EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and entered
into as of May 31, 2002, among Pacific Magtron International Corp., a Nevada
corporation (the "COMPANY"), and the purchasers signatory hereto (each such
purchaser is a "PURCHASER" and all such purchasers are, collectively, the
"PURCHASERS").
This Agreement is made pursuant to the Securities Purchase Agreement, dated
as of the date hereof among the Company and the Purchasers (the "PURCHASE
AGREEMENT").
The Company and the Purchasers hereby agree as follows:
1. DEFINITIONS
CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED HEREIN THAT ARE DEFINED IN
THE PURCHASE AGREEMENT SHALL HAVE THE MEANINGS GIVEN SUCH TERMS IN THE PURCHASE
AGREEMENT. As used in this Agreement, the following terms shall have the
following meanings:
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the
State of New York or the State of California are authorized or required by
law or other government actions to close.
"EFFECTIVENESS DATE" means, with respect to the initial Registration
Statement required to be filed hereunder as to shares of Common Stock
underlying the Shares of Preferred Stock and Warrants, the 90th calendar
day following the Closing Date (120 calendar days in the event of a "full
review" by the Commission), and, with respect to any additional
Registration Statements which may be required pursuant to Section 3(c), the
60th calendar day following the date on which the Company first knows, or
reasonably should have known, that such additional Registration Statement
is required hereunder; PROVIDED, HOWEVER, in the event that the Company is
notified by the Commission that one of the above Registration Statements
will not be reviewed or is no longer subject to further review and
comments, the Effectiveness Date as to such Registration Statement shall be
the fifth Trading Day following the date on which the Company is so
notified if such date precedes the dates required above.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in Section
2(a).
"FILING DATE" means, with respect to the initial Registration
Statement required to be filed hereunder as to shares of Common Stock
underlying the Preferred Stock and Warrants, the 30th calendar day
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following the Closing Date, and, with respect to any additional
Registration Statements which may be required pursuant to Section 3(c), the
30th day following the date on which the Company first knows, or reasonably
should have known that such additional Registration Statement is required
hereunder.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 5(c).
"PROSPECTUS" means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by a Registration Statement, and all other amendments
and supplements to the Prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
"REGISTRABLE SECURITIES" means all of the shares of Common Stock
issuable upon conversion in full of the Preferred Stock, exercise in full
of the Warrants, shares issuable in lieu of the payment of liquidated
damages, together with any securities issued or issuable upon any stock
split, dividend or other distribution recapitalization or similar event
with respect to the foregoing.
"REGISTRATION STATEMENT" means the registration statements required to
be filed hereunder and any additional registration statements contemplated
by Section 3(c), including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre-
and post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
"RULE 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 424" means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
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"SPECIAL COUNSEL" means one special counsel to the Holders, for which
the Holders will be reimbursed by the Company pursuant to Section 4.
"WARRANTS" shall mean the Common Stock purchase warrants issued to the
Purchasers pursuant to the Purchase Agreement.
2. SHELF REGISTRATION
(a) On or prior to each Filing Date, the Company shall prepare and
file with the Commission a "Shelf" Registration Statement covering the
resale of all Registrable Securities applicable to such Filing Date for an
offering to be made on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on Form S-3 (except if the Company is not
then eligible to register for resale the Registrable Securities on Form
S-3, in which case such registration shall be on another appropriate form
in accordance herewith) and shall contain (except if otherwise directed by
the Holders) the "Plan of Distribution" attached hereto as ANNEX A. The
Company shall use its best efforts to cause the Registration Statement to
be declared effective under the Securities Act as promptly as possible
after the filing thereof, but in any event prior to the applicable
Effectiveness Date, and shall use its best efforts to keep such
Registration Statement continuously effective under the Securities Act
until the date which is two years after the date that such Registration
Statement is declared effective by the Commission or such earlier date when
all Registrable Securities covered by such Registration Statement have been
sold or may be sold without volume restrictions pursuant to Rule 144(k), as
determined by the counsel to the Company pursuant to a written opinion
letter to such effect, addressed and acceptable to the Company's transfer
agent and the affected Holders (the "EFFECTIVENESS PERIOD").
(b) The Registration Statements to be filed hereunder shall include a
number of shares of Common Stock equal to no less than the sum of (i) 200%
of the number of shares of Common Stock issuable upon conversion in full of
the Preferred Stock subject to such Registration Statement, assuming for
such purposes that such Preferred Stock are outstanding for three years and
the lowest possible Conversion Price (as defined in the Certificate of
Designations) in effect during the period between the First Closing and the
filing date of the Registration Statement, and that all accrued dividends
are added to the Stated Value of such Preferred Stock, and (ii) the number
of shares of Common Stock issuable upon exercise in full of the Warrants
subject to such Registration Statement.
(c) If (a) a Registration Statement is not filed on or prior to its
respective Filing Date (if the Company files such Registration Statement
without affording the Holder the opportunity to review and comment on the
same as required by Section 3(a) hereof, the Company shall not be deemed to
have satisfied this clause (a)), or (b) the Company fails to file with the
Commission a request for acceleration in accordance with Rule 461
promulgated under the Securities Act, within five Business Days of the date
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that the Company is notified (orally or in writing, whichever is earlier)
by the Commission that a Registration Statement will not be "reviewed," or
not subject to further review, or (c) a Registration Statement filed
hereunder is not declared effective by the Commission on or prior to its
Effectiveness Date, or (d) after a Registration Statement is filed with and
declared effective by the Commission, such Registration Statement ceases to
be effective as to all Registrable Securities to which it is required to
relate at any time prior to the expiration of the Effectiveness Period
without being succeeded within ten Business Days by an amendment to such
Registration Statement or by a subsequent Registration Statement filed with
and declared effective by the Commission, or (e) the Common Stock shall be
delisted or suspended from trading on the Nasdaq Smallcap Market or on the
Nasdaq National Market, the New York Stock Exchange or the American Stock
Exchange (each, a "SUBSEQUENT MARKET") for more than five Business Days
(which need not be consecutive Business Days), or (f) an amendment to a
Registration Statement is not filed by the Company with the Commission
within ten Business Days of the Commission's notifying the Company that
such amendment is required in order for such Registration Statement to be
declared effective (any such failure or breach being referred to as an
"EVENT," and for purposes of clauses (a) and (c), the date on which such
Event occurs, or for purposes of clause (b) the date on which such five
Business Day period is exceeded, or for purposes of clauses (d) and (f) the
date which such ten Business Day-period is exceeded, or for purposes of
clause (e) the date on which such five Business Day-period is exceeded,
being referred to as "EVENT DATE"), then, on each such Event Date and every
monthly anniversary thereof until the applicable Event is cured, the
Company shall pay to each Holder an amount in cash, as liquidated damages
and not as a penalty, equal to 1.0% of (i) the purchase price paid by such
Holder pursuant to the Purchase Agreement, and (ii) if the Warrants are "in
the money", the value of any outstanding Warrants (valued at the difference
between the average Closing Price during the applicable month and the
Exercise Price multiplied by the number of shares of Common Stock the
Warrants are exercisable into) for the first month following such Event
Date and 2.0%, as to clause (i) above, and 1.0%, as to subsection (ii)
above, per month thereafter. If the Company fails to pay any liquidated
damages pursuant to this Section in full within seven days after the date
payable, the Company will pay interest thereon at a rate of 12% per annum
(or such lesser maximum amount that is permitted to be paid by applicable
law) to the Holder, accruing daily from the date such liquidated damages
are due until such amounts, plus all such interest thereon, are paid in
full. At the option of the Company, shares of Common Stock may be issued to
the Holder in lieu of a cash payment for such liquidated damages based upon
the then prevailing Conversion Price in effect provided that such shares
have been registered for resale by such Holder and the Company provides the
Holder with at least five days' irrevocable notice prior to the date such
payment is due. The liquidated damages pursuant to the terms hereof shall
apply on a pro-rata basis for any portion of a month prior to the cure of
an Event.
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3. REGISTRATION PROCEDURES
In connection with the Company's registration obligations hereunder, the
Company shall:
(a) Not less than five Business Days prior to the filing of each
Registration Statement or any related Prospectus or any amendment or
supplement thereto (including any document that would be incorporated or
deemed to be incorporated therein by reference), the Company shall, (i)
furnish to the Holders and their Special Counsel copies of all such
documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to
the review of such Holders and their Special Counsel, and (ii) cause its
officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall
not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities and their Special Counsel shall reasonably object,
provided, the Company is notified of such objection no later than 5
Business Days after the Holders have been so furnished copies of such
documents and provided, further, that such objections relate to the selling
shareholder information, the plan of distribution, any information relating
to the Purchasers, either directly or indirectly, or the compliance under
the securities Act of such Registration Statement or prospectus as to form.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to a Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep a
Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file
with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or supplemented
by any required Prospectus supplement, and as so supplemented or amended to
be filed pursuant to Rule 424; (iii) respond as promptly as reasonably
possible, and in any event within ten days, to any comments received from
the Commission with respect to a Registration Statement or any amendment
thereto and as promptly as reasonably possible provide the Holders true and
complete copies of all correspondence from and to the Commission relating
to a Registration Statement; and (iv) comply in all material respects with
the provisions of the Securities Act and the Exchange Act with respect to
the disposition of all Registrable Securities covered by a Registration
Statement during the applicable period in accordance with the intended
methods of disposition by the Holders thereof set forth in such
Registration Statement as so amended or in such Prospectus as so
supplemented.
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(c) File additional Registration Statements if the number of
Registrable Securities at any time exceeds 75% of the number of shares of
Common Stock then registered for the account of the Holders in all existing
Registration Statements hereunder.
(d) Notify the Holders of Registrable Securities to be sold and their
Special Counsel as promptly as reasonably possible (and, in the case of
(i)(A) below, not less than five Business Days prior to such filing) and
(if requested by any such Person) confirm such notice in writing no later
than one Business Day following the day (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to a Registration
Statement is proposed to be filed; (B) when the Commission notifies the
Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement
(the Company shall provide true and complete copies thereof and all written
responses thereto to each of the Holders); and (C) with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to a
Registration Statement or Prospectus or for additional information; (iii)
of the issuance by the Commission of any stop order suspending the
effectiveness of a Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of
the Company contained in any agreement contemplated hereby ceases to be
true and correct in all material respects; (v) of the receipt by the
Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening
of any Proceeding for such purpose; and (vi) of the occurrence of any event
or passage of time that makes the financial statements included in a
Registration Statement ineligible for inclusion therein or any statement
made in a Registration Statement or Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material
respect or that requires any revisions to a Registration Statement,
Prospectus or other documents so that, in the case of a Registration
Statement or the Prospectus, as the case may be, it will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(e) Promptly deliver to each Holder and their Special Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such
Persons may reasonably request. The Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the
selling Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement
thereto.
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(f) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders
and their Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of
such Registrable Securities for offer and sale under the securities or Blue
Sky laws of such jurisdictions within the United States as any Holder
requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and to do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by
a Registration Statement; provided, that the Company shall not be required
to qualify generally to do business in any jurisdiction where it is not
then so qualified or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(g) Cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be
delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by the Purchase
Agreement, of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as any
such Holders may request.
(h) Upon the occurrence of any event contemplated this Section 3, as
promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to a Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither a Registration Statement
nor such Prospectus will contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(i) Comply with all applicable rules and regulations of the
Commission.
(j) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale
in any jurisdiction, at the earliest practicable moment.
(k) Furnish to each Holder and their Special Counsel, without charge,
at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by reference,
and all exhibits to the extent requested by such Person (including those
previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
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(l) Notwithstanding anything herein to the contrary, if at any time or
from time to time during the Effectiveness Period, the Company notifies the
Holders in writing of the existence of a Potential Material Event (as
defined below), the Holders shall not offer or sell any Securities from the
time of the giving of notice with respect to a Potential Material Event
until the Holders receive written notice from the Company that such
Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; PROVIDED, HOWEVER, that the
Company may not so suspend the right to such holders of Securities for more
than twenty (20) calendar days in the aggregate during any twelve month
period, and if such period is exceeded, such period shall be deemed an
"Event" and the Company shall be liable to the Holder for liquidated
damages pursuant to Section 2(c); PROVIDED, FURTHER, the failure to
maintain a Registration Statement for not more than sixty (60) calendar
days in the aggregate during any twelve month period as a result of a
Potential Material Event shall not be deemed a breach of this Agreement,
provided the Company timely pays the Holder such liquidated damages. THE
COMPANY MUST GIVE THE HOLDERS AT LEAST 30 DAYS' PRIOR WRITTEN NOTICE THAT
SUCH A BLACKOUT PERIOD (WITHOUT INDICATING THE NATURE OF SUCH BLACKOUT
PERIOD) WILL OCCUR AND SUCH NOTICE MUST BE ACKNOWLEDGED IN WRITING BY THE
HOLDERS. FAILURE TO PROVIDE THE HOLDERS WITH SUCH NOTICE SHALL CONSTITUTE
AN EVENT DURING THE ENTIRE APPLICABLE PERIOD THAT THE REGISTRATION
STATEMENT IS SUSPENDED. "Potential Material Event" means any of the
following:
(i) The Board of Directors of the Company determines, in its good
faith judgment, that the use of any prospectus would require the
disclosure of important information which the Company has a bona fide
business purpose for preserving as confidential or the disclosure of
which would impede the Company's ability to consummate a significant
transaction, in which event such period may be extended for up to
sixty (60) additional days in any twelve (12) month period;
(ii) The Company consummates any business combination for
purposes of Rule 3-05 or Article 11 of Regulation S-X under the
Securities Act, in which event such restricted period may be extended
until the date on which the Company has filed such reports or obtained
the financial information required by Rule 3-05 or Article 11 of
Regulation S-X to be included in the Registration Statement, but in no
event more sixty (60) additional days in any twelve (12) month period;
(iii) After one year from the Closing Date, the Company files or
proposes to file a registration statement in an underwritten primary
equity offering initiated by the Company (other than any registration
by the Company on Form S-8), which underwriters are reasonably
acceptable to a majority in interest of the Holders, or a successor or
substantially similar form, of (1) an employee stock option, stock
purchase or compensation plan or of securities issued or issuable
pursuant to any such plan, or (2) a dividend reinvestment plan), in
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which event such restricted period may be extended for 30 days prior
to the effective date of the registration statement covering such
underwritten primary equity offering and ending on the date specified
by such managing underwriter in such written request to each Holder,
which date shall be no more than 30 days after such effective date,
during which the Holder agrees, if requested in writing by the
managing underwriter or underwriters administering such offering, not
to effect any offer, sale or distribution of Company securities (or
any option or right to acquire Company securities;
4. REGISTRATION EXPENSES. All fees and expenses incident to the performance
of or compliance with this Agreement by the Company shall be borne by the
Company whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Nasdaq Smallcap Market and any Subsequent Market on
which the Common Stock is then listed for trading, and (B) in compliance with
applicable state securities or Blue Sky laws (including, without limitation,
fees and disbursements of counsel for the Company in connection with Blue Sky
qualifications or exemptions of the Registrable Securities and determination of
the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as requested by the Holders )), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the Holders),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and (v) fees and expenses of all other Persons retained
by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
5. INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder,
the officers, directors, agents, brokers (including brokers who offer and
sell Registrable Securities as principal as a result of a pledge or any
failure to perform under a margin call of Common Stock), investment
advisors and employees of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and the officers, directors, agents and employees
of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
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attorneys' fees) and expenses (collectively, "Losses"), as incurred,
arising out of or relating to any untrue or alleged untrue statement of a
material fact contained in a Registration Statement, any Prospectus or any
form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or
form of prospectus or supplement thereto, in light of the circumstances
under which they were made) not misleading, except to the extent, but only
to the extent, that (1) such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that
such information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in a Registration
Statement, such Prospectus or such form of Prospectus or in any amendment
or supplement thereto or (2) in the case of an occurrence of an event of
the type specified in Section 3(d)(ii)-(vi), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder
in writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in Section 6(e). The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection
with the transactions contemplated by this Agreement.
(b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and
against all Losses (as determined by a court of competent jurisdiction in a
final judgment not subject to appeal or review) arising out of or based
upon any untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment
or supplement thereto, or arising solely out of or based solely upon any
omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading to the extent, but only to the
extent, that such untrue statement or omission is contained in any
information so furnished in writing by such Holder to the Company
specifically for inclusion in such Registration Statement or such
Prospectus or to the extent that (1) such untrue statements or omissions
are based solely upon information regarding such Holder furnished in
writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was reviewed
and expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in
any amendment or supplement thereto or (2) in the case of an occurrence of
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an event of the type specified in Section 3(d)(ii)-(vi), the use by such
Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or
defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(e). In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the
net proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"INDEMNIFIED PArty"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing,
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent
that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
in writing to pay such fees and expenses; or (2) the Indemnifying Party
shall have failed promptly to assume the defense of such Proceeding and to
employ counsel reasonably satisfactory to such Indemnified Party in any
such Proceeding; or (3) the named parties to any such Proceeding (including
any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to
assume the defense thereof and such counsel shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect
any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on
claims that are the subject matter of such Proceeding.
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All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating
or preparing to defend such Proceeding in a manner not inconsistent with
this Section) shall be paid to the Indemnified Party, as incurred, within
ten Business Days of written notice thereof to the Indemnifying Party
(regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) CONTRIBUTION. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material
fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include, subject to the
limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such
fees or expenses if the indemnification provided for in this Section was
available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the proceeds actually received by such Holder
from the sale of the Registrable Securities subject to the Proceeding
exceeds the amount of any damages that such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to
the Indemnified Parties.
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6. MISCELLANEOUS
(a) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the same shall be in writing and signed by
the Company and the Holders of at least two-thirds of the then outstanding
Registrable Securities. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of at
least a majority of the Registrable Securities to which such waiver or
consent relates; PROVIDED, HOWEVER, that the provisions of this sentence
may not be amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or
any of its subsidiaries, on or after the date of this Agreement, enter into
any agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof. Except as and to the extent specified
in Schedule 6(b) hereto, neither the Company nor any of its subsidiaries
has previously entered into any agreement granting any registration rights
with respect to any of its securities to any Person that have not been
satisfied in full.
(c) NO PIGGYBACK ON REGISTRATIONS. Except as and to the extent
specified in Schedule 6(c) hereto, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto)
may include securities of the Company in the Registration Statement other
than the Registrable Securities, and the Company shall not after the date
hereof enter into any agreement providing any such right to any of its
security holders.
(d) COMPLIANCE. Each Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities
pursuant to the Registration Statement.
(e) DISCONTINUED DISPOSITION. Each Holder agrees by its acquisition of
such Registrable Securities that, upon receipt of a notice from the Company
of the occurrence of any event of the kind described in Sections 3(d), such
Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until such Holder's receipt of
the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(h), or until it is advised in writing
(the "Advice") by the Company that the use of the applicable Prospectus may
be resumed, and, in either case, has received copies of any additional or
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supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may
provide appropriate stop orders to enforce the provisions of this
paragraph.
(f) PIGGY-BACK REGISTRATIONS. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file
with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of
its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection with
stock option or other employee benefit plans, then the Company shall send
to each Holder written notice of such determination and, if within fifteen
days after receipt of such notice, any such Holder shall so request in
writing, the Company shall include in such registration statement all or
any part of such Registrable Securities such holder requests to be
registered, subject to customary underwriter cutbacks applicable to all
Holders of registration rights; provided, that, the Company shall not be
required to register any Registrable Securities pursuant to this Section
6(f) that are eligible for resale pursuant to Rule 144(k) promulgated under
the Securities Act.
(g) NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be delivered as set
forth in the Purchase Agreement.
(h) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written
consent of each Holder. Each Holder may assign their respective rights
hereunder in the manner and to the Persons as permitted under the Purchase
Agreement.
(i) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each 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. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same
with the same force and effect as if such facsimile signature were the
original thereof.
(j) GOVERNING LAW. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be
governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflicts of
law thereof. Each party hereby irrevocably submits to the exclusive
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jurisdiction of the state and federal courts sitting in the City of New
York, borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address
in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby.
If either party shall commence a Proceeding to enforce any provisions of
this Agreement, then the prevailing party in such Proceeding shall be
reimbursed by the other party for its attorneys fees and other costs and
expenses incurred with the investigation, preparation and prosecution of
such Proceeding.
(k) CUMULATIVE REMEDIES. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(l) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(m) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(n) INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of any other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser
pursuant hereto or thereto, shall be deemed to constitute the Purchasers as
a partnership, an association, a joint venture or any other kind of entity,
15
or create a presumption that the Purchasers are in any way acting in
concert with respect to such obligations or the transactions contemplated
by this Agreement. Each Purchaser shall be entitled to protect and enforce
its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Purchaser to be
joined as an additional party in any proceeding for such purpose.
********************
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
PACIFIC MAGTRON INTERNATIONAL CORP.
By: /s/ Xxxxxxxx X. Xx
--------------------------------------
Name: Xxxxxxxx X. Xx
Title: Chairman of the Board and President
XXXXXXXXXXX X.X.
By:
---------------------------------------
Name:
Title:
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PLAN OF DISTRIBUTION
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
* ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
* block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
* purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
* an exchange distribution in accordance with the rules of the
applicable exchange;
* privately negotiated transactions;
* short sales
* broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
* a combination of any such methods of sale; and
* any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus. Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
Selling Stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.
The selling stockholder may from time to time pledge or grant a security
interest in some or all of the Shares or common stock or Warrant owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus.
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The selling stockholders also may transfer the shares of common stock in
other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this
prospectus.
The Selling Stockholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. The Selling Stockholders have informed the
Company that it does not have any agreement or understanding, directly or
indirectly, with any person to distribute the Common Stock.
The Company is required to pay all fees and expenses incident to the
registration of the shares. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
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