Registration Rights Agreement
EXHIBIT
10.17
THIS
REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of April 2, 2008 (the
"Effective Date"), by and among Visual Management Systems, Inc., a Nevada
corporation, with a principal place of business at 0000 Xxxxxxxxxx Xxx Xxxxx
Xxxxx X, Xxxx Xxxxx, XX 00000 (the "Company"), and Intelligent Digital Systems,
LLC, a Delaware limited liability company (the “Holder”).
Recitals
WHEREAS,
the Company may issue shares of its Common Stock, par value $0.001 per share
(the "Common Stock"), to the Holder pursuant to the terms of the Unsecured
Convertible Promissory Note of even date herewith (the "Note”) issued pursuant
to that certain Asset Purchase Agreement of even date herewith by and among the
Company, the Holder, Xxx Xxxx, an individual, and IDS Patent Holding, LLC, a New
York limited liability company (the "Asset Purchase Agreement");
WHEREAS,
it is a condition precedent to the consummation of the transaction contemplated
by the Asset Purchase Agreement that the Company provide for the rights set
forth in this Agreement.
NOW,
THEREFORE, in consideration of the mutual promises and covenants set forth
herein, the parties hereto further agree as follows:
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1.
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Definitions. For
purposes of this Agreement:
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1.1.
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The
term "1934 Act" shall mean the Securities Exchange Act of 1934, as
amended.
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1.2.
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The
term "Act" means the Securities Act of 1933, as
amended.
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1.3.
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The
term “Registration Statement” means any such form under the Act as in
effect on the date hereof or any registration form under the Act
subsequently adopted by the SEC that functions to register publicly
tradable shares of the Common Stock of the Company
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1.4.
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The
terms "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or similar
document in compliance with the Act, and the declaration or ordering of
effectiveness of such Registration Statement or
document.
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1.5.
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The
term "Registrable Securities" means (a) all shares of Common
Stock, issuable to the Holder upon conversion of all or any portion of the
principal amount or accrued interest under the Note, and (b) any shares of
Common Stock issued or issuable by the Company in exchange or substitution
for or otherwise in respect of any shares referred to in the foregoing
clause (a) by way of stock dividend or split or in connection with a
combination or subdivision of shares, reclassification, recapitalization,
merger, consolidation or other reorganization of the
Company.
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1.6.
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The
term "Rule 144" shall mean Rule 144 as promulgated by the SEC under the
Act, as such Rule may be amended from time to time, or any similar
successor rule that may be promulgated by the SEC.
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1.7.
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The
term "Rule 145" shall mean Rule 145 as promulgated by the SEC under the
Act, as such Rule may be amended from time to time, or any similar
successor rule that may be promulgated by the SEC.
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1.8.
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The
term "SEC" shall mean the Securities and Exchange
Commission.
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2.
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Demand
Registration. At any time after the Note shall have become
convertible into Common Stock in accordance with its terms, if the Company
shall receive a written request from the Holder that the Company file a
Registration Statement under the Securities Act with respect to any or all
of the Registrable Securities, then the Company shall use its best efforts
as soon as practicable, and in any event within ninety (90) days of the
receipt of such a request, to file such Registration Statement and, as
expeditiously as reasonably possible, cause such Registration Statement to
become effective under the Act. The Company shall be obligated
to effect only one (1) registration pursuant to this Section
2.
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3.
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Piggyback
Registration Rights. If at any time after the Note shall have
become convertible into Common Stock in accordance with its terms (but
without any obligation to do so) the Company proposes to register
(including for this purpose a registration effected by the Company for its
shareholders) any of its stock or other securities under the Act in
connection with a public offering of such securities solely for cash,
other than: (i) a registration on Form S-8 or other similar successor
form, relating solely to the sale of securities to participants in a
Company stock plan or to other compensatory arrangements to the extent
includable on Form S-8, or other similar successor form, or (ii) a
registration on Form S-4, or other similar successor form, the Company
shall, at such time, promptly give to the Holder written notice of such
registration. Upon the written request of the Holder given
within twenty (20) days after receipt by the Holder of such notice by the
Company, the Company shall use its best efforts to cause to be registered
under the Act all of the Registrable Securities that the Holder has
requested to be included and registered on such Registration
Statement. In the event that in connection with an underwritten
offering the managing underwriter advise the Company that market factors
require a limitation of the number of shares to be underwritten, then
subject to the terms of any other agreements to which the Company is a
party, the Company and its underwriter shall allocate the number of shares
requested to be registered as follows: (i) first, to the Company, and (ii)
second, to the Holder and other security holders requesting registration
of securities pro rata according to the number of shares requested to be
registered by each such security holder. The Company shall have
no obligations under this Section 3 to make any offering of its
securities, or to complete an offering of its securities that it proposes
to make, and shall incur no liability to the Holder for its failure to do
so. In
connection with any offering involving an underwriting of shares being
issued by the Company, the Company shall not be required to include any of
the Registrable Securities in such underwriting unless the Holder accepts
the terms of such underwriting as agreed upon by the Company and such
underwriter(s).
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4.
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Expenses. All
expenses incurred in complying with Sections 2 and 3 hereof, including
without limitation all registration and filing fees, printing expenses,
fees and disbursements of counsel for the Company and independent public
accountants for the Company, any state securities or “blue sky” fees and
expenses, fees of the National Association of Securities Dealers, Inc.,
reasonable fees and disbursements of one (1) counsel to the Holder, fees
and expenses of transfer agents and registrars, but excluding any Selling
Expenses (as hereinafter defined), are herein called
“Registration Expenses”. All underwriting discounts and selling
commissions applicable to the sale of Registrable Securities are herein
called “Selling Expenses”. The Holder will pay all Selling
Expenses in connection with each Registration Statement filed pursuant to
Section 2 or Section 3 hereof on a pro rata basis (based on the number of
shares registered) with each other party that registers shares pursuant to
such registration. The Company will pay all Registration
Expenses in connection with each Registration Statement filed pursuant to
Sections 2 and 3 hereof.
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5.
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Obligations
of the Parties
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5.1.
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Obligations
of the Company. Whenever required under this Agreement to
affect the registration of any Registrable Securities, the Company shall
use its commercially reasonable efforts
to:
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5.1.1.
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Prepare
and file with the SEC a Registration Statement with respect to such
Registrable Securities and use its commercially reasonable efforts to
cause such Registration Statement to become effective, and, upon the
request of the Holder, keep such Registration Statement effective until
the earlier of: (x) the date six months from the date of effectiveness
thereof, or (y) the date on which all of the Registrable Securities are
sold;
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5.1.2.
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Prepare
and file with the SEC such amendments and supplements to such Registration
Statement and the prospectus used in connection with such Registration
Statement as may be necessary to comply with the provisions of the Act
with respect to the disposition of all Registrable Securities covered by
such Registration Statement;
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5.1.3.
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Use
commercially reasonable efforts to register and qualify the securities
covered by such Registration Statement under such other securities or blue
sky laws of such jurisdictions as shall be reasonably requested by the
Holder, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
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5.1.4.
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Notify
Holder at any time when a prospectus relating thereto is required to be
delivered under the Act, of the happening of any event as a result of
which the prospectus included in such Registration Statement contains an
untrue statement of a material fact or omits any fact necessary to make
the statements therein not misleading, and, at the request of Holder, the
Company will prepare a supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain any untrue statement of a material fact
or omit to state any fact necessary to make the statements therein not
misleading;
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5.1.5.
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Provide
a transfer agent and registrar for all Registrable Securities registered
pursuant hereunder, not later than the effective date of such Registration
Statement;
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5.1.6.
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Advise
the Holder promptly after it shall receive notice or obtain knowledge
thereof, of the issuance of any stop order by the SEC suspending the
effectiveness of such Registration Statement or the initiation or
threatening of any proceeding for such purpose and use commercially
reasonable efforts to prevent the issuance of any stop order or to obtain
its withdrawal if such stop order should be issued.
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5.2.
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Obligations
of the Holder. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 2 or
Section 3 with respect to the Registrable Securities of the Holder, that
the Holder shall furnish to the Company such information regarding itself
and the Registrable Securities held by it to effect the registration of
the Holder's Registrable Securities. The Holder agrees to
cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of any Registration Statements
applicable to its Registrable Securities, and agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind
described in Section 5.1.4 above, such Holder will immediately discontinue
disposition of Registrable Securities pursuant the Registration Statement
covering such Registrable Securities until such Holder’s receipt of the
copies of the supplemental or amended prospectus contemplated by Section
5.1.4 and, if so directed by the Company, Holder shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in such Holder’s
possession of the prospectus covering such Registrable Securities current
at the time of receipt of such
notice.
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6.
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Delay
of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any Registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
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7.
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Indemnification.
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7.1.
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To
the extent permitted by law, the Company will indemnify and hold harmless
the Holder against any losses, claims, damages, or liabilities to which
they may become subject under the Act, the 1934 Act or other federal or
state securities law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon
any of the following statements, omissions or violations
(collectively, a "Violation"):
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7.1.1.
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Any
untrue statement or alleged untrue statement of a material fact contained
in a Registration Statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto
(collectively, the "Filings");
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7.1.2.
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The
omission or alleged omission to state in the Filings a material fact
required to be stated therein, or necessary to make the statements therein
not misleading; or
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7.1.3.
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Any
violation or alleged violation by the Company of the Act, the 1934 Act,
any state securities law or any rule or regulation promulgated under the
Act, the 1934 Act or any state securities law; and the Company will pay
any legal or other expenses reasonably incurred by any person to be
indemnified pursuant to this Section in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this subsection shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of
the Company (which consent shall not be unreasonably withheld), nor shall
the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon
a Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such
Registration by any such Holder.
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7.2.
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To
the extent permitted by law, the Holder, will indemnify and hold harmless
the Company, each of its directors, each of its officers who has signed
the Registration Statement, its legal counsel and accountants, each
person, if any, who controls the Company within the meaning of the Act,
any underwriter, any other holder of securities, selling securities in
such Registration Statement and any controlling person of any such
underwriter or other holder of securities, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, the 1934 Act or other federal
or state securities law insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon
any violation of the Act, the 1934 Act or other federal or state
securities law, in each case to the extent (and only to the extent) that
such violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with
such Registration; and each such Holder will pay, as incurred, any legal
or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this subsection 7.2, in connection with defending
any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 7.2 shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of
the Holder, which consent shall not be unreasonably withheld; provided,
that, in no event shall any indemnity under this subsection exceed the net
proceeds from the offering received by the Holder less the aggregate
amount of any damages which the Holder has otherwise been required to pay
in respect of such loss, claim, damage or liability or any substantially
similar loss, claim, damage or liability arising from the sale of such
Registrable Securities.
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7.3.
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Promptly
after receipt by an indemnified party under this Section 7 of notice of
the commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties that may be
represented without conflict by one counsel) shall have the right to
retain one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any
such action, if materially prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under
this Section.
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7.4.
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If
the indemnification provided for in this Section 7 is held by a court of
competent jurisdiction to be unavailable to an indemnified party with
respect of any loss, claim, damage or expense referred to therein, then
the indemnifying party in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or expense in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in such
loss, liability, claim or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. In no event shall any Holder be required to
contribute an amount in excess of the net proceeds from the offering
received by such Holder less the aggregate amount of any damages which the
Holder has otherwise been required to pay in respect of such loss, claim,
damage or liability or any substantially similar loss, claim, damage or
liability arising from the sale of such Registrable
Securities.
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7.5.
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Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in
connection with the underwritten public offering are in conflict with the
foregoing provisions, the provisions of the underwriting agreement shall
control.
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7.6.
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The
obligations of the Company and Holders under this Section 7 shall survive
the completion of any offering of Registrable Securities in a Registration
Statement under this Agreement and/or the termination of this
Agreement.
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8.
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Reports
Under Securities Exchange Act of 1934. With a view to making
available the benefits of certain rules and regulations of the SEC,
including Rule 144 that may at any time permit a Holder to sell securities
of the Company to the public without registration or pursuant to a
registration on Form S-3, the Company agrees to:
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8.1.
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Make
and keep public information available, as those terms are understood and
defined in Rule 144, at all times after the effective date of the first
Registration Statement filed by the Company for the offering of its
securities to the general public;
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8.2.
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Take
such action, including the voluntary registration of its Common Stock
under Section 12 of the 1934 Act, as is necessary to enable the Holders to
utilize Form S-3 for the sale of their Registrable Securities, such action
to be taken as soon as practicable after the end of the fiscal year in
which the first Registration Statement filed by the Company for the
offering of its securities to the general public is declared effective;
and
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8.3.
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File
with the SEC in a timely manner all reports and other documents required
of the Company under the Act and the 1934 Act.
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9.
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Assignment
of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section may be assigned
(but only with all related obligations) by the Holder to a transferee or
assignee of such securities who acquires:
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9.1.
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All
of the Holder's Registrable Securities from such Holder;
or
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9.2.
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Is
a subsidiary, parent, constituent partner or other affiliate of the
Holder; provided that the Company is, furnished with written notice of the
transfer in accordance with the terms of the Note, such transferee or
assignee agrees in writing to be bound by and subject to the terms and
conditions of this Agreement, and such assignment shall be effective only
if immediately following such transfer the further disposition of such
Registrable Securities by the transferee or assignee is
restricted under the Act.
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10.
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"Market
Stand-Off" Agreement. The Holder hereby agrees that upon
receipt by it of notification of the commencement of a public offering by
the Company, it will not, without the prior written consent of the
managing underwriter, during the period commencing on the date of the
final prospectus relating to such public offering by the Company and
ending on the date specified by the Company and the managing underwriter
(such period not to exceed one hundred eighty (l80) calendar days) do any
of the following:
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10.1.
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Lend,
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any securities of the Company, including (without limitation)
shares of Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock (whether now owned or
hereafter acquired); or
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10.2.
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Enter
into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of any securities
of the Company, including (without limitation) shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common
Stock (whether now owned or hereafter acquired), whether any such
transaction described in clause 10.1 or 10.2 above is to be settled by
delivery of securities, in cash or otherwise. The foregoing
covenants shall not apply to the sale of any Registrable Securities
pursuant to this Agreement or to an underwriter pursuant to an
underwriting agreement and shall only be applicable to the Holder if all
officers and directors of the Company enter into similar
agreements.
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11.
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Miscellaneous
Terms.
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11.1.
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Termination
of Registration Rights. The Holder shall not be entitled to
exercise any right provided for in this Agreement after such time at which
all Registrable Securities held by such Holder can be sold in any
three-month period without registration in compliance with Rule 144 or
Rule 145 of the Act.
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11.2.
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Governing
Law. This agreement in all respects shall be governed by the
laws of the state of New York.
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11.3.
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Waivers
and Amendments. Any term of this Agreement may be amended or
amended and restated and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and prospectively
but not retroactively), only with the written consent of the Company and
the written consent of the Holder.
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11.4.
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Successors
and Assigns. Except as otherwise expressly provided herein, the
provisions of this Agreement shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto
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11.5.
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Entire
Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
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11.6.
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Notices. All
notices and other communications required or permitted hereunder shall be
in writing and may be delivered in person or by facsimile, electronic
mail, courier or U.S. mail, in which event it may be mailed by
first-class, certified or registered, postage prepaid, addressed (a) to
the Holder, at the address set forth in the Company's records or, at such
other address as the Holder shall have furnished to the Company or (b) if
to the Company, at its address set forth in the introductory paragraph of
this Agreement, or at such other address as the Company shall have
furnished to the Holder. All such notices and other
communications shall be deemed given upon personal delivery, upon
confirmation of facsimile transfer, upon confirmation of electronic mail
transmission, upon delivery by courier or three business days after
deposit in the United States mail.
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11.7.
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Titles
and Subtitles. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
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11.8.
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Severability. If
one or more provisions of this Agreement are held to be unenforceable
under applicable law, such provision shall be reformed to the greatest
extent possible and limited to any jurisdiction finding such illegality
or, if such reformation is not possible, such provision shall be excluded
from this Agreement, and the balance of the Agreement shall be interpreted
as if such provision were so excluded, and shall be enforceable in
accordance with its terms.
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[Signature
page follows]
7
IN
WITNESS WHEREOF, the parties hereto have set their hands this 2nd day of
April, 2008.
VISUAL
MANAGEMENT SYSTEMS, INC.
By:___________________________________
Name: Xxxxx
Xxxxxxxx
Title: President
INTELLIGENT
DIGITAL SYSTEMS, LLC
By:___________________________________
Name: Xxx
Xxxx
Title: Managing
Member
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