REGISTRATION RIGHTS AGREEMENT
DATED AS OF SEPTEMBER 9, 2004
BY AND AMONG
DIGITAL LIFESTYLES GROUP, INC.
AND
THE INVESTORS NAMED
ON THE SIGNATURE PAGES
HERETO
AND
WESTECH CAPITAL CORPORATION
TABLE OF CONTENTS
DEFINITIONS..................................................................................... 1
SHELF REGISTRATION.............................................................................. 3
PIGGYBACK REGISTRATION.......................................................................... 5
REGISTRATION PROCEDURES......................................................................... 6
REGISTRATION EXPENSES........................................................................... 9
INDEMNIFICATION................................................................................. 9
CONTRIBUTION.................................................................................... 11
REPORTS UNDER THE EXCHANGE ACT.................................................................. 11
MISCELLANEOUS................................................................................... 11
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REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and entered
into as of September 9, 2004 (the "EXECUTION DATE"), by and among Digital
Lifestyles Group, Inc., a Delaware corporation (the "COMPANY"), and the
investors named on the signature pages hereto (each, individually, an "INVESTOR"
and, collectively, the "INVESTORS"), and Westech Capital Corporation, as
designee of Tejas Securities Group, Inc. ("WESTECH"). The Investors have agreed
to purchase from the Company, pursuant to the Purchase Agreement (as defined
below), 14,450,858 shares (the "SHARES") of the Company's common stock, par
value $0.03 per share (the "COMMON STOCK"), and warrants to purchase 7,225,426
shares of Common Stock (the "WARRANTS").
This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof (the "PURCHASE AGREEMENT"), by and among the Company
and the Investors. In order to induce the Investors to purchase the Shares and
Warrants, and for the benefit of the Holders from time to time of the
Registrable Securities (as defined below), the Company has agreed to provide the
registration rights set forth in this Agreement.
The parties hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following capitalized terms shall have the
following meanings:
"ACT" - As defined in the final paragraph of this Section 1.
"AGREEMENT" - As defined in the preamble hereto.
"BUSINESS DAY" - A day other than a Saturday, a Sunday, a day on which the
banking institutions in the State and City of New York are authorized or
obligated by law or executive order to close or a day that is declared a
national or New York state holiday.
"COMMISSION" - Securities and Exchange Commission.
"COMMON STOCK" - As defined in the preamble hereto.
"COMPANY" - As defined in the preamble hereto.
"COMPANY COUNSEL" - As defined in Section 2(a) hereof.
"CONTROLLING PERSON" - As defined in Section 5(a) hereof.
"DAMAGES WARRANT" - As defined in Section 2(c) hereof.
"EFFECTIVENESS PERIOD" - As defined in Section 2(a)(ii) hereof.
"EFFECTIVENESS TARGET DATE" - The 65th day after the Execution Date;
provided, however, that if the Commission subjects the Shelf Registration
Statement to a review and has written comments that would require the filing of
a pre-effective amendment thereto with the Commission, then the Effectiveness
Target Date shall be the 95th day after the Execution Date.
"EXCHANGE ACT" - Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"EXECUTION DATE" - As defined in the preamble hereto.
"HOLDER" - Each registered owner of any Registrable Security.
"INDEMNIFIED HOLDER" - As defined in Section 5(a) hereof.
"INVESTORS" - As defined in the preamble hereto.
"LOSSES" - As defined in Section 5(a) hereof.
"OUTSIDE INVESTORS" " - As defined in Section 2(c) hereof.
"PERSON" - A corporation, an association, a partnership, an individual, a
joint venture, a joint stock company, a trust, an unincorporated organization or
a government or an agency or political subdivision thereof.
"PROSPECTUS" - The prospectus included in the Shelf Registration
Statement, as amended or supplemented including, without limitation, by any
post-effective amendments thereto, and all material incorporated by reference
into such prospectus.
"PURCHASE AGREEMENT" - As defined in the preamble hereto.
"REGISTRABLE SECURITIES" - Means (a) the Shares, (b) the Warrant Shares,
and (c) any securities issued or issuable upon any stock split, divided or other
distribution, recapitalization or similar event with respect to any securities
referenced in (a) or (b) above, in each case until the earliest to occur of (x)
the date on which such Share, Warrant or other security, as the case may be, has
been effectively registered under the Securities Act and sold in a manner
contemplated by the Shelf Registration Statement, or (y) the date on which such
Share, Warrant Share or other security, as the case may be, has been sold to the
public in compliance with Rule 144 under the Securities Act (or any successor
provision thereto), or is transferable to the public pursuant to paragraph (k)
of such Rule 144 (or any successor provision thereto).
"REQUISITE INFORMATION" - As defined in Section 2(b) hereof.
"SECURITIES ACT" - Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"SHARES" - As defined in the preamble hereto.
"SHELF REGISTRATION STATEMENT" - As defined in Section 2(a) hereof.
"SUSPENSION PERIOD" - As defined in Section 2(d) hereof.
"TARGETED FILING DATE" - The 21st day after the Execution Date.
"UNDERWRITTEN OFFERING" - A registration in which securities of the
Company are sold to an underwriter for reoffering to the public.
"WARRANTS" - As defined in the preamble hereto.
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"WARRANT SHARES" - The shares of Common Stock or other equity securities
issued or issuable upon exercise of the Warrants, Damages Warrants, if any, and
the 1,000,000 shares of Common Stock or other equity securities issued or
issuable upon exercise of that certain Warrant to Purchase Shares of Common
Stock dated the date hereof issued to Westech.
"WESTECH" - As defined in the preamble hereto.
References herein to the term "Holders of a majority in aggregate
principal amount of Registrable Securities" or words to a similar effect shall
mean, with respect to any request, notice, demand, objection or other action by
the holders of Registrable Securities hereunder or pursuant hereto (each, an
"ACT"), registered holders of a number of shares of then outstanding Common
Stock constituting Registrable Securities and an aggregate amount of then
outstanding Warrants exercisable for Registrable Securities, such that the sum
of such shares of Common Stock and the shares of Common Stock issuable upon
exercise of such Warrants constitute in excess of 50% of the sum of all of the
then outstanding shares of Common Stock constituting Registrable Securities and
the number of shares of Common Stock issuable upon exercise of then outstanding
Warrants exercisable for Registrable Securities. For purposes of the immediately
preceding sentence, any Holder may elect to take any Act with respect to all or
any portion of the Registrable Securities held by it and only the portion as to
which such Act is taken shall be included in the numerator of the fraction
described in the preceding sentence.
2. SHELF REGISTRATION.
(a) The Company hereby agrees to use its best efforts to:
(i) file with the Commission no later than the Targeted Filing Date,
a registration statement on Form S-1 for an offering to be made on a
continuous basis pursuant to Rule 415 under the Securities Act (or any
successor provision thereto) covering all of the Registrable Securities
(the "SHELF REGISTRATION STATEMENT"); and
(ii) cause the Shelf Registration Statement to be declared effective
pursuant to the Securities Act by the Effectiveness Target Date, and use
all reasonable efforts to keep the Shelf Registration Statement
continuously effective and available for resale of the Registrable
Securities under the Securities Act for the period (the "EFFECTIVENESS
PERIOD") ending on the earliest of (A) the date that is two years after
the date on which all the Shares are issued (including those issued
pursuant to Purchase Agreement at any closing occurring after the
Execution Date) to the Investors; provided, such date shall be extended by
the amount of time of any Suspension Period; (B) the date on which there
ceases to be outstanding any Registrable Securities; and (C) the date on
which the Company receives an opinion from its legal counsel ("COMPANY
COUNSEL") to the effect that all Registrable Securities can be freely
traded without the continued effectiveness of the Shelf Registration
Statement and the Company has instructed the transfer agent for the Shares
and Warrant Shares that any legends on the certificate representing such
Shares or Warrant Shares that restrict the transfer of such Shares or
Warrant Shares shall be removed upon presentation to the transfer agent of
any such certificate. Thereafter, the Company shall be entitled to
withdraw the Shelf Registration Statement and, upon such withdrawal, the
Investors shall have no further right to offer or sell any of the
Registrable Securities pursuant to the Shelf Registration Statement (or
any Prospectus relating thereto).
Notwithstanding anything contained within to the contrary, the Company shall
have the right to convert the Shelf Registration Statement to a registration
statement on Form S-2 or Form S-3 or file a new registration statement on Form
S-2 or Form S-3 for an offering to be made on a continuous basis pursuant to
Rule 415 under the Securities Act (or any successor provision thereto) covering
all the Registrable Securities and, upon the declaration of effectiveness
thereof by the Commission, the
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Company shall have the right to withdraw the Shelf Registration Statement (in
which event, such registration statement on Form S-2 or Form S-3 will be deemed
to be a "SHELF REGISTRATION STATEMENT," for the purposes of this Agreement,
including the Company's obligations with respect thereto).
(b) The Company may require each Holder of Registrable Securities as to
which any registration is being effected to furnish to the Company, within ten
calendar days after written request therefor has been made by the Company, such
information regarding the distribution of such Holder's Registrable Securities
as is required by law to be disclosed in the Shelf Registration Statement (the
"REQUISITE INFORMATION").
The Company shall file prospectus supplements pursuant to Rule 424 under
the Securities Act (or any successor provision thereto) to amend or supplement
the Shelf Registration Statement to include in the Shelf Registration Statement
the Requisite Information as to each Holder (and the Registrable Securities held
by such Holder) that provides notice to the Company of the Requisite
Information. The Company shall file such a prospectus supplement with the
Commission no less than once every twenty Business Days if during such period
the Company receives notice from any Holder which includes the Requisite
Information with respect to any such Holder. The Company shall provide each
Holder a copy of such Prospectus as so amended or supplemented containing the
Requisite Information within three Business Days of filing such Prospectus with
the Commission in order to permit such Holder to comply with the prospectus
delivery requirements of the Securities Act in a timely manner with respect to
any proposed disposition of such Holder's Registrable Securities.
No Holder shall be entitled to use the Prospectus unless and until such
Holder shall have furnished the information required by this Section 2(b) in
accordance with the first or second paragraph hereof and such information with
respect to such Holder shall have been included in the Prospectus. If any
information furnished to the Company by a Holder for inclusion in the Shelf
Registration Statement or the Prospectus becomes materially misleading, such
Holder agrees (i) to furnish promptly to the Company all information required to
be disclosed in such Shelf Registration Statement in order to make the
information previously furnished to the Company not materially misleading and
(ii) to stop selling or offering for sale Registrable Securities pursuant to the
Shelf Registration Statement until such Holder's receipt of the copies of a
supplemented or amended Prospectus as contemplated by Section 4(b)(xii) hereof.
(c) The Company and each Investor that is not an officer or director of
the Company or an affiliate or associate of an officer or director of the
Company (the "OUTSIDE INVESTORS") agree that the Outside Investors will suffer
damages if the Company fails to fulfill its obligations pursuant to Section
2(a)(i) hereof and that it would not be possible to ascertain the extent of such
damages. Accordingly, (i) if the Shelf Registration Statement has not been filed
with the Commission by or on the Targeted Filing Date, the Company hereby
agrees, as a sole remedy and as liquidated damages to the Outside Investors, to
issue to each Outside Investor with respect to each Warrant held by such Outside
Investor an additional warrant, with the same terms and conditions and exercise
price as such Warrant, to purchase the number of shares of Common Stock equal to
50% of the number of Warrant Shares issuable upon exercise of such Warrant held
by such Outside Investor (the "DAMAGES WARRANT"), and (ii) if the Shelf
Registration Statement has not been filed with the Commission by or on the 45th
day of after the Execution Date, the Company hereby agrees, as a sole remedy and
as liquidated damages to the Outside Investors, to issue to each Outside
Investor with respect to each Warrant held by such Outside Investor, an
additional Damages Warrant, with the same terms and conditions and exercise
price as such Warrant, to purchase the number of shares of Common Stock equal to
50% of the number of Warrant Shares issuable upon exercise of such Warrant held
by such Outside Investor. No Damages Warrant shall be issued in respect of any
Damages Warrant.
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(d) Notwithstanding anything in this Section 2 to the contrary, if the
Company shall furnish to the Investors a certificate signed by the President or
Chief Executive Officer of the Company stating that the Company's Board of
Directors has made the good faith determination (i) that the continued use by
the Investors of the Shelf Registration Statement for purposes of effecting
offers or sales of Registrable Securities pursuant hereto would require, under
the Securities Act and the rules and regulations promulgated thereunder,
premature disclosure in the Shelf Registration Statement (or the Prospectus
relating thereto) of material, nonpublic information concerning the Company, its
business or prospects or any proposed material transaction involving the
Company, (ii) that such premature disclosure would be materially adverse to the
Company, its business or prospects or any such proposed material transaction or
would not be in the best interests of the Company and (iii) that it is therefore
essential to suspend the use by the Investors of the Shelf Registration
Statement (and the Prospectus relating thereto), then the right of the Investors
to use the Shelf Registration Statement (and the Prospectus relating thereto)
for purposes of effecting offers or sales of Registrable Securities pursuant
thereto shall be suspended for a period (the "SUSPENSION PERIOD") not greater
than sixty (60) Business Days during any consecutive twelve (12) month period,
which shall include no more than thirty (30) consecutive Business Days. During
the Suspension Period, the Investors shall not offer or sell any Registrable
Securities pursuant to or in reliance upon the Shelf Registration Statement (or
the Prospectus relating thereto). The Company agrees that, as promptly as
possible, but in no event later than three (3) Business Days, after the
consummation, abandonment or public disclosure of the event or transaction that
caused the Company to suspend the use of the Shelf Registration Statement (and
the Prospectus relating thereto) pursuant to this Section 2(d), the Company will
lift any suspension, provide the Investors with revised Prospectuses, if
required, and will notify the Investors of their ability to effect offers or
sales of Registrable Securities pursuant to or in reliance upon the Shelf
Registration Statement.
3. PIGGYBACK REGISTRATION.
(a) If at any time during the Effectiveness Period any Registrable
Securities are not able to be resold pursuant to an effective Shelf Registration
Statement, and the Company proposes to register any of its equity securities
under the Securities Act, whether as a result of an offering for its own account
or the account of others (but excluding any registrations to be effected on
Forms S-4 or S-8 or other applicable successor Forms), the Company shall, each
such time, give to the Investors twenty (20) days' prior written notice of its
intent to do so, and such notice shall describe the proposed registration and
shall offer such Investors the opportunity to register such number of
Registrable Securities as each such Investor may request. Upon the written
request of any Investor given to the Company within fifteen (15) days after the
receipt of any such notice by the Company, the Company shall include in such
registration all or part of the Registrable Securities of such Investor, to the
extent requested to be registered.
(b) If a registration pursuant to Section 3 hereof involves an
underwritten offering and the managing underwriter shall advise the Company in
writing that, in its opinion, the number of shares of Common Stock requested by
the Investors to be included in such registration is likely to affect materially
and adversely the success of the offering or the price that would be received
for any shares of Common Stock offered in such offering, then, notwithstanding
anything in this Section 3 to the contrary, the Company shall only be required
to include in such registration, to the extent of the number of shares of Common
Stock which the Company is so advised can be sold in such offering, (i) first,
the number of shares of Common Stock requested to be included in such
registration for the account of the Company and any stockholders of the Company
(excluding the Investors) that have the right to demand or request the inclusion
in such registration of shares of Common Stock held by such stockholders,
allocated amongst them in any manner that the Company and such stockholders
agree upon, and (ii) second, any shares of Common Stock proposed to be included
in such registration for the account of the Investors.
(c) In connection with any offering under this Section 3 involving an
underwriting of shares, the Company shall not be required under this Section 3
or otherwise to include the Registrable Securities
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of any Investor therein unless such Investor accepts and agrees to the terms of
the underwriting, which shall be reasonable and customary, as agreed upon
between the Company and the underwriters selected by the Company.
4. REGISTRATION PROCEDURES.
(a) The parties hereto agree that the initial filing and declaration of
effectiveness of the Shelf Registration Statement shall not contemplate an
Underwritten Offering and the Company shall not be required to cooperate with
any Underwritten Offering prior to such declaration of effectiveness. Although
the Holders may after the declaration of effectiveness of the Shelf Registration
Statement engage underwriters in connection with their distribution of
Registrable Securities and the Company will cooperate with any reasonable
requests for its cooperation in connection with any such engagement, the Company
shall in no event be required to pay any expenses associated with any such
Underwritten Offering, except as otherwise specified herein.
(b) In connection with the Shelf Registration Statement and any Prospectus
required by this Agreement, during the Effectiveness Period the Company shall:
(i) use all reasonable efforts to keep the Shelf Registration
Statement continuously effective for the Effectiveness Period; upon the
occurrence of any event that would cause the Shelf Registration Statement
or the Prospectus contained therein (A) to contain a material misstatement
or omission or (B) to not be effective or to not be usable for resales of
Registrable Securities during the Effectiveness Period, the Company shall
in the case of clause (A) file promptly an appropriate amendment to the
Shelf Registration Statement or a supplement to the Prospectus correcting
any such misstatement or omission, and, in the case of either clause (A)
or (B), use all reasonable efforts to cause such amendment, if applicable,
to be declared effective or the Shelf Registration Statement and the
related Prospectus to become usable for their intended purposes as soon as
practicable thereafter;
(ii) furnish to each of the Investors and to counsel for the
Investors, before filing with the Commission, copies of the Shelf
Registration Statement and the Prospectus included therein, and any
pre-effective amendments thereof, which documents shall be subject to the
review of the Investors and such counsel for a period of at least three
Business Days; and shall consider any requests for additions to or
modifications of the Shelf Registration Statement and the Prospectus
included therein and any pre-effective amendments thereto reasonably made
by any Investor or counsel for the Investors;
(iii) use all reasonable efforts to prepare and file with the
Commission such amendments and post-effective amendments to the Shelf
Registration Statement as may be necessary to keep the Shelf Registration
Statement effective during the Effectiveness Period; use all reasonable
efforts to cause the Prospectus to be supplemented by any required
Prospectus supplement within the time period specified in Section 2(b)
hereof, and as so supplemented, cause the Prospectus to be filed pursuant
to Rule 424 under the Securities Act and to comply fully with the
applicable provisions of Rule 424 under the Securities Act in a timely
manner; and use all reasonable efforts to comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by the Shelf Registration Statement during the Effectiveness
Period in accordance with the intended method or methods of distribution
by the sellers thereof set forth in the Shelf Registration Statement or
supplement to the Prospectus;
(iv) Cooperate with any reasonable due diligence investigation
undertaken by the Investors, and any attorney, accountant or other agent
retained by the Investors, in connection with the sale of the Registrable
Securities, including, without limitation, making available any
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documents and information; provided, however, that the Company will not
deliver or make available to any Outside Investor material, nonpublic
information unless such Outside Investor specifically requests and
consents in advance in writing to receive such material, nonpublic
information and, if requested by the Company, such Outside Investor agrees
in writing to treat such information as confidential.
(v) use all reasonable efforts to notify the selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus, any Prospectus supplement or any
post-effective amendment to the Shelf Registration Statement applicable to
such Holder has been filed, and, with respect to the Shelf Registration
Statement or any post-effective amendment thereto, when the same has
become effective, (B) of any request by the Commission for amendments to
the Shelf Registration Statement or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the Shelf
Registration Statement under the Securities Act or of the suspension by
any state securities commission of the qualification of the Registrable
Securities for offering or sale in any jurisdiction or of the initiation
of any proceeding for any of the preceding purposes, or (D) of the
existence of any fact or of the happening of any event (but not the
substance or details of any such fact or event) that makes untrue any
statement of a material fact made in the Shelf Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein, or that requires the making of any
additions to or changes in the Shelf Registration Statement or the
Prospectus in order to make the statements therein not misleading;
(vi) if at any time the Commission shall issue any stop order
suspending the effectiveness of the Shelf Registration Statement, or any
state securities commission shall issue an order suspending the
qualification or exemption from qualification of the Registrable
Securities under state securities or Blue Sky laws, use all reasonable
efforts to obtain the withdrawal or lifting of such order at the earliest
possible time;
(vii) if requested by any selling Holder, within the time period
specified in Section 2(b) hereof, use all reasonable efforts to
incorporate in the Shelf Registration Statement or Prospectus, pursuant to
a supplement or post-effective amendment, if necessary, such Requisite
Information as such selling Holders request to have included therein, and
use all reasonable efforts to make all required filings of any such
Prospectus supplement or post-effective amendment as soon as practicable
after the Company is notified of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; provided, however, that
the Company shall not be required to take any action pursuant to this
Section 4(b)(vii) that would, in the opinion of Company Counsel, violate
applicable law or to include information to which the Company reasonably
objects;
(viii) deliver to each selling Holder, without charge, as many
copies of the Shelf Registration Statement and the Prospectus (including
each preliminary prospectus intended for public distribution) (including
documents incorporated by reference therein and exhibits thereto) and any
amendment or supplement thereto as such selling Holder reasonably may
request; subject to Section 4(c) below, the Company hereby consents to the
use of the Prospectus and any amendment or supplement thereto by each of
the selling Holders in connection with the offering and the sale of the
Registrable Securities covered by the Prospectus or any amendment or
supplement thereto in conformity with the Plan of Distribution set forth
in the Prospectus and in compliance with all applicable laws and this
Agreement;
(ix) take all such other actions in connection therewith as are
reasonable and customary in order to expedite or facilitate the
disposition of the Registrable Securities pursuant
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to the Shelf Registration Statement contemplated by this Agreement, all to
such extent as may be reasonably requested by any Investor or by any
Holder of Registrable Securities in connection with any sale or resale
pursuant to the Shelf Registration Statement contemplated by this
Agreement;
(x) prior to any public offering of Registrable Securities,
cooperate with the selling Holders, and their respective counsel in
connection with the registration and qualification of the Registrable
Securities under the securities or Blue Sky laws of such domestic
jurisdictions as the selling Holders may reasonably request; and do any
and all other acts or things reasonably necessary or advisable to enable
the disposition in such jurisdictions of the Registrable Securities
covered by the Shelf Registration Statement; provided, however, that in no
event shall the Company be obligated to (A) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it is
not now so qualified, (B) file any general consent to service of process
in any jurisdiction where it is not as of the date hereof so subject, or
(C) subject itself to taxation in any jurisdiction if it is not so
subject;
(xi) cooperate with the selling Holders to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends; and enable
such Registrable Securities to be in such denominations and registered in
such names as the selling Holders may request, provided that such request
is made at least two Business Days prior to any sale of Registrable
Securities;
(xii) as soon as reasonably practicable after the occurrence of any
fact or event of the kind described in Section 4(b)(v)(D) above, use all
reasonable efforts to prepare a supplement or post-effective amendment to
the Shelf Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of Registrable Securities,
the Prospectus shall not contain an untrue statement of a material fact or
omit to state any material fact necessary, to make the statements made
therein not misleading in the light of the circumstances in which they
were made; provided, however, that notwithstanding anything to the
contrary herein, the Company shall not be required to prepare and file
such a supplement or post-effective amendment or document if the fact no
longer exists; and
(xiii) provide promptly to each Holder upon request any document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15 of the Exchange Act.
(c) Each Holder agrees by acquisition of a Registrable Security that, upon
receipt of any notice from the Company of the existence of any fact or event of
the kind described in Section 4(b)(v)(D) hereof, such Holder shall: (i) keep the
fact of such notice confidential and (ii) stop selling or offering for sale
Registrable Securities pursuant to the Shelf Registration Statement until such
Holder's receipt of the copies of a supplemented or amended Prospectus as
contemplated by Section 4(b)(xii) hereof, or until it receives advice in writing
from the Company that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus (it being understood and agreed by the Company that
the foregoing shall in no way diminish or otherwise impair the Company's
obligation to as promptly as possible prepare a Prospectus amendment or
supplement as above provided in Section 4(b)(xii) and deliver copies of same as
above provided in Section 4(b)(vii) hereof), and it being further understood
that, in the case of the Shelf Registration Statement, any such period during
which the Investors are restricted from offering or selling Registrable
Securities shall constitute a Suspension Period. If so directed by the Company,
each Holder shall deliver to the Company (at the expense of the Company) all
copies, other than permanent file copies then in such Holder's possession, of
the Prospectus covering such Registrable Securities that was current at the time
of receipt of such notice.
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(d) The Company shall have no obligation to keep a Prospectus usable with
respect to a particular Holder or to give notice that a Prospectus is not usable
by such Holder to the extent such Prospectus is not usable by such Holder
because current Requisite Information with respect to such Holder is not
included therein because such Holder has not provided such information to the
Company in accordance with Section 2(b).
5. REGISTRATION EXPENSES.
The following expenses incident to the Company's performance of or
compliance with this Agreement shall be borne by the Company regardless of
whether the Shelf Registration Statement becomes effective: (a) all registration
and filing fees and expenses; (b) all fees and expenses associated with
compliance with federal securities and Blue Sky or state securities laws; (c)
all expenses of printing of copying, messenger and delivery services and
telephone; (d) all fees and disbursements of Company Counsel; (e) all fees and
disbursements of independent certified public accountants of the Company; and
(f) reasonable fees and disbursements for one firm acting as counsel to the
Investors in connection with the preparation and filing of the Shelf
Registration Statement.
The Company shall, in any event, bear its own internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Company.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless (i) each Holder and
(ii) each person, if any, who controls (within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act) any Holder (any of the
persons referred to in this clause (ii) being hereinafter referred to as a
"CONTROLLING PERSON") and (iii) the respective officers, directors, partners,
employees, representatives and agents of any Holder or any controlling person
(any person referred to in clause (i), (ii) or (iii) may hereinafter be referred
to as an "INDEMNIFIED HOLDER"), to the fullest extent lawful, from and against
any and all losses, liabilities, claims, damages and expenses whatsoever as
incurred (including but not limited to reasonable attorneys' fees and expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation) (collectively, "LOSSES"),
joint or several, to which they or any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Losses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Shelf
Registration Statement or Prospectus or any amendment or supplement thereto or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the Company will not be liable in any
such case to the extent but only to the extent that any such Losses arise out of
or are based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by any Holder for use as
specified therein; and provided further, however, that the foregoing indemnity
shall not inure to the benefit of any Indemnified Holder if the person asserting
such Loss (A) purchased a Registrable Security and the Indemnified Holder, or
someone acting on the Indemnified Holder's behalf, did not deliver to such
person at or prior to the written confirmation of the sale of such Registrable
Security a Prospectus (as then amended or supplemented, if the Company furnished
or made available to the Indemnified Holder free of charge any amendments or
supplements thereto prior to such purchase by the person asserting such Loss)
and if the Prospectus (as so amended or supplemented) would have cured the
defect giving rise to such loss, liability, claim, damage or expense; or (B)
received a
9
Prospectus or an amendment or supplement thereto in violation of Section 4(c) of
this Agreement if such violation caused such Loss. The Company shall notify the
Holders promptly of the institution, threat or assertion of any claim,
proceeding (including any governmental investigation) or litigation in
connection with the matters addressed by this Agreement that involves the
Company or any Indemnified Holder.
(b) In case any action or proceeding (including, without limitation, any
governmental or regulatory investigation or proceeding) shall be brought or
asserted against any of the Indemnified Holders with respect to which indemnity
may be sought against the Company, such Indemnified Holder (or the Indemnified
Holder controlled by such controlling person) shall promptly notify the Company
in writing; provided, however, that the failure to give such notice shall not
relieve the Company of its obligations pursuant to this Agreement except to the
extent the Company is prejudiced by such failure. In case any such action is
brought against an Indemnified Holder, and it notifies the Company of the
commencement thereof, the Company will be entitled to participate therein, and
to the extent it elects by written notice delivered to the Indemnified Holder
promptly after receiving the aforesaid notice from such Indemnified Holder, to
assume and control the defense thereof with counsel reasonably satisfactory to
such Indemnified Holder. Notwithstanding the foregoing, the Indemnified Holder
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Holder; provided, however, that the
fees and expenses of such counsel shall be at the expense of the Company if (i)
the Company has failed to assume the defense of such action or (ii) the named
parties to any such action (including any impleaded parties) include such
Indemnified Holder and the Company and such Indemnified Holder shall have
reasonably concluded that there may be one or more legal defenses available to
it that are different from or in addition to those available to the Company;
provided, further, that the Company shall not in such event be responsible
hereunder for the fees and expenses of more than one firm of separate counsel,
which firm shall be designated by the Indemnified Holders and shall be subject
to the Company's approval, not to be unreasonably withheld, in connection with
any action or separate but related actions in the same jurisdiction, in addition
to any local counsel. The Company shall not be liable for any settlement of any
such action or proceeding effected without the Company's prior written consent,
which consent shall not be unreasonably withheld or delayed, and the Company
agrees to indemnify and hold harmless any Indemnified Holder from and against
any Loss by reason of any settlement of any action effected with the Company's
written consent. The Company shall not, without the prior written consent of
each Indemnified Holder, settle or compromise or consent to the entry of a
judgment in or otherwise seek to terminate any pending or threatened litigation
or proceeding in respect of which indemnification or contribution may be sought
hereunder, unless such settlement, compromise, consent or termination includes
an unconditional release of each Indemnified Holder from all liability arising
out of such action, claim, litigation or proceeding and no finding of fault by
any Indemnified Holder.
(c) Each Holder of Registrable Securities agrees, severally and not
jointly, to indemnify and hold harmless the Company, its directors, its
officers, and any person controlling (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) the Company, each Holder
selling Registrable Securities under Shelf Registration Statement, each such
Holder's directors and officers, and any person controlling (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) any such
Holder, and the respective officers, directors, partners, employees,
representatives and agents of each such person, to the same extent as the
foregoing indemnity from the Company to each of the Indemnified Holders, but
only with respect to claims and actions based on information relating to such
Holder furnished by such Holder for use in the Shelf Registration Statement or
Prospectus and used in the Shelf Registration Statement or Prospectus in the
manner specified by such Holder; provided, however, that the maximum amount of
liability of such Investor hereunder shall be limited to the proceeds (net of
underwriting discounts and commissions, if any) actually received by such
Investor from the sale of Registrable Securities covered by such Shelf
Registration Statement; and provided, further, however, that the indemnity
agreement contained in this Section 7(c) shall not apply to amounts paid in
settlement of any such Losses if such settlement is effected without the consent
of such
10
Investor against which the request for indemnity is being made (which consent
shall not be unreasonably withheld). In case any action or proceeding shall be
brought against any of the Company or its directors or officers or any such
controlling person in respect of which indemnity may be sought against a Holder
of Registrable Securities, such Holder shall have the rights and duties given
the Company, and each of the Company or its directors or officers or such
controlling person shall have the rights and duties given to each Holder by the
preceding paragraph.
7. CONTRIBUTION.
If the indemnification provided for in Section 5 hereof is unavailable to
a party entitled to indemnification in respect of any Losses referred to
therein, then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such Losses (a) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the Holders on
the other hand from their sale of Registrable Securities or (b) if such
allocation is not permitted by applicable law, the relative fault of the Company
on the one hand and of the Indemnified Holder on the other in connection with
the statements or omissions that resulted in such Losses, as well as any other
relevant equitable considerations; provided, however, that the maximum amount of
liability of any Investor hereunder shall be limited to the proceeds (net of
underwriting discounts and commissions, if any) actually received by such
Investor from the sale of Registrable Securities covered by the Shelf
Registration Statement. The relative fault of the Company on the one hand of the
Indemnified Holder on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, or by a Holder and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The indemnity and contribution obligations of each
indemnifying party set forth herein shall be in addition to any liability or
obligation such indemnifying party may otherwise have to any indemnified party,
including under this Agreement.
8. REPORTS UNDER THE EXCHANGE ACT.
With a view to making available to the Investors the benefits of Rule 144
and any other rule or regulation of the Commission that may at any time permit
the Investors to sell the Registrable Securities to the public without
registration, the Company agrees during the Effectiveness Period to use best
efforts to: (i) make and keep public information available, as those terms are
understood and defined in Rule 144, (ii) file with the Commission in a timely
manner all reports and other documents required to be filed by an issuer of
securities registered under the Securities Act or the Exchange Act, and (iii) as
long as any Investor owns any Shares or Warrant Shares, to furnish in writing
upon such Investor's request a written statement by the Company that it has
complied with the reporting requirements of Rule 144 and of the Securities Act
and the Exchange Act, and to furnish to such Investor a copy of the most recent
annual and quarterly reports of the Company, and such other reports and
documents so filed by the Company as may be reasonably requested in availing
such Investor of any rule or regulation of the Commission permitting the selling
of any such Shares without registration.
9. MISCELLANEOUS.
(a) The provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given, unless the Company has obtained the written consent of
Holders of a majority in aggregate principal amount of Registrable Securities.
11
(b) All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return-receipt requested), or courier guaranteeing
overnight delivery:
(i) if to a Holder, at the address set forth on the stock register
or other records of the Company; and
(ii) if to the Company:
Digital Lifestyles Group, Inc.
1001 S. Capital of Xxxxx Xxxxxxx
Xxxxxxxx X, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx, Chief Financial Officer
with a copy to:
Digital Lifestyles Group, Inc.
1001 S. Capital of Xxxxx Xxxxxxx
Xxxxxxxx X, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: J. Xxxxxxx Xxxxxx, General Counsel
All such notices and communications shall be deemed to have been duly
given; at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
(c) This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties, including without limitation and
without the need for an express assignment, subsequent Holders of Registrable
Securities; provided, however, that this Agreement shall not inure to the
benefit of or be binding upon a successor or assign of a Holder unless such
successor or assignee and Holder provide the Company with written notice at the
time of such succession or assignment stating the name of such successor or
assignee and identifying the Registrable Securities as to which this Agreement
is being assigned; provided, however, that any such assignee or successor shall
receive such Registrable Securities subject to all the terms and conditions of
this Agreement, including without limitation, Section 5, and shall thereafter be
deemed a "Holder" for all purposes under this Agreement.
(d) This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(f) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
(g) THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS BETWEEN RESIDENTS OF
DELAWARE WHOLLY EXECUTED AND WHOLLY PERFORMED THEREIN.
12
(h) In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and the remaining provisions contained herein shall not
be affected or impaired thereby.
(i) This Agreement, together with the Purchase Agreement and other
Agreements referred to in the Purchase Agreement, is intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Registrable Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
DIGITAL LIFESTYLES GROUP, INC.
By: /s/ XXXX X. XXXXXX
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: Chief Executive Officer
WESTECH:
WESTECH CAPITAL CORPORATION,
AS DESIGNEE OF TEJAS SECURITIES GROUP, INC.
By: /s/ XXXX X. XXXXXXX
----------------------------------------
Name: Xxxx X. Xxxxxxx
Title: President and C.O.O.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGES OF INVESTORS TO FOLLOW]
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INVESTOR:
[__________________________________________]
By:_________________________________________
Name:____________________________________
Title:___________________________________
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
