EXHIBIT 10.48
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 31, 1998
("Agreement"), is made by and between CHATCOM, INC., a California corporation
(the "Company"), and Strategic Growth International, Inc. ("SGI").
W I T N E S S E T H:
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WHEREAS, upon the terms and subject to the conditions of the Settlement
Agreement, dated as of March 31, 1998, by and between SGI and the Company (the
"Settlement Agreement"), the Company has agreed to issue to SGI 800,000 shares
(the "Common Shares") of the Company's common stock, no par value ("Common
Stock"), and options (the "Options") to purchase up to 200,000 shares of Common
Stock (the "Option Shares"); and
WHEREAS, to induce SGI to execute and deliver the Settlement Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the "Securities Act"), with respect to
the Common Shares and the Option Shares.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and SGI hereby agree
as follows:
1. Definitions.
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(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investor" means SGI and any permitted transferee or assignee
who agrees to become bound by the provisions of this Agreement in accordance
with Section 9 hereof.
(ii) "Potential Material Event" means any of the following: (a)
the possession by the Company of material information not ripe for disclosure in
a registration statement, which shall be evidenced by determinations in good
faith by the Board of Directors of the Company that disclosure of such
information in the registration statement would be detrimental to the business
and affairs of the Company; or (b) any material engagement or activity by the
Company which would, in the good faith determination of the Board of Directors
of the Company, be adversely affected by disclosure in a registration statement
at such time, which determination shall be accompanied by a good faith
determination by the Board of Directors of the Company that the
registration statement would be materially misleading absent the inclusion of
such information.
(iii) "Register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act (other than on Form S-8 or Form
S-4) in connection with the proposed offer and sale for money of any of the
Company's securities by the Company or any of its security holders, including,
without limitation, a Registration Statement filed pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iv) "Registrable Shares" means the Common Shares and the Option
Shares.
(v) "Registration Statement" means a registration statement of
the Company under the Securities Act.
(b) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Settlement Agreement.
2. Registration.
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(a) Piggyback Registration Rights. If the Company shall at any time
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propose to file a Registration Statement under the Securities Act for the
registration of any shares of Common Stock, the Company shall give written
notice of such registration to the Investor no later than 30 days before its
filing with the SEC. If the Investor so requests within 15 days after the
giving of such notice, the Company shall include in any such registration the
Registrable Shares, but the Company shall not be obligated to so include the
Registrable Shares to the extent the underwriter or underwriters, if any, of the
securities being otherwise registered by the Company shall determine in good
faith that the inclusion of such Registrable Shares would interfere with the
successful sale of such other securities proposed to be sold by such underwriter
or underwriters, in which case the Investor shall be entitled to participate in
any such reduced number of Registrable Shares (if any) which may included in
such registration, prorated in proportion to the number of shares of Common
Stock proposed to be included in such registration by each holder of shares and
by the Company. The Investor shall, as a condition to the Company's obligation
to include the Registrable Shares held by the Investor in any such registration,
agree to execute an underwriting agreement, if any, in customary form as a
selling shareholder.
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(b) Demand Registration Rights. If a Registration Statement covering
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the Registrable Shares is not effective by June 30, 1998, the Investor may by
written notice request the Company to effect the registration of the Registrable
Shares on a Registration Statement under the Securities Act ("Registration
Demand"). Upon receipt of a Registration Demand from the Investor, the Company
shall within 90 days after the receipt of the Registration Demand file a
Registration Statement with the SEC covering the Registrable Shares as to which
registration is requested in the Registration Demand. If the Investor gives one
Registration Demand pursuant to this Section 2(b) and if the Registration
Statement with respect to such Registration Demand becomes effective, then the
Investor may not give a second Registration Demand under this Section 2(b).
3. Obligations of the Company. In connection with the registration of
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the Registrable Shares, the Company shall do each of the following:
(a) With reasonable promptness prepare and file with the SEC a
Registration Statement with respect to the Registrable Shares pursuant to
Section 2, and thereafter use its reasonable efforts to cause each Registration
Statement relating to the Registrable Shares to become effective as soon as
possible after such filing, and keep the Registration Statement effective
pursuant to Rule 415 at all times until the earliest (the "Registration Period")
of (i) the date that is one year after the date of effectiveness of the
Registration Statement, (ii) the date when the Investor may sell all Registrable
Shares under Rule 144 promulgated under the Securities Act, or (iii) the date
the Investor no longer owns any of the Registrable Shares, which Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any 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 in which they were made,
not misleading;
(b) Prepare and file with the SEC such amendments (including post-
effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
reasonably necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during the Registration Period, comply with
the provisions of the Securities Act with respect to the disposition of all
Registrable Shares of the Company covered by the Registration Statement until
such time as all of such Registrable Shares have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statement;
(c) Permit a single firm of counsel designated by SGI to review the
Registration Statement and all amendments and
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supplements thereto a reasonable period of time prior to their filing with the
SEC, and not file any document in a form to which such counsel reasonably
objects;
(d) Furnish to the Investor whose Registrable Shares are included in
the Registration Statement and its legal counsel identified to the Company, (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and each
amendment or supplement thereto, and (ii) such number of copies of a prospectus,
and all amendments and supplements thereto and such other documents, as the
Investor may reasonably request in order to facilitate the disposition of the
Registrable Shares owned by the Investor;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be state therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and use its reasonable efforts promptly to prepare a
supplement or amendment to the Registration Statement or other appropriate
filing with the SEC to correct such untrue statement or omission, and deliver a
number of copies of such supplement or 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 Shares being sold of the issuance by
the SEC of any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time;
(g) Use its commercially reasonable efforts, if eligible, to secure
designation of all the Registrable Shares covered by the Registration Statement
as a National Association of Securities Dealers Automated Quotations System
("Nasdaq") "Small Capitalization" within the meaning of Rule 11Aa2-1 of the SEC
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the quotation of the Registrable Shares on the Nasdaq/Small Cap Market; or if,
despite the Company's commercially reasonable efforts to satisfy the preceding
clause, the Company is unsuccessful in doing so, to use its commercially
reasonable efforts to secure Nasdaq/OTC Bulletin Board authorization and
quotation for such Registrable Shares and, without limiting the generality of
the foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such Registrable Shares;
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(h) Prior to any offering of Registrable Shares, to register or
qualify (or obtain an exemption therefrom) the Registrable Shares for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as the Investors may request, and keep each such registration or
qualification (or exemption therefrom) effective during the Registration Period;
provided, however, that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it is not then so qualified,
or (ii) take any action that would subject it to general service of process in
any such jurisdiction where it is not then so subject;
(i) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Shares not later than the effective date of the
Registration Statement;
(j) Cooperate with the Investor who holds Registrable Shares being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Shares to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or amounts as the case may
be, as the Investor may reasonably request and registered in such names as the
Investor may request; and, within three business days after a Registration
Statement which includes Registrable Shares is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Shares (with copies to the
Investor whose Registrable Shares are included in such Registration Statement)
an appropriate instruction and opinion of such counsel; and
(k) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Shares pursuant to the
Registration Statement.
4. Obligations of the Investor. In connection with the registration of
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the Registrable Shares, the Investor 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 Shares of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Shares held by
it, and the intended method of disposition of the Registrable Shares held by it,
as shall be reasonably required to effect the registration of such Registrable
Shares and shall execute such documents in connection with such registration as
the Company may reasonably request. At least ten 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
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Investor elects to have any of such Investor's Registrable Shares included in
the Registration Statement. If at least two business days prior to the 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 Shares of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Shares agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable Shares
from the Registration Statement;
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Investor shall immediately discontinue disposition of
Registrable Shares pursuant to the Registration Statement covering such
Registrable Shares until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) 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 Shares current at the time of receipt of such notice;
and
(d) If at any time or from time to time after the date of
effectiveness of the Registration Statement, the Company notifies the Investor
in writing of the existence of a Potential Material Event, the Investor shall
not offer or sell any Registrable Shares, or engage in any other transaction
involving or relating to the Registrable Shares, from the time of the giving of
notice with respect to a Potential Material Event until such Investor receives
written notice from the Company that such Potential Material Event either has
been disclosed to the public or no longer constitutes a Potential Material
Event.
5. Expenses of Registration. All reasonable expenses relating to the
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Registration of the Registrable Shares (other than any underwriting discounts
and commissions incurred in connection with the registrations and fees and
expenses of counsel for the Investor), including, without limitation, all
registration, listing, and qualification fees, printers and accounting fees, and
the fees and disbursements of counsel for the Company, shall be borne by the
Company. Fees of counsel, if any, for the Investor shall be borne by the
Investor.
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6. Indemnification. In the event any Registrable Shares are included in
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a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company shall indemnify and
hold harmless each Investor who holds such Registrable Shares, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act, and the agents and representatives thereof (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities or expenses (joint or
several) incurred (collectively, "Claims") to which any of them may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as such
Claims (or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations in the Registration Statement, or any post-effective
amendment thereof, or any prospectus included therein: (i) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereof or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). The Company shall reimburse the Investor, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a) shall not
(i) apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(c) hereof; (ii) be available to
the extent such Claim is based on a failure of the Investor to deliver or cause
to be delivered the prospectus made available by the Company; or (iii) apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of
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the Company, which consent shall not be unreasonably withheld. Each Investor
shall indemnify the Company and its officers, directors, agents and
representatives against any claims arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information furnished in
writing to the Company, by or on behalf of such Investor, expressly for use in
connection with the preparation of the Registration Statement, subject to such
limitations and conditions as are applicable to the indemnification provided by
the Company to this Section 6. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Shares by the Investor
pursuant to Section 9.
(b) Promptly after receipt by an Indemnified Person under this Section
6 of notice of the commencement of any action (including any governmental
action), such Indemnified Person shall, if a Claim in respect thereof is to be
made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person,
provided, however, that an Indemnified Person shall have the right to retain its
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own counsel with the reasonable fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person and the
indemnifying party would be inappropriate due to actual or potential differing
interests between such Indemnified Person and any other party represented by
such counsel in such proceeding. In such event, the Company shall pay for only
one separate legal counsel for the Investor; such legal counsel shall be
selected by the Investor holding a majority in interest of the Registrable
Shares included in the Registration Statement to which the Claim relates. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person under this Section 6, except to
the extent that the indemnifying party is prejudiced in its ability to defend
such action. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.
7. Contribution. To the extent any indemnification by an indemnifying
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party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under
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Section 6 to the fullest extent permitted by law; provided, however, that (a) no
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contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6; (b) no seller of Registrable Shares guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Shares who was not guilty of such
fraudulent misrepresentation; and (c) contribution by any seller of Registrable
Shares shall be limited in amount to the net amount of proceeds received by such
seller from the sale of such Registrable Shares.
8. Reports under Exchange Act. With a view to making available to the
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Investor the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investor to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144:
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns Registrable
Shares, promptly upon request, (i) a written statement by the Company that it
has complied with the reporting requirements of Rule 144, the Securities Act and
the Exchange Act, (ii) a copy of the most recent annual or quarterly report of
the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investor to sell such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the Company
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register the Registrable Shares pursuant to this Agreement shall be
automatically assigned by the Investor to any transferee of at least 30% of the
Registrable Shares or to the transferee of all of the Options 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 further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities
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laws, and (d) at or before the time the Company receives 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.
In the event of any delay in filing or effectiveness of the Registration
Statement as a result of such assignment, the Company shall not be liable for
any damages arising from such delay.
10. Amendment of Registration Rights. Any provision of this Agreement may
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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 an 80% interest of the
Registrable Shares. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.
11. Miscellaneous.
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(a) A person or entity is deemed to be a holder of Registrable Shares
whenever such person or entity owns of record such Registrable Shares. If the
Company receives conflicting instructions, notices or elections from two or more
persons or entities with respect to the same Registrable Shares, the Company
shall act upon the basis of instructions, notice or election received from the
registered owner of such Registrable Shares.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission, receipt
confirmed, or other means) or sent by certified mail, return receipt requested,
properly addressed and with proper postage pre-paid (i) if to the Company, at
ChatCom, Inc., 0000 Xxxxxxx Xxxxxx Xxxxxxxxx, Xxxxxxxxxx, Xxxxxxxxxx 00000,
Attention: President or Chairman of the Board, with a copy to Xxxx & Xxxxx
Professional Corporation, 0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxxxxx, Esq., (ii) if to SGI, at the
address set forth in the Settlement Agreement, and (iii) if to any other
Investor, at such address as such Investor shall have provided in writing to the
Company, or at such other address as each such party furnishes by notice given
in accordance with this Section 11(b), and shall be effective, when personally
delivered, upon receipt and, when so sent by certified mail, four calendar days
after deposit with the United States Postal Service.
(c) 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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(d) This Agreement shall be governed by and construed in accordance
with the laws of the State of California applicable to agreements made and to be
performed entirely within such State. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of Los Angeles or the state courts of the State of California sitting in
the City of Los Angeles 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. In the event that any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid
or unenforceable under any law shall not effect the validity or enforceability
of any other provision hereof.
(e) This Agreement and the Settlement Agreement constitute the entire
agreement among the parties hereto with respect to the subject matter hereof.
This Agreement and the Settlement Agreement supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) 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. This Agreement, once executed by a party, may be delivered
to the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
CHATCOM, INC.
By /s/
---------------------------------
Name:
Title:
STRATEGIC GROWTH INTERNATIONAL, INC.
By /s/
---------------------------------
Name:
Title: Chairman
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