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EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
24th May 1999, by and among International Microcomputer Software, Inc., a
California corporation, with headquarters located at 00 Xxxxxxx Xxx, Xxxxxx, XX
00000 (the "COMPANY"), and the undersigned buyers (each, a "BUYER" and
collectively, the "BUYERS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and
among the parties of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue to the Buyers the Company's 9% Senior
Subordinated Convertible Notes due May 24, 2002 in the aggregate principal
amount of $5 million (the "CONVERTIBLE NOTES"), which will be convertible into
shares of the Company's common stock, no par value per share (the "COMMON
STOCK") (as converted, the "CONVERSION SHARES") in accordance with the terms of
the Convertible Notes;
B. In consideration for the Buyers agreeing to purchase the
Convertible Notes, the Company shall issue and deliver to the Buyers common
stock purchase warrants (the "WARRANTS") to acquire additional shares of Common
Stock pursuant to the terms of the Securities Purchase Agreement (the shares of
Common Stock issued or issuable upon exercise of the Warrants are hereinafter
referred to as the "WARRANT SHARES"); and
C. To induce the Buyers to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyers hereby agree as follows:
1. definitions.
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTOR" means a Buyer and any transferee or assignee
thereof to whom a Buyer assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section
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b. "PERSON" means a corporation, a limited liability company,
an association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
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c. "REGISTER", "REGISTERED", and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("RULE 415"), and the declaration or ordering of effectiveness of such
Registration Statement(s) by the United States Securities and Exchange
Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means (i) the Conversion Shares
and any other shares of Common Stock issued or issuable upon conversion of the
Convertible Notes (including, without limitation, any shares issuable pursuant
to the Convertible Note in lieu of any delinquent payment of interest
thereunder), (ii) the Warrant Shares issued or issuable upon exercise of the
Warrants and (iii) any shares of capital stock issued or issuable with respect
to the Conversion Shares, the Convertible Notes, the Warrant Shares or the
Warrants as a result of any stock split, stock dividend, recapitalization,
exchange or similar event.
e. "REGISTRATION STATEMENT" means a registration statement of
the Company filed under the 1933 Act.
Capitalized terms used herein are not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. registration.
a. Mandatory Registration. The Company shall prepare, and,
within thirty (30) days after the date of issuance of the Convertible Notes file
with the SEC a Registration Statement or Registration Statements (as is
necessary) on Form S-3 (or, if such form is unavailable for such a registration,
or such other form as is available for such a registration), covering the resale
of all of the Registrable Securities. The Registration Statement shall cover the
resale of the Registrable Securities, the resale of such other securities as are
specified on Schedule 2(a) and, if the Company so chooses, the resale of the
common stock issuable to Capital Ventures International pursuant to the
transactions contemplated by the Securities Purchase Agreement dated as of March
3, 1999 between the Company and Capital Ventures International. The Registration
Statement(s) shall state that, in accordance with Rule 416 promulgated under the
1933 Act, such Registration Statement(s) also covers such indeterminate number
of additional shares of Common Stock as may become issuable upon conversion of
the Convertible Notes to prevent dilution resulting from stock splits, stock
dividends or similar transactions. Such Registration Statement shall initially
register for resale 1,375,000 shares of Common Stock, subject to adjustment as
provided in Section 3(b). The Company shall use its best efforts to have the
Registration Statement declared effective by the SEC within one hundred twenty
(120) days after the date of issuance of the Convertible Notes.
b. Counsel and Investment Bankers. Subject to Section 5
hereof, in connection with any offering pursuant to Section 2, the Investors
shall have the right to select legal counsel to the Investors and an investment
banker or bankers and manager or managers to administer their interest in the
offering, which investment banker or bankers or manager or
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managers shall be reasonably satisfactory to the Company. The Company shall
reasonably cooperate with any such counsel and investment bankers.
c. Eligibility for Form S-3. The Company represents, warrants
and covenants that it does, and will meet the requirements for the use of Form
S-3 for registration of the sale by the Buyers and any other Investor of the
Registrable Securities and the Company has filed and shall file all reports
required to be filed by the Company with the SEC in a timely manner so as to
maintain such eligibility for the use of Form S-3. In the event that Form S-3 is
not available for sale by the Investors of the Registrable Securities, then the
Company (i) shall file a registration statement to register the resale of the
Registrable Securities on another appropriate form and not more than twenty (20)
days after being notified that Form S-3 is not available and use its best
efforts to cause such registration statement to be declared effective as soon as
possible, and (ii) the Company shall undertake to register the Registrable
Securities on Form S-3 as soon as such form is available, provided that the
Company shall maintain the effectiveness of the Registration Statement then in
effect until such time as a Registration Statement on Form S-3 covering the
Registrable Securities has been declared effective by the SEC.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to file a
Registration Statement with the SEC pursuant to Section 2(a), the Company will
use its best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and, pursuant
thereto, the Company shall have the following obligations:
a. (1) The Company shall within the time period specified in
Section 2(a) prepare and file with the SEC a Registration Statement with respect
to the Registrable Securities and use its best efforts to cause such
Registration Statement(s) relating to Registrable Securities to become effective
pursuant to Section 2(a), and keep the Registration Statement(s) effective
pursuant to Rule 415 at all times until the earlier of (i) the date as of which
the Investors may sell all of the Registrable Securities without restriction
pursuant to Rule 144 or Rule 144(k) promulgated under the 1933 Act (or successor
thereto) or (ii) the date on which (A) the Investors shall have sold all the
Registrable Securities and (B) none of the Convertible Notes is outstanding (the
"REGISTRATION Period"). Such Registration Statement(s) (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
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 in which they were made, not misleading.
(2) If the Registration Statement is not declared effective by
the SEC within 120 days after the issuance of the Convertible Notes, until the
Registration Statement is declared effective by the SEC, the Company will incur
a cash penalty of 1% of the original principal amount of the Notes as of the
Issuance Date (as defined in the Notes) for each 30 days thereafter (pro rated
for any partial period thereof), until the earlier to occur of (i) the date that
the Investor may sell all of the Registrable Securities without restriction
pursuant to Rule 144 or
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Rule 144(k), (ii) the date that the Investor has sold all of the Investor's
Registrable Securities, or (iii) the date that the Convertible Note held by the
Investor is no longer outstanding, and payable at the earlier of the end of each
such 30-day period or on the declared effectiveness of the Registration
Statement. If, (i) after the Registration Statement has been declared effective,
sales cannot be made pursuant thereto, or (ii) the Common Stock is not listed or
included for quotation on any one or more of the Nasdaq National Market, the New
York Stock Exchange or the American Stock Exchange after being so listed or
included for quotation (either or both of (i) and (ii), an "ILLIQUIDITY EVENT"),
then, until the cessation of such Illiquidity Event, the Company will incur a
cash penalty of 1% of the original principal amount of the Convertible Notes
commencing on the date of such Illiquidity Event, for each 30 days thereafter
(pro rated for any partial period thereof), exclusive of the period of any
Allowed Delays (as defined below), payable at the earlier of the end of each
such 30-day period or on the date that such Illiquidity Event ceases.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement(s) and the prospectus(es) used in connection with the
Registration Statement(s), which prospectus(es) are to be filed pursuant to Rule
424 promulgated under the 1933 Act, as may be necessary to keep the Registration
Statement(s) effective at all times during the Registration Period, and, during
such period, the Company and the Investors agree to comply with the provisions
of the 1933 Act with respect to the disposition of all Registrable Securities of
the Company covered by the Registration Statement(s) until such time as all of
such Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
the Registration Statement(s). In the event the number of shares available under
a Registration Statement filed pursuant to this Agreement is insufficient to
cover all of the Registrable Securities issuable as of such date (including,
without limitation, as a result of the issuance of shares of Common Stock in
lieu of payment of any delinquent interest payment, or any other issuance of
Common Stock during a "Default" under the Convertible Note), the Company shall
amend the Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover all of
the Registrable Securities, in each case, as soon as practicable, but in any
event within fifteen (15) days after the necessity therefor arises (based on the
market price of the Common Stock and other relevant factors on which the Company
reasonably elects to rely). The Company shall use its best efforts to cause any
such necessary amendment and/or new Registration Statement to become effective
as soon as practicable following the filing thereof. In addition, any such
amendment or new Registration Statement shall for purposes of Section 3(a) above
be deemed to be a "REGISTRATION STATEMENT". For purposes of the foregoing
provisions, if applicable, the number of shares available under a Registration
Statement shall be deemed "insufficient to cover all of the Registrable
Securities" if at any time the maximum number of Registrable Securities issued
or issuable upon conversion and redemption of the Convertible Notes (taking into
account, prior to the Reset Date (as defined in the Convertible Note) the lowest
potential Reset Fixed Conversion Price (as defined in the Convertible Note)) and
exercise of the Warrants is greater than the number of shares so registered. For
purposes of the calculation set forth in the foregoing sentence, any
restrictions on the convertibility of the Convertible Notes shall be disregarded
and such calculation shall assume that the Convertible Notes are then
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convertible into shares of Common Stock at the then prevailing Conversion Price
(as defined in the Convertible Note).
c. The Company shall use its best efforts to furnish to each
Investor whose Registrable Securities are included in the Registration
Statement(s) and its legal counsel without charge (i) promptly after the same is
prepared and filed with the SEC at least one copy of the Registration Statement
and any amendment thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits, the prospectus(es)
included in such Registration Statement(s) (including each preliminary
prospectus) and, with regards to the Registration Statement, any correspondence
by or on behalf of the Company to the SEC or the staff of the SEC and any
correspondence from the SEC or the staff of the SEC to the Company or its
representatives, (ii) upon the effectiveness of any Registration Statement, ten
(10) copies of the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies as such
Investor may reasonably request) and (iii) such other documents, including any
preliminary prospectus, as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Investor.
The Company will promptly respond to any and all comments received from the SEC,
and shall use its best efforts to cause any Registration Statement or any
amendment thereto to be declared effective by the SEC as soon as practicable
following the resolution or clearance of all SEC comments or, if applicable,
following notification by the SEC that the Registration Statement or any
amendment thereto will not be subject to review.
d. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statement(s)
under such other securities or "blue sky" laws of such jurisdictions in the
United States as any Investor reasonably requests, (ii) prepare and file in
those jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction,
which in each case, the Board of Directors of the Company determines to be
contrary to the best interests of the Company and its stockholders. The Company
shall promptly notify each Investor who holds Registrable Securities of the
receipt by the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United States
or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.
e. In the event Investors who hold a majority of the
Registrable Securities being offered in the offering select underwriters for the
offering, the Company shall,
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subject to Section 5 hereof, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
f. If at any time during the Registration Period, counsel to
the Company should determine in good faith that the compliance by the Company
with its disclosure obligations in connection with the Registration Statement
may require the disclosure of information which the Chief Executive Officer of
the Company has identified as material and which the Chief Executive Officer has
determined that the Company has a bona fide business purpose for preserving as
confidential, the Company shall promptly, (i) notify the Investors in writing of
the existence of (but in no event, without the prior written consent of an
Investor, shall the Company disclose to such investor any of the facts or
circumstances regarding) material non-public information and (ii) advise the
Investors in writing to cease all sales under the Registration Statement until
such information is disclosed to the public or ceases to be material. In such
instance, the Company's obligation to make payments under clause (ii) of the
penultimate sentence in the first paragraph of Section 2(c) shall be suspended
for a period (an "ALLOWED DELAY") expiring upon the earlier to occur of (A) the
date on which such material information is disclosed to the public or the
Company notifies the Investors that the information has ceased to be material or
the Company supplements or amends (and such amendment is declared effective) the
Registration Statement to disclose such information, or (B) 15 trading days
after the Company first notifies the Investor of such good faith determination.
There shall not be more than two (2) Allowed Delays in any twelve (12) month
period nor more than three (3) Allowed Delays in any twenty-four (24) month
period.
If an event giving rise to an Allowed Delay occurs, the
Company shall, within the 15 trading day period described in the preceding
paragraph, prepare a supplement or amendment to the Registration Statement to
correct any such untrue statement or omission, and deliver ten (10) copies of
such supplement or amendment to each Investor (or such other number of copies as
such Investor may reasonably request). The Company shall also promptly notify
each Investor in writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (and, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution there or
its receipt of actual notice of the initiation or threat of any proceeding for
such purpose.
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h. The Company shall permit a single firm of counsel,
initially Xxxxxx & Xxxxxxx or such other counsel as thereafter designated as
selling stockholders' counsel by the Investors who hold a majority of the
Registrable Securities being sold, to review and comment upon the Registration
Statement(s) and all amendments and supplements thereto at least seven (7) days
prior to their filing with the SEC, and not file any document in a form to which
such counsel reasonably objects. The Company shall not subject a request for
acceleration of the effectiveness of a Registration Statement(s) or any
amendment or supplement thereto without the prior approval of such counsel,
which consent shall not be unreasonably withheld.
i. At the request of the Investors who hold a majority of the
Registrable Securities being sold in any underwritten offering undertaken in
compliance with the other terms of this Agreement, the Company shall furnish, on
the date that Registrable Securities are delivered to an underwriter, if any,
for sale in connection with the Registration Statement, at the expense of the
Investors who are selling Registrable Securities in the underwritten offering
(i) if required by an underwriter, a letter, dated such date, from the Company's
independent certified public accounts in customary form and addressing such
matters as are addressed in letters customarily given by independent certified
public accountant to underwriters in an underwritten public offering, addressed
to the underwriters, and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration Statement, in
customary form and addressing such matters as are addressed in opinions
customarily given in an underwritten public offering, addressed to the
underwriters and the Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the 1933 Act, (b) the release of such Records is ordered pursuant
to a final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
agreement. Each Investor agrees that it shall, upon learning that disclosure of
such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, given prompt notices to the Company and
allow the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any
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Investor) shall be deemed to limit the Investors' ability to sell Registrable
Securities in a manner which is otherwise consistent with applicable laws and
regulations.
k. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
l. The Company shall use its best efforts either to (i) 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
(ii) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market System or the Nasdaq
SmallCap Market for such Registrable Securities and without limiting the
generality of the foregoing, to arrange for at least two market makers to
register with the AMEX or, if applicable, the National Association of Securities
Dealers, Inc. as such with respect to such Registrable Securities. The Company
shall pay all fees and expenses in connection with satisfying its obligation
under this Section 3(l).
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any opinion of counsel reasonably required by the transfer agent,
that permit sales of unlegended securities in a timely fashion that complies
with then mandated securities settlement procedures for regular way market
transactions; provided that the Investor shall comply with any applicable
prospectus delivery requirements.
n. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
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o. The Company shall provide a transfer agent and registrar of
all such Registrable Securities not later than the effective date of such
Registration Statement.
p. If requested by the managing underwriters or an Investor,
the Company shall, subject to Allowed Delays, as promptly as is reasonably
possible incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriters and the Investors agree should be
included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the
number of Registrable Securities being sold to such underwriters, the purchase
price being paid therefor by such underwriters and with respect to any other
terms of the underwritten (or best efforts underwritten) offering of the
Registrable Securities to be sold in such offering; make all required filings of
such prospectus supplement or post-effective amendment as soon as notified of
the matters to be incorporated in such prospectus supplement or post-effective
amendment; and supplement or make amendments to any Registration Statement if
requested by a shareholder or any underwriter of such Registrable Securities. q.
The Company shall use its best efforts to cause the Registrable Securities
covered by the applicable Registration Statement to be registered with or
approved by such other government agencies or authorities as may be necessary to
consummate to disposition of such Registrable Securities.
r. The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify each
Investor or its counsel in writing of the information the Company requires from
each such Investor if such Investor elects to have any of such Investor's
Registrable Securities included in the Registration Statement. It shall be a
condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular investor that such Investor shall furnish to the
Company such information as may be requested in writing by the Company regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.
b. Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f),
such Investor will
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immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement(s) covering such Registrable Securities until such
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(f) or the first sentence of 3(f) and, if so directed
by the Company, such Investor shall deliver to the Company (at the expense of
the Company) or destroy all copies in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions and other expenses in connection with an underwritten offering to be
paid by the Investors pursuant to the terms hereof, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, and fees and disbursements of counsel for
the Company and fees and disbursements of one counsel for the Investors, shall
be paid by the Company. In addition, the prevailing party shall pay the other
party's legal fees incurred in connection with any judicial action to enforce
any rights hereunder.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Investor who holds
such Registrable Securities, the directors, officers, partners, employees,
agents and each Person, if any, who controls any Investor within the meaning of
the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934
ACT"), and any underwriter (as defined in the 0000 Xxx) for the Investors, and
the directors and officers of, and each Person, if any, who controls any such
underwriter within the meaning of the 1933 Act or the 1934 Act (each, an
"INDEMNIFIED PERSON"), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid in
settlement or expenses, joint or several (collectively, "CLAIMS"), incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto, in each case brought by a third party ("INDEMNIFIED
DAMAGES"), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other "blue sky" laws of any jurisdiction
in which Registrable Securities are offered, or the omission or alleged omission
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the statements
therein were made, not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any
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preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder, in each case relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement (the matters in the
foregoing clauses (i) through (iii) being, collectively, "VIOLATIONS"). Subject
to the restrictions set forth in Section 6(d) with respect to the number of
legal counsel, the Company shall reimburse the Investors and each such
underwriter or controlling person, promptly as such expenses are incurred and
are due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c); (ii) with respect to any preliminary prospectus, shall
not inure to the benefit of any such person from whom the person asserting any
such Claim purchased the Registrable Securities that are the subject thereof (or
to the benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c), and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used it; and (iii) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or are based upon any Violation, 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 to the Company by such
Investor expressly for use in connection with such Registration Statement; and,
subject to Section 6(d), such Investor will reimburse any reasonable legal or
other expenses reasonably
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incurred by them in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the net proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professional participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for including in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, 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 control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the Indemnified Person or
Indemnified Party, as the case may be, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The Company shall pay reasonable fees for only one
separate legal counsel for the Investors, and such legal counsel shall be
selected by the Investors holding a majority in interest of the Registrable
Securities included in the Registration Statement to which the Claim relates.
The Indemnified Party or Indemnified Person shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the Indemnified Party or
Indemnified Person which relates to such action or claim. The indemnifying party
shall keep the Indemnified Party or Indemnified Person fully apprised at
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all times as to the status of the defense or any settlement negotiations with
respect thereto. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its written consent, provided,
however, that the indemnifying party shall not unreasonably withhold, delay or
condition its consent. No indemnifying party shall, without the consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such claim or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Party or Indemnified
Person under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
e. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
f. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation shall be entitled to indemnification or contribution
hereunder; and (iii) contribution (together with any indemnification or other
obligations under this Agreement) by any seller of Registrable Securities shall
be limited in amount to the net amount of proceeds received by such seller from
the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of
Rule 144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
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a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the Investors to
any transferee or assignee (a "TRANSFEREE") of all or any portion (but not less
than $1,000,000 face amount of Convertible Notes) of Registrable Securities if:
(i) the Investor agrees in writing with the Transferee to assign such rights,
and a copy of such agreement is furnished to the Company within a reasonable
time after such assignment; (ii) the Company is, within a reasonable time after
such transfer or assignment, furnished with written notice of (a) the name and
address of such Transferee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such securities
by the Transferee is restricted under the 1933 Act and applicable state
securities laws; (iv) at or before the time the Company receives the written
notice contemplated by clause (ii) of this sentence the Transferee agrees in
writing with the Company to be bound by all of the provisions contained herein;
(v) such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement; (vi) such Transferee shall be
an "accredited investor" as that term is defined in Rule 501 of Regulation D
promulgated under the 1933 Act; and (vii) in the event the assignment occurs
subsequent to the date of effectiveness of the Registration Statement required
to be filed pursuant to Section 2(a), the Transferee agrees to pay all
reasonable expenses of amending or supplementing such Registration Statement to
reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold two-thirds (2/3) of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
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11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided a copy
is mailed by U.S. certified mail, return receipt requested; (iii) three (3) days
after being sent by U.S. certified mail, return receipt requested; or (iv) one
(1) day after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers of such communications shall be:
If to the Company:
International Microcomputer Software, Inc.
00 Xxxxxxx Xxx
Xxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
With a copy to:
Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: C. Xxxxx Xxxxx, Esq.
If to the Buyer:
BayStar Capital, L.P.
c/x Xxxxx Investments
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxxx
With a copy to:
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BayStar Capital, L.P
c/o LG Capital
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxx
With a copy to:
Xxxxxx & Xxxxxxx
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxx, Esq.
if to a Buyer, to its address and facsimile number on the signature pages, with
copies to such Buyer's counsel as set forth on such signature pages.
Each party shall provide five (5) days prior notice to the other
party of any change in address, phone number or facsimile number.
c. Failure to any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California without regard to the
principles of conflict of laws. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. This Agreement, the Convertible Notes, the Warrants and the
Securities Purchase Agreement (including all schedules and exhibits thereto)
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. The aforementioned documents supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
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g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
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IN WITNESS WHEREOF, the parties have caused this Registration
Rights Agreement to be duly executed as of the day and year first above written.
COMPANY: BUYER:
INTERNATIONAL MICROCOMPUTER BAYSTAR CAPITAL L.P.
SOFTWARE, INC.
By: BAYSTAR MANAGEMENT LLC,
ITS GENERAL PARTNER
By: __________________________________ By: __________________________________
Name: Xxxxx Xxxx Name:
Its: Chief Financial Officer Its:
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SCHEDULE 2(a)
Other Securities to be Included in Registration Statement
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