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EXHIBIT 4.20
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of May 15, 1997 (this
"AGREEMENT"), is made by and among CyberGuard Corporation, a Florida
corporation (the "COMPANY"), and the person named on the signature page hereto
(the "INVESTOR").
W I T N E S S E T H:
WHEREAS, in connection with the Private Securities Subscription Agreement,
of even date herewith between the Investor and the Company (the "SUBSCRIPTION
AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions of the Subscription Agreement, to issue and sell to the Investor
shares and warrants to purchase shares (collectively, the "COMMON SHARES" or
the "SHARES") of Common Stock, $0.01 par value (the "COMMON STOCK");
WHEREAS, the Subscription Agreement relates to an offering (the
"OFFERING") of Seven Million Five Hundred Thousand Dollars U.S. ($7,500,000),
which Subscription Agreement was received and countersigned by the Company on
May 15, 1997 (the "COMMITMENT DATE"), pursuant to which the Investor committed
to purchase the full $7,500,000 of Common Shares; and
WHEREAS, to induce the Investor to execute and deliver the Subscription
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"), and applicable state securities laws with respect to the 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 the Investor
hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "INVESTOR" or "INVESTORS" means the Investor and any transferee
or assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements on Form S-3 or another form acceptable to Investor in compliance
with the Securities Act and 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
("SEC").
(iii) "REGISTRABLE SECURITIES" means the Shares.
(iv) "REGISTRATION STATEMENT" means a registration statement under the
Securities Act.
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(v) "RULE 144" means Rule 144 promulgated under the Securities Act.
(vi)"WARRANTS" means warrants to purchase Common Shares issued to the
Investor in connection with the Subscription Agreement.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted transferee
or assignee of the Registrable Securities pursuant to Section 9 of this
Agreement.
(c) Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Subscription Agreement.
2. REGISTRATION.
(a) INITIAL REGISTRATION. The Company shall prepare and file with the SEC
within 30 days of the Commitment Date, a registration statement on Form S-3
covering at least 1,470,085 shares of Common Stock as Registerable Securities
hereunder, and which Registration Statement shall state that, in accordance
with Rule 416 under the Securities Act, such Registration Statement also covers
such indeterminate number of additional shares of Common Stock as may become
issuable to prevent dilution resulting from stock splits, stock dividends or
similar transactions.
(b) PIGGY-BACK REGISTRATIONS. If at any time prior to the date which is
four years, in the case of Shares issuable upon the exercise of Warrants, or 30
months, in the case of other Shares, after the final closing date under the
Subscription Agreement the Company shall file with the SEC a Registration
Statement relating to an underwritten offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
of business or equity securities issuable in connection with stock option or
other employee benefit plans, the Company shall send to each Investor who is
entitled to registration rights under this Section 2(b) written notice of such
determination and, if within twenty (20) days after receipt of such notice,
such Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registerable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registerable Securities with respect to which such Investor has
requested inclusion hereunder. Any exclusion of Registerable Securities shall
be made pro rata among the Investors seeking to include Registerable
Securities, in proportion to the number of registerable Securities sought to be
included by such Investors; provided, however, that the Company shall not
exclude any Registerable Securities unless the Company has first excluded all
outstanding securities the holders of which are entitled to inclusion of such
securities in such Registration Statement by reason of piggyback registration
rights, are not entitled to pro rata exclusion with the Registerable Securities
and are not entitled by right to inclusion of securities in such Registration
Statement; and provided further, however, that after giving effect to the
immediately preceding proviso, any exclusion of Registerable Securities shall
be made pro rata with holders of other securities having
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the right to include such securities in the Registration Statement other
than holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right to
registration of Registerable Securities under this Section 2(b) shall be
construed to limit any registration required under Section 2(a) hereof. The
obligations of the Company under this Section 2(b) may be waived by Investors
holding a majority in interest of the Registerable Securities and shall expire
after the Company has afforded the opportunity for the Investors to exercise
registration rights under this Section 2(b) for two registrations; provided,
however, that any Investor who shall have had any Registerable Securities
excluded from any Registration Statement in accordance with this Section 2(b)
shall be entitled to include in an additional Registration Statement filed by
the Company the Registerable Securities so excluded. If an offering in
connection with which an Investor is entitled to registration under this
Section 2(b) is an underwritten offering, then each Investor whose Registerable
Securities are included in such Registration Statement shall, unless otherwise
agreed by the Company, offer and sell such Registerable Securities in an
underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
(c) ELIGIBILITY FOR FORM S-3. The Company represents and warrants that it
meets the requirements for the use of Form S-3 for registration of the sale by
the Investor of the Registerable Securities and the Company shall file all
reports required to be filed by the Company with the SEC in a timely manner so
as to maintain such eligibility for the use of Form S-3.
(d) SALES UNDER RULE 144. Notwithstanding the registration of Registerable
Securities in accordance with Section 2(a), if at any time of offer and sale of
such Registerable Securities by an Investor such Registerable Securities can be
sold pursuant to Rule 144 promulgated under the Securities Act or any other
similar rule or regulation of the SEC that may at anytime permit the Investor
to sell securities of the Company to the public without registration ("RULE
144") in the manner, amount and on such terms as such Investor wishes to offer
and sell such Registerable Securities, such Investor may endeavor to offer and
sell such Registerable Securities pursuant to Rule 144; provided, however, that
such Investor shall not be required to limit the amount or manner of sale or
otherwise modify such offer or sale to use Rule 144; and provided further,
however, that such Investor shall have no liability to the Company under this
Section 2(d) if such Investor does not offer and sell such Registerable
Securities pursuant to Rule 144 notwithstanding the availability thereof.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of the
Registrable Securities, the Company shall:
(a) prepare promptly and file with the SEC promptly (but in no event later
than the applicable time periods set forth in Section 2(a)) a Registration
Statement or Statements with respect to all Registrable Securities to be
included therein, and thereafter use its best efforts to cause the Registration
Statement to become effective as soon as possible after such filing, and keep
the Registration Statement, if the Registration Statement utilizes to Rule 415,
effective at all times until such date as is four years, in the case of Shares
issuable upon the exercise of Warrants, or 30 months, in the case of other
Shares, after the date such Registration Statement is first ordered effective
by the SEC. In any case, the Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) filed by the Company
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
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which they were made, not misleading; provided, however, that, subject to
the conditions set forth in Section 4(a) below, each Investor may notify the
Company in writing that it wishes to exclude all or a portion of its
Registrable Securities from such Registration Statement; provided further,
however, that if at any time one year or more after the final closing date
under the Subscription Agreement the Investor shall be entitled to sell all
Registrable Securities held by the Investor pursuant to Rule 144, in a period
of three consecutive months then the Company shall, so long as it meets the
current public information requirements of Rule 144, thereafter no longer be
required to maintain the registration of Registrable Securities pursuant to
this Agreement.
(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
necessary to keep the Registration Statement effective at all times until such
date as is two years or, two years and six months in the case where Seller has
exercised its option to extend the call period pursuant to the last paragraph
of Section 5 of the Subscription Agreement, after the date such Registration
Statement is first ordered effective by the SEC, and, during such period,
comply with the provisions of the Securities Act with respect to the
disposition of all 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 seller or sellers thereof as set forth in the Registration Statement;
(c) furnish to each Investor whose Registrable Securities are included in
the Registration Statement, (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 any amendment thereto, each preliminary
prospectus and prospectus and each amendment or supplement thereto and, in the
case of the Registration Statement referred to in Section 2(a), each letter
written by or on behalf of the Company to the SEC or the staff of the SEC, each
item of correspondence from the SEC or the staff of the SEC, in each case
relating to such Registration Statement and (ii) such number of copies of a
prospectus, including a preliminary 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) use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other 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 those jurisdictions such amendments (including
post-effective amendments) and supplements, (iii) take such other actions as
may be necessary to maintain such registrations and qualifications in effect at
all times until such date as is the earlier of four years, in the case of
Shares issuable upon the exercise of Warrants, or 30 months, in the case of
other Shares, after the date such Registration Statement is first ordered
effective by the SEC and (iv) take all other actions 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 (I) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (II) subject itself to general taxation in any such jurisdiction,
(III) file a general consent to service of process in any such jurisdiction,
(IV) provide any undertakings that cause more than nominal expense or burden to
the Company or (V) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders;
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(e) as promptly as practicable after becoming aware of such event, notify
each Investor who holds Registrable Securities being sold pursuant to such
registration of the happening of any event of which the Company has knowledge,
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement to correct such untrue statement or
omission, and deliver a number of copies of such supplement or amendment to
each 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 pursuant to such
registration of the issuance by the SEC of any stop order or other suspension
of effectiveness of the Registration Statement at the earliest possible time;
(g) permit a single firm of counsel designated as selling stockholders'
counsel by the Investors who hold a majority in interest of the Registrable
Securities being sold pursuant to such registration to review the Registration
Statement and all amendments and supplements thereto a reasonable period of
time prior to their filing with the SEC, and shall not file any document in a
form to which such counsel reasonably objects;
(h) make generally available to its security holders as soon as practical,
but not later than ninety (90) days after the close of the period covered
thereby, an earnings statement (in form complying with the provisions of Rule
158 under the Securities Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
date of the Registration Statement;
(i) make available for inspection by any Investor whose Registrable
Securities are being sold pursuant to such registration, any underwriter
participating in any disposition pursuant to the Registration Statement and any
attorney, accountant or other agent retained by any such Investor or
underwriter (collectively, the "INSPECTORS"), all pertinent financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "RECORDS"), as shall be reasonably necessary to enable each
Inspector to exercise its due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information which any Inspector
may reasonably request for purposes of such due diligence; provided, however,
that each Inspector shall hold in confidence (making such confidential
information known only to officers, agents or employees thereof who have a need
to know), shall not use any information so obtained for any purpose other than
preparation or review of the registration statement, and shall not make any
disclosure (except to an Investor or underwriter) of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (i) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in any Registration Statement, (ii) the release of such Records is
requested pursuant to a subpoena or other order from a court or government body
of competent jurisdiction, or (iii) the information in such Records has been
made generally available to the public other than by disclosure in violation of
this or any other agreement. The Company shall not be required to disclose any
confidential information in such Records to any Inspector or Investor until and
unless such Investor or Inspector shall have
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entered into confidentiality agreements (in a form as is customary in
similar circumstances) with the Company with respect thereto, substantially in
the form of this Section 3(i). Each Investor agrees that it shall, upon
learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential. The Company shall hold
in confidence and shall not make any disclosure of information concerning an
Investor provided to the Company pursuant to Section 4(e) hereof unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees
that it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor, to
undertake, at Investor's expense, appropriate action to prevent disclosure of,
or to obtain a protective order for, such information;
(j) use its best efforts either to (i) cause all the Registrable
Securities covered by the Registration Statement to be listed on a national
securities exchange and on each additional national securities exchange on
which similar securities issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of
such exchange or (ii) secure designation of all the Registrable Securities
covered by the Registration Statement as a National Association of Securities
Dealers Automated Quotations System ("NASDAQ") "national market system
security" 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 Securities on the Nasdaq National Market System; or, if, despite
the Company's best efforts to satisfy the preceding clause (i) or (ii), the
Company is unsuccessful in satisfying the preceding clause (i) or (ii), 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 Securities;
(k) provide 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;
(l) cooperate with the Investors who hold Registrable Securities being
sold and the managing underwriter or underwriters, if any, to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legends) representing Registrable Securities to be sold pursuant to the
denominations or amounts as the case may be, and registered in such names as
the Investors may reasonably request; and, within three business days after a
Registration Statement which includes Registrable Securities 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 Securities (with copies to the Investor whose Registrable
Securities are included in such Registration Statement) instructions to the
transfer agent to issue new stock certificates without a legend and an opinion
of such counsel that the shares have been registered; and
(m) take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement.
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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 each
Investor that such Investor shall furnish to the Company such information
regarding 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 the Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least fifteen (15) 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 such Investor's
Registrable Securities included in the Registration Statement. If within five
(5) 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
Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities 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
Securities 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),
such Investor will immediately discontinue 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) 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 Securities current at the time of receipt of such notice;
(d) In the event Investors holding a majority in interest of Registerable
Securities being registered determined to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registerable Securities, unless such Investor has notified
the Company in writing of such Investor's election to exclude all of such
Investor's Registerable Securities from the Registration Statement; and
(e) No Investor may participate in any underwritten registration hereunder
unless such Investor (i) agrees to sell such Investor's Registerable Securities
on the basis provided in any underwriting arrangements approved by the
Investors entitled hereunder to approve such arrangements, (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably requested under the terms of such
underwriting arrangements and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and other fees and expenses of
investment bankers and any manager or managers of such underwriting and legal
expenses of the underwriters applicable
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with respect to its Registerable Securities, in each case to the extent not
payable by the Company pursuant to the terms of this Agreement.
5. EXPENSES OF REGISTRATION. All expenses (other than brokerage commissions
or discounts and, in connection with securities registered pursuant to
Section 2(b) hereof, the pro rata portion of state and federal filing
fees) incurred in connection with registrations, filings or qualifications
pursuant to Section 3, including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees and the fees
and disbursements of counsel for the Company, shall be borne by the
Company; provided, however, that the Investors shall bear the fees and
out-of-pocket expenses of the one legal counsel selected by the Investors
pursuant to Section 3(g) hereof.
6. INDEMNIFICATION. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, 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, any underwriter (as defined in the Securities Act) for the
Investors, the directors, if any, of such underwriter and the officers, if any,
of such underwriter, and each person, if any, who controls any such underwriter
within the meaning of the Securities Act or the Exchange Act (each, an
"INDEMNIFIED PERSON"), against any losses, claims, damages, expenses or
liabilities (joint or several) (collectively "CLAIMS") to which any of them
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 any preliminary prospectus if used prior to the effective date of such
Registration Statement, or 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 or 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").
Subject to the restrictions set forth in Section 6(d) with respect to the
number of legal counsel, the Company shall reimburse the Investors and each
such underwriters or controlling person, promptly as such expenses are incurred
and are due and payable, for any 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) (I) shall not 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 any
Indemnified Person or underwriter for such 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
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made available by the Company pursuant to Section 3(c) hereof; (II) with
respect to any preliminary prospectus shall not inure to the benefit of any
such person from whom the person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus,
as then amended or supplemented, if such prospectus was timely made available
by the Company pursuant to Section 3(c) hereof; (III) shall not 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; and (IV) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Persons and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to indemnify and hold harmless, to the
same extent and in the same manner set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration Statement,
each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act (collectively and together with an
Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim to which any of
them may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
(I) in reliance upon and in conformity with written information furnished to
the Company by such Investor expressly for use in connection with such
Registration Statement or (II) the Investor's violation of Regulation M; and
such Investor will promptly reimburse any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of such Investor, which consent
shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Section 6(b) for only that amount of a
Claim as does not exceed the net proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer
of the Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the
untrue statement or omission of material fact contained in the preliminary
prospectus was corrected on a timely basis in the prospectus, as then amended
or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing by such
persons expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party 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
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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 parties
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the indemnifying party, if, in the reasonable written opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party or other party represented by such
counsel in such proceeding. The Company shall pay for only one separate legal
counsel for the Investors; such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities 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 or Indemnified Party 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 provided for herein 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 Section 6 to the fullest extent permitted by
law; provided, however, that (a) no 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 Securities 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 Securities who was
not guilty of such fraudulent misrepresentation and (c) contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144 or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of
the Company to the public without Registration, until such time as the
Investors have sold all the Registrable Securities pursuant to a
Registration Statement or 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
Securities, 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
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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
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to transferees or assignees of all
or any portion of such securities only if:
(a) (i) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (x) the name and address of such
transferee or assignee and (y) the securities with respect to which such
registration rights are being transferred or assigned, (ii) 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 laws, (iii) at or before the time the Company
received the written notice contemplated by clause (i) of this subsection the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, and (iv) the transferee or assignee acquires
(or has the right to acquire) at least 100,000 shares of Common Stock as a
result of such transfer or assignment;
(b) in the case of a transfer or assignment which constitutes a transfer
or assignment of rights pursuant to the Subscription Agreement, such transfer
or assignment is not in violation of Section 15 of the Subscription Agreement;
or
(c) such transfer or assignment is made to an affiliate of any Investor or
a clearing or other agent of any Investor in connection with the customary
trading activities of such Investor.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with
the written consent of the Company and Investor who hold a majority in
interest of the Registrable Securities. Any amendment of waiver effected
in accordance with this Section 10 shall be binding upon each Investor and
the Company.
11. MISCELLANEOUS.
(a) 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) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or when sent by registered mail, return receipt requested, addressed (i) if to
the Company, at CyberGuard Corporation, 0000 Xxxx Xxxxxxx Xxxxx Xxxx, Xx.
Xxxxxxxxxx, XX 00000, Attention: Mr. Xxxxxxx Xxxxxxx, Chief Financial Officer,
and (ii) if to the Investor, at the address set forth under its name in the
Subscription Agreement, 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 business days after deposit with the United States Postal Service.
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(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.
(d) This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of New York applicable to the agreements
made and to be performed entirely within such state, without giving effect to
rules governing the conflict of laws. 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 affect the validity or enforceability of any other
provision hereof.
(e) This Agreement constitutes 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 supersedes 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 the Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
(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.
CYBERGUARD CORPORATION
By
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Xxxxxxx X. Xxxxxxx,
Chief Financial Officer
Date: May 15, 1997
CAPITAL VENTURES INTERNATIONAL
BY: HEIGHTS CAPITAL MANAGEMENT, as agent
By
------------------------------------------
Xxxxxx Xxxxx,
President, Heights Capital Management
Date: May 15, 1997
