REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement dated January 16, 2001 (this "AGREEMENT") by
and between The ▇▇▇▇▇ Group, Inc., a Delaware corporation, with principal
executive offices located at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
(the "COMPANY"), and (the "INITIAL
INVESTOR"). ------------------ ----------------------
WHEREAS, prior to the date hereof, the Company issued and sold
to the Initial Investor shares (the "BRIDGE LOAN SHARES") of
------------
newly-issued common stock, par value $0.001 per share (the "COMMON STOCK"), of
the Company;
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement of even date herewith (the "SECURITIES PURCHASE
AGREEMENT") by and between the Initial Investor and the Company, the Company has
agreed to issue and sell to the Initial Investor an 8% Convertible Debenture
(the "DEBENTURE") of the Company in the aggregate principal amount of
$ which, upon the terms of and subject to the conditions
-------------------
contained therein, is convertible into shares of Common Stock and
WHEREAS, to induce the Initial Investor to execute and deliver
the Securities Purchase Agreement, the Company has agreed to provide with
respect to the Bridge Loan Shares and the shares (the "DEBENTURE SHARES") of
Common Stock issuable in lieu of cash dividend payments on the Debenture and
upon conversion of the Debenture certain registration rights under the
Securities Act (as such term is hereinafter defined);
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. DEFINITIONS
(a) As used in this Agreement, the following terms shall have the meanings:
(i) "AFFILIATE" of any specified Person means any other Person who
directly, or indirectly through one or more intermediaries, is in
control of, is controlled by, or is under common control with, such
specified Person. For purposes of this definition, control of a Person
means the power, directly or indirectly, to direct or cause the
direction of the management and policies of such Person whether by
contract, securities, ownership or otherwise; and the terms
"CONTROLLING" and "CONTROLLED" have the respective meanings
correlative to the foregoing.
(ii) "CLOSING DATE" means January 16, 2001.
(iii) "COMMISSION" means the Securities and Exchange Commission.
(iv) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
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amended, and the rules and regulations of the Commission thereunder,
or any similar successor statute.
(v) "INVESTOR" means each of the Initial Investor and any transferee
or assignee of Registrable Securities which agrees to become bound by
all of the terms and provisions of this Agreement in accordance with
Section 8 hereof.
(vi) "PERSON" means any individual, partnership, corporation, limited
liability company, joint stock company, association, trust,
unincorporated organization, or a government or agency or political
subdivision thereof.
(vii) "PROSPECTUS" means the prospectus (including, without
limitation, any preliminary prospectus and any final prospectus filed
pursuant to Rule 424(b) under the Securities Act, including any
prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in
reliance on Rule 430A under the Securities Act) included in the
Registration Statement, as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of
the Registrable Securities covered by the Registration Statement and
by all other amendments and supplements to such prospectus, including
all material incorporated by reference in such prospectus and all
documents filed after the date of such prospectus by the Company under
the Exchange Act and incorporated by reference therein.
(viii) "PUBLIC OFFERING" means an offer registered with the Commission
and the appropriate state securities commissions by the Company of its
Common Stock and made pursuant to the Securities Act.
(ix) "REGISTRABLE SECURITIES" means the Bridge Loan Shares and the
Debenture Shares; PROVIDED, HOWEVER, a share of Common Stock shall
cease to be a Registrable Security for purposes of this Agreement when
it no longer is a Restricted Security.
(x) "REGISTRATION STATEMENT" means a registration statement of the
Company filed on an appropriate form under the Securities Act
providing for the registration of, and the sale on a continuous or
delayed basis by the holders of, all of the Registrable Securities
pursuant to Rule 415 under the Securities Act, including the
Prospectus contained therein and forming a part thereof, any
amendments to such registration statement and supplements to such
Prospectus, and all exhibits to and other material incorporated by
reference in such registration statement and Prospectus.
(xi) "RESTRICTED SECURITY" means any Bridge Loan Shares or Debenture
Shares, except any such share that (i) has been registered pursuant to
an effective registration statement under the Securities Act and sold
in a manner contemplated by the prospectus included in such
registration statement, (ii) has been transferred in compliance with
the resale
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provisions of Rule 144 under the Securities Act (or any successor
provision thereto) or is transferable pursuant to paragraph (k) of Rule
144 under the Securities Act (or any successor provision thereto) or
(iii) otherwise has been transferred and a new share of Common Stock
not subject to transfer restrictions under the Securities Act has been
delivered by or on behalf of the Company.
(xii) "SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder, or any
similar successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase
Agreement.
2. REGISTRATION
(a) FILING AND EFFECTIVENESS OF REGISTRATION STATEMENT. The Company shall
prepare and file with the Commission not later than thirty (30) days after
the Closing Date, a Registration Statement (using a conversion price with
respect to the Debenture Shares of One Cent ($0.01) per share) relating to
the offer and sale of the Registrable Securities and shall use its best
efforts to cause the Commission to declare such Registration Statement
effective under the Securities Act as promptly as practicable but in no
event later than one hundred and twenty (120) days after the Closing Date.
The Company shall promptly (and, in any event, no more than twenty-four
(24) hours after it receives comments from the Commission), notify the
Initial Investor when and if it receives any comments from the Commission
on the Registration Statement and promptly forward a copy of such comments,
if they are in writing, to the Initial Investor. At such time after the
filing of the Registration Statement pursuant to this Section 2(a) as the
Commission indicates, either orally or in writing, that it has no further
comments with respect to such Registration Statement or that it is willing
to entertain appropriate requests for acceleration of effectiveness of such
Registration Statement, the Company shall promptly, and in no event later
than two (2) business days after receipt of such indication from the
Commission, request that the effectiveness of such Registration Statement
be accelerated within forty-eight (48) hours of the Commission's receipt of
such request. The Company shall not include any other securities in the
Registration Statement relating to the offer and sale of the Registrable
Securities other than those securities issued or issuable by the Company to
PHD or investors introduced to the Company by PHD and which securities are
covered by registration rights agreements containing terms and conditions
substantially similar to those contained herein (collectively, the "OTHER
REGISTRATION RIGHTS AGREEMENTS"). The Company shall notify the Initial
Investor by written notice that such Registration Statement has been
declared effective by the Commission within twenty-four (24) hours of such
declaration by the Commission.
(b) ELIGIBILITY FOR USE OF FORM S-3. The Company agrees that at such time
as it meets all the requirements for the use of Securities Act Registration
Statement on Form S-3 it shall file all reports and information required to
be filed by it with the Commission in a timely manner and take all such
other action so as to maintain such eligibility for the use of such form.
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(c) (i) If the Company proposes to register any of its warrants, Common
Stock or any other shares of common stock of the Company under the
Securities Act (other than a registration (A) on Form S-8 or S-4 or any
successor or similar forms, (B) relating to Common Stock or any other
shares of common stock of the Company issuable upon exercise of employee
share options or in connection with any employee benefit or similar plan of
the Company or (C) in connection with a direct or indirect acquisition by
the Company of another Person or any transaction with respect to which Rule
145 (or any successor provision) under the Securities Act applies), whether
or not for sale for its own account, it will each such time, give prompt
written notice at least twenty (20) days prior to the anticipated filing
date of the registration statement relating to such registration to each
Investor, which notice shall set forth such Investor's rights under this
Section 2(c) and shall offer such Investor the opportunity to include in
such registration statement such number of Registrable Securities as such
Investor may request. Upon the written request of any Investor made within
ten (10) days after the receipt of notice from the Company (which request
shall specify the number of Registrable Securities intended to be disposed
of by such Investor), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities that
the Company has been so requested to register by each Investor, to the
extent requisite to permit the disposition of the Registrable Securities so
to be registered; PROVIDED, HOWEVER, that (A) if such registration involves
a Public Offering, each Investor must sell its Registrable Securities to
any underwriters selected by the Company with the consent of such Investor
on the same terms and conditions as apply to the Company and (B) if, at any
time after giving written notice of its intention to register any
Registrable Securities pursuant to this Section 2 and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register
such Registrable Securities, the Company shall give written notice to each
Investor and, thereupon, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration. The
Company's obligations under this Section 2(c) shall terminate on the date
that the Registration Statement to be filed in accordance with Section 2(a)
is declared effective by the Commission.
(ii) If a registration pursuant to this Section 2(c) involves a Public
Offering and the managing underwriter thereof advises the Company that, in
its view, the number of shares of Common Stock that the Company and the
Investors intend to include in such registration exceeds the largest number
of shares of Common Stock that can be sold without having an adverse effect
on such Public Offering (the "MAXIMUM OFFERING SIZE"), the Company will
include in such registration only such number of shares of Common Stock as
does not exceed the Maximum Offering Size, and the number of shares in the
Maximum Offering Size shall be allocated among the Company, the Investors
and any other sellers of Common Stock in such Public Offering ("THIRD-PARTY
SELLERS"), FIRST, pro rata among the Investors and the Third-Party Sellers
covered by one of the Other Registration Rights Agreements until all the
shares of Common Stock originally proposed to be offered for sale by the
Investors and such Third-Party Sellers have been allocated, and SECOND, pro
rata among the Company and any other Third-Party Sellers, in each case on
the basis of the relative number of shares of Common Stock originally
proposed to be offered for sale under such registration by each of the
Investors, the Company and the Third-Party Sellers, as the
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case may be. If as a result of the proration provisions of this Section
2(c)(ii), any Investor is not entitled to include all such Registrable
Securities in such registration, such Investor may elect to withdraw its
request to include any Registrable Securities in such registration. With
respect to registrations pursuant to this Section 2(c), the number of
securities required to satisfy any underwriters' over-allotment option
shall be allocated among the Company, the Investors and any Third-Party
Seller pro rata on the basis of the relative number of securities offered
for sale under such registration by each of the Investors, the Company and
any such Third-Party Sellers before the exercise of such over-allotment
option.
3. OBLIGATIONS OF THE COMPANY
In connection with the registration of the Registrable Securities, the
Company shall:
(a) Promptly (i) prepare and file with the Commission such amendments
(including post-effective amendments) to the Registration Statement
and supplements to the Prospectus as may be necessary to keep the
Registration Statement continuously effective and in compliance with
the provisions of the Securities Act applicable thereto so as to
permit the Prospectus forming part thereof to be current and useable
by Investors for resales of the Registrable Securities for a period of
five (5) years from the date on which the Registration Statement is
first declared effective by the Commission (the "EFFECTIVE TIME") or
such shorter period that will terminate when all the Registrable
Securities covered by the Registration Statement have been sold
pursuant thereto in accordance with the plan of distribution provided
in the Prospectus, transferred pursuant to Rule 144 under the
Securities Act or otherwise transferred in a manner that results in
the delivery of new securities not subject to transfer restrictions
under the Securities Act (the "REGISTRATION PERIOD") and (ii) take all
lawful action such that each of (A) the Registration Statement and any
amendment thereto does not, when it becomes effective, contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, not misleading and (B) the Prospectus forming part of the
Registration Statement, and any amendment or supplement thereto, does
not at any time during the Registration Period include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
(b) During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the
Company covered by the Registration Statement until such time as all
of such Registrable Securities have been disposed of in accordance
with the intended methods of disposition by the Investors as set forth
in the Prospectus forming part of the Registration Statement;
(c) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or
delivery of any Prospectus (including any supplements thereto),
provide (A) draft copies thereof to the Investors and reflect in such
documents all such comments as the Investors (and their counsel)
reasonably may propose and (B) to the
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Investors a copy of the accountant's consent letter to be included in
the filing and (ii) furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal
counsel identified to the Company, (A) promptly after the same is
prepared and publicly distributed, filed with the Commission, or
received by the Company, one copy of the Registration Statement, each
Prospectus, and each amendment or supplement thereto and (B) such
number of copies of the Prospectus and all amendments and supplements
thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable
Securities owned by such Investor;
(d) (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of
such jurisdictions as the Investors who hold a majority-in-interest of
the Registrable Securities being offered reasonably request, (ii)
prepare and file in such jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness
thereof at all times during the Registration Period, (iii) take all
such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the
Registration Period and (iv) take all such other lawful actions
reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions; PROVIDED, HOWEVER, that the
Company shall not be required in connection therewith or as a
condition thereto to (A) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such
jurisdiction or (C) file a general consent to service of process in
any such jurisdiction;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the occurrence of any event, as a result of
which the Prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits 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, and promptly prepare an amendment to
the Registration Statement and supplement to the Prospectus to correct
such untrue statement or omission, and deliver a number of copies of
such supplement and amendment to each Investor as such Investor may
reasonably request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or,
in the event of an underwritten offering, the managing underwriters)
of the issuance by the Commission of any stop order or other
suspension of the effectiveness of the Registration Statement at the
earliest possible time and take all lawful action to effect the
withdrawal, recession or removal of such stop order or other
suspension;
(g) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange,
and included in an inter-dealer quotation system of a registered
national securities association, on or in which securities of the same
class or series issued by the Company are then listed or included;
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(h) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective
date of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to
the registration statement and enable such certificates for the
Registrable Securities to be in such denominations or amounts, as the
case may be, as the Investors reasonably may request and registered in
such names as the Investor may request; and, within three (3) business
days after a registration statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause
legal counsel selected by the Company to deliver to the transfer agent
for the Registrable Securities (with copies to the Investors whose
Registrable Securities are included in such registration statement) an
appropriate instruction and, to the extent necessary, an opinion of
such counsel;
(j) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of their
Registrable Securities in accordance with the intended methods
therefor provided in the Prospectus which are customary under the
circumstances;
(k) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after
(i) the effective date (as defined in Rule 158(c) under the Securities
Act) of the Registration Statement and (ii) the effective date of each
post-effective amendment to the Registration Statement, as the case
may be, an earnings statement of the Company and its subsidiaries
complying with Section 11 (a) of the Securities Act and the rules and
regulations of the Commission thereunder (including, at the option of
the Company, Rule 158);
(l) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to
the Registration Statement such information as the managers reasonably
agree should be included therein and to which the Company does not
reasonably object and make all required filings of such Prospectus
supplement or post- effective amendment as soon as practicable after
it is notified of the matters to be included or incorporated in such
Prospectus supplement or post-effective amendment;
(m) (i) Make reasonably available for inspection by Investors, any
underwriter participating in any disposition pursuant to the
Registration Statement, and any attorney, accountant or other agent
retained by such Investors or any such underwriter all relevant
financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and (ii) cause the
Company's officers, directors and employees to supply all information
reasonably requested by such Investors or any such underwriter,
attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence
examinations; PROVIDED, HOWEVER, that all records, information and
documents that are designated in writing by the Company, in good
faith, as confidential, proprietary or containing any material
nonpublic information shall be kept confidential by such Investors and
any such underwriter, attorney, accountant or agent (pursuant to an
appropriate confidentiality agreement in the case of any such
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holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an
opportunity promptly to seek a protective order or otherwise limit the
scope of the information sought to be disclosed) or is required by
law, or such records, information or documents become available to the
public generally or through a third party not in violation of an
accompanying obligation of confidentiality; and PROVIDED, FURTHER,
that, if the foregoing inspection and information gathering would
otherwise disrupt the Company's conduct of its business, such
inspection and information gathering shall, to the maximum extent
possible, be coordinated on behalf of the Investors and the other
parties entitled thereto by one firm of counsel designed by and on
behalf of the majority in interest of Investors and other parties;
(n) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and
scope as are customarily made by the Company to underwriters in
secondary underwritten offerings;
(o) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed
to the underwriters, covering such matters as are customarily covered
in opinions requested in secondary underwritten offerings (it being
agreed that the matters to be covered by such opinions shall include,
without limitation, as of the date of the opinion and as of the
Effective Time of the Registration Statement or most recent
post-effective amendment thereto, as the case may be, the absence from
the Registration Statement and the Prospectus, including any documents
incorporated by reference therein, of an untrue statement of a
material fact or the omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of
the Prospectus, in light of the circumstances under which they were
made) not misleading, subject to customary limitations);
(p) In connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public
accountants of the Company (and, if necessary, from the independent
public accountants of any subsidiary of the Company or of any business
acquired by the Company, in each case for which financial statements
and financial data are, or are required to be, included in the
Registration Statement), addressed to each underwriter participating
in such underwritten offering (if such underwriter has provided such
letter, representations or documentation, if any, required for such
cold comfort letter to be so addressed), in customary form and
covering matters of the type customarily covered in "cold comfort"
letters in connection with secondary underwritten offerings;
(q) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the
managers, if any, and
(r) In the event that any broker-dealer registered under the Exchange
Act shall be an "AFFILIATE" (as defined in Rule 2729(b)(1) of the
rules and regulations of the National Association of Securities
Dealers, Inc. (the "NASD RULES") (or any successor provision thereto))
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of the Company or has a "CONFLICT OF INTEREST" (as defined in Rule
2720(b)(7) of the NASD Rules (or any successor provision thereto)) and
such broker-dealer shall underwrite, participate as a member of an
underwriting syndicate or selling group or assist in the distribution
of any Registrable Securities covered by the Registration Statement,
whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in
respect thereof, or otherwise, the Company shall assist such
broker-dealer in complying with the requirements of the NASD Rules,
including, without limitation, by (A) engaging a "QUALIFIED
INDEPENDENT UNDERWRITER" (as defined in Rule 2720(b)(15) of the NASD
Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect
thereof and to recommend the public offering price of such Registrable
Securities, (B) indemnifying such qualified independent underwriter to
the extent of the indemnification of underwriters provided in Section
6 hereof and (C) providing such information to such broker-dealer as
may be required in order for such broker-dealer to comply with the
requirements of the NASD Rules.
4. OBLIGATIONS OF THE INVESTORS
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
(a) It shall be a condition 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 the registration of such Registrable
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. As least seven (7)
days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information
the Company requires from each such Investor (the "REQUESTED
INFORMATION") if such Investor elects to have any of its Registrable
Securities included in the Registration Statement. If at least two (2)
business days prior to the anticipated filing date the Company has not
received the Requested Information from an Investor (a "NON-RESPONSIVE
INVESTOR"), then the Company may file the Registration Statement
without including Registrable Securities of such Non-Responsive
Investor and have no further obligations to the Non-Responsive
Investor;
(b) Each Investor by its acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the
preparation and filing of the Registration Statement hereunder, unless
such Investor has notified the Company in writing of its election to
exclude all of its Registrable Securities from the Registration
Statement and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in
Section 3(e) or 3(f), it shall immediately discontinue its disposition
of Registrable Securities pursuant to the Registration Statement
covering
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such Registrable Securities until such Investor's receipt of the
copies of the supplemented or amended Prospectus contemplated by
Section 3(e) and, if so directed by the Company, such Investor shall
deliver to the Company (at the expense of the Company) or destroy (and
deliver to the Company a certificate of destruction) all copies in
such Investor's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
5. EXPENSES OF REGISTRATION
All expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to
Section 3, but including, without limitation, all registration, listing,
and qualifications fees, printing and engraving fees, accounting fees, and
the fees and disbursements of counsel for the Company, and the reasonable
fees of one firm of counsel to the holders of a majority in interest of the
Registrable Securities shall be borne by the Company.
6. INDEMNIFICATION AND CONTRIBUTION
(a) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify and
hold harmless each Investor and each underwriter, if any, which
facilitates the disposition of Registrable Securities, and each of
their respective officers and directors and each person who controls
such Investor or underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (each such person
being sometimes hereinafter referred to as an "INDEMNIFIED PERSON")
from and against any losses, claims, damages or liabilities, joint or
several, to which such Indemnified Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or an 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 arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any
Prospectus or an omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; and the Company hereby agrees to reimburse
such Indemnified Person for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any
such action or claim as and when such expenses are incurred; PROVIDED,
HOWEVER, that the Company shall not be liable to any such Indemnified
Person in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon (i) an untrue
statement or alleged untrue statement made in, or an omission or
alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to
the Company by such Indemnified Person expressly for use therein or
(ii) in the case of the occurrence of an event of the type specified
in Section 3(e), the use by the Indemnified Person of an outdated or
defective Prospectus after the Company has provided to such
Indemnified Person an updated Prospectus correcting the untrue
statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage or liability.
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(b) INDEMNIFICATION BY THE INVESTORS AND UNDERWRITERS. Each Investor
agrees, as a consequence of the inclusion of any of its Registrable
Securities in a Registration Statement, and each underwriter, if any,
which facilitates the disposition of Registrable Securities shall
agree, as a consequence of facilitating such disposition of
Registrable Securities, severally and not jointly, to (i) indemnify
and hold harmless the Company, its directors (including any person
who, with his or her consent, is named in the Registration Statement
as a director nominee of the Company), its officers who sign any
Registration Statement and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act, against any losses, claims, damages
or liabilities to which the Company or such other persons may become
subject, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in such Registration Statement
or Prospectus or arise out of or are based upon the 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 under which they were made, in the case of the
Prospectus), not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such
holder or underwriter expressly for use therein; PROVIDED, HOWEVER,
that no Investor or underwriter shall be liable under this Section
6(b) for any amount in excess of the net proceeds paid to such
Investor or underwriter in respect of shares sold by it and (ii)
reimburse the Company for any legal or other expenses incurred by the
Company in connection with investigating or defending any such action
or claim as such expenses are incurred.
(c) NOTICE OF CLAIMS, ETC. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "INDEMNIFIED PARTY") of
written notice of any investigation, claim, proceeding or other action
in respect of which indemnification is being sought (each, a "CLAIM"),
the Indemnified Party promptly shall notify the party against whom
indemnification pursuant to this Section 6 is being sought (the
"INDEMNIFYING PARTY") of the commencement thereof; but the omission to
so notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party, except
to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and
the Indemnified Party are parties, the Indemnifying Party shall be
entitled to assume the defense thereof. Notwithstanding the assumption
of the defense of any Claim by the Indemnifying Party, the Indemnified
Party shall have the right to employ separate legal counsel and to
participate in the defense of such Claim, and the Indemnifying Party
shall bear the reasonable fees, out-of-pocket costs and expenses of
such separate legal counsel to the Indemnified Party if (and only if):
(x) the Indemnifying Party shall have agreed to pay such fees, costs
and expenses, (y) the Indemnified Party and the Indemnifying Party
shall reasonably have concluded that representation of the Indemnified
Party by the Indemnifying Party by the same legal counsel would not be
appropriate due to actual or, as reasonably determined by legal
counsel to the Indemnified Party, potentially differing interests
between such parties in the conduct of the defense of such Claim, or
if there may be legal defenses
HFNY2: #520846 v2/05466-0001 / 01/16/2001
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available to the Indemnified Party that are in addition to or
disparate from those available to the Indemnifying Party or (z) the
Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable
period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances
other than as described in clauses (x), (y) or (z) above, the fees,
costs and expenses of such legal counsel shall be borne exclusively by
the Indemnified Party. Except as provided above, the Indemnifying
Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than one
firm of counsel for the Indemnified Party (together with appropriate
local counsel). The Indemnified Party shall not, without the prior
written consent of the Indemnifying Party (which consent shall not
unreasonably be withheld), settle or compromise any Claim or consent
to the entry of any judgment that does not include an unconditional
release of the Indemnifying Party from all liabilities with respect to
such Claim or judgment.
(d) CONTRIBUTION. If the indemnification provided for in this Section
6 is unavailable to or insufficient to hold harmless an Indemnified
Person under subsection (a) or (b) above in respect of any losses,
claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each Indemnifying Party shall contribute to
the amount paid or payable by such Indemnified Party as a result of
such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and the Indemnified Party in
connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party shall
be determined by reference to, among other things, whether 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
such Indemnifying Party or by such Indemnified Party, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contribution pursuant
to this Section 6(d) were determined by pro rata allocation (even if
the Investors or any 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 this Section
6(d). The amount paid or payable by an Indemnified Party as a result
of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or
claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any
underwriters in this Section 6(d) to contribute shall be several in
proportion to the percentage of Registrable Securities registered or
underwritten, as the case may be, by them and not joint.
(e) Notwithstanding any other provision of this Section 6, in no event
shall any (i) Investor be required to undertake liability to any
person under this Section 6 for any amounts in excess of the dollar
amount of the proceeds to be received by such Investor from the sale
of such Investor's Registrable Securities (after deducting any fees,
discounts and commissions applicable
HFNY2: #520846 v2/05466-0001 / 01/16/2001
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thereto) pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act
and (ii) underwriter be required to undertake liability to any Person
hereunder for any amounts in excess of the aggregate discount,
commission or other compensation payable to such underwriter with
respect to the Registrable Securities underwritten by it and
distributed pursuant to the Registration Statement.
(f) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under
this Section 6 shall be in addition to any liability which such
Indemnified Person may otherwise have to the Company. The remedies
provided in this Section 6 are not exclusive and shall not limit any
rights or remedies which may otherwise be available to an indemnified
party at law or in equity.
7. RULE 144
With a view to making available to the Investors the benefits of Rule 144
under the Securities Act or any other similar rule or regulation of the
Commission 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 use its best efforts to:
(a) comply with the provisions of paragraph (c) (1) of Rule 144 and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13
or 15(d) under the Exchange Act; and, if at any time it is not
required to file such reports but in the past had been required to or
did file such reports, it will, upon the request of any Investor, make
available other information as required by, and so long as necessary
to permit sales of, its Registrable Securities pursuant to Rule 144.
8. ASSIGNMENT
The rights to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assigned by the Investors to any
permitted transferee of all or any portion of such Registrable Securities
only if (a) 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, (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (i) the name and address of such transferee or assignee
and (ii) the securities with respect to which such registration rights are
being transferred or assigned, (c) immediately following such transfer or
assignment, the securities so transferred or assigned to the transferee or
assignee constitute Restricted Securities and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this
sentence the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions contained herein.
HFNY2: #520846 v2/05466-0001 / 01/16/2001
13
9. AMENDMENT AND WAIVER
Any provision 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 hold a majority-in-interest of the Registrable
Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Investor and the Company.
10. CHANGES IN COMMON STOCK
If, and as often as, there are any changes in the Common Stock by way of
stock split, stock dividend, reverse split, combination or
reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be
made in the provisions hereof, as may be required, so that the rights and
privileges granted hereby shall continue with respect to the Common Stock
as so changed.
11. MISCELLANEOUS
(a) A person or entity shall be deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or
entities with respect to the same Registrable Securities, the Company
shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(b) If, after the date hereof and prior to the Commission declaring
the Registration Statement to be filed pursuant to Section 2(a)
effective under the Securities Act, the Company grants to any Person
any registration rights with respect to any Company securities which
are more favorable to such other Person than those provided in this
Agreement, then the Company forthwith shall grant (by means of an
amendment to this Agreement or otherwise) identical registration
rights to all Investors hereunder.
(c) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally, or sent by telecopier
machine or by a nationally recognized overnight courier service, and
shall be deemed given when so delivered personally, or by telecopier
machine or overnight courier service as follows:
(i) if to the Company, to:
The ▇▇▇▇▇ Group, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
HFNY2: #520846 v2/05466-0001 / 01/16/2001
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Telecopier: 973.890.9877
Telephone: ▇▇▇.▇▇▇.▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & Jaclin, LLP
▇▇▇▇ ▇▇▇▇▇ ▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: 732.577.1188
Telephone: ▇▇▇.▇▇▇.▇▇▇▇
(ii) if to the Initial Investor, to:
▇/▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: 212.269.3087
Telephone: ▇▇▇.▇▇▇.▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ LLP
▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier: 212.592.1500
Telephone: ▇▇▇.▇▇▇.▇▇▇▇
(iii) if to any other Investor, at such address as
such Investor shall have provided in writing to the Company.
The Company, the Initial Investor or any Investor may change the foregoing
address by notice given pursuant to this Section 11(c).
(d) 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.
(e) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. Each of the parties consents
to the jurisdiction of the federal courts
HFNY2: #520846 v2/05466-0001 / 01/16/2001
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whose districts encompass any part of the City of New York or the
state courts of the State of New York sitting in the City of New York
in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection
including any objection based on forum non conveniens, to the bringing
of any such proceeding in such jurisdictions.
(f) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
(g) Except for the Other Registration Rights Agreements, the Company
is not currently a party to any agreement granting any registration
rights with respect to any of its securities to any person which
conflicts with the Company's obligations hereunder or gives any other
party the right to include any securities in any Registration
Statement filed pursuant hereto.
(h) This Agreement and the Securities Purchase Agreement constitute
the entire agreement between the parties hereto with respect to the
subject matter hereof. There are no restrictions, promises, warranties
or undertakings, other than those set forth or referred to herein.
This Agreement and the Securities Purchase Agreement supersede all
prior agreements and undertakings between the parties hereto with
respect to the subject matter hereof.
(i) Subject to the requirements of Section 8 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(j) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(k) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(l) The Company acknowledges that any failure by the Company to
perform its obligations under Section 3, or any delay in such
performance, could result in direct damages to the Investors and
the Company agrees that, in addition to any other liability the
Company may have by reason of any such failure or delay, the
Company shall be liable for all direct damages caused by such
failure or delay.
(m) This Agreement may be executed in two (2) counterparts, each of
which shall
HFNY2: #520846 v2/05466-0001 / 01/16/2001
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be deemed an original but both of which shall constitute one and the
same agreement. A facsimile transmission of this signed Agreement
shall be legal and binding on the parties hereto.
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NEXT PAGE IS SIGNATURE PAGE.]
HFNY2: #520846 v2/05466-0001 / 01/16/2001
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IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed and delivered on the date first above written.
THE ▇▇▇▇▇ GROUP, INC.
By:
----------------------------
Name:
Title:
----------------------------
By:
---------------------------
Name:
Title:
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