REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of March 18,
1999, by and among x-XxxXxxx.xxx, a corporation organized under the laws of
the State of Nevada (the "Company"), and the undersigned (the "Lenders").
WHEREAS:
A. In connection with the Loan Agreement of even date herewith by and
between the Company and the other signatories thereto (the "Loan Agreement"),
(i) the Company has agreed, upon the terms and subject to the conditions
contained therein, to issue and sell to the Lenders warrants (the "Warrants")
to acquire shares (the "Warrant Shares") of the Company's common stock, par
value $.001 per share (the "Common Stock"), and (ii) Sanga e-Health, LLC, a
California limited liability company ("SEH") has agreed to transfer 1,000,000
shares of Common Stock to each of the two lenders (the "SEH Shares").
B. To induce the Lenders to execute and deliver the Loan Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the "Securities Act"), and applicable
state securities laws; and
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Lenders
hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "Lenders" means the Lenders and any transferees or assignees
who agree to become bound by the provisions of this Agreement in accordance
with Section 9 hereof.
(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415
under the Securities Act or any successor rule providing for offering
securities on a continuous basis ("Rule 415"), and the declaration or ordering
of effectiveness of such Registration Statement by the United States
Securities and Exchange Commission (the "SEC").
(iii) "Registrable Securities" means the SEH Shares and the
Warrant Shares issued or issuable with respect to the Warrants and any shares
of capital stock issued or issuable, from time to time (with any adjustments),
as a distribution on or in exchange for or otherwise with respect to any of
the foregoing.
(iv) "Registration Statement" means a registration statement of
the Company under the Securities Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Loan Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on or
before the thirtieth (30th) day following the date of the Closing under the
Loan Agreement (the "Filing Date"), file with the SEC a Registration
Statement on Form S-1 covering the resale of 2,500,000 Registrable Securities.
The Registration Statement filed hereunder, to the extent allowable under the
Securities Act and the Rules promulgated thereunder (including Rule 416),
shall state that the Registration Statement also covers such indeterminate
number of additional shares of Common Stock as may become issuable upon
exercise of the Warrants to prevent dilution resulting from stock splits,
stock dividends or similar transactions. The Registrable Securities included
in the Registration Statement filed hereunder shall be allocated to the
Lenders as set forth in Section 11(k) hereof. The Registration Statement
filed hereunder (and each amendment or supplement thereto, and each request
for acceleration of effectiveness thereof) shall be provided to (and subject
to the approval of) the Lenders and their counsel prior to its filing or other
submission.
b. Underwritten Offering. If any offering pursuant to the
Registration Statement pursuant to Section 2(a) hereof involves an
underwritten offering, the Lenders who hold a majority in interest of the
Registrable Securities subject to such underwritten offering, with the consent
of the Lenders, shall have the right to select one legal counsel to represent
the Lenders and an investment banker or bankers and manager or managers to
administer the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company. In the event that
any Lenders elect not to participate in such underwritten offering, the
Registration Statement covering all of the Registrable Securities shall
contain appropriate plans of distribution reasonably satisfactory to the
Lenders participating in such underwritten offering and the Lenders electing
not to participate in such underwritten offering (including, without
limitation, the ability of nonparticipating Lenders to sell from time to time
and at any time during the effectiveness of such Registration Statement).
c. Payments by the Company. The Company shall cause the
Registration Statement required to be filed pursuant to Section 2(a) hereof to
become effective as soon as practicable, but in no event later than the one
hundred twentieth (120th) day following the date hereof (the "Registration
Deadline"). If (i) (A) the Registration Statement required to be filed by the
Company pursuant to Section 2(a) hereof is not declared effective by the SEC
on or before the Registration Deadline, or (ii) if, after any such
Registration Statement has been declared effective by the SEC, sales of all of
the Registrable Securities required to be covered by such Registration
Statement (including any Registrable Securities required to be registered
pursuant to Section 3(b) hereof) cannot be made pursuant to such Registration
Statement (by reason of a stop order or the Company's failure to update the
Registration Statement or any other reason outside the control of the Lenders)
or (iii) the Common Stock is not listed or included for quotation on the OTC
Bulletin Board (the "Bulletin Board"), Nasdaq SmallCap Market ("SmallCap") ,
the American Stock Exchange (the "AMEX"), the New York Stock Exchange (the
"NYSE") or the Nasdaq National Market ("NNM") at any time after the initial
Registration Deadline hereunder, then the Company will make payments to the
Lenders in such amounts and at such times as shall be determined pursuant to
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this Section 2(c) as partial relief for the damages to the Lenders by reason
of any such delay in or reduction of their ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other remedies
available at law or in equity). The Company shall pay to each Investor an
amount equal to $3,000, in each case for each thirty (30) day period (or
portion thereof) (A) after the Registration Deadline and prior to the date the
Registration Statement filed pursuant to Section 2(a) is declared effective by
the SEC, and (b) during which sales of any Registrable Securities cannot be
made pursuant to any such Registration Statement after the Registration
Statement has been declared effective or the Common Stock is not listed or
included for quotation on the Bulletin Board, SmallCap, AMEX, NYSE or NNM;
provided, however, that there shall be excluded from each such period any
delays which are solely attributable to changes (other than corrections of
Company mistakes with respect to information previously provided by the
Lenders) required by the Lenders in the Registration Statement with respect to
information relating to the Lenders, including, without limitation, changes to
the plan of distribution and delays caused by the SEC beyond their normal
processing time. (For example, if the Registration Statement is not effective
by the Registration Deadline, the Company would pay $3,000 to each Investor
for each thirty (30) day period thereafter until the Registration Statement
becomes effective.) Payments of cash pursuant hereto shall be made within
five (5) days after the end of each period that gives rise to such obligation,
provided that, if any such period extends for more than thirty (30) days,
interim payments shall be made for each such thirty (30) day period.
d. Piggy-Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) the Company
shall file with the SEC a Registration Statement relating to an offering for
its own account or the account of others under the Securities Act of any of
its equity securities (other than on Form S-4 or Form S-8 or their then
equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable
in connection with stock option or other employee benefit plans), the Company
shall send to each Investor who is entitled to registration rights under this
Section 2(d) written notice of such determination and, if within fifteen (15)
days after the date of such notice, such Investor shall so request in writing,
the Company shall include in such Registration Statement all or any part of
the Registrable Securities such Investor requests to be registered, except
that if, in connection with any underwritten public offering, the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. Any exclusion
of Registrable Securities shall be made pro rata among the Lenders seeking to
include Registrable Securities, in proportion to the number of Registrable
Securities sought to be included by such Lenders; provided, however, that the
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not
entitled to inclusion of such securities in such Registration Statement or are
not entitled to pro rata inclusion with the Registrable Securities; and
provided, further, however, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
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reason of demand registration rights. No right to registration of
Registrable Securities under this Section 2(d) shall be construed to limit any
registration required under Section 2(a) hereof. If an offering in connection
with which an Investor is entitled to registration under this Section 2(d) is
an underwritten offering, then each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten
offering using the same underwriter or underwriters and, subject to the
provisions of this Agreement, on the same terms and conditions as other shares
of Common Stock included in such underwritten offering.
e. Eligibility for Form S-3. The Company represents and warrants
that when it meets the requirements for the use of Form S-3 it shall use Form
S-3 for registration of the sale by the Lenders and any other Investor of the
Registrable Securities and the Company shall file all reports required to be
filed by the Company with the SEC in a timely manner so as to maintain such
eligibility for the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare and file with the SEC the Registration
Statement required by Section 2(a) (but in no event later than the Filing
Date), and cause such Registration Statement relating to Registrable
Securities to become effective as soon as practicable after such filing (but
in no event later than the Registration Deadline), and keep such Registration
Statement effective pursuant to Rule 415 at all times until such date as is
the earlier of (i) the date on which all of the Registrable Securities have
been sold and (ii) the date on which all of the Registrable Securities (in the
reasonable opinion of counsel to the Lenders) may be immediately sold to the
public without registration or restriction pursuant to Rule 144(k) under the
Securities Act or any successor provision (the "Registration Period"), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein and all documents incorporated by reference
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration
Statement as may be necessary to keep the Registration Statement effective at
all times during the Registration Period, and, during such period, comply with
the provisions of the Securities Act with respect to the disposition of all
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 seller or sellers
thereof as set forth in the Registration Statement.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel
(i) promptly after the same is prepared and publicly distributed, filed with
the SEC, or received by the Company, one copy of the Registration Statement
and any amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, and, in the case of the Registration
Statement referred to in Section 2(a), each letter written by or on behalf of
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the Company to the SEC or the staff of the SEC (including, without limitation,
any request to accelerate the effectiveness of the Registration Statement or
amendment thereto), and each item of correspondence from the SEC or the staff
of the SEC, in each case relating to the Registration Statement (other than
any portion, if any, thereof which contains information for which the Company
has sought confidential treatment), (ii) on the date of effectiveness of the
Registration Statement or any amendment thereto, a notice stating that the
Registration Statement or amendment has been declared effective, and (iii)
such number of copies of a prospectus, including a preliminary 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. The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as each Investor who holds Registrable Securities being offered
reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications
in effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions; provided, however, that the Company
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, (c) file a general consent to service of
process in any such jurisdiction, (d) provide any undertakings that cause the
Company undue expense or burden, or (e) make any change in its charter or
bylaws, which in each case the Board of Directors of the Company determines to
be contrary to the best interests of the Company and its stockholders.
e. In the event the Lenders who hold a majority in interest of the
Registrable Securities being offered in an offering select underwriters for
the offering, the Company shall enter into and perform its obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of which
the Company has knowledge, 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 omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and use
its best efforts promptly to prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and
deliver such number of copies of such supplement or amendment to each Investor
as such Investor may reasonably request.
g. The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest practicable moment (including in each case by amending
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or supplementing such Registration Statement) and to notify each Investor who
holds Registrable Securities being sold (or, in the event of an underwritten
offering, the managing underwriters) of the issuance of such order and the
resolution thereof (and if such Registration Statement is supplemented or
amended, deliver such number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request).
h. The Company shall permit a single firm of counsel designated by
the Lenders to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to its filing with the
SEC, and not file any document in a form to which such counsel reasonably
objects and will not request acceleration of the effectiveness of any
Registration Statement without prior notice to such counsel.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the Securities Act) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration
Statement.
j. At the request of any Investor, the Company shall furnish, on
the date of effectiveness of the Registration Statement (i) an opinion, dated
as of such date, from counsel representing the Company addressed to the
Lenders and in form, scope and substance as is customarily given in an
underwritten public offering and (ii) in the case of an underwriting, a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and the Lenders.
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to
the Registration Statement, (iii) one firm of attorneys and one firm of
accountants or other agents retained by the Lenders, and (iv) one firm of
attorneys retained by all such underwriters (collectively, the "Inspectors")
all pertinent financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the "Records"), as shall be
reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that
each Inspector shall hold in confidence and shall not make any disclosure
(except to an Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (b) the release of such Records is ordered pursuant to a subpoena
or other order from a court or government body of competent jurisdiction, or
(c) the information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other agreement.
The Company shall not be required to disclose any confidential information in
such Records to any Inspector until and unless such Inspector shall have
entered into confidentiality agreements (in form and substance satisfactory to
the Company) with the Company with respect thereto, substantially in the form
of this Section 3(k). Each Investor agrees that it shall, upon learning that
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disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential. Nothing herein shall be deemed to limit the Lenders'
ability to sell Registrable Securities in a manner which is otherwise
consistent with applicable laws and regulations.
l. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement, or (v) such Investor
consents to the form and content of any such disclosure. The Company agrees
that it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, such information.
m. The Company shall use its best efforts to promptly either (i)
cause all of the Registrable Securities covered by the Registration Statement
to be listed on the AMEX, NNM or the NYSE or another national securities
exchange and on each additional national securities exchange on which
securities of the same class or series issued by the Company are then listed,
if any, if the listing of such Registrable Securities is then permitted under
the rules of such exchange, or (ii) secure the designation and quotation of
all of the Registrable Securities covered by the Registration Statement on the
Bulletin Board, SmallCap or NNM and, without limiting the generality of the
foregoing, to arrange for or maintain at least two market makers to register
with the National Association of Securities Dealers, Inc. ("NASD") as such
with respect to such Registrable Securities.
n. The Company shall provide 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.
o. The Company shall cooperate with the Lenders who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable
such certificates to be in such denominations or amounts, as the case may be,
as the managing underwriter or underwriters, if any, or the Lenders may
reasonably request and registered in such names as the managing underwriter or
underwriters, if any, or the Lenders may request, and, within three (3)
business days after the Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and
shall cause legal counsel selected by the Company to deliver, to the transfer
agent for the Registrable Securities (with copies to the Lenders whose
Registrable Securities are included in such Registration Statement) an opinion
of such counsel in the form attached hereto as Exhibit 1.
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p. At the request of any Investor, the Company shall prepare and
file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary in order to change the
plan of distribution set forth in such Registration Statement.
q. The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including, without limitation, the Securities Act and the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated by the
SEC.)
r. The Company shall take all such other actions as any Investor or
the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of the Registrable Securities.
s. From and after the date of this Agreement, the Company shall
not, and shall not agree to, allow the holders of any securities of the
Company to include any of their securities in the Registration Statement under
Section 2(a) hereof or any amendment or supplement thereto under Section 3(b)
hereof without the consent of the holders of a majority in interest of the
Registrable Securities.
4. OBLIGATIONS OF THE LENDERS.
In connection with the registration of the Registrable Securities, the
Lenders 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. At least five (5) business 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.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
c. In the event Lenders holding a majority in interest of the
Registrable Securities being offered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such
other actions as are reasonably required in order to expedite or facilitate
the disposition of the Registrable Securities, unless such Investor has
notified the Company in writing of such Investor's election not to participate
in such underwritten distribution.
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d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Sections 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Sections 3(f) or 3(g) 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.
e. No Investor may participate in any underwritten distribution
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation,
all registration, listing and qualifications fees, printers and accounting
fees, the fees and disbursements of counsel for the Company and the fees and
disbursements contemplated by Section 3(k) hereof shall be borne by the
Company. In addition, the Company shall pay all of the Lenders' costs and
expenses (including legal fees) incurred in connection with the enforcement of
the rights of the Lenders hereunder.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities,
and (ii) the directors, officers, partners, members, employees, agents and
each person who controls any Investor within the meaning of Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), if any, and underwriters for Lenders and such
underwriters' directors, officers, partners, members, employees, agents and
each person who controls any such underwriter within the meaning of Section 15
of the Exchange Act (each, an "Indemnified Person"), against any joint or
several losses, claims, damages, liabilities or expenses (collectively,
together with actions, proceedings or inquiries by any regulatory or
self-regulatory organization, whether commenced or threatened, in respect
thereof, "Claims") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or any filing
made in connection with qualification under state securities laws or the
omission or alleged omission to state therein a material fact required to be
stated or necessary to make the statements therein not misleading, (ii) any
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untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading,
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any other applicable securities law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities or (iv) any
material breach of this Agreement (the matters in the foregoing clauses (i)
through (iv) being, collectively, "Violations"). Subject to the restrictions
set forth in Section 6(c) with respect to the number of legal counsel, the
Company shall reimburse the Lenders and each other Indemnified Person,
promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of
or based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by such Indemnified Person
expressly for use in the Registration Statement or any such amendment thereof
or supplement thereto; (ii) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld; and (iii) with
respect to any preliminary prospectus, shall not inure to the benefit of any
Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, if such corrected prospectus was
timely made available by the Company pursuant to Section 3(c) hereof, and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Lenders pursuant to Section 9 hereof.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, its employees, agents and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any
Claim to which any of them may become subject, under the Securities Act, the
Exchange Act or otherwise, insofar as such Claim arises out of or is based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and subject to Section 6(c) such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
10
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Agreement (including this Section 6(b) and Section 7) for
only that amount as does not exceed the net proceeds actually received by such
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Lenders
pursuant to Section 9 hereof. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of
any Indemnified Party if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, and the Indemnified Party failed
to utilize such corrected prospectus.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to
assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying party and the Indemnified Person or the Indemnified Party, as
the case may be; provided, however, that such indemnifying party shall not be
entitled to assume such defense and an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to
be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential conflicts of interest between such
Indemnified Person or Indemnified Party and any other party represented by
such counsel in such proceeding or the actual or potential defendants in, or
targets of, any such action include both the Indemnified Person or the
Indemnified Party and the indemnifying party and any such Indemnified Person
or Indemnified Party reasonably determines that there may be legal defenses
available to such Indemnified Person or Indemnified Party which are different
from or in addition to those available to such indemnifying party. The
indemnifying party shall pay for only one separate legal counsel for the
Indemnified Persons or the Indemnified Parties, as applicable, and such legal
counsel shall be selected by Lenders holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to which the
Claim relates (with the approval of the Lenders if they hold Registrable
Securities included in such Registration Statement), if the Lenders are
entitled to indemnification hereunder, or by the Company, if the Company is
entitled to indemnification hereunder, as applicable. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is actually
prejudiced in its ability to defend such action. The indemnification required
by this Section 6 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as such expense, loss,
damage or liability is incurred and is due and payable.
11
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (i) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6, (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any seller of Registrable Securities who was not guilty
of such fraudulent misrepresentation, and (iii) contribution (together with
any indemnification or other obligations under this Agreement) by any seller
of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities
pursuant to the Registration Statement.
8. REPORTS UNDER THE EXCHANGE ACT.
With a view to making available to the Lenders the benefits of Rule 144
promulgated under the Securities Act or any other similar rule or regulation
of the SEC that may at any time permit the Lenders to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees
to:
a. file with the SEC in a timely manner and make and keep available
all reports and other documents required of the Company under the Securities
Act and the Exchange Act so long as the Company remains subject to such
requirements (it being understood that nothing herein shall limit the
Company's obligations under Section 4(c) of the Loan Agreement) and the filing
and availability of such reports and other documents is required for the
applicable provisions of Rule 144; and
b. furnish to each Investor so long as such Investor owns Warrants
or Registrable Securities, promptly upon request, (i) a written statement by
the Company that it has complied with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so
filed by the Company, and (iii) such other information as may be reasonably
requested to permit the Lenders to sell such securities under Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of the Lenders hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assignable by each Investor to any transferee of all or any
portion of the Warrants or the Registrable Securities if: (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company after such assignment, (ii)
the Company is furnished with written notice of (a) the name and address of
such transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, and (iv) the transferee or assignee agrees in writing
for the benefit of the Company to be bound by all of the provisions contained
herein.
12
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company and
Lenders who hold a majority in interest of the Registrable Securities;
provided, however, that no amendment hereto which restricts the ability of an
Investor to elect not to participate in an underwritten offering shall be
effective against any Investor which does not consent in writing to such
amendment; provided, further, however, that no consideration shall be paid to
an Investor by the Company in connection with an amendment hereto unless each
Investor similarly affected by such amendment receives a pro-rata amount of
consideration from the Company. Unless an Investor otherwise agrees, each
amendment hereto must similarly affect each Investor. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is 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. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective upon receipt or refusal of receipt, if delivered personally
or by courier or confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
x-XxxXxxx.xxx
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
and if to any Investor, at such address as such Investor shall have provided
in writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 11(b).
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and construed in accordance
with the laws of the State of California applicable to contracts made and to
be performed in the State of California. The Company irrevocably consents to
the jurisdiction of the courts located in the State of California in any suit
or proceeding based on or arising under this Agreement and irrevocably agrees
that all claims in respect of such suit or proceeding may be determined in
13
such courts. The Company irrevocably waives the defense of an inconvenient
forum to the maintenance of such suit or proceeding. The Company further
agrees that service of process upon the Company, mailed by first class mail
shall be deemed in every respect effective service of process upon the Company
in any such suit or proceeding. Nothing herein shall affect the Lenders'
right to serve process in any other manner permitted by law. The Company
agrees that a final non-appealable judgment in any such suit or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner.
e. This Agreement, the Loan Agreement (including all schedules and
exhibits thereto and documents contemplated thereby) and the Warrants
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns
of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
j. All consents, approvals and other determinations to be made by
the Lenders or the Lenders pursuant to this Agreement shall be made by the
Lenders or the Lenders holding a majority in interest of the Registrable
Securities (determined as if all Warrants then outstanding had been exercised
for Registrable Securities and all SEH Shares were then held by the Lender)
held by all Lenders or Lenders, as the case may be.
k. The initial number of Registrable Securities included on any
Registration Statement and each increase (if any) to the number of Registrable
Securities included thereon shall be allocated pro rata among the Lenders
based on the number of Registrable Securities held by each Investor at the
time of such establishment or increase, as the case may be. In the event an
Investor shall sell or otherwise transfer any of such holder's Registrable
Securities, each transferee shall be allocated a pro rata portion of the
number of Registrable Securities included on a Registration Statement for such
transferor. Any shares of Common Stock included on a Registration Statement
and which remain allocated to any person or entity which does not hold any
Registrable Securities shall be allocated to the remaining Lenders, pro rata
14
based on the number of shares of Registrable Securities then held by such
Lenders. For the avoidance of doubt, the number of Registrable Securities
held by any Investor shall be determined as if the SEH Shares were held by the
Lender and all Warrants then outstanding were exercised for Registrable
Securities.
l. Each party to this Agreement has participated in the negotiation
and drafting of this Agreement. As such, the language used herein shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party
to this Agreement.
m. For purposes of this Agreement, the term "business day" means
any day other than a Saturday or Sunday or a day on which banking institutions
in the State of New York are authorized or obligated by law, regulation or
executive order to close.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
x-XxxXxxx.xxx
By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Its: Chief Executive Officer
Lenders:
Xxxxxxx Investors LLC
By: /s/ Xxxxx Xxxxxxx
Name: Xxxxxx Xxxxxxx
Its: Manager
/s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
16
EXHIBIT 1
to
Registration
Rights
Agreement
[Date]
[Name and address
of transfer agent]
RE: x-XxxXxxx.xxx
Ladies and Gentlemen:
We are counsel to x-XxxXxxx.xxx, a corporation organized under the laws
of the State of Nevada (the "Company"), and we understand that, [Name of
Investor] (the "Holder") has (i) purchased from the Company warrants (the
"Warrants") to acquire shares of the Company's common stock, par value $.001
per share (the "Common Stock") and/or (ii) exercised its rights with respect
to the Pledged Securities (as defined in the Registration Rights Agreement
(defined below). Pursuant to a Registration Rights Agreement, dated as of
March 18, 1999, by and among the Company and the signatories thereto (the
"Registration Rights Agreement"), the Company agreed with the Holder, among
other things, to register the Registrable Securities (as that term is defined
in the Registration Rights Agreement) under the Securities Act of 1933, as
amended (the "Securities Act"), upon the terms provided in the Registration
Rights Agreement. In connection with the Company's obligations under the
Registration Rights Agreement, on __________, the Company filed a Registration
Statement on Form S-___ (File No. 333- _____________) (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC") relating
to the Registrable Securities, which names the Holder as a selling stockholder
thereunder. The Registration Statement was declared effective by the SEC on
_____________, 1999.
[Other customary introductory and scope of examination language to be
inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
[Other customary language to be included.]
Very truly yours,
cc: [Name of Investor]
