EXHIBIT 4.2
ANNEX IV
TO
SECURITIES PURCHASE AGREEMENT REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of April 2, 2004
(this "Agreement"), is made by and between XXXXXXXX TECHNOLOGIES, INC., a
Florida corporation with headquarters located at #207, 00 Xxxxxxx Xxxx,
Xxxxxxxxxx, XX 00000 (the "Company"), and each entity named on a signature page
hereto (each, an "Initial Investor") (each agreement with an Initial Investor
being deemed a separate and independent agreement between the Company and such
Initial Investor, except that each Initial Investor acknowledges and consents to
the rights granted to each other Initial Investor under such agreement).
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of April 2, 2004, between the Initial
Investor and the Company (the "Securities Purchase Agreement"; capitalized terms
not otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement), the Company has agreed to issue and sell to the
Initial Investors the Purchased Shares and the Warrants; and
WHEREAS, the Warrant Shares may be issued upon the exercise of
the Warrants; and
WHEREAS, to induce the Initial Investor 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
"Securities Act"), with respect to the Registrable Securities (as defined
below);
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
Initial Investor hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"Company Counsel" means Xxxxx Xxxx LLP.
"Effective Date" means the date the SEC declares a
Registration Statement covering Registrable Securities and otherwise meeting the
conditions contemplated hereby to be effective.
-1-
"Held Shares Value" means, on the relevant date, the amount
equal to (i) the number shares of Purchased Shares still held by the Holder,
multiplied by (ii) the Per Share Purchase Price.
"Investor" means the Initial Investor and any permitted
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof and who holds Purchased Shares,
Warrants or Warrant Shares.
"Payment Shares" means shares of Common Stock issued by the
Company as provided in Section 2(b) below.
"Permitted Suspension Period" means up to two periods during
any consecutive 12-month period during which the Holder's right to sell
Registrable Securities under the Registration Statement is suspended, each of
which suspension period shall neither (i) be for more than ten (10) days nor
(ii) begin less than ten (10) business days after the last day of the preceding
suspension (whether or not such last day was during or after a Permitted
Suspension Period).
"Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.
"Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities 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 by the SEC.
"Registrable Securities" means, collectively, the Purchased
Shares, the Warrant Shares, the Additional Shares and the Payment Shares.
"Registration Statement" means a registration statement of the
Company under the Securities Act covering Registrable Securities on Form SB-2,
if the Company is then eligible to file using such form, and if not eligible, on
Form S-1 or other appropriate form.
"Required Effective Date" means, initially, the Initial
Required Effective Date or the Increased Required Effective Date (as those terms
are defined below), as the case may be.
-2-
"Restricted Sale Date" means the first date, other than a date
during a Permitted Suspension Period (as defined below), on which the Investor
is restricted from making sales of Registrable Securities covered by any
previously effective Registration Statement.
2. REGISTRATION.
(a) MANDATORY REGISTRATION.
(i) The Company shall prepare and file with the SEC, as soon
as practicable after the Closing Date but no later than forty-five (45) days
after the Closing Date (the "Required Filing Date"), a Registration Statement
registering for resale by the Investor a sufficient number of shares of Common
Stock for the Initial Investors to sell the Registrable Securities.
Notwithstanding the requirement to register all Registrable Securities, the
Company's obligation to register the Registrable Securities shall initially be
satisfied by the registration of the Initial Number of Shares to Be Registered
(as defined below). The "Initial Number of Shares to Be Registered" is a number
of shares of Common Stock which is at least equal to the sum of (x) one hundred
fifty percent (150%) of the number of Purchased Shares and (y) one hundred ten
percent (110%) of the number of Warrant Shares covered by the Warrants (assuming
for such purposes that all the Warrants had been issued, had been eligible to be
exercised and had been exercised for the issuance of Warrant Shares in
accordance with their terms, whether or not such issuance, eligibility or
exercise had in fact occurred as of such date). Unless otherwise specifically
agreed to in writing in advance by the Initial Investor, the Registration
Statement (W) shall include only (1) the Registrable Securities, (2) the shares
issuable on exercise of warrants issued to the Finder in connection with the
transactions contemplated by the Transaction Agreements, and (3) the shares
listed under the heading "Reg Rights" on Exhibit 1 to Schedule 10 hereto, and
(X) shall also state that, in accordance with Rule 416 and 457 under the
Securities Act, it also covers such indeterminate number of additional shares of
Common Stock as may become issuable to prevent dilution resulting from stock
splits, or stock dividends.
(ii) The Company will use its reasonable best efforts to cause
such Registration Statement to be declared effective on a date (the "Initial
Required Effective Date") which is no later than the earlier of (Y) five (5)
Trading Days after oral or written notice by the SEC that it may be declared
effective or (Z) ninety (90) days after the Closing Date.
(iii) If at any time (an "Increased Registered Shares Date"),
the number of shares of Common Stock represented by the Registrable Securities
issued or to be issued as contemplated by the Transaction Agreements, exceeds
ninety percent (90%) of the aggregate number of shares of Common Stock then
registered or sought to be registered in a Registration Statement which has not
yet been declared effective, the Company shall either
(X) amend the relevant Registration Statement filed by the Company
pursuant to the preceding provisions of this Section 2, if such
Registration Statement has not been declared effective by the SEC at
that time, to register the Increased Number of Shares to Be Registered
(as defined below). The "Increased Number of Shares to Be
-3-
Registered" is a number of shares of Common Stock which is at least
equal to the sum of (I) one hundred fifty percent (150%) of the number
of Purchased Shares and Additional Shares, if any, previously issued or
currently issuable, plus (II) one hundred ten percent (110%) of the
adjusted number of shares issued or still issuable upon exercise of the
Warrants (assuming for such purposes that all the Warrants had been
issued, had been eligible to be exercised and had been exercised for
the issuance of Warrant Shares in accordance with their terms, whether
or not such issuance, eligibility or exercise had in fact occurred as
of such date), plus (III) the number of Payment Shares, if any,
previously issued or currently issuable, or
(Y) if such Registration Statement has been declared effective by the
SEC at that time, file with the SEC an additional Registration
Statement (an "Additional Registration Statement") to register the
number of shares equal to the excess of the Increased Number of Shares
to Be Registered over the aggregate number of shares of Common Stock
already registered.
The Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (each, an "Increased Required
Effective Date") which is no later than (q) with respect to a Registration
Statement under clause (X) of this subparagraph (ii), the Initial Required
Effective Date and (r) with respect to an Additional Registration Statement, the
earlier of (I) five (5) Trading Days after notice by the SEC that it may be
declared effective or (II) thirty (30) days after the Increased Registered
Shares Date.
(b) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the Registrable
Securities is not filed as contemplated by this Agreement with the SEC by the
Required Filing Date, the Company will make payment to the Initial Investor in
such amounts and at such times as shall be determined pursuant to this Section
2(b).
(ii) If the Registration Statement covering the Registrable
Securities is not effective by the relevant Required Effective Date or if there
is a Restricted Sale Date, then the Company will make payments to the Initial
Investor in such amounts and at such times as shall be determined pursuant to
this Section 2(b).
(iii) The amount (the "Periodic Amount") to be paid by the
Company to the Initial Investor shall be determined as of each Computation Date
(as defined below) and such amount shall be equal to the Periodic Amount
Percentage (as defined below) of the Purchase Price for all Purchased Shares for
the period from the date following the relevant Required Filing Date or the
Required Effective Date or a Restricted Sale Date, as the case may be, to the
first relevant Computation Date (each, a "First Period"), and thereafter to each
subsequent Computation Date (each, a "Subsequent Period"). The "Periodic Amount
Percentage" means two percent (2%) of the Purchase Price for each such period
(and pro rata for any period less than thirty days). Anything in the preceding
provisions of this paragraph (iii) to the contrary notwithstanding, after the
-4-
relevant Effective Date the Purchase Price shall be deemed to refer to the Held
Shares Value. By way of illustration and not in limitation of the foregoing, if
the Registration Statement is filed on or before the Required Filing Date, but
is not declared effective until seventy-five (75) days after the Initial
Required Effective Date, the Periodic Amount will aggregate five percent (5%) of
the Purchase Price (2% for days 1-30, plus 2% for days 31-60, plus 1% for days
61-75).
(iv) Each Periodic Amount, if any, will be payable by the
Company, except as provided in the other provisions of the immediately
succeeding subparagraph (v), in cash or other immediately available funds to the
Investor (1) on the day after the Required Filing Date, the Required Effective
Date or a Restricted Sale Date, as the case may be, and (2) on the earlier of
(A) each thirtieth day thereafter, (B) the third business day after the date the
Registration Statement is filed or is declared effective, or (C) the third
business day after the Registration Statement has its restrictions removed after
the relevant Effective Date, in each case without requiring demand therefor by
the Investor.
(v) Notwithstanding the provisions of the immediately
preceding subparagraph
(A) at the option of the Company, exercisable in its discretion on the
date the Periodic Amount is due; provided, however, that the Company
may exercise this discretion if, but only if the Effective Date is
within one hundred eighty-five (185) days after the Closing Date and
the Registration Statement covering the Payment Shares is then
effective(1); or
(B) at the option of the Investor, exercisable in its sole and absolute
discretion by written notice to the Company at any time before the
Periodic Amount is paid,
all or a portion of the Periodic Amount shall be paid by the issuance of
additional shares of Common Stock to the Investor ("Payment Shares") in an
amount equal to the Periodic Amount being paid thereby divided by the then
Applicable Per Share Purchase Price Per Share (as defined below); provided,
further that the delivery date for the Payment Shares shall be three (3)
--------------------
(1) If the Investor requests payment of any accrued Periodic Amount on
any date which is earlier than one hundred eighty-five (185) days after the
Closing Date but prior to the Effective Date, and if, prior to the payment
thereof, the Investor does not elect to have such payment made in shares as
provided in clause (B) of this paragraph, the Company shall either pay such
amount to the Investor or deposit such amount in escrow with the Company Counsel
with a statement that it will issue shares to the Investor pursuant to this
clause (A) if the conditions provided herein are met. If such amount is paid in
escrow, it shall be held until such date or the earlier issuance of shares
pursuant to such election in accordance with such terms. If the shares are not
issued or issuable by such date, the Company Counsel shall release the funds to
the Investor. If the shares are duly issued to the Investor, as confirmed by the
Investor, the funds held in escrow may be released to the Company.
-5-
business days after the date the Investor or the Company, as the case may be,
gives the notice contemplated by this subparagraph. The term "Applicable Per
Share Purchase Price" means the lower of the Per Share Purchase Price or the
Adjusted Per Share Purchase Price, if any (in each case subject to adjustment in
the same manner as the Exercise Price of the Warrant is adjusted).
(vi) The parties acknowledge that the damages which may be
incurred by the Investor if the Registration Statement is not filed by the
Required Filing Date or the Registration Statement has not been declared
effective by a Required Effective Date, including if the right to sell
Registrable Securities under a previously effective Registration Statement is
suspended or the shares of the Company's stock are not listed on the Principal
Trading Market, may be difficult to ascertain. The parties agree that the
amounts payable pursuant to the foregoing provisions of this Section 2(b)
represent a reasonable estimate on the part of the parties, as of the date of
this Agreement, of the amount of such damages.
(vii) Notwithstanding the foregoing, the amounts payable by
the Company pursuant to this provision shall not be payable to the extent any
delay in the filing or effectiveness of the Registration Statement occurs
because of an act of, or a failure to act or to act timely by the Initial
Investor or its counsel.
(viii) "Computation Date" means (A) the date which is the
earlier of (1) thirty (30) days after the Required Filing Date, the Required
Effective Date or a Restricted Sale Date, as the case may be, or (2) the date
after the Required Filing Date, the Required Effective Date or Restricted Sale
Date on which the Registration Statement is filed (with respect to payments due
as contemplated by Section 2(b)(i) hereof) or is declared effective or has its
restrictions removed or the shares of the Company's stock are listed on the
Principal Trading Market (with respect to payments due as contemplated by
Section 2(b)(ii) hereof), as the case may be, and (B) each date which is the
earlier of (1) thirty (30) days after the previous Computation Date or (2) the
date after the previous Computation Date on which the Registration Statement is
filed (with respect to payments due as contemplated by Section 2(b)(i) hereof)
or is declared effective or has its restrictions removed or the shares of the
Company's stock are listed on the Principal Trading Market (with respect to
payments due as contemplated by Section 2(b)(ii) hereof), as the case may be.
(ix) Anything in the preceding provisions of this Section 2(b)
to the contrary notwithstanding, if, but only if, the Registration Statement is
declared effective within thirty-five (35) days following the Initial Required
Effective Date or five (5) Trading Days after oral or written notice by the SEC
that it may be declared effective, whichever is earlier,
(A) the provisions of Section 2(b)(i) shall not apply; and
(B) the provisions of Section 2(b)(ii) shall not apply to the fact that
the Registration Statement was initially declared effective after the
-6-
Initial Required Effective Date; and the Company will not have any obligation to
pay any Periodic Amount to the Investor with respect thereto; provided, however,
that the provisions of Section 2(b)(ii) shall continue to apply to all other
events described therein.
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall do each of the
following:
(a) Prepare promptly, and file with the SEC by the Required
Filing Date a Registration Statement with respect to not less than the number of
Registrable Securities provided in Section 2(a) above, and thereafter use its
reasonable best efforts to cause such Registration Statement relating to
Registrable Securities to become effective by the Required Effective Date and
keep the Registration Statement effective at all times other than during
Permitted Suspension Periods during the period (the "Registration Period")
continuing until the earlier of (i) the date when the Investors may sell all
Registrable Securities under Rule 144 without volume or other restrictions or
limits (the "Unrestricted Sale Date") or (ii) the date the Investors no longer
own any of the Registrable Securities, which Registration Statement (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;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities 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;
(c) Permit a single firm of counsel designated by the Initial
Investors (which, until further notice, shall be deemed to be Xxxxxxx & Prager
LLP, Attn: Xxxxxx Xxxxxxxx, Esq., which firm has requested to receive such
notification; each, an "Investor's Counsel") to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
(but not less than three (3) business days) prior to their filing with the SEC,
and not file any document in a form to which such counsel reasonably objects;
(d) Notify each Investor and the Investor's Counsel and any
managing underwriters immediately (and, in the case of (i)(A) below, not less
than three (3) business days prior to such filing) and (if requested by any such
person) confirm such notice in writing no later than one (1) business day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) whenever the SEC notifies the Company whether there will be a "review" of
such Registration Statement; (C) whenever the Company receives (or a
representative of the Company receives on its behalf) any oral or written
comments from the SEC in respect of a Registration Statement (copies or, in the
case of oral comments, summaries of such comments shall be promptly furnished by
-7-
the Company to the Investors); and (D) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or any other Federal or state governmental
authority for amendments or supplements to the Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement
covering any or all of the Registrable Securities or the initiation of any
proceedings for that purpose; (iv) if at any time any of the representations or
warranties of the Company contained in any agreement (including any underwriting
agreement) contemplated hereby ceases to be true and correct in all material
respects; (v) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose; and (vi) of the occurrence of
any event that to the best knowledge of the Company makes any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall communicate with the
Investor's Counsel with regard to its proposed written responses to the comments
contemplated in clause (C) of this Section 3(d), so that, to the extent
practicable, the Investors shall have the opportunity to comment thereon;
(e) Furnish to each Investor and to Investor's Counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(f) As promptly as practicable after becoming aware thereof,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(g) As promptly as practicable after becoming aware thereof,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of a Notice of Effectiveness or any notice of effectiveness or any stop
order or other suspension of the effectiveness of the Registration Statement at
the earliest possible time;
-8-
(h) Comply with Regulation FD or any similar rule or
regulation regarding the dissemination of information regarding the Company, and
in furtherance of the foregoing, and not in limitation thereof, not disclose to
the Investor any non-public material information regarding the Company;
(i) Notwithstanding the foregoing, if at any time or from time
to time after the date of effectiveness of the Registration Statement, the
Company notifies the Investors in writing that the effectiveness of the
Registration Statement is suspended for any reason, whether due to a Potential
Material Event or otherwise, the Investors shall not offer or sell any
Registrable Securities, or engage in any other transaction involving or relating
to the Registrable Securities, from the time of the giving of such notice until
such Investor receives written notice from the Company that such the
effectiveness of the Registration Statement has been restored, whether because
the Potential Material Event has been disclosed to the public or it no longer
constitutes a Potential Material Event or otherwise; PROVIDED, HOWEVER, that the
Company may not so suspend the right to such holders of Registrable Securities
during the periods the Registration Statement is required to be in effect other
than during a Permitted Suspension Period (and the applicable provisions of
Section 2(b) shall apply with respect to any such suspension other than during a
Permitted Suspension Period);
(j) Use its reasonable efforts to secure and maintain, if and
to the extent required or contemplated by the rules or regulations of the
Principal Trading Market, the designation of all the Registrable Securities
covered by the Registration Statement on the Principal Trading Market within the
meaning of Rule 11Aa2-1 of the SEC under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the quotation of the Registrable Securities on
the Principal Trading Market;
(k) Provide a transfer agent ("Transfer Agent") and registrar,
which may be a single entity, for the Registrable Securities not later than the
initial Effective Date;
(l) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within five (5) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the Transfer Agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and opinion
of such counsel, which shall include, without limitation, directions to the
Transfer Agent to issue certificates of Registrable Securities(including
certificates for Registrable Securities to be issued after the Effective Date
and replacement certificates for Registrable Securities previously issued)
without legends or other restrictions, subject to compliance with applicable law
and other rules and regulations, including, without limitation, prospectus
delivery requirements; and
-9-
(m) Take all other reasonable administrative steps and actions
(including the participation of Company counsel) necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement; provided, however, that the foregoing does not
require that the Company take any steps whatsoever regarding the identification
or selection of a broker to sell the Registrable Securities, the identification
of buyers of the Registrable Securities, or the negotiation of the sale terms of
the Registrable Securities.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) 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 hereunder and, without limiting the generality of the
foregoing, each Investor shall promptly, but in any event, within ten (10)
Trading Days of a request from the Company, provide all such information
requested by the SEC concerning such Investor or its beneficial owners, 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 (in which event the Company shall have no further obligations to the
Investor under Section 2 of this Agreement); and
(b) 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),
(g) or (i) above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f), (g) or (i),
and, if so directed by the Company, such Investor shall deliver to the Company
(at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in such 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 of the Investor) incurred in
connection with registrations, filings or qualifications pursuant to Section 3,
but including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company shall be borne by the Company.
6. INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor, and
each Buyer Control Person (each, an "Indemnified Party"), against any losses,
-10-
claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or 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, (ii) any untrue statement or alleged
untrue statement of a material fact 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
Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively
referred to as "Violations"). Subject to clause (b) of this Section 6, the
Company shall reimburse the Investors, promptly as such expenses are incurred
and are due and payable, for any 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) shall not (I) apply to any 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 or on behalf
of such Indemnified Party 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(b) hereof; (II) be available to the extent such Claim is based on a
failure of the Investor to deliver or cause to be delivered the prospectus made
available by the Company or the amendment or supplement thereto made available
by the Company; (III) be available to the extent such Claim is based on the
delivery of a prospectus by the Investor after receiving notice from the Company
under Section 3(f), (g) or (i) hereof (other than a notice regarding the
effectiveness of the Registration Statement or any amendment or supplement
thereto), or (IV) 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 or delayed. The Investor will
indemnify the Company and its officers, directors and agents (each, an
"Indemnified Party") against any claims 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 or on behalf of such Investor, expressly for use in
connection with the preparation of the Registration Statement or the amendment
or supplement thereto or that arises out of or in connection with the failure by
the Investor to meet the prospectus delivery requirements of the Securities Act,
subject to such limitations and conditions as are applicable to the
indemnification provided by the Company to this Section 6. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
-11-
(b) In case any such action is brought against any Indemnified
Party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified,
assume the defense thereof, subject to the provisions herein stated and after
notice from the indemnifying party to such Indemnified Party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
Indemnified Party under this Section 6 for any legal or other reasonable
out-of-pocket expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action to its
final conclusion. The Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and reasonable out-of-pocket expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the Indemnified
Party provided such counsel is of the opinion that all defenses available to the
Indemnified Party can be maintained without prejudicing the rights of the
indemnifying party. 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 under
this Section 6, except to the extent that the indemnifying party is prejudiced
in its ability to defend such action. 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 such expense, loss, damage or
liability is incurred and is due and payable.
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 (a) 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; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) except where the seller has committed fraud (other
than a fraud by reason of the information included or omitted from the
Registration Statement as to which the Company has not given notice as
contemplated under Section 3 hereof) or intentional misconduct, contribution 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 SECURITIES ACT AND EXCHANGE ACT. With a view
to making available to Investor the benefits of Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the SEC that may at
any time permit Investor to sell securities of the Company to the public without
Registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
-12-
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) until the Unrestricted Sale Date, furnish to the Investor
so long as the 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 Securities Act and the Exchange Act, (ii) if not
available on the SEC's XXXXX system, 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 Investor to sell such securities pursuant to Rule 144 without
Registration; and
(d) at the request of any Investor holding Registrable
Securities (a "Holder"), give its Transfer Agent instructions (supported by an
opinion of Company counsel, if required or requested by the Transfer Agent) to
the effect that, upon the Transfer Agent's receipt from such Holder of
(i) a certificate (a "Rule 144 Certificate") certifying (A) that the
Holder's holding period (as determined in accordance with the
provisions of Rule 144) for the shares of Registrable Securities which
the Holder proposes to sell (the "Securities Being Sold") is not less
than (1) year and (B) as to such other matters as may be appropriate in
accordance with Rule 144 under the Securities Act, and
(ii) an opinion of counsel acceptable to the Company (for which
purposes it is agreed that the initial Investor's Counsel shall be
deemed acceptable if not given by Company Counsel) that, based on the
Rule 144 Certificate, Securities Being Sold may be sold pursuant to the
provisions of Rule 144, even in the absence of an effective
Registration Statement,
the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the Holder,
as the seller or transferor thereof, or the status, including any relevant
legends or restrictions, of the shares of the Securities Being Sold while held
by the Holder). If the Transfer Agent reasonably requires any additional
documentation at the time of the transfer, the Company shall deliver or cause to
be delivered all such reasonable additional documentation as may be necessary to
effectuate the issuance of an unlegended certificate.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investor to any transferee of the Registrable
Securities or other Securities (such transfer or assignment being subject to the
provisions of Section 4(a) of the Securities Purchase Agreement) only if 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 or
-13-
assignee and (b) the securities with respect to which such registration rights
are being transferred or assigned.
10. NO INCONSISTENT AGREEMENTS. Except as and to the extent
specifically set forth in Schedule 10 attached hereto, neither the Company nor
any of its subsidiaries has, as of the date hereof, nor shall the Company nor
any of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as and to the extent specifically set forth in
Schedule 10 attached hereto, neither the Company nor any of its subsidiaries has
previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person. Without limiting the generality
of the foregoing, without the written consent of the Holders of a majority of
the then outstanding Registrable Securities, the Company shall not grant to any
person the right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Holders set forth herein, and are
not otherwise in conflict or inconsistent with the provisions of this Agreement.
11. AMENDMENT OF REGISTRATION RIGHTS. Any provision 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 a eighty (80%) percent interest of the Registrable Securities (as
calculated by the number of Purchased Shares then held by the Investors). Any
amendment or waiver effected in accordance with this Section 11 shall be binding
upon each Investor and the Company.
12. 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) Notices required or permitted to be given hereunder shall
be given in the manner contemplated by the Securities Purchase Agreement, (i) if
to the Company or to the Initial Investor, to their respective address
contemplated by the Securities Purchase Agreement, and (ii) if to any other
Investor, at such address as such Investor shall have provided in writing to the
Company, or at such other address as each such party furnishes by notice given
in accordance with this Section 12(b).
(c) Failure of 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.
-14-
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
County of New York or the state courts of the State of New York sitting in the
County of New York in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on FORUM NON COVENIENS, to the bringing of any
such proceeding in such jurisdictions.
(e) The Company and the Investor hereby waive a trial by jury
in any action, proceeding or counterclaim brought by either of the parties
hereto against the other in respect of any matter arising out of or in
connection with this Agreement or any of the other Transaction Agreements.
(f) 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 or the
validity or enforceability of this Agreement in any other jurisdiction.
(g) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(h) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(i) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof. (j)
This Agreement may be executed in one or more 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 telephone line facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
(k) The Company acknowledges that any failure by the Company
to perform its obligations under Section 3(a) hereof, or any delay in such
performance could result in loss to the Investors, and the Company agrees that,
in addition to any other liability the Company may have by reason of such
failure or delay, the Company shall be liable for all direct damages caused by
any such failure or delay, unless the same is the result of force majeure.
Neither party shall be liable for consequential damages.
(l) This Agreement (including to the extent relevant the
provisions of other Transaction Agreements) constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-15-
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
COMPANY:
XXXXXXXX TECHNOLOGIES, INC.
By: ________________________________
Name:_______________________________
Title:______________________________
INITIAL INVESTOR:
____________________________________
[PRINT NAME OF INITIAL INVESTOR]
By: ________________________________
Name:_______________________________
Title:______________________________
-16-
Schedule 10
Attached as Exhibit 1 hereto is a schedule of shareholders and shares registered
in their names or which they have rights to acquire from the Company, by way of
conversion or otherwise. For each such shareholder, the shares listed under the
heading "Reg Rights" on the schedule may also be included in the Registration
Statement.
The Investors understand and agree that, anything in section 10 or elsewhere in
the Agreement to the contrary notwithstanding, the Company may file a
registration statement for its equity line concurrently with or promptly after
the registration statement referred to in the Agreement.
-17-
