REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of
September 16, 1999, by and among X-Xxxxxxx.xxx Inc., a Canadian corporation (the
"Company"), Xxxx Xxxxxxxxx ("Champagne"), Xxxx Xxxxxx Xxxxxxx ("Xxxxxxx") and
Xxx Xxxxxxxx ("Xxxxxxxx", and together with Champagne and Xxxxxxx, the
"Shareholders"), each of whom is a current shareholder of the Company.
RECITALS
A. The Company proposes to offer and sell 1,700,000 of its common
shares in an initial public offering (the "IPO") in the United States to be
underwritten by Whale Securities Co., L.P. For that purpose, the Company will
file a registration statement under the United States Securities Act of 1933
(the "Securities Act") with the United States Securities and Exchange Commission
(the "SEC").
B. Each of the Shareholders currently is entitled by contract to
piggyback registration rights in the event that the Company effects an IPO of
its equity securities. At the request of the Company, each of the Shareholders
has waived all his registration rights in connection with the IPO in
consideration for the Company's agreement to register common shares owned by him
pursuant to the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the parties agree as follows:
SECTION 1
Demand Registration Rights
1.1 Right to Demand. At any time after 12 months after the IPO,
Champagne and Xxxxxxx may each make a written request of the Company for
registration with the SEC under and in accordance with the provisions of the
Securities Act, of all or part of his Registrable Securities (a "Demand
Registration"); provided, however, that (i) the Company need not effect a Demand
Registration unless the Demand Registration includes at least 50% of the
Registrable Securities held by the demanding Shareholder on the date the request
is made and 3% of the issued and outstanding common shares of the Company, (ii)
the Company may, if its Board of Directors determines in the exercise of its
reasonable judgment that effecting such Demand Registration at such time would
have a material adverse effect on the Company, defer such Demand Registration
for a period not to exceed 90 days, and (iii) if the Company elects to defer any
Demand Registration pursuant to (ii) above, no Demand Registration will be
deemed to have occurred for purposes of this Agreement. The demanding
Shareholder's request will specify the aggregate number of Registrable
Securities requested to be registered and the intended methods of disposition of
such Registrable Securities.
1.2 Number of Demand Registrations. Champagne will be entitled to two
Demand Registrations. Xxxxxxx will be entitled to one Demand Registration. A
Demand Registration will not be counted as a Demand Registration under this
Agreement until the registration statement related to such Demand Registration
has been declared effective by the SEC and maintained continuously effective for
a period of at least six months or such shorter period when all Registrable
Securities included in the Demand Registration have been sold in accordance with
such Demand Registration. If the Company elects to issue and sell any equity
securities pursuant to any Registration Statement filed in connection with a
Demand Registration or if the number of Registrable Securities that the
demanding Shareholder is entitled to sell in a Demand Registration is reduced in
accordance with Section 1.3 below, then such registration will be deemed not to
be a Demand Registration solely for purposes of determining the number of Demand
Registrations to which the demanding Shareholder is entitled under this
Agreement.
1.3 Priority on Demand Registrations. If the managing underwriter or
underwriters of the Demand Registration (or in the case of a Demand Registration
not being underwritten, in the opinion of the demanding Shareholder), advise the
Company in writing that in its/their/his reasonable opinion the number of
securities proposed to be sold in the Demand Registration is inconsistent with
that which can be sold in such offering without having a material effect on the
success of the offering (including, without limitation, an impact on the selling
price or the number of Registrable Securities that the demanding Shareholder may
sell), the Company will include in such registration only the number of
securities that, in the reasonable opinion of such underwriter or underwriters
(or the demanding Shareholder as the case may be) can be sold without having a
material adverse effect on the success of the offering as follows: (i) first,
the Registrable Securities requested to be included in such Demand Registration
by the demanding Shareholder(s), provided, however that if it shall be necessary
to reduce the number of Registrable Securities requested to be included in the
Demand Registration by demanding Shareholders, the Company will first reduce the
number of Registrable Securities included by Xxxxxxx and only after that number
is reduced to zero, reduce the number of Registrable Securities included by
Champagne; (ii) second, any securities being issued and sold by the Company; and
(iii) third, any securities held by other shareholders of the Company and being
registered pursuant to Piggyback Registration rights.
1.4 Selection of Underwriters. If the Demand Registration is an underwritten
offering, the Company, subject to the demanding Shareholder's consent (not to
unreasonably withheld) will: (i) select a managing underwriter or underwriters
to administer the offering; and (ii) determine the terms under which the
underwriting will take place.
SECTION 2
Piggyback Registration Rights
2.1 Right to Piggyback. Subject to Sections 2.2 and 2.3 whenever the
Company proposes to register any common shares with the SEC under the Securities
Act on its own behalf and/or on behalf of any of its security holders (the
"demanding security holders"), other than pursuant to a registration on Forms
S-4, F-4 or S-8, or any successor forms to those forms (a "Piggyback
Registration"), the Company (i) will give written notice to all Shareholders who
hold Registrable Securities at least 30 days prior to the anticipated filing
date, of its intention to effect such a registration, specifying the proposed
offering price, the number of securities proposed to be registered, the
distribution arrangements and such other information that at the time would be
appropriate to include in such notice, and (ii) will, subject to Section 2.3
below, include in such Piggyback Registration all Registrable Securities with
respect to which the Company has received written requests for inclusion therein
within 20 days after the date of the Company's notice. Except as otherwise may
be provided in this Agreement, Registrable Securities with respect to which such
request for registration has been received will be registered by the Company and
offered to the public in a Piggyback Registration on terms and conditions at
least as favorable as those applicable to the registration of the common shares
to be sold by the Company and/or the demanding security holders and any other
person selling under such Piggyback Registration.
2.2 Number of Piggyback Registrations. Each Shareholder will be
entitled to two Piggyback Registrations. A Piggyback Registration will not be
counted as a Piggyback Registration under this Agreement until the registration
statement related to such Piggyback Registration has been declared effective by
the SEC and maintained continuously effective for a period of at least six
months or such shorter period when all Registrable Securities included in the
Piggyback Registration have been sold in accordance with such Piggyback
Registration.
2.3 Priority on Piggyback Registrations. If the managing underwriter or
underwriters, if any, advise the selling Shareholders in writing that in its or
their reasonable opinion (or in the case of a Piggyback Registration not being
underwritten the demanding security holders, if any, or if there are no
demanding security holders, the Company, shall reasonably determine and notify
the selling Shareholders of such determination), that the number or kind of
securities proposed to be sold in such registration (including Registrable
Securities to be included pursuant to Section 2.1 above) is inconsistent with
that which can be sold in such registration without having a material effect on
the success of the offering (including, without limitation, an impact on the
selling price or the number of securities that any participant may sell), the
Company will include in such registration the number of securities, if any,
which, in the opinion of such underwriter or underwriters, or the demanding
security holders, or the Company, as the case may be, can be sold as follows:
(i) first, the securities the demanding security holders propose to sell, (ii)
second, the securities the Company proposes to sell, and (iii) third, the
Registrable Securities requested to be included in such registration by the
Shareholders and any other holder of securities of the Company entitled to
Piggyback Registration rights. To the extent that the privilege of including
Registrable Securities in any Piggyback Registration pursuant to clause (iii)
above must be allocated among the selling Shareholders and any other holder of
securities of the Company entitled to Piggyback Registration rights, the
allocation will be made pro rata based on the number of Registrable Securities
that each holder entitled to Piggyback Registration rights shall have requested
to include therein.
2.4 Selection of Underwriters. If any Piggyback Registration is an
underwritten offering, the Company will: (i) select a managing underwriter or
underwriters to administer the offering, and (ii) determine the terms under
which such underwriting will take place.
SECTION 3
Registration Procedures
3.1 Registration Procedures. With respect to any Demand Registration or
Piggyback Registration (generically, a "Registration"), the Company will,
subject to Sections 1.3 and 2.3, as promptly as practicable:
3
(a) prepare and file with the SEC, a registration statement or
registration statements (the "Registration Statement") relating to the
applicable Registration on any appropriate form under the Securities Act that is
available for the sale of the Registrable Securities in accordance with the
intended method or methods of distribution thereof; provided, however, that the
Company will include in any Registration Statement on a form other than Form S-1
all information that the selling Shareholders shall reasonably request and shall
include all financial statements required by the SEC to be filed therewith,
cooperate and assist in any filings required to be made with the National
Association of Securities Dealers, Inc. ("NASD"), and use its best efforts to
cause such Registration Statement to become effective; provided further, that
before filing a Registration Statement or prospectus related to the Registration
Statement (a "Prospectus") or any amendments to the Registration Statement or
any supplements to a Prospectus, the Company will furnish to the selling
Shareholders and the underwriters, if any, copies of all such documents proposed
to be filed, which documents will be subject to the reasonable review of such
selling Shareholders and underwriters and their respective counsel, and the
Company will not file any Registration Statement, or amendment to the
Registration Statement, or any Prospectus, or any supplement to a Prospectus to
which the holders of a majority of the Registrable Securities covered by such
Registration Statement or the underwriters, if any, shall reasonably object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep the
Registration Statement effective for the applicable period, or such shorter
period which will terminate when all Registrable Securities covered by the
Registration Statement have been sold; cause each Prospectus to be supplemented
by any required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Securities Act; and comply with the provisions of
the Securities Act with respect to the disposition of all securities covered by
such Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof specified in
such Registration Statement or supplement to the Prospectus; the Company will
not be deemed to have used its best efforts to keep a Registration Statement
effective during the applicable period if it voluntarily takes any action that
would result in selling Shareholders not being able to sell such Registrable
Securities during that period unless such action is required under applicable
law, provided that the foregoing will not apply to actions taken by the Company
in good faith and for valid business reasons, including, without limitation, the
acquisition or divestiture of assets, so long as the Company promptly thereafter
complies with the requirements of Section 3.1(k) below, if applicable;
(c) notify the selling Shareholders and the managing underwriters, if
any, promptly, and (if requested by any such person or entity) confirm such
advice in writing: (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and with respect to the Registration
Statement or any post-effective amendment, 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 for that purpose; (D) if at any
time the representations and warranties of the Company contemplated by Section
3.1(n) below cease to be true and correct; (E) of the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and (F) of the happening of any
event which makes any statement made in the Registration Statement, the
Prospectus or any document incorporated by reference in the Registration
Statement or Prospectus untrue or which requires the making of any changes in
the Registration Statement, the Prospectus or any document incorporated by
reference in the Registration Statement or Prospectus in order to make the
statements therein not misleading;
4
(d) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(e) if requested by the managing underwriter or underwriters or a
holder of Registrable Securities being sold in connection with an underwritten
offering, promptly incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters and the holders of a
majority of the Registrable Securities being sold agree should be included
therein relating to the plan of distribution with respect to such Registrable
Securities, including, without limitation, information with respect to the
number of Registrable Securities being sold to such underwriters, the purchase
price being paid for the Registrable Securities by such underwriters and with
respect to any other terms of the underwritten offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(f) furnish to each managing underwriter and, upon request, to each
selling Shareholder, without charge, one signed copy of the Registration
Statement and any amendment to the Registration Statement, including financial
statements and schedules, all documents incorporated by reference in the
Registration Statement and all exhibits (including those incorporated by
reference);
(g) deliver to each selling Shareholder and the underwriters, if any,
without charge, as many copies of the Prospectus (including each preliminary
prospectus) and any amendment or supplement to the Prospectus as such
Shareholder and underwriters may reasonably request; the Company consents to the
use of each Prospectus or any amendment or supplement to the Prospectus by each
of the selling Shareholders and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by such Prospectus or
any amendment or supplement to the Prospectus;
(h) prior to any public offering of Registrable Securities, register or
qualify or cooperate with the selling Shareholders, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or "Blue Sky" laws of such jurisdictions as any selling Shareholder
or underwriter reasonably requests in writing, considering the amount of
Registrable Securities proposed to be sold in each such jurisdiction, and do any
and all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, however, that the Company will not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject;
5
(i) cooperate with the selling Shareholders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends and in such denominations and registered in such names as
the managing underwriters may request at least two business days prior to any
sale of Registrable Securities to the underwriters;
(j) use its best efforts to cause the Registrable Securities covered by
the applicable Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
selling Shareholders or the underwriters, if any, to consummate the disposition
of the Registrable Securities;
(k) upon the occurrence of any event contemplated by Section 3.1(c)(F)
above, prepare a supplement or post-effective amendment to the Registration
Statement or the related Prospectus or any document incorporated by reference in
the Registration Statement or Prospectus or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Securities,
the Prospectus will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements in the Prospectus
not misleading;
(l) cause all Registrable Securities covered by any Registration
Statement to be authorized for trading or listed, as appropriate, on the Nasdaq
Small Cap Market and/or any other automatic quotation system or securities
exchange on which the common shares are then authorized for trading or listed,
as appropriate;
(m) provide a CUSIP number for the Registrable Securities, not later
than the effective date of the applicable Registration Statement;
(n) enter into such agreements (including an underwriting agreement)
and take all such other actions in connection therewith as shall be reasonably
necessary to facilitate the disposition of the Registrable Securities, and in
connection therewith: (A) make such representations and warranties to the
selling Shareholders and the underwriters, if any, in form, substance and scope
as are customarily made by issuers to underwriters in primary underwritten
offerings; (B) obtain opinions of counsel to the Company and updates of those
opinions (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and the holders of
a majority of the Registrable Securities being sold) addressed to each selling
Shareholder and the underwriters, if any, covering the matters customarily
covered in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by such Shareholders and underwriters; (C) obtain
"cold comfort" letters and updates of such letters from the Company's
independent certified public accountants addressed to the underwriters, if any,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters to underwriters in connection with
primary underwritten offerings; (D) if an underwriting agreement is entered
into, it shall set forth in full the indemnification provisions and procedures
set forth in Section 3.2 below with respect to all parties to be indemnified
pursuant to said Section; and (E) the Company shall deliver such documents and
certificates as may be requested by the holders of a majority of the Registrable
Securities being sold and the managing underwriters, if any, to evidence
compliance with Section 3.1(c)(F) above and with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company. The above will be done at each closing under such underwriting or
similar agreement or as and to the extent required under such agreement;
6
(o) make available for inspection during normal business hours by a
representative of the holders of a majority of the Registrable Securities, any
underwriter participating in any disposition pursuant to such Registration, and
any attorney or accountant retained by the representative or underwriter, all
financial and other records, and pertinent corporate documents of the Company,
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such representative, underwriter,
attorney or accountant in connection with such Registration Statement; provided,
however, that any records, information or documents that are designated by the
Company in writing as confidential shall be kept confidential by such persons
unless disclosure of such records, information or documents is required by court
or administrative order or any regulatory body having jurisdiction (in which
case such persons will notify the Company in writing no less than 5 business
days in advance of making the disclosure);
(p) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC; and
(q) promptly prior to the filing of any document that is to be
incorporated by reference into any Registration Statement or Prospectus (after
initial filing of the Registration Statement), provide copies of such document
to counsel to the selling Shareholders and to the managing underwriters, if any,
make the Company's representatives available for discussion of such document and
make such changes in such document prior to its filing as counsel for such
selling Shareholders or underwriters may reasonably request.
3.2 Obligation of Selling Shareholders to Furnish Information. (a) The
Company may require each seller of Registrable Securities as to which any
Registration is being effected to furnish to the Company such information
regarding the proposed distribution of such securities as the Company may from
time to time reasonably request in writing.
(b) Each Shareholder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
3.1(c)(F), such Shareholder will forthwith discontinue disposition of
Registrable Securities pursuant to the Registration Statement until such
Shareholder's receipt of copies of the supplemented or amended Prospectus as
contemplated by Section 3.1(k), or until it is advised in writing (the "Advice")
by the Company that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus, and, if so directed by the Company, such
Shareholder will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Shareholder's possession, of the
Prospectus covering such Registrable Securities. In the event the Company shall
give any such notice, the six-month time period referred to in Sections 1.2 and
2.2 shall be extended by the number of days during the period from and including
the date of the giving of such notice to and including the date when each seller
of Registrable Securities covered by such Registration Statement shall have
received the copies of the supplemented or amended prospectus contemplated by
Section 3.1(c)(F) or the Advice.
7
3.3 Rule 144. The Company agrees that at all times after it has filed a
registration statement pursuant to the requirements of the Securities Act
relating to any class of equity securities of the Company, it will file in a
timely manner all reports required to be filed by it pursuant to the Securities
Act and the Exchange Act and will take such further action as any Shareholder
may reasonably request in order that such Shareholder may effect sales of
Registrable Securities pursuant to Rule 144. At any reasonable time and upon
request of a Shareholder, the Company will furnish such Shareholder and others
with such information as may be necessary to enable the Shareholder to effect
sales of common shares pursuant to Rule 144 under the Securities Act and will
deliver to such Shareholder a written statement as to whether it has complied
with such requirements. Notwithstanding the foregoing, the Company may
deregister any class of its equity securities under Section 12 of the Exchange
Act or suspend its duty to file reports with respect to any class of its equity
securities under Section 12 of the Exchange Act or suspend its duty to file
reports with respect to any class of its securities pursuant to Section 15(d) of
the Exchange Act if it is then permitted to do so pursuant to the Exchange Act
and the rules and regulations thereunder.
3.4 Participation in Underwritten Registrations. No Shareholder may
participate in any underwritten registration hereunder unless such Shareholder
(i) agrees to sell his Registrable Securities on the basis provided in any
underwriting arrangements approved by the Company, and (ii) accurately completes
in a timely manner and executes all questionnaires, powers of attorney,
underwriting agreements and other documents customarily required under the terms
of such underwriting arrangements.
SECTION 4
Restrictions on Public Sale
4.1 Public Sale by Shareholders. To the extent not inconsistent with
applicable law, each Shareholder whose Registrable Securities are included in a
Registration Statement pursuant to this Agreement, if requested by the managing
underwriter or underwriters for such Registration, shall agree not to effect any
public sale or distribution of Registrable Securities, including a sale pursuant
to Rule 144 (or any similar provision then in force) under the Securities Act,
during the 15 business days prior to, and during the 90-day period (or such
shorter period as may be agreed to by such underwriter or underwriters)
following the effective date of a Registration Statement pursuant to such Demand
Registration or Piggyback Registration (except as part of such Demand or
Piggyback Registration).
4.2 Public Sale by the Company. If requested by the managing
underwriter or underwriters for any underwritten Registration, or by the holders
of a majority of the Registrable Securities being registered in a Demand
Registration that is not being underwritten, (i) the Company will not effect any
public sale or distribution of common shares (or securities convertible into or
exchangeable or exercisable for common shares) for its own account during the 15
business days prior to, and during the 90-day period following the effective
date of such Registration, and (ii) the Company will use its best efforts to
cause each other holder of common shares (or securities convertible into or
exchangeable for, or options to purchase, common shares) purchased from the
Company at any time after the date of this Agreement (other than in a registered
public offering) to agree not to effect any public sale or distribution of any
such securities during the period described in (i) above (except as part of such
Registration, if otherwise permitted).
8
SECTION 5
Registration Expenses
5.1 Generally. Except as provided in Section 5.2 below, all expenses
incident to the Company's performance of or compliance with this Agreement will
be borne by the Company, including, without limitation, all registration and
filing fees, the fees and expenses of the counsel and accountants for the
Company (including the expenses of any "cold comfort" letters and special audits
required by or incident to the performance of such persons), all other costs and
expenses of the Company incident to the preparation, printing and filing under
the Securities Act of the Registration Statement (and all amendments and
supplements to the Registration Statement) and furnishing copies of the
Registration Statement and of the Prospectus included therein, the costs and
expenses incurred by the Company in connection with the qualification of the
Registrable Securities under the state securities or "Blue Sky" laws of various
jurisdictions, the costs and expenses associated with filings required to be
made with the NASD (including, if applicable, the fees and expenses of any
"qualified independent underwriter" and its counsel as may be required by the
rules and regulations of the NASD), the costs and expenses of authorizing the
Registrable Securities for trading on the Nasdaq Small Cap Market or of listing
them for trading on a national securities exchange and all other costs and
expenses incurred by the Company in connection with any Registration under this
Agreement.
5.2 Excluded Costs and Expenses, The Company shall not bear the costs
and expenses of any selling Shareholder for underwriters' commissions, discounts
and nonaccountable expense allowances, brokerage fees or transfer taxes, nor the
fees and expenses of any counsel, accountants or other representative retained
by any selling Shareholder.
SECTION 6
Indemnification
6.1 Indemnification by the Company. The Company agrees to indemnify, to
the full extent permitted by law, each Shareholder, against all losses, claims,
damages, liabilities and expenses caused by any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus
or preliminary Prospectus, or any omission or alleged omission to state therein
a material fact necessary to make the statements therein (in the case of a
Prospectus or any preliminary Prospectus, in light of the circumstances under
which they were made) not misleading, except to the extent that such untrue
statement or omission is caused by any information with respect to such
Shareholder furnished in writing to the Company by such Shareholder or its
representative expressly for use therein. The Company will also indemnify
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, their officers and directors
and each person who controls such persons (within the meaning of the Securities
Act) to the same extent as provided above with respect to Shareholders;
provided, however, that if pursuant to an underwritten public offering of
Registrable Securities, the Company and any underwriters enter into an
underwriting or purchase agreement relating to such offering that contains
provisions relating to indemnification and contribution between the Company and
such underwriters, such provisions shall be deemed to govern indemnification and
contribution as between the Company and such underwriters.
9
6.2 Indemnification by Shareholders. In connection with any
Registration, each Shareholder participating in such Registration will furnish
to the Company in writing such information with respect to the Shareholder as
the Company reasonably requests for use in connection with any Registration
Statement, Prospectus or preliminary Prospectus, and agrees to indemnify, to the
full extent permitted by law, the Company, the directors and officers of the
Company signing the Registration Statement and each person who controls the
Company (within the meaning of the Securities Act and the Exchange Act) against
any losses, claims, damages, liabilities and expenses resulting from any untrue
statement of a material fact or any omission to state a material fact required
to be stated therein or necessary to make the statements in the Registration
Statement, Prospectus or preliminary Prospectus (in the case of the Prospectus
or any preliminary Prospectus, in light of the circumstances under which they
were made) not misleading, to the extent, and only to the extent, that such
untrue statement or omission is caused by any information with respect to the
Shareholder furnished in writing by the Shareholder or its representative
specifically for inclusion therein. In no event shall the liability of any
selling Shareholder hereunder be greater in amount than the dollar amount of the
proceeds received by such Shareholder upon the sale of the Registrable
Securities giving rise to such indemnification obligation. The Company shall be
entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, to the same extent as provided above with respect to information
with respect to such persons or entities so furnished in writing by such persons
or entities or their representatives specifically for inclusion in any
Registration Statement, Prospectus or preliminary Prospectus.
6.3 Conduct of Indemnification Proceedings. Any person or entity
entitled to indemnification hereunder will (i) give prompt written notice to the
indemnifying party after the receipt by the indemnified party of a written
notice of the commencement of any action, suit, proceeding or investigation or
threat thereof made in writing for which such indemnified party will claim
indemnification or contribution pursuant to this Agreement; provided, however,
that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under the preceding
Section 6.1 or 6.2, as applicable, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice and (ii) unless in
such indemnified party's reasonable judgment a conflict of interest may exist
between such indemnified and indemnifying parties with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. Whether or not such defense is
assumed by the indemnifying party, the indemnifying party will not be subject to
any liability for any settlement made without its consent (but such consent will
not be unreasonably withheld). No indemnifying party will be required to consent
to the entry of any judgment or to enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
of a release from all liability in respect of such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel in any one jurisdiction for all parties indemnified by such indemnifying
party with respect to such claim unless a conflict of interest exists between
the indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of the
additional counsel or counsels.
10
6.4 Contribution. If for any reason the indemnification provided for in
the preceding Section 6.1 or 6.2, as applicable, is unavailable to an
indemnified party as contemplated by such Section, then the indemnifying party,
in lieu of indemnification, shall contribute to the amount paid or payable by
the indemnified party as a result of such loss, claim, damage, liability or
expense in such proportion as is appropriate to reflect not only the relative
benefits received by the indemnified party and the indemnifying party, but also
the relative fault of the indemnified party and the indemnifying party, as well
as any other relevant equitable considerations; provided, however, that no
selling Shareholder shall be required to contribute in an amount greater than
the difference between the net proceeds received by the Shareholder with respect
to the sale of Registrable Securities and all amounts already contributed by the
Shareholder with respect to such claims, including amounts paid for any legal or
other fees or expenses incurred by the Shareholder.
SECTION 7
Definitions
7.1 Certain Definitions. As used in this Agreement, the following terms
have the following meanings:
"Exchange Act" means the United States Securities Exchange Act of 1934.
"Permitted Transferee" with respect to any Shareholder means such
Shareholder's issue, spouse, or any trust, partnership or limited liability
company for the exclusive benefit of such Shareholder's issue or spouse.
"Registrable Securities" means: (i) the common shares of the Company
held by the Selling Shareholders on the date of this Agreement, which in the
case of Champagne is ___________ common shares, in the case of Xxxxxxx is
________ common shares and in the case of Xxxxxxxx is _____________ common
shares, and (ii) any common shares or other equity securities of the Company
issued or issuable in respect of the common shares referred to in clause (i)
upon any stock split, stock dividend, recapitalization, or similar event;
provided, however, that common shares or other securities will only be treated
as Registrable Securities if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act pursuant
to Section 4(l) of the Securities Act so that all transfer restrictions and any
restrictive legends with respect to those transfer restrictions are removed upon
the consummation of such sale.
11
7.2 Terms Defined in the Agreement. The following terms are defined in
the Agreement:
Term Section
---- -------
Advice 3.2
Agreement Preamble
Champagne Preamble
Company Preamble
Demand Registration 1.1
demanding security holders 2.1
IPO Recitals
Xxxxxxxx Preamble
NASD 3.1(a)
Piggyback Registration 2.1
Prospectus 3.1(a)
Registration 3.1
Registration Statement 3.1(a)
SEC Recitals
Securities Act Recitals
Xxxxxxx Preamble
SECTION 8
Miscellaneous
8.1 Assignment. (a) No transferee of common shares from a Shareholder
or a subsequent transferee, other than a Permitted Transferee shall be entitled
to the registration rights provided in this Agreement.
(b) Before a Permitted Transferee is entitled to the registration
rights provided in this Agreement, such Permitted Transferee shall execute a
letter agreement in form and substance reasonably satisfactory to the Company,
agreeing to be bound by the terms and conditions of this Agreement to the same
extent as the Transferor of the common shares so transferred was bound.
(c) Upon the transfer of Registrable Securities to a Permitted
Transferee, the registration rights of the Shareholder transferring the
Registrable Securities shall thereafter be exercised by action of holders of a
majority of the Registrable Securities of the transferring Shareholder's class.
8.2 Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties to this Agreement, and
their Permitted Transferees, any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly provided in this
Agreement.
12
8.3 Governing Law. This Agreement will be governed by and construed
under the laws of the State of New York in the United States of America without
giving effect to the conflicts of laws principles thereof.
8.4 Counterparts. This Agreement may be executed in counterparts, each
of which will be deemed an original, but all of which together will constitute
one and the same instrument.
8.5 Notices. Any notice required or permitted by this Agreement will be
in writing and sent by prepaid registered or certified mail return receipt
requested, delivered by hand or by messenger, or delivered by Federal Express or
other reputable overnight delivery service, or by facsimile followed with a copy
by first class mail and addressed to the other party at the address shown below
or at such other address for which such party gives notice under this Agreement.
Such notice will be deemed to have been given when delivered if delivered
personally, if sent by mail, at the earlier of its receipt or three (3) business
days after deposit in the mail, if sent by Federal Express or another reputable
overnight delivery service two (2) business days after delivery to such service,
or, if by facsimile, upon confirmation that the transmission was sent
successfully.
(a) If to the Company:
X-Xxxxxxx.xxx Inc.
0000-000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxx
Xxxxxx, KIR-7X7
Attention:______________
Telephone: 000-000-0000
Facsimile: 613-
(b) If to Champagne, to:
Xxxx Xxxxxxxxx
[ ]
[ ]
Canada
Telephone:
Facsimile:
(c) If to Xxxxxxx, to
Xxxx Xxxxxx Xxxxxxx
[ ]
[ ]
Canada
Telephone:
Xxxxxxxxx
00
(x) If to Xxxxxxxx, to:
Xxx Xxxxxxxx
[ ]
[ ]
Canada
Telephone:
Facsimile:
8.6 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, portions of such provisions, or such
provisions in their entirety, to the extent necessary, shall be severed from
this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
8.7 Entire Agreement; Amendments and Waivers. This Agreement
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties to this Agreement. The
provisions of this Agreement, including the provisions of this sentence, may not
be amended, modified or supplemented, and waivers of or consents to departures
from the provisions of this Agreement may not be given unless approved in
writings by the Company and each Shareholder; provided, however, that no
Shareholder consent shall be required to amend this Agreement to include any
Permitted Transferee of a Shareholder. No action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, will be deemed to constitute a waiver by the party taking such
action. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as waiver of any preceding or
succeeding breach and no failure by any party to exercise any right or privilege
hereunder shall be deemed a waiver of such party's rights or privileges
hereunder or shall be deemed a waiver of such party's rights to exercise the
same at any subsequent time or times hereunder.
8.8 Termination. This Agreement shall terminate and cease to be of any
further force or effect upon the earlier to occur of: (i) the date on which all
Registrable Securities cease to be treated as Registrable Securities by reason
of the proviso contained in the definition of "Registrable Securities;" (ii) the
exercise by all Shareholders of the registration rights to which they are
entitled under this Agreement; and (iii) the Company's merger with and into
another corporation where, in connection with the merger, the common shares are
exchanged exclusively for cash and/or shares of capital stock or other
securities that are publicly traded on a national securities exchange or
authorized for trading on the NASDAQ National Market System.
8.9 Recapitalizations, Exchange, Etc. Affecting the Company's Common
Shares. The provisions of this Agreement shall apply, to the full extent set
forth herein with respect to the common shares, to any and all shares of capital
stock of the Company that may be issued in respect of, in exchange for, or in
substitution of the common shares referred to in the definition of "Registrable
Securities" and shall be appropriately adjusted for any stock dividends, splits,
reverse splits, combinations, recapitalizations and the like occurring after the
date of this Agreement.
14
8.10 Headings. The headings of the Sections of this Agreement are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.,
X-XXXXXXX.XXX INC.,
By:
---------------------------------
Name:
Title:
THE SHAREHOLDERS:
-------------------------------------
Xxxx Xxxxxxxxx
-------------------------------------
Xxxx Xxxxxx Xxxxxxx
-------------------------------------
Xxx Xxxxxxxx
16
TABLE OF CONTENTS
Page
SECTION 1 Demand Registration Rights.....................................................................1
1.1 Right to Demand....................................................................................1
1.2 Number of Demand Registrations.....................................................................1
1.3 Priority on Demand Registrations...................................................................2
1.4 Selection of Underwriters..........................................................................2
SECTION 2 Piggyback Registration Rights..................................................................2
2.1 Right to Piggyback.................................................................................2
2.2 Number of Piggyback Registrations..................................................................3
2.3 Priority on Piggyback Registrations................................................................3
2.4 Selection of Underwriters..........................................................................3
SECTION 3 Registration Procedures........................................................................3
3.1 Registration Procedures............................................................................3
3.2 Obligation of Selling Shareholders to Furnish Information..........................................7
3.3 Rule 144...........................................................................................7
3.4 Participation in Underwritten Registrations........................................................8
SECTION 4 Restrictions on Public Sale....................................................................8
4.1 Public Sale by Shareholders........................................................................8
4.2 Public Sale by the Company.........................................................................8
SECTION 5 Registration Expenses..........................................................................9
5.1 Generally..........................................................................................9
5.2 Excluded Costs and Expenses........................................................................9
SECTION 6 Indemnification................................................................................9
6.1 Indemnification by the Company.....................................................................9
6.2 Indemnification by Shareholders...................................................................10
6.3 Conduct of Indemnification Proceedings............................................................10
6.4 Contribution......................................................................................11
SECTION 7 Definitions...................................................................................11
7.1 Certain Definitions...............................................................................11
7.2 Terms Defined in the Agreement....................................................................12
SECTION 8 Miscellaneous.................................................................................12
8.1 Assignment........................................................................................12
8.2 Third Parties.....................................................................................12
8.3 Governing Law.....................................................................................12
8.4 Counterparts......................................................................................13
8.5 Notices...........................................................................................13
8.6 Severability......................................................................................14
8.7 Entire Agreement; Amendments and Waivers..........................................................14
8.8 Termination.......................................................................................14
8.9 Recapitalizations, Exchange, Etc. Affecting the Company's Common Shares...........................14
8.10 Headings..........................................................................................14
Registration Rights Agreement
by and among
E-Cruiter-Com Inc.,
Xxxx Xxxxxxxxx,
Xxxx Xxxxxx Xxxxxxx and
Xxx Xxxxxxxx
dated as of September 16th, 1999
