EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is entered into as of December
17, 1999, between Secure Computing Corporation, a Delaware corporation with
offices at Xxx Xxxxxxx Xxxxxxxxx, Xxxxx 000, Xxx Xxxx, Xxxxxxxxxx 00000 (the
"Company") and Westgate International, LP, a Cayman Islands limited partnership
with an office c/o Stonington Management Corporation, 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 (the "Investor").
W I T N E S S E T H:
Whereas, pursuant to that certain Preferred Stock Investment Agreement,
dated on or about the date hereof, by and between the Company and the Investor
(the "Purchase Agreement"), the Company has agreed to sell and issue to the
Investor, and the Investor has agreed to purchase from the Company, an aggregate
of 5,000 shares, Liquidation Preference $1,000, of the Company's Series D 4%
Cumulative Convertible Preferred Stock (the "Initial Preferred Shares") subject
to the terms and conditions set forth therein and the Investors and the Company
have agreed that, pursuant to an option in the Purchase Agreement, the Investor
may purchase up to an additional 2,500 shares of the Company's Series D 4%
Cumulative Convertible Preferred Stock (the "Additional Preferred Shares" and
collectively with the Initial Preferred Shares, the "Preferred Shares"), subject
to terms and conditions substantially similar to those contained in the Purchase
Agreement; and
Whereas, the Purchase Agreement contemplates that the Preferred Shares
will be convertible into shares (the "Common Shares") of common stock, par value
$0.01, of the Company ("Common Stock") pursuant to the terms and conditions set
forth in the Certificate of Designations for the Preferred Shares (the
"Certificate"); and
Now, Therefore, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Purchase Agreement and
this Agreement, the Company and the Investors agree as follows:
1. Certain Definitions. Capitalized terms used herein and not otherwise
defined shall have the meaning ascribed thereto in the Purchase Agreement or the
Certificate. As used in this Agreement, the following terms shall have the
following respective meanings:
"Closing" and "Closing Date" shall have the meanings ascribed to such
terms in the Purchase Agreement; provided that they shall refer to the initial
Closing and Closing Date scheduled under the Purchase Agreement.
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EXHIBIT 10.3
"Commission" or "SEC" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Holder" and "Holders" shall include the Investor and any transferee or
transferees of the Preferred Shares, Common Shares or Registrable Securities
which have not been sold to the public to whom the registration rights conferred
by this Agreement have been transferred in compliance with this Agreement and
the Purchase Agreement.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean: (i) the Common Shares or other
securities issued or issuable to each Holder or its permitted transferee or
designee upon conversion of the Preferred Shares; (ii) securities issued or
issuable upon any stock split, stock dividend, recapitalization or similar event
with respect to such Common Shares; and (iii) any other security issued as a
dividend or other distribution with respect to, in exchange for or in
replacement of the securities referred to in the preceding clauses.
"Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, reasonable fees and disbursements of counsel to Holders
(using a single counsel selected by a majority in interest of the Holders) for a
"due diligence" examination of the Company and review of the Registration
Statement and related documents, and the expense of any special audits incident
to or required by any such registration (but excluding the compensation of
regular employees of the Company, which shall be paid in any event by the
Company and further excluding any fees and disbursements for counsel in
connection with any due diligence review incurred in connection with the Common
Stock Investment Agreement, dated as of October 4, 1999, by and between
Manchester Securities Corp. and the Company).
"Registration Statement" shall have the meaning set forth in Section 2(a)
herein.
"Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Securities Act" or "Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for Holders not included within "Registration
Expenses".
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EXHIBIT 10.3
2. Registration Requirements. The Company shall use its best efforts to
effect the registration of the Registrable Securities (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale) and in all
states reasonably requested by the Holder. Such best efforts by the Company
shall include, without limitation, the following:
(a) The Company shall, as expeditiously as possible after the
Closing Date:
i. But in any event within 30 days of the Closing, prepare and
file a registration statement with the Commission pursuant to Rule 415 under the
Securities Act on Form S-3 under the Securities Act (or in the event that the
Company is ineligible to use such form, such other form as the Company is
eligible to use under the Securities Act) covering resales by the Holders of the
Registrable Securities ("Registration Statement"), which Registration Statement,
to the extent allowable under the Securities Act and the rules promulgated
thereunder (including Rule 416), shall state that such Registration Statement
also covers such indeterminate number of additional shares of Common Stock as
may become issuable upon conversion of the Preferred Shares. In the event that
the Registrable Securities issuable upon conversion of the Initial Preferred
Shares (the "INITIAL REGISTRABLE SECURITIES") can be registered on Form S-3, but
the Registrable Securities issuable upon conversion of the Additional Preferred
Shares (the "ADDITIONAL REGISTRABLE SECURITIES") cannot, then the Company shall
file two separate Registration Statements, one on Form S-3 to cover the Initial
Registrable Securities and the other, on such form as the Company shall be
permitted to use, to cover the Additional Registrable Securities. In such case,
all references herein to "Registration Statement" shall refer to both
Registration Statements. The number of shares of Common Stock initially included
in such Registration Statement shall be no less than the sum of two times the
number of Common Shares that are then issuable upon conversion of the Preferred
Shares. Nothing in the preceding sentence will limit the Company's obligations
to reserve shares of Common Stock pursuant to Section 3.7 of the Purchase
Agreement. Thereafter the Company shall use its best efforts to cause such
Registration Statement and other filings to be declared effective as soon as
possible, and in any event prior to 60 days following the Closing Date. Without
limiting the foregoing, the Company will promptly respond to all SEC comments,
inquiries and requests, and shall request acceleration of effectiveness at the
earliest possible date. The Company shall provide the Holders reasonable
opportunity to review any such Registration Statement or amendment or supplement
thereto prior to filing.
ii. Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary to comply with the
provisions of the
3
EXHIBIT 10.3
Act with respect to the disposition of all securities covered by such
Registration Statement and notify the Holders of the filing and effectiveness of
such Registration Statement and any amendments or supplements.
iii. Furnish to each Holder such numbers of copies of a current
prospectus conforming with the requirements of the Act, copies of the
Registration Statement, any amendment or supplement thereto and any documents
incorporated by reference therein and such other documents as such Holder may
reasonably require in order to facilitate the disposition of Registrable
Securities owned by such Holder.
iv. Register and qualify the securities covered by such
Registration Statement under the securities or "Blue Sky" laws of all domestic
jurisdictions; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
v. Notify each Holder immediately of the happening of any event
(but not the substance or details of any such events unless specifically
requested by a Holder) as a result of which the prospectus (including any
supplements thereto or thereof) included in such Registration Statement, as then
in effect, includes an untrue statement of material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and use its
best efforts to promptly update and/or correct such prospectus.
vi. Notify each Holder immediately of the issuance by the
Commission or any state securities commission or agency of any stop order
suspending the effectiveness of the Registration Statement or the threat or
initiation of any proceedings for that purpose. The Company shall use its best
efforts to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible time.
vii. Permit counsel to the Holders to review the Registration
Statement and all amendments and supplements thereto within a reasonable period
of time (but not less than 2 full Trading Days (as defined in the Certificate))
prior to each filing, and shall not file any document in a form to which such
counsel reasonably objects and will not request acceleration of the Registration
Statement without prior notice to such counsel.
viii. List the Registrable Securities covered by such
Registration Statement with all securities exchange(s) and/or markets on which
the Common Stock is then listed and prepare and file any required filings with
the Nasdaq National Market or any exchange or market where the Common Shares are
traded.
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EXHIBIT 10.3
ix. Take all steps necessary to enable Holders to avail
themselves of the prospectus delivery mechanism set forth in Rule 153 (or
successor thereto) under the Act.
(b) Set forth below in this Section 2(b) are (I) events that may
arise that the Investors consider will interfere with the full enjoyment of
their rights under this Agreement, the Purchase Agreement and the Certificate
(the "Interfering Events"), and (II) certain remedies applicable in each of
these events.
Paragraphs (i) through (iv) of this Section 2(b) describe the
Interfering Events, provide a remedy to the Investors if an Interfering Event
occurs and provide that the Investors may require that the Company repurchase
outstanding Preferred Shares at a specified price if certain Interfering Events
are not timely cured.
Paragraph (v) provides, inter alia, that if default adjustments
required as the remedy in the case of certain of the Interfering Events are not
provided when due, the Company may be required by the Investors to redeem
outstanding Preferred Shares at a specified price.
Paragraph (vi) provides, inter alia, that the Investors have the
right to specific performance.
The preceding paragraphs in this Section 2(b) are meant to serve
only as an introduction to this Section 2(b), are for convenience only, and are
not to be considered in applying, construing or interpreting this Section 2(b).
i. Delay in Effectiveness of Registration Statement.
(A) In the event that such Registration Statement has not
been declared effective within 90 days from the Closing Date, then the Company
shall pay each Holder a Monthly Delay Payment (as defined below) for each 30 day
period (or portion thereof) that effectiveness of the Registration Statement is
delayed. In addition to the foregoing, if the Registration Statement has not
been declared effective within 120 days after the Closing Date, then each Holder
shall have the right to sell, at any time after the 120th day after the Closing
Date, any or all of its Preferred Shares to the Company for consideration (the
"Mandatory Repurchase Price") equal to the greater of (x) 120% of the
Liquidation Preference of all such Preferred Shares being sold to the Company,
(y) the Liquidation Preference for the Preferred Shares being sold to the
Company divided by the then applicable Conversion Price multiplied by the
greater of the last closing price of the Common Stock on (i) the date a Holder
exercises its option pursuant to this Section 2(b) to require repurchase of
Preferred Shares or (ii) the date on which the event triggering Holder's
remedies under this Section 2(b) first occurred, in each case payable in cash.
(B) As used in this Agreement, a "Monthly Delay Payment"
shall be a cash payment equal to 1% of the Liquidation Preference of the
Preferred Shares
5
EXHIBIT 10.3
held a Holder for the first 30 day period (or portion thereof) that the
specified condition in this Section 2(b) has not been fulfilled or the specified
deficiency has not been remedied and 2% of such Liquidation Preference
thereafter for each subsequent 30 day period (or portion thereof) that the
specified condition in this Section 2(b) has not been fulfilled or the specified
deficiency has not been remedied. Payment of the Monthly Delay Payments and
Mandatory Repurchase Price shall be due and payable from the Company to such
Holder within 5 business days of demand therefor. Without limiting the
foregoing, if cash payment of the Mandatory Repurchase Price is not made within
such 5 business day period, the Holder may revoke and withdraw its election to
cause the Company to make such mandatory purchase at any time prior to its
receipt of such cash. At the option of the Holder, Monthly Delay Payments may be
added to the Liquidation Preference of the Preferred Shares held by it.
(C) Notwithstanding the foregoing, there shall be excluded
from the calculation of the number of days that the Registration Statement has
not been declared effective the delays which are solely attributable to delays
in the Investors providing information required for the Registration Statement.
ii. No Listing; Premium Price Redemption for Delisting of Class
of Shares.
(A) In the event that the Company fails, refuses or for any
other reason is unable to cause the Registrable Securities covered by the
Registration Statement to be listed with Nasdaq National Market or one of the
other Approved Markets (as defined in the Purchase Agreement) at all times
during the period ("Listing Period") from the 60th day following the Closing
Date until such time as all of the Preferred Shares shall have been subject to
mandatory conversion pursuant to the terms of the Certificate, then the Company
shall provide to each Holder a Monthly Delay Payment, for each 30 day period or
portion thereof during which such listing is not in effect. In addition to the
foregoing, following the 30th day that such listing is not in effect, each
Holder shall have the right to sell to the Company any or all of its Preferred
Shares at the Mandatory Repurchase Price. The provisions of Section 2(b)(i)(B)
shall apply to this Section 2(b)(ii)(A).
(B) In the event that shares of Common Stock of the Company
are not listed on any of the Approved Markets at all times following the Closing
Date, or are otherwise suspended from trading and remain unlisted or suspended
for 5 consecutive days, or if the Registrable Securities are not listed for 5
consecutive days following the Closing, then at the option of each Holder and to
the extent such Holder so elects, each Holder shall have the right to sell to
the Company the Preferred Shares held by such Holder, in whole or in part, for
the Mandatory Repurchase Price on the terms set forth in Section 2(b)(i)(B)
above
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EXHIBIT 10.3
iii. Blackout Periods. In the event any Holder's ability to sell
Registrable Securities under the Registration Statement is suspended for more
than (i) five (5) consecutive days or (ii) twenty (20) days in any calendar year
("Suspension Grace Period"), including without limitation by reason of any
suspension or stop order with respect to the Registration Statement or the fact
that an event has occurred as a result of which the prospectus (including any
supplements thereto) included in such Registration Statement then in effect
includes an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing (a "Blackout"), then the
Company shall provide to each Holder a Monthly Delay Payment for each 30 day
period or portion thereof from and after the expiration of the Suspension Grace
Period, on the terms set forth in Section 2(b)(i)(B) above. In addition, at any
time following the expiration of the Suspension Grace Period if the Blackout
continues for more than five (5) additional consecutive days, a Holder shall
have the right to sell to the Company its Preferred Shares in whole or in part
for the Mandatory Repurchase Price on the terms set forth in Section 2(b)(i)(B)
above.
iv. Redemption for Conversion Deficiency. In the event that the
Company does not have a sufficient number of Common Shares available to satisfy
the Company's obligations to any Holder upon receipt of a Conversion Notice (as
defined in the Certificate) or is otherwise unable or unwilling for any reason
to issue such Common Shares (other than failure of the Holder to comply with the
conversion notice and delivery requirements of Section 5 of the Certificate)
(each, a "Conversion Deficiency") in accordance with the terms of the
Certificate for any reason after receipt of a Conversion Notice from any Holder,
then:
(A) The Company shall provide to each Holder a Monthly Delay
Payment for each 30 day period or portion thereof following the Conversion
Deficiency, on the terms set forth in Section 2(b)(i)(B) above.
(B) At any time five days after the commencement of the
running of the first 30-day period described above in clause (A) of this
paragraph (iv), at the request of any Holder, the Company promptly shall
purchase from such Holder, for the Mandatory Repurchase Price and on the terms
set forth in Section 2(b)(i)(B) above, the outstanding Preferred Shares equal to
such Holder's pro rata share of the "Deficiency", as such term is defined below,
if the failure to issue Common Shares results from the lack of a sufficient
number thereof and (2) shall purchase all of such Holder's Preferred Shares (or
such portion requested by such Holder) for such consideration and on such terms
if the failure to issue Common Shares results from any other cause, or is
without cause.
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EXHIBIT 10.3
v. Mandatory Purchase Price for Defaults.
(A) The Company acknowledges that any failure, refusal or
inability by the Company to perform the obligations described in the foregoing
paragraphs (i) through (v) will cause the Holders to suffer damages in an amount
that will be difficult to ascertain, including without limitation damages
resulting from the loss of liquidity in the Registrable Securities and the
additional investment risk in holding the Registrable Securities. Accordingly,
the parties agree, after consulting with counsel, that it is appropriate to
include in this Agreement the foregoing provisions for Monthly Delay Payments
and mandatory redemptions in order to compensate the Holders for such damages.
The parties acknowledge and agree that the Monthly Delay Payments and mandatory
redemptions set forth above represent the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such payments and
mandatory redemptions are reasonable and will not constitute a penalty.
(B) In the event that the Company fails to pay any Monthly
Delay Payment within 5 business days of demand therefor, each Holder shall have
the right to sell to the Company any or all of its Preferred Shares at the
Mandatory Repurchase Price on the terms set forth in Section 2(b)(i)(B) above.
vi. Cumulative Remedies. The Monthly Delay Payments and
mandatory purchases provided for above are in addition to and not in lieu or
limitation of any other rights the Holders may have at law, in equity or under
the terms of the Certificate, the Purchase Agreement, and this Agreement,
including without limitation the right to monetary contract damages and specific
performance. Each Holder shall be entitled to specific performance of any and
all obligations of the Company in connection with the registration rights of the
Holders hereunder.
vii. Remedies for Registrable Securities. In any case in which a
Holder of Preferred Shares has the right to cause the purchase of its Preferred
Shares under this Section 2(b), it shall also have the right to cause the
purchase of the Registrable Securities that it owns as follows: such shares
shall be purchased at a price ("Common Purchase Price") equal to the Mandatory
Repurchase Price of the Preferred Shares which were converted into Common
Shares.
In the case in which a Holder of Preferred Shares would
have the right to receive Monthly Delay Payments with respect to
Preferred Shares under Section 2(b), it shall also have the
right to receive payments with respect to Registrable Securities
owned by it in an amount at the rate of the Monthly Delay
Payments that would have applied to the Preferred Shares
converted into Common Shares had such Preferred Shares not been
converted.
8
EXHIBIT 10.3
(c) If the Holder(s) intend to distribute the Registrable Securities
by means of an underwriting, the Holder(s) shall so advise the Company. Any such
underwriting may only be administered by nationally or regionally recognized
investment bankers reasonably satisfactory to the Company.
(d) The Company shall enter into such customary agreements for
secondary offerings (including a customary underwriting agreement with the
underwriter or underwriters, if any) and take all such other reasonable actions
reasonably requested by the Holders in connection therewith in order to expedite
or facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into and whether
or not the Registrable Securities are to be sold in an underwritten offering:
i. make such representations and warranties to the Holders and
the underwriter or underwriters, if any, in form, substance and scope as are
customarily made by issuers to underwriters in secondary offerings;
ii. cause to be delivered to the sellers of Registrable
Securities and the underwriter or underwriters, if any, opinions of independent
counsel to the Company, on and dated as of the effective day (or in the case of
an underwritten offering, dated the date of delivery of any Registrable
Securities sold pursuant thereto) of the Registration Statement, and within
ninety (90) days following the end of each fiscal year thereafter, which counsel
and opinions (in form, scope and substance) shall be reasonably satisfactory to
the Holders and the underwriter(s), if any, and their counsel and covering,
without limitation, such matters as the due authorization and issuance of the
securities being registered and compliance with securities laws by the Company
in connection with the authorization, issuance and registration thereof and
other matters that are customarily given to underwriters in underwritten
offerings, addressed to the Holders and each underwriter, if any;
iii. cause to be delivered, immediately prior to the
effectiveness of the Registration Statement (and, in the case of an underwritten
offering, at the time of delivery of any Registrable Securities sold pursuant
thereto), and at the beginning of each fiscal year following a year during which
the Company's independent certified public accountants shall have reviewed any
of the Company's books or records, a "comfort" letter from the Company's
independent certified public accountants addressed to the Holders and each
underwriter, if any, stating that such accountants are independent public
accountants within the meaning of the Securities Act and the applicable
published rules and regulations thereunder, and otherwise in customary form and
covering such financial and accounting matters as are customarily covered by
letters of the independent certified public accountants delivered in connection
with secondary offerings; such accountants shall have undertaken in each such
letter to update the same during each such fiscal year in which such books or
records are being reviewed so that each such letter shall remain
9
EXHIBIT 10.3
current, correct and complete throughout such fiscal year; and each such letter
and update thereof, if any, shall be reasonably satisfactory to the Holders;
iv. if an underwriting agreement is entered into, the same shall
include customary indemnification and contribution provisions to and from the
underwriters and procedures for secondary underwritten offerings; and
v. deliver such documents and certificates as may be reasonably
requested by the Holders of the Registrable Securities being sold or the
managing underwriter or underwriters, if any, to evidence compliance with clause
(i) above and with any customary conditions contained in the underwriting
agreement, if any.
(e) The Company shall make available for inspection by the Holders,
representative(s) of all the Holders together, any underwriter participating in
any disposition pursuant to a Registration Statement, and any attorney or
accountant retained by any Holder or underwriter, all financial and other
records customary for purposes of the Holders' due diligence examination of the
Company and review of any Registration Statement, all SEC Documents (as defined
in the Purchase Agreement) filed subsequent to the Closing, pertinent corporate
documents and properties 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 that such parties agree to keep such
information confidential.
(f) Subject to Section 2(b) above, the Company may suspend the use
of any prospectus used in connection with the Registration Statement only in the
event, and for such period of time as, such a suspension is required by the
rules and regulations of the Commission. The Company will use its best efforts
to cause such suspension to terminate at the earliest possible date.
(g) The Company shall file a Registration Statement with respect to
any newly authorized and/or reserved Registrable Securities consisting of Common
Shares described in clause (i) of the definition of Registrable Securities
within five (5) business days of any stockholders meeting authorizing same and
shall use its best efforts to cause such Registration Statement to become
effective within sixty (60) days of such stockholders meeting. If the Holders
become entitled, pursuant to an event described in clause (ii) and (iii) of the
definition of Registrable Securities, to receive any securities in respect of
Registrable Securities that were already included in a Registration Statement,
subsequent to the date such Registration Statement is declared effective, and
the Company is unable under the securities laws to add such securities to the
then effective Registration Statement, the Company shall promptly file, in
accordance with the procedures set forth herein, an additional Registration
Statement with respect to such newly Registrable Securities. The Company shall
use its best efforts to (i) cause any such additional Registration Statement,
when filed, to become effective under the Securities
10
EXHIBIT 10.3
Act, and (ii) keep such additional Registration Statement effective during the
period described in Section 5 below and cause such Registration Statement to
become effective within 30 days of that date that the need to file the
Registration Statement arose. All of the registration rights and remedies under
this Agreement shall apply to the registration of such newly reserved shares and
such new Registrable Securities, including without limitation the provisions
providing for default payments and mandatory redemptions contained herein.
3. Expenses of Registration. All Registration Expenses in connection with
any registration, qualification or compliance with registration pursuant to this
Agreement shall be borne by the Company, and all Selling Expenses of a Holder
shall be borne by such Holder.
4. Registration on Form S-3. The Company shall use its best efforts to
remain qualified for registration on Form S-3 or any comparable or successor
form or forms, or in the event that the Company is ineligible to use such form,
such form as the Company is eligible to use under the Securities Act.
5. Registration Period. In the case of the registration effected by the
Company pursuant to this Agreement, the Company will use its best efforts to
keep such registration effective until all the Holders have completed the sales
or distribution described in the Registration Statement relating thereto or, if
earlier, until such Registrable Securities may be sold by the Holders under Rule
144(k) (provided that the Company's transfer agent has accepted an instruction
from the Company to such effect).
6. Indemnification.
(a) Company Indemnity. The Company will indemnify each Holder, each
of its officers, directors, agents and partners, and each person controlling
each of the foregoing, within the meaning of Section 15 of the Securities Act
and the rules and regulations thereunder with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls, within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on 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 in light of the circumstances under which they were made,
or any violation by the Company of the Securities Act or any state securities
law or in either case, any rule or regulation thereunder applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will reimburse each
Holder, each
11
EXHIBIT 10.3
of its officers, directors, agents and partners, and each person controlling
each of the foregoing, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any such
case to a Holder to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission based upon
written information furnished to the Company by such Holder or the underwriter
(if any) therefor and stated to be specifically for use therein. The indemnity
agreement contained in this Section 6(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent will
not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally and not jointly,
if Registrable Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, agents and partners, and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, each other Holder (if any), and each of their officers, directors
and partners, and each person controlling such other Holder(s) against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statement therein not misleading in light of the circumstances under which they
were made, and will reimburse the Company and such other Holder(s) and their
directors, officers and partners, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein, and provided that the maximum
amount for which such Holder shall be liable under this indemnity shall not
exceed the net proceeds received by such Holder from the sale of the Registrable
Securities pursuant to the registration statement in question. The indemnity
agreement contained in this Section 6(b) shall not apply to amounts paid in
settlement of any such claims, losses, damages or liabilities if such settlement
is effected without the consent of such Holder (which consent shall not be
unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under this
Section 6 (the "Indemnified Party") shall give notice to the party required to
provide
12
EXHIBIT 10.3
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim in any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at its own expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 6 except to the extent
that the Indemnifying Party is materially and adversely affected by such failure
to provide notice. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement 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 in respect to such claim or
litigation. Each Indemnified Party shall furnish such non-privileged information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with the defense of such claim and litigation resulting therefrom.
7. Contribution. If the indemnification provided for in Section 6 herein
is unavailable to the Indemnified Parties in respect of any losses, claims,
damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such 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 losses, claims, damages or
liabilities as between the Company on the one hand and any Holder on the other,
in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of any Holder 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 or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Holders or the underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an
13
EXHIBIT 10.3
Indemnified Party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraphs shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
section, no Holder or underwriter shall be required to contribute any amount in
excess of the amount by which (i) in the case of any Holder, the net proceeds
received by such Holder from the sale of Registrable Securities pursuant to the
registration statement in question 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 or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
8. Survival. The indemnity and contribution agreements contained in
Sections 6 and 7 and the representations and warranties of the Company referred
to in Section 2(d)(i) shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement or the Purchase Agreement or
any underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company, and (iii) the consummation
of the sale or successive resales of the Registrable Securities.
9. Information by Holders. Each Holder shall furnish to the Company such
information regarding such Holder and the distribution and/or sale proposed by
such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities as so provided
by such Investor shall be included without alteration in the Registration
Statement covering the Registrable Securities and shall not be changed without
written consent of such Holder.
10. Replacement Certificates. The certificate(s) representing the Common
Shares or Notes Shares held by any Investor (or then Holder) may be exchanged by
such Investor (or such Holder) at any time and from time to time for
certificates with different denominations representing an equal aggregate number
of Common Shares, as reasonably requested by such Investor (or such Holder) upon
surrendering the same. No service charge will be made for such registration or
transfer or exchange.
11. Transfer or Assignment. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Investors by
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or
14
EXHIBIT 10.3
assigned (in whole or in part) to a transferee or assignee of Preferred Shares
or Registrable Securities, and all other rights granted to the Investors by the
Company hereunder may be transferred or assigned to any transferee or assignee
of any Preferred Shares, or Registrable Securities; provided in each case that
the Company must be given written notice by the such Investor at the time of or
within a reasonable time after said transfer or assignment, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned; and
provided further that the transferee or assignee of such rights agrees in
writing to be bound by the registration provisions of this Agreement.
12. Miscellaneous.
(a) Remedies. The Company and the Investor acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which any of
them may be entitled by law or equity.
(b) Jurisdiction. Each of the Company and the Investor (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court, the New York State courts and other courts of the United States sitting
in New York County, New York for the purposes of any suit, action or proceeding
arising out of or relating to this Agreement and (ii) hereby waives, and agrees
not to assert in any such suit action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. The Company and the Investor consent to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this paragraph shall affect or
limit any right to serve process in any other manner permitted by law.
(c) Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing by facsimile, mail or personal
delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
15
EXHIBIT 10.3
to the Company:
Secure Computing Corporation
000 Xxxxxx Xxxxx Xxxxx, Xxxxx 0
Xxx Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxx Xxxxx and
Secure Computing Corporation
Xxx Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxxxx Xxxxxxxx
with copies to:
Xxxxxx Xxxxxx White & XxXxxxxxx
0000 Xxxx Xxxx Xxxx
Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxx, Esq.
to the Investor:
c/o Stonington Management Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxx Xxxxxxx and Mr. Xxxxx Xxxxx
16
EXHIBIT 10.3
with copies to:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Any party hereto may from time to time change its address for notices by giving
at least five days' written notice of such changed address to the other parties
hereto.
(d) Indemnity. Each party shall indemnify each other party against
any loss, cost or damages (including reasonable attorney's fees) incurred as a
result of such parties' breach of any representation, warranty, covenant or
agreement in this Agreement.
(e) Waivers. No waiver by any party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter. The representations and warranties and the agreements and
covenants of the Company and each Investor contained herein shall survive the
Closing.
(f) Execution in Counterpart. This Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement, it being understood that all parties need not sign the same
counterpart.
(g) Publicity. The Company agrees that it will not disclose, and
will not include in any public announcement, the name of the Investor without
its consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement. The Company agrees
to deliver a copy of any public announcement regarding the matters covered by
this Agreement or any agreement or document executed herewith to the Investor
and any public announcement including the name of the Investor to the Investor,
prior to the publication of such announcements.
(h) Entire Agreement; Amendment. This Agreement, together with the
Purchase Agreement, the Certificate and the agreements and documents
contemplated hereby and thereby, contains the entire understanding and agreement
of the parties, and may not be amended, modified or terminated except by a
written agreement signed by the Company plus the Holders of 75% of the Preferred
Shares issued under the Purchase Agreement to that date; provided that for the
purposes of this Section 12(h)) the Holders of Common Shares still entitled to
registration rights under this Agreement will be
17
EXHIBIT 10.3
deemed to still be Holders of that number of Preferred Shares which were
converted into such number of Common Shares issued upon conversion which are
still held by them.
(i) Governing Law. This Agreement and the validity and performance
of the terms hereof shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts executed and to be
performed entirely within such state, except to the extent that the law of the
State of Delaware regulates the Company's issuance of securities.
(j) [INTENTIONALLY OMITTED]
(k) Jury Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY
JURY.
(l) Titles. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
(m) No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction will be applied against any party.
[SIGNATURE PAGE FOLLOWS]
18
EXHIBIT 10.3
In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SECURE COMPUTING CORPORATION
By: /s/ Xxxx XxXxxxx
-------------------------------------
Name: Xxxx XxXxxxx
Title: Chief Executive Officer
WESTGATE INTERNATIONAL, LP
By: Martley International, Inc.
Attorney-in-Fact
By: /s/ Xxxxxx Xxxxxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Vice President
19
