EXHIBIT 99.4
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
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THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), entered into as
of ________ ___, 1997 by and between Offshore Nominees, with offices at Xxxxxxx
Xxxxx, 0/xx/ Xxxxx, 00/00 Xxxx Xxxxxx, Xxxxxxxx, XX00 Xxxxxxx (xxx "Buyer"), and
Citadel Computer Systems, Inc., Inc., a Delaware corporation with offices at
0000 Xxxxxx Xxxxx Xxxx., Xxxxx 000, Xxxxxx, Xxxxx 00000, U. S. A. (the
"Company").
W I T N E S S E T H:
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WHEREAS, pursuant to a Offshore Securities Subscription Agreement,
dated as of the date hereof (the "Subscription Agreement"), by and between the
Company and the Buyer, the Company has agreed to sell and the Buyer has agreed
to purchase U.S. $1,500,000 of the Company's 5% Redeemable Convertible Notes due
________ ___, 2000 (the "Notes") convertible into shares of the Company's common
stock, $0.01 par value (the "Shares");
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Buyer's agreement to enter into the Subscription Agreement, the Company has
agreed to provide the Buyer with certain registration rights with respect to the
Shares as set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the
Subscription Agreement and this Registration Rights Agreement, the Company and
the Buyer agree as follows:
1. Certain Definitions. As used in this Agreement, the following
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terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean the Shares issued to Buyer or its
designee upon conversion of the Notes or upon any stock split, stock dividend,
recapitalization or similar event with respect to such Shares; provided,
however, that Registrable Securities shall cease to be Registrable Securities
when they may be sold pursuant to Rule 144 under the Securities Act.
Registrable Securities shall not include the Notes.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with Buyer's exercise of its registration rights under
this Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, reasonable fees and disbursements of one counsel to Holders
participating in the registration for a review of the Registration Statement and
related documents, and the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
the Company, which shall be paid in any event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of
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counsel for Holder not included with "Registration Expenses".
"Holder" shall include the Buyer and any permitted transferee of
Notes, Shares or Registrable Securities which have not been sold to the public
to whom the registration rights conferred by this Agreement have been
transferred in compliance with Section 11 herein.
"Registration Statement" shall have the meaning set forth in Section
3(a) herein.
"Regulation S" shall mean Regulation S as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Rule 144" shall mean Rule 144 under the Securities Act, as such rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
"Securities Act" shall mean the United States Securities Act of 1933,
as amended.
2. Conditions to Registration Requirement. The Company's obligation
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hereunder to register Registrable Securities shall arise in the event that
Company receives a written opinion of counsel for the Holder (which counsel
shall be of a law firm experienced in United States securities matters)
indicating that there has been an amendment or change to the Securities Act or
Regulation S after the date hereof, or the promulgation by the Commission of an
interpretative release or other statement after the date hereof, which prohibits
or restricts Holder from reselling Registrable Securities without registration
under the Securities Act (a "Registration Trigger Event"). Notwithstanding the
foregoing, it will not be deemed a "Registration Trigger Event" to the extent
that Holder desires to engage in a distribution of the Registrable Securities
which otherwise requires registration under the Securities Act or in activity
which otherwise deems Holder to be a statutory underwriter under Section 5 of
the Securities Act. In the event that a Registration Trigger Event has
occurred, then Holder shall be entitled to require the Company to register all
of Holder's Registrable Securities in accordance with this Agreement.
3. Request for Registration.
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(a) Upon the occurrence of a Registration Trigger Event, if the
Company shall receive from a Holder (or, in the event there is more than one
Holder as a result of the issuance by the Company of the Notes, the Company
shall receive written notice from such Holders acting with respect to their
rights under this Agreement according to a vote of a majority-in-interest of the
Holders) a written request that the Company effect any registration with respect
to any Registrable Securities, the Company shall use its commercially reasonable
efforts to effect such registration (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request in
the states specified in such request. Notwithstanding the foregoing, the
Company shall not be obligated hereunder to effect such registration unless the
proposed public offering price of the securities to be included in such
registration shall be at least $100,000 (before deducting underwriting discounts
and commissions). If the registration request pertains to any Registrable
Securities not yet outstanding because conversion rights have not been
exercised, Company may condition the registration of such securities on an
irrevocable undertaking to pay all expenses incident to such registration if
such conversion rights are not exercised prior to the effective date of the
registration statement.
Subject to the previous paragraph, the Company shall file (i) a
registration statement with the Commission pursuant to Rule 415 under the
Securities Act on Form S-3 under
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the Securities Act (or in the event that the Company in ineligible to use such
form, such other form as the Company is eligible to use under the Securities
Act) covering the Registrable Securities so requested to be registered
("Registration Statement"); (ii) such state securities filings as shall have
been requested by the Holder; and (iii) any required filings with The Nasdaq
Stock Market, Inc. or exchange where the Shares are traded, as soon as
practicable, after receipt of the request of the Holder. Thereafter the Company
shall use its best efforts to have such Registration Statement and other filings
declared effective.
(b) (i) Subject to the conditions contained in Section 3(a) above,
if the Company fails to file a Registration Statement complying with the
requirements of this Agreement within 45 days from the date of receipt by the
Company of the Holder's written request (provided, however, that under the
circumstances described in 3(e)(i)(ii) or (iii) below the Company may have an
additional 45 days thereafter to file such Registration Statement by providing
written notice to the Holders requesting such registration indicating that the
Company is diligently pursuing the filing of such Registration Statement) or if
such Registration Statement has not become effective within 90 days from the
date of filing thereof, the Holder shall have, in addition to and without
limiting any other rights it may have at law, in equity or under the Notes, the
Subscription Agreement, or this Agreement (including the right to specific
performance), the right to receive, as liquidated damages, the payments as
provided in subparagraph (ii) of this section.
(ii) If after ninety (90) days from the date of filing of the
Registration Statement, the Registration Statement has not been declared
effective by the Commission because the Company (A) has been negligent in timely
responding to any comments from the Commission on the Registration Statement;
(B) has failed to use its commercially reasonable efforts to cause the
Registration Statement to be declared effective by the Commission; (C) has
otherwise acted in bad faith in honoring its commitment to cause the
Registration Statement to be declared effective; (D) has commenced a corporate
action such as an acquisition, merger divestiture, asset sale, reorganization or
similar transaction; or (E) has filed a Registration Statement with the
Commission to issue public securities in accordance with the Securities Act
which does not include a registration of the Registrable Securities, then the
Company shall pay to the Buyer an amount equal to 3% of the Initial Principal
Amount (as defined in the Note) in cash, for each 30-day period after the ninety
(90) day period that such Registration Statement is not effective (which payment
shall be pro rata for any period of less than 30 days). In addition to the
foregoing, if after 180 days from the date hereof the Registration Statement has
not been declared effective by the Commission due to any of the causes described
in clauses (A) through (E) of this paragraph 3(b)(ii), then at the option of
such Holder, the Company shall be required to redeem all the Notes held by such
Holder at a redemption price equal to 140% of the Initial Principal Amount of
the Note plus accrued interest thereon, together with all other payments due
under this paragraph and under the Note and the Agreement.
(iii) The Company acknowledges that its failure to register the
Registrable Securities in accordance with this Agreement will cause the Holder
to suffer damages in an amount that will be difficult to ascertain.
Accordingly, the parties agree that it is appropriate to include in this
Registration Rights Agreement a provision for liquidated damages. The parties
acknowledge and agree that the liquidated damages provisions set forth above
represent the parties' good faith effort to quantify such damages and, as such,
agree that the form and amount of such liquidated damages are reasonable and
will not constitute a penalty.
(iv) In computing the time periods provided in this paragraph
3(b), any delays arising from the failure or refusal of any Holder to provide
information which the Company's counsel or the Commission states in writing is
required for inclusion on the Registration Statement within ten (10) days of a
written request by the Company to provide such information, shall increase the
number of days for the Company to act by a corresponding number.
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(c) If there is more than one Holder, such Holders shall act with
respect to their rights under this Agreement according to the vote of a
majority-in-interest of the Holders.
(d) The Company shall make available for inspection by a
representative or representatives of the Holder, and any attorney or accountant
retained by such Holder, all financial and other records customary for such
purposes, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all information
reasonably requested by any such representative, attorney or accountant in
connection with such Registration Statement. The Holder will agree to keep all
non-public information supplied to it confidential until such information is
included in a Registration Statement which has been made publicly available.
(e) The Company shall not be obligated to keep such Registration
Statement continuously effective for a period of more than two years from the
date it is declared effective by the Commission; provided, however, that if so
requested by the holders of a majority-in-interest of the Registrable Securities
the Company shall agree to extend the period for which the Registration
Statement remains effective to the same extent that "suspension periods" are
imposed pursuant to the next paragraph, but only so long as the then unsold
Registrable Securities covered by such Registration are too numerous to be sold
under the volume limitations of Rule 144 in any applicable three-month period by
any holder.
Following the effectiveness of the Registration Statement
pursuant to this Agreement, the Company may, at any time, suspend the
effectiveness of such Registration Statement and sales thereunder for up to
forty-five (45) days, as appropriate (a "Suspension Period"), by giving notice
to each holder (or underwriter, if any) selling thereunder, if the Company shall
have determined that the Company may be required to disclose any material
corporate development which disclosure (i) may have a material adverse effect on
the Company, (ii) may have a material adverse affect on the transaction or
matter to be disclosed, or (iii) would be detrimental to the Company or its
stockholders. Notwithstanding the foregoing, no more than two Suspension Periods
(i.e., ninety (90) days) may occur in immediate succession, and the Company
shall use its best efforts to limit the duration and number of any suspension
periods. Holder agrees (and shall require that any underwriter agree) that, upon
receipt of any notice from the Company of any Suspension Period, Holder shall
forthwith discontinue disposition of shares covered by the Registration
Statement and related prospectus or other offering materials (the "Prospectus")
until such Holder (i) is advised in writing by the Company that the use of the
applicable Prospectus may be resumed, (ii) has received copies of a supplemental
or omitted Prospectus, if applicable, and (iii) has received copies of any
additional or supplemental filings which are incorporated or deemed to be
incorporated by reference in such Prospectus.
4. Expenses of Registration. All Registration Expenses incurred in
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connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses shall be borne by the Holder.
5. Registration on Form S-3. Although the Company shall use its
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commercially reasonable efforts to qualify for registration on Form S-3 or any
comparable or successor form or forms, or in the event that the Company is
ineligible to use such form, such form as the Company is eligible to use under
the Securities Act, nothing in the Subscription Agreement or this Agreement is
intended to require the Company to pay dividends in order to use Form S-3.
6. Registration Procedures. In the case of each registration
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effected by the Company pursuant to this Agreement, the Company will keep the
Holder advised in writing as to the initiation of each registration and as to
the completion thereof. At its expense, the Company
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will use its best efforts to:
(a) Keep such Registration Statement effective for the period
ending twenty-four (24) months after the registration has been declared
effective by the Commission or until the Holder has completed the distribution
described in the Registration Statement relating thereto, whichever first
occurs.
(b) Furnish such number of Prospectuses and other documents
incident thereto as the Holder from time to time may reasonably request.
7. Indemnification.
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(a) Company Indemnity. The Company will indemnify the Holder,
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each of its officers, directors and partners, and each person controlling
Holder, within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any Prospectus, (including any related Registration Statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act or
any state securities law or in either case, any rule or regulation thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse the Holder, each of its officers, directors and partners, and
each person controlling such Holder, for any legal and any other expenses
reasonably incurred in connection with investigating and defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by Holder and
stated to be specifically for use therein. The indemnity agreement contained in
this Section 7(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent will not be unreasonably withheld).
(b) Holder Indemnity. The Holder will, if Registrable
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Securities held by it are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, partners, and each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, each
other Holder (if any), and each of their officers, directors and partners, and
each person controlling such other Holder against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statement therein not
misleading, and will reimburse the Company and such other holders and their
directors, officers and partners, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by Holder and
stated to be specifically for use therein, and provided that the maximum amount
for which the Holder shall be liable under this indemnity shall not exceed the
net proceeds received by the Holder from the sale of the Registrable Securities.
The indemnity agreement contained in this Section 7(b) shall not apply to
amounts paid in settlement of any such claims, losses, damages or liabilities if
such
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settlement is effected without the consent of Holder (which consent shall not be
unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under
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this Section 7 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after the
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section 7
except to the extent that the Indemnifying Party is materially and adversely
affected by such failure to provide notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
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. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
8. Contribution. If the indemnification provided for in Section 7
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herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying the Indemnified Party, shall contribute to the amount paid or
payable by the Indemnified Party as a result of such losses, claims, damages or
liabilities (i) as between the Company and the Holder on the one hand and the
underwriters on the other, in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Holder on the one hand or
underwriters, as the case may be, on the other from the offering of the
Registrable Securities, or if such allocation is not permitted by applicable
law, in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company on the one hand and of the
Holder or underwriters, as the case may be, on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations and (ii) as
between the Company on the one hand and the Holder on the other, in such
proportion as is appropriate to reflect the relative fault of the Company and of
the Holder in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations.
The relative benefits received by the Company on the one hand and the
Holder or the underwriters, as the case may be, on the other shall be deemed to
be in the same proportion as the proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
from the initial sale of the Notes which can be converted into Registrable
Securities by the Company to the Holder pursuant to the Subscription Agreement
which corresponds to this Agreement bear to the gain realized by such Holder or
the total underwriting discounts and commissions received by the underwriters as
set forth in the table on the cover page of the prospectus, as the case may be.
The relative fault of the Company on the one hand and of the Holder or
underwriters, as the case may be, on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company, by the Holder or by the underwriters.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 8 exceed the amount that the Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 7(a) or 7(b) hereof
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had been available under the circumstances.
The Company and the Holder agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation (even if the Holder or the underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraphs shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by the Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of the Holder, the net proceeds received by the Holder from the sale of
Registrable Securities or (ii) in the case of an underwriter, the total price at
which the Registrable Securities purchased by it and distributed to the public
were offered to the public exceeds, in any such case, the amount of any damages
that the Holder or underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
9. Survival. The indemnity and contribution agreements contained in
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Sections 7 and 8 shall remain operative and in full force and effect regardless
of (i) any termination of the Subscription Agreement or any underwriting
agreement, (ii) any investigation made by or on behalf of any Indemnified Party
or by or on behalf of the Company and (iii) the consummation of the sale or
successive resales of the Registrable Securities.
10. Information by Holder. The Holder shall furnish to the Company
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such information regarding such Holder and the distribution proposed by such
Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement.
11. Transfer or Assignment of Registration Rights. The rights,
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granted to Buyer by the Company under this Registration Rights Agreement, to
cause the Company to register Registrable Securities, may be transferred or
assigned to a transferee or assignee of not less than $50,000 in principal
amount of Notes, provided that the Company is given written notice by Holder at
the time of or within a reasonable time after said transfer or assignment,
stating the name and address of said transferee or assignee and identifying the
securities with respect to which such registration rights are being transferred
or assigned, and provided further that the transferee or assignee of such rights
is not deemed by the board of directors of the Company, in its reasonable
judgment, to be a competitor of the Company; and provided further that the
transferee or assignee of such rights agrees to be bound by this Agreement.
Buyer is one of a group of holders of Registrable Securities issued or
issuable pursuant to a total aggregate amount of up to $1.5 million of notes
purchased by Buyer and others in a transaction designed to qualify as an
offering pursuant to Regulation S. Any action to be taken under this Agreement
or any term of this Agreement may be amended or waived only with written action
by the Company and the holders of at least a majority-in-interest of the total
of the Registrable Securities. Any action, amendment or waiver effected in
accordance with this paragraph shall be binding upon each of the other holders
of Registrable Securities at the time then outstanding.
12. Miscellaneous.
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(a) Entire Agreement. This Agreement contains the entire
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understanding and agreement of the parties, and may not be modified or
terminated except by a
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written agreement signed by both parties.
(b) Notices. Any notice or other communication given or
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permitted under this Agreement shall be in writing and shall be deemed to have
been duly given if personally delivered or sent by registered or certified mail,
return receipt requested, postage prepaid or by air courier, (a) if to Buyer, at
its address hereinabove set forth, (b) if to the Company, at its address
hereinabove set forth, and (c) if to a holder other than Buyer, at the address
thereof furnished by like notice to the Company, or (d) to any such addresses at
such other address or addresses as shall be so furnished to the other parties by
like notice.
(c) Gender of Terms. All terms used herein shall be deemed to
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include the feminine and the neuter, and the singular and the plural, as the
context requires.
(d) Governing Law; Consent of Jurisdiction. This Agreement and
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the validity and performance of the terms hereof shall be governed by and
construed in accordance with the laws of the State of Delaware. The parties
hereto hereby consent to, and waive any objection to the exercise of, personal
jurisdiction in the State of Delaware with respect to any action or proceeding
arising out of this Agreement.
(e) Titles. The titles used in this Agreement are used for
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convenience only and are not to be considered in construing or interpreting this
Agreement.
(f) Prospectus Delivery Requirements. Holder agrees, on
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Holder's behalf, and shall require any transferee or assignee pursuant to
Section 11 above to agree, to comply with all prospectus delivery requirements
applicable to resales of the securities pursuant to the Registration Statement.
(g) Termination. The rights of Holder to require the Company to
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request a registration pursuant to this Agreement shall terminate on the date
which is five (5) years from the date of this Agreement.
(Signature Page Follows)
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[REGISTRATION RIGHTS AGREEMENT - SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
BUYER CITADEL COMPUTER SYSTEMS, INC.
a Delaware Corporation
By: __ By:
Name: __ Name: Xxxxxx X. Xxxxxxx
Title: __ Title: Chief Operating Officer
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