EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement"), dated April 9,
2002, is by and between PC-EPhone, Inc., a Nevada corporation (the "Company"),
and Process Control (Holdings) Limited, a company organized under the laws of
the Republic of Ireland (the "Holder")
WHEREAS, the Company, its Subsidiaries and the Holder are party to that
certain Credit Agreement, dated as of the date hereof (the "Credit Agreement"),
whereby the Company is issuing to the Holder that certain Convertible
Promissory Note, dated the date hereof (the "Note"), in the maximum principal
amount of $480,000; and
WHEREAS, the Note is convertible at the option of the Holder upon or after
and during the continuance of any Event of Default, or after and during the
continuance of a Default pursuant to Section 7.1(c) of the Credit Agreement,
into shares of the Company's common stock, par value $.001 per share (the
"Common Stock"); and
WHEREAS, the Company has agreed to grant the Holder certain registration
rights in respect of any shares issued or issuable upon conversion of the Note.
NOW, THEREFORE, in consideration of the promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Definitions: Capitalized terms not otherwise defined herein have the
meanings given to such terms in the Credit Agreement
2. Registration Rights.
2.1. Demand Registrations. Upon or at any time, or from time to time,
after and during the continuance of any Event of Default, or after and
during the continuance of a Default pursuant to Section 7.1(c) of the
Credit Agreement, the Company shall, upon the written demand of the
Holder, use its best efforts to effect the registration (a "Demand
Registration") under the Securities Act of such number of shares of Common
Stock issuable upon conversion of the Note ("Registration Shares") then
beneficially owned by the Holder as shall be indicated in a written demand
sent to the Company by the Holder; provided that, if a Demand Registration
is initiated by the Holder, and the Company (or any other stockholder of
the Company with registration rights) then wishes to offer any of its
securities in connection with the registration, no such securities may be
offered by the Company or any other such stockholder unless the managing
underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in the Demand Registration
does not exceed the number which can efficiently be sold in the offering.
Upon receipt of a written demand under this Section 2.1, the Company shall
expeditiously effect the registration under the Securities Act of the
Registration Shares and use its best efforts to have such registration
become and remain effective as provided in Section 2.8. The Holder shall
have the right to select the underwriters for a Demand Registration,
subject to the approval of such selection by the Company (which approval
shall not be unreasonably withheld).
2.2. Piggyback Registrations. (a) Upon or at any time, or from time to
time, after and during the continuance of an Event of Default, or after
and during the continuance of a Default pursuant to Section 7.1(c) of the
Credit Agreement, if the Company proposes to register any of its equity
securities under the Securities Act for sale for cash (otherwise than in
connection with the registration of securities issuable pursuant to an
employee stock option, stock purchase or similar plan or pursuant to a
merger, exchange offer or a transaction of the type specified in Rule
145(a) under the Securities Act), the Company shall give the Holder notice
of such proposed registration at least 30 days prior to the filing of a
registration statement. At the written request of the Holder delivered to
the Company within 20 days after the receipt of the notice from the
Company, which request shall state the number of Registration Shares that
the Holder wishes to sell or distribute publicly under the registration
statement proposed to be filed by the Company, the Company shall use its
best efforts to register under the Securities Act such Registration
Shares, and to cause such registration (a "Piggyback Registration") to
become and remain effective as provided in Section 2.8.
(b) If a Piggyback Registration relates to an underwritten
offering by the Company, and the managing underwriters thereof advise the
Company in writing that in their opinion the number of securities
requested to be included in the registration exceeds the number which can
be sold in the offering, the Company may exclude from the registration all
or any Registration Shares that the Holder proposes to sell on a pro rata
basis by reference to the total number of Registration Shares requested to
be included by the Holder.
(c) If a Piggyback Registration is an underwritten secondary
registration on behalf of holders of the Company's securities who have
exercised demand registration rights and the managing underwriters thereof
advise the Company in writing that in their opinion the number of
securities requested to be included in the registration exceeds the number
which can be sold in the offering, the Company shall first include in the
registration the securities that all holders of Company securities propose
to sell in proportion to the number of securities each proposes to sell.
In the event that all Registration Shares that the Holder desires to sell
are included in such offering, and Company then desires to participate in
such a registration of Securities, the Company shall include in the
registration only such number of securities the Company proposes to sell
as the managing underwriter may permit.
2.3. Indemnification by the Company. In the event of any registration of
any Registration Shares of the Holder under the Securities Act, the
Company shall, and hereby does, indemnify and hold harmless the Holder,
its directors and officers, each other Person who participates as an
underwriter in the offering or sale of such Registration Shares and each
other Person, if any, who controls such party or any such underwriter
within the meaning of Section 15 of the Securities Act against any losses,
claims, damages or liabilities, joint or several, to which such party or
any such director or officer or underwriter or controlling Person may
become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which the Registration
Shares were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or
any amendment or supplement thereto, or any omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances in
which they were made not misleading, and the Company shall reimburse such
party and each such director, officer, underwriter and controlling Person
for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with written
information about such party as a stockholder of the Company furnished to
the Company through an instrument duly executed by such party specifically
stating it is for use in the preparation thereof. Such indemnity shall
remain in full force and effect regardless of any investigation made by or
on behalf of such party or any such director, officer, controlling Person
or underwriter and shall survive any transfer of the Registration Shares.
2.4. Indemnification by Holder. The Company may require, as a condition to
including any Registration Shares of the Holder in any registration
statement filed pursuant to Section 2.1 or 2.2, that the Company shall
have received an undertaking satisfactory to it from the Holder to
indemnify and hold harmless (in the same manner and to the same extent as
set forth in section 2.3) the Company, each director of the Company, each
officer of the Company signing such registration statement, each Person
who participates as an underwriter in the offering or sale of such
Registration Shares and each other Person, if any, who controls the
Company or any such underwriter within the meaning of Section 15 of the
Securities Act with respect to any untrue statement or alleged untrue
statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein or any amendment or supplement thereto, if
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written
information about the Holder as a stockholder of the Company furnished to
the Company through an instrument duly executed by the Holder specifically
stating that it is for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement. Such indemnity shall remain in full force and
effect, regardless of any investigation made by or an behalf of the
Company or any such director, officer or controlling Person and shall
survive the transfer by the seller of the securities of the Company being
registered.
2.5. Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving
a claim referred to in Section 2.3 or 2.4, such indemnified party will, if
a claim in respect thereof is to be made against an indemnifying party,
give notice to the latter of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its
obligations under Section 2.3 or 2.4, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party, unless in
such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist or the
indemnified party may have defenses not available to the indemnifying
party in respect of such claim, the indemnifying party shall be entitled
to participate in and to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall be liable
for any settlement of any action or proceeding effected without its
written consent. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release
from all liability in respect to such claim or litigation.
2.6. Indemnification Payments. The indemnification required by Sections
2.3 and 2.4 hereof 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 expense, loss, damage or liability is incurred.
2.7. Adjustments Affecting Registration Shares. The Company shall not
effect or permit to occur any combination, subdivision or other
recapitalization of any of its securities that would (i) materially
adversely affect the ability of the Holder to include its Registration
Shares, or reduce the number of Registration Shares that the Holder would
otherwise be entitled to include pursuant to this Agreement, in any
registration of securities of the Company contemplated by this Agreement
or (ii) materially adversely affect the marketability of such Registration
Shares under any such registration.
2.8. Registration Covenants of the Company. In the event that any
Registration Shares are to be registered pursuant to Section 2.1 or 2.2,
the Company covenants and agrees that it shall use its best efforts to
effect the registration and cooperate in the sale of the Registration
Shares to be registered and shall as expeditiously as possible:
(a) (i) within 60 days prepare and file with the SEC a registration
statement with respect to the Registration Shares (as well as any
necessary amendments or supplements thereto) (a "Registration Statement")
and (ii) use its best efforts to cause the Registration Statement to
become effective; provided, however, that the Company may extend such 60
day period for not more than an additional 60 days if (A) such delay would
relieve the Company of the obligation to include any interim financial
statements in the Registration Statement or (B) the Company would be
required to disclose in the Registration Statement any material nonpublic
information and the Company concludes that the disclosure of such
information would be inadvisable at that time;
(b) prior to the filing described in clause (a), furnish to the
Holder copies of the Registration Statement and any amendments or
supplements thereto and any prospectus forming a part thereof, which
documents shall be subject to the review of counsel for the Holder (but
not approval of such counsel except with respect to any statement in the
Registration Statement which relates to the Holder);
(c) notify the Holder, promptly after the Company shall receive
notice thereof, of the time when the Registration Statement becomes
effective or when any amendment or supplement or any prospectus forming a
part of the Registration Statement has been filed;
(d) notify the Holder promptly of any request by the SEC for the
amending or supplementing of the Registration Statement or prospectus or
for additional information;
(e) advise the Holder after the Company shall receive notice or
otherwise obtain knowledge of the issuance of any order by the SEC
suspending the effectiveness of the Registration Statement or any
amendment thereto or of the initiation or threatening of any proceeding
for that purpose and (B) promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal promptly if a stop
order should be issued;
(f) prepare and file with the SEC such amendments and supplements to
the Registration Statement and the prospectus forming a part thereof as
may be necessary to keep the Registration Statement effective for a period
of time necessary to permit the Holder to dispose of all its Registration
Shares and (B) comply with the provisions of the Securities Act with
respect to the disposition of all Registration Shares covered by the
Registration Statement during such period in accordance with the intended
methods of disposition by the Holder set forth in the Registration
Statement;
(g) furnish to the Holder such number of copies of the Registration
Statement, each amendment and supplement thereto, the prospectus included
in the Registration Statement (including any preliminary prospectus) and
such other documents as the Holder may reasonably request in order to
facilitate the disposition of the Registration Shares owned by the Holder;
(h) use its best efforts to register or qualify such Registration
Shares under such other securities or blue sky laws of such jurisdictions
as determined by the underwriters after consultation with the Company and
the Holder and do any and all other acts and things which may be
reasonably necessary or advisable to enable the Holder to consummate the
disposition in such jurisdictions of the Registration Shares;
(i) notify the Holder, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening of
any event as a result of which the Registration Statement would contain an
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
not misleading, and, at the request of the Holder, prepare a supplement or
amendment to the Registration Statement so that the Registration Statement
shall not, to the Company's knowledge, contain an 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 not misleading;
(j) if the Registration Shares are securities of a class then listed
on a securities exchange, NASDAQ or quoted on the OTC Bulletin Board,
cause the Registration Shares to be so listed or quoted; and if the
Registration Shares are securities of a class not then listed on a
securities exchange or NASDAQ or quoted on the OTC Bulletin Board, use its
best efforts to facilitate the listing of the Registration Shares on a
securities exchange or NASDAQ or the quotation of the Registration Shares
on the OTC Bulletin Board;
(k) provide a transfer agent and registrar, which may be a single
entity, for all the Registration Shares not later than the effective date
of the Registration Statement;
(l) enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other action, if any, as
the Holder or the underwriters shall reasonably request in order to
expedite or facilitate the disposition of the Registration Shares;
(m) make available for inspection by the Holder, any underwriter
participating in any disposition pursuant to the Registration Statement
and any attorney, accountant or other agent retained by the Holder or any
such underwriter all financial and other records, pertinent corporate
documents and properties of the Company reasonably requested by the Holder
and such Persons and (B) cause the Company's officers, directors and
employees to supply all information reasonably requested by the Holder or
any such underwriter, attorney, accountant or agent in connection with the
Registration Statement;
(n) use its best efforts to cause the Registration Shares covered by
the Registration Statement to be registered with or approved by such other
Governmental Authorities as may be necessary to enable the Holder to
consummate the disposition of such Registration Shares; and
(o) obtain a comfort letter or letters from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by comfort letters as the Holder may reasonably
request.
2.9. Expenses. The Company shall pay, on behalf of the Holder, all the
expenses in connection with any Demand Registration or Piggyback
Registration, including all registration, filing and regulatory review
fees, all fees and expenses of complying with securities or blue sky laws,
all listing fees, all word processing, duplicating and printing expenses,
all messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants (including the
expenses of comfort letters required by or incident to such performance
and compliance), the reasonable fees and disbursements of any counsel
retained by the Holder, any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities, but excluding any
underwriting discounts and commissions and transfer taxes, if any. In any
registration, the Holder shall pay for its own underwriting discounts and
commissions and transfer taxes.
2.10. Assignment of Registration Rights. The rights of the Holder under
this Agreement shall be transferable to anyone to whom the Holder
transfers the Note or any Registration Shares (other than in a sale exempt
from registration under the Securities Act by reason of Rule 144 under the
Securities Act or a Demand Registration or a Piggyback Registration).
2.11. No Preferential Registration. Notwithstanding any other provision of
this Agreement, if the Company grants registration rights with respect to
equity securities to any other Person on terms that the Holder reasonably
considers preferential to the terms of this Section 2, the Holder shall be
entitled to registration rights with such preferential terms.
3. GENERAL.
3.1. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF).
3.2. INTERPRETATION. If any term or provision of this Agreement shall be
held invalid, illegal or unenforceable, the validity of all other terms
and provisions hereof shall in no way be affected thereby.
3.3. AMENDMENTS, WAIVERS AND CONSENT. None of the terms or provisions of
this Agreement may be waived, altered, modified or amended orally, but
only by an agreement in writing signed by the Company or any successor or
assign of the Company and the Holder or any successor or assign. No
failure to exercise, nor any delay in exercising, on the part of the
Holder, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the Holder of
any right or remedy hereunder on any one occasion shall not be construed
as a bar to any right or remedy which the Holder would otherwise have on
any future occasion. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies provided by
law.
3.4. SUCCESSORS AND ASSIGNS; TRANSFERABILITY. This Agreement shall be
binding upon the Company and its successor and assigns and shall inure to
the benefit of the Holder and its successors and assigns (which shall
include transferees), except that the Company may not assign or otherwise
transfer any of its rights or obligations under this Agreement.
3.5. Notices. All notices, requests, consents and demands shall be made in
the manner and to the addresses specified in the Credit Agreement.
3.6. NON-BUSINESS DAYS. If any date that may at any time be specified in
this Agreement as a date for the taking of any action under this Agreement
shall fall on a day that is not a Business Day, then the date for the
taking of that action shall be the next subsequent Business Day.
3.7. Survival. The provisions of this Agreement shall continue in full
force and effect until all Registration Shares have been sold by the
Holder (or its successors and assigns) in a sale exempt from registration
under the Securities Act by reason of Rule 144 under the Securities Act or
a Demand Registration or a Piggyback Registration.
3.8. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION, ETC. IN THE EVENT OF
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE COMPANY
WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL BY JURY, ALL
RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-CLAIMS
(UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF
ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR
ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM NON CONVENIENS OR
IMPROPER VENUE. THE COMPANY HEREBY IRREVOCABLY CONSENTS TO THE
NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF
ANY FEDERAL COURT LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY
LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
IF ANY TERM OR PROVISION OF THIS AGREEMENT SHALL BE HELD INVALID, ILLEGAL
OR UNENFORCEABLE, THE VALIDITY OF ALL OTHER TERMS AND PROVISIONS HEREIN
SHALL IN NO WAY BE AFFECTED THEREBY.
3.9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of
which together shall constitute but one agreement.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first above written.
PC-EPHONE, INC.
By:_________________________
Name:
Title:
PROCESS CONTROL (HOLDINGS) LIMITED
By:___________________________
Name:
Title:
