Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is made and entered
into by and among Integrated Information Systems, Inc., a Delaware corporation
(the "Company"), and those who have executed a Signature Page to this Agreement
(collectively the "Purchasers" and each individually a "Purchaser"). With
respect to the initial Purchaser of Shares under that certain Series A 8%
Convertible Preferred Stock Purchase Agreement by and among the parties hereto
(the "Purchase Agreement"), the effective date of this Agreement shall be
February 26, 2003.
RECITALS
WHEREAS, IIS and Purchasers are parties to the Purchase Agreement,
pursuant to which the Purchasers have agreed to purchase shares of the Series A
8% Convertible Preferred Stock of IIS (the "Preferred Stock");
WHEREAS, shares of the Preferred Stock are convertible into shares (the
"Conversion Shares") of the $0.001 par value common stock of IIS (the "Common
Stock") on the terms and conditions set forth in the Purchase Agreement; and
WHEREAS, IIS has agreed to grant to Purchasers registration rights in the
Conversion Shares on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth herein, IIS and Purchasers agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the following meanings:
a. "Commission" shall mean the Securities and Exchange Commission,
or any successor agency.
b. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
c. "Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
d. "Registrable Securities" shall mean all of the following to the
extent the same have not been sold to the public: (i) the Conversion Shares; or
(ii) stock issued in respect of the Conversion Shares in any reorganization; or
(iii) stock issued in respect of the Conversion
1
Shares as a result of a stock split, stock dividend, recapitalization or
combination. Notwithstanding the foregoing, Registrable Securities shall not
include otherwise Registrable Securities: (i) sold by a person or entity other
than the original Purchaser of the Preferred Stock which was converted into
Conversion Shares (except as permitted by Section 12); or (ii) (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions, and restrictive legends
with respect thereto, if any, are removed upon the consummation of such sale or
(C) the registration rights associated with such securities have been terminated
pursuant to Section 13 of this Agreement.
e. "Rule 144" shall mean Rule 144 under the Securities Act or any
successor or similar rule as may be enacted by the Commission from time to time,
but shall not include Rule 144A.
f. "Rule 144A" shall mean Rule 144A under the Securities Act or any
successor or similar rule as may be enacted by the Commission from time to time,
but shall not include Rule 144.
g. "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
2. Restrictions on Transferability. The Registrable Securities (as defined
herein) shall not be sold, assigned, transferred or pledged except upon the
conditions specified in this Agreement, which conditions are intended to ensure
compliance with the provisions of the Securities Act.
3. Restrictive Legend. Each certificate representing Registrable
Securities shall be stamped or otherwise imprinted with a legend substantially
in the following form (in addition to any legend required under applicable state
securities laws or otherwise):
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, OFFERED, PLEDGED, OR OTHERWISE DISTRIBUTED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
SUCH LAWS COVERING SUCH SECURITIES OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT, OFFER, PLEDGE OR OTHER DISTRIBUTION FOR VALUE IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT AND SUCH LAWS.
Each Purchaser consents to IIS making a notation on its records and giving
instructions to any transfer agent of the Registrable Securities in order to
implement the restrictions on transfer established in this Agreement.
2
4. Notice of Proposed Transfer. Each Purchaser agrees not to make any
disposition of all or any portion of any Registrable Securities unless and
until:
a. There is in effect a registration statement under the Securities
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
b. (i) Such Purchaser shall have notified IIS of the proposed
disposition and shall have furnished IIS with a detailed statement of the
circumstances surrounding the proposed disposition, and (ii) if requested by
IIS, such Purchaser shall furnish IIS with an opinion of counsel, reasonably
satisfactory to IIS that such disposition shall not require registration of such
shares under the Securities Act.
5. Piggyback Registration.
a. The registration rights granted herein may be exercised by a
Purchaser on not more than two occasions. If at any time or from time to time,
IIS shall determine to register any of its Common Stock, for its own account or
the account of any of its other shareholders, other than (X) a registration on
Form S-8, or its successor form, relating to employee benefit plans, (Y) a
registration on Form S-4, or its successor form, relating to a transaction of
the type specified in paragraph (a) of SEC Rule 145, a merger in which the
applicable state law would not require the solicitation of the votes or consents
of all of the security holders of the company being acquired, an exchange offer
for securities of the issuer or another entity or any combination of the
foregoing or relating to the or resale of any such securities acquired pursuant
to such a registration statement, or (Z) a transaction relating solely to the
sale of debt, convertible debt or convertible preferred instruments, which does
not include substantially the same information as would be required to be
included in a registration statement covering the sale of Registrable
Securities, IIS will:
i. give Purchasers written notice thereof as soon as
practicable prior to filing the registration statement; and
ii. include in such registration and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within fifteen (15) days after receipt of such written notice
from IIS by Purchasers, except as set forth in Subsection 5.b. below.
b. If the registration is for a registered public offering involving
an underwriting, IIS shall so advise Purchasers as a part of the written notice
given pursuant to Subsection 5.a.i. In such event, the right of Purchasers to
registration pursuant to Section 5 shall be conditioned upon Purchasers'
participation in such underwriting and the inclusion of Purchasers' Registrable
Securities in the underwriting to the extent provided herein. Purchasers, IIS
and any other holders of securities of IIS distributing their securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by IIS.
Notwithstanding any other provision of this Section 5, if the managing
underwriter determines that marketing factors require a limitation
3
of the number of shares to be underwritten, the managing underwriter may limit
the number of Registrable Securities to be included in the registration and
underwriting. IIS shall so advise Purchasers and any other holders distributing
their securities through such underwriting pursuant to piggyback registration
rights similar to those granted hereunder, and the number of shares of
Registrable Securities and other securities that may be included in the
registration and underwriting shall be allocated among Purchasers and all such
other holders in proportion, as nearly as practicable, to the respective amounts
of Registrable Securities held by Purchasers and such other holders at the time
of filing the registration statement. If any holder disapproves of the terms of
any such underwriting, such holder may elect to withdraw therefrom by written
notice to IIS and the managing underwriter.
6. Expenses of Registration. All expenses incurred in connection with
registration, including without limitation all registration and filing fees,
printing expenses, fees and disbursements of counsel for IIS shall be borne by
IIS, except that IIS shall not be required to pay underwriters' fees, discounts
or commissions relating to Registrable Securities or fees of a separate legal
counsel of a Holder.
7. Registration Procedures. In the case of each registration effected by
IIS pursuant to this Agreement in which a Purchaser participates, IIS will keep
such Purchaser advised in writing as to the initiation of each registration and
as to the completion thereof. At its expense IIS will:
a. keep such registration continuously effective for a period of
ninety (90) days, respectively, or, such reasonable period necessary to permit
Purchasers to complete the distribution described in the registration statement
relating thereto, whichever first occurs;
b. promptly prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Securities
Act;
c. furnish such number of prospectuses and other documents incident
thereto as Purchasers from time to time may reasonably request;
d. use best efforts to cause the Registrable Securities covered by
such registrations to be listed on each securities exchange at which similar
securities issued by IIS are then listed; and
e. notify Purchasers, at any time a prospectus covered by such
registration statement is required to be delivered under the Securities Act, of
the happening of any event of which it has knowledge as a result of which the
prospectus included in such 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 not
misleading in the light of the circumstances then existing.
4
8. Indemnification.
a. In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Section 5, IIS will indemnify
and hold harmless Purchasers against any losses, claims, damages or liabilities,
joint or several, to which Purchasers 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 any untrue statement
or alleged untrue statement of any material fact contained in any registration
statement under which such Registrable Securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, 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 not misleading,
or any violation by IIS of any rule or regulation promulgated under the
Securities Act or any state securities law applicable to IIS and relating to
action or inaction required of IIS in connection with any such registration, and
will reimburse Purchasers for any reasonable legal and any other expenses
incurred in connection with investigating, defending or settling any such claim,
loss, damage, liability or action, provided that IIS will not be liable in any
such case to the extent that any such claim, loss, damage or liability arises
out of or is based on any untrue statement or omission based upon written
information furnished to IIS by Purchasers for use therein.
b. Each Purchaser will, if Registrable Securities held by or
issuable to such Purchaser are included in the securities as to which such
registration is being effected, indemnify and hold harmless IIS, each of its
directors and officers, each person who controls IIS and each underwriter within
the meaning of the Securities Act, against all claims, losses, expenses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse IIS, such directors, officers, partners, persons
or underwriters for any reasonable legal or any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to IIS by such Purchaser for use therein.
c. Each party entitled to indemnification under this Section 8 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claims as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations hereunder, unless such failure resulted in actual detriment
5
to the Indemnifying Party. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect of such
claim or litigation.
d. If the indemnification provided for in this Section 8 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
thereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other hand in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the Indemnifying Party and the Indemnified
Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
e. The indemnification provided by this Section 8 shall be a
continuing right to indemnification and shall survive the registration and sale
of any securities by any party entitled to indemnification hereunder and the
expiration or termination of this Agreement.
9. Lockup Agreement. In consideration for IIS agreeing to its obligations
under this Agreement, each Purchaser agrees in connection with any registration
of IIS' securities (whether or not such Purchaser is participating in such
registration) upon the request of IIS and the underwriters managing any
underwritten offering of IIS' securities, not to sell, make any short sale of,
loan, grant any option for the purchase of, or otherwise dispose of any
Registrable Securities (other than those included in the registration) without
the prior written consent of IIS or such underwriters, as the case may be, for
such period of time from the effective date of such registration as IIS and the
underwriters may specify.
10. Information. Each Purchaser shall promptly furnish to IIS such
information regarding himself, herself or itself and any distribution proposed
by such Purchaser as IIS may request in writing and as shall be required in
connection with any registration referred to herein.
11. Rule 144 and l44A Reporting. With a view to making available to
Purchasers the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, IIS agrees to: (a) make and keep public information available, as
those terms are understood and defined in Rule 144 and Rule l44A; and (b) use
its best efforts to file with the Commission in a timely manner all reports and
other documents required of IIS under the Securities Act and the Exchange Act.
6
12. Transfer of Registration Rights. The rights to cause IIS to register
Registrable Securities and keep information available granted to Purchasers by
IIS under Section 5 may be assigned by a Purchaser to immediate family members,
partners, shareholders or affiliates of such Purchaser; provided, that IIS is
given written notice by the Purchaser at the time of or within a reasonable time
after said transfer, stating the name and address of said transferee or assignee
and identifying the securities with respect to which such registration rights
are being assigned; and, provided, further, that any such transferee or assignee
agrees to be bound by the terms herein (in which case, references to Purchaser
herein shall be deemed to be references to each such transferee and assignee).
13. Termination of Rights. This Agreement shall terminate on the earlier
of (a) the end of the first three-month period in which a Purchaser may then
sell all of its Registrable Securities without registration under the Securities
Act by virtue of Rule 144 or (b) the fifth anniversary of the date hereof.
14. Representations and Warranties of IIS. IIS represents and warrants to
Purchasers as follows:
a. The execution, delivery and performance of this Agreement by IIS
has been duly authorized by all requisite corporate action and will not violate
any provision of law, any order of any court or other agency of government, the
Certificate of Incorporation or Bylaws of IIS, as the same have been amended and
restated through the date hereof.
b. This Agreement has been duly executed and delivered by IIS and
constitutes the legal, valid and binding obligation of IIS, enforceable in
accordance with its terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance and moratorium laws and other laws of
general application affecting enforcement of creditors' rights generally and
(ii) the availability of equitable remedies as such remedies may be limited by
equitable principles of general applicability (regardless of whether enforcement
is sought in a proceeding in equity or at law).
15. Miscellaneous.
a. Amendments. Other than subsequent Purchasers joining in this
Agreement by executing a signature page hereto, this Agreement may be amended
only by a writing signed by all parties hereto.
b. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement. The exchange of copies of this Agreement and of
signature pages by facsimile transmission shall constitute effective execution
and delivery of this Agreement as to the parties and may be used in lieu of the
original Agreement for all purposes. Signatures of the parties transmitted by
facsimile shall be deemed to be their original signatures for all purposes.
7
c. Notices, Etc. All notices, consents, waivers and other
communications required or permitted by this Agreement shall be in writing and
shall be deemed given to a party when: (i) delivered to the appropriate address
by hand or by nationally recognized overnight courier service (costs prepaid);
(ii) sent by facsimile or e-mail with confirmation of transmission by the
transmitting equipment; or (iii) received or rejected by the addressee, if sent
by certified mail, return receipt requested, to IIS at the following address
(and to Purchasers and permitted transferees and assignees at the address shown
for such Purchasers, transferees and assignees on the register for the Preferred
Stock or Common Stock, as applicable):
IIS: Integrated Information Systems, Inc.
0000 Xxxxx Xxxxxxx Xxxxx, Xxxxx, Xxxxxxx 00000
Attention: Secretary
Fax Number: 000-000-0000
d. Nonpublic Information. Any other provisions of this Agreement to
the contrary notwithstanding, IIS' obligation to file a registration statement,
or cause such registration statement to become and remain effective, shall be
suspended for a period not to exceed 30 days (and for periods not exceeding, in
the aggregate, 60 days in any 24-month period) if there exists at the time
material non-public information relating to IIS which, in the reasonable opinion
of IIS, should not be disclosed.
e. Severability. If any provision of this Agreement shall be held to
be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
f. Dilution. If, and as often as, there is any change in the Common
Stock by way of a stock split, stock dividend, combination or reclassification,
or through a merger, consolidation, reorganization or recapitalization, or by
any other means, appropriate adjustment shall be made in the provisions hereof
so that the rights and privileges granted hereby shall continue with respect to
the Common Stock as so changed.
g. Arbitration. Any controversy relating to this Agreement, any
transaction contemplated hereby, or relating to the breach hereof shall be
settled by arbitration in Phoenix, Arizona in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect. The
award rendered by the arbitrator(s) shall be final and judgment upon the award
rendered by the arbitrator(s) may be entered upon it in any court having
jurisdiction thereof. The arbitrator(s) shall possess the powers to issue
mandatory orders and restraining orders concerning such arbitration. The
expenses of the arbitration shall be borne by the losing party unless otherwise
allocated by the arbitrator(s).
h. Entire Agreement and Modification. This Agreement supersedes all
prior agreements, whether written or oral, between the parties with respect to
its subject matter and constitutes a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter.
8
i. Governing Law. This Agreement will be governed by and construed
under the laws of the State of Arizona without regard to conflicts-of-laws
principles that would require the application of any other law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Integrated Information Systems, Inc.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Chief Financial Officer
9
SIGNATURE PAGE
TO
REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
INTEGRATED INFORMATION SYSTEMS, INC.
AND
THE PURCHASERS NAMED THEREIN
Purchaser:
/s/ Xxxxx X. Xxxxxx, Xx.
10
