FORWARD INDUSTRIES, INC.
REGISTRATION RIGHTS AGREEMENT
FOR 1997 PRIVATE PLACEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made by
Forward Industries, Inc., a New York corporation (the "Company"), for the
benefit of the investors listed on Schedule I hereto (collectively, the
"Investors" and, individually, an "Investor").
RECITALS
A. The Investors desire to purchase from the Company, and the Company
desires to issue and sell to the Investors in an offering (the
"Offering"), units (the "Units"), each Unit consisting of (i) 60,000
shares of Common Stock, par value $.01 par share, of the Company (the
"Common Stock"), (ii) one 10% Convertible Promissory Note in the
principal amount of $10,000 (collectively, the "Notes"), (ii) one
Warrant to purchase 60,000 shares of Common Stock at an initial
exercise price per share equal to $2.00 per share (subject to
adjustment upon the occurrence of certain events and without giving
effect to a contemplated reverse stock split) (collectively the
"Warrants").
B. As further inducement for the Investors to purchase the Units from the
Company, the Company desires to undertake to register the shares of
Common Stock included in the Units (the "Shares") and underlying the
Warrants (the "Warrant Shares"), the Notes (the "Note Shares") and the
Warrants which may be issued upon conversion at the Notes (the "Note
Warrant Shares") for resale or other transfer by the Investors under
the Securities Act in accordance with the terms hereof.
AGREEMENTS
The Company and the Investors covenant and agree as follows:
1. Definitions. For the purposes of this Agreement:
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
statements or similar documents in compliance with the Securities Act of 1933,
as amended (the "Securities Act"), and the declaration or ordering of
effectiveness of such registration statement or document by the Securities and
Exchange Commission (the "SEC").
The term "Registrable Securities" means (i) the Shares, (ii) the
Warrant Shares, (iii) the Note Shares, (iv) the Note Warrant Shares and (v) any
Shares of Common Stock issued as (or issuable upon the conversion or exercise
of any convertible security, warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of the Shares, Warrant Shares, Note Shares or Note Warrant Shares.
The term "Investor" includes (i) each Investor (as defined above) and
(ii) each person who is a transferee or assignee of the Registrable Securities
in accordance with Section 7 of this Agreement.
Other terms herein which are capitalized but not defined shall have
the same meanings as in the Subscription Agreement signed by each Investor with
respect to the Units.
2. Obligations of the Company. In connection with the registration of the
Registrable Securities pursuant to this Agreement, the Company shall, at its
sole cost and expense:
(a) Prepare and file with the SEC, within 120 days after the Final
Closing of the Offering, a registration statement or registration statements
under the Securities Act (the "Registration Statement") with respect to all
Registrable Securities not excluded pursuant to Section 2, and use its best
efforts to cause the Registration Statement to become effective as soon as
reasonably possible after such filing, which Registration Statement (including
any amendments or supplements thereto and prospectuses contained therein), at
the time it becomes effective, shall not contain any 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 in
which they were made, not misleading.
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and
any prospectus constituting Part I of the Registration Statement as may be
necessary to keep the Registration Statement effective for at least two years
after the Final Closing of the Offering, or such shorter period as may be
prescribed by Rule 144(k) (or any successor thereto) under the Securities Act,
and during such period to comply with the provisions of the Securities Act with
respect to the Registration Statement.
(c) Furnish promptly to each Investor whose Registrable Securities are
included in the Registration Statement such number of copies of a prospectus,
including a preliminary prospectus, and all amendments and supplements thereto,
and of such other documents as such Investor may reasonably request in order to
facilitate the disposition of Registrable Securities owned by such Investor.
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(d) Use its reasonable efforts to register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Investors who then hold of record a majority of the Registrable Securities
covered by the Registration Statement, and prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements and to take such other actions as may be necessary to maintain such
registration and qualification in effect at all times for a period of at least
two years after the Final Closing of the Offering, or such shorter period as
may be prescribed by Rule 144(k), and to take all other actions reasonably
necessary or advisable to enable the disposition of such securities in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (i) qualify to do business,
file a general consent to service of process or subject itself to general
taxation in any such states or jurisdictions or (ii) make any change in its
Certificate of Incorporation or bylaws.
(e) Notify the Investors who hold Registrable Securities being sold,
at any time when a prospectus relating to Registrable Securities covered by the
Registration Statement is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing. The Company shall use its best efforts promptly to
amend or supplement the Registration Statement to correct any such untrue
statement or omission.
(f) Notify the Investors who hold Registrable Securities being sold of
the issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose.
The Company will make every reasonable effort to prevent the issuance of any
stop order and, if any stop order is issued, to obtain the lifting thereof at
the earliest possible time.
(g) Make generally available to its security holders as soon as
practicable, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions
of Rule 158 under the Securities Act) covering a twelve-month period beginning
not later than the first day of the Company's fiscal quarter next following the
effective date of the Registration Statement.
(h) Use its best efforts to facilitate the quotation of the Shares on
the Nasdaq SmallCap System, and use its best efforts to cause continued listing
of the Common Stock so long as the Registration Statement is in effect under
the Securities Act.
(i) Take all actions, after the Registration Statement is declared
effective, reasonably necessary to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be sold pursuant to the Registration Statement, in
such denominations and registered in such names as the Investors may reasonably
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request.
(j) Take all other actions reasonably necessary to expedite and
facilitate disposition by the Investors of the Registrable Securities pursuant
to the Registration Statement.
(k) Notwithstanding anything contained in this Section 2 to the
contrary, the Company shall have no obligation hereunder with respect to
Registrable Securities held by any Investor where such Investor would then be
entitled to sell under Rule 144(e) within any three-month period (or such other
unitary period prescribed under Rule 144 as may be provided by amendment
thereof) all of the Registrable Securities then held by such Investor.
3. Obligations of the Investors. In connection with the registration of
the Registrable Securities pursuant to this Agreement, the Investors shall have
the following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement with respect to any
Investor that such Investor shall furnish to the Company such information
regarding itself, the Registrable Securities held by it, and the intended plan
of distribution of such securities as shall be reasonably required to effect
the registration of the Registrable Securities and shall execute such documents
in connection with such registration as the Company may reasonably request. At
least thirty (30) days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") who elects to have any of his Registrable Securities included in
the Registration Statement. If within seven (7) business days of the filing
date the Company has not received the Requested Information from an Investor (a
"Non-Responsive Investor"), then the Company may file the Registration
Statement without including Registrable Securities of such Non-Responsive
Investor.
(b) Each Investor by his acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the preparation and
filing of any Registration Statement hereunder, unless such Investor has
notified the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement.
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 2(e) or
(f), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement until such Investor's receipt
of the copies of the supplemented or amended prospectus contemplated by Section
2(e) or the stop order is lifted, and, if so desired by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or
destroy (and deliver to the Company a certificate of such destruction) all
copies, other than the permanent file copies then in such Investor's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice.
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4. Expenses of Registration. All expenses other than underwriting
discounts and commissions incurred in connection with registration, filings or
qualifications pursuant to this Agreement, including, without limitation, all
registration, listing, filing and qualification fees, printers and accounting
fees, the fees and disbursements of counsel for the Company and the reasonable
fees and disbursements of one firm of counsel for the Investors shall be borne
by the Company.
5. Indemnification.
(a) To the extent permitted by law, the Company hereby indemnifies and
holds harmless each Investor, the directors and officers, if any, of such
Investor, each person, if any, who controls such Investor, any underwriter (as
defined in the Securities Act) for the Investors and each person, if any, who
controls any such underwriter within the meaning of the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), against any
losses, claims, damages, expenses or liabilities, joint or several) to which
any of them may become subject under the Securities Act, the Exchange Act,
other federal or state law or otherwise, insofar as such losses, claims,
damages, expenses or liabilities (or actions or proceedings, whether commenced
or threatened, in respect thereof, arise out of or are based upon any of the
following statements, omissions or violations (collectively, a "Violation"):
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading or (iii) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law. Subject
to the restrictions set forth in Section 5(c) with respect to the number of
legal counsel, the Company will reimburse the Investors and each such
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding. Notwithstanding anything
contained in this Agreement to the contrary, the indemnity agreement contained
above in this Section 5(a): (I) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld, (II) shall not apply to any such case for any
such loss, claim, damage, liability or action arising out of or based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished for use in connection with such registration by the
Investors or any such underwriter or controlling person, as the case may be,
and (III) with respect to any preliminary prospectus, shall not inure to the
benefit of any person from whom the person asserting any such claim purchased
the Registrable Securities that are the subject thereof (or to the benefit of
any person controlling such person) if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected in the
prospectus, as then amended or supplemented. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Investors or any such underwriter
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or controlling person and shall survive the transfer of the Registrable
Securities by an Investor.
(b) To the extent permitted by law, each Investor, severally and not
jointly, hereby indemnifies and holds harmless, to the same extent and in the
same manner set forth in Section 5(a), the Company, each of its directors, each
of its officers who have signed the Registration Statement, each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act, any underwriter and any other Investor selling securities
pursuant to the Registration Statement or any of its directors or officers or
any person who controls such holder or underwriter, against any losses, claims,
damages or liabilities, joint or several) to which any of them may become
subject, under the Securities Act, the Exchange Act, other federal or state law
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Investor for use in connection with such registration; and such Investor will
reimburse any legal or other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Investor shall be liable under
this Section 5(b) for only that amount of losses, claims, damages and
liabilities as does not exceed the proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such registration. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of such indemnified party and shall survive the transfer of the
Registrable Securities by the Investors.
(c) Promptly after receipt by an indemnified party under this Section
5 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 5, deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
satisfactory to the indemnifying party; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel for the indemnifying party, representation of such indemnified party by
the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. In that event, the
Company shall pay for only one legal counsel for the Investors. Such legal
counsel shall be selected by the Investors holding a majority of the
Registrable Securities. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall relieve such indemnifying party of any liability to the
indemnified party under this Section 5 only to the extent prejudicial to its
ability to defend such action, but the omission so to deliver written notice to
the indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 5. To the extent
permitted by law, the indemnification required by this Section 5 shall be made
by periodic payments of the amount thereof during the course of the
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investigation or defense, promptly as such expense, loss, damage or liability
is incurred and is due and payable.
(d) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under this Section 5 to the extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
this Section 5, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11 of the Securities Act)
shall be entitled to contribution from any Investor who was not guilty of such
fraudulent misrepresentation, and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such Investor from the sale of Registrable Securities.
6. Reports Under Securities Exchange Act of 1934. With a view to making
available to the Investors the benefits of Rule 144 and any other rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration, the Company
agrees to:
(a) Make and keep current public information available, as provided in
Rule 144(c).
(b) File with the SEC in a timely manner all reports and other
documents required of the Company under the Exchange Act.
(c) Furnish to each Investor, so long as such Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the current public information requirements
of Rule 144(c), (ii) a copy of the most recent annual or quarterly report of
the Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested in availing the
Investors of any rule or regulation of the SEC which permits the selling of any
such securities without registration.
7. Assignments of Registration Rights. The rights of Investors under this
Agreement may be assigned by the Investors to transferees or assignees of their
Registrable Securities, provided that (i) the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned, (ii) such transfer and assignment are
in accordance with and permitted by all other agreements between the Company
and the transferor or assignor, and (iii) immediately following such transfer,
such securities are not freely tradeable by virtue of the exemption from
registration under the Securities Act provided in Section 4(l) thereof. The
term "Investors" as used in this Agreement shall include permitted assignees.
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8. Miscellaneous.
(a) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, (i) if to the Company, to
000 Xxxxxxxxx Xxxxxxxx, Xxxx Xxxxxxxxx, Xxx Xxxx, 00000, Attention: Xxxxxxxx X.
Xxxxxxxxx, Chief Executive Officer, and (ii) if to an Investor, at the address
set forth under his or her name in the subscription agreement executed by such
Investor in connection with its investment, or at such other address as each
such party furnishes by notice given in accordance with this Section 8(a).
(b) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
will not operate as a waiver thereof. No waiver will be effective unless and
until it is in writing and signed by the party giving the waiver.
(c) This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of New York, as such laws are
applied by New York courts to agreements entered into and to be performed in
New York by and between residents of New York. This Agreement shall be binding
upon each Investor and its heirs, estate, legal representatives, successors and
permitted assignees and shall inure to the benefit of the Company and its
successors and assigns. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any
law shall not affect the validity or enforceability of any other provision
hereof.
(d) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only by a writing executed by the Company and Investors who
then hold of record a majority of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 8(d) shall be binding upon such
Investor and the Company.
(e) Any such person is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, then
the Company shall be entitled to act upon the basis of the instructions, notice
or election received from the registered owner of such Registrable Securities.
Dated this ___ day of ________ 1997.
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FORWARD INDUSTRIES, INC.
By:
--------------------------------
Name:
Title:
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