Exhibit 10.4
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and entered
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into as of October 26, 2006, to be effective as of September 26, 2006, and to
replace and supersede the previous Registration Rights Agreement entered into
between the parties on September 26, 2006, by and among XA, Inc., a Nevada
corporation (the "COMPANY") and each Holder of the Notes and Warrants issued by
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the Company pursuant to a Securities Purchase Agreement, dated as of the date
hereof, by and between each Investor and the Company (the "SPA").
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The Underlying Shares shall have the registration rights as set forth
herein.
The Company and the Investor hereby agree as follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined herein
that are defined in the SPA shall have the meanings given such terms in the SPA.
As used in this Agreement, the following terms shall have the following
meanings:
"CLOSING DATE" means the date of the closing of the Financing.
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"COMMISSION" means the United States Securities and Exchange Commission.
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"COMMON STOCK" means the Company's common stock par value $0.001 per share.
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"CONVERSION SHARES" means all shares of Common Stock issuable upon
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conversion of the Notes.
"DEMAND EFFECTIVENESS DATE" shall have the meaning set forth in Section
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2(b).
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"DEMAND FILING DATE" shall have the meaning set forth in Section 2(b).
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"DEMAND NOTICE" shall have the meaning set forth in Section 2(b).
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"DEMAND REGISTRATION STATEMENT" shall have the meaning set forth in Section
2(b).
"EFFECTIVENESS PERIOD" shall mean from the date hereof until the earlier to
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occur of the date when all Registrable Securities covered by a Registration
Statement either (a) have been sold pursuant to a Registration Statement or an
exemption from the registration requirements of the Securities Act, and (b)
pursuant to a written opinion of Company counsel acceptable to the Company's
transfer agent and the legal counsel for the Holders, may be sold pursuant to
Rule 144(k).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
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"HOLDER" or "HOLDERS" means the holder or holders, as the case may be, from
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time to time of Registrable Securities (including any permitted assignee).
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 5(c).
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"INDEMNIFYING PARTY" shall have the meaning set forth in Section 5(c).
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"INVESTOR" shall mean each purchaser of Notes and Warrants pursuant to the
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SPA.
"INVESTORS" shall mean, collectively, each Investor.
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"LOSSES" shall have the meaning set forth in Section 5(a).
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"MANDATORY EFFECTIVENESS DATE" means, with respect to the Mandatory
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Registration Statement required to be filed pursuant to Section 2(a) of this
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Agreement.
"MANDATORY FILING DATE" shall have the meaning set forth in Section 2(a).
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"MANDATORY REGISTRATION DATE" shall have the meaning set forth in Section
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2(a).
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"MANDATORY REGISTRATION STATEMENT" shall have the meaning set forth in
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Section 2(a).
"NOTES" means the 11% Senior Secured Convertible Promissory Notes in the
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aggregate amount of $1,500,000 issued to certain Investors including the
Investor.
"PERSON" shall mean an individual or corporation, partnership, trust,
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incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"PRIOR CLOSING" shall mean the August 8, 2006 closing of the sale of
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$1,250,000 in 11% Senior Subordinated Secured Convertible Promissory Notes by
the Company.
"PRIOR CLOSING DATE" shall mean August 8, 2006.
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"PRIVATE OFFERING" shall mean a private placement of the Company's
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securities in which the Company receives gross proceeds of no less than
$3,000,000, and (ii) the effective purchase price of the Common Stock securities
sold in the Private Offering is $1.50 or more per share (subject to adjustment
for stock splits, etc.)
"PROCEEDING" means an action, claim, suit, investigation or proceeding
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(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration Statement
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(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Conversion Registrable Securities or
Exchange Registrable Securities covered by the Registration Statement, and all
other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" means (i) the Underlying Shares, and (ii) any
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shares of Common Stock issued or issuable upon any stock split, dividend or
other distribution, recapitalization, anti-dilution adjustment or similar event
with respect to the foregoing or in connection with any provisions in the Notes
and/or Warrants.
"REGISTRATION STATEMENT" means any registration statement required to be
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filed hereunder (which, at the Company's option, may be an existing registration
statement of the Company previously filed with the Commission, but not declared
effective), including (in each case) the Prospectus, amendments and supplements
to the registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in the registration statement.
"RULE 144" means Rule 144 promulgated by the Commission pursuant to the
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Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission pursuant to the
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Securities Act, as such Rule may be amended from time to time, or any similar
Rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"RULE 424" means Rule 424 promulgated by the Commission pursuant to the
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Securities Act, as such Rule may be amended from time to time, or any similar
Rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
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"TRADING DAY" means (a) a day on which the Common Stock is traded on a
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Trading Market, or (b) if the Common Stock is not quoted on a Trading Market, a
day on which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting price);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (a), and (b) hereof, then Trading Day shall mean a Business Day;
"TRADING MARKET" means the following markets or exchanges on which the
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Common Stock is listed or quoted for trading on the date in question: the OTC
Bulletin Board, the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the Nasdaq SmallCap Market.
"UNDERLYING SHARES" means collectively, all Conversion Shares and the
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Detachable Warrant Shares.
"WARRANT SHARES" means all shares of Common Stock issuable upon exercise of
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the Warrants.
"WARRANTS" means the Common Stock purchase warrants in the amount of 15,000
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shares issued to the Investor.
2. Registration.
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(a) Mandatory Registration. Provided that a closing of a Private
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Offering has not previously occurred, the Company shall, on the date six
(6) months from the Prior Closing Date (the "MANDATORY REGISTRATION DATE"),
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file with the Commission a Registration Statement (the "MANDATORY
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REGISTRATION STATEMENT"), no later than forty-five (45) days from such
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Mandatory Registration Date (the "MANDATORY FILING DATE"), covering the
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resale of all of the Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. The Mandatory Registration Statement
required hereunder shall be on Form S-1, Form SB-2 or Form S-3 (except if
the Company is not then eligible to register for resale the Registrable
Securities on Form S-1, Form SB-2 or Form S-3, in which case the Mandatory
Registration Statement shall be on another appropriate form in accordance
herewith). The Mandatory Registration Statement required hereunder shall
contain the Plan of Distribution, attached hereto as ANNEX A (which may be
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modified to respond to comments, if any, received by the Commission). The
Company shall cause the Mandatory Registration Statement to become
effective, no later than ninety (90) days after the Mandatory Filing Date,
(the "MANDATORY EFFECTIVENESS DATE") and remain effective as provided
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herein. The Company shall use its best efforts to cause the Mandatory
Registration Statement to be declared effective under the Securities Act
and shall use its best efforts to keep the Mandatory Registration Statement
continuously effective under the Securities Act until the earlier date (i)
when all Registrable Securities have been sold pursuant to the Mandatory
Registration Statement, and (ii) two (2) years from the effective date of
the Mandatory Registration Statement provided all the Holders can sell all
of their shares, without limitation, pursuant to Rule 144(k) of the
Securities Act.
(b) Demand Registration Rights. At any time commencing on the date
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nine (9) months following the Prior Closing Date, the Holders owning no
less than 50.1% of the aggregate principal amount of the Notes then
outstanding shall have the one-time right, by written notice signed by such
50.1% of Holders, provided to the Company (the "DEMAND NOTICE"), to demand
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the Company to register for resale all Registrable Securities under and in
accordance with the provisions of the Securities Act by filing with the
Commission a Registration Statement covering the resale of all of the
Registrable Securities (the "DEMAND REGISTRATION STATEMENT"). Such Demand
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Registration Statement shall be (i) filed by the Company with the
Commission no later than forty-five (45) days after receipt by the Company
of the Demand Notice (the "DEMAND FILING DATE"), and (ii) declared
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effective by the Commission no later than ninety (90) days after the Demand
Filing Date (the "DEMAND EFFECTIVENESS DATE"). The Demand Registration
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Statement required hereunder shall be on Form S-1 or Form SB-2 (except if
the Company is not then eligible to register for resale the Registrable
Securities on Form S-1 or Form SB-2, in which case the Demand Registration
Statement shall be on another appropriate form). The Demand Registration
Statement required hereunder shall contain the Plan of Distribution,
attached hereto as ANNEX A (which may be modified to respond to comments,
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if any, received by the Commission). The Company shall keep the Demand
Registration Statement continuously effective under the Securities Act
until the earlier of (i) the date when all Registrable Securities have been
sold pursuant to the Demand Registration Statement, and (ii) two (2) years
from the effective date of the Demand Registration Statement if the Holders
can sell all of their shares, without limitation, pursuant to Rule 144(k)
of the Securities Act.
(c) Filing Default Damages. If a Demand Registration Statement or
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Mandatory Registration Statement (as the case may be) is not filed on or
prior to the Demand Filing Date or Mandatory Filing Date (as the case may
be), then the Company shall pay to the Holders of the Underlying Shares,
for each thirty (30) day period of such failure and until the date a
Mandatory Registration Statement or Demand Registration Statement (as the
case may be) is filed and/or the Registrable Securities may be sold
pursuant to Rule 144(k), as the case may be, an amount in cash, as partial
liquidated damages and not as a penalty, equal to two (2%) percent of the
aggregate gross proceeds paid by the Holders for the Notes. If the Company
fails to pay any partial liquidated damages pursuant to this Section 2(c)
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in full within five (5) days of the date payable, the Company shall pay
interest thereon at a rate of 18% per annum (or such lesser maximum amount
that is permitted to be paid by applicable law) to the Holders, accruing
daily from the date such partial liquidated damages are due until such
amounts, plus all such interest thereon, are paid in full.
(d) Effectiveness, Etc. Default Damages. If a Mandatory Registration
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Statement or Demand Registration Statement (as the case may be) is not
declared effective by the Commission on or prior to the Mandatory
Effectiveness Date or the Demand Effectiveness Date (as the case may be),
or the Commission declared any such Registration Statement effective, but
the Holders of Registrable Securities cannot sell such Registrable
Securities thereunder, for any reason or no reason, then the Company shall
pay to the Holder, for each thirty (30) day period until the Registration
Statement is declared effective (or the Holders of Registrable Securities
can sell thereunder, as the case may be), an amount in cash equal to two
(2%) percent of the aggregate gross proceeds paid by the Holders for the
Notes in the Financing.
(e) Piggyback Registrations Rights. If, at any time following the date
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hereof, and there is not an effective Registration Statement covering the
Registrable Securities and the Company shall determine to prepare and file
with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of
its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection with
stock option or other employee benefit plans, then the Company shall send
to each Holder a written notice of such determination at least twenty (20)
days prior to the filing of any such registration statement and shall
automatically include in such registration statement all Registrable
Securities; provided, however, that (i) if, at any time after giving
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written notice of is intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company determines for any reason not to proceed with
such registration, the Company will be relieved of its obligation to
register any Registrable Securities in connection with such registration,
and (ii) in case of a determination by the Company to delay registration of
its securities, the Company will be permitted to delay the registration of
Registrable Securities for the same period as the delay in registering such
other securities.
3. Registration Procedures. In connection with the Company's registration
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obligations hereunder, and during the period during which the Company is
required or elects to keep a registration statement effective (the
"EFFECTIVENESS PERIOD"), the Company shall:
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(a) Not less than five (5) business days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or
supplement thereto, the Company shall furnish to Holders, a draft of the
Registration Statement, or any related Prospectus or any amendment or
supplement thereto.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule
424; and (iii) respond to any comments received from the Commission with
respect to the Registration Statement or any amendment thereto.
(c) Notify as promptly as reasonably possible, but no later than three
(3) business days, each Holder of Registrable Securities included in the
Registration Statement: (i) (A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement has
been filed, provided such Holder has previously requested in writing to
receive notice of such filing; (B) when the Commission notifies the Company
whether there will be a "review" of the Registration Statement and whenever
the Commission comments in writing on the Registration Statement, provided
such Holder has previously requested in writing to receive notice of such
notification; and (C) when the Registration Statement or any post-effective
amendment has become effective; (ii) of any request by the Commission or
any other Federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements
to the Registration Statement or Prospectus or for additional information;
(iii) of the issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness of
the Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv) of
the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation
of any Proceeding for such purpose; and (v) of the occurrence of any event
or passage of time that makes the financial statements included in the
Registration Statement ineligible for inclusion therein or any statement
made in the Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in
any material respect or that requires any revisions to the Registration
Statement, Prospectus or other documents so that, in the case of the
Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any
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.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of the
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale
in any jurisdiction, at the earliest practicable moment.
(e) Promptly deliver to each Holder no later than three (3) business
days after the Effectiveness Date, without charge, two (2) copies of the
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto (and, upon the request of the Holder such
additional copies as such Persons may reasonably request in connection with
resales by the Holder of Registrable Securities). The Company hereby
consents to the use of such Prospectus and each amendment or supplement
thereto by the Holder in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto, except after the giving of any notice pursuant to
Section 3(c).
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(f) Prior to any resale of Registrable Securities by a Holder, use its
best efforts to register or qualify or cooperate with the selling Holders
in connection with the registration or qualification (or exemption from the
registration or qualification) of such Registrable Securities for the
resale by the Holder under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in
writing, to keep such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all
other acts or things reasonably necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, however, that the Company shall not be required to
qualify generally to do business in any jurisdiction where it is not then
so qualified, subject the Company to any material tax in any such
jurisdiction where it is not then so subject or file a general consent to
service of process in any such jurisdiction.
(g) Upon the occurrence of any event contemplated by Section 3(c)(v),
as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration
Statement nor such Prospectus will contain 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, in light of the
circumstances under which they were made, not misleading. (h) Use its best
efforts to comply with all applicable rules and regulations of the
Commission relating to the registration of the Registrable Securities
pursuant to the Registration Statement or otherwise.
(i) The Company agrees that the Selling Shareholder Questionnaire
attached hereto as EXHIBIT A, satisfies all of the information required to
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be provided by each Holder in connection with the Registration Statement.
The Company shall not be required to include any Holder that does not
complete, date and execute a Selling Shareholder Questionnaire.
(j) The Company shall either (a) cause all the Registrable Securities
covered by a Registration Statement to be listed on each securities
exchange on which securities of the same class or series issued by the
Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (b)
secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market or the Nasdaq
SmallCap Market, or, (c) if the Company is unsuccessful in satisfying the
preceding clauses (a) or (b), the Company shall secure the inclusion for
quotation on The American Stock Exchange, Inc. or if it is unable to, the
NASD Bulletin Board for such Registrable Securities and, without limiting
the generality of the foregoing, to arrange for at least two (2) market
makers to register with the National Association of Securities Dealers,
Inc. ("NASD") as such with respect to such Registrable Securities. The
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Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(j).
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(k) The Company covenants that it shall file the reports required to
be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder so long as the Holder owns
any Registrable Securities, but in no event longer than two (2) years;
provided, however, the Company may delay any such filing but only pursuant
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to Rule 12b-25 under the Exchange Act, and the Company shall take such
further reasonable action as the Holder may reasonably request (including,
without limitation, promptly obtaining any required legal opinions from
Company counsel necessary to effect the sale of Registrable Securities
under Rule 144 and paying the related fees and expenses of such counsel),
all to the extent required from time to time to enable such Holder to sell
Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the
request of any Holder of Registrable Securities, the Company will deliver
to such Holder a written statement as to whether it has complied with such
requirements.
4. Registration Expenses. All fees and expenses incident to the performance
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of or compliance with this Agreement by the Company shall be borne by the
Company whether or not any Registrable Securities are sold pursuant to the
Registration Statement, other than fees and expenses of counsel or any other
advisor retained by the Holders and discounts and commissions with respect to
the sale of any Registrable Securities by the Holders. The fees and expenses
referred to in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
(A) with respect to filings required to be made with the Trading Market on which
the Common Stock is then listed for trading, and (B) in compliance with
applicable state securities or Blue Sky laws), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is reasonably requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company, (v) Securities Act liability insurance, if the Company so desires such
insurance, (vi) fees and disbursements in the amount of $20,000 for one (1)
counsel to the Purchasers who shall be Gusrae, Xxxxxx, Xxxxx & Xxxxxxx PLLC; and
(vii) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement.
5. Indemnification
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(a) Indemnification by the Company. The Company shall, notwithstanding
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any termination of this Agreement, indemnify and hold harmless the Holder,
the officers, directors, agents and employees of it, each Person who
controls the Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted
by applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable attorneys'
fees) and expenses (including the cost (including without limitation,
reasonable attorneys' fees) and expenses relating to an Indemnified Party's
actions to enforce the provisions of this Section 5) (collectively,
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"LOSSES"), as incurred, to the extent arising out of or relating to any
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untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or
arising out of or relating to any omission or alleged omission of a
material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that
(1) such untrue statements or omissions are based solely upon information
regarding such Holder furnished (or in the case of an omission, not
furnished) in writing to the Company by or on behalf of such Holder
expressly for use therein, or to the extent that such information relates
to such Holder or such Holder's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing
by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement
thereto (it being understood that the Holder has approved Annex A hereto
for this purpose), (2) in the case of an occurrence of an event of the type
specified in Section 3(c)(ii)-(v), the use by such Holder of an outdated or
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defective Prospectus after the Company has notified such Holder in writing
that the Prospectus is outdated or defective and prior to the receipt by
such Holder of the Advice contemplated in Section 6(b), or (3) the failure
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of the Holder to deliver a prospectus prior to the confirmation of a sale.
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection
with the transactions contemplated by this Agreement.
(b) Indemnification by Holder. The Holder shall indemnify and hold
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harmless the Company, its directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses, as
incurred, to the extent arising out of or based upon: (x) the Holder's
failure to comply with the prospectus delivery requirements of the
Securities Act or (y) any untrue or alleged untrue statement of a material
fact contained in any Registration Statement, any Prospectus, or any form
of prospectus, or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading (i) to the extent,
but only to the extent, that such untrue statement or omission is contained
in any information so furnished (or in the case of an omission, not
furnished) in writing by or on behalf of such Holder to the Company
specifically for inclusion in the Registration Statement or such Prospectus
or (ii) to the extent that (1) such untrue statements or omissions are
based solely upon information regarding such Holder furnished (or in the
case of an omission, not furnished) in writing to the Company by or on
behalf of such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto, or (2) in the case of
an occurrence of an event of the type specified in Section 3(c)(ii)-(v),
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the use by such Holder of an outdated or defective Prospectus after the
Company has notified such Holder in writing that the Prospectus is outdated
or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(b), or (3) the failure of the Holder to deliver a
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Prospectus prior to the confirmation of a sale. In no event shall the
liability of any selling Holder hereunder be greater in amount than the
dollar amount of the Subscription Amount paid by the Holder in the Purchase
Agreement.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
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brought or asserted against any Person entitled to indemnity hereunder (an
"INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify the
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Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing,
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and the Indemnifying Party shall have the right to assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any
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Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except
(and only) to the extent that such failure shall have materially prejudiced
the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and the reasonable fees and expenses of one
separate counsel for all Indemnified Parties in any matters related on a factual
basis shall be at the expense of the Indemnifying Party). The Indemnifying Party
shall not be liable for any settlement of any such Proceeding affected without
its written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All reasonable fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Trading Days of written notice thereof to the
Indemnifying Party; provided, that the Indemnified Party shall promptly
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reimburse the Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is not entitled to
indemnification hereunder, determined based upon the relative faults of the
parties.
(d) Contribution. If a claim for indemnification under Section 5(a) or
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Section 5(b) is unavailable to an Indemnified Party (by reason of public
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policy or otherwise), 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, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material
fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include, subject to the
limitations set forth in Section 5(c), any reasonable attorneys' or other
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reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such
fees or expenses if the indemnification provided for in this Section was
available to such party in accordance with its terms.
(e) Rule 144. As long as any Holder owns any Notes, Warrants or
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Registrable Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period)
all reports required to be filed by the Company after the date hereof
pursuant to Section 13(a) or 15(d) of the Exchange Act. As long as any
Holder owns any Notes, Warrants or Registrable Securities, if the Company
is not required to file reports pursuant to Section 13(a) or 15(d) of the
Exchange Act, it will prepare and furnish to the Holders and make publicly
available in accordance with Rule 144(c) promulgated under the Securities
Act annual and quarterly financial statements, together with a discussion
and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act,
as well as any other information required thereby, in the time period that
such filings would have been required to have been made under the Exchange
Act. The Company further covenants that it will take such further action as
any Holder may reasonably request, all to the extent required from time to
time to enable such person to sell Conversion Shares and Warrant Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act,
including providing any legal opinions relating to such sale pursuant to
Rule 144, if such person is deemed by the Company's counsel to be in
compliance with the rules and regulations set forth in Rule 144. Upon the
request of any Holder, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied
with such requirements.
6. Miscellaneous.
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(a) Compliance. The Holder covenants and agrees that it will comply
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with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities
pursuant to the Registration Statement.
(b) Amendments and Waivers. The provisions of this Agreement,
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including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the same shall be in writing and signed by
the Company and each Holder of the then outstanding Registrable Securities.
(c) Notices. Any and all notices or other communications or deliveries
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required or permitted to be provided hereunder shall be in writing and
shall be deemed given and effective on the earliest of (i) the Trading Day
following the date of delivery to the courier service, if sent by
nationally recognized overnight courier service, (ii) the third Trading Day
following the date of mailing, if sent by first-class, registered or
certified mail, postage prepaid, (iii) the Trading Day following
transmission by electronic mail with receipt confirmed or acknowledged, or
(iv) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be delivered
and addressed as set forth in the Purchase Agreement or to such other
address as shall be designated in writing from time to time by a party
hereto.
(d) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of the Holder.
(e) Execution and Counterparts. This Agreement may be executed in any
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number of 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. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.
(f) Governing Law. This Agreement shall be governed by and construed
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exclusively in accordance with the internal laws of the State of New York
without regard to the conflicts of laws principles thereof. The parties
hereto hereby irrevocably agree that any suit or proceeding arising
directly and/or indirectly pursuant to or under this Agreement, shall be
brought solely in a federal or state court located in the City, County and
State of New York. By its execution hereof, the parties hereby covenant and
irrevocably submit to the in personam jurisdiction of the federal and state
courts located in the City, County and State of New York and agree that any
process in any such action may be served upon any of them personally, or by
certified mail or registered mail upon them or their agent, return receipt
requested, with the same full force and effect as if personally served upon
them in New York City. The parties hereto waive any claim that any such
jurisdiction is not a convenient forum for any such suit or proceeding and
any defense or lack of in personam jurisdiction with respect thereto. In
the event of any such action or proceeding, the party prevailing therein
shall be entitled to payment from the other party hereto of its reasonable
counsel fees and disbursements.
(g) Severability. If any term, provision, covenant or restriction of
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this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(h) Headings. The headings in this Agreement are for convenience of
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reference only and shall not limit or otherwise affect the meaning hereof.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
XA, INC.
By: /s/ Xxxxxx Xxxxxx
----------------------------
Xxxxxx Xxxxxx
President
INVESTOR'S SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
--------------------------
By: /s/ G. Xxxxx Xxxxxxxx
-----------------------
Name:
Title:
0000 Xxxxx Xxx 0-X XX, XX 00000
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Address
000-000-0000
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Facsimile Number
ANNEX A
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PLAN OF DISTRIBUTION
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The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
- ordinary brokerage transactions and transactions in which the
broker/dealer solicits purchasers;
- block trades in which the broker/dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker/dealer as principal and resale by the
broker/dealer for its account;
- an exchange distribution in accordance with the Rules of the
applicable exchange;
- privately negotiated transactions;
- settlement of short sales;
- broker/dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker/dealers engaged by the Selling Stockholders may arrange for other
brokers/dealers to participate in sales. Broker/dealers may receive commissions
from the Selling Stockholders (or, if any broker/dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
Selling Stockholders do not expect these commissions to exceed what is customary
in the types of transactions involved.
The Selling Stockholders may from time to time pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock from time to time under
this prospectus, or under an amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act of 1933 amending the list of
Selling Stockholders to include the pledgee, transferee or other successors in
interest as Selling Stockholders under this prospectus.
The Selling Stockholders and any broker/dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker/dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions under the
Securities Act. The Selling Stockholders have informed the Company that it does
not have any agreement or understanding, directly or indirectly, with any person
to distribute the Common Stock.
The Company is required to pay all fees and expenses incident to the
registration of the shares. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
