REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of December ___, 2000, by and between Fusion Networks Holdings, Inc., a
Delaware corporation, with its principal place of business at 0000 XX 00xx
Xxxxxx, Xxxxx, Xxxxxxx 00000 (the "Company"); and GEM Global Yield Fund Limited,
a Nevis company, with its administrative office at Xxxxxxx Xxxxxxxxxx Xxxxx,
X.X. Xxx 000, Xxxx Xxxxxx, Xxxxx, Xxxx Xxxxxx (Referred to herein as the
"Purchaser" or sometimes the "Purchasers").
Simultaneously with the execution of this Agreement, the Purchasers and the
Company have entered into a Convertible Debenture Purchase Agreement, dated as
of the date hereof (the "Purchase Agreement") incorporated herein by reference,
pursuant to which the Purchasers have agreed to purchase certain Debentures and
Warrants (the "Debentures" and the "Warrants") of the Company.
The Company and the Purchasers hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
shall have the meanings given such terms in the Purchase Agreement. As used in
this Agreement, the following terms shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York are authorized or required by law or other government actions to close
between the hours of 9:30 a.m. and 6:00 p.m. New York Time.
"Closing" shall mean the Closing, as such term is defined in the Purchase
Agreement.
"Closing Date" shall mean the Closing Date, as such term is defined in the
Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value $.00001 per
share.
"Debentures" means the Company's 3% Convertible Debentures delivered to the
Purchasers pursuant to the Purchase Agreement.
"Effectiveness Date" means, with respect to a Registration Statement, in
the case of a Closing, the earlier of the 120th day following the execution of
the Purchase Agreement (or if such date is not a Business Day, the next Business
Day) and the fifth (5th) Business Day after the date the Company is notified by
the Commission that such Registration Statement will not be reviewed.
"Effectiveness Period" shall have the meaning set forth in Section 2(a).
"Event" shall have the meaning set forth in Section 6 hereof.
"Event Date" shall have the meaning set forth in Section 6 hereof.
"Escrow Agreement" means the escrow agreement, by and among the Company,
KGL and the Purchasers, entered into on the date hereof, which is incorporated
herein by reference.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Execution Date" means the day the Purchase Agreement and the other
Transaction Documents are executed by the parties.
"Filing Date" means the day the Registration Statement is filed with the
Commission, which date shall be as soon as practicable, but in no event more
than 30 days, after the Execution Date.
"Holder" or "Holders" means the holder or holders, as the case may be, from
time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 8(c)
hereof.
"Indemnifying Party" shall have the meaning set forth in Section 8(c)
hereof.
"Inspectors" shall have the meaning set forth in Section 3(m) hereof.
"Losses" shall have the meaning set forth in Section 8(a) hereof.
"New York Courts" shall have the meaning set forth in Section 10(h) hereof.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
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"Prospectus" means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), 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 all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"Records" shall have the meaning set forth in Section 3(m) hereof.
"Registrable Securities" means the Warrant Shares and the Underlying
Shares; provided, however, that in order to account for adjustments in the
conversion and exercise ratios, Registrable Securities shall include a number of
shares of Common Stock equal to no less than four (4) times the number of shares
of Common Stock into which the Debentures are convertible in full, at the Per
Share Market Value on the date of execution of the Purchase Agreement together
with such number of Warrant Shares issuable upon exercise of the Warrants issued
on the Closing.
"Registration Statement" means the registration statement, contemplated by
Section 2(a) hereof, including the Prospectus, amendments and supplements to
such registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Underlying Shares" shall mean the shares of Common Stock into which the
Debentures are convertible in accordance with the Purchase Agreement and the
Debentures.
"Underwritten Registration" or "Underwritten Offering" means a registration
in connection with which securities of the Company are sold to an underwriter
for sale to the public pursuant to an effective registration statement.
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"Warrants" means the Common Stock purchase warrants of the Company issued
in accordance with the terms of the Purchase Agreement.
"Warrant Shares" means the shares of Common Stock issuable upon exercise of
the Warrants.
2. Shelf Registration.
(a) As soon as practicable after the date of this Agreement (the "Execution
Date"), the Company shall prepare and file with the Commission a "Shelf"
Registration Statement covering the issuance or resale of all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-3 or another appropriate form
permitting registration of Registrable Securities for issuance to or resale by
the Holders in the manner or manners designated by them (including, without
limitation, public or private sales and one or more Underwritten Offerings). The
Company shall (i) not permit any securities other than the Registrable
Securities to be included in the Registration Statement except as provided for
in Section 7(b) hereof and (ii) use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
practicable after the filing thereof, but in any event prior to the
Effectiveness Date, and to keep such Registration Statement continuously
effective under the Securities Act until the date which is five years after the
date of this Agreement or such earlier date when all Registrable Securities
covered by such Registration Statement have been sold or may be sold pursuant to
Rule 144 as determined by the counsel to the Company pursuant to a written
opinion letter, addressed to the Holders, to such effect (the "Effectiveness
Period"); provided, however, that the Company shall not be deemed to have used
its best efforts to keep the Registration Statement effective during the
Effectiveness Period if it voluntarily takes any action to suspend the
effectiveness of the Registration Statement under the Securities Act during the
Effectiveness Period, unless the Company, after consultation with its counsel,
determines that such action is required under applicable law or the Company has
filed a post-effective amendment to the Registration Statement and the
Commission has not declared it effective. Should the Registration Statement not
relate to the maximum number of Registrable Securities acquired by (or
potentially acquirable by) the Holders upon conversion or exercise of the
Debentures and the Warrants (because of the indeterminable number of shares of
Common Stock issuable upon conversion or exercise thereof), the Company shall be
required to file a separate registration statement (utilizing Rule 462
promulgated under the Securities Act, where applicable) relating to such
Registrable Securities which then remain unregistered. The provisions of this
Agreement shall relate to such separate registration statement as if it were an
amendment to such Registration Statement.
(b) If the Holders of a majority of the Registrable Securities so elect and
inform the Company in writing a reasonable time prior to the Filing Date, an
offering of Registrable Securities pursuant to the Registration Statement may be
effected in the form of an Underwritten Offering. In such event, and if the
managing underwriter or the representative of the several underwriters (the
"Representative") advises the Company and such Holders in writing that, in the
Representative's opinion, the number of Registrable Securities proposed to be
sold in such offering exceeds the number of Registrable Securities which can be
sold in such offering, there shall be included in such Underwritten Offering the
amount of such Registrable Securities which, in the opinion of such
Representative, can be sold, and such amount shall be allocated pro rata among
the Holders proposing to sell Registrable Securities in such Underwritten
Offering.
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(c) If any of the Registrable Securities are to be sold in an Underwritten
Offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders of a majority
of the Registrable Securities included in such offering, with the approval of
the Company, which shall not be unreasonably withheld or delayed. No Holder may
participate in any Underwritten Offering hereunder unless such Holder (i) agrees
to sell its Registrable Securities on the basis provided in any underwriting
agreements approved by the Persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such arrangements.
3. Registration Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:
(a) Prepare and file with the Commission within the time period set forth
in Section 2 a Registration Statement on Form S-3 or another appropriate form
permitting registration of Registrable Securities for issuance to the Holders
and the resale thereof in accordance with the method or methods of distribution
thereof as specified by the Holders, and use its best efforts to cause the
Registration Statement to become effective and remain effective as provided
herein; provided, however that, subject only to the provision by the Holders to
the Company in writing of information requested in writing by the Company
relating to the Holders' proposed method of distribution of Registrable
Securities and such other information required by law, not less than ten (10)
days prior to the filing of the Registration Statement or any related Prospectus
or any amendment (pre or post effective) or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein by
reference), the Company shall (i) furnish to the Holders, their counsel and any
managing underwriters, copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be incorporated by
reference) will be subject to the review of such Holders, their counsel and such
managing underwriters, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the opinion of the respective counsel to such Holders and such
underwriters, to conduct a reasonable investigation within the meaning of the
Securities Act. The Holders shall have five days after receipt of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto to comment on or object to the filing of such documents. The Company
shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto without including any comments reasonably
requested by the Holders and shall not file any such documents to which the
Holders of a majority of the Registrable Securities, their counsel, or any
managing underwriters, shall object; provided, however, that the counting of
days for determining whether the Company has complied with the Filing Date and
Effectiveness Date requirements for purposes of this Agreement shall not include
any days during the period commencing with such objection and ending when the
Person objecting subsequently consents to the filing of such documents. On the
date of effectiveness of any Registration Statement, the Company shall furnish
an opinion, dated as of such date, from counsel representing the Company
addressed to the Holders of the Registrable Securities and in form, scope and
substance as is customarily given in an underwritten public offering. The
Company shall also use its best efforts to cause to be furnished on the date of
effectiveness of any Registration Statement, 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 Holders of the Registrable
Securities.
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(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective for the applicable time
period; (ii) cause the related Prospectus to be amended or supplemented by any
required Prospectus supplement, and as so supplemented or amended to be filed
pursuant to Rule 424 (or any similar provisions then in force) promulgated under
the Securities Act; (iii) respond as promptly as practicable to any comments
received from the Commission with respect to the Registration Statement or any
amendment thereto; and (iv) comply with the provisions of the Securities Act and
the Exchange Act with respect to the registration of all Registrable Securities
covered by the Registration Statement during the applicable period in accordance
with the intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold, their counsel
and any managing underwriters immediately (and, in the case of (i)(A) below, not
less than three Business Days prior to such filing) and (if requested by any
such Person) confirm such notice in writing no later than one Business Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
and (B) with respect to the Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any request by the
Commission or any other federal or state governmental authority for amendments
or supplements to the Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time the Registration Statement becomes stale and is no
longer effective; (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose; and (vi) of the
occurrence of any event that makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
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(d) Use its best efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of the Registration
Statement or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) If requested by any Representative or the Holders of a majority of the
Registrable Securities to be sold in connection with an Underwritten Offering,
(i) promptly incorporate in a Prospectus supplement or post-effective amendment
to the Registration Statement such information as such managing underwriters and
such Holders reasonably agree should be included therein and (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment; provided, however, that the Company shall not be required to take any
action pursuant to this Section 3(e) unless in the opinion of counsel for the
Company such action is required by applicable law.
(f) Furnish to each Holder, its counsel and any Representative, without
charge, at least one complete copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(g) Promptly deliver to each Holder, its counsel, and any Representative,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus forming part of the effective Registration Statement) and
each amendment or supplement thereto as such Persons may reasonably request; and
the Company hereby agrees to respond in writing to a written request from the
Purchasers with respect to the effectiveness of such Prospectus.
(h) Prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the selling
Holders, any Representative and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder, Representative or underwriter requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; provided, however, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or subject the Company to any tax in any such jurisdiction
where it is not then so subject.
(i) Cooperate with the Holders and the Representative to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall be free of all restrictive
legends, except as required by applicable law, and to enable such Registrable
Securities to be in such denominations and registered in such names as any such
Representative or Holders may request at least three (3) Business Days prior to
any sale of Registrable Securities.
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(j) Upon the occurrence of any event contemplated by Section 3(c)(vi)
hereof, as promptly as practicable, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will 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,
in light of the circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities relating to
such Registration Statement to be listed or quoted on the Nasdaq National
Market, the Nasdaq SmallCap Market and any other securities exchange, market or
over-the-counter bulletin board, if any, on which similar securities issued by
the Company are then listed or quoted to the extent required by the rules of
such exchange, market or other quotation system.
(l) If the Registrable Securities are included in a Registration Statement
filed in connection with an Underwritten Offering, the Company shall, (i) make
such representations and warranties to such Holders as it agrees to make to the
underwriters in such Underwritten Public Offerings, and confirm the same if and
when requested; (ii) enter into an indemnification agreement which shall contain
indemnification provisions and procedures no less favorable to the selling
Holders, than those set forth in Section5 and (iii) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority of the
Registrable Securities being sold, their counsel and any Representative to
evidence the continued validity of the representations and warranties made
pursuant to clause 3(1)(i).
(m) Make available for inspection by (i) Holders of the Registrable
Securities, (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 Holders, and (iv) one firm of
attorneys retained by all the Holders (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(m). Each Holder of
Registrable Securities agrees that it shall, upon learning that disclosure of
such Records is sought in or by a court or government 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 Holders' ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
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(n) Comply with all applicable rules and regulations of the Commission and
make generally available to its security holders earning statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 not later
than forty-five (45) days after the end of any 12-month period (or ninety (90)
days after the end of any 12-month period if such period is a fiscal year)
(i) commencing at the end of any fiscal quarter in which Registrable Securities
are sold to underwriters in a firm commitment or best efforts Underwritten
Offering and (ii) if not sold to underwriters in such an offering, commencing on
the first (1st) day of the first (1st) fiscal quarter of the Company after the
effective date of the Registration Statement.
(o) At such time as the Registration Statement has been declared effective
by the Commission covering a resale of any Registrable Securities, the Company
shall cause its legal counsel to deliver to the Transfer Agent an opinion,
subject to the holders of any Registrable Securities making such representations
and warranties to Company counsel as it may require, certifying that such
Registrable Securities may be sold by the Holders pursuant to such Registration
Statement with the purchasers thereof receiving share certificates without
restrictive legend, which opinion shall remain effective so long as such
Registration Statement remains in full force and effect. In the event that, at
any time, such Registration Statement ceases to be effective, the Company shall
immediately deliver written notice thereof to the Transfer Agent and the Holders
stating that the opinion of the Company's legal counsel may no longer be relied
upon by the Transfer Agent (unless and until an additional or amended, as
applicable, Registration Statement is so declared effective (with respect to the
resale of such Registrable Securities)).
(p) Provide a CUSIP number for all Registrable Securities, not later than
the effective date of the Registration Statement.
(q) The Company shall take all such other actions as any Holder of
Registrable Securities or the underwriters, if any, may reasonably request in
order to expedite or facilitate the disposition of the Registration Securities.
The Company may require each selling Holder and the underwriters to furnish
to the Company such information regarding the distribution of such Registrable
Securities and the Holder as is required by law to be disclosed in the
Registration Statement and as may otherwise be reasonably requested by the
Company, including, without limitation, information necessary for the Company to
respond to the comments from the Commission and/or state securities authorities,
and the Company may exclude from such registration the Registrable Securities of
any such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request, and such Holder shall be deemed to
have violated this Registration Rights Agreement for purposes of Section 6.2 of
the Purchase Agreement.
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If the Registration Statement refers to any Holder by name or otherwise as
the holder of any securities of the Company, then such Holder shall have the
right to require (i) the inclusion therein of language, in form and substance
reasonably satisfactory to such Holder and the Company, to the effect that the
ownership by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such ownership does not imply that such
Holder will assist in meeting any future financial requirements of the Company,
or (ii) if such reference to such Holder by name or otherwise is not required by
the Securities Act or any similar federal statute then in force, the deletion of
the reference to such Holder in any amendment or supplement to the Registration
Statement filed or prepared subsequent to the time that such reference ceases to
be required.
Each Purchaser covenants and agrees that (i) it will not offer or sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) hereof and notice from the Company that such Registration Statement
and any post-effective amendments thereto have become effective as contemplated
by Section 3(c) hereof and (ii) each Purchaser and its officers, directors or
Affiliates, if any, will comply with the prospectus delivery requirements of the
Securities Act as applicable to them in connection with sales of Registrable
Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities that,
upon receipt of a written notice from the Company of the occurrence of any event
of the type described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(c)(vi) hereof, such Holder will forthwith discontinue disposition of such
Registrable Securities until such Holder's receipt of copies of the supplemented
Prospectus and/or amended Registration Statement contemplated by Section 3(j)
hereof, or until it is advised in writing by the Company that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies
of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement.
4. Registration Expenses.
(a) All fees and expenses incident to the performance of or compliance with
this Agreement by the Company shall be borne by the Company whether or not the
Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses with respect to filings (A) required to be made with the
National Association of Securities Dealers, Inc. and (B) in compliance with
state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the underwriters or Holders in connection with Blue
Sky qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Representative, if any, or Holders of a majority of
Registrable Securities may designate)), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities
and of printing prospectuses if the printing of prospectuses is requested by the
Representative, if any, or by the holders of a majority of the Registrable
Securities included in the Registration Statement), (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company,
(v) fees and disbursements of all independent certified public accountants
referred to in Section 3(a)(ii), (vi) Securities Act liability insurance, if the
Company so desires such insurance, and (vii) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement. In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange on which similar securities issued by the
Company are then listed.
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(b) Notwithstanding anything contained to the contrary herein, the Holders
shall be responsible for the cost of underwriting discounts and commissions if
any, applicable to the Registrable Securities and the fees and expenses of
counsel to any of the Holders.
5. Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding
termination of this Agreement and without limitation as to time, indemnify and
hold harmless each Holder, the officers, directors, agents (including any
underwriters retained by such Holder in connection with the offer or sale of
Registrable Securities), brokers, investment advisors and employees of each of
them, each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except solely to the extent that (i) such untrue statements or
omissions are based solely upon information regarding such Holder furnished in
writing to the Company by or on behalf of such Holder expressly for use therein,
which information was relied on by the Company for use therein or (ii) such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was furnished in writing to the
Company by or on behalf of such Holder expressly for use therein. The Company
shall notify the Holders promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the transactions
contemplated by this Agreement.
11
(b) Indemnification by Holders. In connection with the Registration
Statement, each Holder shall furnish to the Company in writing such information
as the Company reasonably requests for use in connection with the Registration
Statement or any Prospectus and agrees, severally and not jointly, to indemnify
and hold harmless the Company, their directors, officers, agents and employees,
each Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors, officers,
agents or employees of such controlling Persons, to the fullest extent permitted
by applicable law, from and against all Losses (as determined by a court of
competent jurisdiction in a final judgment not subject to appeal or review)
arising solely out of or based solely upon any untrue statement of a material
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading solely to the extent, and only to the extent, that
(i) such untrue statement or omission is contained in any information furnished
in writing by such Holder to the Company specifically for inclusion in the
Registration Statement or such Prospectus and such information was relied upon
by the Company for use in the Registration Statement, such Prospectus or such
form of prospectus, or (ii) such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
furnished in writing by or on behalf of such Holder to the Company specifically
for inclusion in the Registration Statement or such Prospectus and such
information was relied upon by the Company for use in the Registration
Statement, such Prospectus or such form of prospectus. In addition, the
foregoing shall not inure to the benefit of any Holder if a copy of the
Prospectus (as then amended or supplemented) was furnished by the Company to
such Holder and was not sent or given by or on behalf of such Holder to such
Holder's purchaser of Registrable Securities if required by law to have been so
delivered.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense of the
claim against the Indemnified Party but will retain the right to control the
overall Proceedings out of which the claim arose, and counsel employed by the
Indemnified Party shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
12
All fees and expenses of the Indemnified Party to which the Indemnified
Party is entitled hereunder (including reasonable fees and expenses to the
extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten (10) Business Days of written notice
thereof to the Indemnifying Party.
(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b)
is unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section would
apply by its terms (other than by reason of exceptions provided in this
Section), then each Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Losses, (i) in such proportion as is appropriate to reflect
the relative benefits received by the Indemnifying Party on the one hand and the
Indemnified Party on the other from the distribution of the Registrable
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative benefits received by the
Indemnified Party and the Indemnifying Party, as the case may be, shall be
deemed to be in the same proportion as the total net proceeds received by the
Company from the initial sale of the Registrable Securities by the Company to
the Purchasers pursuant to the Purchase Agreement and the Warrants bear to the
gain, if any, realized by the selling Holder upon the resale thereof. The
relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any attorneys' or other fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party.
13
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Rule 144.
The Company shall file the reports required to be filed by it under the
Securities Act and the Exchange Act in a timely manner and, if at any time the
Company is not required to file such reports, they will, upon the request of any
Holder, make publicly available other information so long as necessary to permit
sales of its securities pursuant to Rule 144. The Company further covenants that
it will take such further action as any Holder may reasonably request, all to
the extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144. Upon the request of any Holder, the
Company shall deliver to such Holder a written certification of a duly
authorized officer as to whether it has complied with such requirements.
7. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a Holder of any
of their respective obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled, after the Closing, to specific performance of its rights under
this Agreement. The Company and each Holder agree that, after the Closing,
monetary damages would not provide adequate compensation for any losses incurred
by reason of a breach by it of any of the provisions of this Agreement and
hereby further agrees that, in the event of any action for specific performance
in respect of such breach, it shall waive the defense that a remedy at law would
be adequate.
(b) No Piggyback on Registrations. Except as provided in Section 4.23 of
the Purchase Agreement, neither the Company nor any of its security holders
(other than the Holders in such capacity pursuant hereto) may include securities
of the Company in the Registration Statement other than the Registrable
Securities and the Company shall not enter into any agreement providing any such
right to any of its security holders.
14
(c) Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the Holder or
Holders of 51% or more of the shares of (i) Registrable Securities issued at
such time plus (ii) Registrable Securities issuable upon exercise or conversion
of any Debentures and any Warrants that have not been fully converted or
exercised as of the date such consent is sought. Each Holder of any Registrable
Securities at the time or thereafter outstanding shall be bound by any consent
authorized by this Section 10(c), whether or not such Registrable Securities
shall have been marked to indicate such consent.
(d) Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second (2nd) business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company: Fusion Networks Holdings, Inc.
0000 XX 00xx Xxxxxx
Xxxxx, XX 00000
Attn: Xxxx Xxxxxxxx, President
Tel: (000) 000-0000
Fax: (000) 000-0000
With copies to: Vanderkam & Xxxxxxx
000 Xxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx Xxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Purchasers: See Schedule 1 - Schedule
of Purchasers
(attached to the Purchase Agreement)
15
With copies to: Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to any other Person who is then the registered Holder: to the address of
such Holder as it appears in the stock transfer books of the Company;
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. The Company may not assign its
rights or obligations hereunder without the prior written consent of each
Holder.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(g) Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without regard to principles thereof relating to the conflict
of laws. Each of the Company and each Holder (including Warrant Holders) hereby
irrevocably submits to the jurisdiction of any New York state court sitting in
the City and county of New York or any federal court sitting in the City and
County of New York (collectively, the "New York Courts") in respect of any
Proceeding arising out of or relating to this Agreement and irrevocably accepts
for itself and in respect of its property, generally and unconditionally,
jurisdiction of the New York Courts. Each of the Company and each Holder
(including Warrant Holders) irrevocably waives to the fullest extent it may
effectively do so under applicable law any objection that it may now or
hereafter have to the laying of the venue of any such Proceeding brought in any
New York Court and any claim that any such Proceeding brought in any New York
Court has been brought in an inconvenient forum.
(h) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(i) Severability. 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 reasonable 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.
16
(j) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(k) Shares Held by The Company and its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its Affiliates
(other than a Purchaser or transferees or successors or assigns thereof if such
Persons are deemed to be Affiliates solely by reason of their holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.
[Signatures on following page]
17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Company:
FUSION NETWORKS HOLDINGS, INC.
By:
--------------------------------
Name:
Title:
Purchaser:
GEM GLOBAL YIELD FUND LIMITED
By:
--------------------------------
Name:
Title:
