AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of April 17, 2006 and Amended and Restated as of November 10, 2006 among
Xxxxxx Electronics, Inc., a New York corporation (the "Company"), and the
several purchasers signatory hereto (each such purchaser is a "Purchaser" and
collectively, the "Purchasers").
This Agreement is made pursuant to the Securities Purchase Agreement, dated as
of the date hereof between the Company and each Purchaser (the "Purchase
Agreement").
The Company and each Purchaser hereby agrees as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:
"Advice" shall have the meaning set forth in Section 6(d).
"Effectiveness Date" means, with respect to the initial Registration
Statement required to be filed hereunder, the 180th calendar day following
the date hereof and, with respect to any additional Registration Statements
which may be required pursuant to Section 3(c), the 60th calendar day
following the date on which the Company first knows, or reasonably should
have known, that such additional Registration Statement is required
hereunder; provided, however, in the event the Company is notified by the
Commission that one of the above Registration Statements will not be
reviewed or is no longer subject to further review and comments, the
Effectiveness Date as to such Registration Statement shall be the fifth
Trading Day following the date on which the Company is so notified if such
date precedes the dates required above.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Event" shall have the meaning set forth in Section 2(b).
"Event Date" shall have the meaning set forth in Section 2(b).
"Filing Date" means, with respect to the initial Registration
Statement required hereunder, the 30th calendar day following the date
hereof and, with respect to any additional Registration Statements which
may be required pursuant to Section 3(c), the 30th day following the date
on which the Company first knows, or reasonably should have known that such
additional Registration Statement is required hereunder.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Plan of Distribution" shall have the meaning set forth in Section
2(a).
"Prospectus" means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by a Registration Statement, and all other amendments
and supplements to the Prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
"Registrable Securities" means, as of the date in question, (i) all of
the shares of Common Stock issuable upon conversion in full of the shares
of Preferred Stock, (ii) all shares of Common Stock issuable as dividends
or principal on the Preferred Stock assuming all dividend and principal
payments are made in shares of Common Stock and the Preferred Stock is held
for at least 3 years, (iii) all Warrant Shares, (iv) any additional shares
issuable in connection with any anti-dilution provisions associated with
the Preferred Stock and Warrants (in each case, without giving effect to
any limitations on conversion set forth in the Certificate of Designation
or limitations on exercise set forth in the Warrant) and (v) any securities
issued or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing.
"Registration Statement" means the registration statements required to
be filed hereunder and any additional registration statements contemplated
by Section 3(c), including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre-
and post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
"Selling Shareholder Questionnaire" shall have the meaning set forth
in Section 3(a).
2. Shelf Registration
(a) On or prior to each Filing Date, the Company shall prepare and file
with the Commission a "Shelf" Registration Statement covering the resale of 130%
of the Registrable Securities on such Filing Date for an offering to be made on
a continuous basis pursuant to Rule 415; provided, however, that if 130% of the
Registrable Securities hereunder shall equal or exceed 30% of the issued and
outstanding Common Stock of the Company on the actual filing date of the initial
Registration Statement, the initial Registration Statement shall register a
number of shares of Common Stock which is equal to 30% of the issued and
outstanding shares of Common Stock of the Company on such actual filing date
minus 10,000 shares of Common Stock, and the remaining Registrable Securities
shall be subject to Section 3(c). In such event, the number of Registrable
Securities to be registered for each Holder shall be reduced pro-rata among all
Holders and each Holder shall have the right to designate which of its
Registrable Securities shall be omitted from the initial Registration Statement
(i.e. no Warrant Shares and all Conversion Shares). The Registration Statement
shall be on Form S-3 (except if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3, in which case such registration
shall be on another appropriate form in accordance herewith) and shall contain
(unless otherwise directed by at least an 85% majority in interest of the
Holders) substantially the "Plan of Distribution" attached hereto as Annex A.
Subject to the terms of this Agreement, the Company shall use its best
commercial efforts to cause a Registration Statement to be declared effective
under the Securities Act as promptly as possible after the filing thereof, but
in any event prior to the applicable Effectiveness Date, and shall use its best
commercial efforts to keep such Registration Statement continuously effective
under the Securities Act until all Registrable Securities covered by such
Registration Statement have been sold, or may be sold without volume
restrictions pursuant to Rule 144(k), as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent and the affected Holders (the
"Effectiveness Period"). The Company shall telephonically request effectiveness
of a Registration Statement as of 5:00 pm Eastern Time on a Trading Day. The
Company shall immediately notify the Holders via facsimile of the effectiveness
of a Registration Statement on the same Trading Day that the Company
telephonically confirms effectiveness with the Commission, which shall be the
date requested for effectiveness of a Registration Statement. The Company shall,
by 9:30 am Eastern Time on the Trading Day after the Effective Date (as defined
in the Purchase Agreement), file a final Prospectus with the Commission as
required by Rule 424. Failure to so notify the Holder within 1 Trading Day of
such notification of effectiveness or failure to file a final Prospectus as
aforesaid shall be deemed an Event under Section 2(b).
(b) If: (i) a Registration Statement is not filed on or prior to its Filing
Date (if the Company files a Registration Statement without affording the
Holders the opportunity to review and comment on the same as required by Section
3(a), the Company shall not be deemed to have satisfied this clause (i)), or
(ii) the Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act, within five
Trading Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not
be "reviewed," or not subject to further review, or (iii) prior to its
Effectiveness Date, the Company fails to file a pre-effective amendment and
otherwise respond in writing to comments made by the Commission in respect of
such Registration Statement within 10 calendar days after the receipt of
comments by or notice from the Commission that such amendment is required in
order for a Registration Statement to be declared effective, or (iv) a
Registration Statement filed or required to be filed hereunder is not declared
effective by the Commission by its Effectiveness Date, or (v) after the
Effectiveness Date, a Registration Statement ceases for any reason to remain
continuously effective as to all Registrable Securities for which it is required
to be effective, or the Holders are otherwise not permitted to utilize the
Prospectus therein to resell such Registrable Securities for more than 15
consecutive calendar days or more than an aggregate of 20 calendar days during
any 12-month period (which need not be consecutive calendar days), or (vi) the
Common Stock shall fail to be listed or quoted for trading on a Trading Market
(including trading on the OTC Bulletin Board) for more than five Trading Days,
which need not be consecutive Trading Days (any such failure or breach being
referred to as an "Event", and for purposes of clause (i) or (iv) the date on
which such Event occurs, or for purposes of clause (ii) the date on which such
five Trading Day period is exceeded, or for purposes of clause (iii) the date
which such 10 calendar day period is exceeded, or for purposes of clause (v) the
date on which such 15 or 20 calendar day period, or for purposes of clause (vi)
the date on which such five Trading Day period is exceeded, as applicable, is
exceeded being referred to as "Event Date"), then in addition to any other
rights the Holders may have hereunder or under applicable law, on each such
Event Date and on each monthly anniversary of each such Event Date (if the
applicable Event shall not have been cured by such date) until the applicable
Event is cured, the Company shall pay to each Holder an amount in cash, as
partial liquidated damages and not as a penalty, equal to 1.5% of the aggregate
purchase price paid by such Holder pursuant to the Purchase Agreement for any
Registrable Securities then held by such Holder up to an aggregate maximum of
9.0%. If the Company fails to pay any partial liquidated damages pursuant to
this Section in full within seven days after the date payable, the Company will
pay interest thereon at a rate of 18% per annum (or such lesser maximum amount
that is permitted to be paid by applicable law) to the Holder, accruing daily
from the date such partial liquidated damages are due until such amounts, plus
all such interest thereon, are paid in full. The partial liquidated damages
pursuant to the terms hereof shall apply on a daily pro-rata basis for any
portion of a month prior to the cure of an Event.
3. Registration Procedures.
In connection with the Company's registration obligations hereunder, the
Company shall:
(a) Not less than 5 Trading Days prior to the filing of each Registration
Statement and not less than one 1 Trading Day prior to the filing of any related
Prospectus or any amendment or supplement thereto (including any document that
would be incorporated or deemed to be incorporated therein by reference), the
Company shall, (i) furnish to each Holder copies of all such documents proposed
to be filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the reasonable review of such
Holders, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary,
in the reasonable opinion of respective counsel to each Holder to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file a Registration Statement or any such Prospectus or any amendments
or supplements thereto to which the Holders of a majority of the Registrable
Securities shall reasonably object in good faith, provided that, the Company is
notified of such objection in writing no later than 5 Trading Days after the
Holders have been so furnished copies of a Registration Statement or 1 Trading
Day after the Holders have been so furnished copies of any related Prospectus or
amendment or supplement thereto. Each Holder agrees to furnish to the Company a
completed Questionnaire in the form attached to this Agreement as Annex B (a
"Selling Shareholder Questionnaire") not less than two Trading Days prior to the
Filing Date or by the end of the fourth Trading Day following the date on which
such Holder receives draft materials in accordance with this Section.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to a Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep a Registration Statement
continuously effective as to the applicable Registrable Securities for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement (subject to the
terms of this Agreement), and as so supplemented or amended to be filed pursuant
to Rule 424; (iii) respond as promptly as reasonably possible to any comments
received from the Commission with respect to a Registration Statement or any
amendment thereto and as promptly as reasonably possible provide the Holders
true and complete copies of all correspondence from and to the Commission
relating to a Registration Statement (provided that the Company may excise any
information contained therein which would constitute material non-public
information as to any Holder which has not executed a confidentiality agreement
with the Company); and (iv) comply in all material respects with the provisions
of the Securities Act and the Exchange Act with respect to the disposition of
all Registrable Securities covered by a Registration Statement during the
applicable period in accordance (subject to the terms of this Agreement) with
the intended methods of disposition by the Holders thereof set forth in such
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) If during the Effectiveness Period, the number of Registrable
Securities at any time exceeds 90% of the number of shares of Common Stock then
registered in a Registration Statement, then the Company shall file as soon as
reasonably practicable but in any case prior to the applicable Filing Date, an
additional Registration Statement covering the resale by the Holders of not less
than 130% of the number of such Registrable Securities. In addition, in the
event that 130% of the Registrable Securities are not included in the initial
Registration Statement as contemplated by the proviso regarding Registrable
Securities in Section 2(a) above, then, upon written request of holders holding
at least 51% of the then outstanding Registrable Securities, the Company shall
file as soon as reasonably practicable, but in no event earlier than six months
after the Effective Date of the initial Registration Statement, an additional
Registration Statement covering the resale by the Holders of not less than the
difference between 130% of the Registrable Securities and the number of
Registrable Securities included in the initial Registration Statement, or such
lesser number of shares as may then be permitted under any then-applicable rules
or unwritten staff positions of the Commission.
(d) Notify the Holders of Registrable Securities to be sold (which notice
shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an
instruction to suspend the use of the Prospectus until the requisite changes
have been made) as promptly as reasonably possible (and, in the case of (i)(A)
below, not less than 1 Trading Day prior to such filing) and (if requested by
any such Person) confirm such notice in writing no later than one Trading Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to a Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a "review" of
such Registration Statement and whenever the Commission comments in writing on
such Registration Statement; and (C) with respect to a Registration Statement or
any post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to a Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission or any other
federal or state governmental authority of any stop order suspending the
effectiveness of a Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; (v) of the occurrence of any event or passage of
time that makes the financial statements included in a Registration Statement
ineligible for inclusion therein or any statement made in a Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to a Registration Statement, Prospectus or other
documents so that, in the case of a Registration Statement or the Prospectus, as
the case may be, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; and (vi) the occurrence or existence of any pending
corporate development with respect to the Company that the Company believes may
be material and that, in the determination of the Company, makes it not in the
best interest of the Company to allow continued availability of a Registration
Statement or Prospectus; provided that any and all of such information shall
remain confidential to each Holder until such information otherwise becomes
public, unless disclosure by a Holder is required by law; provided, further,
notwithstanding each Holder's agreement to keep such information confidential,
the Holders make no acknowledgement that any such information is material,
non-public information.
(e) Use its best commercial efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(f) Furnish to each Holder, without charge, at least one conformed copy of
each such Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference to the extent requested by such Person, and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.
(g) Subject to the terms of this Agreement, the Company hereby consents to
the use of such Prospectus and each amendment or supplement thereto by each of
the selling Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement thereto,
except after the giving of any notice pursuant to Section 3(d).
(h) If NASDR Rule 2710 requires any broker-dealer to make a filing prior to
executing a sale by a Holder, the Company shall (i) make an Issuer Filing with
the NASDR, Inc. Corporate Financing Department pursuant to proposed NASDR Rule
2710(b)(10)(A)(i), (ii) respond within five Trading Days to any comments
received from NASDR in connection therewith, and (iii) pay the filing fee
required in connection therewith.
(i) Prior to any resale of Registrable Securities by a Holder, use its
commercially reasonable efforts to register or qualify or cooperate with the
selling Holders in connection with the registration or qualification (or
exemption from the Registration or qualification) of such Registrable Securities
for the resale by the Holder under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in
writing, to keep each registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and to do any and all other acts or
things reasonably necessary to enable the disposition in such jurisdictions of
the Registrable Securities covered by each Registration Statement; provided,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified, subject the Company to any
material tax in any such jurisdiction where it is not then so subject or file a
general consent to service of process in any such jurisdiction.
(j) If requested by the Holders, cooperate with the Holders to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to a Registration Statement,
which certificates shall be free, to the extent permitted by the Purchase
Agreement, of all restrictive legends, and to enable such Registrable Securities
to be in such denominations and registered in such names as any such Holders may
request.
(k) Upon the occurrence of any event contemplated by this Section 3, as
promptly as reasonably possible under the circumstances taking into account the
Company's good faith assessment of any adverse consequences to the Company and
its stockholders of the premature disclosure of such event, prepare a supplement
or amendment, including a post-effective amendment, to a Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither a Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If the Company notifies the Holders in accordance with clauses
(iii) through (vi) of Section 3(d) above to suspend the use of any Prospectus
until the requisite changes to such Prospectus have been made, then the Holders
shall suspend use of such Prospectus. The Company will use its best commercial
efforts to ensure that the use of the Prospectus may be resumed as promptly as
is practicable. The Company shall be entitled to exercise its right under this
Section 3(k) to suspend the availability of a Registration Statement and
Prospectus, subject to the payment of partial liquidated damages pursuant to
Section 2(b), for a period not to exceed 60 calendar days (which need not be
consecutive days) in any 12 month period.
(l) Comply with all applicable rules and regulations of the Commission.
(m) The Company may require each selling Holder to furnish to the Company a
certified statement as to the number of shares of Common Stock beneficially
owned by such Holder and, if required by the Commission, the natural persons
thereof that have voting and dispositive control over the Shares. During any
periods that the Company is unable to meet its obligations hereunder with
respect to the registration of the Registrable Securities solely because any
Holder fails to furnish such information within three Trading Days of the
Company's request, any liquidated damages that are accruing at such time as to
such Holder only shall be tolled and any Event that may otherwise occur solely
because of such delay shall be suspended as to such Holder only, until such
information is delivered to the Company.
4. Registration Expenses. All fees and expenses incident to the performance
of or compliance with this Agreement by the Company shall be borne by the
Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with any Trading Market on which the Common Stock is then
listed for trading, (B) in compliance with applicable state securities or Blue
Sky laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities) and (C) if
not previously paid by the Company in connection with an Issuer Filing, with
respect to any filing that may be required to be made by any broker through
which a Holder intends to make sales of Registrable Securities with NASD
Regulation, Inc. pursuant to the NASD Rule 2710, so long as the broker is
receiving no more than a customary brokerage commission in connection with such
sale, (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in a Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions of any Holder or, except to
the extent provided for in the Transaction Documents, any legal fees or other
costs of the Holders.
5. Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, members, partners, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees (and any other Persons with a functionally equivalent role of a
Person holding such titles, notwithstanding a lack of such title or any other
title) of each of them, each Person who controls any such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, members, shareholders, partners, agents and
employees (and any other Persons with a functionally equivalent role of a Person
holding such titles, notwithstanding a lack of such title or any other title) of
each such controlling Person, to the fullest extent permitted by applicable law,
from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to (1) any
untrue or alleged untrue statement of a material fact contained in a
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, or (2) any violation
or alleged violation by the Company of the Securities Act, Exchange Act or any
state securities law, or any rule or regulation thereunder, in connection with
the performance of its obligations under this Agreement, except to the extent,
but only to the extent, that (i) such untrue statements or omissions arise out
of or are based solely upon information regarding such Holder furnished in
writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in a Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto (it being understood that the Holder has reviewed and
approved Annex A hereto for this purpose) or (ii) in the case of an occurrence
of an event of the type specified in Section 3(d)(iii)-(vi), the use by such
Holder of an outdated or defective Prospectus after the Company has notified
such Holder in writing that the Prospectus is outdated or defective and prior to
the receipt by such Holder of the Advice contemplated in Section 6(d). The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding arising from or in connection with the transactions
contemplated by this Agreement of which the Company is aware.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, to the extent arising out of or based solely upon: (x) such Holder's
failure to comply with the prospectus delivery requirements of the Securities
Act or (y) any untrue or alleged untrue statement of a material fact contained
in any Registration Statement, any Prospectus, or any form of prospectus, or in
any amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (i) to the extent, but only to the extent, that such untrue statement
or omission is contained in any information so furnished in writing by such
Holder to the Company specifically for inclusion in such Registration Statement
or such Prospectus or (ii) to the extent that such information relates to such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in a
Registration Statement (it being understood that the Holder has reviewed and
approved Annex A hereto for this purpose), such Prospectus or such form of
Prospectus or in any amendment or supplement thereto or (ii) in the case of an
occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the use
by such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 6(d).
In no event shall the liability of any selling Holder hereunder be greater in
amount than the dollar amount of the net proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall have the right to assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure shall have prejudiced
the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and counsel to the
Indemnified Party shall reasonably believe that a material conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and the reasonable fees and expenses of no
more than one separate counsel shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any settlement of any
such Proceeding effected without its written consent, which consent shall not be
unreasonably withheld or delayed. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.
Subject to the terms of this Agreement, all reasonable fees and expenses of
the Indemnified Party (including reasonable fees and expenses to the extent
incurred in connection with investigating or preparing to defend such Proceeding
in a manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten Trading Days of written notice thereof to the
Indemnifying Party; provided, that the Indemnified Party shall promptly
reimburse the Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is judicially
determined to be not entitled to indemnification hereunder.
(d) Contribution. If the indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party or insufficient to hold an Indemnified Party
harmless for any Losses, then each Indemnifying Party shall contribute to the
amount paid or payable by such Indemnified Party, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in this Agreement, any reasonable attorneys' or
other fees or expenses incurred by such party in connection with any Proceeding
to the extent such party would have been indemnified for such fees or expenses
if the indemnification provided for in this Section was available to such party
in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission, except in the case of fraud by
such Holder.
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a Holder, of
any of their respective obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall not assert
or shall waive the defense that a remedy at law would be adequate.
(b) No Piggyback on Registrations. Except as set forth on Schedule 6(b)
attached hereto, neither the Company nor any of its security holders (other than
the Holders in such capacity pursuant hereto) may include securities of the
Company in the initial Registration Statement other than the Registrable
Securities. The Company shall not file any other registration statements until
the initial Registration Statement required hereunder is declared effective by
the Commission, provided that this Section 6(b) shall not prohibit the Company
from filing amendments to registration statements already filed. In addition,
the Company shall not file any registration statement registering the resale of
shares underlying warrants issued to any director of the Company until at least
six months after the initial Registration Statement required hereunder is
declared effective by the Commission.
(c) Compliance. Each Holder covenants and agrees that it will comply with
the prospectus delivery requirements of the Securities Act as applicable to it
in connection with sales of Registrable Securities pursuant to a Registration
Statement.
(d) Discontinued Disposition. Each Holder agrees by its acquisition of
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Section 3(d)(iii) through (vi),
such Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus (as it may
have been supplemented or amended) may be resumed. The Company will use its best
commercial efforts to ensure that the use of the Prospectus may be resumed as
promptly as it practicable. The Company agrees and acknowledges that any periods
during which the Holder is required to discontinue the disposition of the
Registrable Securities hereunder shall be subject to the provisions of Section
2(b).
(e) Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with the stock option or other employee
benefit plans, then the Company shall send to each Holder a written notice of
such determination and, if within fifteen days after the date of such notice,
any such Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Holder requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights; provided, however, that the
Company shall not be required to register any Registrable Securities pursuant to
this Section 6(e) that are eligible for resale pursuant to Rule 144(k)
promulgated under the Securities Act or that are the subject of a then effective
Registration Statement.
(f) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and each Holder of
the then outstanding Registrable Securities. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of all of
the Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(g) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be delivered as set forth
in the Purchase Agreement.
(h) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. The Company may not assign
(except by merger) its rights or obligations hereunder without the prior written
consent of all of the Holders of the then-outstanding Registrable Securities.
Each Holder may assign their respective rights hereunder in the manner and to
the Persons as permitted under the Purchase Agreement.
(i) No Inconsistent Agreements. Neither the Company nor any of its
Subsidiaries has entered, as of the date hereof, nor shall the Company or any of
its Subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof. Except as set forth on Schedule 6(i),
neither the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person that have not been satisfied in full.
(j) Execution and Counterparts. This Agreement may be executed in two or
more counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission or by e-mail delivery of a ".pdf" format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or ".pdf" signature page were an original
thereof.
(k) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be determined in
accordance with the provisions of the Purchase Agreement.
(l) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any other remedies provided by law.
(m) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(n) Headings. The headings in this Agreement are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
(o) Independent Nature of Holders' Obligations and Rights. The obligations
of each Holder hereunder are several and not joint with the obligations of any
other Holder hereunder, and no Holder shall be responsible in any way for the
performance of the obligations of any other Holder hereunder. Nothing contained
herein or in any other agreement or document delivered at any closing, and no
action taken by any Holder pursuant hereto or thereto, shall be deemed to
constitute the Holders as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Holders are in any way
acting in concert with respect to such obligations or the transactions
contemplated by this Agreement. Each Holder shall be entitled to protect and
enforce its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Holder to be joined as an
additional party in any proceeding for such purpose.
********************
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
XXXXXX ELECTRONICS, INC.
By:__________________________________________
Name:
Title:
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
[SIGNATURE PAGE OF HOLDERS TO HRVE RRA]
Name of Holder: __________________________
Signature of Authorized Signatory of Holder: __________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
[SIGNATURE PAGES CONTINUE]
ANNEX A
Plan of Distribution
Each Selling Stockholder (the "Selling Stockholders") of the common stock
and any of their pledgees, assignees and successors-in-interest may, from time
to time, sell any or all of their shares of common stock on the Nasdaq Capital
Market or any other stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. A Selling Stockholder may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o settlement of short sales entered into after the effective date of the
registration statement of which this prospectus is a part;
o broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
o through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
o a combination of any such methods of sale; or
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.
In connection with the sale of the common stock or interests therein, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
Common Stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Stockholder has informed the
Company that it does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock. In no
event shall any broker-dealer receive fees, commissions and markups which, in
the aggregate, would exceed eight percent (8%).
The Company is required to pay certain fees and expenses incurred by the
Company incident to the registration of the shares. The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act including Rule 172 thereunder. In addition,
any securities covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than under
this prospectus. There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the Selling
Stockholders.
We agreed to keep this prospectus effective until the earlier of (i) the
date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule
144(k) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale shares may not simultaneously engage
in market making activities with respect to the common stock for the applicable
restricted period, as defined in Regulation M, prior to the commencement of the
distribution. In addition, the Selling Stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases and
sales of shares of the common stock by the Selling Stockholders or any other
person. We will make copies of this prospectus available to the Selling
Stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale (including by
compliance with Rule 172 under the Securities Act).
Annex B
XXXXXX ELECTRONICS, INC.
Selling Securityholder Notice and Questionnaire
The undersigned beneficial owner of common stock, par value $.01 per share
(the "Common Stock"), of Xxxxxx Electronics, Inc., a New York corporation (the
"Company"), (the "Registrable Securities") understands that the Company has
filed or intends to file with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (the "Registration
Statement") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "Securities Act"), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement, dated as of
March __, 2006 (the "Registration Rights Agreement"), among the Company and the
Purchasers named therein. A copy of the Registration Rights Agreement is
available from the Company upon request at the address set forth below. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.
Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.
NOTICE
The undersigned beneficial owner (the "Selling Securityholder") of
Registrable Securities hereby elects to include the Registrable Securities owned
by it and listed below in Item 3 (unless otherwise specified under such Item 3)
in the Registration Statement.
The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
QUESTIONNAIRE
1. Name.
(a) Full Legal Name of Selling Securityholder
------------------------------------------------------------
(b) Full Legal Name of Registered Holder (if not the same as (a)
above) through which Registrable Securities Listed in Item 3
below are held:
------------------------------------------------------------
(c) Full Legal Name of Natural Control Person (which means a natural
person who directly or indirectly alone or with others has power
to vote or dispose of the securities covered by the
questionnaire):
-------------------------------------------------------------
2. Address for Notices to Selling Securityholder:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Telephone:---------------------------------------------------------------------
Fax:---------------------------------------------------------------------------
Contact Person:----------------------------------------------------------------
3. Beneficial Ownership of Registrable Securities:
(a) Type and Number of Registrable Securities beneficially owned (not
including the Registrable Securities that are issuable pursuant
to the Purchase Agreement):
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
4. Broker-Dealer Status:
(a) Are you a broker-dealer?
Yes [ ] No [ ]
(b) If "yes" to Section 4(a), did you receive your Registrable
Securities as compensation for investment banking services to the
Company.
Yes [ ] No [ ]
Note: If no, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
(c) Are you an affiliate of a broker-dealer?
Yes [ ] No [ ]
(d) If you are an affiliate of a broker-dealer, do you certify that
you bought the Registrable Securities in the ordinary course of
business, and at the time of the purchase of the Registrable
Securities to be resold, you had no agreements or understandings,
directly or indirectly, with any person to distribute the
Registrable Securities?
Yes [ ] No [ ]
Note: If no, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
5. Beneficial Ownership of Other Securities of the Company Owned by the Selling
Securityholder.
Except as set forth below in this Item 5, the undersigned is not the
beneficial or registered owner of any securities of the Company other
than the Registrable Securities listed above in Item 3.
(a) Type and Amount of Other Securities beneficially owned by the
Selling Securityholder:
----------------------------------------------------------------
----------------------------------------------------------------
6. Relationships with the Company:
Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (owners of
5% of more of the equity securities of the undersigned) has held any
position or office or has had any other material relationship with the
Company (or its predecessors or affiliates) during the past three
years.
State any exceptions here:
---------------------------------------------------------------------
---------------------------------------------------------------------
The undersigned agrees to promptly notify the Company of any inaccuracies
or changes in the information provided herein that may occur subsequent to the
date hereof at any time while the Registration Statement remains effective.
By signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items 1 through 6 and the
inclusion of such information in the Registration Statement and the related
prospectus and any amendments or supplements thereto. The undersigned
understands that such information will be relied upon by the Company in
connection with the preparation or amendment of the Registration Statement and
the related prospectus.
IN WITNESS WHEREOF the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.
Dated: ----------------------- Beneficial Owner: -----------------------
By:--------------------------------------
Name:
Title:
PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:
