REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of December 27, 2006, by and among DigitalFX International,
Inc., a Florida corporation (the "Company"), and the several purchasers
signatory hereto (each a "Purchaser" and collectively, the "Purchasers").
This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof between the Company and each Purchaser (the
"Purchase Agreement").
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:
1. Definitions. Capitalized terms used and not otherwise defined
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herein that are defined in the Purchase Agreement shall have the meanings given
such terms in the Purchase Agreement. As used in this Agreement, the following
terms shall have the respective meanings set forth in this Section 1:
"Advice" shall have the meaning set forth in Section 6(f).
"Affiliate" means, with respect to any person, any other person which
directly or indirectly controls, is controlled by, or is under common control
with, such person.
"Business Day" means a day, other than a Saturday or Sunday, on which
banks in New York City are open for the general transaction of business.
"Closing" has the meaning set forth in the Purchase Agreement.
"Closing Date" has the meaning set forth in the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value
$0.0001 per share, and any securities into which such common stock may
hereinafter be reclassified.
"Effective Date" means the date that the Registration Statement filed
pursuant to Section 2(a) is first declared effective by the Commission.
"Effectiveness Deadline" means, with respect to the Registration
Statement required to be filed to cover the resale by the Holders of the
Registrable Securities, the earlier of: (i) the 90th calendar day following the
Closing Date; provided, that, if the Commission reviews and has written comments
to the filed Registration Statement, then the Effectiveness Deadline under this
clause (i) shall be the 135th calendar day following the Closing Date, and (ii)
the fifth (5th) Trading Day following the date on which the Company is notified
by the Commission that the Registration Statement will not be reviewed or is no
longer subject to further review and comments and the effectiveness of the
Registration Statement may be accelerated.
"Effectiveness Period" shall have the meaning set forth in Section
2(b).
"Event" shall have the meaning set forth in Section 2(c).
"Event Date" shall have the meaning set forth in Section 2(c).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Filing Deadline" means, with respect to the Registration Statement
required to be filed pursuant to Section 2(a), the 35th calendar day following
the Closing 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 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"New York Courts" means the state and federal courts sitting in the
City of New York, Borough of Manhattan.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Placement Agent" means Xxxx Capital Partners, LLC and any permitted
assigns.
"Principal Trading Market" means the Trading Market on which the
Common Stock is primarily listed on and quoted for trading, which, as of the
Closing Date, shall be the OTC Bulletin Board.
"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.
"Prospectus" means the prospectus included in a 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 a
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.
"Register," "registered" and "registration" refer to a registration
made by preparing and filing a Registration Statement or similar document in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such Registration Statement or document.
"Registrable Securities" means all of (i) the Shares issuable and (ii)
any securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event; provided, that the Holder has
completed and delivered to the Company a Selling Shareholder Questionnaire; and
provided, further, that a Holder's security shall cease to be Registrable
Securities upon the earliest to occur of the following: (A) sale pursuant to a
Registration Statement or Rule 144 under the Securities Act
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(in which case, only such security sold shall cease to be a Registrable
Security); or (B) such security becoming eligible for sale by the Holder
pursuant to Rule 144(k).
"Registration Statement" means any registration statement of the
Company filed under the Securities Act that covers the resale of any of the
Registrable Securities pursuant to the provisions of this Agreement, amendments
and supplements to such Registration Statement, including post-effective
amendments, all exhibits 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 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.
"Rule 424" means Rule 424 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, and the
rules and regulations promulgated thereunder.
"Selling Shareholder Questionnaire" means a questionnaire in the form
attached as Annex B hereto, or such other form of questionnaire as may
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reasonably be adopted by the Company from time to time.
"Shares" means the shares of Common Stock issued or issuable to the
Purchasers pursuant to the Purchase Agreement.
"Subscription Amount" means $4.75 (as subject to adjustment for stock
splits, stock dividends, and stock combinations affecting the Shares), being the
per Share purchase price paid by each Purchaser for the securities purchased by
such Purchaser pursuant to the Purchase Agreement.
"Trading Day" means (i) a day on which the Common Stock is listed or
quoted and traded on its primary Trading Market (other than the OTC Bulletin
Board), or (ii) if the Common Stock is not listed on a Trading Market (other
than the OTC Bulletin Board), a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not quoted on any Trading Market, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
to its functions of reporting prices); provided, that in the event that the
Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof,
then Trading Day shall mean a Business Day.
"Trading Market" means whichever of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global
Market, the NASDAQ Capital Market or OTC Bulletin Board on which the Common
Stock is listed or quoted for trading on the date in question.
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2. Registration.
(a) On or prior to the Filing Deadline, the Company shall prepare
and file with the Commission a Registration Statement covering the resale of all
Registrable Securities not already covered by an existing and effective
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement shall be on Form S-3 (except if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration shall be on another appropriate
form in accordance with the Securities Act and the Exchange Act) and shall
contain (except if otherwise required pursuant to written comments received from
the Commission upon a review of such Registration Statement) the "Plan of
Distribution" attached hereto as Annex A.
(b) The Company shall use its best efforts to cause the
Registration Statement to be declared effective by the Commission as soon as
practicable and, in any event, no later than the Effectiveness Deadline
(including filing with the Commission a request for acceleration of
effectiveness in accordance with Rule 461 promulgated under the Securities Act
within five (5) Business Days after the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that a
Registration Statement will not be "reviewed," or not be subject to further
review and the effectiveness of the Registration Statement may be accelerated)
and shall use its reasonable best efforts to keep the Registration Statement
continuously effective under the Securities Act until the earlier of (i) such
time as all of the Registrable Securities covered by such Registration Statement
have been publicly sold by the Holders, or (ii) the date that all Registrable
Securities covered by the Registration Statement may be sold by non-affiliates
without volume restrictions pursuant to Rule 144(k) as determined by counsel to
the Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent and the affected Holders (the
"Effectiveness Period"). The Company shall ensure that each Registration
Statement (including any amendments or supplements thereto and prospectuses
contained 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 (in the case of prospectuses, in the light of the
circumstances in which they were made) not misleading. Such Registration
Statement shall also cover, to the extent allowable under the Securities Act and
the rules promulgated thereunder (including Rule 416), such indeterminate number
of additional shares of Common Stock resulting from stock splits, stock
dividends or similar transactions with respect to the Registrable Securities.
The Company shall telephonically request effectiveness of a Registration
Statement as of 5:00 pm Eastern Time on a Trading Day. The Company shall
immediately notify the Holders via facsimile or e-mail of the effectiveness of a
Registration Statement on the same Trading Day that the Company telephonically
confirms effectiveness with the Commission, which shall be the date requested
for effectiveness of a Registration Statement. The Company shall, by 9:30 am
Eastern Time on the Trading Day after the Effective Date (as defined in the
Purchase Agreement), file a final Prospectus with the Commission pursuant to
Rule 424. Failure to so notify the Holder within 1 Trading Day of such
notification or effectiveness or failure to file a final Prospectus as aforesaid
shall be deemed an Event under Section 2(c).
(c) If: (i) the Registration Statement is not filed on or prior to
the Filing Deadline, (ii) a Registration Statement is not declared effective by
the Commission (or otherwise does not become effective) on or prior to its
Effectiveness Deadline or (iii) after its Effective Date, such Registration
Statement ceases for any reason (including without limitation by reason of a
stop order, or the Company's failure to update the Registration Statement), but
excluding the inability of any Holder to sell the Registrable Securities covered
thereby due to market conditions, to remain continuously effective and available
to the Holders as to all Registrable Securities to which it is required to cover
at any time prior to the expiration of the Effectiveness Period for an aggregate
of more than 30 consecutive Trading Days or for more than an aggregate of 60
Trading Days in any 12-month period (which need not be consecutive), (any such
failure or breach in clauses (i), (ii) or (iii) above being referred to as an
"Event," and, for purposes of clauses (i) or (ii), the date on which such Event
occurs, or for purposes of clause (iii), the date which such 30 consecutive or
60 Trading Day period (as applicable) is exceeded, being referred to as "Event
Date"), then in addition to any other rights available to the Holders: (x) on
such Event Date the
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Company shall pay to each Holder an amount in cash, as partial liquidated
damages and not as a penalty, equal to 1.0% of the aggregate purchase price paid
by such Holder pursuant to the Purchase Agreement for any Registrable Securities
then held by such Holder (which remedy shall not be exclusive of any other
remedies available under this Agreement); and (y) on each monthly anniversary of
each such Event Date thereof (if the applicable Event shall not have been cured
by such date) until the applicable Event is cured, the Company shall pay to each
Holder an amount in cash, as partial liquidated damages and not as a penalty,
equal to 1.0% of the aggregate purchase price paid by such Holder pursuant to
the Purchase Agreement for any Registrable Securities then held by such Holder
(which remedy shall not be exclusive of any other remedies available under this
Agreement). If the Company fails to pay any partial liquidated damages pursuant
to this Section in full within seven days after the date payable, the Company
will pay interest thereon at a rate of 10% per annum (or such lesser maximum
amount that is permitted to be paid by applicable law) to the Holder, accruing
daily from the date such partial liquidated damages are due until such amounts,
plus all such interest thereon, are paid in full. The partial liquidated
damages pursuant to the terms hereof shall apply on a daily pro-rata basis for
any portion of a month prior to the cure of an Event, except in the case of the
first Event Date. Notwithstanding the foregoing, the maximum payment to a Holder
associated with all Events in the aggregate shall not exceed (i) in any 30-day
period, an aggregate of 1.0% of the purchase price paid by such Holder for its
Registrable Securities (plus interest accrued thereon, if applicable) and (ii)
18.0% of the purchase price paid by such Holder for its Registrable Securities
in any 12 month period, unless, as a result of this clause (ii), Generally
Accepted Accounting Principles ("GAAP"), including without limitation, FAS 133,
EITF 00-19 or any other interpretation of GAAP, require the Registrable
Securities to be treated as a derivative security, or as any other financial
component other than in stockholders equity, in which case, the maximum amount
payable under this Section 2(c) shall not exceed 18.0% of the purchase price
paid by such Holder for its Registrable Securities.
(d) The Company shall not, from the date hereof until the date
occurring sixty (60) days after the Effective Date of the Registration
Statement, prepare and file with the Commission 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 a registration
statement on Form S-8 or, in connection with an acquisition, on Form S-4.
(e) Each Holder agrees to furnish to the Company a completed and
executed Selling Shareholder Questionnaire. The Company shall not be required
to include the Registrable Securities of a Holder in a Registration Statement
and shall not be required to pay any liquidated or other damages under Section
2(c) to any Holder who fails to furnish to the Company a fully completed and
executed Selling Shareholder Questionnaire at least two Trading Days prior to
the Filing Deadline (subject to the requirements set forth in Section 3(a)).
(f) It is agreed and understood that the Company shall, from time to
time, be obligated to file an additional Registration Statement to cover any
Registrable Securities which are not registered for resale pursuant to a
pre-existing Registration Statement.
(g) Notwithstanding anything in this Agreement to the contrary, if the
Commission refuses to declare a Registration Statement filed pursuant to this
Agreement effective as a valid secondary offering under Rule 415 due to the
number of Registrable Securities included in such Registration Statement
relative to the outstanding number of shares of Common Stock, then, without any
obligation to pay any amount under Section 2(c) with respect to, or any further
obligation to register, such excess Registrable Securities, the Company shall be
permitted to reduce the number of Registrable Securities included in such
Registration Statement to an amount that does not exceed an amount that the
Commission allows for the offering thereunder to qualify as a valid secondary
offering under Rule 415.
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3. Registration Procedures
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In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Not less than three Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or supplement
thereto, furnish to each Holder copies of such Registration Statement,
Prospectus or amendment or supplement thereto, as proposed to be filed, which
documents will be subject to the review of such Holder (it being acknowledged
and agreed that if a Holder does not object to or comment on the aforementioned
documents within such three Trading Day period, then the Holder shall be deemed
to have consented to and approved the use of such documents). The Company shall
not file a Registration Statement, any Prospectus or any amendments or
supplements thereto in which the "Selling Stockholder" section thereof differs
from the disclosure received from a Holder in its Selling Shareholder
Questionnaire (as amended or supplemented), except as may otherwise be required
by applicable securities law or the Commission.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep such
Registration Statement continuously effective as to the applicable Registrable
Securities for its Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (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; (iii)
respond as promptly as reasonably practicable, and in any event within ten (10)
Trading Days, to any comments received from the Commission with respect to each
Registration Statement or any amendment thereto and, as promptly as reasonably
possible, provide the Holders true and complete copies of all correspondence
from and to the Commission relating to such Registration Statement that pertains
to the Holders as Selling Stockholders but not any comments that would result in
the disclosure to the Holders of material and non-public information concerning
the Company; and (iv) comply with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all Registrable Securities
covered by each Registration Statement.
(c) Notify the Holders as promptly as reasonably possible (and, in
the case of (i)(A) below, not less than three Trading Days prior to such filing,
in the case of (iii) and (iv) below, not more than one Trading Day after such
issuance or receipt and, in the case of (v) below, not less than three Trading
Days prior to the financial statements in any Registration Statement becoming
ineligible for inclusion therein) and (if requested by any such Person) confirm
such notice in writing no later than one Trading Day following the day (i)(A)
when a Prospectus or any Prospectus supplement or post-effective amendment to a
Registration Statement is proposed to be filed; (B) when the Commission notifies
the Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on any Registration Statement (in
which case the Company shall provide true and complete copies thereof and all
written responses thereto to each of the Holders that pertain to the Holders as
a Selling Stockholder or to the Plan of Distribution, but not information which
the Company believes would constitute material and non-public information); and
(C) with respect to each 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 a
Registration Statement or Prospectus or for additional information that pertains
to the Holders as Selling Stockholders or the Plan of Distribution; (iii) of the
issuance by the Commission or any other federal or state governmental authority
of any stop order suspending the effectiveness of a Registration Statement
covering any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) 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
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initiation or threatening of any Proceeding for such purpose; and (v) of the
occurrence of any event or passage of time that makes the financial statements
included in a Registration Statement ineligible for inclusion therein or any
statement made in such 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 such Registration Statement,
Prospectus or other documents so that, in the case of such 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 the case of any
Prospectus, form of prospectus or supplement thereto, in light of the
circumstances under which they were made), not misleading.
(d) Use reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as practicable.
(e) If requested by a Holder, furnish to such Holder, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto 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; provided, that the
Company shall have no obligation to provide any document pursuant to this clause
that is available on the Commission's XXXXX system.
(f) Upon notification by the Commission that a Registration
Statement will not be reviewed or is no longer subject to further review and
comments, the Company shall request acceleration of such Registration Statement
within five (5) Business Days after receipt of such notice such that it becomes
effective no later than 5:00 p.m. New York City time on the Effective Date and
file a prospectus supplement for any Registration Statement, whether or not it
is required under Rule 424 (or otherwise), by 9:00 a.m. New York City time the
day after the Effective Date.
(g) Prior to any public offering of Registrable Securities,
register or qualify such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder reasonably 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 reasonably necessary to enable the
disposition in such jurisdictions of the Registrable Securities covered by the
Registration Statements; provided, 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 the Company to general
service of process in any jurisdiction where it is not then so subject or
subject the Company to any material tax in any such jurisdiction where it is not
then so subject.
(h) If requested by the Holders, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to the
Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement and under law, of all restrictive legends,
and to enable such Registrable Securities to be in such denominations and
registered in such names as any such Holders may reasonably request. In
connection therewith, if required by the Company's transfer agent, the Company
shall promptly after the effectiveness of the Registration Statement cause an
opinion of counsel as to the effectiveness of the Registration Statement to be
delivered to and maintained with its transfer agent, together with any other
authorizations, certificates and directions required by the transfer agent,
which authorize and direct the transfer agent to issue such Registrable
Securities without legend upon sale by the holder of such shares of Registrable
Securities under the Registration Statement.
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(i) Following the occurrence of any event contemplated by Section
3(c)(v), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the affected Registration Statements 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, no Registration Statement nor any 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
the case of any Prospectus, form of prospectus or supplement thereto, in light
of the circumstances under which they were made), not misleading.
(j) (i) In the time and manner required by the Principal Trading
Market, prepare and file with such Trading Market an additional shares listing
application covering all of the Registrable Securities, (ii) take all steps
necessary to cause such Registrable Securities to be approved for listing on the
Principal Trading Market as soon as possible thereafter, (iii) if requested by
any Holder, provide such Holder evidence of such listing, and (iv) during the
Effectiveness Period, maintain the listing of such Registrable Securities on the
Principal Trading Market.
(k) As long as any Holder owns Shares, the Company covenants to
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after
the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. As long
as any Holder owns Shares, if the Company is not required to file reports
pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and
furnish to the Holders and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in form and substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of the
Exchange Act, as well as any other information required thereby, in the time
period that such filings would have been required to have been made under the
Exchange Act. 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 Person to sell Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including compliance with the provisions
of the Purchase Agreement relating to the transfer of the Shares.
(l) The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Holder and any Affiliate thereof and as to any NASD
affiliations and of any natural persons who have the power to vote or dispose of
the Common Stock.
4. Registration Expenses. All fees and expenses incident to the
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Company's performance of or compliance with its obligations under this Agreement
(excluding any underwriting discounts and selling commissions and all legal fees
and expenses of legal counsel for any Holder) shall be borne by the Company
whether or not any Registrable Securities are sold pursuant to a 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 (A) with respect to filings required to be
made with the securities exchanges on which the Common Stock is then listed for
trading, and (B) in compliance with applicable state securities or Blue Sky
laws), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is reasonably requested 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) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) 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
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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 and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder. In no event shall the Company be responsible for any broker or
similar commissions or any legal fees or other costs of the Holders.
5. Indemnification.
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(a) Indemnification by the Company. The Company shall,
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notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, partners, members, managers,
shareholders, Affiliates 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, partners, members,
managers, shareholders, 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,
reasonable costs of preparation and investigation and reasonable attorneys'
fees) and expenses (collectively, "Losses"), as incurred, arising out of or
relating to (i) any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto (it being understood that
the Holder has approved Annex A hereto for this purpose) 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, or (ii) any violation or alleged violation by the Company of the
Securities Act, Exchange Act or any state securities law, or any rule or
regulation thereunder, in connection with the performance of its obligations
under this Agreement, except to the extent, but only to the extent, that (A)
such untrue statements, alleged untrue statements, omissions or alleged
omissions are based solely upon information regarding such Holder furnished in
writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and approved
by such Holder expressly for use in the Registration Statement, such Prospectus
or such form of Prospectus or in any amendment or supplement thereto (it being
understood that each Holder has approved Annex A hereto for this purpose) or (B)
in the case of an occurrence of an event of the type specified in Section
3(c)(ii)-(v), the use by a Holder of an outdated or defective Prospectus after
the Company has notified such Holder in writing that the Prospectus is outdated
or defective and prior to the receipt by such Holder of Advice (as defined in
Section 6(f) below), but only if and to the extent that following the receipt of
the Advice the misstatement or omission giving rise to such Loss would have been
corrected; provided, however, that the indemnity agreement contained in this
Section 5(a) shall not apply to amounts paid in settlement of any Losses if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld. Each Holder shall notify the
Company promptly of the institution, threat or assertion of any Proceeding of
which the Holder is aware in connection with the transactions contemplated by
this Agreement. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of an Indemnified Party (as defined in
Section 5(c)) and shall survive the transfer of the Registrable Securities by
the Holders.
(b) Indemnification by Holders. Each Holder shall, notwithstanding
--------------------------
any termination of this Agreement, severally and not jointly, indemnify and hold
harmless the Company, its 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 incurred, arising solely out of
or based solely upon any untrue or alleged untrue statement of
9
a material fact contained in any Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising solely
out of or based solely upon 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 any form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading to the
extent, but only to the extent that, such untrue statements or omissions are
based solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and approved by such
Holder expressly for use in the Registration Statement (it being understood that
the Holder has approved Annex A hereto for this purpose), such Prospectus or
such form of Prospectus or in any amendment or supplement thereto; provided,
however, that the indemnity agreement contained in this Section 5(b) shall not
apply to amounts paid in settlement of any Losses if such settlement is effected
without the prior written consent of the Holder, which consent shall not be
unreasonably withheld. In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(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 shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall have the right to assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all reasonable 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 in writing to pay such
fees and expenses; (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 thereof and such counsel shall be at the expense of
the Indemnifying Party); provided, that the Indemnifying Party shall not be
liable for the fees and expenses of more than one separate firm of attorneys at
any time for all Indemnified Parties. 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, delayed or
conditioned. 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.
All fees and expenses of the Indemnified Party (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
10
twenty Trading Days of written notice thereof to the Indemnifying Party
(regardless of whether it is ultimately determined that an Indemnified Party is
not entitled to indemnification hereunder; provided, that the Indemnifying Party
may require such Indemnified Party to undertake to reimburse all such fees and
expenses to the extent it is finally judicially determined that such Indemnified
Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section
------------
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), 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, in such proportion as is
appropriate to reflect 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 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 reasonable attorneys' or other
reasonable 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 in accordance with its terms.
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 Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
net proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder 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 and are not in diminution or limitation of the
indemnification provisions under the Purchase Agreement.
6. Miscellaneous
-------------
(a) Remedies. In the event of a breach by the Company or by a
--------
Holder of any of their 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 to specific performance of its rights under this Agreement.
The Company and each Holder agree that 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.
11
(b) No Piggyback on Registrations. Except and to the extent
--------------------------------
specified in Schedule 3.1(x) to 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 a Registration Statement other
than the Registrable Securities, and the Company shall not prior to the
Effective Date enter into any agreement providing any such right to any of it
security holders.
(c) Entire Agreement. This Agreement is intended by the parties
-----------------
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter, except for, and as provided in the Transaction Documents.
(d) Benefits of the Agreement. The terms and conditions of this
---------------------------
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
(e) Compliance. Each Holder covenants and agrees that it will
----------
comply with the prospectus delivery requirements of the Securities Act as
applicable to it (unless an exemption therefrom is available) in connection with
sales of Registrable Securities pursuant to the Registration Statement and shall
sell the Registrable Securities only in accordance with a method of distribution
described in the Registration Statement.
(f) Discontinued Disposition. Each Holder further agrees by its
-------------------------
acquisition of such Registrable Securities that, upon receipt of a notice from
the Company of the occurrence of any event of the kind described in Section
3(c)(ii)-(v), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until it is advised in
writing (the "Advice") 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. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
(g) Piggy-Back Registrations. If at any time during the
-------------------------
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission 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 (each as promulgated under
the Securities Act) 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 or
director benefit plans, then the Company shall send to each Holder written
notice of such determination and, if within fifteen days after receipt of such
notice, any such Holder shall so request in writing, the Company shall include
in such registration statement all or any part of such Registrable Securities
such holder requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights on a pro rata basis; provided,
that if at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to such Holder and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities pursuant to this
Section 6(g) in connection with such registration (but not from its obligation
to pay expenses in accordance with Section 4 hereof), and (ii) in the case of a
determination to delay
12
registering, shall be permitted to delay registering any Registrable Securities
being registered pursuant to this Section 6(g) for the same period as the delay
in registering such other securities.
(h) Amendments and Waivers. This Agreement may be amended only by
----------------------
a writing signed by all of the parties hereto. 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 each Purchaser. No consideration shall
be offered or paid to any Holder to amend or consent to a waiver or modification
of any provision of this Agreement unless the same consideration also is offered
to all of the Holders. 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.
(i) Notices. Any and all notices or other communications or
-------
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 5:00 p.m. (New York City
time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile or
e-mail to the facsimile number or e-mail addressed specified in this Section on
a day that is not a Trading Day or later than 5:00 p.m. (New York City time) on
any Trading Day, (iii) the Business Day following the date of mailing, if sent
by nationally recognized overnight courier service with next day delivery
specified, or (iv) upon actual receipt by the party to whom such notice is
required to be given.
The address for such notices and communications shall be as follows:
If to the Company: DigitalFX International, Inc.
0000 Xxxx Xxxxxxx Xxxx, Xxxxx 0
Xxx Xxxxx, XX 00000
Facsimile:
Attn:
With a copy to: Xxxxxx Xxxxxxxx & Markiles, LLP
00000 Xxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxx Xxxxxxxx
Xxxxxxx X. Xxxxxx, Esq
0000 Xxxx Xxxxx X Xxxxxx
Xxxxx, XX 00000-0000
Facsimile: 000-000-0000
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature pages
hereto.
If to any other Person To the address of such Holder as it
who is then the appears in the stock transfer books of the
registered Holder:
13
Company or such other address as may
be designated in writing hereafter, in the
same manner, by such Person.
provided, that any party may change its address for notices by providing written
notice to the other parties in the manner prescribed by this Section.
(j) 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. The rights of the Holders hereunder, including the right to have
the Company register Registrable Securities pursuant to this Agreement, may be
assigned by each Holder to transferees or assignees of all or any portion of the
Registrable Securities, but only if (i) the Holder agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being transferred or assigned, (iii) at or before the time the Company received
the written notice contemplated by clause (ii) of this sentence, the transferee
or assignee agrees in writing with the Company to be bound by all of the
provisions contained herein and (iv) the transferee is an "accredited investor,"
as that term is defined in Rule 501 of Regulation D.
(k) Execution and 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.
(l) Governing Law. All questions concerning the construction,
--------------
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement (whether brought
against a party hereto or its respective Affiliates, employees or agents) will
be commenced in the New York Courts. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any New York Court, or that such
Proceeding has been commenced in an improper or inconvenient forum. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such Proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law. Each
party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any Proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby. If
any party shall commence a Proceeding to enforce any provisions of this
Agreement, then the prevailing party in such Proceeding shall be reimbursed by
the other parties for its
14
attorneys' fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding.
(m) Cumulative Remedies. The remedies provided herein are
--------------------
cumulative and not exclusive of any remedies provided by law.
(n) 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.
(o) Headings. The headings in this Agreement are for convenience
--------
of reference only and shall not limit or otherwise affect the meaning hereof.
(p) Independent Nature of Purchasers' Obligations and Rights. The
--------------------------------------------------------
obligations of each Purchaser under this Agreement are several and not joint
with the obligations of any other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. The decision of each Purchaser to purchase Securities
pursuant to the Transaction Documents has been made independently of any other
Purchaser. Nothing contained herein or in any other agreement or document
delivered at any closing, and no action taken by any Purchaser pursuant hereto
or thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert with respect to
such obligations or the transactions contemplated by this Agreement. Each
Purchaser acknowledges that no other Purchaser has acted as agent for such
Purchaser in connection with making its investment hereunder and that no
Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment in the Securities or enforcing its rights under the
Transaction Documents. Each Purchaser shall be entitled to protect and enforce
its rights, including, without limitation, the rights arising out of this
Agreement, and it shall not be necessary for any other Purchaser to be joined as
an additional party in any Proceeding for such purpose. The Company
acknowledges that each of the Purchasers has been provided with the same
Registration Rights Agreement for the purpose of closing a transaction with
multiple Purchasers and not because it was required or requested to do so by any
Purchaser.
(q) Currency. Unless otherwise indicated, all dollar amounts
--------
referred to in this Agreement are in United States Dollars. All amounts owing
under this Agreement are in United States Dollars. All amounts denominated in
other currencies shall be converted in the United States dollar equivalent
amount in accordance with the applicable exchange rate in effect on the date of
calculation.
(r) Further Assurances. The parties shall execute and deliver all
------------------
such further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES TO FOLLOW]
15
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
DIGITALFX INTERNATIONAL, INC.
By: /s/ Xxxxx Xxxxxx
--------------------------------
Name: Xxxxx Xxxxxx
Title: Chief Financial Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF HOLDERS TO FOLLOW]
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
KINGDON ASSOCIATES
By: Kingdon Capital Management, LLC
By: /s/ Xxxxxx Xxxxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: General Counsel
Address for Notice:
KINGDON FAMILY PARTNERSHIP, L.P.
By: Kingdon Capital Management, LLC
By: /s/ Xxxxxx Xxxxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: General Counsel
Address for Notice:
X. XXXXXXX OFFSHORE LTD.
By: Kingdon Capital Management, LLC
By: /s/ Xxxxxx Xxxxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: General Counsel
Address for Notice:
2
Annex A
PLAN OF DISTRIBUTION
We are registering the shares of Common Stock issued to the selling
shareholders to permit the resale of these shares of Common Stock by the holders
of the shares of Common Stock from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale by the
selling shareholders of the shares of Common Stock. We will bear all fees and
expenses incident to our obligation to register the shares of Common Stock.
The selling shareholders may sell all or a portion of the shares of Common
Stock beneficially owned by them and offered hereby from time to time directly
or through one or more underwriters, broker-dealers or agents. If the shares of
Common Stock are sold through underwriters or broker-dealers, the selling
shareholders will be responsible for underwriting discounts or commissions or
agent's commissions. The shares of Common Stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions. The Selling Stockholders may use any one or more of the following
methods when selling shares:
- on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale;
- in the over-the-counter market;
- in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
- through the writing of options, whether such options are listed on an
options exchange or otherwise;
- ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- short sales;
- broker-dealers may agree with the selling securityholders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
3
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. If the selling shareholders effect such
transactions by selling shares of Common Stock to or through underwriters,
broker-dealers or agents, such underwriters, broker-dealers or agents may
receive commissions in the form of discounts, concessions or commissions from
the selling shareholders or commissions from purchasers of the shares of Common
Stock for whom they may act as agent or to whom they may sell as principal. The
selling stockholders do not expect these discounts, commissions or concessions
to exceed what is customary in the types of transactions involved
In connection with sales of the shares of Common Stock or otherwise, the
selling shareholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
shares of Common Stock in the course of hedging in positions they assume. The
selling shareholders may also sell shares of Common Stock short and if such
short sale shall take place after the date that this Registration Statement is
declared effective by the Commission, the selling stockholders may deliver
shares of Common Stock covered by this prospectus to close out short positions
and to return borrowed shares in connection with such short sales. The selling
shareholders may also loan or pledge shares of Common Stock to broker-dealers
that in turn may sell such shares. The selling stockholders may also enter into
option or other transactions with broker-dealers or other financial institutions
or the creation of one or more derivative securities which require the delivery
to such broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
The selling shareholders may pledge or grant a security interest in some or
all of the shares of Common Stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of Common Stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933, as amended, amending, if
necessary, the list of selling shareholders to include the pledgee, transferee
or other successors in interest as selling shareholders under this prospectus.
The selling shareholders also may transfer and donate the shares of Common Stock
in other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The selling shareholders and any broker-dealer participating in the
distribution of the shares of Common Stock may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commission paid, or any
discounts or concessions allowed to, any such broker-dealer may be deemed to be
underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of Common Stock is made, a prospectus
supplement, if required, will be distributed which will set forth (i) the name
of each such selling stockholder and of the participating broker-dealer(s), (ii)
the number of shares involved, (iii) the price at which such the shares of
Common Stock were sold, (iv) the commissions paid or discounts or concessions
allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus, and (vi) other facts
material to the transaction. In addition, upon the Company being notified in
writing by a Selling Stockholder that a donee or pledgee intends to sell more
than 500 shares of Common Stock, a supplement to this prospectus will be filed
if then required in accordance with applicable securities law.
Under the securities laws of some states, the shares of Common Stock may be
sold in such states only through registered or licensed brokers or dealers. In
addition, in some states the shares of Common Stock may not be sold unless such
shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with.
There can be no assurance that any selling shareholder will sell any or all
of the shares of Common Stock registered pursuant to the shelf registration
statement, of which this prospectus forms a part.
4
The selling shareholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may limit the timing
of purchases and sales of any of the shares of Common Stock by the selling
shareholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of Common
Stock to engage in market-making activities with respect to the shares of Common
Stock. All of the foregoing may affect the marketability of the shares of
Common Stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of Common Stock.
We will pay all expenses of the registration of the shares of Common Stock
pursuant to the registration rights agreement, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with
state securities or "blue sky" laws; provided, however, that a selling
shareholder will pay all underwriting discounts and selling commissions, if any
and any related legal expenses incurred by it. We will indemnify the selling
shareholders against liabilities, including some liabilities under the
Securities Act, in accordance with the registration rights agreements, or the
selling shareholders will be entitled to contribution. We may be indemnified by
the selling shareholders against civil liabilities, including liabilities under
the Securities Act, that may arise from any written information furnished to us
by the selling shareholder specifically for use in this prospectus, in
accordance with the related registration rights agreements, or we may be
entitled to contribution.
5
