Exhibit 99.5
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REGISTRATION RIGHTS AGREEMENT
by and among
AVALON DIGITAL MARKETING SYSTEMS, INC.
and
AVALON ACQUISITION COMPANY, LLC
and
NETWORKS DIRECT, INC.
and
THE XXXXXXXX GROUP, LLC
dated as of
December 9, 2004
REGISTRATION RIGHTS AGREEMENT, dated as of December 9, 2004 (the
"Agreement"), by and among Avalon Digital Marketing Systems, Inc., a Delaware
corporation, Avalon Acquisition Company, LLC, a Delaware limited liability
company, and Networks Direct, Inc., a Delaware corporation, (individually a
"Purchaser," and, collectively, the "Purchasers"), and The Xxxxxxxx Group, LLC,
a Utah limited liability company ("Xxxxxxxx"), and such other persons who become
signatories hereto from time to time as provided for herein.
WHEREAS, pursuant to the Note and Warrant Purchase and Security
Agreement, dated as of May 28, 2004 (the "Purchase and Security Agreement"), by
and among the Company and the Purchasers, upon the terms and subject to the
conditions contained therein, the Company will issue and sell to the Purchasers
the Securities (as defined below) of the Company upon the effectiveness of the
Plan (as defined below);
WHEREAS, to induce the Purchasers to execute and deliver the Purchase
and Security Agreement and to consummate the transactions contemplated thereby,
the Company has agreed to provide the Purchasers with the rights set forth in
this Agreement;
WHEREAS, pursuant to the terms of the Xxxxxxxx Settlement Agreement (as
defined below) Xxxxxxxx made certain concession with respects to its Secured
Claim (as defined below); and
WHEREAS, as part of such concessions, Xxxxxxxx agreed to reduce its
Secured Claim by $87,000 (the "Option Concession") in exchange for the agreement
of the Company to issue options to purchase the Option Shares (as defined below)
to Xxxxxxxx and to make Xxxxxxxx a party to this Agreement with respect to the
Option Shares.
Accordingly, the parties hereto agree as follows:
SECTION 1. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings (except
that those capitalized terms used herein that are not defined herein shall have
the meanings provided in the Purchase and Security Agreement):
1.1. "Affiliate" means with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person.
1.2. "Assignee" has the meaning set forth in Section 4.2.
1.3. "Common Stock" means any shares of common stock, par value $0.0001
per share, of the Company, now or hereafter authorized to be issued, and any and
all securities of any kind whatsoever of the Company or any successor thereof
which may be issued on or after the date hereof in respect of, in exchange for,
or upon conversion of shares of Common Stock pursuant to a merger,
consolidation, stock split, reverse split, stock dividend, recapitalization of
the Company or otherwise.
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1.4. "Company" shall mean Avalon Digital Marketing Systems, Inc., a
Delaware corporation, and shall include any successor thereto by reorganization,
merger, consolidation, acquisition of substantially all the assets thereof, or
otherwise.
1.5. "Convertible Securities" shall mean (i) any options or warrants to
purchase or other rights to acquire Common Stock, including rights to the Option
Shares granted to Xxxxxxxx pursuant to the Xxxxxxxx Settlement Agreement, (ii)
any securities by their terms convertible into or exchangeable for Common Stock,
and (iii) any options or warrants to purchase or other rights to acquire any
such convertible or exchangeable securities.
1.6. "Demand Exercise Notice" has the meaning set forth in Section
2.2(a).
1.7. "Demand Registration" has the meaning set forth in Section 2.2(a).
1.8. "Effectiveness Date" means, with respect to the registration
statement required to be filed under Section 2.1(a) hereof, the earlier of (a)
the 120th calendar day following the Filing Date (140th calendar day in the
event of a full review by the SEC) and (b) the fifth trading day following the
date on which the Company is notified by the SEC that such registration
statement will not be reviewed or is no longer subject to further review and
comments.
1.9. "Event" has the meaning set forth in Section 2.1(b).
1.10. "Event Date" has the meaning set forth in Section 2.1(b).
1.11. "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such similar federal statute.
1.12. "Filing Date" has the meaning set forth in Section 2.1(a).
1.13. "Form S-3" means a Form S-3 registration statement under the
Securities Act, and any successor or similar form thereto.
1.14. "Holder" means each of the Purchasers, Xxxxxxxx and any Assignee.
1.15. "Holder Demand" has the meaning set forth in Section 2.2(a).
1.16. "indemnified party" means any Person seeking indemnification
pursuant to Section 2.8.
1.17. "indemnifying party" means any Person from whom indemnification
is sought pursuant to Section 2.8.
1.18. "Indemnitees" has the meaning set forth in Section 2.8(a).
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1.19. "Initiating Holder" means the party or parties delivering a
Holder Demand as provided for under Section 2.2(a).
1.20. "Purchase and Security Agreement" has the meaning set forth in
the recitals.
1.21. "Losses" has the meaning set forth in Section 2.8(a).
1.22. "Majority Participating Holders" means, at any time,
Participating Holders holding more than 50% of the Registrable Securities
proposed to be included in any offering of Registrable Securities by such
Participating Holders pursuant to Section 2.1, Section 2.2 or Section 2.3.
1.23. "Xxxxxxxx" means The Xxxxxxxx Group, LLC, a Utah limited
liability company.
1.24. "Xxxxxxxx Settlement Agreement" means that certain Amended and
Restated Settlement Agreement and Mutual Release, dated October, 2004, by and
among Xxxxxxxx, Xxxxx Xxxxxxxx, Xxxxxxx Xxxxxx, the Company, and the Official
Committee of Unsecured Creditors, which Xxxxxxxx Settlement Agreement was
approved by an order (the "Order") of the United States Bankruptcy Court,
District of Utah, Central Division, dated November 3, 2004 (Case No. 03-35180).
1.25. "NASD" means National Association of Securities Dealers, Inc.
1.26. "Option Concession" has the meaning set forth in the recitals.
1.27. "Option Shares" has the meaning set forth in the Xxxxxxxx
Settlement Agreement.
1.28. "Participating Holders" means any Holder in the case of
registration pursuant to Section 2.1 or any Holder participating in any offering
of Registrable Securities in the case of registration pursuant to Section 2.2 or
Section 2.3.
1.29. "Person" means an individual, a corporation, a partnership, a
limited liability company, a business, an association, a trust, an individual,
or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
1.30. "Purchaser" or "Purchasers" has the meaning set forth in the
introduction.
1.31. "Registrable Securities" means (i) any shares of Common Stock
acquired by the Holders from the Company or a third party on or after the date
hereof, including shares of Common Stock acquired upon exercise or conversion of
Convertible Securities, including the Securities and the Option Shares, that are
acquired by the Holders from the Company after the date hereof and (ii) any and
all securities of any kind whatsoever of the Company which may be issued on or
after the date hereof, in respect of, in exchange for, or upon conversion of
shares of Common Stock acquired by the Holders on or after the date hereof,
including shares of Common Stock acquired upon exchange for or conversion of
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Convertible Securities, including the Securities and the Option Shares, that are
acquired by the Holders from the Company or a third party after the date hereof,
pursuant to a plan of reorganization, merger, consolidation, stock split,
reverse split, stock dividend, recapitalization of the Company or otherwise. For
purposes of this Agreement, a Person will be deemed to a Holder of Registrable
Securities whenever such Person has the right to acquire, directly or
indirectly, such Registrable Securities (upon conversion, exercise or exchange
of any Convertible Securities but disregarding any restrictions or limitations
upon the exercise of such right), whether or not such acquisition has actually
been effected, and such Person shall not be required to convert, exercise or
exchange such Convertible Security (or otherwise acquire such Registrable
Security) to participate on any registered offering hereunder until the closing
of such offering. As to any particular Registrable Securities, such securities
shall cease to be Registrable Securities when (a) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement or (b) when such securities shall have been
sold pursuant to Rule 144 under the Securities Act.
1.32. "Registration Expenses" means all fees and expenses incurred in
connection with the Company's performance of or compliance with Section 2
hereof, including, without limitation, (i) all registration, filing and
applicable SEC fees, NASD fees, national securities exchange or inter-dealer
quotation system fees, and fees and expenses of complying with state securities
or blue sky laws (including fees and disbursements of counsel to the
underwriters and the Participating Holders in connection with "blue sky"
qualification of the Registrable Securities and determination of their
eligibility for investment under the laws of the various jurisdictions), (ii)
all printing (including printing certificates for the Registrable Securities in
a form eligible for deposit with The Depository Trust Company and printing
preliminary and final prospectuses), word processing, duplicating, telephone and
facsimile expenses, and messenger and delivery expenses, (iii) all fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of "cold comfort" letters or any special
audits required by, or incident to, such registration, (iv) all fees and
expenses of one law firm or other counsel selected by the Majority Participating
Holders, (v) all fees and expenses of any special experts or other Persons
retained by the Company in connection with any registration, (vi) Securities Act
liability insurance or similar insurance if the Company so desires or the
underwriters so require in accordance with then-customary underwriting
practices, (vii) all applicable rating agency fees with respect to the
Registrable Securities, (viii) all fees and disbursements of the underwriters
(other than underwriting discounts and commissions), (ix) all transfer taxes and
(x) all expenses incurred in connection with promotional efforts or "roadshows";
provided, however, that Registration Expenses shall exclude, and the
Participating Holders shall pay ratably, underwriting discounts and commissions
in respect of the Registrable Securities being registered for such Participating
Holders.
1.33. "SEC" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
1.34. "Section 2.3 Sale Amount" has the meaning set forth in Section
2.3(c).
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1.35. "Secured Claim" has the meaning set forth in the Xxxxxxxx
Settlement Agreement.
1.36. "Securities" means the Notes and the Warrants purchased by the
Purchasers from the Company pursuant to the Purchase and Security Agreement.
1.37. "Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act shall include a reference to the
comparable section, if any, of any such similar federal statute.
1.38. "Selected Courts" has the meaning set forth in Section 4.4(b).
SECTION 2. Registration Under Securities Act.
2.1. Registration.
(a) Registration by the Filing Date. On or prior to the 90th
calendar day from the date of completion of the Restructuring (the "Filing
Date"), the Company shall prepare and file with the SEC the registration
statement covering the resale of all of the Registrable Securities for an
offering to be made on a continuous basis pursuant to Rule 415. The registration
statement required hereunder shall be on Form S-3 (except if the Company is not
then eligible to register for resale the Registrable Securities on Form S-3, in
which case the registration shall be on another appropriate form in accordance
herewith). The Company shall cause the registration statement to become
effective and remain effective as provided herein. The Company shall use its
best efforts to cause such registration statement to be declared effective under
the Securities Act as promptly as possible after the filing thereof, but in any
event not later than the Effectiveness Date, and shall use its best efforts to
keep the registration statement filed hereunder continuously effective under the
Securities Act until such date when all Registrable Securities covered by the
registration statement (a) have been sold pursuant to the registration statement
or an exemption from the registration requirements of the Securities Act or (b)
may be sold without volume restrictions pursuant to Rule 144(k) as determined by
the counsel to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company's transfer agent and the affected
Holders.
(b) Liquidated Damages. If by virtue of the Company's willful
conduct: (i) a registration statement is not filed on or prior to its Filing
Date or (ii) the Company fails to file with the SEC a request for acceleration
in accordance with Rule 461 promulgated under the Securities Act, within five
trading days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the SEC that a registration statement will not be
"reviewed," or not subject to further review, or (iii) prior to the date when
such registration statement is first declared effective by the SEC, the Company
fails to file a pre-effective amendment and otherwise respond in writing to
comments made by the SEC in respect of such registration statement within ten
trading days after the receipt of comments by or notice from the SEC that such
amendment is required in order for a registration statement to be declared
effective, or (iv) a registration statement filed or required to be filed
hereunder is not declared effective by the SEC on or before the Effectiveness
Date, or (v) after a registration statement is first declared effective by the
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SEC, it ceases for any reason to remain continuously effective as to all
Registrable Securities for which it is required to be effective, or the Holders
are not permitted to utilize the prospectus therein to resell such Registrable
Securities, for in any such cases ten trading days (which need not be
consecutive days) in the aggregate during any 12-month period (any such failure
or breach that was caused by the Company's willful misconduct being referred to
as an "Event," and for purposes of clause (i) or (iv) the date on which such
Event occurs, or for purposes of clause (ii) the date on which such five trading
day period is exceeded, or for purposes of clauses (iii) the date which such ten
trading day period is exceeded, or for purposes of clause (v) the date on which
such ten trading day period is exceeded being referred to as "Event Date"), then
in addition to any other rights the Holders may have hereunder or under
applicable law, on each such Event Date and on each monthly anniversary of each
such Event Date (if the applicable Event shall not have been cured by such date)
until the applicable Event is cured, the Company shall issue to each Holder the
number of fully paid, nonassessable shares of Common Stock, as liquidated
damages and not as a penalty, equal to 1% of the aggregate purchase price paid
by such Holder for the Registrable Securities then held by such Holder; provided
that with respect to Xxxxxxxx, such purchase price shall be deemed to be an
amount equal to the Option Concession.
2.2. Registration on Demand.
(a) Demand. At any time or from time to time, a Holder or Holders
holding Registrable Securities may require the Company to effect the
registration under the Securities Act of all or part of their respective
Registrable Securities (each, a "Demand Registration"), by delivering a written
request (a "Holder Demand") therefor to the Company specifying the number of
shares of Registrable Securities to be registered and the intended method of
distribution thereof. As promptly as practicable, but no later than five days
after receipt of a Holder Demand, the Company shall give written notice (the
"Demand Exercise Notice") of the Holder Demand to all Holders. Such Holders
shall have the option, within 30 days after the receipt of the Demand Exercise
Notice (or, 15 days if, at the request of the Initiating Holder, the Company
states in such written notice or gives telephonic notice to each Holder, with
written confirmation to follow promptly thereafter, stating that (i) such
registration will be on Form S-3 (except if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3, in which case the
registration shall be on another appropriate form in accordance herewith) and
(ii) such shorter period of time is required because of a planned filing date),
to request, in writing, that the Company include in such registration any
Registrable Securities held by such Holder (which request shall specify the
maximum number of Registrable Securities intended to be disposed of by such
Holder). The Company shall as expeditiously as possible use its best efforts to
effect the registration under the Securities Act of the Registrable Securities
which the Company has been so requested to register by the Initiating Holder and
any other Holders which have made such written request. The Company shall (i)
use its best efforts to effect the registration of Registrable Securities for
distribution in accordance with the intended method of distribution set forth in
a written request delivered by the Majority Participating Holders, and (ii) if
requested by the Majority Participating Holders, obtain acceleration of the
effective date of the registration statement relating to such registration.
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(b) Registration Statement Form. Registrations under this Section
2.2 shall be on such appropriate form of the SEC (i) as shall be selected by the
Company and as shall be reasonably acceptable to the Majority Participating
Holders and (ii) as shall permit the disposition of such Registrable Securities
in accordance with the intended method or methods of disposition specified in
such Participating Holders' requests for such registration, including, without
limitation, a continuous or delayed basis offering pursuant to Rule 415 under
the Securities Act. The Company agrees to include in any such registration
statement all information which, in the opinion of counsel to the Participating
Holders and counsel to the Company, is necessary or desirable to be included
therein.
(c) Selection of Underwriters. The underwriters of each
underwritten offering of the Registrable Securities pursuant to this Section 2.2
shall be selected by the Majority Participating Holders.
(d) Right to Withdraw. Any Participating Holder shall have the
right to withdraw its request for inclusion of Registrable Securities in any
registration statement pursuant to this Section 2.2 at any time prior to the
effective date of such registration statement by giving written notice to the
Company of its request to withdraw. Upon receipt of notices from the Majority
Participating Holders to such effect, the Company shall cease all efforts to
obtain effectiveness of the applicable registration statement.
(e) Priority in Registrations on Demand. Whenever the Company
effects a registration pursuant to this Section 2.2 in connection with an
underwritten offering by Holders, no securities other than Registrable
Securities shall be included among the securities covered by such registration
unless the Majority Participating Holders consent in writing to the inclusion
therein of such other securities, which consent may be subject to terms and
conditions determined by the Majority Participating Holders in their sole
discretion. If any registration pursuant to a Holder Demand involves an
underwritten offering and the managing underwriter(s) of such offering shall
inform the Company in writing of its belief that the number of Registrable
Securities requested to be included in such registration pursuant to this
Section 2.2, when added to the number of any other securities to be offered in
such registration, would materially adversely affect such offering, then the
Participating Holders shall be entitled to participate on a pro rata basis based
on the number of shares of Registrable Securities requested to be included in
the offering by each such Participating Holder prior to the inclusion of any
securities other than Registrable Securities.
2.3. Piggyback Registration.
(a) Right to Include Registrable Securities. If the Company at any
time proposes to register any of its equity securities under the Securities Act
by registration on Form X-0, X-0 or S-3, or any successor or similar form(s)
(except registrations (i) pursuant to Section 2.2, (ii) solely for registration
of equity securities in connection with an employee benefit plan (as defined in
405 of the Securities Act) or dividend reinvestment plan on Form S-8 or any
successor form thereto or (iii) in connection with any acquisition or merger on
Form S-4 or any successor form thereto), whether or not for sale for its own
account, it will each such time give prompt written notice (but in no event less
than 30 days prior to the initial filing of a registration statement with
respect thereto) to each of the Holders of its intention to do so and such
notice shall offer the Holders of such Registrable Securities the opportunity to
register under such registration statement such number of Registrable Securities
as each such Holder may request in writing. Upon the written request of any of
the Holders (which request shall specify the maximum number of Registrable
Securities intended to be disposed of by such Holder), made as promptly as
practicable and in any event within 30 days after the receipt of any such notice
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(or, 15 days if the Company states in such written notice or gives telephonic
notice to each Holder, with written confirmation to follow promptly thereafter,
stating that (i) such registration will be on Form S-3 and (ii) such shorter
period of time is required because of a planned filing date), the Company shall
include in such registration under the Securities Act all Registrable Securities
which the Company has been so requested to register by each Holder; provided,
however, that if, at any time after giving written notice of its intention to
register any equity securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
equity securities, the Company shall give written notice of such determination
and its reasons therefor to the Holders and (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from any obligation of
the Company to pay the Registration Expenses in connection therewith as provided
hereunder), without prejudice, however, to the rights of the Holders to request
that such registration be effected as a registration under Section 2.2 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
2.3 shall relieve the Company of its obligation to effect any registration upon
request under Section 2.2.
(b) Right to Withdraw; Option to Participate in Shelf Takedowns.
Any Holder shall have the right to withdraw its request for inclusion of
Registrable Securities in any registration statement pursuant to this Section
2.3 at any time prior to the effective date of such registration statement by
giving written notice to the Company of its request to withdraw. In the event
that the Holder has requested inclusion of Registrable Securities in a shelf
registration, the Holder shall have the right, but not the obligation, to
participate in any offering of the Company's equity securities under such shelf
registration.
(c) Priority in Piggyback Registrations. If any registration
pursuant to this Section 2.3 involves an underwritten offering and the managing
underwriter(s) of such offering shall inform the Company in writing of its
belief that the number of Registrable Securities requested to be included in
such registration or offering, when added to the number of other equity
securities to be offered in such registration or offering, would materially
adversely affect such offering, then the Company shall include in such
registration or offering, to the extent of the number and type which the Company
is so advised can be sold in (or during the time of) such registration or
offering without so materially adversely affecting such registration or offering
(the "Section 2.3 Sale Amount"), (i) all of the securities proposed by the
Company to be sold for its own account; (ii) thereafter, to the extent the
Section 2.3 Sale Amount is not exceeded, the Registrable Securities requested by
the Participating Holders (provided that if all of the Registrable Securities
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requested by the Participating Holders may not be included, the Participating
Holders shall be entitled to participate on a pro rata basis based on the
aggregate number of shares of Registrable Securities requested by the
Participating Holders to be registered); and (iii) thereafter, to the extent the
Section 2.3 Sale Amount is not exceeded, any other securities of the Company
requested to be included by Company stockholders holding other such registration
rights.
(d) Selection of Underwriters. The underwriters of each
underwritten offering of the Registrable Securities pursuant to this Section 2.3
shall be selected by the Company provided that the Majority Participating
Holders shall have the right to select a co-managing underwriter.
2.4. Registration Procedures.
(a) If and whenever the Company is required to effect the
registration of any Registrable Securities under the Securities Act pursuant to
Section 2.1, Section 2.2 or Section 2.3 hereof, the Company shall as
expeditiously as possible:
(i) prepare and file with the SEC as soon as practicable
(and in the case of registration pursuant to Section 2.1, by the Filing Date;
and in the case of a demand pursuant to Section 2.2, within 30 days after
receipt by the Company of a Demand Exercise Notice) a registration statement on
an appropriate registration form of the SEC for the disposition of such
Registrable Securities in accordance with the intended method of disposition
thereof which registration statement shall comply as to form in all material
respects with the requirements of the applicable form and include all financial
statements required by the SEC to be filed therewith, and thereafter use its
best efforts to cause such registration statement to become and remain effective
(A) with respect to an underwritten offering, for a period of at least 180 days
or until all shares subject to such registration statement have been sold, and
(B) with respect to a shelf registration, until the sale of all Registrable
Securities thereunder;
(ii) prepare and file with the SEC any 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 Securities Act with respect to the
disposition of all Registrable Securities covered by such registration statement
in accordance with the intended methods of disposition by the Participating
Holders set forth in such registration statement for such period as provided for
in Section 2.4(a)(i) above;
(iii) furnish, without charge, to each Participating Holder
and each underwriter 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 summary
prospectus) and any other prospectus filed under Rule 424 under the Securities
Act, in conformity with the requirements of the Securities Act, and such other
documents, as the Majority Participating Holders and such underwriters may
reasonably request (it being understood that the Company consents to the use of
such prospectus or any amendment or supplement thereto by each Participating
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Holder and the underwriters in connection with the offering and sale of the
Registrable Securities covered by such prospectus or any amendment or supplement
thereto);
(iv) use its best efforts (A) to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such state securities or blue sky laws where an exemption is not
available and as the Majority Participating Holders or any managing underwriter
shall request, (B) to keep such registration or qualification in effect for so
long as such registration statement remains in effect, and (C) to take any and
all other actions which may be necessary or advisable to enable the
Participating Holders or underwriters to consummate the disposition in such
jurisdictions of the securities to be sold by the Participating Holders or
underwriters, 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 Section 2.4(a)(iv), be
obligated to be so qualified;
(v) use its 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
in the opinion of counsel to the Company and counsel to the Participating
Holders to consummate the disposition of such Registrable Securities;
(vi) furnish to each Participating Holder and each
underwriter a signed counterpart of (A) an opinion of counsel for the Company
and (B) a "comfort" letter signed by the independent public accountants who have
certified the Company's financial statements included or incorporated by
reference in such registration statement, in each case, addressed to each
Participating Holder and each underwriter covering matters with respect to such
registration statement (and the prospectus included therein) as such Majority
Participating Holders and managing underwriter(s) shall request;
(vii) promptly notify each Participating Holder and each
managing underwriter (A) when such registration statement, any pre-effective
amendment, the prospectus or any prospectus supplement related thereto or
post-effective amendment to such registration statement has been filed, and,
with respect to such registration statement or any post-effective amendment,
when the same has become effective; (B) of the receipt by the Company of any
comments from the SEC or receipt of any request by the SEC for additional
information with respect to any registration statement or the prospectus related
thereto or any request by the SEC for amending or supplementing the registration
statement and the prospectus used in connection therewith; (C) of the issuance
by the SEC of any stop order suspending the effectiveness of such registration
statement or the initiation of any proceedings for that purpose; (D) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale under the securities
or blue sky laws of any jurisdiction or the initiation of any proceeding for
such purpose; and (E) at any time when a prospectus relating thereto is required
to be delivered under the Securities 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 fact required to be stated therein
or necessary to make the statements therein not misleading, in the light of the
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circumstances under which they were made, and in the case of this clause (E),
promptly prepare and furnish, at the Company's expense, to each Participating
Holder and each managing underwriter a 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 under which they were made; and (F)
at any time when the representations and warranties of the Company contemplated
by Section 2.6(a) or (b) hereof cease to be true and correct;
(viii) otherwise comply with all applicable rules and
regulations of the SEC and file all reports required to be filed under the
Exchange Act;
(ix) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement;
(x) (A) use its best efforts to cause all Registrable
Securities covered by such registration statement to be listed on the principal
securities exchange on which similar securities issued by the Company are then
listed (if any), if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (B) if no similar securities are then so
listed, use its best efforts to cause all such Registrable Securities to be
listed on a national securities exchange;
(xi) deliver promptly to counsel to the Participating
Holders and each underwriter, if any, participating in the offering of the
Registrable Securities, 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 such registration statement;
(xii) use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of the registration statement;
(xiii) provide a CUSIP number for all Registrable
Securities, no later than the effective date of the registration statement and
provide the applicable transfer agents with printed certificates for the
Registrable Securities which are in a form eligible for deposit with The
Depository Trust Company;
(xiv) cause its officers and employees to participate in,
and to otherwise facilitate and cooperate with the preparation of the
registration statement and prospectus and any amendments or supplements thereto
(including participating in meetings, drafting sessions, due diligence sessions
and the marketing of the Registrable Securities covered by the registration
statement (including, without limitation, participation in "road shows") taking
into account the Company's business needs;
(xv) enter into and perform its obligations under such
customary agreements (including, without limitation, if applicable, an
underwriting agreement as provided for in Section 2.6 herein) and take such
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other actions as the Majority Participating Holders or managing underwriter(s)
shall request in order to expedite or facilitate the disposition of such
Registrable Securities;
(xvi) promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter(s) or
Majority Participating Holders request to be included therein relating to the
plan of distribution with respect to such Registrable Securities; and make all
required filings of such prospectus supplement or post-effective amendment as
soon as practicable after being notified of the matters to be incorporated in
such prospectus supplement or post-effective amendment;
(xvii) cooperate with each Participating Holder and each
underwriter, and their respective counsel in connection with any filings
required to be made with the NASD, New York Stock Exchange, or any other
securities exchange on which such Registrable Securities are traded or will be
traded;
(xviii) promptly prior to the filing of any document which
is to be incorporated by reference into the registration statement or the
prospectus contained therein (after the initial filing of such registration
statement) provide copies of such document to counsel for the Participating
Holders and to each managing underwriter, and make the Company's representatives
available for discussion of such document and make such changes in such document
concerning the Participating Holders prior to the filing thereof as counsel for
such Participating Holders or underwriters may request;
(xix) furnish to each Participating Holder and each
managing underwriter(s), without charge, at least one signed copy of the
registration statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(xx) cooperate with the Participating Holders and the
managing underwriter(s) to facilitate the timely preparation and delivery of
certificates not bearing any restrictive legends representing the Registrable
Securities to be sold, and cause such Registrable Securities to be issued in
such denominations and registered in such names in accordance with the
underwriting agreement prior to any sale of Registrable Securities to the
underwriters or, if not an underwritten offering, in accordance with the
instructions of the Participating Holders at least five business days prior to
any sale of Registrable Securities and instruct any transfer agent or registrar
of Registrable Securities to release any stop transfer orders in respect
thereof;
(xxi) to the extent required by the rules and regulations
of the NASD, retain a Qualified Independent Underwriter, which shall be
acceptable to the Majority Participating Holders; and
(xxii) take no direct or indirect action prohibited by
Regulation M under the Exchange Act; provided, however, that to the extent that
any prohibition is applicable to the Company, the Company will take such action
as is necessary to make any such prohibition inapplicable.
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(b) Each Participating Holder agrees that upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 2.4(a)(vii)(C) or (E), each Participating Holder will, to the extent
appropriate, discontinue its disposition of Registrable Securities pursuant to
the registration statement relating to such Registrable Securities until, in the
case of Section 2.4(a)(vii)(E), its receipt of the copies of the supplemented or
amended prospectus contemplated by Section 2.4(a)(vii)(E) 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 its possession, of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice.
(c) If any such registration statement or comparable statement
under "blue sky" laws refers to any Holder by name or otherwise as the Holder of
any securities of the Company, then such Holder shall have the right to require
(i) the insertion therein of language, in form and substance satisfactory to
such Holder and the Company, to the effect that the holding by such Holder of
such securities is not to be construed as a recommendation by such Holder of the
investment quality of the Company's securities covered thereby and that such
holding does not imply that such Holder will assist in meeting any future
financial requirements of the Company, or (ii) in the event that such reference
to such Holder by name or otherwise is not in the judgment of the Company, as
advised by counsel, required by the Securities Act or any similar federal
statute or any state "blue sky" or securities law then in force, the deletion of
the reference to such Holder.
2.5. Expenses. The Company shall pay, and shall be responsible for, all
Registration Expenses in connection with any registration pursuant to Sections
2.1, 2.2 and 2.3 Notwithstanding the foregoing, the provisions of this Section
2.5 shall be deemed amended to the extent necessary to cause these expense
provisions to comply with "blue sky" laws of each state or the securities laws
of any other jurisdiction in the United States and its territories in which the
offering is made.
2.6. Underwritten Offerings.
(a) Demanded Underwritten Offerings. If requested by the
underwriters for any underwritten offering by the Participating Holders pursuant
to a registration requested under Section 2.2, the Company shall enter into a
customary underwriting agreement with the managing underwriter(s) selected by
the Majority Participating Holders (in accordance with Section 2.2(c) hereto).
Such underwriting agreement shall be reasonably satisfactory in form and
substance to the Majority Participating Holders and shall contain such
representations and warranties by, and such other agreements on the part of, the
Company and such other terms as are generally prevailing in agreements of that
type, including, without limitation, customary provisions relating to
indemnification and contribution which are no less favorable to the recipient
than those provided in Section 2.8 hereof. Each Participating Holder shall be a
party to such underwriting agreement and may, at their option, require that any
or all of the representations and warranties by, and the other agreements on the
part of, the Company to and for the benefit of such underwriters shall also be
made to and for the benefit of each Participating Holder and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of each
14
Participating Holder. No Participating Holder shall be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
Participating Holder, its ownership of and title to the Registrable Securities,
and its intended method of distribution; and any liability of any Participating
Holder to any underwriter or other person under such underwriting agreement
shall be limited to liability arising from breach of its representations and
warranties and shall be limited to an amount equal to the proceeds (net of
expenses and underwriting discounts and commissions) that it derives from such
registration.
(b) Piggyback Underwritten Offerings. In the case of a
registration pursuant to Section 2.3 hereof, if the Company shall have
determined to enter into an underwriting agreement in connection therewith, all
of the Registrable Securities to be included in such registration shall be
subject to such underwriting agreements. The Participating Holders may, at their
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of the Participating
Holders and that any or all of the conditions precedent to the obligations of
such underwriters under such underwriting agreement be conditions precedent to
the obligations of the Participating Holders. None of the Participating Holders
shall be required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties or
agreements regarding such Participating Holder, its ownership of and title to
the Registrable Securities and its intended method of distribution; and any
liability of any Participating Holder to any underwriter or other Person under
such underwriting agreement shall be limited to liability arising from breach of
its representations and warranties and shall be limited to an amount equal to
the proceeds (net of expenses and underwriting discounts and commissions) that
it derives from such registration.
(c) Participation in Underwritten Registrations. In the case of an
underwritten registration pursuant to Section 2.2 or Section 2.3 hereof, as the
Company may from time to time reasonably request in writing, the Company may
require the Participating Holders (i) to furnish the Company such information
regarding such Participating Holders and the distribution of the Registrable
Securities to enable the Company to comply with the requirements of applicable
laws or regulations in connection with such registration and (ii) to complete
and execute all customary questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements. The Company shall not be obligated to effect
the registration of any Registrable Securities of a particular Participating
Holder unless such information and documents regarding such Participating Holder
and the distribution of such Participating Holder's Registrable Securities is
provided to the Company.
2.7. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the Participating Holders, the
managing underwriter(s), and their respective counsel, accountants and other
representatives and agents 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 or comparable statements
under securities or blue sky laws of any jurisdiction, and give each of the
foregoing parties access to its books and records, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries, and such opportunities to discuss the business of the Company and
its subsidiaries with their respective directors, officers and employees and the
15
independent public accountants who have certified the Company and its
subsidiaries' financial statements, and supply all other information and respond
to all inquiries requested by such Participating Holders, managing
underwriter(s), or their respective counsel, accountants or other
representatives or agents in connection with such registration statement, as
shall be necessary or appropriate, in the opinion of counsel to such
Participating Holder or managing underwriter(s), to conduct a reasonable
investigation within the meaning of the Securities Act, and the Company shall
not file any registration statement or amendment thereto or any prospectus or
supplement thereto to which the Majority Participating Holders or the managing
underwriter(s) shall object.
2.8. Indemnification.
(a) Indemnification by the Company. The Company agrees that in the
event of any registration of any Registrable Securities under the Securities
Act, the Company shall, and hereby does, indemnify and hold harmless, to the
fullest extent permitted by law, (i) each of the Holders and their Affiliates,
(ii) each of the Holders' and their Affiliates' respective Affiliates, officers,
directors, successors, assigns, members, partners, shareholders, employees,
advisors, representatives, and agents, (iii) each other Person who participates
as an underwriter or Qualified Independent Underwriter in the offering or sale
of such securities, (iv) each Person who controls (within the meaning of the
Securities Act or the Exchange Act) any of the Persons listed in clauses (i),
(ii), (iii) or (iv), and (v) any representative (legal or otherwise) of any of
the Persons listed in clauses (i), (ii), (iii) or (iv) (collectively, the
"Indemnitees"), from and against any losses, penalties, fines, liens, judgments,
suits, claims, damages, liabilities, costs and expenses (including attorney's
fees and any amounts paid in any settlement effected in compliance with Section
2.8(e)) or liabilities, joint or several (or actions or proceedings, whether
commenced or threatened, in respect thereof, and whether or not such Indemnitee
is a party thereto) ("Losses"), to which such Indemnitee has become or may
become subject under the Securities Act or otherwise, insofar as such Losses
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Securities Act, or any
preliminary prospectus, final prospectus or summary prospectus contained
therein, any amendment or supplement thereto, or any documents incorporated by
reference therein, (ii) 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, or (iii) any violation by the Company of any federal,
state or common law rule or regulation applicable to the Company and relating to
action required of or inaction by the Company in connection with any such
registration, and the Company shall reimburse such Indemnitee for any legal or
any other fees or expenses incurred by it in connection with investigating or
defending any such Loss; provided that the Company shall not be liable to an
Indemnitee to the extent that any such Loss 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, or document
16
incorporated by reference, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Indemnitee, which
specifically states that it is for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement.
(b) Indemnification by Participating Holders. As a condition to
including any Registrable Securities in any registration statement, the Company
shall have received an undertaking reasonably satisfactory to it from each
Participating Holder so including any Registrable Securities to, severally and
not jointly, to the fullest extent permitted by law, indemnify and hold harmless
(i) the Company, each director and officer of the Company, and each other
Person, if any, who controls the Company within the meaning of the Securities
Act or Exchange Act and (ii) any underwriters of the Registrable Securities,
their officers and directors and each person who controls such underwriters
(within the meaning of the Securities Act or the Exchange 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, but only
to the extent such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished by such Participating Holder to the Company which specifically states
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement and such Participating Holder shall reimburse such indemnified party
for any reasonable legal or any other fees or expenses reasonably incurred by
them in connection with investigating or defending any such Loss; provided,
however, that the liability of such indemnifying party under this Section 2.8(b)
shall be limited to the amount of proceeds (net of expenses and underwriting
discounts and commissions) received by such indemnifying party in the offering
giving rise to such liability. Each Participating Holder shall also indemnify
and hold harmless all other prospective sellers and Participating Holders, their
respective Affiliates, officers, directors, successors, assigns, members,
partners, shareholders, employees, advisors, representatives, and agents, and
each Person who controls (within the meaning of the Securities Act or the
Exchange Act) any such seller or Participating Holder to the same extent as
provided above with respect to indemnification of the Company and underwriters.
(c) Notices of Claims. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in Section 2.8(a) or Section 2.8(b), such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to such indemnifying party of the commencement of
such action or proceeding; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under Section 2.8(a) or Section 2.8(b),
except to the extent that the indemnifying party is actually and materially
prejudiced by such failure to give notice, and shall not relieve the
indemnifying party from any liability which it may have to the indemnified party
otherwise than under this Section 2.8.
(d) Defense of Claims. In case any such action or proceeding is
brought against an indemnified party, except as provided for in the next
sentence, the indemnifying party shall be entitled to participate therein and
assume the defense thereof, jointly with any other indemnifying party, 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 and approval by the indemnified party of such counsel, the
17
indemnifying party shall not be liable to such indemnified party for any legal
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than costs of investigation and the indemnified party
shall be entitled to participate in such defense at its own expense. If (i) the
indemnifying party fails to notify the indemnified party in writing, within 15
days after the indemnified party has given notice of the action or proceeding,
that the indemnifying party will indemnify the indemnified party from and
against all Losses the indemnified party may suffer resulting from, arising out
of, relating to, in the nature of, or caused by the claim, (ii) the indemnifying
party fails to provide the indemnified party with evidence acceptable to the
indemnified party that the indemnifying party will have the financial resources
to defend against the claim or proceeding and fulfill its indemnification
obligations hereunder, (iii) the indemnifying party fails to defend diligently
the action or proceeding within 10 days after receiving notice of such failure
from such indemnified party; (iv) such indemnified party reasonably shall have
concluded (upon advice of its counsel) that there may be one or more legal
defenses available to such indemnified party or other indemnified parties which
are not available to the indemnifying party; or (v) if such indemnified party
reasonably shall have concluded (upon advice of its counsel) that, with respect
to such claims, the indemnified party and the indemnifying party may have
different, conflicting, or adverse legal positions or interests then, in any
such case, the indemnified party shall have the right to assume or continue its
own defense and the indemnifying party shall be liable for any fees and expenses
therefor.
(e) Consent to Entry of Judgment and Settlements. No indemnifying
party shall be liable for any settlement of any action or proceeding effected
without its written consent, which consent shall not be unreasonably withheld,
provided, that, in the case where the indemnifying party shall have failed to
take any of the actions listed in clauses (i), (ii) or (iii) of the last
sentence of Section 2.8(d), the indemnified party shall have the right to
compromise or settle such action on behalf of and for the account, expense, and
risk of the indemnifying party and the indemnifying party will remain
responsible for any Losses the indemnified party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the action or
proceeding to the fullest extent provided in this Section 2.8. No indemnifying
party shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (A) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim, (B) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party and
(C) does not require any action other than the payment of money by the
indemnifying party.
(f) Contribution. If for any reason the indemnification provided
for in Sections 2.8(a), (b) or (g) is unavailable to an indemnified party or
insufficient in respect of any Losses referred to therein, then, in lieu of the
amount paid or payable under Sections 2.8(a), (b) or (g), the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such Loss (i) in such proportion as is appropriate to reflect the
18
relative fault of the indemnifying party on the one hand, and the indemnified
party on the other, with respect to the statements or omissions which resulted
in such Loss, as well as any other relevant equitable considerations, or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law
or if the allocation provided in this clause (ii) provides a greater amount to
the indemnified party than clause (i) above, in such proportion as shall be
appropriate to reflect not only the relative fault but also the relative
benefits received by the indemnifying party and the indemnified party from the
offering of the securities covered by such registration statement 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 the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 2.8(f) were to be determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the preceding sentence of this
Section 2.8(f). 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 amount paid or payable by an indemnified party as a
result of the Losses referred to in Sections 2.8(a), (b) or (g) shall be deemed
to include, subject to the limitations set forth in Sections 2.8(a), (b) and
(g), any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding anything in this Section 2.8(f) to the contrary, no
Participating Holder shall be required to contribute any amount in excess of the
proceeds (net of expenses and underwriting discounts and commissions) received
by such Participating Holder from the sale of the Registrable Securities in the
offering to which the Losses of the indemnified parties relate.
(g) Other Indemnification. Indemnification and contribution
similar to that specified in the preceding subsections of this Section 2.8 (with
appropriate modifications) shall be given by the Company and the Participating
Holders with respect to any required registration or other qualification of
securities under state or blue sky law or regulation. The indemnification
agreements contained in this Section 2.8 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 by or on behalf of any Indemnitee or
other indemnified party and shall survive the transfer of any of the Registrable
Securities by any such party.
(h) Indemnification Payments. The indemnification and contribution
required by this Section 2.8 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 a Loss is incurred.
2.9. Limitation on Sale of Securities. If the Company receives a
request for registration pursuant to an underwritten offering of Registrable
Securities pursuant to Section 2.2 or 2.3 hereof, and if such a request is being
implemented or has not been withdrawn or abandoned, the Company agrees that (i)
the Company shall not effect any public or private offer, sale, distribution or
other disposition of any of its equity securities or of any security convertible
into or exchangeable or exercisable for any equity security of the Company or
effect any registration of any of such securities under the Securities Act (in
each case, other than (x) option grants to employees pursuant to the Company's
19
option plan, (y) as part of such registration and (z) as a registration using
Form S-8 or any successor or similar form which is then in effect), whether or
not for sale for its own account, during the period beginning on the date the
Company receives such request until 180 days after the effective date of such
registration (or such shorter period as the managing underwriter(s) may require)
and (ii) the Company shall use its best efforts to obtain from each of its
officers, directors and beneficial owners of 5% or more of Common Stock, an
agreement not to effect any public or private offer, sale, distribution or other
disposition of Common Stock, or any securities that are convertible or
exchangeable or exercisable for Common Stock, during the period referred to in
clause (i) of this paragraph, including, without limitation, a sale pursuant to
Rule 144 under the Securities Act. The Company agrees to cause each holder of
Common Stock, or any securities that are convertible or exchangeable or
exercisable for Common Stock, purchased or otherwise acquired from the Company
(other than in a public offering) at any time after the date of this Agreement
to agree not to effect any public or private offer, sale, distribution or other
disposition of any such securities during the period referred to in clause (i)
of the preceding sentence, including, without limitation, a sale pursuant to
Rule 144 under the Securities Act.
2.10. No Required Sale. Nothing in this Agreement shall be deemed to
create an independent obligation on the part of any of the Holders to sell any
Registrable Securities pursuant to any effective registration statement.
2.11. Rule 144; Rule 144A; Regulation S. The Company covenants that, at
its own expense, it will promptly file the reports required to be filed by it
under the Securities Act and the Exchange Act, and it will take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rules 144, 144A or Regulation S under the Securities Act or (ii)
any similar rule or regulation hereafter adopted by the SEC. Within 5 calendar
days after receipt of the request of a Holder, the Company, at its own expense,
will deliver to such Holder (i) a written statement as to whether it has
complied with such requirements (and such Holder shall be entitled to rely upon
the accuracy of such written statement), (ii) a copy of the most recent annual
or quarterly report of the Company and (iii) such other reports and documents as
such Holder may reasonably request in order to avail itself of any rule or
regulation of the SEC allowing it to sell any Registrable Securities without
registration.
2.12. Adjustments. At the request of the Holders, in the event of any
change in the capitalization of the Company as a result of any stock split,
stock dividend, reverse split, combination, recapitalization, merger,
consolidation, or otherwise, the provisions of this Section 2 shall be
appropriately adjusted. The Company agrees that it shall not effect or permit to
occur any combination or subdivision of shares which would adversely affect the
ability of the Holders to include any Registrable Securities in any registration
contemplated by this Agreement or the marketability of such Registrable
Securities in any such registration. The Company agrees that it will take all
steps necessary to effect a combination or subdivision of shares if in the
judgment of the Holders or managing underwriter(s) such combination or
subdivision would enhance the marketability of the Registrable Securities.
20
SECTION 3. Subsequent Registration Rights; No Inconsistent Agreements.
3.1. Limitations on Subsequent Registration Rights. From and after the
date of this Agreement until the Holders and their respective assigns shall no
longer hold any Registrable Securities, without the prior written consent of the
Holders, the Company shall not enter into an agreement that grants a holder or
prospective holder of any securities of the Company demand or piggyback
registration rights that by their terms are not subordinate to the registration
rights granted to the Holders in this Agreement. Notwithstanding the foregoing,
if after the date of this Agreement the Company enters into any other agreement
with respect to the registration of any of its equity securities, and the terms
contained therein are more favorable to, or less restrictive on, the other party
thereto than the terms and conditions contained in this Agreement (insofar as
they are applicable) with respect to the Holders, then the terms of this
Agreement shall immediately be deemed to have been amended without further
action by the Company or the Holders so that the Holders shall be entitled to
the benefit of any such more favorable or less restrictive terms or conditions.
3.2. No Inconsistent Agreements. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holders in Section 2 or
otherwise conflicts with the provisions of Section 2, other than any customary
lock-up agreement with the underwriters in connection with any offering effected
hereunder, pursuant to which the Company shall agree not to register for sale,
and the Company shall agree not to sell or otherwise dispose of, Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock,
for a specified period (not to exceed 180 days) following such offering. The
Company warrants that the rights granted to the Holders hereunder do not in any
way conflict with and are not inconsistent with any other agreements to which
the Company is a party or by which it is bound. Except as set forth on Schedule
3.2 hereto, the Company has not previously entered into any agreement with
respect to its securities granting any registration rights to any Person.
SECTION 4. Miscellaneous.
4.1. Amendments and Waivers. This Agreement and any of the provisions
hereof may be amended, waived (either generally or in a particular instance and
either retroactively or prospectively), modified or supplemented, in whole or in
part, only by written agreement of the Company and all of the Holders; provided,
however, that the observance of any provision of this Agreement may be waived in
writing by the party that will lose the benefit of such provision as a result of
such waiver. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a further or continuing waiver of
such breach or as a waiver of any other or subsequent breach, except as
otherwise explicitly provided for in such waiver. Except as otherwise expressly
provided herein, no failure on the part of any party to exercise, and no delay
in exercising, any right, power or remedy hereunder, or otherwise available in
respect hereof at law or in equity, shall operate as a waiver thereof, nor shall
21
any single or partial exercise of such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The execution of a counterpart signature page to this
Agreement after the date hereof by any Person as provided for herein shall not
require consent of any party hereto and shall not be deemed an amendment to this
Agreement.
4.2. Assignment; Third Party Beneficiaries. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and any of their respective successors, personal representatives and
permitted assigns who agree in writing to be bound by the terms hereof. The
Company may not assign any of its rights or delegate any of its duties under
this Agreement without the prior written consent of the Holders. Any Holder may,
at its election and at any time or from time to time, assign its rights and
delegate its duties under this Agreement, in whole or in part, to an Affiliate,
to a partner of such Holder or Affiliate or to any Person to whom the Holder
sells, assigns or otherwise transfers any of its Registrable Securities (an
"Assignee"); provided that, no such assignment shall be binding upon or obligate
the Company to any such Assignee unless and until the Assignee delivers to the
Company (i) a written notice stating the name and address of the Assignee and
identifying the securities with respect to which such rights are being assigned,
if any, and (ii) a written instrument by which such Assignee agrees to be bound
by the obligations imposed upon Holders under this Agreement to the same extent
as if such Assignee were a party hereto (or executes and delivers to the Company
a counterpart to this Agreement and agrees to be treated as a "Holder" for all
purposes of this Agreement).
4.3. Notice. Unless otherwise provided herein, all notices, requests,
demands, claims and other communications provided for under the terms of this
Agreement shall be in writing and shall be delivered personally, telecopied or
sent by certified, registered or express mail, postage prepaid. Any such notice
shall be deemed given if delivered personally or telecopied, on the date of such
delivery, or if sent by reputable overnight courier, on the first business day
following the date of such mailing, as follows:
if to the Company:
Avalon Digital Marketing Systems, Inc.
0000 X. Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxx, XX 00000
Fax: (000) 000-0000
Attn: President & Chief Executive Officer
with a copy to:
Durham Xxxxx & Xxxxxxx
000 Xxxx Xxxxxxxx
Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxx, Esq.
22
if to the Purchasers:
at the address specified for each Purchaser on the
signature pages hereto
with a copy to:
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
and
if to Xxxxxxxx:
The Xxxxxxxx Group, LLC
0000 Xxxxx Xxxxx Xxxxxxxx
Xxxxx, XX 00000
Attn: Xxxxx Xxxxxxxx
with a copy to:
Stoel Rives LLP
000 Xxxxx Xxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxx Xxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Any party may by notice given in accordance with this Section 4.3
designate another address or person for receipt of notices hereunder.
4.4. Governing Law; Venue; Service of Process; Waiver of Jury Trials.
(a) Governing Law. This Agreement shall be construed and enforced
in accordance with, and the rights and obligations of the parties hereto shall
be governed by, the laws of the State of New York, without giving effect to the
principles of conflicts of laws thereof.
(b) Venue and Service of Process. By execution and delivery of
this Agreement, each of the parties hereto hereby irrevocably and
unconditionally (i) consents to submit to the exclusive jurisdiction of the
courts of the State of New York in New York county and the United States
District Court for the Southern District of New York (the "Selected Courts") for
23
any action or proceeding arising out of or relating to this Agreement and the
transactions contemplated hereby, and agrees not to commence any action or
proceeding relating thereto except in the Selected Courts, provided, that, a
party may commence any action or proceeding in a court other than a Selected
Court solely for the purpose of enforcing an order or judgment issued by one of
the Selected Courts; (ii) consents to service of any process, summons, notice or
document in any action or proceeding by registered first-class mail, postage
prepaid, return receipt requested or by nationally recognized courier
guaranteeing overnight delivery in accordance with Section 4.3 hereof and agrees
that such service of process shall be effective service of process for any
action or proceeding brought against it in any such court, provided, that,
nothing herein shall affect the right of any party hereto to serve process in
any other manner permitted by law; (iii) waives any objection to the laying of
venue of any action or proceeding arising out of this Agreement or the
transactions contemplated hereby in the Selected Courts; and (iv) waives and
agrees not to plead or claim in any court that any such action or proceeding
brought in any such Selected Court has been brought in an inconvenient forum.
(c) Waiver of Jury Trial. With respect to any action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby, each of the parties hereby irrevocably, to the extent not prohibited by
applicable law that cannot be waived, waives, and covenants that it will not
assert (whether as plaintiff, defendant or otherwise), any right to trial by
jury in any action arising in whole or in part under or in connection with this
Agreement or the transactions contemplated hereby, whether now existing or
hereafter arising, and whether sounding in contract, tort or otherwise, and
agrees that any of them may file a copy of this paragraph with any court as
written evidence of the knowing, voluntary and bargained-for agreement among the
parties irrevocably to waive its right to trial by jury in any action or
proceeding whatsoever between them relating to this Agreement or the
transactions contemplated hereby. Such action or proceeding shall instead be
tried in a Selected Court by a judge sitting without a jury.
4.5. Remedies. The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with its specific terms or was otherwise breached and
further agree that money damages or other remedy at law would not be a
sufficient or adequate remedy for any breach or violation of, or a default
under, this Agreement by them and that, in addition to all other remedies
available to them, each of them shall be entitled to an injunction restraining
such breach, violation or default or threatened breach, violation or default and
to any other equitable relief, including, without limitation, specific
performance of the terms and provisions of this Agreement. Any requirements for
the securing or posting of any bond with respect to such remedy are hereby
waived by each of the parties hereto. Each party further agrees that, in the
event of any action for an injunction or other equitable remedy in respect of
such breach or enforcement of specific performance, it will not assert the
defense that a remedy at law would be adequate. In any action or proceeding
brought to enforce any provision of this Agreement (including the
indemnification provisions thereof), or where any provision hereof is validly
asserted as a defense, the successful party to such action or proceeding shall
be entitled to recover, to the extent permitted by applicable law, attorneys'
fees in addition to its costs and expenses and any other available remedy.
24
4.6. Further Assurances. Each party hereto shall cooperate with each
other party, shall do and perform or cause to be done and performed all further
acts and things, and shall execute and deliver all other agreements,
certificates, instruments, and documents as any other party hereto reasonably
may request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
4.7. Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
4.8. Entire Agreement. This Agreement, the Purchase and Security
Agreement, the Notes, the Warrants and the documents referred to herein or
therein or delivered pursuant hereto or thereto, are intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein or therein. This Agreement, the Purchase and Security
Agreement, the Notes, the Warrants and the documents referred to herein or
therein or delivered pursuant hereto or thereto, supersede all prior agreements
and understandings between the parties with respect to such subject matter.
4.9. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, all of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
4.10. Defaults. A default by any party to this Agreement in such
party's compliance with any of the conditions or covenants hereof or performance
of any of the obligations of such party hereunder shall not constitute a default
by any other party.
4.11. General Interpretive Principles. Whenever used in this Agreement,
except as otherwise expressly provided or unless the context otherwise requires,
any noun or pronoun shall be deemed to include the plural as well as the
singular and to cover all genders. The headings of the sections, paragraphs,
subparagraphs, clauses and subclauses of this Agreement are for convenience of
reference only and shall not in any way affect the meaning or interpretation of
any of the provisions hereof. Unless otherwise specified, the terms "hereof,"
"herein" and similar terms refer to this Agreement as a whole, and references
herein to Sections refer to Sections of this Agreement. Words of inclusion shall
not be construed as terms of limitation herein, so that references to "include",
"includes" and "including" shall not be limiting and shall be regarded as
references to non-exclusive and non-characterizing illustrations.
25
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized.
AVALON DIGITAL MARKETING SYSTEMS, INC.
By: /s/ XXXXXX XXXXXX
------------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chairman
AVALON ACQUISITION COMPANY, LLC
By: /s/ XXXXXXX X. XXXXXX
------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Managing Member
Address for Notice:
0000 Xxxxxxxxx Xxx.
Xxxxx, XX 00000
Fax:
NETWORKS DIRECT, INC.
By: /s/ XXXXXXX X. XXXXXX
------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Managing Member
Address for Notice:
0000 Xxxxxxxxx Xxx.
Xxxxx, XX 00000
Fax:
THE XXXXXXXX GROUP, LLC
By: /s/ XXXXX XXXXXXXX
------------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Member
Address for Notice:
0000 X. Xxxxx Xxxxxxxx
Xxxxx, XX 00000
Fax:
26
