Exhibit 99.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is made and entered into as
of 8th day of February, 2006, by and among XXXXXXXXXX HOLDINGS III, INC., a
corporation organized and existing under the laws of the State of Delaware (the
"COMPANY"), and Xxxxxx Partners L.P., a Delaware limited partnership ("XXXXXX"),
XXX AND XXX Xxxxxx, JTROS, XXXXX XXXXX and XXXXXXX X. XXXXXX (collectively, with
Xxxxxx, the "INVESTORS" and each, individually, an "INVESTOR"). Unless defined
otherwise, capitalized terms herein shall have the identical meaning as in the
Preferred Stock Purchase Agreement, of even date herewith (the "PURCHASE
AGREEMENT"), by and among the Company and the Investors.
PRELIMINARY STATEMENT
WHEREAS, pursuant to the Purchase Agreement, the Investors are purchasing
Preferred Stock and Warrants, which entitle the Investors to receive Shares of
the Company upon conversion or exercise thereof; and
WHEREAS, the ability of the Investors to sell their Shares of Common Stock
is subject to certain restrictions under the 1933 Act; and
WHEREAS, as a condition to purchase of Preferred Stock and Warrants
pursuant to the Purchase Agreement, the Company has agreed to provide the
Investors with a mechanism that will permit such Investors, subject to a market
stand-off agreement, to sell the Shares in the future.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements, and subject to the terms and conditions herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
INCORPORATION BY REFERENCE, SUPERSEDER
1.1. INCORPORATION BY REFERENCE. The foregoing recitals and the Exhibits
attached hereto and referred to herein, are hereby acknowledged to be true and
accurate, and are incorporated herein by this reference.
1.2. SUPERSEDER. This Agreement, to the extent that it is inconsistent with any
other instrument or understanding among the parties governing the affairs of the
Company, shall supersede such instrument or understanding to the fullest extent
permitted by law. A copy of this Agreement shall be filed at the Company's
principal office.
ARTICLE II
DEMAND REGISTRATION RIGHTS
2.1. REGISTRABLE SECURITIES. The term "Registrable Securities" shall means and
include the Shares of the Company underlying the Preferred Stock and Warrants
issued pursuant to the Purchase Agreement. As to any particular Registrable
Securities, such securities will cease to be Registrable Securities when (a)
they have been effectively registered under the 1933 Act and disposed of in
accordance with the registration statement covering them, (b) they are or may be
freely traded without registration pursuant to Rule 144 under the 1933 Act (or
any similar provisions that are then in effect), or (c) they have been otherwise
transferred and new certificates for them not bearing a restrictive legend have
been issued by the Company and the Company shall not have "stop transfer"
instructions against them. "Shares" shall mean, collectively, the shares of
Common Stock of the Company issuable upon conversion of the Preferred Stock and
those shares of Common Stock of the Company issuable to the Investors upon
exercise of the Warrants.
2.2. REGISTRATION OF REGISTRABLE SECURITIES. The Company shall prepare and file
within sixty (60) days following the date hereof (the "Filing Date") a
registration statement (the "Registration Statement") covering the sale of such
number of shares of the Registrable Securities as the Investors shall elect by
written notice to the Company, and absent such election, covering the sale of
all of the shares of the Registrable Securities. The Company shall use its best
efforts to cause the Registration Statement to be declared effective by the SEC
on the first to occur of (i) 120 days following the Filing Date with respect to
the Registration Statement, (ii) ten (10) days following the receipt of a "No
Review" or similar letter from the SEC or (iii) the third (3rd) business day
following the day the Company receives notice from the SEC that the SEC has
determined that the Registration Statement eligible to be declared effective
without further comments by the SEC (the "Required Effectiveness Date"). Nothing
contained herein shall be deemed to limit the number of Registrable Securities
to be registered by the Company hereunder. As a result, should the Registration
Statement not relate to the maximum number of Registrable Securities acquired by
(or potentially acquirable by) the holders of the Shares of the Company issued
to the Investors pursuant to the Purchase Agreement and the Warrants, other than
as a result of the election by the holder thereof not to have Shares included in
the Registration Statement, the Company shall be required to promptly file a
separate registration statement (utilizing Rule 462 promulgated under the 1933
Act, if applicable) relating to such Registrable Securities which then remain
unregistered. The provisions of this Agreement shall relate to any such separate
registration statement as if it were an amendment to the Registration Statement.
2.3. DEMAND REGISTRATION. Subject to the limitations of Section 2.2, at any time
and from time to time, the Investors may request the registration under the 1933
Act of all or part of the Registrable Securities then outstanding (a "Demand
Registration"). Subject to the conditions of Section 3, the Company shall use
its commercially reasonable best efforts to file such registration statement
under the 1933 Act as promptly as practicable after the date any such request is
received by the Company and to cause such registration statement to be declared
effective. The Company shall notify the Investors promptly when any such
registration statement has been declared effective. If more than eighty percent
(80%) of the Shares issuable under the Purchase Agreement have been registered
or sold, the Company's obligations under this Article II shall terminate.
2.4. REGISTRATION STATEMENT FORM. Registrations under Section 2.2 and Section
2.3 shall be on the appropriate registration form of the SEC as shall permit the
disposition of such Registrable Securities in accordance with the intended
method or methods of disposition specified in the Registration Statement;
provided, however, such intended method of disposition shall not include an
underwritten offering of the Registrable Securities.
2.5. EXPENSES. The Company will pay all Registration Expenses in connection with
any registration required by under Sections 2.2 and Section 2.3 herein.
Registration Expenses shall mean all expenses incident to the Company's
performance of or compliance with its obligations under this Agreement,
including, without limitation, all registration, filing, listing, stock exchange
and NASD fees, all fees and expenses of complying with state securities or blue
sky laws (including fees, disbursements and other charges of counsel for the
underwriters only in connection with blue sky filings), all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees,
disbursements and other charges of counsel for the Company and of its
independent public accountants, including the expenses incurred in connection
with "cold comfort" letters required by or incident to such performance and
compliance, any fees and disbursements of underwriters customarily paid by the
issuer of securities, but excluding from the definition of Expenses underwriting
and discounts and brokerage commissions and applicable transfer taxes, if any,
or legal and other expenses incurred by any sellers, which discounts,
commissions, transfer taxes and legal and other expenses shall be borne by the
seller or sellers of Registrable Securities in all cases.
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2.6. EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant to
Sections 2.2 and Section 2.3 shall not be deemed to have been effected, other
than for an Excused Reason, as hereinafter defined, (i) unless a registration
statement with respect thereto has become effective, provided that a
registration which does not become effective after the Company filed a
registration statement with respect thereto solely by reason of the refusal to
proceed of any holder of Registrable Securities (other than a refusal to proceed
based upon the advice of counsel in the form of a letter signed by such counsel
and provided to the Company relating to a disclosure matter unrelated to such
holder) shall be deemed to have been effected by the Company, (ii) if, after it
has become effective, such registration becomes subject to any stop order,
injunction or other order or extraordinary requirement of the SEC or other
governmental agency or court for any reason and such stop order or other action
continues in effect for five trading days or (iii) if, after it has become
effective, such registration ceases to be effective for more than the allowable
Black-Out Periods, as hereinafter defined. An Excused Reason shall include,
without limitation, acts of God, closure of the SEC.
2.7. PLAN OF DISTRIBUTION. The Company hereby agrees that the Registration
Statement shall include a plan of distribution section reasonably acceptable to
the Investors; provided, however, such plan of distribution section shall be
modified by the Company so as to not provide for the disposition of the
Registrable Securities on the basis of an underwritten offering.
2.8. LIQUIDATED DAMAGES.
(i) In the event (a) the Company does not file the Registration
Statement covering the Registrable Securities by the Filing Date as required by
Section 2.2 herein, or (b) the Registration Statement filed pursuant to Section
2.2 herein is not declared effective by the Required Effectiveness Date as
provided in said Section 2.2, or (c) if the Registrable Securities are
registered pursuant to an effective Registration Statement and such Registration
Statement or other Registration Statement(s) demanded by Investors including the
Registrable Securities is not effective in the period from the Required
Effective Date through two years following the date hereof other than for a
Black-out Period, the Company shall, for each such day (x) after the Filing Date
that the Company shall not have filed the Registration Statement, (y) after the
Required Effectiveness Date that the Registration Statement shall not have been
declared effective, or (z) during which the Registration Statement is not
effective as required by clause (c) of this Section 2.8(i), issue to the
Investors, as liquidated damages and not as a penalty, 1,025 shares of Preferred
Stock for any such day (based on a 365 day working calendar year), such issuance
shall be made no later than the tenth business day of the calendar month next
succeeding the month in which such day occurs; provided, however, that if the
Registration Statement does not cover, or registration has not been requested
for, the Registrable Securities issuable upon conversion of all of the shares of
Preferred Stock that were issued by the Company, the liquidated damages per day
shall be the percentage of 1,025 shares that the number of Registrable
Securities then subject to, or proposed to be include in, the Registration
Statement bears to the total number Registrable Securities issued or issuable
upon conversion of all of the Preferred Stock that were initially issued to the
Investors. However, in no event shall the Company be required to pay any
liquidated damages under this Section 2.8 in an amount exceeding 375,000 shares
of Preferred Stock in the aggregate (as adjusted pursuant to the terms of the
Certificate of Designation).
(ii) Notwithstanding the provisions of Section 2.8(i):
(a) In the event that the Company shall fail to file the
Registration Statement by the Filing Date but the Registration Statement shall
have been declared effective by the Required Effectiveness Date, then no
liquidated damages shall be payable with respect to the failure to file by the
Filing Date. The Company may defer the issuance of any such shares of Preferred
Stock until the first date after the Required Effectiveness Date that the
Company is required to pay liquidated damages pursuant to Section 2.8(i).
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(b) Any liquidated damages payable as a result of the failure to
file the Registration Statement by the Filing Date shall be credited against
liquidated damages payable as a result of the failure of the Registration
Statement to be declared effective by the Required Effectiveness Date.
(c) No fractional shares shall be issued. Any fractional shares
which would otherwise be issued on any date on which Preferred Stock is to be
issued pursuant to Section 2.8(i) of this Agreement, shall be carried forward;
provided, however, that if, at the expiration of the period during which
liquidated damages is payable there remains a fractional shall which has not
been applied to liquidated damages, the Company shall have no further obligation
to issue such fractional share.
(iii) In no event shall the Company be required to pay any
liquidated damages in the event that the failure of the registration statement
to be declared effective on the Required Effective Date results in whole or in
part from either (a) the failure of any Investor to provide information relating
to the Investor and its proposed method of sale or any other information
concerning the Investor that is required to be included in the registration
statement or (b) any delays resulting from questions raised by the SEC or any
other regulatory agency, market or exchange concerning the Investors or the
affiliates of any of the Investors.
(iv) The parties hereto agree that the liquidated damages provided
for in this Section 2.8 constitute a reasonable estimate of the damages that may
be incurred by the Investors by reason of the failure of the Registration
Statement(s) to be filed or declared effective in accordance with the provisions
hereof.
(v) The obligation of the Company terminates when the Investors no
longer hold more than ten percent (10%) of the Registrable Securities, based on
the number of Registrable Securities initially issuable pursuant to the Purchase
Agreement and any shares issued due to adjustments in these transaction
documents and the Warrants.
ARTICLE III
INCIDENTAL REGISTRATION RIGHTS
3.1. RIGHT TO INCLUDE ("PIGGY-BACK") REGISTRABLE SECURITIES. Provided that the
Registrable Securities have not been registered, if at any time after the date
hereof but before the second anniversary of the date hereof, the Company
proposes to register any of its securities under the 1933 Act (other than by a
registration in connection with an acquisition in a manner which would not
permit registration of Registrable Securities for sale to the public, on Form
S-8, or any successor form thereto, on Form S-4, or any successor form thereto
and other than pursuant to Section 2), on an underwritten basis (either
best-efforts or firm-commitment), then, the Company will each such time give
prompt written notice to all holders of Registrable Securities of its intention
to do so and of such holders of Registrable Securities' rights under this
Section 3.1. Upon the written request of any such holders of Registrable
Securities made within ten (10) days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
such holders of Registrable Securities and the intended method of disposition
thereof), the Company will, subject to the terms of this Agreement, use its
commercially reasonable best efforts to effect the registration under the 1933
Act of the Registrable Securities, to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
such Registrable Securities so to be registered, by inclusion of such
Registrable Securities in the registration statement which covers the securities
which the Company proposes to register, provided that if, at any time after
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason either not to register
or to delay registration of such securities, the Company may, at its election,
give written notice of such determination to each holders of Registrable
Securities and, thereupon, (i) in the case of a determination not to register,
shall be relieved of this obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith), without prejudice, however, to
the rights of any holder or holders of Registrable Securities entitled to do so
to request that such registration be effected as a registration under Section 2,
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities, for the same period as the
delay in registering such other securities. No registration effected under this
Section 3.1 shall relieve the Company of its obligation to effect any
registration upon request under Section 2 except to the extent that any
Registrable Securities are registered pursuant to such registration statement.
The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 3.1.
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3.2. PRIORITY IN INCIDENTAL REGISTRATIONS. If the managing underwriter of the
underwritten offering contemplated by this Section 3 shall inform the Company
and holders of the Registrable Securities requesting such registration by letter
of its belief that the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering, then the
Company will include in such registration, to the extent of the number which the
Company is so advised can be sold in such offering, (i) first securities
proposed by the Company to be sold for its own account, and (ii) second to
holders of securities having demand registration rights and exercising such
rights in connection with such registration statement, (iii) third Registrable
Securities and securities of other selling security holders (including Insiders,
as defined in the Purchase Agreement) who requested to be included in such
registration on a pari passu basis.
ARTICLE IV
REGISTRATION PROCEDURES
4.1. REGISTRATION PROCEDURES. If and whenever the Company is required to effect
the registration of any Registrable Securities under the 1933 Act as provided in
Section 2.2 and, as applicable, 2.3, the Company shall, as expeditiously as
possible:
(i) prepare and file with the SEC the Registration Statement, or
amendments thereto, to effect such registration (including such audited
financial statements as may be required by the 1933 Act or the rules and
regulations promulgated thereunder) and thereafter use its commercially
reasonable best efforts to cause such registration statement to be declared
effective by the SEC, as soon as practicable, but in any event no later than the
Required Effectiveness Date (with respect to a registration pursuant to Section
2.2); provided, however, that before filing such registration statement or any
amendments thereto, the Company will furnish to the counsel selected by the
holders of Registrable Securities which are to be included in such registration,
copies of all such documents proposed to be filed;
(ii) with respect to any registration statement pursuant to Section 2.2
or Section 2.3, prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities covered by such registration statement until the earlier
to occur of thirty six (36) months after the date of this Agreement (subject to
the right of the Company to suspend the effectiveness thereof for not more than
15 consecutive Trading Days or an aggregate of 20 Trading Days during each year
(each a "BLACK-OUT PERIOD")) or such time as all of the securities which are the
subject of such registration statement cease to be Registrable Securities (such
period, in each case, the "REGISTRATION MAINTENANCE PERIOD"). The Company must
notify the Investors within twenty four (24) hours prior to any Black-Out
Period;
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(iii) furnish to each holder of Registrable Securities covered by such
registration statement such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus contained in
such registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the 1933
Act, in conformity with the requirements of the 1933 Act, and such other
documents, as such holder of Registrable Securities and underwriter, if any, may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities owned by such holder of Registrable Securities;
(iv) use its commercially reasonable best efforts to register or qualify
all Registrable Securities and other securities covered by such registration
statement under such other U.S. federal or state securities laws or U.S. state
blue sky laws as any U.S. holder of Registrable Securities thereof shall
reasonably request, to keep such registrations or qualifications in effect for
so long as such registration statement remains in effect, and take any other
action which may be reasonably necessary to enable such holder of Registrable
Securities to consummate the disposition in such jurisdictions of the securities
owned by such holder of Registrable Securities, except that the Company shall
not for any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not but for the
requirements of this subdivision (iv) be obligated to be so qualified or to
consent to general service of process in any such jurisdiction;
(v) use its commercially reasonable best efforts to cause all
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the U.S. holder of Registrable Securities thereof to
consummate the disposition of such Registrable Securities;
(vi) furnish to each holder of Registrable Securities a signed
counterpart, addressed to such holder of Registrable Securities, and the
underwriters, if any, of an opinion of counsel for the Company, dated the
effective date of such registration statement (or, if such registration includes
an underwritten public offering, an opinion dated the date of the closing under
the underwriting agreement), such opinion to be in the form filed as Exhibit 5
to the registration statement, and
(vii) notify the Investors and their counsel promptly and confirm such
advice in writing promptly after the Company has knowledge thereof:
(a) when the Registration Statement, the prospectus or any
prospectus supplement related thereto or post-effective amendment to the
Registration Statement has been filed, and, with respect to the Registration
Statement or any post-effective amendment thereto, when the same has become
effective;
(b) of any request by the SEC for amendments or supplements to the
Registration Statement or the prospectus or for additional information;
(c) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
by any Person for that purpose; and
(d) of the receipt by the Company of any notification with respect
to the suspension of the qualification of any Registrable Securities for sale
under the securities or blue sky laws of any jurisdiction or the initiation or
threat of any proceeding for such purpose;
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(viii) notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, upon discovery that, or upon the
happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material facts required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of any such holder of
Registrable Securities promptly prepare and furnish to such holder of
Registrable Securities a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
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 not
misleading in the light of the circumstances then existing;
(ix) use its commercially reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of the Registration
Statement at the earliest possible moment;
(x) otherwise use its commercially reasonable best efforts to comply
with all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first full calendar month after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;
(xi) enter into such agreements and take such other actions as the
Investors shall reasonably request in writing (at the expense of the requesting
or benefiting Investors) in order to expedite or facilitate the disposition of
such Registrable Securities; and
(xii) use its commercially reasonable best efforts to list all Registrable
Securities covered by such registration statement on any securities exchange on
which any of the Registrable Securities are then listed.
The Company may require each holder of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such holder of Registrable Securities and the distribution of such
securities as the Company may from time to time reasonably request in writing,
including
(a) furnish the information as to any shares of Common Stock or
other securities of the Company owned by the holder, the holder's proposed plan
of distribution, any relationship between the holder and the Company and any
other information which the Company reasonably requests in connection with the
preparation of the registration statement and update such information
immediately upon the occurrence of any events or condition which make the
information concerning the Seller inaccurate in any material respect;
(b) not sell any Registrable Securities pursuant to the
registration statement except in the manner set forth in the Registration
Statement;
(c) comply with the prospectus delivery requirements and the
provisions of Regulation M of the SEC pursuant to the 1933 Act to the extent
that such regulation is applicable to the holder;
(d) not sell or otherwise transfer or distribute any Registrable
Securities if the holder possesses any material nonpublic information concerning
the Company.
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4.2. The Company will not file any registration statement pursuant to Section
2.2 or Section 2.3, or amendment thereto or any prospectus or any supplement
thereto to which the Investors shall reasonably object, provided that the
Company may file such documents in a form required by law or upon the advice of
its counsel.
4.3. The Company represents and warrants to each holder of Registrable
Securities that it has obtained all necessary waivers, consents and
authorizations necessary to execute this Agreement and consummate the
transactions contemplated hereby other than such waivers, consents and/or
authorizations specifically contemplated by the Purchase Agreement.
4.4. Each holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the occurrence of any event of the kind described in
subdivision (viii) of Section 4.1, such Holder will forthwith discontinue such
holder of Registrable Securities' disposition of Registrable Securities pursuant
to the Registration Statement relating to such Registrable Securities until such
holder of Registrable Securities' receipt of the copies of the supplemented or
amended prospectus contemplated by subdivision (viii) of Section 4.1 and, if so
directed by the Company, will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in such Holder's possession
of the prospectus relating to such Registrable Securities current at the time of
receipt of such notice.
ARTICLE V
UNDERWRITTEN OFFERINGS
5.1. INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any time proposes to
register any of its securities under the 1933 Act as contemplated by Section 3.1
and such securities are to be distributed by or through one or more
underwriters, the Company will, if requested by any holder of Registrable
Securities as provided in Section 3.1 and subject to the provisions of Section
3.2, use its commercially reasonable best efforts to arrange for such
underwriters to include all the Registrable Securities to be offered and sold by
such holder among the securities to be distributed by such underwriters. In no
event shall any Investors be deemed an underwriter for purposes of this
Agreement. This Article V shall not apply to any Registrable Securities
theretofore registered pursuant to Article II of this Agreement.
5.2. PARTICIPATION IN UNDERWRITTEN OFFERINGS. No holder of Registrable
Securities may participate in any underwritten offering under Section 3.1 unless
such holder of Registrable Securities (i) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements approved,
subject to the terms and conditions hereof, by the holders of a majority of
Registrable Securities to be included in such underwritten offering and (ii)
completes and executes all questionnaires, indemnities, underwriting agreements
and other documents (other than powers of attorney) required under the terms of
such underwriting arrangements. Notwithstanding the foregoing, no underwriting
agreement (or other agreement in connection with such offering) shall require
any holder of Registrable Securities to make a representation or warranty to or
agreements with the Company or the underwriters other than representations and
warranties contained in a writing furnished by such holder of Registrable
Securities expressly for use in the related registration statement or
representations, warranties or agreements regarding such holder of Registrable
Securities, such holder's Registrable Securities and such holder's intended
method of distribution and any other representation required by law.
5.3. PREPARATION; REASONABLE INVESTIGATION. In connection with the preparation
and filing of each registration statement under the 1933 Act pursuant to this
Agreement, the Company will give the holders of Registrable Securities
registered under such registration statement, and their respective counsel and
accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the SEC,
and each amendment thereof or supplement thereto, and will give each of them
such access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
reasonable opinion of such holders' and such underwriters' respective counsel,
to conduct a reasonable investigation within the meaning of the 1933 Act.
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ARTICLE VI
INDEMNIFICATION
6.1. INDEMNIFICATION BY THE COMPANY. In the event of any registration of any
securities of the Company under the 1933 Act, the Company will, and hereby does
agree to indemnify and hold harmless the holder of any Registrable Securities
covered by such registration statement, its directors and officers, each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such holder or any such
underwriter within the meaning of the 1933 Act against any losses, claims,
damages or liabilities, joint or several, to which such holder or any such
director or officer or underwriter or controlling person may become subject
under the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the 1933 Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Company will reimburse such holder
and each such director, officer, underwriter and controlling person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding, provided that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability, (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such holder or
underwriter stating that it is for use in the preparation thereof and, provided
further that the Company shall not be liable to any Person who participates as
an underwriter in the offering or sale of Registrable Securities or to any other
Person, if any, who controls such underwriter within the meaning of the 1933
Act, in any such case to the extent that any such loss, claim, damage, liability
(or action or proceeding in respect thereof) or expense arises out of such
Person's failure to send or give a copy of the final prospectus, as the same may
be then supplemented or amended, within the time required by the 1933 Act to the
Person asserting the existence of an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus or an amendment or
supplement thereto. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such holder or any such
director, officer, underwriter or controlling person and shall survive the
transfer of such securities by such holder.
6.2. INDEMNIFICATION BY THE INVESTORS. The Company may require, as a condition
to including any Registrable Securities in any registration statement filed
pursuant to this Agreement, that the Company shall have received an undertaking
satisfactory to it from the prospective holder of such Registrable Securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 6.1) the Company, each director of the Company, each officer of
the Company and each other Person, if any, who controls the Company within the
meaning of the 1933 Act, with respect to any statement or alleged statement in
or omission or alleged omission from such registration statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such holder of Registrable Securities specifically
stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Any such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such Investors. The indemnification by the Investors shall be limited to
Fifty Thousand ($50,000) Dollars.
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6.3. NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified party of
notice of the commencement of any action or proceeding involving a claim
referred to in Sections 6.1 and Section 6.2, such indemnified party will, if
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action, provided that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under Sections 6.1 and Section
6.2, except to the extent that the indemnifying party is actually prejudiced by
such failure to give notice. In case any such action is brought against an
indemnified party, unless in such reasonable judgment of counsel to the
indemnified party, a conflict of interest, as hereinafter defined, between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability, or a covenant not to xxx, in respect to such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party. If the
defendants in any action covered by this Section 6.3 include both the
indemnified party and the indemnifying party and counsel for the indemnified
party shall have reasonably concluded that there may be reasonable defenses
available to it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party
(collectively, a "conflict of interest"), the indemnified parties, as a group,
shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party. Such counsel
shall be selected by the holders of a majority of the shares of Common Stock
having an indemnity claim against the Company, whether pursuant to this
Agreement or any other agreements which provide such or similar indemnity.
6.4. OTHER INDEMNIFICATION. Indemnification similar to that specified in
Sections 6.1 and Section 6.2 (with appropriate modifications) shall be given by
the Company and each holder of Registrable Securities (but only if and to the
extent required pursuant to the terms herein) with respect to any required
registration or other qualification of securities under any Federal or state law
or regulation of any governmental authority, other than the 1933 Act.
6.5. INDEMNIFICATION PAYMENTS. The indemnification required by Sections 6.1 and
Section 6.2 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
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6.6. CONTRIBUTION.
(i) If the indemnification provided for in Sections 6.1 and Section 6.2
is unavailable to an indemnified party in respect of any expense, loss, claim,
damage or liability referred to therein, then each indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such expense, loss, claim,
damage or liability (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the holder of
Registrable Securities or underwriter, as the case may be, on the other from the
distribution of the Registrable Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the
holder of Registrable Securities or underwriter, as the case may be, on the
other in connection with the statements or omissions which resulted in such
expense, loss, damage or liability, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the holder of Registrable Securities or underwriter, as the case may be, on
the other in connection with the distribution of the Registrable Securities
shall be deemed to be in the same proportion as the total net proceeds received
by the Company from the initial sale of the Registrable Securities by the
Company to the purchasers bear to the gain, if any, realized by all selling
holders participating in such offering or the underwriting discounts and
commissions received by the underwriter, as the case may be. The relative fault
of the Company on the one hand and of the holder of Registrable Securities or
underwriter, as the case may be, on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission to state a material fact relates to information
supplied by the Company, by the holder of Registrable Securities or by the
underwriter and the parties' relative intent, knowledge, access to information
supplied by the Company, by the holder of Registrable Securities or by the
underwriter and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission, provided that
the foregoing contribution agreement shall not inure to the benefit of any
indemnified party if indemnification would be unavailable to such indemnified
party by reason of the provisions contained herein, and in no event shall the
obligation of any indemnifying party to contribute under this Section 6.6 exceed
the amount that such indemnifying party would have been obligated to pay by way
of indemnification if the indemnification provided for hereunder had been
available under the circumstances.
(ii) The Company and the holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 6.6
were determined by pro rata allocation (even if the holders of Registrable
Securities and any underwriters were treated as one entity for such purpose) or
by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth herein, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
(iii) Notwithstanding the provisions of this Section 6.6, no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities in the
applicable Registration Statement or (ii) in the case of an underwriter, the
total price at which the Registrable Securities purchased by it and distributed
to the public were offered to the public exceeds, in any such case, the amount
of any damages that such holder or underwriter has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 0000 Xxx) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
-11-
ARTICLE VII
RULE 144
7.1. RULE 144. The Company shall use its commercially reasonable efforts to file
in a timely manner the reports required to be filed by the Company under the
1933 Act and the 1934 Act (including but not limited to the reports under
Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c) of
Rule 144 adopted by the SEC under the 0000 Xxx) and the rules and regulations
adopted by the SEC thereunder (or, if the Company is not required to file such
reports, will, upon the request of any holder of Registrable Securities, make
publicly available other information) and will take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the 1933 Act within the limitation of the exemptions
provided by (a) Rule 144 under the 1933 Act, as such Rule may be amended from
time to time, or (b) any similar rule or regulation hereafter adopted by the
SEC. Upon the request of any holder of Registrable Securities, the Company will
deliver to such holder a written statement as to whether it has complied with
the requirements of this Section 7.1.
ARTICLE VIII
MISCELLANEOUS
8.1. AMENDMENTS AND WAIVERS. This Agreement may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, only if the Company shall have obtained the written consent
to such amendment, action or omission to act, of the holder or holders of
fifty-one percent (51%) or more of the sum of the shares of (i) Registrable
Securities issued at such time, plus (ii) Registrable Securities issuable upon
exercise or conversion of the Securities then constituting derivative securities
(if such Securities were not fully exercised or converted in full as of the date
such consent if sought without regard to the 4.9% Limitation, as defined in the
Purchase Agreement). Each holder of any Registrable Securities at the time or
thereafter outstanding shall be bound by any consent authorized by this Section
8.1, whether or not such Registrable Securities shall have been marked to
indicate such consent.
8.2. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof shall be treated as the holder of such Registrable
Securities for purposes of any request or other action by any holder or holders
of Registrable Securities pursuant to this Agreement or any determination of any
number of percentage of shares of Registrable Securities held by a holder or
holders of Registrable Securities contemplated by this Agreement. The Company
may require assurances reasonably satisfactory to it of such owner's beneficial
ownership or such Registrable Securities.
8.3. NOTICES. Except as otherwise provided in this Agreement, all notices,
requests and other communications to any Person provided for hereunder shall be
in writing and shall be given to such Person (a) in the case of a party hereto
other than the Company, addressed to such party in the manner set forth in the
Purchase Agreement or at such other address as such party shall have furnished
to the Company in writing, or (b) in the case of any other holder of Registrable
Securities, at the address that such holder shall have furnished to the Company
in writing, or, until any such other holder so furnishes to the Company an
address, then to and at the address of the last holder of such Registrable
Securities who has furnished an address to the Company, or (c) in the case of
the Company, at the address set forth on the signature page hereto, to the
attention of its President, or at such other address, or to the attention of
such other officer, as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding. Each such notice, request or
other communication shall be effective (i) upon receipt after such communication
is deposited in the mail with first class postage prepaid, addressed as
aforesaid or (ii) if given by any other means (including, without limitation, by
fax or air courier), when delivered at the address specified above, provided
that any such notice, request or communication shall not be effective until
received, and provided, further, that notice by fax shall not be deemed received
unless receipt is acknowledged.
-12-
8.4. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto. In addition, and whether or not any
express assignment shall have been made, the provisions of this Agreement which
are for the benefit of the parties hereto other than the Company shall also be
for the benefit of and enforceable by any subsequent holder of any Registrable
Securities. Each of the Holders of the Registrable Securities agrees, by
accepting any portion of the Registrable Securities after the date hereof, to
the provisions of this Agreement including, without limitation, appointment of a
representative (the "Investors' Representative") to act on behalf of such Holder
pursuant to the terms hereof which such actions shall be made in the good faith
discretion of the Investors' Representative and be binding on all persons for
all purposes.
8.5. DESCRIPTIVE HEADINGS. The descriptive headings of the several sections and
paragraphs of this Agreement are inserted for reference only and shall not limit
or otherwise affect the meaning hereof.
8.6. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
applicable principles of conflicts of law.
8.7. JURISDICTION. If any action is brought among the parties with respect to
this Agreement or otherwise, by way of a claim or counterclaim, the parties
agree that in any such action, and on all issues, the parties irrevocably waive
their right to a trial by jury. Exclusive jurisdiction and venue for any such
action shall be the State or Federal Courts serving the City, County and State
of New York. In the event suit or action is brought by any party under this
Agreement to enforce any of its terms, or in any appeal therefrom, it is agreed
that the prevailing party shall be entitled to reasonable attorneys fees to be
fixed by the arbitrator, trial court, and/or appellate court if such party
prevails on substantially all disputed matters.
8.8. ENTIRE AGREEMENT. This Agreement, together with the Purchase Agreement,
embodies the entire agreement and understanding between the Company and each
other party hereto relating to the subject matter hereof and supercedes all
prior agreements and understandings relating to such subject matter.
8.9. SEVERABILITY. If any provision of this Agreement, or the application of
such provisions to any Person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
8.10. BINDING EFFECTError! Bookmark not defined.. All the terms and provisions
of this Agreement whether so expressed or not, shall be binding upon, inure to
the benefit of, and be enforceable by the parties and their respective
administrators, executors, legal representatives, heirs, successors and
assignees.
8.11. PREPARATION OF AGREEMENTError! Bookmark not defined.. This Agreement shall
not be construed more strongly against any party regardless of who is
responsible for its preparation. The parties acknowledge each contributed and is
equally responsible for its preparation.
8.12. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVEError! Bookmark not
defined.. No failure or delay on the part of any party hereto in the exercise of
any right hereunder shall impair such right or be construed to be a waiver of,
or acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall nay single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
-13-
8.13. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement. A facsimile transmission of this
signed Agreement shall be legal and binding on all parties hereto.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the Investors and the Company have as of the date
first written above executed this Agreement.
XXXXXXXXXX HOLDINGS III, INC.
By:
---------------------------------
Xxxxx Xxx, President
INVESTORS
XXXXXX PARTNERS LP
By: Xxxxxx Capital Advisors, LLC, its General Partners
By:
---------------------------------
Xxxxxx Xxxxxx Xxxxxx
President
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx XX 00000
------------------------------------
Ray and Xxx Xxxxxx, JTROS
00 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
------------------------------------
Xxxxx Xxxxx
00 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
------------------------------------
Xxxxxxx X Xxxxxx
00 Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
