REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
as of this 15th day of November, 1996, among ROM TECH, INC., a Pennsylvania
corporation with an address of 0000 Xxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx,
Xxxxxxxxxxxx 00000 (the "Company"), and the investors listed on Schedule "A"
(collectively, the "Investors").
W I T N E S S E T H:
WHEREAS, the Investors have agreed to purchase from the Company (i) an
aggregate of 300,000 shares of Class Two Convertible Preferred Stock (the
"Preferred Stock"), which Preferred Stock is convertible into shares of Common
Stock, without par value, of the Company (the "Common Stock"), and (ii) an
aggregate of 420,000 warrants (the "Warrants") to purchase shares of the Common
Stock; and
WHEREAS, the Company has agreed to enter into this Registration Rights
Agreement with the Investors as a condition to the purchase of the Preferred
Stock and the Warrants.
NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound, the parties to this Agreement hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following respective meanings:
(a) "Holder" shall mean any person holding Registrable
Securities or any permitted assignee in accordance with Section 8 hereof.
(b) "Registrable Securities" shall mean (i) the shares of the
Common Stock acquired by the Investors upon conversion of the Preferred Stock
and upon exercise of the Warrants, and (ii) any Common Stock of the Company
issued as a dividend or other distribution with respect to, or in exchange for
or in replacement of, shares of the Common Stock described in clause (i) above.
2. Restricted Nature of the Common Stock. Each of the Investors hereby
acknowledges that the Common Stock issuable upon conversion of the Preferred
Stock and upon exercise of the Warrants is subject to the following:
(a) Each of the Investors may not, directly or indirectly,
offer, sell, transfer, assign or otherwise dispose of the Common Stock issuable
upon conversion of the Preferred Stock and upon exercise of the Warrants (or
solicit any offers to purchase or otherwise acquire or take a pledge of such
Common Stock), except pursuant to (i) an effective registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations thereunder and (ii) an effective registration statement or
qualification under applicable "Blue Sky" state securities laws (the
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"Blue Sky Laws"), or unless such Investor shall have delivered to the Company an
opinion of counsel, which opinion of counsel shall be satisfactory to the
Company, to the effect that no registration statement or qualification is
required because of the availability of exemptions from registration and/or
qualification under the Securities Act or Blue Sky Laws;
(b) Each of the Investors understands that, although the
Company will use its best efforts to cause the Registration Statement (as
defined in Section 3 below) to become effective in accordance with such
provisions, (i) the offer and sale of such Common Stock issuable upon conversion
of the Preferred Stock or upon exercise of the Warrants has not been registered
under the Securities Act or registered or qualified under any Blue Sky Laws as
of the date hereof and will not be registered or qualified under the Securities
Act or any Blue Sky Laws on the closing date of the purchase of the Preferred
Stock and Warrants (the "Effective Time"), (ii) each Investor must continue to
bear the economic risk of the investment in his or her shares of the Common
Stock issuable upon conversion of the Preferred Stock or upon exercise of the
Warrants until the offer and sale of such Common Stock is subsequently
registered and/or qualified under the Securities Act and any applicable Blue Sky
Laws pursuant to this Agreement or an exemption from such registration and/or
qualification is available, (iii) when and if such Common Stock issuable upon
conversion of the Preferred Stock or upon exercise of the Warrants may be
disposed of without registration in reliance upon Rule 144 under the Securities
Act ("Rule 144"), the offer and sale of such Common Stock may not qualify under
Rule 144 since dispositions under such Rule can be made only in limited amounts
in accordance with the terms and conditions of such Rule, (iv) if the exemption
afforded by Rule 144 is not available, public offer or sale of the Common Stock
issuable upon conversion of the Preferred Stock or upon exercise of the Warrants
without registration will require the availability of another exemption under
the Securities Act, (v) a restrictive legend in substantially the form
hereinafter set forth shall be placed upon such Common Stock, and (vi) a
notation shall be made in the appropriate records of the Company indicating that
such Common Stock is subject to restrictions on transfer and appropriate
stop-transfer instructions will be issued to the transfer agent of the Company
with respect to such Common Stock;
(c) If such Common Stock is disposed of in accordance with
Rule 144, such Investor shall deliver to the Company at or prior to the time of
such disposition an executed copy of Form 144 (if required by Rule 144) and such
other documentation as the Company may reasonably require in connection with
such disposition;
(d) Each of the Investors has been furnished with a copy of
the Company's Offering Materials, dated November 13, 1996, to which is attached,
among other things, the Company's Form 10-KSB for the year ended June 30, 1996
and Form 10-QSB for the fiscal quarter ended September 30, 1996, each as filed
with the Securities and Exchange Commission (the "SEC"); and
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(e) Each of the Investors understands that such Common Stock
shall bear a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR, UNLESS, IN THE OPINION OF COUNSEL , IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER,
SALE, OR OTHER TRANSFER IS EXEMPT FROM REGISTRATION OR IS
OTHERWISE IN COMPLIANCE WITH THE ACT AND SUCH LAWS.
3. Registration.
(a) Within six months days after the Effective Time, the
Company shall file with the SEC under the Securities Act, on Form S-3 or other
appropriate or necessary form, a registration statement under Section 5 of the
Securities Act (together with the documents incorporated by reference therein,
the "Registration Statement") for an offering to be made on a continuous or
delayed basis covering the Registrable Securities held by the Holders; provided,
however, that the Company may defer making such filing for a reasonable period
after the Effective Time (but not in excess of 90 days) if in the good faith
judgment of the Company's Board of Directors such filing would, at such time,
(a) require the disclosure of material information that the Company has a bona
fide business purpose for preserving as confidential, (b) require the providing
of information required by the SEC that at such time the Company would be unable
to provide, or (c) adversely affect active negotiations or planning for a
proposed or pending merger or acquisition.
(b) At such time as it shall file the Registration Statement,
the Company agrees to use its best efforts to register or qualify the
Registrable Securities covered by the Registration Statement under the Blue Sky
Laws of such jurisdictions, not to exceed ten in number, as shall be reasonably
requested by the Holders in writing to permit such Holders to sell or otherwise
to dispose of any and all Registrable Securities in such states, provided that
the Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it shall not then be
qualified.
(c) The Company agrees to use its best efforts to cause the
Registration Statement and all such state filings to become effective and to
remain effective until the earlier of (A) the date when all Registrable
Securities covered by the Registration Statement have been sold or (B) two years
after the Effective Time if the Registration Statement is filed pursuant to Rule
415 of the Act (or any similar rule that may be adopted by the SEC).
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(d) Each of the selling Holders undertakes to provide all such
information and materials and take all such actions as may be required in order
to permit the Company to comply with all applicable requirements of the
Securities Act and the SEC, to obtain any desired acceleration of the effective
date of such Registration Statement and to comply with all requirements of
applicable Blue Sky Laws or other administrative agency of any state of the
United States.
(e) The Company agrees to prepare and file with the SEC such
amendments and post-effective amendments to the Registration Statement as may be
necessary to keep such Registration Statement effective during the period
referred to in Section 3(c) and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
Registration Statement, and cause the prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed with the SEC.
(f) The Company agrees to furnish to the selling Holders such
numbers of copies of the Registration Statement, each amendment thereto, the
prospectus included in such Registration Statement (including each preliminary
prospectus), each supplement thereto and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(g) The Company shall promptly notify each selling Holder of
such Registrable Securities at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement
contains an untrue statement of a material fact or omits any fact necessary to
make the statements therein not misleading and, the Company will prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading.
(h) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Agreement that the selling
Holders shall furnish to the Company such information regarding them, the
Registrable Securities held by them and the intended method of disposition of
such Registrable Securities and execute such documents regarding the sale of the
Registrable Securities as the Company shall reasonably request and as shall be
required in connection with the action to be taken by the Company.
(i) Each selling Holder of Registrable Securities agrees that,
upon receipt of any notice from the Company of the happening of any event of the
kind described in Section 3(g) hereof, such Holder will discontinue disposition
of Registrable Securities until such Holder's receipt of copies of a
supplemented or amended prospectus contemplated by Section 3(g) or 5 hereof, as
the case may be, 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 which are incorporated by reference in the
prospectus, and, if so directed by the Company, such Holder will deliver to the
Company (at the expense of the Company) all copies, other than permanent file
copies then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of
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receipt of such notice. In the event the Company shall give any such notice, or
in the event of the suspension of the Company's obligations as described in
Section 5 hereof, the time periods mentioned in Section 3(c) hereof shall be
extended by the number of days during the period from and including the date of
the giving of such notice pursuant to Section 3(g) or 5 hereof, as the case may
be, to and including the date when each selling Holder of Registrable Securities
shall have received the copies of the supplemented or amended prospectus
contemplated by Section 3(g) or 5 hereof, as the case may be, or the Advice.
4. Expenses. The Company shall pay all expenses incurred by the Company
in connection with the preparation, filing and execution of the Registration
Statement referred to in Section 3; provided, however, that the Company shall
not be obligated to pay any underwriting or brokerage commissions, discounts or
fees relating to any sale of the Registrable Securities or the fees and expenses
of any counsel to any of the selling Holders.
5. Notice of Proposed Sale. If the Registrable Securities have been
registered pursuant to Rule 415, then if any of the Holders desires to sell or
otherwise transfer any of such Holder's Registrable Securities pursuant to the
Registration Statement, such Holder shall notify the Company of such Holder's
intention to do so by written notice received by the Company at least two (2)
business days prior to such sale or transfer. Such Holder may effect a sale or
transfer within 20 days after the delivery of such notice unless the Company
shall have provided notice to such Holder pursuant to Section 3(g).
6. Reports. From and after the Effective Time and for so long as
necessary in order to permit the undersigned Investors to sell the Common Stock
pursuant to Rule 144 under the Securities Act, to the extent applicable, the
Company will file on a timely basis all reports required to be filed by it
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the
"Exchange "Act"), referred to in paragraph (c) (1) of Rule 144 under the
Securities Act (or, if applicable, will use its best efforts to make publicly
available the information regarding itself referred to in paragraph (c) (2) of
Rule 144), in order to permit the undersigned Investors to sell, pursuant to the
applicable provisions of Rule 144, the Common Stock.
7. Eligibility for Form S-3. The Company represents and warrants that
as of the date hereof, the Company meets the conditions for use of Form S-3 for
the registration of the Registrable Securities to be offered for the account of
the Investors.
8. Transfer of Registration Rights. The rights to cause the Company to
use its best efforts to register the Registrable Securities hereunder may be
assigned by gift or inheritance to a relative of a Holder (or his/her spouse) or
to a trust established by a Holder or his/her spouse; provided, that the Company
shall be entitled to written notice within ten (10) days after any such
transfer.
9. Indemnification. In connection with any registration of securities
under this Agreement, the Company hereby agrees to indemnify the selling Holders
and each underwriter, if any, against all losses, claims, damages and
liabilities caused by any untrue, or alleged untrue, statement
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of a material fact contained in any registration statement or prospectus (and as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus or caused by 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, except insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or alleged untrue statement or omission based upon information furnished in
writing to the Company by such selling Holder or, as the case may be, any
underwriter, expressly for use therein, and the Company, each officer, director
and controlling person of the Company and each underwriter, if any, for the
Company shall be indemnified by each selling Holder for all such losses, claims,
damages and liabilities caused by any untrue, or alleged untrue, statement or
omission, or alleged omission, based upon information furnished in writing to
the Company or the underwriter by such selling Holder for any such use.
Promptly upon receipt by a party indemnified under this
Section 9 of notice of the commencement of any action against such indemnified
party in respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section, such indemnified party shall notify the
indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may have to any indemnified party otherwise than under this
Section 9. In the case that notice of commencement of any such action shall be
given to the indemnifying party as above provided, the indemnifying party shall
be obligated to participate in and, jointly with any other indemnifying party
similarly notified, shall assume the defense of such action at its own expense,
with counsel chosen by it and reasonably satisfactory to such indemnified party.
The indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be paid by the indemnified party unless the indemnifying
party either agrees to pay the same or fails to assume the defense of such
action with counsel reasonably satisfactory to the indemnified party. No
indemnifying party shall be liable for any settlement entered into without its
consent, such consent not to be unreasonably withheld.
10. Contribution. If the indemnification provided for in section 9 is
for any reason, other than pursuant to the terms thereof, held to be unavailable
to an indemnified party in respect of any losses, claims, damages or liabilities
(or actions in respect thereof) referred to therein, then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the selling Holders from the registration of the Registrable
Securities. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and the selling Holders in connection with the
statements or omission which resulted in such losses, claims, damages,
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact relates to information supplied by the Company or
the selling Holders and the parties' relative intent,
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knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the selling Holders agree that it would
not be just and equitable if contribution pursuant to this paragraph were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this paragraph shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
11. Amendment of Registration Rights. This Agreement may be amended
only with the written consent of the Company and of the Holders of the
Registrable Securities.
12. Notices. Any notice or other communication given under this
Agreement shall be sufficient if in writing and sent by first class, registered
or certified mail, return receipt requested, postage prepaid, or transmitted by
hand delivery, overnight express, telegram, telex or facsimile addressed (a) if
to a Investor, at Investor's address set forth on Exhibit A, or at such other
address as Investor shall have furnished to the Company in writing, or (b) if to
the Company, one copy should be sent to its address set forth the cover page of
this Agreement and addressed to the attention of the Corporate Secretary, or at
such other address as the Company shall have furnished to the Holders. Each
notice, demand, request, or communication that shall be mailed, delivered or
transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a telex the answer back being deemed conclusive
evidence of such delivery) or at such time as delivery is refused by the
addressee upon presentation unless if mailed, in which case on the third
business day after the mailing thereof.
13. Captions and Headings. The captions and headings used herein are
for convenience and ease of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
14. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the matters set forth herein and
supersedes all prior agreements and understandings between the parties relating
to the subject matter hereof.
15. Governing Law. This Agreement is made pursuant to and shall be
construed in accordance with the laws of the Commonwealth of Pennsylvania.
16. Severability. If any provision of this Agreement or any portion
thereof is finally determined to be unlawful or unenforceable, such provision or
portion thereof shall be deemed to be severed from this Agreement. Every other
provision, and any portion of such an invalidated provision that is not
invalidated by such a determination, shall remain in full force and effect.
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17. Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date aforesaid.
ROM TECH, INC.
By:
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Name:
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Title:
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Signatures, Continued:
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