THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF
CAN BE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND APPLICABLE STATE SECURITIES LAWS. THE SHARES
OF COMMON STOCK UNDERLYING THIS WARRANT MAY NOT BE SOLD, TRANSFERRED, OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT, UNLESS, IN THE
OPINION OF COUNSEL FOR DOCUMENT SECURITY SYSTEMS, INC., REGISTRATION IS NOT THEN
REQUIRED.
DATED JULY 8, 2003
WARRANT
TO SUBSCRIBE FOR AND PURCHASE SHARES OF COMMON STOCK OF
DOCUMENT SECURITY SYSTEMS, INC.
THIS WARRANT EXPIRES July 7, 2008.
THIS CERTIFIES THAT, for value received, W.A.B. Capital LLC, or its
registered assigns as permitted under Section 2 below (the "Holder"), is
entitled to subscribe for and purchase from DOCUMENT SECURITY SYSTEMS, INC.
("DCSS"), a New York corporation, whose corporate offices are located at 00 X.
Xxxx Xxxxxx; Xxxxx 000; Rochester, NY; 14614, at any time from and after July 8,
2003, and prior to July 7, 2008 (the "Exercise Period"), an aggregate of 100,000
fully paid and nonassessable shares of DCSS's common stock, $0.02 par value, at
a per share price of $2.00 (the "Share Purchase Price"); subject, however, to
the provisions and upon the terms and conditions set forth in this Warrant (the
"Warrant"). The shares of common stock (or other securities pursuant to Section
6 below) deliverable upon exercise of this Warrant shall be referred to in this
Warrant as the "Shares."
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENTS FOR SHARES; VESTING.
This Warrant may be exercised by the Holder, in whole or in part (subject to the
vesting schedule below), at any time or from time to time during the Exercise
Period, upon presentation and surrender of this Warrant to DCSS at its principal
office as set forth on Page 1 of this Warrant, or at any other place DCSS may
designate by notice in writing to the Holder, with a duly-executed subscription
in the form of the Subscription Agreement attached to this Warrant (the
"Subscription Agreement") and accompanied by payment of the applicable Share
Purchase Price for each Share purchased. The payment shall be made in cash or by
certified, bank, or cashier's check, payable to the order of Document Security
Systems, Inc. Upon receipt thereof DCSS shall, as promptly as practicable, and
in any event within 10 business days thereafter, execute or cause to be executed
and deliver to the Holder a certificate or certificates representing the
aggregate number of Shares specified in said Subscription Agreement. The Shares
purchased shall be deemed to have been issued to the Holder as of the close of
1
business on the date next following the date on which this Warrant is
surrendered to DCSS, along with the Subscription Agreement and full payment for
the Shares purchased. DCSS shall pay all expenses, taxes and other charges
payable in connection with the preparation, execution and delivery of stock
certificates pursuant to this Section, except that in case such stock
certificates shall be registered in a name or names other than the name of the
registered holder of this Warrant, funds sufficient to pay all stock transfer
taxes which shall be payable upon the execution and delivery of such stock
certificate or certificates shall be paid by the registered holder hereof to
DCSS at the time of delivering this Warrant to DCSS as mentioned above. In the
event that this Warrant is exercised in part, DCSS will execute and deliver a
new warrant of like tenor exercisable for the number of Shares for which this
Warrant may then be exercised.
Notwithstanding the foregoing, this Warrant may not be exercised for
more than the number of Shares which have vested. The shares will vest according
to the following schedule: 100,000 shares will vest upon the completion of the
initial equity research report, as defined in Section 1(a) of the attached
Research Agreement.
2. RESTRICTIONS ON TRANSFER OF WARRANT. The Holder may sell, assign,
transfer, or hypothecate this Warrant without prior written permission from
DCSS.
3. EXCHANGE, ASSIGNMENT, OR LOSS OF WARRANT.
(a) This Warrant is exchangeable, at the option of the Holder and
without expense other than as provided in this Section, for other Warrants of
different denominations entitling the Holder to purchase in the aggregate the
same number of Shares purchasable under this Warrant, upon presentation and
surrender of this Warrant to DCSS.
(b) This Warrant may be sold, transferred, assigned, or hypothecated as
permitted under Section 2 above. Any sale, transfer, or assignment shall be made
by surrender of this Warrant to DCSS, together with a duly executed assignment
(in the form of the assignment attached to this Warrant) and funds sufficient to
pay any transfer costs. Upon receipt of the assignment and the appropriate
payment, DCSS shall execute and deliver a new Warrant in the name of the
assignee named in the assignment, and this Warrant shall promptly be canceled.
(c) This Warrant may be divided or combined with other Warrants that
carry the same rights upon presentation and surrender of this Warrant at the
office of DCSS together with a written notice, signed by the Holder, specifying
the names and denominations in which new Warrants are to be issued.
(d) DCSS will execute and deliver a duplicate of this Warrant upon
receipt by DCSS of evidence satisfactory to it of the loss, theft, destruction,
or mutilation of this Warrant, and (i) in the case of loss, theft, or
destruction, upon receipt by DCSS of indemnity satisfactory to DCSS, or (ii) in
the case of mutilation, upon presentation, surrender, and cancellation of this
Warrant.
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(e) The term "Warrant" as used in this Section includes any Warrants
issued in substitution for or replacement of this Warrant, or into which this
Warrant may be divided or exchanged.
(f) DCSS shall pay all federal and state taxes and any other
governmental charge applicable to any issuance of new Warrants under this
Section.
4. NO RIGHTS AS SHAREHOLDER. The Holder shall not, by virtue of this
Warrant, be entitled to any rights of a shareholder in DCSS, either at law or
equity. The rights of the Holder are limited to those expressed in the Warrant
and are not enforceable against DCSS except to the extent set forth in this
Warrant.
5. ANTI-DILUTION PROVISIONS: ADJUSTMENTS. The Share Purchase Price and
the number of Shares purchasable hereunder are subject to adjustment from time
to time as follows:
(a) MERGER, SALE OF ASSETS, ETC. If at any time while this Warrant, or
any portion hereof, is outstanding and unexpired there shall be (i) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of DCSS with or into another corporation in which DCSS is not the
surviving entity, or a reverse triangular merger in which DCSS is the surviving
entity but the shares of DCSS's capital stock outstanding immediately prior to
the merger are converted by virtue of the merger into other property, whether in
the form of securities, cash, or otherwise, or (iii) a sale or transfer of
DCSS's properties and assets as, or substantially as, an entirety to any other
person, then, as a part of such reorganization, merger, consolidation, sale or
transfer, lawful provision shall be made so that the holder of this Warrant
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Share Purchase Price then in
effect, the number of shares of stock or other securities or property of the
successor corporation resulting from such reorganization, merger, consolidation,
sale or transfer that a holder of the shares deliverable upon exercise of this
Warrant would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if this Warrant had been exercised
immediately before such reorganization, merger, consolidation, sale or transfer,
all subject to further adjustment as provided in this Section 5. The foregoing
provisions of this Section 5(a) shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If the per share consideration payable to the Holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by DCSS's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by DCSS's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
3
(b) RECLASSIFICATION, ETC. If DCSS, at any time while this Warrant, or
any portion hereof, remains outstanding and unexpired shall, by
reclassification, combination, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant exist into the same or a different number of securities of any other
class or classes, this Warrant shall thereafter represent the right to acquire
such number and kind of securities as would have been issuable as the result of
such change with respect to the securities that were subject to the purchase
rights under this Warrant immediately prior to such reclassification or other
change and the Share Purchase Price therefor shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 5.
(c) SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If DCSS at any time
while this Warrant, or any portion hereof, remains outstanding and unexpired
shall split, subdivide or combine the securities as to which purchase rights
under this Warrant exist, into a different number of securities of the same
class, the Share Purchase Price for such securities shall be proportionately
decreased in the case of a split or subdivision or proportionately increased in
the case of a combination.
(d) ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR PROPERTY.
If while this Warrant, or any portion hereof, remains outstanding and unexpired
the holders of the securities as to which purchase rights under this Warrant
exist at the time shall have received, or, on or after the record date fixed for
the determination of eligible stockholders, shall have become entitled to
receive, without payment therefor, other or additional stock or other securities
or property (other than cash) of DCSS by way of dividend, then and in each case,
this Warrant shall represent the right to acquire, in addition to the number of
shares of the security receivable upon exercise of this Warrant, and without
payment of any additional consideration therefor, the amount of such other or
additional stock or other securities or property (other than cash) of DCSS that
such holder would hold on the date of such exercise had it been the holder of
record of the securities receivable upon exercise of this Warrant on the date
hereof and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and/or all other
additional stock available to, it as aforesaid during such period, giving effect
to all adjustments called for during such period by the provisions of this
Section 5.
(e) FRACTIONAL SHARES. No fractional Shares or scrip representing
fractional Shares shall be issued upon the exercise of this Warrant, and DCSS
shall have no obligation for any cash payment with respect to any such Shares.
(f) NO CHANGE IN WARRANT. Regardless of any adjustment or change in the
Share Purchase Price or the number of Shares or other securities actually
purchasable under the Warrant, any Warrant may continue to express the Share
Purchase Price and the number of Shares purchasable under the Warrant as the
price and number of shares were expressed in the Warrant when initially issued,
subject to the Holder's rights under Section 3 to exchange the Warrant for a new
Warrant that reflects the terms of any such adjustment or change.
4
(g) DEFINITION OF "STOCK." As used in this Warrant, "Stock" shall mean
shares of DCSS's capital stock of any class, whether now or subsequently
authorized, that has the right to participate in the distribution of earnings
and assets of DCSS without limit as to amount or percentage. On the date of this
Warrant, Stock consists of 200,000,000 authorized shares of DCSS's common stock
at $0.02 par value per share. The number of shares of Stock of any class at any
time outstanding shall include all shares of Stock of that class then owned or
held by or for the account of DCSS.
6. NOTIFICATION BY DCSS. (a) In case at any time:
(i) DCSS shall pay any dividend payable in stock upon its Stock or
make any distribution (other than cash dividends which are not in a
greater amount per share than the then most recent cash dividend) to
the holders of its Stock;
(ii) DCSS shall make an offer for subscription pro rata to the
holders of its Stock of any additional shares of stock of any class
or make any offer to receive any other rights;
(iii) there shall be any capital reorganization, reclassification of
the capital stock of DCSS, consolidation or merger of DCSS with, or
sale of all or substantially all of its assets to, another
corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of DCSS;
then, in any one or more of such cases, DCSS shall give written notice to the
registered holder of this Warrant of the date on which (a) the books of DCSS
shall close, or a record shall be taken for such dividend, distribution or
subscription rights, or (b) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up shall take
place, as the case may be. Such notice shall also specify the date as of which
the holders of Stock of record shall participate in such dividend, distribution
or subscription rights, or shall be entitled to exchange their Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such written notice shall be given not less than
30 and not more than 90 days prior to the record date or the date on which
DCSS's transfer books are closed in respect thereto and such notice may state
that the record date is subject to the effectiveness of a registration statement
under the Securities Act, or to a favorable vote of stockholders, if either is
required.
5
(b) Whenever the Share Purchase Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 5 hereof, DCSS shall issue a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the Share Purchase Price and number of shares purchasable
hereunder after giving effect to such adjustment, and shall cause a copy of such
certificate to be delivered or given in the manner provided in Section 13 hereof
to the holder or holders of this Warrant.
7. REGISTRATION. The Holder shall, with respect to the Shares issuable
upon exercise of this Warrant, have the "demand" and "piggy-back" registration
rights in the Rider attached hereto. Such registration rights are incorporated
by reference herein as if such provisions had been set forth herein in full. .
8. TRANSFER TO COMPLY WITH THE SECURITIES ACT. This Warrant and the
Shares or any other security issued or issuable upon exercise of this Warrant
may not be offered or sold except in conformity with the Securities Act and then
only against receipt of an agreement of the person to whom the offer or sale is
made to comply with the provisions of this Section 8 with respect to any resale
or other disposition of the securities and subject to the restrictions contained
in Section 2 above; except that no such agreement shall be required from any
person purchasing Shares or other security issued or issuable upon exercise of
this Warrant pursuant to a registration statement effective under the Securities
Act.
9. FURTHER ASSURANCES. DCSS will take all action that may be necessary
or appropriate so that DCSS may validly and legally issue fully paid and
nonassessable Shares or other securities upon the exercise of this Warrant.
10. RESERVATION OF STOCK, AVOIDANCE OF CERTAIN ACTIONS. DCSS will at
all times reserve and keep available, solely for issuance and delivery upon the
exercise of the Warrants, all Shares (or other securities) from time to time
issuable upon the exercise of this Warrant, and it will have at all times any
other rights or privileges provided for therein sufficient to enable it at any
time to fulfill all of its obligations hereunder. DCSS will not, by amendment of
its certificate of incorporation or through any reorganization, transfer of
assets, consolidation, merger, issue or sale of securities or otherwise, avoid
or take any action which would have the effect of avoiding the observance or
performance of any of the terms to be observed or performed hereunder by DCSS,
but will at all times in good faith assist in carrying out all of the provisions
of this Warrant and in taking all such action as may be necessary or appropriate
in order to protect the rights of the holders of this Warrant against dilution
or other impairment.
6
11. APPLICABLE LAW. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of New York (without regard to the choice
of law principles thereof).
12. NOTICE. Any notices or certificates by DCSS to the Holder shall be
deemed delivered if in writing and delivered personally or sent by certified
mail to the Holder at 0000 Xxxxxxx Xxxx; Xxxxxxx Xxxxxxxxx, XX 00000 or to any
other address if the Holder shall have designated another address by notice in
writing to DCSS; and if to DCSS, addressed to it at the address appearing for it
on page 1 of this Warrant. DCSS may change its address for purposes of service
of notice by written notice to the Holder at the address provided above.
13. SURVIVAL. The various rights and obligations of DCSS as set forth
in Section 7 of this Warrant shall survive the exercise and surrender of this
Warrant. This Warrant shall be binding upon any corporation or entity succeeding
to DCSS by merger, consolidation or acquisition of all or substantially all of
DCSS's assets.
14. MISCELLANEOUS. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against which
enforcement of the same is sought. The descriptive headings of the several
Sections of this Warrant are inserted for convenience only and do not constitute
a part of this Warrant.
IN WITNESS WHEREOF, DCSS has caused this Warrant to be signed by its
duly authorized officer, and to be dated and effective as of the ____ day of
_________, 2003.
DOCUMENT SECURITY SYSTEMS, INC.
By:
--------------------------------
Xxxxxxx Xxxxx, President / CEO
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers to ___________________________, of ___________________________, the
right to purchase ___________________________ (__________) of the shares
evidenced by the Warrant issued to them by Document Security Systems, Inc.
("DCSS"), dated July 8, 2003, that expires on July 7, 2008, and they do
irrevocably constitute and appoint ______________________ to transfer the right
on the books of DCSS, with full power of substitution.
Dated:
---------------------------.
---------------------------------
NAME
---------------------------------
NAME
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Warrant, in every particular, without
alteration or enlargement, or any change whatsoever, and must be guaranteed by a
trust company or a bank, other than a savings bank, that has an office in NEW
YORK, NEW YORK, or by a firm having membership on a registered national
securities exchange and an office in NEW YORK, NEW YORK.
8
SUBSCRIPTION AGREEMENT
DOCUMENT SECURITY SYSTEMS, INC.
The undersigned hereby elects to purchase, pursuant to the provisions
of the Warrant dated July 8, 2003, held by the undersigned, the following number
of shares of common stock, par value $.02 per share, of DOCUMENT SECURITY
SYSTEMS, INC., a New York corporation, as provided in the Warrant:
shares
--------------------
Payment of the purchase price per share and applicable taxes required
under the Warrant accompanies this Subscription Agreement.
Dated:
----------------------------
------------------------------------
Name
------------------------------------
Name
------------------------------------
Address
RIDER
REGISTRATION RIGHTS
1. DEMAND REGISTRATION. W.A.B. Capital LLC or its permitted assigns, as
holder of the Warrant dated July 8, 2003 to which this Rider is attached (the
"Holder"), shall have certain "demand" registration rights with respect to all
of the Shares issuable upon exercise of this Warrant (the "Registrable
Securities") as hereinafter provided. All capitalized terms used but not defined
herein shall have the meanings set forth in the Warrant.
(a) At any time after six (6) months after the date of this Warrant,
if DCSS (hereinafter, the "Company") shall receive, a written request that the
Company file a registration statement under the Securities Act covering the
registration of all or a portion of the Registrable Securities, then the Company
shall, subject to the limitations of subsections 1(d) and 1(e), use its best
efforts to effect as soon as practicable, and in any event within ninety (90)
days of the receipt of such request, the registration under the Securities Act
of all Registrable Securities which the Holder requests to be registered.
(b) If the Holder intends to distribute the Registrable Securities
covered by its request by means of an underwriting, it shall so advise the
Company as a part of its request made pursuant to this Section 1. The Holder
shall enter into such agreements as may be reasonably required by the
underwriters and the Holder shall pay all Registration Expenses (as defined in
Section 3(k)) incurred in connection with a registration of Registrable
Securities pursuant to this Section 1, subject to a maximum of $25,000, whether
or not such registration statement shall become effective. If the Registration
Expenses exceed $25,000, the Company shall pay the excess.
(c) The Company is obligated to effect only two (2) such
registrations pursuant to this Section 1.
(d) Notwithstanding the foregoing, if the Company shall furnish to
Holder a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than ninety (90) days after receipt of the request of
the Holder; provided, however, that the Company may not utilize this right more
than once in any twelve (12) month period.
(e) Notwithstanding the foregoing, the Company shall not be obligated
to effect, or to take any action to effect, any such registration pursuant to
this Section 1 during the period starting with the date sixty (60) days prior to
the Company's good faith estimate of the date of filing of, and ending on a date
one hundred twenty (120) days after the effective date of, a Company-initiated
registration; provided the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective.
2. COMPANY REGISTRATION. The Holder shall have certain "Piggy-back"
registration rights with respect the Registrable Securities as hereinafter
provided:
(a) At any time or times the Company determines to file with
the Securities and Exchange Commission ("SEC"') a registration statement under
the Securities Act registering any shares of its common stock $.02 par value
("Common Stock"), the Company shall give written notice to the Holder prior to
such filing.
(b) Within fifteen (15) days after such notice from the
Company, the Holder shall give written notice to the Company whether or not the
Holder desires to have all of the Holder's Registrable Securities included in
the registration statement. If the Holder fails to give such notice within such
period, the Holder shall not have the right to have its Registrable Securities
registered pursuant to such registration statement. If the Holder gives such
notice, then the Company shall include the Holder's Registrable Securities in
the registration statement, at the Company's sole cost and expense, subject to
the remaining terms of this Section 2.
(c) If the registration statement relates to an underwritten
offering, and the underwriter shall determine in writing that the total number
of Shares to be included in the offering, including the Registrable Securities,
shall exceed the amount which the underwriter deems to be appropriate for the
offering, the number of shares of the Registrable Securities shall be reduced in
the same proportion as the remainder of the shares in the offering and the
Holder's Registrable Securities included in such registration statement will be
reduced proportionately. For this purpose, if other securities in the
registration statement are derivative securities, their underlying shares shall
be included in the computation. The Holder shall enter into such agreements as
may be reasonably required by the underwriters and the Holder shall pay to the
underwriters commissions relating to the sale of the Holder's Registrable
Securities.
(d) The Holder of this Warrant shall have two (2)
opportunities to have the Registrable Securities registered under this Section
2.
(e) The Holder shall furnish in writing to the Company such
information as the Company shall reasonably require in connection with a
registration statement.
3. If and whenever the Company is required by the provisions of
Sections 1 or 2 to register any Registrable Securities under the Securities Act,
the Company shall, as expeditiously as possible under the circumstances:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective as soon as possible after filing
and remain effective.
(b) 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 current and
effective and to comply with the provisions of the Securities Act, and any
regulations promulgated thereunder, with respect to the sale or disposition of
all Registrable Securities covered by the registration statement required to
effect the distribution of the securities, but in no event shall the Company be
required to do so for a period of more than five (5) years following the
effective date of the registration statement.
(c) Furnish to the Holder copies (in reasonable quantities) of
summary, preliminary, final, amended or supplemented prospectuses, in conformity
with the requirements of the Securities Act and any regulations promulgated
thereunder, and other documents as reasonably may be required in order to
facilitate the disposition of the securities, but only while the Company is
required under the provisions hereof to keep the registration statement current.
(d) Use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions of the United States as the
Holder shall reasonably request, and do any and all other acts and things which
may be reasonably necessary to enable the Holder to consummate the disposition
of the Registrable Securities in such jurisdictions.
(e) Notify the Holder at any time when a prospectus relating
to any Registrable Securities covered by such registration statement is required
to be delivered under the Securities Act, of the Company's becoming aware that
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
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and promptly
prepare and furnish to the Holder a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to the purchasers of
such Registrable 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.
(f) As soon as practicable after the effective date of the
registration statement, and in any event within eighteen (18) months thereafter,
make generally available to the Holder an earnings statement (which need not be
audited) covering a period of at. least twelve (12) consecutive months beginning
after the effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act, including,
at the Company's option, Rule 158 thereunder. To the extent that the Company
files such information with the SEC in satisfaction of the foregoing, the
Company need not deliver the above referenced earnings statement to the Holder.
(g) Upon request, deliver promptly to counsel of the Holder
copies of all correspondence between the SEC and the Company, its counsel or
auditors and all memoranda, relating to discussions with the SEC or its staff
with respect to the registration statement and permit the Holder to conduct such
investigation at the Holder's sole cost and expense, upon reasonable advance
notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary. Holder agrees that it
will use its best efforts not to interfere unreasonably with the Company's
business when conducting any such investigation and Holder shall keep any such
information received pursuant to this Section 3(g) confidential.
(h) Provide a transfer agent and registrar located in the
United States for all such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement.
(i) List the Registrable Securities covered by such
registration statement on such exchanges and/or on the NASDAQ as the shares of
Common Stock are then currently listed upon.
(j) Pay all Registration Expenses incurred in connection with
a registration of Registrable Securities pursuant to Section 2 of this Rider,
whether or not such registration statement shall become effective; provided that
Holder shall pay all underwriting discounts, commissions and transfer taxes, and
its own counsel fees, if any, relating to the sale or disposition of such
Holder's Registrable Securities pursuant to a registration statement. As used
herein, "Registration Expenses" means any and all reasonable and customary
expenses incident to performance of or compliance with the registration rights
set forth herein, including, without limitation, (i) all SEC and stock exchange
or National Association of Securities Dealers, Inc. registration and filing
fees, (ii) all fees and expenses of complying with state securities or blue sky
laws (including reasonable fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities but no other expenses of the underwriters or their counsel), (iii)
all printing, messenger and delivery expenses, and (iv) the reasonable fees and
disbursements of counsel for the Company and the Company's independent public
accountants.
(k) Pay all Registration Expenses in excess of $25,000
incurred in connection with a registration of Registrable Securities pursuant to
Section 1 of this Rider, whether or not such registration statement shall become
effective; provided that Holder shall pay the first $25,000 of Registration
Expenses. In addition, the Holder will pay the cost of all underwriting
discounts, commissions and transfer taxes, and its own counsel fees, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to a registration statement. As used herein, "Registration Expenses"
means any and all reasonable and customary expenses incident to performance of
or compliance with the registration rights set forth herein, including, without
limitation, (i) all SEC and stock exchange or National Association of Securities
Dealers, Inc. registration and filing fees, (ii) all fees and expenses of
complying with state securities or blue sky laws (including reasonable fees and
disbursements of counsel for the underwriters in connection with blue sky
qualifications of the Registrable Securities but no other expenses of the
underwriters or their counsel), (iii) all printing, messenger and delivery
expenses, and (iv) the reasonable fees and disbursements of counsel for the
Company and the Company's independent public accountants.
(l) Include as selling security holders under such
registration statement the Holder and its successors, assigns, and transferees
(the "Selling Security Holders") such that any Registrable Securities sold by
such persons would be registered thereunder.
4. REMEDIES. The Company acknowledges that there is no adequate remedy
at law for failure by it to comply with the provisions of this Rider and that
such failure would not be adequately compensable in damages, and therefore
agrees that its agreements contained in this Rider may be specifically enforced.
In the event that the Company shall fail to file such registration statement
when required pursuant to Section 1 or 2 above or to keep any registration
statement effective as provided in Section 3 or otherwise fails to comply with
its obligations and agreements in this Rider, then, in addition to any other
rights or remedies Holder may have at law or in equity, including without
limitation, the right of rescission, the Company shall indemnify and hold
harmless the Holder from and against any and all manner of loss which it may
incur as a result of such failure. In addition, the Company shall also reimburse
Holder for any and all reasonable legal fees and expenses incurred by it in
enforcing its rights pursuant to this Rider, regardless of whether any
litigation was commenced.
5. INDEMNIFICATION BY COMPANY. In the event the Company effects any
registration under the Securities Act of any Registrable Securities pursuant to
Section 1 or 2 above, the Company shall indemnify, to the extent permitted by
law, and hold harmless the Holder, any underwriter, any officer, director,
employee or agent of the Holder or underwriter, and each other person, if any,
who controls the Holder or underwriter within the meaning of Section 15 of the
Securities Act, against any losses, claims, damages or liabilities, judgment,
fines, penalties, costs and expenses, joint or several, or actions in respect
thereof (collectively, the "Claims"), to which each such indemnified party
becomes subject, under the Securities Act or otherwise, insofar as such Claims
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the registration statement or prospectus or
any amendment or supplement thereto or any document filed under a state
securities or blue sky law (collectively, the "Registration Documents") or
insofar as such Claims arise out of or are based upon the omission or alleged
omission to state in any Registration Document a material fact required to be
stated therein or necessary to make the statements made therein not misleading,
and will reimburse any such indemnified party for any legal or other expenses
reasonably incurred by such indemnified party in investigating or defending any
such Claim; provided that the Company shall not be liable in any such case to a
particular indemnified party to the extent such Claim is based upon an untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission of a material fact made in any Registration Document in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such indemnified party specifically for use in the preparation of such
Registration Document.
6. INDEMNIFICATION BY HOLDER. In connection with any registration
statement in which the Holder is participating, the Holder shall indemnify, to
the extent permitted by law, and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
other person, if any, who controls the Company within the meaning of Section 15
of the Securities Act, each underwriter, any officer, director, employee or
agent of any such underwriter and each other person, if any, who controls such
underwriter within the meaning of Section 15 of the Securities Act against any
Claims to which each such indemnified party may become subject under the
Securities Act or otherwise, insofar as such Claims (or actions in respect
thereof) are based upon any untrue statement or alleged untrue statement of any
material fact contained in any Registration Document, or insofar as any Claims
are based upon the omission or alleged omission to state in any Registration
Document a material fact required to be stated therein or necessary to make the
statements made therein not misleading, and will reimburse any such indemnified
party for any legal or other expenses reasonably incurred by such indemnified
party in investigating or defending any such claim; provided, however, that such
indemnification or reimbursement shall be payable only if, and to the extent
that, any such Claim arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
Registration Document in reliance upon and in conformity with written
information furnished to the Company by the Holder specifically for use in the
preparation thereof.
7. NOTICE OF CLAIM; RIGHT TO PARTICIPATE. Any person entitled to
indemnification under Sections 5 or 6 above shall notify promptly the
indemnifying party in writing of the commencement of any Claim if a claim for
indemnification in respect thereof is to be made against an indemnifying party
under this Section 7, but the omission of such notice shall not relieve the
indemnifying party from any liability which it may have to any indemnified
party, except to the extent that such failure shall materially adversely affect
any indemnifying party or its rights hereunder. In case any action is brought
against the indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and, to the extent that it chooses, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party; and, after written
notice from the indemnifying party to the indemnified party that it so chooses,
the indemnifying party shall not be liable for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
(i) if the indemnifying party fails to take reasonable steps necessary to defend
diligently the Claim within twenty (20) days after receiving notice from the
indemnified party that the indemnified party believes it has failed to do so;
(ii) if the indemnified party who is a defendant in any action or proceeding
which is also brought against the indemnifying party reasonably shall have
concluded that there are legal defenses available to the indemnified party which
are not available to the indemnifying party; or (iii) if representation of both
parties by the same counsel is otherwise inappropriate under applicable
standards of professional conduct, the indemnified party shall have the right to
assume or continue its own defense as set forth above (but with no more than one
firm of counsel for all indemnified parties in each jurisdiction, except to the
extent any indemnified party or parties reasonably shall have concluded that
there are legal defenses available to such party or parties which are not
available to the other indemnified parties or to the extent representation of
all indemnified parties by the same counsel is otherwise inappropriate under
applicable standards of professional conduct) and the indemnifying party shall
be liable for any reasonable expenses therefor; provided, that no indemnifying
party shall be subject to any liability for any settlement of a Claim made
without its consent (which may not be unreasonably withheld, delayed or
conditioned). If the indemnifying party assumes the defense of any Claim
hereunder, such indemnifying party shall not enter into any settlement without
the consent of the indemnified party if such settlement attributes liability to
the indemnified party.
8. CONTRIBUTION. If for any reason the indemnity provided in Sections
5 or 6 above is unavailable or is insufficient to hold harmless an indemnified
party, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of any Claim in such proportion as
is appropriate to reflect the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other from the
transactions contemplated by this Rider. If, however, the allocation provided in
the immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the indemnifying party and the
indemnified party as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable in respect of any Claim shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such Claim.
Notwithstanding the foregoing, no underwriter or controlling person thereof if
any, shall be required to contribute, in respect of such underwriter's
participation as an underwriter in the offering, any amount in excess of the
amount by which the total price at which the Registrable Securities underwritten
by it and distributed to the public exceeds the amount of any damages which such
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The obligation of any underwriters
to contribute pursuant to this Section 8 shall be several in proportion to their
respective underwriting commitments and not joint.
9. The provisions of Sections 5 through 8 of this Rider shall be in
addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made or
omitted by or on behalf of any indemnified party and shall survive the transfer
of the Registrable Securities by any such party.
