Exhibit 10.3
REGISTRATION RIGHTS AGREEMENT
This AGREEMENT is made as of December 31, 1996, by and among WORLDCOMM
SYSTEMS INC, a Delaware corporation (hereinafter referred to as the
"Company"), and those persons listed on Exhibit A attached hereto.
RECITALS
Each of the Holders (as defined below) is the owner of shares of the
Company's Class B Preferred Stock, par value $.01 per share. The shares of such
Preferred Stock held by such Holders are referred to in this Agreement as the
"Shares."
1. Registration Rights.
(a) Definitions. For purposes of this Section 1:
(i) The term "Act" means the Securities Act of 1933, as amended, or
any other statute in effect from time to time corresponding to such act.
(ii) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act and the declaration or ordering of effectiveness of such
registration statement.
(iii) The term "Registrable Securities" means (i) the shares of Common
Stock issuable upon conversion of the Shares, (ii) any securities of the Company
issued as a dividend or other distribution with respect to, or in exchange or in
replacement of, Registrable Securities and (iii) shares of Common Stock the
holders of which are entitled to registration rights pursuant to other
agreements of like tenor with the Company. Registrable Securities, if
transferred pursuant to an exemption from registration under the Act, will
remain Registrable Securities.
(iv) The term "Holder" means (i) any stockholder holding Registrable
Securities originally acquired by such person, and (ii) any other person holding
Registrable Securities to whom these registration rights have been transferred.
(v) The term "Initial Public Offering" means the first underwritten
public offering of the Company's securities amounting to not less than
$3,000,000.
(b) Rights to Include Shares in Initial Public Offering. Subject to
Sections 1(f) and 1(g) if at any time or from time to time the Company
determines to register its Common Stock under the Act in connection with an
initial public offering of such securities, the Company shall, each such time,
promptly give each Holder written notice of such determination. Upon the written
request made on behalf of the Holder in accordance with this Section 1(b), and
given within twenty (20) days after mailing of any such notice by the Company,
the Company shall use its best efforts to cause to be included in such
registration statement all of the Registrable Securities owned by such Holder
with respect to which registration has been so requested. A request for
registration in accordance which this Section 1(b) may be made only by Xxxxxx X.
Xxxxxxx, as agent and attorney-in-fact for the Holders, and may not be made by
any Holder independently. Each Holder constitutes and appoints Xxxxxx X. Xxxxxxx
as his agent and attorney-in-fact for the purpose of making such request, with
full power and authority to determine, subject to the following provisions of
this Section 1(b), (i) whether to make such request, and (ii) if such request is
made, and the number of shares of Holders to be included in such registration.
In determining whether to make such request, and the number of shares with
respect to which registration is to be requested, Xx. Xxxxxxx shall consider,
among other things, any adverse impact which the inclusion of Holders' shares
would have on the Company's ability to obtain financing. If required by the
underwriter in connection with such offering, each Holder shall agree to a
"lock-up" of his shares for such period as the underwriter may require. Each
Holder constitutes and appoints Xxxxxx X. Xxxxxxx as his agent and
attorney-in-fact to execute and deliver on his behalf a "lock-up" agreement with
such underwriter in such form and upon such terms as Xx. Xxxxxxx may, in his
sole discretion, determine. Each Holder further acknowledges that Xx. Xxxxxxx is
a Director of the Company, and in that capacity has certain fiduciary
obligations to the Company and its stockholders, and nothing contained herein is
intended to require Xx. Xxxxxxx to take any action which he believes to be
inconsistent with such obligations.
(c) Piggyback Registration. Subject to Sections 1(f) and 1(g), if at any
time or from time to time the Company proposes to register any of its equity
securities under the Act in connection with a primary or secondary public
offering of such securities solely for cash on a form that would also permit the
registration of the Registrable Securities, the Company shall, each such time,
promptly give each Holder written notice of such determination. Upon the written
request of any Holder given within twenty (20) days after mailing of any such
notice by the Company, the Company shall use its best efforts to cause to be
registered under the Act all of the Registrable
Securities that each such Holder has requested be registered. Notwithstanding
the foregoing, the Company shall not be obligated to include shares to be
offered by Holders in a registration statement in accordance with this Section
1(c) on more than two occasions.
(d) Obligations of the Company. Whenever required under Section 1(b) or
1(c) to use its best efforts to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably possible:
(i) Prepare and file with the Securities and Exchange Commission
("SEC") a registration statement with respect to such Registrable Securities and
use its best efforts to cause such registration statement to become and remain
effective; provided, however, that in connection with any proposed registration
intended to permit an offering of any securities from time to time (i.e., a
so-called "shelf registration"), the Company shall in no event be obligated to
cause any such registration to remain effective for more than ninety (90) days.
(ii) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(iii) Furnish to the Holders and deliver as directed such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement, provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, and further provided that (anything
in this Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling Stockholders, then such
expenses shall be payable by selling Stockholders pro rata, to the extent
required by such jurisdiction.
(e) Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 1 that the
Holders shall furnish to the Company such information regarding them, the
Registrable Securities held by them, and the intended method of disposition of
such securities as the Company shall reasonably request and as shall be required
in connection with the action to be taken by the Company.
(f) Registration Expenses. In the case of any registration effected
pursuant to Section 1(b) or 1(c), the Company shall bear all registration and
qualification fees and (excluding underwriters' discounts and commissions),
including any additional costs and disbursements of counsel for the Company that
result from the inclusion of securities held by the Holders in such
registration. Each selling Holder shall bear the fees and costs of its own
counsel in connection with any registration effected pursuant to such Sections
(g) Underwriting Requirements. In connection with any offering involving an
underwriting of shares being issued by the Company, the Company shall not be
required to include any of the Holders' Registrable Securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it. If the total amount of
Registrable Securities that all Holders request to be included in an offering
pursuant to Section 1(c) above exceeds the amount of securities that the
underwriters reasonably believe compatible with the success of the offering, the
Company shall only be required to include in the offering such number of shares
as the underwriters believe are compatible with the success of the offering (the
securities so included to be apportioned pro rata among the selling Holders
according to the total amount of Common Stock held by the selling Holders as if
all options and warrants held by them had been exercised, or in such other
proportions as shall mutually be agreed to by such selling Holders). In the
event a pro rata apportionment is required for purposes of a registration
pursuant to Section 1(b), securities shall be included in the offering in the
following priority and the pro rata apportionment shall occur in the class after
the last class which can be included in the offering without apportionment: (1)
all securities being offered by the Company for its own account; (2) Registrable
Securities of Holders; and (3) Common Stock of executive officers of the
Company.
(h) Delay of Registration. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
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(i) Indemnification and Contribution, Subject to Section 1(f) in the event
any Registrable Securities are included in a registration statement under
Section 1:
(i) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder requesting or joining in a registration, any
underwriter (as defined in the Act) for it, and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the
Securities Exchange Act of 1934 (the "1934 Act") against any losses, claims,
damages or liabilities, joint or several, to which they may become subject under
the Act, the 1934 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based on any
untrue or alleged untrue statement of any material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus, or any amendments or supplements thereto, 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 arise out of any violation by the Company of any rule or
regulation promulgated under the Act or the 1934 Act applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration; and will reimburse each such Holder, such underwriter, or
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 1(i)(i) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld) nor shall the Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in connection with such registration statement,
preliminary prospectus, final prospectus, or amendments or supplements thereto,
in reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by any such Holder, underwriter or
controlling person
(ii) To the extent permitted by law, each Holder requesting or joining
in a registration will severally indemnify and hold harmless the Company, each
of its directors, each of its officers who have signed the registration
statement, each person, if any, who controls the Company within the meaning of
the Act or the 1934 Act, and each agent and any underwriter for the Company
(within the meaning of the Act or the 0000 Xxx) against any losses, claims,
damages or liabilities, joint or several, to which the Company or any such
director, officer, controlling person, agent or underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus, or any amendments or supplements thereto, 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, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in such registration statement, preliminary or final prospectus, or amendments
or supplements thereto, in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
person, agent or underwriter in connection with investigating or defending any
such loss, claim, damage, liability or action, provided, however, that the
indemnity agreement contained in this Section 1(i)(ii) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld).
(iii) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this Section, notify the indemnifying party in writing of the commencement
thereof and (unless the interest of the indemnifying party conflicts with that
of the indemnified party) the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties. The failure to notify
an indemnifying party promptly of the commencement of any such action, if
prejudicial to his ability to defend such action, shall relieve such
indemnifying party, to the extent that he is prejudiced thereby, of any
liability to the indemnified party under this Section, but the omission so to
notify the indemnifying party will not relieve him of any liability that he may
have to any indemnified party otherwise than under this Section
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(iv) In order to provide for just and equitable contribution to joint
liability under the Act in any case in which either (i) any Holder exercising
rights under this Agreement, or any controlling person of any such Holder, makes
a claim for indemnification pursuant to this Section 1(i) but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 1(i) provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
such selling Holder or any such controlling person in circumstances for which
indemnification is provided under this Section 1(i); then, and in each such
case, the Company and such Holder will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that such Holder is responsible for the
portion represented by the percentage that the public offering price of its
Registrable Securities offered by the registration statement bears to the public
offering price of all securities offered by such registration statement, and the
Company is responsible for the remaining portion; provided, however. that, in
any such case, (A) no such Holder will be required to contribute any amount in
excess of the public offering price of all such Registrable Securities offered
by it pursuant to such registration statement; and (B) no person or entity
guilty of fraudulent misrepresentation (within the meaning of Section 1(f) of
the Act) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
2. Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of the Company to the public without registration, the Company
agrees to use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times subsequent to ninety (90) days
after the effective date of the first registration statement covering an
underwritten public offering filed by the Company;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1934 Act, and
(c) furnish to any Holder so long as such Holder owns any of the
Registrable Securities forthwith upon request a written statement by the Company
that it has complied with the reporting requirements of Rule 144 (at any time
after ninety (90) days after the effective date of said first registration
statement filed by the Company), and of the Act and the 1934 Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed by the Company as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC permitting the selling of any such
securities without registration.
3. Lockup Agreement. The Holders shall, in connection with any registration of
the Company's Common Stock for sale to the general public, upon the request of
the Company or the underwriters managing any underwritten offering of the
Company's securities, not sell, make short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Registrable 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 one hundred twenty (120) days) from the effective date of such
registration as the Company or the underwriters may specify; provided, however,
that the Company may not discriminate among the Holders with respect to any
lockup arrangements pursuant to this Section 3.
4. Transfer of Registration Rights. The registration rights of a Holder under
Sections 1(b) may be transferred to a transferee who acquires at least 20% of
the Registrable Securities originally issued to the Holder, or to a partner or
affiliated partnership of such Holder without restriction as to minimum transfer
amount. The Company shall be given written notice by the Holder at the time of
such transfer stating the name and address of the transferee and identifying the
securities with respect to which the rights under Section 1 are being assigned.
5. Notices. Any notice required or permitted to be given pursuant to this
Agreement shall be in writing and shall be deemed to have been properly given
when delivered by hand or mailed by registered or certified mail, return receipt
requested, with postage prepaid, to the party or parties to whom such notice is
intended to be given at the address of such party first above written or such
other address as such party may designate by notice given hereunder
6. Miscellaneous.
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(a) This Agreement shall be governed by the laws of the State of New York.
If any provision or provisions of this Agreement is found to be void or
unenforceable, the remaining provisions of this Agreement shall remain binding
and in full force and effect
(b) Wherever appropriate, the singular shall be deemed also to mean the
plural, and visa versa, and the male gender shall comprehend the female and
neuter. The captions in this Agreement are for convenience only, and shall not
affect the construction of the provisions hereof.
(c) This Agreement may be terminated, waived or modified only by a written
agreement executed by the party against which enforcement of such termination,
waiver or modification is sought. This Agreement merges all prior understandings
of the parties with respect to the subject matter hereof:
(d) This Agreement may be executed in several counterparts, each of which
shall constitute an original, but all counterparts shall constitute but one and
the same Agreement.
(e) This Agreement shall be binding upon and shall inure to the benefit of
the parties and their respective heirs, executors, administrators, legal
representatives, successors and permitted assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ATTEST: WORLDCOMM SYSTEMS INC.
_____________________________ By: _____________________________________
Xxxxxx XxXxxxx Xxxxx X. Xxxxxxxxx, Chairman & CEO
_________________________________
Stockholder
By: _________________________________
(Print name and title if signing
on behalf of a corporation,
partnership, trust or other
legal entity)
Xxxxxx X. Xxxxxxx joins in this Agreement solely to evidence his agreement
to the provisions of Section 1(b).
_________________________________
Xxxxxx X. Xxxxxxx
[Letterhead of Worldcomm Systems Inc.]
January 28, 1997
Xx. Xxxxxx Xxxxxxx
Xxxxxxx Associates
00 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Dear Xx. Xxxxxxx:
This will confirm to you that Worldcomm Systems Inc. (WSI) will register all the
shares of the preferred B shareholders from the private offering conducted by
Northeast Securities that closed on 12/31/96.
This registration will become effective within 54 weeks of any IPO of the
company. In the event that the rule 144 sale restriction expires prior to that
time, a registration will not be undertaken for any shares that can be sold
under that rule.
Thank you for your efforts in the company's behalf.
Very truly yours,
WORLDCOMM SYSTEMS INC.
/s/ Xxxxx X. Xxxxxxxxx
Xxxxx X. Xxxxxxxxx
Chief Executive Officer and Chairman
CC: X. Xxxxxxxx 000-000-0000
X. Xxxxxxx 000-000-00[illegible]
Note: This letter is revised per comments from X. Xxxxxxxx.
