EXECUTION COPY
INVESTOR'S RIGHTS AGREEMENT
This Investor's Rights Agreement (this "AGREEMENT") is made as of January 29,
2001, by and among Xx0.xxx Inc. (the "COMPANY"), a Delaware corporation, and
Abanat Limited, a British Virgin Islands corporation. Certain capitalized terms
used in this Agreement without definition shall have the meanings given them in
Section 14 hereof.
PREAMBLE
The Holder may acquire an aggregate of up to 200 Units consisting of
$2.0 million principal amount of Series A Convertible Debentures due 2005 (the
"DEBENTURES") that are convertible into shares of the Company's Common Stock,
$0.01 par value per share (the "COMMON STOCK"), and warrants (the "WARRANTS") to
purchase 1,333,400 shares of the Company's Common Stock, and may exchange its
existing 116,400 warrants for new warrants (the "NEW WARRANTS") to purchase
116,400 shares of the Company's Common Stock, pursuant to the Unit Subscription
Agreement (the "SUBSCRIPTION AGREEMENT"), dated as of the date hereof, between
the Company and the Holder.
Pursuant to the Subscription Agreement, the Company and the Holder have
agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth herein, the Company and the Holder hereby agree as follows:
1. RESTRICTIONS ON TRANSFERABILITY. None of the Restricted Securities
may be sold, assigned, transferred, pledged or otherwise disposed of, whether or
not for value, except in compliance with the terms and conditions of this
Agreement. At such time as the Restricted Securities cease to be Restricted
Securities under the terms of this Agreement, the provisions of this Agreement
shall no longer apply to the securities that theretofore were Restricted
Securities.
2. RESTRICTIVE LEGEND.
2.1 Each certificate representing the Debentures, the Common Stock into
which such Debentures are convertible, the Warrants, the New Warrants or the
Common Stock issued upon exercise of the Warrants and New Warrants shall be
stamped or otherwise imprinted with a legend substantially in the following form
(in addition to any legend required under applicable state securities laws or
otherwise):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), NOR UNDER ANY
STATE SECURITIES LAW AND SUCH SECURITIES MAY NOT BE PLEDGED,
SOLD, ASSIGNED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT
AS PERMITTED BY THE PROVISIONS OF REGULATION S UNDER THE ACT
OR PURSUANT TO REGISTRATION UNDER THE ACT OR AN AVAILABLE
EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS INVOLVING
THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE
WITH THE ACT.
THE SALE, ASSIGNMENT, TRANSFER, PLEDGE AND OTHER DISPOSITION
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
RESTRICTED BY THE INVESTOR'S RIGHTS AGREEMENT (THE "INVESTOR'S
RIGHTS AGREEMENT"), DATED JANUARY 29, 2001. A COPY OF THE
INVESTOR'S RIGHTS AGREEMENT IS ON FILE WITH THE CORPORATE
SECRETARY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY. A
COPY THEREOF MAY BE OBTAINED AT NO COST UPON WRITTEN REQUEST
THEREFOR MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE CORPORATE SECRETARY AT THE PRINCIPAL OFFICES OF THE
COMPANY.
Upon request of a holder of such a certificate, the Company shall remove the
foregoing legend from the certificate or issue to such holder a new certificate
therefor free of any transfer legend, if, with such request, the Company shall
have received either (i) a written opinion of legal counsel to the Holder who
shall be reasonably satisfactory to the Company, addressed to the Company and
reasonably satisfactory in form and substance to the Company's counsel, to the
effect that the proposed transfer of the Restricted Securities may be effected
without registration under the Securities Act or (ii) a "no-action" letter from
the Commission to the effect that the distribution of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto; PROVIDED, that no such opinion of
counsel shall be required for a transfer by a Holder of Restricted Securities to
an Affiliate if the transferee agrees in writing to be subject to the terms
hereof to the same extent as if such transferee were an original Holder of
Restricted Securities hereunder.
2.2 STOP TRANSFER INSTRUCTIONS. The Holder consents to the Company's
making a notation on its records and giving instructions to any transfer agent
of the Restricted Securities in order to implement the restrictions on transfer
established in this Agreement. The Company agrees to, upon the request of a
Holder and as expeditiously as possible, make a notation on its records and give
instructions to any transfer agent of the Restricted Securities to cease to
implement the restrictions on transfer established in this Agreement, when such
restrictions cease in accordance with the terms of this Agreement or applicable
securities law.
3. NOTICE AND OTHER REQUIREMENTS OF TRANSFER. The Holder will be
permitted to sell, assign, transfer, pledge or otherwise dispose of any
Restricted Securities if and only if:
a. the intended sale, assignment, transfer, pledge or other
disposition is permitted by the other provisions of this
Agreement; or
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b. there is in effect a registration statement under the
Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration
statement; or
c. (i) the proposed sale, assignment, transfer, pledge or
other disposition is to an Affiliate, and (ii) the Affiliate
transferee, as a condition to the effectiveness of such sale,
assignment, transfer, pledge or other disposition, has
executed a counterpart of this Agreement expressly assuming
the obligations of a Holder under this Agreement; or
d. (i) the Holder has notified the Company of the proposed
disposition and has furnished the Company with a statement of
the circumstances surrounding the proposed sale, pledge or
other disposition for value, including the name and address of
the intended transferee, the residence of the transferee, a
brief description of the business of the transferee and
identifying the Restricted Securities with respect to which
such rights are being assigned, and (ii) the intended
transferee, as a condition to the effectiveness of such
disposition, has executed a counterpart of this Agreement
expressly assuming the obligations of the Holder under this
Agreement; and, if the Company requests within five Business
Days of receipt of the notice provided for in (i) the Holder
shall also furnish the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such intended
disposition does not require registration of such shares under
the Securities Act.
4. PIGGYBACK REGISTRATION.
4.1 NOTICE TO HOLDERS REQUIRED. If at any time or from time to time the
Company shall determine to register any shares of Common Stock for its own
account or the account of any person who holds securities of the Company that
are "restricted securities" under Rule 144, other than (a) a registration on
Form S-4 or S-8 or another form not generally available for registering the
Restricted Securities for sale to the public or (b) any registration comprised
in whole or in substantial part of shares underlying stock options or restricted
shares issued under an incentive compensation plan that has been adopted by the
Company or its predecessor, the Company will give to each Holder notice as soon
as practicable prior to filing the registration statement and include in such
registration all Registrable Securities specified in one or more written
requests which have been made within 15 Business Days after receipt of such
written notice from the Company by each Holder, except as set forth in Section
4.2
4.2 REGISTERED PUBLIC OFFERING INVOLVING AN UNDERWRITING. If the
registration of shares of Common Stock is for a registered public offering
involving an underwritten offering, the Company shall so advise each Holder as a
part of the written notice given pursuant to Section 4.1. In such event, the
right of each Holder to registration pursuant to this Section shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of each Holder's Registrable Securities in the underwriting to the
extent provided herein. If any Holder proposes to distribute his securities
through such underwriting, the Holder shall (together with the Company and the
other holders of Common Stock distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company. The
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Company will use its reasonable best efforts to include the Holder's Registrable
Securities, pro rata with all other securities of holders of piggyback
registration rights, in any such underwritten offering. Notwithstanding any
provision of Section 4.1, if the managing underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten, the
managing underwriter may limit the number of Registrable Securities to be
included in the underwriting or may limit the number of Registrable Securities
to be included in such registration. The Company shall so advise the Holders,
and the number of shares of Registrable Securities and other securities that may
be included in the registration and underwriting shall be allocated among each
Holder and all other holders of Common Stock that hold rights granted by the
Company to cause shares of Common Stock held by them to be included in such
registration or underwriting, in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by the Holder and each other
such holder that are requested to be included in the registration or
underwriting. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriter may round the number of shares
allocated to each Holder to the nearest one hundred shares. If any Holder
disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company. In the event of any such withdrawal,
the Company will include in any such registration in lieu thereof, on a pro rata
basis, any additional shares of Registrable Securities which were requested to
be included by a Holder and any other shares requested to be included by any
other piggyback right holders, which were excluded pursuant to the
above-described underwriter limitation, up to the maximum set by such
underwriter.
4.3 The Company's obligation to file a registration statement under
Section 4, or to cause a registration statement to become and remain effective
under such Section, shall be suspended for a period not to exceed 90 days (and
for periods not exceeding, in the aggregate, 120 days in any 12-month period) if
there exists at the time material non-public information relating to the Company
which, in the reasonable opinion of the Board of Directors of the Company,
should not be disclosed.
5. DEMAND REGISTRATION
5.1 NOTICE OF REGISTRATION. At any time after April 29, 2001, the
Holder may thereafter demand that a registration statement be filed with the
Commission within 30 days after the date on which the Company has received such
request, subject to the provisions of this Section 5. Subject to the terms and
conditions set forth below in this Section 5.1 and Sections 5.2 through 5.3 and
Section 7, upon the Company's receipt from a Holder of a written request that
the Company effect a registration under the Securities Act with respect to its
Registrable Securities, the Company will, as expeditiously as possible, notify
the Holders in writing of such request and use its diligent best efforts to
effect all such registrations (including, without limitation, the execution of
an undertaking to file post-effective amendments and appropriate qualifications
and approvals under the laws and regulations applicable to the Company of any
applicable governmental agencies and authorities, including applicable blue sky
or other state securities laws) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of the Registrable
Securities as are specified in such request, PROVIDED, that (a) the Holders may
not make their request within 90 days following the effectiveness of any
registered public offering of Common Stock, unless prohibited by applicable
securities laws; (b) before filing any such registration statement or any
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amendments or supplements thereto, the Company will (i) furnish to the Holders
of Registrable Securities which are to be included in such registration copies
of all such documents proposed to be filed, which documents will be subject to
the review of the Holders and their counsel, and (ii) give the Holders of
Registrable Securities to be included in such registration statement and their
representatives the opportunity to conduct a reasonable investigation of the
records and business of the Company and to participate in the preparation of any
such registration statement or any amendments or supplements thereto; (c) the
Company shall not be obligated to take any action to effect such registration
pursuant to this Section 5.1 after the Company has effected one such
registration pursuant to this Section 5.1 at the request of the Holder;
PROVIDED, that such registration has been declared or ordered effective by the
Commission and, if the method of distribution is a registered public offering
involving an underwritten offering, all such shares registered thereby shall
have been sold pursuant thereto; and (d) the Company shall not be required to
file any registration statement under this Section 5.1 unless the holders of at
least 33% of the issued and outstanding Registrable Securities (taken as a
whole) shall have demanded in writing that the Company file a registration
statement under this Section 5.1. With respect to any registration requested
pursuant to this Section 5.1, the Company may include in such registration any
other shares of Common Stock, subject to the restrictions set forth in Section
5.3, as to which it is obligated to include such shares pursuant to agreements
requiring such registration.
5.2 REGISTRATION STATEMENT. Subject to Section 5.1 above and the other
terms and conditions contained herein, the Company shall file a registration
statement covering the Registrable Securities so requested to be registered as
soon as practical, but in any event within 30 days after receipt of the request
of the Holders; PROVIDED, that if the Company shall furnish to the Holders a
certificate signed by the President of the Company stating that in the good
faith judgment and upon the consent of a majority of the Board of Directors it
would require the disclosure of material non-public information about the
Company, the disclosure of which could be seriously detrimental to the business
or financial condition of the Company or to negotiations in which it is engaged
for such registration statement to be filed at the date filing would be required
under Section 5.1 and it is therefore desirable to defer the filing of such
registration statement, in which case the Company shall have an additional
period of not more than 60 days within which to file such registration
statement.
5.3 REGISTERED PUBLIC OFFERING INVOLVING AN UNDERWRITING. If the
Holders intend to distribute the Registrable Securities covered by their request
under Section 5.1 by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to Section 5.1. In such event, the
Holders shall negotiate in good faith with a nationally recognized underwriter
or underwriters selected by the Holders and reasonably satisfactory to the
Company with regard to the underwriting of such requested registration. The
right of the Holders to registration pursuant to this Section 5.3 shall be
conditioned upon participation by all Holders in such underwriting to the extent
provided herein. The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected pursuant to this Section 5.3. Notwithstanding any other provision of
this Section 5.3, if the underwriter determines that marketing factors require a
limitation on the number of shares to be underwritten, the underwriter may
(subject to the allocation priority set forth below) limit the number of
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Registrable Securities to be included in the registration and underwriting. The
Company shall so advise all holders of securities requesting registration, and
the number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated in the following priority:
first, among all Holders, and any reduction among such Holders shall be pro rata
among all such persons and, for purposes of making any such reduction, each
Holder which is a partnership, together with the affiliates, partners,
employees, retired partners and retired employees of such Holder, the estates
and family members of any such partners, employees, retired partners and retired
employees and of their spouses, and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single "person," and any pro rata
reduction with respect to such "person" shall be based upon the aggregate number
of Registrable Securities owned by all entities and individuals included as such
"person", as defined in this sentence (and the aggregate number so allocated to
such "person" shall be allocated among the entities and individuals included in
such "person" in such manner as such Holder may reasonably determine); and
second, to the Company, and third, among all other stockholders in proportion,
as nearly as practicable, to the respective amounts of securities which they had
requested to be included in such registration at the time of filing the
Registration Statement. To facilitate the allocation of shares in accordance
with the above provisions, the underwriter may round the number of shares
allocated to the Holders to the nearest one hundred shares. If any Holder of
Registrable Securities disapproves of the terms of the underwriting, it may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the other Holders. In the event of any such withdrawal, the Company will
include in any such registration in lieu thereof any additional shares of
Registrable Securities which were requested to be included by a Holder and which
were excluded pursuant to the above-described underwriter limitation up to the
maximum set by such underwriter.
6. EXPENSES OF REGISTRATION. The Company will bear all reasonable
expenses incurred in connection with registrations pursuant to Section 4 and
Section 5, including without limitation all registration, filing and
qualification fees, printing expenses, fees and disbursements of counsel for the
Company and independent accounts for the Company and expenses of any special
audits of the Company's financial statements incidental to or required by such
registration, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars' fees, but the Company
will not pay underwriters' fees, discounts or commissions relating to the
Registrable Securities or any fees or expenses legal counsel for any or all of
the Holders.
7. REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions of Sections 4 or 5 to use its best efforts to effect the
registration of any Registrable Securities under the Securities Act, the Company
will, as expeditiously as possible:
(a) furnish to a single representative of the Holders, who
shall initially be Abanat Limited or such other person or entity as the Company
is instructed in writing (the "Representative") and to each managing
underwriter, if any, a reasonable time in advance of their filing with the SEC
any registration statement, amendment or supplement thereto, and any prospectus
used in connection therewith, and the Representative shall have the opportunity
to object to any information pertaining to it and its plan of distribution that
is contained therein and the Company will make the corrections reasonably
required by such Representative with respect to such information prior to filing
any such registration statement or any amendment or supplement thereto, and if
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requested in writing by the Representative, and furnish a copy of any and all
transmittal letters or other correspondence with the SEC or any other
governmental agency or self-regulatory body or other body having jurisdiction
(including any domestic or foreign securities exchange) relating to such
offering;
(b) prepare and file with the SEC a registration statement
(which, in the case of a requested registration pursuant to Section 5, shall be
on a registration statement form which is sufficient to permit the sale or other
disposition of any or all shares of Common Stock to be included therein in
accordance with the intended method of sale or other distribution stated by the
initiating Holders, including a "shelf" registration statement under Rule 415
under the Securities Act or any successor provision) with respect to such
securities and use its best efforts to cause such registration statement to
become effective as soon as practicable and to remain effective for the period
of the distribution contemplated thereby (determined as hereinafter provided);
(c) furnish to each seller and to each underwriter such number
of copies of the registration statements, each amendment and supplement thereto
(and, if requested in writing, all exhibits thereto and documents incorporated
by reference therein) and the prospectus included therein (including each
preliminary prospectus and prospectus) and any other prospectus filed under Rule
424 promulgated under the Securities Act relating to the Registrable Securities
and such other documents as such persons reasonably may request in order to
facilitate the public sale or other disposition of the Registrable Securities
covered by such registration statement;
(d) after the filing of the registration statement, on the day
of receipt of knowledge thereof notify each seller of Registrable Securities and
each managing underwriter, if any, of any stop order issued or, to the knowledge
of the Company, threatened to be issued by the SEC and promptly take all
reasonably necessary actions to prevent the entry of such stop order or to
remove it if entered;
(e) use its commercially reasonable best efforts to register
or qualify the Registrable Securities covered by such registration statement
under the securities or "blue sky" laws of any state as the sellers of
Registrable Securities, or, in the case of an underwritten public offering, the
managing underwriter reasonably shall request, and use its commercially
reason-able best efforts to obtain all appropriate registrations, permits and
consents required in connection therewith, and to keep such registrations,
qualifications, permits and consents in effect for so long as such registration
statement remains in effect and to take any other action which may be reasonably
necessary to enable the seller of Registrable Securities to consummate the
disposition in such jurisdictions of such securities; provided, however, that
the Company shall not for any such purpose be required to qualify generally to
transact business as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to general service of process in any such
jurisdiction;
(f) use its commercially reasonable best efforts to list the
Registrable Securities covered by such registration statement with any
securities exchange on which the Common Stock of the Company is then listed;
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(g) furnish, in a timely fashion, unlegended certificates
representing ownership of the Registrable Securities being sold in such
denominations as shall be requested by the seller or the lead underwriter;
(h) on the day of receipt of knowledge thereof inform each
seller and the managing underwriter or underwriters, if any, (1) of the date on
which a registration statement or any post-effective amendment thereto has been
filed and when the same has become effective and, if applicable, of the date of
filing a Rule 430A prospectus, or (2) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any
Registrable Securities for sale under the applicable securities or blue sky laws
of any jurisdiction and as soon as practicable after receipt of knowledge
thereof inform each seller and the managing underwriters, if any, of any written
comments from the SEC with respect to any filing referred to in clause (1) and
of any request by the SEC, any securities exchange, government agency,
self-regulatory body or other body having jurisdiction for any amendment of or
supplement to any registration statement or preliminary prospectus or prospectus
included therein or any offering memorandum or other offering document relating
to such offering.
(i) on the day of receipt of knowledge thereof notify the
Representative and each underwriter under such registration statement, at any
time when a prospectus relating thereto is required by law to be delivered in
connection with sales by an underwriter or dealer, of the occurrence of an event
requiring the preparation of a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities
such prospectus will not contain an 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 the light of the circumstances under which they were
made, not misleading, and as promptly as practicable make available to each
seller and to each managing underwriter, if any, any such supplement or
amendment; in the event the Company shall give such notice, the Company shall
extend the period during which such registration statement shall be maintained
effective as provided in Section 7(b) hereof by the number of days during the
period from and including the date of the giving of such notice to the date when
the Company shall make available to such sellers such supplemented or amended
prospectus;
(j) upon written request, make available for inspection by
each seller of Registrable Securities, any underwriter participating in any
distribution pursuant to such registration statement, and any attorney,
accountant or other agent retained by such seller or underwriter, financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply information
reason-ably requested by such seller, underwriter, attorney, accountant or agent
in connection with such registration statement;
(k) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the sale of such securities,
including having one of its senior executives appear at no more than two
"roadshow" meetings to be held in New York City;
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(l) provide a transfer agent and registrar, and a CUSIP
number, for all Registrable Securities covered by such registration statement
not later than the effective date of such registration statement; and
(m) provide signed counterparts, addressed to each such
Holder, of an opinion of the Company's counsel and a "cold comfort" letter of
the Company's independent certified public accountants with respect to the
matters customarily covered in such documents delivered to underwriters in
underwritten public offerings.
In connection with each registration hereunder, the sellers of
Registrable Securities will furnish to the Company in writing such information
with respect to themselves and the proposed distribution by them as reasonably
shall be necessary in order to assure compliance with federal and applicable
state securities laws.
In connection with each registration pursuant to Sections 4 or
5 covering an underwritten public offering, the Company and each Holder agrees
to enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
For purposes of Section 7(b) hereof, the period of
distribution of Registrable Securities in a firm commitment underwritten public
offering shall be deemed to extend until the earlier of the sale of all
Registrable Securities covered thereby or twelve months after the effective date
thereof, and the period of distribution of Registrable Securities in any other
registration shall be deemed to extend until the earlier of the sale of all
Registrable Securities- covered thereby or nine months after the effective date
thereof.
8. INDEMNIFICATION.
8.1 INDEMNITY BY THE COMPANY. If the Company registers any Registrable
Securities held by the Holder under the Securities Act pursuant to Section 4 or
Section 5, the Company will indemnify and hold harmless the Holder, and each
other person, if any, who controls the Holder, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which the Holder, the underwriter, if any, or such controlling
persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such
Registrable Securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act or any state securities
law applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, and will reimburse the Holder
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and the underwriter, their respective officers, directors and partners, and each
person controlling the Holder and the underwriter, for any reasonable legal and
any other expenses incurred in connection with investigating, defending or
settling any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage or liability arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by an
instrument duly executed by the Holder or the underwriter specifically for use
therein.
8.2 INDEMNITY BY THE HOLDER. Each Holder will, if Registrable
Securities held by or issuable to the Holder are included in the securities as
to which such registration is being effected, indemnify and hold harmless the
Company, each of its directors, each officer who signs the registration
statement, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company and each
underwriter within the meaning of the Securities Act, against all claims,
losses, expenses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any such registration statement, prospectus,
offering circular or other document made in writing by the Holder, or any
omission (or alleged omission) by the Holder to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such directors, officers, partners,
persons or underwriters for any reasonable legal or any other expenses incurred
by them in connection with investigating, defending or settling any such claim,
loss, damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by the
Holder specifically for use therein; PROVIDED, that the total amount for which
the Holder, its officers, directors and partners, and any person controlling the
Holder, shall be liable under this Section 8.2 shall not in any event exceed the
proceeds (net of underwriting discounts and commissions) received by the Holder
from the sale of Registrable Securities sold by the Holder in such registration.
8.3 NOTICE BY THE INDEMNIFIED PARTY. Each party entitled to
indemnification under this Section 8 (the "INDEMNIFIED PARTY") shall give notice
to the party required to provide indemnification (the "INDEMNIFYING PARTY")
promptly after such Indemnified Party has actual knowledge of any claims as to
which indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim or any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose approval
shall not be unreasonably withheld), and the Indemnified Party may participate
in such defense at such party's expense, and provided further that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations hereunder, unless such failure resulted in
actual detriment to the Indemnifying Party. Each Indemnified Party shall furnish
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such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom. An Indemnified
Party shall have the right to retain its own 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, provided
that in no event shall the Indemnifying Party be required to pay the fees and
expenses of more than one such separate counsel for all Indemnified Parties. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect of such claim or litigation.
8.4 CONTRIBUTION. If the indemnification provided for in this Section
is held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, 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
hand in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the Indemnifying Party and the Indemnified
Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state 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.
Notwithstanding the foregoing, the amount that the Holder shall be obligated to
contribute pursuant to this Section 8.4 shall be limited to an amount equal to
the proceeds to the Holder of the Registrable Securities sold pursuant to the
registration statement which gives rise to such obligation to contribute (less
the aggregate amount of any damages which the Holder has otherwise been required
to pay in respect of such loss, claim, damage, liability or action or any
substantially similar loss, claim, damage, liability or action arising from the
sale of such Registrable Securities).
8.5 SURVIVAL OF INDEMNITY. The indemnification and contribution
provided by this Section shall be a continuing right to indemnification and
shall survive the registration and sale of any securities by any person entitled
to indemnification under this Agreement.
9. LOCKUP AGREEMENT. In consideration for the Company's performance of
its obligations under this Agreement, the Holder will, in connection with any
registration of any Registrable Securities in an underwritten offering, at the
request of the Company or the underwriters managing any underwritten offering of
the Company's securities, agree not to sell, make any short sale of, loan, grant
any option for the purchase of, or otherwise dispose of any Restricted
Securities (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed 90 days) from the effective date of such
registration as the Company and the underwriters may specify, so long as
similarly situated stockholders of the Company are bound by a comparable
obligation.
10. BOARD OF DIRECTORS. For as long as the Holders beneficially own (as
determined in accordance with Section 13(d) of the Exchange Act) at least 10% of
the outstanding Common Stock of the Company, at the Holders request, the Company
shall use its best efforts to cause and maintain the election to the Board of
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Directors of one designee of the Holders of a majority of the Registrable
Securities; provided, however, that such designee must be approved by the Board
of Directors, which approval shall not be unreasonably withheld. The Company
shall promptly reimburse such director for any expenses incurred by him in
connection with his activities as a director of the Company in accordance with
Company policies. The Company shall indemnify such director against liability to
the fullest extent permitted by applicable law.
11. HOLDERS' COOPERATION.
11.1 INFORMATION REGARDING HOLDERS. Each Holder shall promptly furnish
to the Company such information regarding the Holder and the distribution
proposed by the Holder as the Company may request in writing and as shall be
required in connection with any registration referred to herein.
11.2 OBLIGATIONS OF THE HOLDERS. The Holders will not (until further
notice by the Company) effect sales thereof (or deliver a prospectus to any
purchaser) after receipt of telegraphic or written notice from the Company to
suspend sales to permit the Company to correct or update a registration
statement or prospectus. At the end of the period during which the Company is
obligated to keep any registration statement filed under Section 4 or Section 5
current and effective as required by applicable law, the Holders shall
discontinue sales of shares pursuant to such registration statement upon receipt
of notice from the Company of its intention to remove from registration the
shares of Registrable Securities covered by such registration statement that
remain unsold, and the Holders shall notify the Company of the number of such
shares registered that remain unsold immediately upon receipt of such notice
from the Company.
12. RULE 144. With a view to making available to the Holders the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144; and
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act.
13. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Holder as follows:
13.1 The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or Bylaws of the Company or any
provision of any indenture, agreement or other instrument to which it or any of
its properties or assets is bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or result in the creation or imposition
12
of any lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
13.2 This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to (i) applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and moratorium laws and other
laws of general application affecting enforcement of creditors' rights generally
and (ii) the availability of equitable remedies as such remedies may be limited
by equitable principles of general applicability (regardless of whether
enforcement is sought in a proceeding in equity or at law).
14. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
a. "AFFILIATE" shall have the meaning given to it under Rule
405 of the Securities Act.
b. "BUSINESS DAY" means any day other than a Saturday, Sunday
or a day on which commercial banks in New York City are
required or authorized to close.
c. "COMMISSION" shall mean the U. S. Securities and Exchange
Commission, or any other federal agency at the time
administering the Securities Act.
d. "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, or any similar United States statute and the
rules and regulations thereunder, all as the same shall be in
effect at the time.
e. "HOLDER" or "HOLDERS" shall mean Abanat Limited and, if
applicable, any other person who holds Restricted Securities
and who has assumed the obligations of the Holder under this
Agreement pursuant to Section 3(d).
f. "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to
a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such
registration statement, and compliance with applicable state
securities laws of such states in which the Holder notifies
the Company of its intention to offer Registrable Securities.
g. "REGISTRABLE SECURITIES" shall mean any shares of Common
Stock into which the Debentures are convertible or were
converted and any shares of Common Stock issuable or issued
upon due exercise of the Warrants and New Warrants; provided,
however, that Registrable Securities shall only be treated as
Registrable Securities if and so long as, they have not been
(A) sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction or (B)
sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act so that
all transfer restrictions and restrictive legends with respect
thereto are removed upon the consummation of such sale.
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h. "RESTRICTED SECURITIES" shall mean the Debenture, any
shares of Common Stock into which the Debentures are
convertible, the Warrants, the New Warrants and any shares of
Common Stock issuable upon due exercise of the Warrants and
the New Warrants, in each case only to the extent the same
have not been sold to the public. As to any particular
Restricted Securities, such securities shall cease to be
Restricted Securities when (i) a registration statement with
respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall
have been disposed of under such registration statement, (ii)
such securities shall have become eligible for resale pursuant
to Rule 144(k) and any restrictive legend on certificates
representing such securities shall have been removed, (iii)
such securities shall have been otherwise transferred or
disposed of, and (x) new certificates therefore not bearing a
legend restricting further transfer shall have been delivered
by the Company, and (y) subsequent transfer or disposition of
them shall not require their registration or qualification
under the Securities Act or any similar state law then in
force or compliance with Rule 144, or (iv) such securities
shall have ceased to be outstanding. Notwithstanding the
foregoing, Restricted Securities shall not include otherwise
Restricted Securities (i) sold by a person in a transaction in
which his rights under this Agreement are not properly
assigned; or (ii) (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities
transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the
Securities Act under Section 4(1) thereof if all transfer
restrictions, and restrictive legends with respect thereto, if
any, are removed upon the consummation of such sale.
i. "RULE 144" shall mean Rule 144 under the Securities Act or
any successor or similar rule as may be enacted by the
Commission from time to time.
j. "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar United States statute and the rules
and regulations thereunder, all as the same shall be in effect
at the time.
15. MISCELLANEOUS.
15.1 AMENDMENTS. This Agreement may be amended only by a written
instrument executed by the Holders and the Company.
15.2 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which shall constitute a single instrument.
15.3 NOTICES. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be deemed to be delivered when received by certified mail, postage
prepaid, return receipt requested, when delivered by an expedited delivery
service or when sent by facsimile or e-mail after confirmation. All notices
shall be directed to the parties at the respective addresses set forth below or
to such other address as either party may, from time to time, designate by
notice to the other party:
14
If to the Company: 000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: CFO and General Counsel
Tel: (000) 000-0000
Fax: (000) 000-0000
With copies to: XxXxxxx Xxxxx LLP
0 Xxxx 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Holder: Abanat Limited
------------------------
------------------------
Attn:
Tel:
Fax:
With copies to: White & Case LLP
0000 0xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
15.4 ASSIGNABILITY. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any
rights, duties or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other parties hereto, except that
vested rights to receive payment or to initiate legal action with respect to
causes of action that have accrued hereunder shall be assignable by devise,
descent or operation of law.
15.5 SEVERABILITY. If any provision of this Agreement shall be held to
be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
15.6 GOVERNING LAW; VENUE. (a) This Agreement shall be governed by and
construed under the laws of the State of New York without regard to principles
of conflict of law. Each of the parties hereby (i) irrevocably consents and
agrees that any legal or equitable action or proceeding arising under or in
connection with this Agreement shall be brought exclusively in the Federal or
state courts sitting in New York, New York, and any court to which an appeal may
15
be taken in any such litigation, and (ii) by execution and delivery of this
Agreement, irrevocably submits to and accepts, with respect to any such action
or proceeding, for itself and in respect of its properties and assets, generally
and unconditionally, the jurisdiction of the aforesaid courts, and irrevocably
waives any and all rights such party may now or hereafter have to object to such
jurisdiction.
(b) Each of the Company and the other parties hereto waives
its right to a jury trial with respect to any action or claim arising out of any
dispute in connection with this agreement, any rights or obligations hereunder
or the performance of such rights and obligations. Except as prohibited by law,
each of the Company and the other parties hereto hereby waives any right it may
have to claim or recover in any litigation referred to in the preceding sentence
any special, exemplary, punitive or consequential damages or any damages other
than, or in addition to, actual damages. Each of the Company and other parties
hereto (x) certifies that no representative, agent or attorney of any party
hereto has represented, expressly or otherwise, that such party would not, in
the event of litigation, seek to enforce the foregoing waivers and (y)
acknowledges that the parties hereto have been induced to enter into this
Agreement by, among other things, the waivers and certifications contained
herein.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
THE COMPANY:
XX0.XXX INC.
By:
------------------------------------------
Name:
Title:
THE HOLDER:
ABANAT LIMITED
By:
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Name:
Title:
