REGISTRATION RIGHTS AGREEMENT
Exhibit
99.3a
THIS
REGISTRATION RIGHTS AGREEMENT (the "Agreement")
is
made and entered into as of the 19th
day of
December, 2005 by and between QSGI
INC., a
corporation organized and existing under the laws of the State of Delaware
(“QSGI” or the “Company”)
and
Pike Capital Partners, LP (hereinafter referred to as “Investor”).
Unless defined otherwise, capitalized terms herein shall have the identical
meaning as in the Series A Preferred Stock Purchase Agreement.
PRELIMINARY
STATEMENT
WHEREAS,
pursuant to the Series A Preferred Stock Purchase Agreement of even date
herewith by and between QSGI and the Investor. Investor shall receive Series
A
Preferred Stock of the Company which may be converted into shares of Common
Stock of the Company according to the terms of the Series A Preferred Stock
Purchase Agreement; and
WHEREAS,
the
ability of the Investor to sell shares of Common Stock would be subject to
certain restrictions under the 1933 Act unless the shares of such Common Stock
are registered under the 1933 Act; and
WHEREAS,
as a
condition to the Series A Preferred Stock Purchase Agreement, the Company has
agreed to provide the Investor with a mechanism that will permit the Investor
to
sell its shares of Common Stock in the future in the event that Investor has
converted Series A Preferred Stock to Common Stock pursuant to the terms of
the
Series A Preferred Stock Purchase Agreement.
NOW,
THEREFORE,
in
consideration of the premises and of the mutual covenants and agreements, and
subject to the terms and conditions herein contained, the parties hereto hereby
agree as follows:
ARTICLE
I
INCORPORATION
BY REFERENCE, SUPERSEDER
1.1 Incorporation
by Reference.
The
foregoing recitals and the Exhibit attached hereto and referred to herein,
are
hereby acknowledged to be true and accurate, and are incorporated herein by
this
reference.
1.2 Superseder.
This
Agreement is entered as part of the agreement between the Company and the
Investor which is fully set forth in the Series A Preferred Stock Agreement
and
this Agreement. Such agreements shall be read as consistent and not
in
conflict
with each other. A copy of this Agreement shall be filed at the Company’s
principal office.
ARTICLE
II
REGISTRATION
RIGHTS
2.1 "Registrable
Shares"
means
and includes the Common Stock of the Company which would be issued to Investor
upon conversion of the Series A Preferred Stock under the Series A Preferred
Stock Purchase Agreement. As to any particular Registrable Shares, such
securities will cease to be Registrable Shares when (a) they have been
effectively registered under the 1933 Act and disposed of in accordance with
the
registration statement covering them, (b) they are or may be freely traded
without registration pursuant to Rule 144 under the 1933 Act (or any similar
provisions that are then in effect), or (c) they have been otherwise transferred
and new certificates for them not bearing a restrictive legend have been issued
by the Company and the Company shall not have "stop transfer" instructions
against them.
2.2 Registration
of Registrable Shares.
The
Company shall prepare and file within thirty (30) days following the date which
the Investor has converted at least 25,000 shares of Series A Preferred Stock
to
Common Stock (the "Filing
Date")
a
registration statement (the "Registration
Statement")
covering the resale of all such common and all common stock which may have
been
issued to Investor as a dividend of the Series A Preferred Stock. The Company
shall use its best efforts to cause the Registration Statement to be declared
effective by the SEC on the earlier of (i) 120 days following the Closing Date
with respect to the Registration Statement, (ii) ten (10) days following the
receipt of a "No Review" or similar letter from the SEC or (iii) the first
business day following the day the SEC determines the Registration Statement
eligible to be declared effective (the "Required
Effectiveness Date").
Nothing contained herein shall be deemed to limit the number of Registrable
Securities to be registered by the Company hereunder. As a result, should the
Registration Statement not relate to the maximum number of Registrable
Securities acquired by (or potentially acquirable by) the holders of the Shares
of the Company issued to the Investor pursuant to the Series A Stock Preferred
Purchase Agreement, the Company shall be required to promptly file a separate
registration statement (utilizing Rule 462 promulgated under the Exchange Act,
where applicable) relating to such Registrable Securities which then remain
unregistered which the Investor shall subsequently convert. The provisions
of
this Agreement shall relate to any such separate registration statement as
if it
were an amendment to the Registration Statement.
2.3 Registration
Statement Form.
Registrations under Section 2.2 shall be on
Form
SB-2
or such other appropriate registration form of the SEC as shall permit the
disposition of such Registrable Securities in accordance with the intended
method or methods of disposition specified in the Registration Statement;
provided, however, such intended method of disposition shall not include an
underwritten offering of the Registrable Securities.
2.4 Expenses.
The
Company will pay all Registration expenses in connection with any registration
required by under Section 2.2 herein.
2.5 Effective
Registration Statement.
A
registration requested pursuant to Sections 2.2 shall not be deemed to have
been
effected (i) unless a registration statement with respect thereto has become
effective within the time period specified herein, provided that a registration
which does not become effective after the Company filed a registration statement
with respect thereto solely by reason of the refusal to proceed of any holder
of
Registrable Securities (other than a refusal to proceed based upon the advice
of
counsel in the form of a letter signed by such counsel and provided to the
Company relating to a disclosure matter unrelated to such holder) shall be
deemed to have been effected by the Company unless the holders of the
Registrable Securities shall have elected to pay all Registration Expenses
in
connection with such registration, (ii) if, after it has become effective,
such
registration becomes subject to any stop order, injunction or other order or
extraordinary requirement of the SEC or other governmental agency or court
for
any reason or (iii) if, after it has become effective, such registration ceases
to be effective for more than the allowable Black-Out Periods (as defined
herein).
ARTICLE
III
INCIDENTAL
REGISTRATION RIGHTS
3.1 Right
To Include (“Piggy-Back”) Registrable Securities. Provided
that the Registrable Securities have not been registered, if at any time after
the date hereof but before the second anniversary of the date hereof, the
Company proposes to register any of its securities under the 1933 Act (other
than by a registration in connection with an acquisition in a manner which
would
not permit registration of Registrable Securities for sale to the public, on
Form S-8, or any successor form thereto, on Form S-4, or any successor form
thereto and other than pursuant to Section 2), on an underwritten basis (either
best-efforts or firm-commitment), then, the Company will each such time give
prompt written notice to all holders of Registrable Securities of its intention
to do so and of such holders of Registrable Securities' rights under this
Section 3.1. Upon the written request
of any such holders of Registrable Securities made within ten (10) days after
the receipt of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such holders of Registrable Securities
and the intended method of disposition thereof), the Company will, subject
to
the terms of this Agreement, use its commercially reasonable best efforts to
effect the registration under the 1933 Act of the
Registrable
Securities, to the extent requisite to permit the disposition (in accordance
with the intended methods thereof as aforesaid) of such Registrable Securities
so to be registered, by inclusion of such Registrable Securities in the
registration statement which covers the securities which the Company proposes
to
register, provided that if, at any time after written notice of its intention
to
register any securities and prior to the effective date
of
the registration statement filed in connection with such registration, the
Company shall determine for any reason either not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to each holders of Registrable Securities and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of this obligation to register any Registrable Securities in connection with
such registration (but not from its obligation to pay the Registration Expenses
in connection therewith), without prejudice, however, to the rights of any
holder or holders of Registrable Securities entitled to do so to request that
such registration be effected as a registration under Section 2, and (ii) in
the
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this Section
3.1 shall relieve the Company of its obligation to effect any registration
upon
request under Section 2. The Company will pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 3.1. The right provided the Holders of the Registrable
Securities pursuant to this Section shall be exercisable at their sole
discretion and will in no way limit any of the Company's obligations to pay
the
Securities according to their terms.
3.2 Priority
In Incidental Registrations.
If the
managing underwriter of the underwritten offering contemplated by this Section
3
shall inform the Company and holders of the Registrable Securities requesting
such registration by letter of its belief that the number of securities
requested to be included in such registration exceeds the number which
can
be sold in such offering, then the Company will include in such registration,
to
the extent of the number which the Company is so advised can be sold in such
offering, (i) first securities proposed by the Company to be sold for its own
account, and (ii) second Registrable Securities and (iii) securities of other
selling security holders requested to be included in such
registration.
ARTICLE
IV
REGISTRATION
PROCEDURES
4.1 REGISTRATION
PROCEDURES. If and whenever the Company is required to effect the registration
of any Registrable Securities under the 1933 Act as provided in
Section
2.2, the Company shall, as expeditiously as possible:
(i) prepare
and file with the SEC the Registration Statement, or amendments thereto, to
effect such registration (including such audited financial statements as may
be
required by the 1933 Act or the rules and regulations promulgated thereunder)
and thereafter use its commercially reasonable best efforts to cause such
registration statement to be declared effective by the SEC, as soon as
practicable, but in any event no later than the Required Effectiveness Date
(with respect to a registration pursuant to Section 2.2); provided, however,
that before filing such registration statement or any amendments thereto, the
Company will furnish to the counsel selected by the holders of Registrable
Securities which are to be included in such registration, copies of all such
documents proposed to be filed;
(ii) with
respect to any registration statement pursuant to Section 2.2, prepare and
file
with the SEC such amendments and supplements to such registration statement
and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the 1933
Act with respect to the disposition of all Registrable Securities covered by
such registration statement until the earlier to occur of thirty six (36) months
after the date of this Agreement (subject to the right of the Company to suspend
the effectiveness thereof for not more than 10 consecutive Trading Days or
an
aggregate of 20 Trading Days during each year (each a "Black-Out
Period"))
or
such time as all of the securities which are the subject of such registration
statement cease to be Registrable Securities (such period, in each case, the
"Registration
Maintenance Period");
(iii)
furnish to each holder of Registrable Securities covered by such registration
statement such number of conformed copies of such registration statement and
of
each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the 1933 Act,
in
conformity with the requirements of the 1933 Act, and such other documents,
as
such holder of Registrable Securities and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by such holder of Registrable Securities;
(iv)
use
its commercially reasonable best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement under
such other securities laws or blue sky laws as any holder of Registrable
Securities thereof shall reasonably request, to keep such registrations or
qualifications in effect for so long as such registration statement remains
in
effect, and take any other action which may be reasonably necessary to enable
such holder of Registrable Securities to consummate the disposition in such
jurisdictions of the securities owned by such holder of Registrable Securities,
except that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction wherein
it
would not but for the requirements of this subdivision (iv) be obligated to
be
so
qualified or to consent to general service of process in any such
jurisdiction;
(v)
use
its commercially reasonable best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by
such
other governmental agencies or authorities as may be necessary to enable the
holder of Registrable Securities thereof to consummate the disposition of such
Registrable Securities;
(vi)
furnish to each holder of Registrable Securities a signed counterpart, addressed
to such holder of Registrable Securities, and the underwriters, if any, of
an
opinion of counsel for the Company, dated the effective date of such
registration statement (or, if such registration includes an underwritten public
offering, an opinion dated the date of the closing under the underwriting
agreement), reasonably satisfactory in form and substance to such holder of
Registrable Securities) including that the prospectus and any prospectus
supplement forming a part of the Registration Statement does not contain an
untrue statement of a material fact or omits a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of
the circumstances under which they were made, not misleading, and
(vii)
notify the Investor and its counsel promptly and confirm such advice in writing
promptly after the Company has knowledge thereof:
(A) when
the
Registration Statement, the prospectus or any prospectus supplement related
thereto or post-effective amendment to the Registration Statement has been
filed, and, with respect to the Registration Statement or any post-effective
amendment thereto, when the same has become effective;
(B) of
any
request by the SEC for amendments or supplements to the Registration Statement
or the prospectus or for additional information;
(C) of
the
issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings by any Person for
that purpose; and
(D) of
the
receipt by the Company of any notification with respect to the suspension of
the
qualification of any Registrable Securities for sale under the securities or
blue sky laws of any jurisdiction or the initiation or threat of any proceeding
for such purpose;
(viii) notify
each holder of Registrable Securities covered by such registration statement,
at
any time when a prospectus relating thereto is required to be delivered under
the 1933 Act, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration statement, as
then
in effect, includes an untrue statement of a material fact or omits to state
any
material facts
required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing, and at the request of any
such
holder of Registrable Securities promptly prepare and furnish to such holder
of
Registrable Securities a reasonable number of copies of a supplement to or
an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(ix) use
its
best efforts to obtain the withdrawal of any order suspending the effectiveness
of the Registration Statement at the earliest possible moment;
(x) otherwise
use its commercially reasonable best efforts to comply with all applicable
rules
and regulations of the SEC, and make available to its security holders, as
soon
as reasonably practicable, an earnings statement covering the period of at
least
twelve months, but not more than eighteen months, beginning with the first
full
calendar month after the effective date of such registration statement, which
earnings statement
shall
satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158
thereunder;
(xi) enter
into such agreements and take such other actions as the Investor shall
reasonably request in writing (at the expense of the requesting or benefiting
Investor) in order to expedite or facilitate the disposition of such Registrable
Securities; and
(xii) use
its
commercially reasonable best efforts to list all Registrable Securities covered
by such registration statement on any securities exchange on which any of the
Registrable Securities are then listed.
The
Company may require each holder of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such holder of Registrable Securities and the distribution of such securities
as
the Company may from time to time reasonably request in writing.
4.2 The
Company will not file any registration statement pursuant to Section 2.2, or
amendment thereto or any prospectus or any supplement thereto to which the
Investor shall reasonably object, provided that the Company may file such
documents in a form required by law or upon the advice of its
counsel.
4.3 The
Company represents and warrants to each holder of Registrable Securities that
it
has obtained all necessary waivers, consents and authorizations necessary to
execute this Agreement and consummate the transactions contemplated hereby
other
than such waivers, consents and/or authorizations specifically contemplated
by
the Stock Preferred Purchase Agreement.
4.4 Each
holder of Registrable Securities agrees that, upon receipt of any notice
from
the
Company of the occurrence of any event of the kind described in subdivision
(viii) of Section
4.1, such Holder will forthwith discontinue such holder of Registrable
Securities’ disposition of Registrable Securities pursuant to the Registration
Statement relating to such Registrable Securities until such holder of
Registrable Securities’ receipt of the copies of the supplemented or amended
prospectus contemplated by subdivision (viii) of Section 4.1 and, if so directed
by the Company, will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession
of
the prospectus relating to such Registrable Securities current at the time
of
receipt of such notice.
ARTICLE
V
UNDERWRITTEN
OFFERINGS
5.1 Incidental
Underwritten Offerings.
If the
Company at any time proposes to register any of its securities under the 1933
Act as contemplated by Section 3.1 and such securities are to be distributed
by
or through one or more underwriters, the Company will, if requested by any
holder of Registrable Securities as provided in Section 3.1 and subject to
the
provisions of Section 3.2, use its commercially reasonable best efforts to
arrange for such underwriters to include all the Registrable Securities to
be
offered and sold by such holder among the securities to be distributed by such
underwriters.
5.2 Participation
In Underwritten Offerings.
No
holder of Registrable Securities may participate in any underwritten offering
under Section 3.1 unless such holder of Registrable Securities (i) agrees to
sell such Person's securities on the basis provided in any underwriting
arrangements approved, subject to the terms and conditions hereof, by the
holders of a majority of Registrable Securities to be included in such
underwritten offering and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents (other than powers
of
attorney) required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other agreement
in
connection with such offering) shall require any holder of Registrable
Securities to make a representation or warranty to or agreements with the
Company or the underwriters other than representations and warranties contained
in a writing furnished by such holder of Registrable Securities expressly for
use in the related registration statement or representations, warranties or
agreements regarding such holder of Registrable Securities, such holder's
Registrable Securities and such holder's intended method of distribution and
any
other representation required by law.
5.3 Preparation;
Reasonable Investigation.
In
connection with the preparation and filing of each registration statement under
the 1933 Act pursuant to this Agreement, the Company will give the holders
of
Registrable Securities registered under such registration statement, and their
respective counsel and accountants, the opportunity to participate in the
preparation of such registration statement, each prospectus included therein
or
filed with the SEC, and each amendment thereof or supplement thereto,
and
will
give
each of them such access to its books and records and such opportunities to
discuss the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the reasonable opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the 1933
Act.
ARTICLE
VI
INDEMNIFICATION
6.1 Indemnification
by the Company.
In the
event of any registration of any securities of the Company under the 1933 Act,
the Company will, and hereby does agree to indemnify and hold harmless the
holder of any Registrable Securities covered by such registration statement,
its
directors and officers, each other Person who participates as an underwriter
in
the offering or sale of such securities and each other Person, if any, who
controls such holder or any such underwriter within the meaning of the 1933
Act
against any losses, claims, damages or liabilities, joint or several, to which
such holder or any such director or officer or underwriter or controlling person
may become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced
or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
1933 Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission
or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and the Company
will
reimburse such holder and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably incurred
by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding, provided that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability,
(or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
holder or underwriter stating that it is for use in the preparation thereof
and,
provided further that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or to any other Person, if any, who controls such underwriter within the meaning
of the 1933 Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus,
as
the same may be then supplemented or amended, within the time required by the
1933 Act to the Person asserting the existence of an untrue statement or alleged
untrue statement or omission or
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alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus or an amendment or supplement thereto. Such indemnity shall
remain in full force and effect regardless of any investigation made by or
on
behalf of such holder or any such director, officer, underwriter or controlling
person and shall survive the transfer of such securities by such holder.
Provided however that such indemnity is limited to the total initial payment
paid by any Investor for its Units.
6.2 Indemnification
by the Investor.
The
Company may require, as a condition to including any Registrable Securities
in
any registration statement filed pursuant to this Agreement, that the Company
shall have received an undertaking satisfactory to it from the prospective
holder of such Registrable Securities, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 6.1) the Company,
each director of the Company, each officer of the Company and each other Person,
if any, who controls the Company within the meaning of the 1933 Act, with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged omission was
made
in reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such holder of Registrable
Securities specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Any such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by such Investor.
6.3 Notices
Of Claims, Etc.
Promptly after receipt by an indemnified party of notice of the commencement
of
any action or proceeding involving a claim referred to in Sections 6.1 and
Section 6.2, such indemnified party will, if claim in respect thereof is to
be
made against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party
of
its obligations under Sections 6.1 and Section 6.2, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice.
In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry
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of
any
judgment or enter into any settlement of any such action which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to
such
indemnified party of a release from all liability, or a covenant not to xxx,
in
respect to such claim or litigation. No indemnified party shall consent to
entry
of any judgment or enter into any settlement of any such action the defense
of
which has been assumed by an indemnifying party without the consent of such
indemnifying party.
6.4 Other
Indemnification.
Indemnification similar to that specified in Sections 6.1 and Section 6.2 (with
appropriate modifications) shall be given by the Company and each holder of
Registrable Securities (but only if and to the extent required pursuant to
the
terms herein) with respect to any required registration or other qualification
of securities under any Federal or state law or regulation of any governmental
authority, other than the 1933 Act.
6.5 Indemnification
Payments.
The
indemnification required by Sections 6.1 and Section 6.2 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or expense, loss, damage or liability
is incurred.
6.6 Contribution.
If the
indemnification provided for in Sections 6.1 and Section 6.2 is unavailable
to
an indemnified party in respect of any expense, loss, claim, damage or liability
referred to therein, then each indemnifying party, in lieu of indemnifying
such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such expense, loss, claim, damage or liability
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the holder of Registrable Securities
or underwriter, as the case may be, on the other from the distribution of the
Registrable Securities or (ii) if the allocation provided by clause (i) above
is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the holder of Registrable
Securities or underwriter, as the case may be, on the other in connection with
the statements or omissions which resulted in such expense, loss, damage or
liability, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the holder of Registrable
Securities or underwriter, as the case may be, on the other in connection with
the distribution of the Registrable Securities shall be deemed to be in the
same
proportion as the total net proceeds received by the Company from the initial
sale of the Registrable Securities by the Company to the purchasers bear to
the
gain, if any, realized by all selling holders participating in such offering
or
the underwriting discounts and commissions received by the underwriter, as
the
case may be. The relative fault of the Company on the one hand and of the holder
of Registrable Securities or underwriter, as the case may be, on the other
shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the holder of Registrable Securities
or by the underwriter and the parties' relative intent, knowledge, access to
information supplied by the Company, by the holder
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of
Registrable Securities or by the underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, provided that the foregoing contribution agreement shall
not inure to the benefit of any indemnified party if indemnification would
be
unavailable to such indemnified party by reason of the provisions contained
herein, and in no event shall the obligation of any indemnifying party to
contribute under this Section 6.6 exceed the amount that such indemnifying
party
would have been obligated to pay by way of indemnification if the
indemnification provided for hereunder had been available under the
circumstances.
The
Company and the holders of Registrable Securities agree that it would not be
just and equitable if contribution pursuant to this Section 6.6 were determined
by pro rata allocation (even if the holders of Registrable Securities and any
underwriters were treated as one entity for such purpose) or by any other method
of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth herein, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
Notwithstanding
the provisions of this Section 6.6, no holder of Registrable Securities or
underwriter shall be required to contribute any amount in excess of the amount
by which (i) in the case of any such holder, the net proceeds received by such
holder from the sale of Registrable Securities or (ii) in the case of an
underwriter, the total price at which the Registrable Securities purchased
by it
and distributed to the public were offered to the public exceeds, in any such
case, the amount of any damages that such holder or underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 0000 Xxx) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
ARTICLE
VII
RULE
144
7.1 Rule
144.
The
Company shall timely file the reports required to be filed by it under the
1933
Act and the 1934 Act (including but not limited to the reports under Sections
13
and 15(d) of the Exchange Act referred to in subparagraph (c) of Rule 144
adopted by the SEC under the 0000 Xxx) and the rules and regulations adopted
by
the SEC thereunder (or, if the Company is not required to file such reports,
will, upon the request of any holder of Registrable Securities, make publicly
available other information) and will take such further action as any holder
of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the 1933 Act within the limitation of
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the
exemptions provided by (a) Rule 144 under the 1933 Act, as such Rule may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the SEC. Upon the request of any holder of Registrable Securities,
the Company will deliver to such holder a written statement as to whether it
has
complied with the requirements of this Section 7.1.
ARTICLE
VIII
MISCELLANEOUS
8.1 Amendments
And Waivers.
This
Agreement may be amended and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of the holder or holders of (i) Registrable Securities issued
at such time, plus (ii) Registrable Securities issuable upon exercise or
conversion of the Securities then constituting derivative securities (if such
Securities were not fully exchanged or converted in full as of the date such
consent if sought). Each holder of any Registrable Securities at the time or
thereafter outstanding shall be bound by any consent authorized by this Section
8.1, whether or not such Registrable Securities shall have been marked to
indicate such consent.
8.2 Nominees
For Beneficial Owners.
In the
event that any Registrable Securities are held by a nominee for the beneficial
owner thereof, the beneficial owner thereof may, at its election, be treated
as
the holder of such Registrable Securities for purposes of any request or other
action by any holder or holders of Registrable Securities pursuant to this
Agreement or any determination of any number of percentage of shares of
Registrable Securities held by a holder or holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably satisfactory
to it of such owner's beneficial ownership or such Registrable
Securities.
8.3 Notices.
Except
as
otherwise provided in this Agreement, all notices, requests and other
communications to any Person provided for hereunder shall be in writing and
shall be given to such Person (a) in the case of a party hereto other than
the
Company, addressed to such party in the manner set forth in the Stock Preferred
Purchase Agreement or at such other address as such party shall have furnished
to the Company in writing, or (b) in the case of any other holder of Registrable
Securities, at the address that such holder shall have furnished to the Company
in writing, or, until any such other holder so furnishes to the Company an
address, then to and at the address of the last holder of such Registrable
Securities who has furnished an address to the Company, or (c) in the case
of
the Company, at the address set forth on the signature page hereto, to the
attention of its President, or at such other address, or to the attention of
such other officer, as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding. Each such notice, request or
other communication shall be effective (i) if given by mail, 72 hours after
such
communication is deposited in the mail with first class
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postage
prepaid, addressed as aforesaid or (ii) if given by any other means (including,
without limitation, by fax or air courier), when delivered at the address
specified above, provided that any such notice, request or communication shall
not be effective until received.
8.4 Assignment.
This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the parties hereto. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit
of
and enforceable by any subsequent holder of any Registrable Securities. Each
of
the Holders of the Registrable Securities agrees, by accepting any portion
of
the Registrable Securities after the date hereof, to the provisions of this
Agreement including, without limitation, appointment of the Investor'
Representative to act on behalf of such Holder pursuant to the terms hereof
which such actions shall be made in the good faith discretion of the Investor'
Representative and be binding on all persons for all purposes.
8.5 Descriptive
Headings.
The
descriptive headings of the several sections and paragraphs of this Agreement
are inserted for reference only and shall not limit or otherwise affect the
meaning hereof.
8.6 Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of Florida , without giving effect to applicable principles of
conflicts of law.
8.7 Jurisdiction.
This
Agreement shall be exclusively governed by and construed in accordance with
the
laws of the State of Florida . If any action is brought among the parties with
respect to this Agreement or otherwise, by way of a claim or counterclaim,
the
parties agree that in any such action, and on all issues, the parties
irrevocably waive their right to a trial by jury. Exclusive jurisdiction and
venue for any such action shall be the State Courts of Ohio. In the event suit
or action is brought by any party under this Agreement to enforce any of its
terms, or in any appeal therefrom, it is agreed that the prevailing party shall
be entitled to reasonable attorneys fees to be fixed by the arbitrator, trial
court, and/or appellate court.
8.8 Entire
Agreement.
This
Agreement embodies the entire agreement and understanding between the Company
and each other party hereto relating to the subject matter hereof and supercedes
all prior agreements and understandings relating to such subject
matter.
8.9 Severability.
If any
provision of this Agreement, or the application of such provisions to any Person
or circumstance, shall be held invalid, the remainder of this Agreement, or
the
application of such provision to Persons or circumstances other than those
to
which it is held invalid, shall not be affected thereby.
8.10 Binding
Effect.
All
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the
terms
and provisions of this Agreement whether so expressed or not, shall be binding
upon, inure to the benefit of, and be enforceable by the parties and their
respective administrators, executors, legal representatives, heirs, successors
and assignees.
8.11 Preparation
of Agreement.
This
Agreement shall not be construed more strongly against any party regardless
of
who is responsible for its preparation. The parties acknowledge each contributed
and is equally responsible for its preparation.
8.12 Failure
or Indulgence Not Waiver; Remedies Cumulative.
No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall nay single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights
and
remedies existing under this Agreement are cumulative to, and not exclusive
of,
any rights or remedies otherwise available.
8.13 Counterparts.
This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall
be
deemed to be an original, but all of which taken together shall constitute
one
and the same agreement. A facsimile transmission of this signed Agreement shall
be legal and binding on all parties hereto.
[SIGNATURES
ON FOLLOWING PAGE]
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IN
WITNESS WHEREOF,
the
Investor and the Company have as of the date first written above executed this
Agreement.
|
QSGI
INC.
By:
____________________________
Title:___________________________
|
INVESTOR
PIKE
CAPITAL PARTNERS, LP
By:_____________________________
|
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