REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of July 2,
2004, is entered into by and between Universal Detection Technology, a
California corporation (the "COMPANY"), and Xxxxxx Associates, L.P., as agent
for the purchasers whose name appears on EXHIBIT A hereto (each, a "PURCHASER"
and collectively, the "PURCHASERS").
WHEREAS:
A. In connection with the Subscription Agreement and Investor
Questionnaires by and among the parties hereto (the "SUBSCRIPTION
AGREEMENT") and the Placement Agency Agreement, by and between the
Company and Xxxxxx Associates, L.P. (collectively, the "TRANSACTION
DOCUMENTS"), the Company has agreed, upon the terms and subject to the
conditions of the Transaction Documents, to issue and sell to the
Purchasers, Units consisting of an aggregate of up to (i) 6,000,000
shares (the "COMMON SHARES") of the Company's Common Stock (the
"COMMON STOCK"), and (ii) warrants (the "WARRANTS") to purchase up to
6,000,000 shares of Common Stock (the "WARRANT SHARES"), and issue to
the Agent warrants (the "AGENT WARRANTS") to purchase 3,600,000 shares
of Common Stock (the "AGENT SHARES"); and
B. To induce the Purchasers to execute and deliver the Subscription
Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute
(collectively, the "1933 ACT"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the
Purchasers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "AGENT" means Xxxxxx Associates, L.P., which shall serve as agent
on behalf of the Purchasers for the purposes of this Agreement.
b. "BUSINESS DAY" means any day other than Saturday, Sunday or any
other day on which commercial banks in the city of Los Angeles
are authorized or required by law to remain closed.
c. "INVESTOR" means a Purchaser, any transferee or assignee thereof
to whom a Purchaser assigns its rights under this Agreement and
who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 and any transferee or assignee thereof
to whom a transferee or assignee assigns its rights under this
Agreement and who agrees to become bound by the provisions of
this Agreement in accordance with Section 9.
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d. "PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an
unincorporated organization and governmental or any department or
agency thereof.
e. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more
Registration Statements (as defined below) in compliance with the
1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous
or delayed basis ("RULE 415"), and the declaration or ordering of
effectiveness of such Registration Statement(s) by the United
States Securities and Exchange Commission (the "SEC").
f. "REGISTRABLE SECURITIES" means (i) the Common Shares, (ii) the
Warrant Shares issued or issuable upon exercise of the Warrants,
(iii) the Agent Shares issued or exercisable upon exercise of the
Agent Warrants, and (iii) any shares of capital stock issued or
issuable with respect to the Common Shares, the Warrant Shares or
the Warrants as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, without
regard to any limitations on exercises of Warrants.
g. "REGISTRATION STATEMENT" means a registration statement or
registration statements of the Company filed under the 1933 Act
covering the Registrable Securities.
The location of defined terms in this Agreement is set forth on the Index
of Terms attached hereto. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the Securities
Purchase Agreement.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall prepare, and, as soon
as practicable but in no event later than 30 days after the final
Closing Date (as defined in the Securities Purchase Agreement)
(the "FILING DEADLINE"), file with the SEC the Registration
Statement on Form SB-2 covering the resale of all of the
Registrable Securities. The Registration Statement prepared
pursuant hereto shall register for resale at least 15,600,000
shares of Common Stock. The Company shall use its commercially
reasonable efforts to have the Initial Registration Statement
declared effective by the SEC as soon as practicable.
b. LEGAL COUNSEL. Subject to Section 5 hereof, the Purchasers
holding at least a majority of the Registrable Securities shall
have the right to select one legal counsel to review and oversee
any offering pursuant to this Section 2 ("LEGAL COUNSEL"), which
shall be Xxxxxxxxx Xxxxxxx, LLP or such other counsel as
thereafter designated by the holders of at least a majority of
the Registrable Securities. The Company and Legal Counsel shall
reasonably cooperate with each other in performing the Company's
obligations under this Agreement.
c. EFFECT OF FAILURE TO FILE REGISTRATION STATEMENT. If the
Registration Statement covering the Registrable Securities
required to be filed by the Company pursuant to this Agreement is
not filed with the SEC by the Filing Deadline, then the Company
will make payments to the Investors equal to a two-percent (2%)
per month, pro-rated daily, penalty on the Purchase Price payable
through the issuance by the Company to each Investor of
additional
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shares of Common Stock and an additional three (3%) percent
penalty, pro-rated daily, for each 90 days period thereafter. For
purposes of determining the number of shares of Common Stock
which may be payable pursuant to this Section 2(c), the value per
share of Common Stock shall be equal to the price of the Units in
the Offering.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to file a Registration Statement
with the SEC pursuant to Section 2(a), the Company will use its commercially
reasonable efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and, pursuant
thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities
(but in no event later than the applicable Filing Deadline) and
use its commercially reasonable efforts to cause such
Registration Statement relating to the Registrable Securities to
become effective as soon as practicable after such filing. The
Company shall keep each Registration Statement effective pursuant
to Rule 415 at all times until the earlier of (i) the date as of
which the Investors may sell all of the Registrable Securities
covered by such Registration Statement pursuant to Rule 144 (or
successor thereto) promulgated under the 1933 Act, (ii) two years
from the effective date of a Registration Statement, or (iii) the
date on which the Investors shall have sold all the Registrable
Securities covered by such Registration Statement (the
"REGISTRATION PERIOD"), which Registration Statement (including
any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein, or necessary to make the statements therein, in the
light of the circumstances in which they were made, not
misleading. The term "commercially reasonable efforts" shall
mean, among other things, that the Company shall (i) reply to all
comments received from the SEC within 15 business days, and (ii)
submit to the SEC, within three (3) Business Days after the
Company learns that no review of a particular Registration
Statement will be made by the staff of the SEC or that the staff
has no further comments on the Registration Statement, as the
case may be, and the approval of Legal Counsel pursuant to
Section 3(c), a request for acceleration of effectiveness of such
Registration Statement to a time and date not later than 48 hours
after the submission of such request.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with
such Registration Statement, which prospectus is to be filed
pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep such Registration Statement effective at all
times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered
by such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance
with the intended methods of disposition by the seller or sellers
thereof as set forth in such Registration Statement. In the case
of amendments and supplements to a Registration Statement which
are required to be filed pursuant to this Agreement (including
pursuant to this Section 3(b)) by reason of the Company filing a
report on Form 10-KSB, Form 10-QSB or Form 8-K or any analogous
report under the Securities Exchange Act of 1934, as amended (the
"1934 ACT"), the Company shall
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have incorporated such report by reference into the Registration
Statement, if applicable, or shall file such amendments or
supplements with the SEC on the same day on which the 1934 Act
report is filed which created the requirement for the Company to
amend or supplement the Registration Statement.
c. The Company shall (A) permit Legal Counsel to review and comment
upon (i) the Registration Statement at least two (2) Business
Days prior to its filing with the SEC and (ii) all other
Registration Statements and all amendments and supplements to all
Registration Statements (except for Annual Reports on Form
10-KSB, Quarterly Reports on Form 10-QSB, and Current Reports on
Form 8-K and any similar or successor reports) within a
reasonable number of days prior to their filing with the SEC, and
(B) not file any Registration Statement or amendment or
supplement thereto in a form to which Legal Counsel reasonably
objects. The Company shall not submit a request for acceleration
of the effectiveness of a Registration Statement or any amendment
or supplement thereto without the prior approval of Legal
Counsel, which consent shall not be unreasonably withheld. The
Company shall furnish to Legal Counsel, without charge, (i)
copies of any correspondence from the SEC or the staff of the SEC
to the Company or its representatives relating to any
Registration Statement, (ii) promptly after the same is prepared
and filed with the SEC, one copy of any Registration Statement
and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference, if
requested by an Investor, and all exhibits and (iii) upon the
effectiveness of any Registration Statement, one copy of the
prospectus included in such Registration Statement and all
amendments and supplements thereto. The Company shall reasonably
cooperate with Legal Counsel in performing the Company's
obligations pursuant to this Section 3.
d. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement, without
charge, (i) promptly after the same is prepared and filed with
the SEC, at least one copy of such Registration Statement and any
amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference, if
requested by an Investor, all exhibits and each preliminary
prospectus, (ii) upon the effectiveness of any Registration
Statement, two (2) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto
(or such other number of copies as such Investor may reasonably
request) and (iii) such other documents, including copies of any
preliminary or final prospectus, as such Investor may reasonably
request from time to time in order to facilitate the disposition
of the Registrable Securities owned by such Investor.
e. The Company shall use its commercially reasonable efforts to (i)
register and qualify, unless an exemption from registration and
qualification applies, the resale by Investors of the Registrable
Securities covered by a Registration Statement under such other
securities or "blue sky" laws of all applicable jurisdictions in
the United States, (ii) prepare and file in those jurisdictions,
such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the
Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take
all other actions reasonably necessary or advisable to qualify
the Registrable Securities for sale in such jurisdictions;
PROVIDED, HOWEVER, that the Company
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shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where
it would not otherwise be required to qualify but for this
Section 3(e), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process
in any such jurisdiction. The Company shall promptly notify Legal
Counsel and each Investor who holds Registrable Securities of the
receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue
sky" laws of any jurisdiction in the United States or its receipt
of actual notice of the initiation or threatening of any
proceeding for such purpose.
f. The Company shall notify Legal Counsel and each Investor in
writing, including via facsimile or e-mail followed by overnight
courier, of the happening of any event, as promptly as
practicable after becoming aware of such event, as a result of
which the prospectus included in a Registration Statement, as
then in effect, includes an untrue statement of a material fact
or omission 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
(provided that in no event shall such notice contain any
material, nonpublic information), and, subject to Section 3(o),
promptly prepare a supplement or amendment to such Registration
Statement to correct such untrue statement or omission, and
deliver two (2) copies of such supplement or amendment to Legal
Counsel and each Investor (or such other number of copies as
Legal Counsel or such Investor may reasonably request). The
Company shall also promptly notify Legal Counsel and each
Investor in writing, including via facsimile or e-mail followed
by overnight courier, (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered
to Legal Counsel and each Investor by facsimile or e-mail on the
same day of such effectiveness and by overnight mail), (ii) of
any request by the SEC for amendments or supplements to a
Registration Statement or related prospectus or related
information, and (iii) of the Company's reasonable determination
that a post-effective amendment to a Registration Statement would
be appropriate.
g. The Company shall use its commercially reasonable efforts to
prevent the issuance of any stop order or other suspension of
effectiveness of a Registration Statement, or the suspension of
the qualification of any of the Registrable Securities for sale
in any jurisdiction and, if such an order or suspension is
issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify Legal Counsel and each
Investor who holds Registrable Securities being sold of the
issuance of such order and the resolution thereof or its receipt
of actual notice of the initiation or threat of any proceeding
for such purpose.
h. The Company shall make available for inspection by (i) any
Investor, (ii) Legal Counsel and (iii) one firm of accountants or
other agents retained by the Investors (collectively, the
"INSPECTORS"), all pertinent financial and other records, and
pertinent corporate documents and properties of the Company
(collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector in order to enable it to exercise its
due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any
Inspector may reasonably request for the purpose of such due
diligence; PROVIDED, HOWEVER, that each Inspector shall agree to
hold in strict confidence and shall not make any disclosure
(except to an Investor) or use of any Record or other information
which the
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Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement or is
otherwise required under the 1933 Act, (b) the release of such
Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been
made generally available to the public other than by disclosure
in violation of this or any other agreement of which the
Inspector has knowledge. Each Investor agrees that it shall, upon
learning that disclosure of such Records is sought in or by a
court or governmental body of competent jurisdiction or through
other means, give prompt notice to the Company and allow the
Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and any Investor)
shall be deemed to limit the Investors' ability to sell
Registrable Securities in a manner which is otherwise consistent
with applicable laws and regulations.
i. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company
unless (i) disclosure of such information is necessary to comply
with federal or state securities laws, (ii) the disclosure of
such information is necessary to avoid or correct a misstatement
or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other
final, non-appealable order from a court or governmental body of
competent jurisdiction, or (iv) such information has been made
generally available to the public other than by disclosure in
violation of this Agreement or any other agreement. The Company
agrees that it shall, upon learning that disclosure of such
information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other
means, give prompt written notice to such Investor and allow such
Investor, at the Investor's expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order
for, such information.
j. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent
applicable, facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing
the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Investors
may reasonably request and registered in such names as the
Investors may request.
k. If requested by an Investor, the Company shall (i) as soon as
practicable incorporate in a prospectus supplement or
post-effective amendment such information as an Investor
reasonably requests to be included therein relating to the sale
and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable
Securities being offered or sold, the purchase price being paid
therefor and any other terms of the offering of the Registrable
Securities to be sold in such offering; and (ii) as soon as
practicable make all required filings of such prospectus
supplement or post-effective amendment after being notified of
the matters to be incorporated in such prospectus supplement or
post-effective amendment.
l. The Company shall use its commercially reasonable efforts to
cause the Registrable Securities covered by the Registration
Statement to be registered with or
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approved by such other governmental agencies or authorities as
may be necessary to consummate the disposition of such
Registrable Securities.
m. The Company shall otherwise use its commercially reasonable
efforts to comply with all applicable rules and regulations of
the SEC in connection with any registration hereunder.
n. Within two (2) Business Days after a Registration Statement which
covers Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel for the
Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared
effective by the SEC in the form attached hereto as EXHIBIT A.
o. Notwithstanding anything to the contrary herein, at any time
after the Registration Statement has been declared effective by
the SEC, the Company may delay the disclosure of material
non-public information concerning the Company, the disclosure of
which at the time is not, in the good faith opinion of the Board
of Directors of the Company and its counsel, in the best interest
of the Company and, in the opinion of counsel to the Company,
otherwise required (a "GRACE PERIOD"); PROVIDED, that the Company
shall promptly (i) notify the Investors in writing of the
existence of material non-public information giving rise to a
Grace Period (provided that in each notice the Company will not
disclose the content of such material non-public information to
the Investors) and the date on which the Grace Period will begin,
and (ii) notify the Investors in writing of the date on which the
Grace Period ends; and, PROVIDED FURTHER, that no Grace Period
shall exceed 30 consecutive days and during any 365 day period
such Grace Periods shall not exceed an aggregate of 60 days and
the first day of any Grace Period must be at least 2 trading days
after the last day of any prior Grace Period (an "ALLOWABLE GRACE
PERIOD"). For purposes of determining the length of a Grace
Period above, the Grace Period shall begin on and include the
date the holders receive the notice referred to in clause (i) and
shall end on and include the later of the date the holders
receive the notice referred to in clause (ii) and the date
referred to in such notice. The provisions of Section 3(g) hereof
shall not be applicable during the period of any Allowable Grace
Period. Upon expiration of the Grace Period, the Company shall
again be bound by the first sentence of Section 3(f) with respect
to the information giving rise thereto unless such material
non-public information is no longer applicable. Notwithstanding
anything to the contrary, the Company shall cause its transfer
agent to deliver unlegended shares of Common Stock to a
transferee of an Investor in accordance with the terms of the
Securities Purchase Agreement in connection with any sale of
Registrable Securities with respect to which an Investor has
entered into a contract for sale, and delivered a copy of the
prospectus included as part of the applicable Registration
Statement, prior to the Investor's receipt of the notice of a
Grace Period and for which the Investor has not yet settled.
4. OBLIGATIONS OF THE INVESTORS.
a. At least two (2) Business Days prior to the first anticipated
filing date of a Registration Statement, the Company shall notify
each Investor in writing of the information the Company requires
from each such Investor if such Investor elects to have any of
such Investor's Registrable Securities included in such
Registration Statement. It shall be a condition
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precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such
Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended
method of disposition of the Registrable Securities held by it,
as shall be reasonably required to effect and maintain the
effectiveness of the registration of such Registrable Securities
and shall execute such documents in connection with such
registration as the Company may reasonably request.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and
filing of any Registration Statement hereunder, unless such
Investor has notified the Company in writing of such Investor's
election to exclude all of such Investor's Registrable Securities
from such Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in
Section 3(g) or the first sentence of 3(f), such Investor will
immediately discontinue disposition of Registrable Securities
pursuant to any Registration Statement(s) covering such
Registrable Securities until such Investor's receipt of the
copies of the supplemented or amended prospectus contemplated by
Section 3(g) or the first sentence of 3(f) or receipt of notice
that no supplement or amendment is required. Notwithstanding
anything to the contrary, the Company shall cause its transfer
agent to deliver unlegended shares of Common Stock to a
transferee of an Investor in accordance with the terms of the
Securities Purchase Agreement in connection with any sale of
Registrable Securities with respect to which an Investor has
entered into a contract for sale prior to the Investor's receipt
of a notice from the Company of the happening of any event of the
kind described in Section 3(g) or the first sentence of 3(f) and
for which the Investor has not yet settled.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company shall be paid by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor,
the directors, officers, partners, employees, agents,
representatives of, and each Person, if any, who controls any
Investor within the meaning of the 1933 Act or the 1934 Act
(each, an "INDEMNIFIED PERSON"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges,
costs, reasonable attorneys' fees, amounts paid in settlement or
expenses, joint or several, (collectively, "CLAIMS") incurred in
investigating, preparing or defending any action, claim, suit,
inquiry, proceeding,
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investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an
indemnified party is or may be a party thereto ("INDEMNIFIED
DAMAGES"), to which any of them may become subject insofar as
such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other "blue
sky" laws of any jurisdiction in which Registrable Securities are
offered ("BLUE SKY FILING"), or the omission or alleged omission
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in
the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC)
or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of
the circumstances under which the statements therein were made,
not misleading, (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any other law, including,
without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement or
(iv) any material violation of this Agreement (the matters in the
foregoing clauses (i) through (iv) being, collectively,
"VIOLATIONS"). Subject to Section 6(c), the Company shall
reimburse the Indemnified Persons, promptly as such expenses are
incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to
a Claim by an Indemnified Person arising out of or based upon a
Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by such
Indemnified Person for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement
or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to
Section 3(d); (ii) with respect to any preliminary prospectus,
shall not inure to the benefit of any such person from whom the
person asserting any such Claim purchased the Registrable
Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus
was corrected in the prospectus, as then amended or supplemented,
if such prospectus was timely made available by the Company
pursuant to Section 3(d), and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to
the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it or failed to deliver the
correct prospectus as required by the 1933 Act and such correct
prospectus was timely made available pursuant to Section 3(d);
(iii) shall not be available to the extent such Claim is based on
a failure of the Investor to deliver or to cause to be delivered
the prospectus made available by the Company, including a
corrected prospectus, if such prospectus or corrected prospectus
was timely made available by the Company pursuant to Section
3(d); and (iv) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be
unreasonably withheld or delayed. Such indemnity shall remain in
full force and effect regardless of any
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investigation made by or on behalf of the Indemnified Person and
shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally
and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a),
the Company, each of its directors, each of its officers who
signs the Registration Statement each Person, if any, who
controls the Company within the meaning of the 1933 Act or the
1934 Act (each, an "INDEMNIFIED PARTY"), against any Claim or
Indemnified Damages to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent,
that such Violation occurs in reliance upon and in conformity
with written information furnished to the Company by such
Investor expressly for use in connection with such Registration
Statement; and, subject to Section 6(c), such Investor will
reimburse any legal or other expenses reasonably incurred by an
Indemnified Party in connection with investigating or defending
any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to
contribution contained in Section 7 shall not apply to amounts
paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent
shall not be unreasonably withheld or delayed; provided, further,
however, that the Investor shall be liable under this Section
6(b) for only that amount of a Claim or Indemnified Damages as
does not exceed the net proceeds to such Investor as a result of
the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then
amended or supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or
proceeding) involving a Claim, such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be
made against any indemnifying party under this Section 6, deliver
to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly
noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the
Indemnified Person or the Indemnified Party, as the case may be;
PROVIDED, HOWEVER, that an Indemnified Person or Indemnified
Party shall have the right to retain its own counsel with the
fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the
indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such
counsel of the Indemnified Person or Indemnified Party and the
indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel
in such proceeding. In the case of an Indemnified Person, legal
counsel referred to in the immediately preceding sentence shall
be selected by the Investors
10
holding at least a majority in interest of the Registrable
Securities included in the Registration Statement to which the
Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with
any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party
all information reasonably available to the Indemnified Party or
Indemnified Person which relates to such action or Claim. The
indemnifying party shall keep the Indemnified Party or
Indemnified Person fully apprised at all times as to the status
of the defense or any settlement negotiations with respect
thereto. No indemnifying party shall be liable for any settlement
of any action, claim or proceeding effected without its prior
written consent, PROVIDED, HOWEVER, that the indemnifying party
shall not unreasonably withhold, delay or condition its consent.
No indemnifying party shall, without the prior written consent of
the Indemnified Party or Indemnified Person, consent to entry of
any judgment or enter into any settlement or other compromise
which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to
such Claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all
rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to
the matter for which indemnification has been made. The failure
to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in
its ability to defend such action.
d. The indemnification required by this Section 6 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
Indemnified Damages are incurred.
e. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party
or Indemnified Person against the indemnifying party or others,
and (ii) any liabilities the indemnifying party may be subject to
pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; PROVIDED, HOWEVER, that: (i) no person
involved in the sale of Registrable Securities which person is guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 0000
Xxx) in connection with such sale shall be entitled to contribution from any
person involved in such sale of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities pursuant to such
Registration Statement.
11
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell securities of the Company
to the public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934
Act so long as the Company remains subject to such requirements
(it being understood that nothing herein shall limit the
Company's obligations under Section 4(c) of the Securities
Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144;
and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written
statement by the Company, if true, that it has complied with the
reporting requirements of Rule 144, the 1933 Act and the 1934
Act, (ii) a copy of the most recent annual or quarterly report of
the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably
requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of Registrable Securities if: (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment; (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned; (iii)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the 1933 Act
and applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein; and (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase Agreement
and Warrants.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and Investors
who then hold at least a majority of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company. No such amendment shall be effective to the extent
that it applies to less than all of the holders of the Registrable Securities.
No consideration shall be offered or paid to any Person to amend or consent to a
waiver or
12
modification of any provision of any of this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.
11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such
Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more Persons with
respect to the same Registrable Securities, the Company shall act
upon the basis of instructions, notice or election received from
the such record owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must
be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent
by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with a
nationally recognized overnight delivery service, in each case
properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
Universal Detection Technology
0000 Xxxxxxxx Xxxx., Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxx, CEO
With a copy to:
Akin Gump Xxxxxxx Xxxxx & Xxxx LLP
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
If to Legal Counsel:
Xxxxxxxxx & Xxxxxxx, LLP
00 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxxx, Esq.
13
If to Agent:
Xxxxxx Associates, L.P.
00 Xxxxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President
If to a Purchaser, to its address and facsimile number set forth on the Schedule
of Purchasers attached hereto, with copies to such Purchaser's representatives
as set forth on the Schedule of Purchasers, or to such other address and/or
facsimile number and/or to the attention of such other person as the recipient
party has specified by written notice given to each other party five (5) days
prior to the effectiveness of such change. Written confirmation of receipt (A)
given by the recipient of such notice, consent, waiver or other communication,
(B) mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof.
d. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by the
internal laws of the State of California, without giving effect
to any choice of law or conflict of law provision or rule
(whether of the State of California or any other jurisdictions)
that would cause the application of the laws of any jurisdictions
other than the State of California. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and
federal courts sitting in New York, New York, 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 brought in an inconvenient forum or that
the venue of 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
for such 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. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in
any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR
THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
14
e. This Agreement and the Securities Purchase Agreement constitute
the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and
understandings among the parties hereto with respect to the
subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical counterparts, each of
which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once
executed by a party, may be delivered to the other party hereto
by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments
and documents, as the other party may reasonably request in order
to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations required to be made by the
Investors pursuant to this Agreement shall be made, unless
otherwise specified in this Agreement, by Investors holding at
least a majority of the Registrable Securities, determined as if
all of the Warrants then outstanding have been exercised for
Registrable Securities without regard to any limitations on
exercises of the Warrants.
k. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and
no rules of strict construction will be applied against any
party.
l. This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by,
any other Person.
* * * * * *
15
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: AGENT:
UNIVERSAL DETECTION TECHNOLOGY XXXXXX ASSOCIATES LP
AS AGENTS FOR THE PURCHASERS
By: By:
----------------------------------- ---------------------------------
Name: Xxxxxxx Xxxxxx Name:
Title: Chief Executive Officer Title:
16
SCHEDULE OF PURCHASERS
INVESTOR ADDRESS INVESTOR'S REPRESENTATIVE'S
INVESTOR AND FACSIMILE NUMBER ADDRESS AND FACSIMILE NUMBER
2
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
OTR Stock Transfer
000 XX Xxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxxx (Re: UNIVERSAL DETECTION TECHNOLOGY)
Ladies and Gentlemen:
We are counsel to Universal Detection Technology, a California corporation
(the "COMPANY"), and have represented the Company in connection with that
certain Securities Purchase Agreement (the "PURCHASE AGREEMENT") entered into by
and among the Company and the Purchasers named therein (collectively, the
"HOLDERS") pursuant to which the Company issued to the Holders shares of its
Common Stock, (the "COMMON SHARES") and warrants exercisable for shares of
Company Common Stock (the "WARRANTS"). Pursuant to the Purchase Agreement, the
Company also has entered into a Registration Rights Agreement with the Holders
(the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company agreed,
among other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon exercise of the Warrants under the Securities Act of 1933, as amended (the
"1933 ACT"). In connection with the Company's obligations under the Registration
Rights Agreement, on ____________ ___, 200_, the Company filed a Registration
Statement on Form SB-2 (File No. 333-_____________) (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "SEC") relating to
the Registrable Securities which names each of the Holders as a selling
stockholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:_____________________
CC: [LIST NAMES OF HOLDERS]
1
INDEX OF TERMS
PAGE
1933 Act.....................................................................1
1934 Act.....................................................................4
Agreement....................................................................1
Allowable Grace Period......................................................10
Blue Sky Filing.............................................................11
Business Day.................................................................1
Purchaser....................................................................1
Claims......................................................................11
Common Stock.................................................................1
Company......................................................................1
Filing Deadline..............................................................2
Grace Period.................................................................9
Indemnified Damages.........................................................11
Indemnified Party...........................................................12
Indemnified Person..........................................................11
Inspectors...................................................................7
Investor.....................................................................1
Legal Counsel................................................................3
Person.......................................................................2
Records......................................................................7
Register.....................................................................2
Registrable Securities.......................................................2
Registration Period..........................................................5
Registration Statement.......................................................2
Rule 144....................................................................14
Rule 415.....................................................................2
SEC..........................................................................2
Securities Purchase Agreement................................................1
Violations..................................................................11
Warrant Shares...............................................................1
Warrants.....................................................................1
1
