Exhibit 5
---------
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement"), dated as of March 11,
---------
1998, is by and among ▇▇▇ ▇▇▇▇▇▇, Inc. (the "Company") and the parties listed
under the heading of Investors on signature page attached hereto (the
"Investors").
---------
WHEREAS, the Investors and the Company are, on the date hereof, entering
into a Debenture Purchase Agreement (the "Purchase Agreement") pursuant to which
------------------
the Company is issuing to the Investors (i) convertible subordinated debentures
in an aggregate principal amount of $2,000,000 (the "Debentures") and (ii)
----------
warrants (the "Warrants") to acquire shares of the Company's common stock, par
--------
value $.01 per share ("Common Stock") or shares of preferred stock designated as
------------
having rights and preferences substantially similar to the Common Stock (the
"Common Stock Equivalent Shares");
-------------------------------
WHEREAS, upon the occurrence of certain events set forth in the Debentures
and in the Purchase Agreement, each Debenture is convertible into (i) additional
warrants (the "Additional Warrants") to acquire Common Stock or Common Stock
-------------------
Equivalents or (ii) shares of Series C Convertible Preferred Stock (the "Series
------
C Preferred Shares"), which would be convertible into shares of Common Stock or
------------------
Common Stock equivalents; and
WHEREAS, the Company has agreed to grant to the Investors, as an inducement
to enter into the Purchase Agreement, certain rights with respect to the
Debentures, the Warrants, the Additional Warrants, the Series C Preferred
Shares, and the Conversion Shares;
NOW, THEREFORE, in consideration of the premises set forth herein, the
parties hereto hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
----------
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.01 par value, of the
------------
Company, as constituted as of the date of this Agreement.
"Common Stock Equivalents or Common Stock Equivalent Shares" shall
----------------------------------------------------------
mean shares of preferred stock of the Company designated as Series D Preferred
Stock, which shall have all of the rights and preferences of Common Stock and
shall be convertible into Common Stock on a 1 to 100 basis.
"Conversion Shares" shall mean shares of Common Stock or Common Stock
-----------------
Equivalents issued or issuable upon (i) conversion of the Series C Preferred
Shares, (ii) exercise of the Warrants or Additional Warrants, and (iii) any
shares of capital stock received in respect of the shares described in clause
(i) and/or clause (ii).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Holder" shall mean the person who is the then record owner of
------
Restricted Stock.
"Registrable Shares" shall mean the shares of Restricted Stock.
------------------
"Registration Expenses" shall mean the expenses so described in
---------------------
Section 8.
"Restricted Stock" shall mean the Conversion Shares, excluding shares
----------------
which have been (a) registered under the Securities Act pursuant to an effective
registration statement filed thereunder and disposed of in accordance with the
registration statement covering them or (b) publicly sold pursuant to Rule 144
under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
2. Restrictive Legend.
------------------
Each certificate representing the Restricted Stock shall bear a legend
stating in substance:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED [FOR NON
U.S. PERSONS ADD: IN THE UNITED STATES OR TO U.S. PERSONS] WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS, OR THE
AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE
SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS.
A certificate shall not be required to bear such legend if, in the opinion
of counsel satisfactory to the Company, the securities represented thereby may
be publicly sold without registration under the Securities Act.
2
3. Notice of Proposed Transfer.
---------------------------
Prior to any proposed transfer of any Restricted Stock (other than under
the circumstances described in Section 4, 5 or 6), the Holder thereof shall give
written notice to the Company of its intention to effect such transfer. Each
such notice shall describe the manner of the proposed transfer and, if requested
by the Company, shall be accompanied by an opinion of counsel satisfactory to
the Company to the effect that the proposed transfer may be effected without
registration under the Securities Act, whereupon the Holder of such stock shall
be entitled to transfer such stock in accordance with the terms of its notice;
provided, however, that no such opinion of counsel shall be required for a
-------- -------
distribution by a corporation, partnership, limited partnership, limited
liability company or other entity formed to hold investments in other businesses
to its shareholders, partners, members or other equity holders of such stock in
respect of such interest. Each certificate for shares of Restricted Stock
transferred as above provided shall bear the legend set forth in Section 2,
except that such certificate shall not bear such legend if (i) such transfer is
in accordance with the provisions of Rule 144 (or any other rule permitting
public sale without registration under the Securities Act) or (ii) the opinion
of counsel referred to above is to the further effect that the transferee and
any subsequent transferee (other than an affiliate of the Company) would be
entitled to transfer such securities in a public sale without registration under
the Securities Act. The restrictions provided for in this Section 3 shall not
apply to securities which are not required to bear the legend prescribed by
Section 2 in accordance with the provisions of that Section.
4. Required Registration.
---------------------
(a) At any time prior to December 31, 2007, the Holders of Registrable
Shares constituting at least 51% of the total shares of Registrable Shares then
outstanding may request the Company to register under the Securities Act all or
any portion of the Registrable Shares held by such requesting Holder or Holders
for sale in the manner specified in such notice, provided that the Registrable
--------
Shares for which registration has been requested shall constitute at least 25%
of the total Registrable Shares originally issued if such Holder or Holders
shall request the registration of less than all Registrable Shares then held by
such Holder or Holders. Notwithstanding anything to the contrary contained
herein, no request may be made under this Section 4 within 180 days after the
effective date of a registration statement filed by the Company covering a firm
commitment underwritten public offering in which the Holders of Registrable
Shares shall have been entitled to join pursuant to Section 5 or 6 and in which
there shall have been effectively registered all Registrable Shares to which
registration shall have been requested.
(b) Following receipt of any notice under this Section 4, the Company
shall immediately notify all Holders of Registrable Shares from whom notice has
not been received and shall use its reasonable best efforts to register under
the Securities Act, for public sale in accordance with the method of disposition
specified in such notice from requesting Holders, the number of Registrable
Shares specified in such notice (and in all notices received by the Company from
other Holders within 30 days after the giving of such notice by the Company).
If
3
such method of disposition shall be an underwritten public offering, the
Holders of a majority of the Registrable Shares to be sold in such offering may
designate the managing underwriter of such offering, subject to the approval of
the Company, which approval shall not be unreasonably withheld or delayed. The
Company shall be obligated to register Registrable Shares pursuant to this
Section 4 on two occasions only, provided, however, that such obligation shall
-------- -------
be deemed satisfied only when a registration statement, which covers all
Registrable Shares specified in notices received as aforesaid and with respect
to which the request for registration has not been withdrawn and provides for
sale of such shares in accordance with the method of disposition specified by
the requesting Holders, shall have become effective and, if such method of
disposition is a firm commitment underwritten public offering, all such shares
shall have been sold pursuant thereto.
(c) The Company shall be entitled to include in any registration
statement referred to in this Section 4, for sale in accordance with the method
of disposition specified by the requesting Holders, shares of Common Stock to be
sold by the Company for its own account, except as and to the extent that, in
the opinion of the managing underwriter (if such method of disposition shall be
an underwritten public offering), such inclusion would adversely affect the
marketing of the Registrable Shares to be sold. Except for registration
statements on Form ▇-▇, ▇-▇ or any successor thereto, the Company will not file
with the Commission any other registration statement with respect to its Common
Stock or Common Stock Equivalent Shares, whether for its own account or that of
other stockholders, from the date of receipt of a notice from requesting Holders
pursuant to this Section 4 (the "Demand Holders") until the first to occur of
--------------
(i) withdrawal of such registration statement or (ii) the effectiveness of such
registration statement unless such registration statement relates to a firm
commitment underwritten public offering, then the completion of the period of
distribution of the registration contemplated thereby; provided, however, that
-------- -------
following receipt of any notice under this Section 4, the Company shall
immediately notify all holders of the Company's Common Stock or Common Stock
Equivalent Shares who have contractual rights to demand registrations pursuant
to the terms of any other registration rights agreement to which the Company is
a party. Upon the written request of such demand rights holders constituting
the requisite percentages of shares to initiate a demand under such other
registration rights agreement specifying the number of shares to be registered,
which request shall be deemed to be an exercise of a demand right under the
terms of the registration rights agreement to which they are parties, such
demand rights holders shall be deemed to be Demand Holders and the shares
requested to be registered by such Demand Holders shall be deemed to be
Registrable Shares, in each case, for purposes of Section 4(d), provided that
--------
such written request is received by the Company within 30 days of the giving of
notice by the Company.
(d) If, in the opinion of the managing underwriter, the inclusion in a
registration statement to be filed under this Section of any shares other than
the Registrable Shares requested to be registered under this Section by Demand
Holders would adversely affect the marketing of such shares, then, in such event
(a) such other shares may be included in such registration only if all of the
Registrable Shares requested to be registered by Demand Holders hereunder are
included, and (b) such other shares shall be subject to the provisions of
Section 5 and the first sentence of Section 4(c) as to priority of inclusion.
If, in the opinion of the
4
managing underwriter, the inclusion of the Registrable Shares requested to be
registered under this Section by Demand Holders would adversely affect the
marketing of such Registrable Shares, Registrable Shares to be sold by the
Demand Holders shall be excluded in such manner that the Registrable Shares to
be excluded shall first be the Registrable Shares of Demand Holders who are not
affiliates (as defined in Rule 144 of the Securities Act) of the Company (the
"Affiliate Holders") and whose Registrable Shares are then saleable under
-----------------
Rule 144(e) or Rule 144(k) under the Securities Act and then pro rata among
them, and if further reduction is necessary, shall next be pro rata among the
remaining Registrable Shares of the Demand Holders who are Affiliate Holders or
whose Registrable Shares are not then saleable under Rule 144(e) or Rule 144(k);
provided, however, that, notwithstanding anything in this Agreement to the
-------- -------
contrary, in respect of the first underwritten public offering following the
date of this Agreement, no reduction shall reduce the number of shares which may
be sold by requesting Holders to less than 25% of the shares to be sold in such
offering.
5. Incidental Registration.
-----------------------
If the Company at any time (other than pursuant to Section 4 or Section 6)
proposes to register any of its securities under the Securities Act for sale to
the public, whether for its own account or for the account of other
securityholders or both (except with respect to registration statements on Forms
▇-▇, ▇-▇ or another form not available for registering the Restricted Stock for
sale to the public), each such time the Company will give written notice to all
Holders of outstanding Restricted Stock of its intention to do so. Upon the
written request of any such Holder received by the Company within 30 days of the
giving of any such notice by the Company to register any of such Holder's
Restricted Stock (which request shall state the intended method of disposition
thereof), the Company will use its reasonable best efforts to cause the
Restricted Stock as to which registration shall have been so requested to be
included in the securities to be covered by the registration statement proposed
to be filed by the Company, all to the extent requisite to permit the sale or
other disposition by the Holder (in accordance with such Holder's written
request) of such Restricted Stock so registered. In the event that any
registration pursuant to this Section 5 shall be, in whole or in part, an
underwritten public offering of Common Stock or Common Stock Equivalent Shares,
the number of shares of Restricted Stock to be included in such an underwriting
may be reduced if and to the extent that the managing underwriter shall be of
the opinion that such inclusion would adversely affect the marketing of the
securities to be sold by the Company or the requesting party therein or that
such reduction is otherwise advisable; provided, however, that after any shares
-------- -------
to be sold by holders that do not have contractual rights to have shares
included in such registration have been excluded, shares to be sold by the
Holders shall be excluded in such manner that the shares to be excluded shall
first be the shares of selling Holders and other requesting holders who, in each
case, are not Affiliate Holders and whose shares are then saleable under Rule
144(e) or Rule 144(k) under the Securities Act and then pro rata among them, and
if further reduction is necessary, shall next be pro rata among the remaining
shares of the selling Holders and other requesting holders who are Affiliate
Holders or whose shares are not then saleable under Rule 144(e) or Rule 144(k),
unless such registration is pursuant to the exercise of a demand right of
another securityholder, in which event such securityholder shall be entitled to
include all shares it desires to have so included before any shares of
Restricted Stock or shares of any other holder
5
are included therein and provided, however, that, notwithstanding anything in
-------- -------
this Agreement to the contrary, in respect of the first underwritten public
offering following the date of this Agreement, no reduction shall reduce the
number of shares which may be sold by requesting Holders to less than 25% of the
shares to be sold in such offering.
6. Registration on Form S-3.
------------------------
If at any time prior to December 31, 2007 (i) a Holder or Holders of
Registrable Shares request that the Company file a registration statement on
Form S-3 or any successor thereto for a public offering of all or any portion of
the Registrable Shares held by such requesting Holder or Holders, with a
reasonably anticipated aggregate price to the public of at least $500,000, and
(ii) the Company is a registrant entitled to use Form S-3 or any successor
thereto to register such shares, then the Company shall use its reasonable best
efforts to register under the Securities Act on Form S-3 or any successor
thereto, for public sale in accordance with the method of disposition specified
in such notice, the number of Registrable Shares specified in such notice.
Whenever the Company is required by this Section 6 to use its reasonable best
efforts to effect the registration of Registrable Shares, each of the procedures
and requirements of Section 4 (including but not limited to the requirement that
the Company notify all Holders of Registrable Shares from whom notice has not
been received and provide them with the opportunity to participate in the
offering) shall apply to such registration, provided, however, that there shall
-------- -------
be up to five (5) registrations on Form S-3 which may be requested and obtained
under this Section 6, and the Company shall not be obligated to register
Registrable Shares pursuant to this Section 6 on more than one occasion per
twelve (12) month period, and provided, further, however, that the requirements
-------- ------- -------
contained in the first sentence of Section 4(a) shall not apply to any
registration on Form S-3 which may be requested and obtained under this Section
6.
7. Registration Procedures.
-----------------------
If and whenever the Company is required by the provisions of Section 4, 5
or 6 to use its reasonable best efforts to effect the registration of any shares
of Restricted Stock under the Securities Act, the Company will, as expeditiously
as possible:
(a) prepare and file with the Commission a registration statement
(which, in the case of an underwritten public offering pursuant to Section 4,
shall be on Form S-1 or other form of general applicability satisfactory to the
managing underwriter selected as therein provided) with respect to such
securities and use its reasonable best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided);
(b) 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 keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the sellers' intended
method of disposition set forth in such registration statement for such period;
6
(c) furnish to each seller of Restricted Stock and to each underwriter
such number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or other disposition of the
Restricted Stock covered by such registration statement;
(d) use its reasonable best efforts to register or qualify the
Restricted Stock covered by such registration statement under the securities or
"blue sky" laws of such jurisdictions as the sellers of Restricted Stock or, in
the case of an underwritten public offering, the managing underwriter reasonably
shall request, provided, however, that the Company shall not for any such
-------- -------
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) use its reasonable best efforts to list the Restricted Stock
covered by such registration statement with any securities exchange on which the
Common Stock is then listed;
(f) immediately notify each seller of Restricted Stock and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained 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 light of the circumstances then existing, and promptly prepare
and furnish to such seller a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to the purchasers of
such Restricted Stock, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing;
(g) if the offering is underwritten and at the request of any seller
of Restricted Stock as provided herein, use its reasonable best efforts to
furnish on the date that Restricted Stock is delivered to the underwriters for
sale pursuant to such registration: (i) an opinion dated such date of counsel
representing the Company for the purposes of such registration, addressed to the
underwriters and to such seller, stating that such registration statement has
become effective under the Securities Act and that (A) to the knowledge of such
counsel, no stop order suspending the effectiveness thereof has been issued and
no proceedings for that purpose have been instituted or are pending or
threatened under the Securities Act, (B) the registration statement, the related
prospectus and each amendment or supplement thereof comply as to form in all
material respects with the requirements of the Securities Act (except that such
counsel need not express any opinion as to financial statements, schedules and
other financial or statistical information contained therein) and (C) to such
other effects as reasonably may be requested by counsel for the underwriters or
by such seller or its counsel; and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters and to such seller, stating that they are independent public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements of the
7
Company included in the registration statement or the prospectus, or any
amendment or supplement thereof, comply as to form in all material respects with
the applicable accounting requirements of the Securities Act, and such letter
shall additionally cover such other financial matters (including information as
to the period ending no more than five business days prior to the date of such
letter) with respect to such registration as such underwriters reasonably may
request;
(h) make available for inspection by each seller of Restricted Stock,
any underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such seller
or underwriter, all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement;
(i) cooperate with the selling holders of Restricted Stock and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Restricted Stock to be sold, such certificates to
be in such denominations and registered in such names as such holders or the
managing underwriters may request at least two business days prior to any sale
of Restricted Stock; and
(j) permit any holder of Restricted Stock which holder, in the sole
and exclusive judgment, exercised in good faith, of such holder, might be deemed
to be a controlling person of the Company, to participate in good faith in the
preparation of such registration or comparable statement and to require the
insertion therein of material, furnished to the Company in writing, which in the
reasonable judgment of such holder and its counsel should be included.
For purposes of Section 7(a) and 7(b) and of Section 4(c), the period of
distribution of Restricted Stock included therein shall be deemed to extend
until the first to occur of (i) each underwriter's completion of the
distribution of all securities purchased by it, and (ii) one hundred and twenty
(120) days.
In connection with each registration hereunder, the sellers of Restricted
Stock will furnish to the Company in writing such information with respect to
themselves and the proposed distribution by them as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Section 4, 5 or 6 covering
an underwritten public offering, the Company and each seller agree to enter into
a written agreement with the managing underwriter selected in the manner herein
provided in such form and containing such provisions as are customary in the
securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.
No Holder of shares of Restricted Stock included in a registration
statement shall (until further notice) effect sales thereof after receipt of
telegraphic or written notice from the Company to suspend sales to permit the
Company to correct or update a registration statement or
8
prospectus; but the obligations of the Company with respect to maintaining any
registration statement current and effective shall be extended by a period of
days equal to the period such suspension is in effect unless (i) such extension
would result in the Company's inability to use the financial statements in the
registration statement as initially filed and (ii) such correction or update did
not result from the Company's acts or failures to act.
At the end of the period during which the Company is obligated to keep the
registration statement current and effective as described above (and any
extensions thereof required by the preceding sentence), the Holders of shares of
Restricted Stock included in the registration statement shall discontinue sales
of shares pursuant to such registration statement upon receipt of notice from
the Company of its intention to remove from registration the shares covered by
such registration statement which remain unsold, and such Holders shall notify
the Company of the number of shares registered which remain unsold immediately
upon receipt of such notice from the Company.
8. Expenses.
--------
All expenses incurred by the Company in complying with Section 4, 5 and 6,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel and independent public accountants
for the Company, fees and expenses (including counsel fees) incurred in
connection with complying with state securities or "blue sky" laws, fees of the
National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, costs of insurance, and fees and disbursements
of one counsel for the sellers of Restricted Stock, but excluding any Selling
Expenses, are called "Registration Expenses." All underwriting discounts and
selling commissions applicable to the sale of Restricted Stock are called
"Selling Expenses."
The Company will pay all Registration Expenses in connection with each
registration statement under Section 4, 5 or 6. All Selling Expenses in
connection with each registration statement under Section 4, 5 or 6 shall be
borne by the participating sellers in proportion to the number of shares sold by
each, or by such participating sellers other than the Company (except to the
extent the Company shall be a seller) as they may agree.
9. Indemnification and Contribution.
--------------------------------
(a) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Section 4, 5 or 6, the Company will
indemnify and hold harmless each seller of such Restricted Stock thereunder, its
officers and directors, each underwriter of such Restricted Stock thereunder and
each other person, if any, who controls such seller or underwriter within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such seller, officer, director,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such Restricted Stock was registered under the Securities
Act pursuant to Section 4,
9
5 or 6, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, (ii) any blue sky application or other document
executed by the Company specifically for that purpose or based upon written
information furnished by the Company filed in any state or other jurisdiction in
order to qualify any or all of the Restricted Stock under the securities laws
thereof (any such application, document or information herein called a "Blue Sky
Application"), (iii) 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, (iv) any violation by the Company or its agents of any
rule or regulation promulgated under the Securities Act applicable to the
Company or its agents and relating to action or inaction required of the Company
in connection with such registration, or (v) any failure to register or qualify
the Restricted Stock in any state where the Company or its agents has
affirmatively undertaken or agreed in writing that the Company (the undertaking
of any underwriter chosen by the Company being attributed to the Company) will
undertake such registration or qualification on the seller's behalf (provided
that in such instance the Company shall not be so liable if it has undertaken
its best efforts to so register or qualify the Restricted Stock) and will
reimburse each such seller, and such officer and director, each such underwriter
and each such controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will
-------- -------
not be liable in any such case if and to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by any such seller, any such underwriter or any such
controlling person in writing specifically for use in such registration
statement or prospectus, and except that the foregoing indemnity agreement is
subject to the condition that, insofar as it relates to any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the preliminary prospectus but eliminated or remedied in the amended prospectus
on file with the Commission at the time the registration statement becomes
effective or in the amended prospectus filed with the Commission pursuant to
Rule 424(b) or in the prospectus subject to completion and term sheet under Rule
434 of the Securities Act, which together meet the requirements of Section 10(a)
of the Securities Act (the "Final Prospectus"), such indemnity agreement shall
----------------
not inure to the benefit of any such seller, any such underwriter or any such
controlling person, if such seller, underwriter or controlling person was
obligated under law to provide a copy of the Final Prospectus to the person or
entity asserting the loss, liability, claim or damage and failed to do so after
sufficient copies of the Final Prospectus were delivered by the Company to such
seller, underwriter or controlling person in sufficient time to deliver the
Final Prospectus within the period required by the Securities Act; provided,
--------
further, that this indemnity shall not be deemed to relieve any underwriter
-------
of any of its due diligence obligations.
(b) To the extent permitted by law, in the event of a registration of
any of the Restricted Stock under the Securities Act pursuant to Section 4, 5 or
6, each seller of such Restricted Stock thereunder, severally and not jointly,
will indemnify and hold harmless the Company, each person, if any, who controls
the Company within the meaning of the Securities Act, each officer of the
Company who signs the registration statement, each director of the Company, each
underwriter and each person who controls any underwriter within the meaning of
the Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which the
10
Company or such officer, director, underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Section 4, 5 or 6, 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 in the light of the
circumstances in which they were made, and will reimburse the Company and each
such officer, director, underwriter or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
-------- -------
that such seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in reliance upon and in conformity with information pertaining
to such seller furnished in writing to the Company by such seller specifically
for use in such registration statement or prospectus, and provided, further,
-------- -------
that the foregoing indemnity agreement is subject to the condition
that, insofar as it relates to any such untrue statement or alleged untrue
statement or omission or alleged omission made in the preliminary prospectus but
eliminated or remedied in the amended prospectus on file with the Commission at
the time the registration statement becomes effective or in the Final
Prospectus, such indemnity agreement shall not inure to the benefit of the
Company, any controlling person or any underwriter, if the Company, underwriter
or controlling person was obligated under law to provide a copy of the Final
Prospectus to the person or entity asserting the loss, liability, claim or
damage and failed to do so within the period required by the Securities Act;
provided, further, that this indemnity shall not be deemed to relieve any
-------- -------
underwriter of any of its due diligence obligations; and provided, further, that
-------- -------
in no event shall any indemnity by a seller under this Section 9(b) exceed the
gross proceeds from the offering received by such seller.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 9 and shall only relieve it
from any liability which it may have to such indemnified party under this
Section 9 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 9 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided,
--------
however, that, if the defendants in any such action include both the indemnified
-------
party and the indemnifying party and counsel to the indemnified party shall have
reasonably concluded that there are reasonable
11
defenses available to the indemnified party which are different from or
additional to those available to the indemnifying party or if the interests of
the indemnified party reasonably may be deemed to conflict with the interests of
the indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred. 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
to such claim or litigation.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any Holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for Indemnification pursuant to this
Section 9 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 9 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under this Section
9; then, and in each such case, the Company and such Holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such Holder
is responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such Holder will be
-------- -------
required to contribute any amount in excess of the public offering price of all
such Restricted Stock offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
10. Changes in Stock. If, and as often as, there is any change in the
----------------
Common Stock, Common Stock Equivalents, Series A Preferred Stock, Series B
Convertible Preferred Stock, or Series C Preferred Shares 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,
Common Stock Equivalents, Series A Preferred Stock, Series B Convertible
Preferred Stock or Series C Preferred Shares as so changed.
11. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Stock to the public without registration, the Company
agrees to:
12
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its reasonable best efforts to file with the Commission 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 Holder of Restricted Stock forthwith upon request
a written statement by the Company as to its compliance with the reporting
requirements of such Rule 144 and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed by the Company as such Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such Holder to sell any Restricted Stock without
registration.
The Company shall not be required to effect a registration pursuant to
Section 4, 5 or 6 hereof for any Holder desiring to participate in such
registration who (a) may then dispose of all of its shares of Restricted Stock
pursuant to Rule 144 within the three-month period following such proposed
registration; and (b) holds less than 1% of the outstanding capital stock of the
Company (on a common stock-equivalent basis) at the time of such registration.
12. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have 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 Charter or By-laws of the Company or any provision of any
indenture, agreement or other instrument to which it or any or its properties or
assets is bound, conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.
(b) This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms (subject, as to enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting the rights of creditors generally), except to the extent
the indemnification provisions herein may be deemed not enforceable.
(c) The Company has not granted any registration rights, and no such
registration rights exist, that conflict with the registrations rights set forth
herein or contemplated hereby. All registration rights agreements relating to
the capital stock of the Company permit, or have been amended to permit, the
transactions and rights set forth herein and contemplated hereby.
13
13. Miscellaneous.
-------------
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including without
limitation transferees of any of the shares of Restricted Stock), whether so
expressed or not, provided, however, that registration rights conferred herein
-------- -------
on the Holders of shares of Restricted Stock shall only inure to the benefit of
a transferee of shares of Restricted Stock if such transferee, in the Company's
reasonable judgment, is not a competitor of the Company, and (i) there is
transferred to such transferee at least 20% of the total shares of Restricted
Stock originally issued to the direct or indirect transferor of such transferee
by the Company or (ii) such transfer is made in connection with the distribution
by a Holder to such Holders beneficial owners (including, without limitation, to
partners of a general or limited partnership, shareholders of a corporation and
beneficiaries of a trust) of securities of the Holder or to the partners or
employees of the Holder, provided that at the Company's request, one person
shall be designated by such transferees as their agent for purposes of their
rights hereunder and the provision of a notice by the Company to such agent in
accordance with the provisions hereof shall be deemed compliance with such
provisions for all such beneficial owners, partners and employees, and following
such request by the Company, the Company shall have no obligation under said
provisions with respect to such transferees until it shall have been notified of
the name and address of such agent.
(b) Each Holder agrees that it will provide notice to the Company of
any transfer or assignment of its rights or interests hereunder. Any failure by
the Company to fulfill a covenant or obligation hereunder which is the direct
result of a failure by a Holder to provide such notice shall not be deemed to be
a breach of any covenant or obligation hereunder.
Nothing in this Agreement shall be construed to create any rights or
obligations except among the parties hereto and their respective and permitted
successors and assigns, and no person or entity shall be regarded as a third-
party beneficiary of this Agreement.
Except as provided in Section 13(a) above, all notices, requests, consents
and other communications hereunder shall be in writing, shall be addressed to
the receiving party's address set forth below or to such other address as a
party may designate by notice hereunder, and shall be either (i) delivered by
hand, (ii) sent by overnight courier, with a receipt obtained or (iii) sent by
registered or certified mail, return receipt requested, postage prepaid.
If to the Company:
▇▇▇ ▇▇▇▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇ ▇. ▇▇▇▇▇▇▇
14
with a copy to:
Stoel Rives, LLP
One Union Square
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Purchasers:
c/▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Company, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and:
▇. ▇▇▇▇ Price Recovery Fund II, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
High Street Tower
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
All notices, requests, consents and other communications hereunder shall be
deemed to have been given (i) if by hand, at the time of the delivery thereof to
the receiving party at the address of such party set forth above, (ii) if sent
by overnight courier, on the next business day
15
following the day such notice is delivered to the courier service, or (iii) if
sent by registered or certified mail, on the 5th business day following the day
such mailing is made.
(c) This Agreement shall be governed and construed in accordance with
the law of the Sate of Delaware, without giving effect to the conflict of laws
principles thereof.
(d) This Agreement may be amended or modified, and any provision
hereof may be waived in whole or in part, but only by the written consent of the
Company and the holders of a majority of the aggregate number of outstanding
shares of Restricted Stock held of record by the Holders or their permitted
successors and assigns. This Agreement may be terminated by written agreement
of the Company and the holders of at least a majority of the aggregate number of
outstanding shares of Restricted Stock held of record by the Holders or their
permitted successors and assigns.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) Except as otherwise expressly provided herein, the obligations of
the Company to register shares of Restricted Stock under Section 4, 5 or 6 as
provided herein shall terminate on December 31, 2007.
(g) If requested by the underwriter or underwriters for an
underwritten public offering of securities of the Company which offering is by
the Company, each Holder of Restricted Stock who is a party to this Agreement
(including, without limitation, a successor or permitted assignee of a party)
shall agree not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any shares of Restricted Stock or any other
shares of Common Stock or Common Stock Equivalents (other than shares being
registered in such offering), without the consent of such underwriter or
underwriters, for a period of not more than 90 days following the effective date
of the registration statement relating to such offering (unless in any event
such underwriter or underwriters shall, based on then current market conditions,
agree to a shorter period), provided, with respect to each such offering, that
--------
all persons entitled to registration rights in such offering who are not parties
to this Agreement, all other persons selling shares of Common Stock or Common
Stock Equivalents in such offering and all executive officers of the Company
shall also have agreed to be bound by provisions pertaining to the sale of their
shares of Common Stock or Common Stock Equivalents following such offering which
provisions are substantially similar to the provisions binding upon the Holders
of Restricted Stock obligated under this Agreement with respect to the sale of
their shares following such offering.
(h) The Company shall be permitted to require any Holders requesting
registration under Section 4, 5 or 6 to delay any request for registration or to
cease sales under any effective registration statement if the Company is then
contemplating a transaction that could reasonably be expected to be adversely
affected or the Company would be required to make
16
public disclosure of information, the disclosure of which at such time could
reasonably be expected to cause a material adverse effect upon the Company's
business.
In addition, if at the time of any request to register Registrable Shares
pursuant to Section 4 or Section 6 hereof, the Company is engaged or has fixed
plans to engage within ninety (90) days of the time of the request in a
registered public offering as to which such Holders may include Registrable
Shares pursuant to Section 5 hereof, then the Company may at its option direct
that such request be delayed.
(i) 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.
In the event that any court of competent jurisdiction shall determine that
any provision, or any portion thereof, contained in this Agreement shall be
unreasonable or unenforceable in any respect, then such provision shall be
deemed limited to the extent that such court deems it reasonable and
enforceable, and as so limited shall remain in full force and effect.
(j) The headings and captions of the various subdivisions of this
Agreement are for convenience of reference only and shall in no way modify, or
affect the meaning or construction of any of the terms or provisions hereof.
14. Entire Agreement.
----------------
This Agreement embodies the entire agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes all
prior oral or written agreements and understandings related to the subject
matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
IN WITNESS WHEREOF, the undersigned have executed this Registration Rights
Agreement as a sealed instrument as of the day and year first written above.
THE COMPANY: ▇▇▇ ▇▇▇▇▇▇, INC.
By:
---------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
THE INVESTORS: ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ STRATEGIC PARTNERS FUND, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ STRATEGIC PARTNERS, L.P.,
its General Partner
By:
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: a General Partner
STRATEGIC ASSOCIATES, L.P.
By: ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & COMPANY, LLC
its General Partner
By:
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Member
▇. ▇▇▇▇ PRICE RECOVERY FUND II, L.P.
By: ▇. ▇▇▇▇ PRICE RECOVERY FUND II ASSOCIATES,
L.L.C., its General Partner
By: ▇. ▇▇▇▇ PRICE ASSOCIATES, INC.,
its Manager
By:
---------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
