensation
payable to such underwriter with respect to the Registrable Securities
underwritten by it and distributed pursuant to the Registration Statement.
(f) The obligations of the Company under this Section 6 shall
be in addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
7. RULE 144
With a view to making available to the Investors the benefits
of Rule 144 under the Securities Act or any other similar rule or regulation of
the Commission that may at any time permit the Investors to sell securities of
the Company to the public without registration ("RULE 144"), the Company agrees
to use its best efforts to:
(a) comply with the provisions of paragraph (c) (1) of Rule
144; and
(b) file with the Commission in a timely manner all reports
and other documents required to be filed by the Company pursuant to Section 13
or 15(d) under the Exchange Act; and, if at any time it is not required to file
such reports but in the past had been required to or did file such reports, it
will, upon the request of any Investor, make available other information as
required by, and so long as necessary to permit sales of, its Registrable
Securities pursuant to Rule 144.
8. ASSIGNMENT
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assigned by the Investors to
any permitted transferee of all or any portion of such Registrable Securities
(or all or any portion of any Preferred Shares or
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Warrant of the Company which is convertible into such securities) only if: (a)
the Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment, the securities so transferred
or assigned to the transferee or assignee constitute Restricted Securities, and
(d) at or before the time the Company received the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein.
9. AMENDMENT AND WAIVER
Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the
Company and Investors who hold a majority-in-interest of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section 9
shall be binding upon each Investor and the Company.
10. CHANGES IN COMMON STOCK
If, and as often as, there are any changes in the Common Stock
by way of stock split, stock dividend, reverse split, combination or
reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Common Stock as so changed.
11. MISCELLANEOUS
(a) A person or entity shall be deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) If, after the date hereof and prior to the Commission
declaring the Registration Statement to be filed pursuant to Section 2(a)
effective under the Securities Act, the Company grants to any Person any
registration rights with respect to any Company securities which are more
favorable to such other Person than those provided in this Agreement, then the
Company forthwith shall grant (by means of an amendment to this Agreement or
otherwise) identical registration rights to all Investors hereunder.
(c) Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three days after the date of deposit in the United States mails, as
follows:
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(i) if to the Company, to:
XxxXxxx.xxx Inc.
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
(000) 000-0000
(000) 000-0000(Fax)
with a copy to:
Xxxxxx Xxxxxxx Xxxxxx & Brand, LLP
0000 Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
(000) 000-0000
(000) 000-0000
(ii) if to the Initial Investor, to:
The Shaar Fund Ltd.,
c/x Xxxxxxxx Capital Management
0 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
(000) 000-0000
(000) 000-0000 (Fax)
with a copy to:
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Block, Esq.
(000) 000-0000
(000) 000-0000 (Fax)
(iii) if to any other Investor, at such address as
such Investor shall have provided in writing to the Company.
The Company, the Initial Investor or any Investor may change the foregoing
address by notice given pursuant to this Section 11(c).
(d) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
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(e) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties consents
to the jurisdiction of the federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
(f) The remedies provided in this Agreement are cumulative and
not exclusive of any remedies provided by law. 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 best 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.
(g) The Company shall not enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
holders of Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing, without
the written consent of the holders of a majority in interest of the Registrable
Securities, the Company shall not grant to any person the right to request it to
register any of its securities under the Securities Act unless the rights so
granted are subject in all respect to the prior rights of the holders of
Registrable Securities set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement. The restrictions on the
Company's rights to grant registration rights under this paragraph shall
terminate on the date the Registration Statement to be filed pursuant to Section
2(a) is declared effective by the Commission.
(h) This Agreement, the Securities Purchase Agreement, the
Escrow Instructions, dated as of a date even herewith (the "ESCROW
INSTRUCTIONS"), between the Company, the Initial Investor and Cadwalader,
Xxxxxxxxxx & Xxxx, the Preferred Shares and the Warrants constitute the entire
agreement among the parties hereto with respect to the subject matter hereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein. This Agreement, the Securities Purchase
Agreement, the Escrow Instructions, the Certificate of Designation and the
Warrants supersede all prior agreements and undertakings among the parties
hereto with respect to the subject matter hereof.
(i) Subject to the requirements of Section 8 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
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(j) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(k) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(l) The Company acknowledges that any failure by the Company
to perform its obligations under Section 3, or any delay in such performance
could result in direct damages to the Investors and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct damages caused by
such failure or delay.
(m) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto.
[SIGNATURE PAGE FOLLOWS.]
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In Witness Whereof, the parties have caused this Agreement to
be duly executed and delivered as of the date first above written.
XxxXxxx.xxx Inc.
By: s/ Xxxxxxx X. Xxxx
------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Chief Executive Officer
The Shaar Fund Ltd.
Intercarribean Services
By:
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Name:
Title:
