REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated this 19th day of July, 2001 (this
"Agreement"), between Emergent Financial Group, Inc., a Delaware corporation,
with principal executive offices located at 232-10711 Cambie Road, Richmond, BC
(the "Company"), and Shareholders (the "Shareholders") holding Senior Series E
Secured Preferred Stock (the "Stock"), Shareholder represented by their Agent,
Xxxxxx X. Xxxx, 0000 X. Xxxxxxxx Xxxx Xxxxxxxxx, Xx. 0, Xxxxxxxx Xxxx,
Xxxxxxxxxx 00000 (the "Agent").
W I T N E S S E T H
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WHEREAS, upon the terms and subject to the conditions of the Shareholder
Agreement and Plan of Reorganization dated July 19, 2001 (the "Plan"), for the
Acquisition of KeyCom, Inc. by Emergent Financial Group, Inc. ("Emergent"), the
Company has agreed to issue 250,000 E senior preferred shares with a stated
value of $100 per share which, upon the terms and subject to the conditions of
the Certificate of Designations of Rights, Preferences and Privileges and
Restrictions of Series E Preferred Stock (the "Certificate of Designations") ;
and
WHEREAS, to induce the Shareholders to execute and deliver the Plan the
Company has agreed to provide with respect to the Common Stock issued or
issuable upon conversion of the Preferred Stock certain registration rights
under the Securities Act;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
meanings:
(i) "AFFILIATE" of any specified Person means any other Person
who directly, or indirectly through one or more intermediaries, is in control
of, is controlled by, or is under common control with, such specified Person.
For purposes of this definition, control of a Person means the power, directly
or indirectly, to direct or cause the direction of the management and policies
of such Person whether by contract, securities, ownership or otherwise; and the
terms "controlling" and "controlled" have the respective meanings correlative to
the foregoing.
(ii) "COMMISSION" means the Securities and Exchange Commission.
(iii) "EXCHANGE ACT" means the Securities Exchange Act of 1934 and
the rules and regulations of the Commission thereunder, or any similar successor
statute.
(iv) "SHAREHOLDER" means the Shareholders, as represented by their
Agent. Shareholder and any transferee or assignee of Registrable Securities who
agrees to become bound by all of the terms and provisions of this Agreement and
all other Agreements made by the Shareholders (or their Agent in a
representative capacity) relative to the securities subject of this Agreement,
and in accordance with SECTION 8 hereof.
(v) "MARKET PRICE" on any date of determination means the closing
bid price of a share of Common Stock on such day as reported on the American
Stock Exchange, or Nasdaq SmallCap Market ("NASDAQ") or, if such security is not
listed or admitted to trading on the NASDAQ, on the principal national security
exchange or quotation system on which such security is quoted or listed or
admitted to trading (including the OTC Bulletin Board), or, if not quoted or
listed or admitted to trading on any national securities exchange or quotation
system, the closing bid price of such security on the over--the-counter market
on the day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or if not so
available, in such manner as furnished by any NASDAQ member firm of the National
Association of Securities Dealers, Inc. selected from time to time by the Board
of Directors of the Company for that purpose, or a price determined in good
faith by the Board of Directors of the Company as being equal to the fair market
value thereof, as the case may be.
(vi) "PERSON" means any individual, partnership, corporation,
limited liability company, joint stock company, association, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
(vii) "PROSPECTUS" means the prospectus (including" without
limitation, any preliminary prospectus and any final prospectus filed pursuant
to Rule 424(b) under the Securities Act, including any prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance on Rule 430A under the Securities Act)
included in the Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by the Registration Statement and by all
other amendments and supplements to such prospectus, including all material
incorporated by reference in such prospectus and all documents filed after the
date of such prospectus by the Company under the Exchange Act and incorporated
by reference therein.
(viii) "REGISTRABLE SECURITIES" means the Common Stock issued or
issuable upon conversion of the Preferred Stock; provided, however, a share of
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Common Stock shall cease to be a Registrable Security for purposes of this
Agreement when it no longer is a Restricted Security.
(ix) "REGISTRATION STATEMENT" means a registration statement of the
Company filed on an appropriate form under the Securities Act providing for the
registration of, and the sale on a continuous or delayed basis by the holders
of, all of the Registrable Securities pursuant to Rule 415 under the Securities
Act, including the Prospectus contained therein and forming a part thereof, any
amendments to such registration statement and supplements to such Prospectus,
and all exhibits and other material incorporated by reference in such
registration statement and Prospectus.
(x) "RESTRICTED SECURITY" means any share of Common Stock issued
or issuable upon conversion of the Preferred Stock, except any such share that
(i) has been registered pursuant to an effective registration statement under
the Securities Act and sold in a manner contemplated by the Prospectus included
in the Registration Statement, (ii) has been transferred in compliance with the
resale provisions of Rule 144 under the Securities Act (or any successor
provision thereto) or is transferable pursuant to paragraph (k) of Rule 144
under the Securities Act (or any successor provision thereto), or (iii)
otherwise has been transferred and a new share of Common Stock not subject to
transfer restrictions under the Securities Act has been delivered by or on
behalf of the Company.
(xi) "SECURITIES ACT" means the Securities Act of 1933 and the
rules and, regulations of the Commission thereunder, or any similar successor
statute.
(b) All capitalized terms used and not defined herein have the respective
meaning assigned to them in the Securities Purchase Agreement.
2. REGISTRATION.
(a) FILING AND EFFECTIVENESS OF REGISTRATION STATEMENT. The Company
shall prepare and file with the Commission in compliance with the provisions of
the Plan a Registration Statement relating to the offer and sale of the
Registrable Securities and shall use its best efforts to cause the Commission to
declare such Registration Statement effective under the Securities Act as
promptly as practicable but not later than 60 days after the expiration of the
preemptive l call right as described in Section 5.14 of the Certificate of
Designations. The Company shall notify the Shareholder by written notice that
such Registration Statement has been declared effective by the Commission within
one business day of such declaration by the Commission.
(b) REGISTRATION DEFAULT. If the Registration Statement covering the
Registrable Securities or the Additional Registrable Securities (as defined in
Section 2 (d) hereof) required to be filed by the Company pursuant to Section
2(a) or 2(d) hereof, as the case may be, is not (i) filed with the
Commissionwithin 60 days after the date required by the Planr (the "Required
Date") (ii) declared effective by the Commission within 90 days after the
Required Date, or if the Commission notifies the Company that it will not review
the Registration Statement and the Registration Statement is not declared
effective not later than seven business days thereafter (any of which, without
duplication, an "Initial Date"), then the Company shall
ShareholdersShareholdersShareholders, such failure shall be regarded as an Event
of Default, pursuant to the Security Agreement of even date herewith to which
the Shareholders and the Company are party, incorporated by reference.
As used in this Section 2 (b), "Computation Date" means the date which is
30 days after the Initial Date and, if the Registration Statement required to be
filed by the Company pursuant to Section 2(a) has not theretofore been declared
effective by the Commission, each date which is 30 days after the previous
Computation Date until such Registration Statement is so declared effective.
The registration of the Securities pursuant to this provision shall not
affect or limit Shareholder's other rights or remedies as set forth in this
Agreement.
(c) ELIGIBILITY FOR USE OF FORM S-3. The Company agrees that at such time
as it meets all the requirements for the use of Securities Act Registration
Statement on Form S-3 it shall file all reports and information required to be
filed by it with the Commission in a timely manner and take all such other
action so as to maintain such eligibility for the use of such form.
(d) PIGGY-BACK REGISTRATIONS. (i) If the Company proposes to register any
of its warrants, Common Stock or any other shares of common stock of the Company
under the Securities Act (other than a registration (A) on Form S-8 or S-4 or
any successor or similar forms, (B) relating to Common Stock or any other shares
of common stock of the Company issuable upon exercise of employee share options
or in connection with any employee benefit or similar plan of the Company or (C)
in connection with a direct or indirect acquisition by the Company of another
Person or any transaction with respect to which Rule 145 [or any successor
provision) under the Securities Act applies], whether or not for sale for its
own account, it will each such time, give prompt written notice at least 20 days
prior to the anticipated filing date of the registration statement relating to
such registration to the Shareholders, which notice shall set forth such
Shareholders' rights under this Section 2(e) and shall offer the Shareholders
the opportunity to include in such registration statement such number of
Registrable Securities as the Initial Shareholders or their Agent may request.
Upon the written request of an Shareholders made within ten (10) days after the
receipt of notice from the Company (which request shall specify the number of
Registrable Securities intended to be disposed of by such Initial Shareholders),
the Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities that the Company has been so
requested to register by the Initial Shareholders, to the extent requisite to
permit the disposition of the Registrable Securities so to be registered;
provided, however, that (I) if such registration involves a public offering, the
Shareholders must sell their Registrable Securities to the underwriters selected
as provided in Section 2(f) hereof on the same terms and conditions as apply to
the Company and (II) if, at any time after giving written notice of its
intention to register any Registrable Securities pursuant to this Section 2 (e)
and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any reason
not to register such Registrable Securities, the Company shall give written
notice to the Shareholders and, thereupon, shall be relieved of its obligation
to register any Registrable Securities in connection with such registration. The
Company's obligations under this Section 2(e) shall terminate on the date that
the registration statement to be filed in accordance with Section 2(a) is
declared effective by the Commission.
(ii) If a registration pursuant to this Section 2(e) involves a public
offering and the managing underwriter thereof advises the Company that, in its
view, the number of shares of Common Stock or other shares of Common Stock that
the Company and the Shareholders intend to include in such registration exceeds
the largest number of shares of Common Stock or Warrants (including any other
shares of Common Stock or Warrants of the Company) that can be sold without
having an adverse effect on such public offering (the "Maximum Offering Size"),
the Company will include in such registration, only that number of shares of
Common Stock or Warrants, as applicable, such that the number of Registrable
Securities registered does not exceed the Maximum Offering Size, with the
difference between the number of shares in the Maximum Offering Size and the
number of shares to be issued by the Company to be allocated (after including
all shares to be issued and sold by the Company) among the Company and the
Shareholders pro rata on the basis of the relative number of Registrable
Securities offered for sale under such registration by each of the Company and
the Shareholders.
If as a result of the proration provisions of this Section 2 (e)(ii), any
Shareholders is not entitled to include all such Registrable Securities in such
registration, such Shareholders may elect to withdraw its request to include any
Registrable Securities in such registration. With respect to registrations
pursuant to this Section 2(e), the number of securities required to satisfy any
underwriter's over-allotment option shall be allocated pro rata among the
Company and the Shareholders on the basis of the relative number of securities
otherwise to be included by each of them in the registration with respect to
which such over-allotment option relates.
3. Obligations of the Company. In connection with the registration of
the Registrable Securities, the Company shall:
(a) Promptly (i) prepare and file with the Commission such amendments
(including post-effective amendments) to the Registration Statement and
supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Shareholders for resales of the Registrable
Securities for a period of three years from the date on which the Registration
Statement is first declared effective by the Commission (the "Effective Time")
or such shorter period that will terminate when all the Registrable Securities
covered by the Registration Statement have been sold pursuant thereto in
accordance with the plan of distribution provided in the Prospectus, transferred
pursuant to Rule 144 under the Securities Act or otherwise transferred in a
manner that results in the delivery of new securities not subject to transfer
restrictions under the Securities Act (the "Registration Period") and (ii) take
all lawful action such that each of (A) the Registration Statement and any
amendment thereto does not, when it becomes effective, contain an 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, not misleading and
(B) the Prospectus forming part of the Registration Statement, and any amendment
or supplement thereto, does not at any time during the Registration Period
include an 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 under which they were made, not misleading.
Notwithstanding the foregoing provisions of this Section 3(a), the Company may,
during the Registration Period, suspend the use of the Prospectus for a period
not to exceed 20 days (whether or not consecutive) in any 12-month period if the
Board of Directors of the Company determines in good faith that because of
pending mergers or other business combination transactions, the planned
acquisition or divestiture of assets, pending material corporate developments
and similar events, it is in the best interests of the Company to suspend such
use, and prior to or contemporaneously with suspending such use, the Company
provides the Shareholders with written notice of such suspension, which notice
need not specify the nature of the event giving rise to such suspension. At the
end of any such suspension period, the Company shall provide the Shareholders
with written notice of the termination of such suspension;
(b) During the Registration Period, comply with the provisions of the
Securities Act with respect to the 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 Shareholders as set forth in the Prospectus forming part of
the Registration Statement or are no longer Registrable Securities;
(c)(i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide draft copies thereof
to the Shareholders and reflect in such documents all such comments as the
Shareholders (and their counsel) reasonably may propose with regard to Holder
ownership and the Plan of Distribution included therein and (ii) furnish to each
Shareholder whose Registrable Securities are included in the Registration
Statement and its legal counsel identified to the Company, (A) promptly after
the same is prepared and publicly distributed, filed with the Commission, or
received by the Company, one copy of the Registration Statement, each
Prospectus, and each amendment or supplement thereto, and (B) such number of
copies of the Prospectus and all amendments and supplements thereto and such
other documents, as such Shareholder may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Shareholder;
(d)(i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Shareholders who hold a majority-in-interest of the
Registrable Securities being offered or the Shareholder's Agent reasonably
request, (ii) prepare and file in such jurisdictions such amendments (including
post--effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times during the Registration Period, (iii) take all such other lawful actions
as may be necessary to maintain such registrations and qualifications in effect
at all times during the Registration Period, and (iv) take all such other lawful
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
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required in connection therewith or as a condition thereto to (A) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d),(B) subject itself to general taxation in any such
jurisdiction or (C) file a general consent to service of process in any such
jurisdiction;
(e) As promptly as practicable after becoming aware of such event, notify
each Shareholder of the occurrence of any event, 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
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Shareholder as such
Shareholder may reasonably request;
(f) As promptly as practicable after becoming aware of such event, notify
each Shareholder who holds Registrable Securities being sold (or, in the event
of an underwritten offering, the managing underwriters) of the issuance by the
Commission of any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all lawful action
to effect the withdrawal, recession or removal of such stop order or other
suspension;
(g)(i) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange, and
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than the effective date of the
Registration Statement;
(i) Cooperate with the Shareholders 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 Shareholders reasonably may
request and registered in such names as the Shareholder may request; and, within
three business days after a Registration Statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Shareholders whose Registrable
Securities are included in such Registration Statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(j) Take all such other lawful actions reasonably necessary to expedite and
facilitate the disposition by the Shareholders of their Registrable Securities
in accordance with the intended methods therefor provided in the Prospectus
which are customary under the circumstances;
(k) If required, make generally available to its security holders as soon
as practicable, but in any event not later than 18 months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(1) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
(m) Enter into such customary agreements (including an underwriting
agreement in customary form in the event of an underwritten offering) and take
such other lawful and reasonable action to expedite and facilitate the
registration and disposition of the Registrable Securities, and in connection
therewith, if an underwriting agreement is entered into, use its best efforts to
cause the same to contain indemnification provisions and procedures
substantially identical to those set forth in this Agreement;
(n) (i) Make reasonably available for inspection by Shareholders, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Shareholders or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Shareholders or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents that are
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designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material non-public information shall be kept
confidential by such Shareholders and any such underwriter, attorney, accountant
or agent (pursuant to an appropriate confidentiality agreement in the case of
any such holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided further that, if the foregoing inspection and information gathering
----------------
would otherwise disrupt the Company's conduct of its business, such inspection
and information gathering shall, to the maximum extent possible, be coordinated
on behalf of the Shareholders and the other parties entitled thereto by one firm
of counsel designed by and on behalf of the majority in interest of Shareholders
and other parties;
(o) In connection with any underwritten offering, make such representations
and warranties to the Shareholders participating in such underwritten offering
and to the managers, in form, substance and scope as are customarily made by the
Company to underwriters in secondary underwritten offerings;
(p) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions [in form, scope and
substance] shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings;
(q) In connection with any underwritten offering, obtain "cold comfort"
letters and updates thereof from the independent public accountants of the
Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such "cold
comfort" letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(r) In connection with any underwritten offering, deliver such documents
and certificates as may be reasonably required by the managers, if any; and
(s) In the event that any broker-dealer registered under the Exchange Act
shall be an "Affiliate" (as defined in Rule 2729(b)(1) of the rules and
regulations of the National Association of Securities Dealers, Inc. [the "NASD
Rules"] [or any successor provision thereto]) of the Company or has a "conflict
of interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite, participate as a
member of an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "qualified independent underwriter" (as defined in Rule 2720(b)(15)
of the NASD Rules [or any successor provision thereto[) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof, and (C) providing
such information to such broker-dealer as may be required in order for such
broker--dealer to comply with the requirements of the NASD Rules.
4. OBLIGATIONS OF THE SHAREHOLDERS. In connection with the registration of
the Registrable Securities, the Shareholders shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Shareholder that such Shareholder shall
promptly furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. If the
Shareholder does not furnish adequate information in order to obtain an
effective registration statement for either the parent or the KeyCom subsidiary,
the period within which the company is obligated to register the shares shall be
extended until the shareholder corrects the deficiency and during the period of
deficiency, as determined by the filer, the provision under the Security
Agreement are tolled. As least seven days prior to the first anticipated filing
date of the Registration Statement, the Company shall promptly notify each
Shareholder of the information the Company requires from each such Shareholder
(the "Requested Information") if such Shareholder elects to have any of its
Registrable Securities included in the Registration Statement. If at least two
business days prior to the anticipated filing date the Company has not received
the Requested Information from an Shareholder (a "Non-Responsive Shareholder"),
then the Company may file the Registration Statement without including
Registrable Securities of such Non-Responsive Shareholder and have no further
obligations to the Non-Responsive Shareholder;
(b) Each Shareholder by its acceptance of the Registrable Securities agrees
to cooperate with the Company in connection with the preparation and filing of
the Registration Statement hereunder, unless such Shareholder has notified the
Company in writing of its election to exclude all of its Registrable Securities
from the Registration Statement; and
(c) Each Shareholder agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in Section 3(e) or
3(f), it shall immediately discontinue its disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Shareholder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(e) and, if so directed by the Company, such
Shareholder 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 Shareholder's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice.
5. EXPENSES OF REGISTRATION. All expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications. fees, printing and engraving fees,
accounting fees, and the fees and disbursements of counsel for the Company and
the reasonable fees and disbursements of one firm of counsel to the holders of a
majority in interest of the Registrable Securities (which fees and disbursements
shall not exceed $7,500) shall be borne by the Company.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification by the Company. The Company shall indemnify and hold
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harmless each Shareholder and its Agent and each underwriter, if any, which
facilitates the disposition of Registrable Securities, and each of their
respective officers and directors and each person who controls such Shareholder
or underwriter within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act (each such person being sometimes hereinafter referred to
as an "Indemnified Person") from and against any losses, claims, damages or
liabilities, joint or several, to which such Indemnified Person 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 an untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or an omission or alleged omission to
state therein 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, or arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Prospectus or an
omission or alleged omission to state therein a 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 the Company hereby
agrees to reimburse such Indemnified Person for all reasonable legal and other
expenses incurred by them in connection with investigating or defending any such
action or claim as and when such expenses are incurred; provided, however, that
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the Company shall not be liable to any such Indemnified Person in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the case
of the occurrence of an event of the type specified in Section 3(e), the use by
the Indemnified Person of an outdated or defective Prospectus after the Company
has provided to such Indemnified Person an updated Prospectus correcting the
untrue statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage or liability.
(b) Indemnification by the Shareholders and Underwriters. Each Shareholder
----------------------------------------------------
agrees, as a consequence of the inclusion of any of its Registrable Securities
in a Registration Statement, and each underwriter, if any, which facilitates the
disposition of Registrable Securities shall agree, as a consequence of
facilitating such disposition of Registrable Securities, severally and not
jointly, to (i) indemnify and hold harmless the Company, its directors
(including any person who, with his or her consent, is named in the Registration
Statement as a director nominee of the Company), its officers who sign any
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or such other 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 an untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement or
Prospectus 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, in light of the circumstances under which they were
made, in the case of the Prospectus), 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 reliance upon and in
conformity with written information furnished to the Company by such holder or
underwriter expressly for use therein, and (ii) reimburse the Company for any
legal or other expenses incurred by the Company in connection with investigating
or defending any such action or claim as such expenses are incurred.
(c) Notice of Claims, etc. Promptly after receipt by a party seeking
------------------------
indemnification pursuant to this Section 6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim, the Indemnifying Party shall be entitled to assume
the defense thereof. Notwithstanding the assumption of the defense of any Claim
by the Indemnifying Party, the Indemnified Party shall have the right to employ
separate legal counsel and to participate in the defense of such Claim, and the
Indemnifying Party shall bear the reasonable fees, out-of--pocket costs and
expenses of such separate legal counsel to the Indemnified Party if (and only
if): (x) the Indemnifying Party shall have agreed to pay such fees, costs and
expenses, (y) the Indemnified Party and the Indemnifying Party shall reasonably
have concluded that representation of the Indemnified Party by the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, (i) potentially
differing interests between such parties in the conduct of the defense of such
Claim, or (ii) if there may be legal defenses available to the Indemnified Party
that are in addition to or disparate from those available to the Indemnifying
Party and which can not be presented by counsel to the Indemnifying Party, or
(z) the Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. If the Indemnified Party employs
separate legal counsel in circumstances other than as described in clauses (x),
(y) or (z) above, the fees, costs and expenses of such legal counsel shall be
borne exclusively by the Indemnified Party. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than one firm of
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnifying Party shall not, without the prior written consent of the
Indemnifying Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnifying Party from all liabilities
with respect to such Claim or judgment.
(d) Contribution.If the indemnification provided for in this Section 6 is
-------------
unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnified Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6 (d) were determined by
pro rata allocation (even if the Shareholders or any underwriters were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in this Section
6(d). The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Shareholders and any
underwriters in this Section 6(d) to contribute shall be several in proportion
to the percentage of Registrable Securities registered or underwritten, as the
case may be, by them and not joint.
(e) Notwithstanding any other provision of Section 6(d), in no event shall
any (i) Shareholder be required to undertake liability to any person under
Section 6(d) for any amounts in excess of the dollar amount of the proceeds to
be received by such Shareholder from the sale of such Shareholder's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are to be registered under the Securities Act and (ii) underwriter be
required to undertake liability to any Person hereunder for any amounts in
excess of the aggregate discount, commission or other compensation payable to
such underwriter with respect to the Registrable Securities underwritten by it
and distributed pursuant to the Registration Statement; provided, however, in
the event of fraud by the Shareholder (in the case of (i) above) or underwriter
(in the case of (ii) above), there shall be no such dollar amount limitation.
(f) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
7. RULE 144. With a view to making available to the Shareholders the
benefits of Rule 144 under the Securities Act or any other similar rule or
regulation of the Commission that may at any time permit the Shareholders to
sell securities of the Company to the public without registration ("Rule 144"),
the Company agrees to use its best efforts to:
(a) comply with the provisions of paragraph (c) (1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Holder, make available other information as required by,
and so long as necessary to permit sales of, its Registrable Securities pursuant
to Rule 144.
8. ASSIGNMENT. The rights to have the Company register Registrable
Securities pursuant to this Agreement shall be automatically assigned by the
Shareholders to any permitted transferee of all or any portion of such
securities (or all or any portion of any Preferred Stock or Warrant of the
Company which is convertible into such securities) of Registrable Securities
only if: (a) the Shareholder agrees in writing with the transferee or assignee
to assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (b) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (i) the name and address of such transferee or assignee and (ii) the
securities with respect to which such registration rights are being transferred
or assigned, (c) immediately following such transfer or assignment, the
securities so transferred or assigned to the transferee or assignee constitute
Restricted Securities, and (d) at or before the time the Company received the
written notice contemplated by clause (b) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein.
9. AMENDMENT AND WAIVER. 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 Shareholders who hold a majority--interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Shareholder and the Company.
10. MISCELLANEOUS.
(a) A person or entity shall be 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) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three (3) days after the date of deposit in the United States mails, as follows:
(1) if to the Company, to:
Emergent Financial Group, Inc
000-00000Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxx XX
Attention: Xxxxx Xxxxxxx
(2) if to the Initial Shareholder, to:
Xxxxxx X. Xxxx, Agent
0000 X. Xxxxxxxx Xxxx Xxxxxxxxx, Xx. 0
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
(3) if to any other Shareholder, at such address as such Shareholder
shall have provided in writing to the Company.
The Company, the Initial Shareholder or any Shareholder may change the foregoing
address by notice given pursuant to this Section 10(c).
(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.
(d) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of California. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of Los Angeles or the state courts of the State of California sitting in
the City of Los Angeles 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 conveniens, to the bringing
of any such proceeding in such jurisdictions.
(e) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provision,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(f) The Company shall not enter into any agreement with respect to its
securities that constitutes a breach of any of the provisions hereof. Except as
previously disclosed to the Initial Shareholder, the Company is not currently a
party to any agreement granting any registration rights with respect to any of
its securities to any person which conflicts with the Company's obligations
hereunder or gives any other party the right to include any securities in any
Registration Statement filed pursuant hereto.
(g) This Agreement, the Security Agreement, the Plan of Reorganization, the
Plan of Merger and the Certificate of Designations constitute the entire
agreement 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. This Agreement, the Securities Purchase
Agreement, the Certificate of Designations and the Warrants supersede all prior
agreements and undertakings among the parties hereto with respect to the subject
matter hereof.
(h) Subject to the requirements of Section 8 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(i) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(j) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
(k) The Company acknowledges that any failure by the Company to perform its
obligations under Section 3, or any delay in such performance could result in
direct damages to the Shareholders and the Company agrees that, in addition to
any other liability the Company may have by reason of any such failure or delay,
the Company shall be liable for all direct damages caused by such failure or
delay.
(l) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
EMERGENT FINANICAL GROUP, INC.
By: __________________________
Xxxxx Xxxxxxx, President and CEO:
THE SHAREHOLDERS
_______________________________
Xxxxxx X. Xxxx, Agent and
Attorney-in-Fact
