REGISTRATION RIGHTS AGREEMENT
Exhibit
10.2
THIS REGISTRATION RIGHTS
AGREEMENT (this “Agreement”), dated as
of March 26, 2008, by and among LML PAYMENT SYSTEMS, INC., a
Yukon corporation (the “Company”), and the
buyer named on the signature page hereto (the “Buyer”).
WHEREAS:
A. In
connection with the Securities Purchase Agreement by and among the parties
hereto of even date herewith (the “Securities Purchase
Agreement”), the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, to issue to the Buyer an
aggregate amount of 4,000,000 shares of common stock (the “Buyer’s Common
Stock”).
B. To
induce the Buyer to execute and deliver the Securities Purchase Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the “Securities Act”), and
applicable state securities laws.
NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Buyer hereby agree as
follows:
1. DEFINITIONS.
Capitalized
terms not defined herein shall have the meaning ascribed to them in the
Securities Purchase Agreement. As used in this Agreement, the
following terms shall have the following meanings:
(a) “Closing” means the
day that the transactions contemplated by the Securities Purchase
Agreement are closed.
(b) “Effectiveness
Deadline” means, with respect to the Registration Statement required to
be filed hereunder, the 60th calendar day following the date filed, provided,
however, in the event the Company is notified by the U.S. Securities and
Exchange Commission (“SEC”) that a
Registration Statement will not be reviewed or is no longer subject to further
review and comments, the Effectiveness Date as to such Registration Statement
shall be the fifth Trading Day following the date on which the Company is so
notified if such date precedes the date required above.
(c) “Filing Deadline”
means, with respect to the Registration Statement required hereunder, the
earlier of (i) the 15th calendar day following the date the Company files on
Xxxxx its form 10-K for the fiscal year ended March 31, 2008, and (ii) one
hundred (100) calendar days after the Closing.
(d) “Person” means a
corporation, a limited liability company, an association, a partnership, an
organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
(e) “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.
(f) “Registrable
Securities” means all of the Buyer’s Common Stock.
(g) “Registration
Statement” means the registration statement required to be filed
hereunder and any additional registration statements contemplated by Section
3(c), including (in each case) 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, each a
“Registration Statement”.
(h) “Rule 415” means Rule
415 promulgated by the SEC pursuant to the Securities Act, as such Rule may be
amended from time to time, including applicable SEC staff interpretations, or
any similar rule or regulation hereafter adopted by the SEC having
substantially the same purpose and effect as such Rule.
(i) “SEC” means the United
States Securities and Exchange Commission.
(j) “Trading Day” means a
day when the principal trading market where the Company’s common stock is listed
for trading is open for trading, currently the NASDAQ Capital
Market.
2. REGISTRATION.
(a) On or
prior to the Filing Deadline, the Company shall prepare and file with the SEC a
Registration Statement on Form S-1 (or, if the Company is then eligible, on Form
S-3) covering the resale of the maximum number of the Registrable Securities as
is permitted under Rule 415. The Registration Statement shall contain
the “Selling
Stockholders” and “Plan of Distribution”
sections in substantially the form attached hereto as Exhibit
A. The Company shall use its commercially reasonable efforts
to have the Registration Statement declared effective by the SEC within 30 days
of filing, but in no event later than the Effectiveness Deadline. By
9:30 am on the business day following the date of effectiveness, the Company
shall file with the SEC in accordance with Rule 424 under the 1933 Act the final
Prospectus to be used in connection with sales pursuant to such Registration
Statement. The Company shall cause the Registration Statement to
remain effective until the earlier of (i) six years from the Effectiveness Date,
and the date that all of the Registrable Securities (ii) have been sold or (iii)
may be sold without volume restrictions pursuant to Rule 144(b)(1), as
determined by the 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 (“Registration
Period”). Prior to the filing of the Registration Statement
with the SEC, the Company shall furnish a draft of the Registration Statement to
the Buyers for their review and comment. The Buyers shall furnish
comments on the Registration Statement to the Company within twenty-four (24)
hours of the receipt thereof from the Company.
(b) Failure to File or Obtain
Effectiveness of the Registration Statement. If: (i) a
Registration Statement is not filed on or prior to the Filing Date or (ii) the
Company fails to file with the SEC a request for acceleration in accordance with
Rule 461 promulgated under the Securities Act, within five Trading Days of the
date that the Company is notified (orally or in writing, whichever is earlier)
by the SEC that a Registration Statement will not be “reviewed,” or not subject
to further review, or (iii) a Registration Statement filed or required to be
filed hereunder is not declared effective by the SEC by its Effectiveness
Deadline (each, an “Event”), then in
addition to any other rights the Buyer may have hereunder or under applicable
law, on each such Event date and on each monthly anniversary of each such Event
date (if the applicable Event shall not have been cured by such date) until the
applicable Event is cured, the Company shall pay to the Buyer an amount in cash,
as partial liquidated damages (“Liquidated Damages”)
and not as a penalty, equal to 1.0% of the purchase price of the Buyer’s Common
Stock then held by Buyer. The parties agree that the maximum
aggregate Liquidated Damages payable to the Buyer under this Agreement shall be
six percent (6%) of the aggregate Purchase Price paid by the Buyer pursuant to
the Securities Purchase Agreement. 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.
(c) Liquidated
Damages. The Company and the Buyer hereto acknowledge and
agree that the sums payable under subsection 2(b) above shall constitute
liquidated damages and not penalties and are in addition to all other rights of
the Buyer, including the right to call a default. The parties further
acknowledge that (i) the amount of loss or damages likely to be incurred is
incapable or is difficult to precisely estimate, (ii) the amounts specified in
such subsections bear a reasonable relationship to, and are not plainly or
grossly disproportionate to, the probable loss likely to be incurred in
connection with any failure by the Company to obtain or maintain the
effectiveness of a Registration Statement, (iii) one of the reasons for the
Company and the Buyer reaching an agreement as to such amounts was the
uncertainty and cost of litigation regarding the question of actual damages, and
(iv) the Company and the Buyer are sophisticated business parties and have been
represented by sophisticated and able legal counsel and negotiated this
Agreement at arm’s length.
3. RELATED
OBLIGATIONS.
(a) The
Company shall, not less than five (5) Trading Days prior to the filing of each
Registration Statement and not less than one (1) Trading Day prior to the filing
of any related amendments and supplements to all Registration Statements (except
for periodic reports on Form 10-K or Form 10-Q), furnish to the Buyer 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
reasonable and prompt review of such Buyer. The Company shall not file a
Registration Statement or any such Prospectus or any amendments or supplements
thereto to which the Buyers shall reasonably object in good faith; provided that, the Company is
notified of such objection in writing no later than three (3) Trading Days after
the Buyers have been so furnished copies of a Registration
Statement.
(b) The
Company shall (i) prepare and file with the SEC (electronically on Xxxxx) such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the Prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the Securities Act, as may be necessary to keep such
Registration Statement effective at all times during the Registration Period,
and prepare and file with the SEC 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 (subject to the terms of this Agreement), and
as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
promptly as reasonably possible to any comments received from the SEC with
respect to a Registration Statement or any amendment thereto and as promptly as
reasonably possible provide the Buyers true and complete copies of all
correspondence from and to the SEC relating to a Registration Statement
(provided that the Company may excise any information contained therein which
would constitute material non-public information as to any Buyer which has not
executed a confidentiality agreement with the Company); and (iv) comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such Registration Statement. In the
case of amendments and supplements to a Registration Statement which are
required to be filed pursuant to this Agreement (including pursuant to this
Section 3(b)) by reason of the Company’s filing a report on Form 10-K, Form 10-Q
or Form 8-K or any analogous report under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), the
Company shall incorporate such report by reference into the Registration
Statement, if permissible, or shall file such amendments or supplements with the
SEC on the same day on which the Exchange Act report is filed which created the
requirement for the Company to amend or supplement the Registration
Statement.
(c) Reduction of Registrable
Securities Included in a Registration Statement. Notwithstanding anything
contained herein, in the event that the SEC requires the Company, or counsel for
the Company in good faith advises that the SEC would require the Company to
reduce the number of Registerable Securities to be included in a Registration
Statement in order to allow the Company to rely on Rule 415 with respect to a
Registration Statement, then the Company shall be obligated to include in such
Registration Statement (which may be a subsequent Registration Statement if the
Company needs to withdraw the initial Registration Statement and refile a new
Registration Statement in order to rely on Rule 415) only such limited portion
of the Registrable Securities as the SEC shall permit. Any
Registrable Securities that are excluded in accordance with the foregoing terms
are hereinafter referred to as “Cut Back
Securities.” To the extent Cut Back Securities exist, as soon
as may be permitted by the SEC, the Company shall be required to file a
Registration Statement covering the resale of the Cut Back Securities and shall
use best efforts to cause such Registration Statement to be declared effective
as promptly as practicable thereafter.
(d) The
Company shall furnish to the Buyer whose Registrable Securities are included in
any Registration Statement, without charge, (i) at least one (1) copy of such
Registration Statement as declared effective by the SEC and any amendment(s)
thereto, including financial statements and schedules, all documents
incorporated therein by reference, all exhibits and each preliminary prospectus,
(ii) one (1) copy of the final prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number of
copies as such Buyer may reasonably request) and (iii) such other documents as
such Buyer may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Buyer.
(e) As
promptly as practicable after becoming aware of such event or development, the
Company shall notify the Buyer in writing of the happening of any event as a
result of which the Prospectus included in a Registration Statement, as then in
effect, includes an untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (provided that in no event shall such notice contain any material,
nonpublic information), and promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
one (1) copy of such supplement or amendment to the Buyer. The
Company shall also promptly notify the Buyer in writing (i) when a Prospectus or
any Prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to the Buyer by facsimile
on the same day of such effectiveness), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company’s reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.
(f) The
Company shall use its commercially reasonable efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction within the United States of America and, if such an
order or suspension is issued, to obtain the withdrawal of such order or
suspension at the earliest possible moment and to notify the Buyer who holds
Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.
(g) If
requested by the Buyer, the Company shall hold in confidence and not make any
disclosure of information concerning a Buyer provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, or is required to be in the Registration Statement (ii) the
disclosure of such information is requested by the SEC as part of their review
of the Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other order from a court or governmental body of
competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this Agreement
or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning a Buyer is sought in or
by a court or governmental body of competent jurisdiction or through other
means, give prompt written notice to such Buyer and allow such Buyer, at the
Buyer’s expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.
(h) The
Company shall use its best efforts either to cause all the Registrable
Securities covered by a Registration Statement (i) to be listed on each
securities exchange on which securities of the same class or series issued by
the Company are then listed. The Company shall pay all fees and
expenses in connection with satisfying its obligation under this
Section.
(i) The
Company shall cooperate with the Buyer who holds Registrable Securities being
offered and, to the extent applicable, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the Buyers may reasonably request and registered in such names as the
Buyers may request.
(j) The
Company shall otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC in connection with any registration
hereunder.
(k) Within
three (3) business days after a Registration Statement which covers Registrable
Securities is declared effective by the SEC, the Company shall deliver, and
shall cause legal counsel for the Company to deliver, to the transfer agent for
such Registrable Securities (with copies to the Buyer whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit
B.
4. OBLIGATIONS OF THE
BUYERS.
(a) The Buyer
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 3(e) such Buyer will immediately
discontinue disposition of Registrable Securities pursuant to any Registration
Statement covering such Registrable Securities until such Buyer’s receipt of the
copies of the supplemented or amended prospectus contemplated by Section 3(e) or receipt of notice
that no supplement or amendment is required.
(b) The Buyer
covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it or an exemption therefrom
in connection with sales of Registrable Securities pursuant to the Registration
Statement.
5. EXPENSES OF
REGISTRATION.
All
expenses incurred in connection with registrations, filings or qualifications
pursuant to Sections 2 and 3, including, without limitation, all registration,
listing and qualifications fees, printers, legal and accounting fees shall be
paid by the Company.
6. INDEMNIFICATION.
With
respect to Registrable Securities which are included in a Registration Statement
under this Agreement:
(a) The
Company will, and hereby does, indemnify, hold harmless and defend the Buyer,
the directors, officers, partners, employees, agents, representatives of, and
each Person, if any, who controls any Buyer within the meaning of the Securities
Act or the Exchange Act (each, an “Indemnified Person”),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
expenses, joint or several (collectively, “Claims”) incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto (“Indemnified
Damages”), to which any of them may become subject insofar as such Claims
(or actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto, or the omission
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading; (ii) any untrue statement of a material fact
contained in any final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation by the Company of the Securities
Act, the Exchange Act, any other law, including, without limitation, any state
securities law, or any rule or regulation there under relating to the offer or
sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively, “Violations”). The
Company shall reimburse the Buyers and each such controlling person promptly as
such expenses are incurred and are due and payable, for any legal fees or
disbursements or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything
to the contrary contained herein, the indemnification agreement contained in
this Section 6(a): (x) shall not apply to a Claim by an Indemnified Person
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished to the Company by such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; (y) shall not be
available to the extent such Claim is based on a failure of the Buyer to deliver
or to cause to be delivered the prospectus made available by the Company, if
such prospectus was timely made available by the Company pursuant to Section
3(c); and (z) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Buyers pursuant to Section 9 hereof.
(b) In
connection with a Registration Statement, the Buyer agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers, employees, representatives, or agents and each Person, if any,
who controls the Company within the meaning of the Securities Act or the
Exchange Act (each an “Indemnified Party”),
against any Claim or Indemnified Damages to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim or Indemnified Damages arise out of or is based upon any Violation,
in each case to the extent, and only to the extent, that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Buyer expressly for use in connection with such Registration
Statement; and, subject to Section 6(d), such Buyer will reimburse any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Buyer, which consent shall not be unreasonably withheld; provided, further,
however, that the Buyer shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
such Buyer as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the Buyers
pursuant to Section 9. The Buyer shall reimburse the Company and each such
controlling person promptly as such expenses are incurred and are due and
payable, for any legal fees or disbursements or other reasonable expenses
incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the prospectus was corrected
and such new prospectus was delivered to the Buyer prior to such Buyer’s use of
the prospectus to which the Claim relates.
(c) Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section 6
of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses of not
more than one (1) counsel for such Indemnified Person or Indemnified Party to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between
such Indemnified Person or Indemnified Party and any other party represented by
such counsel in such proceeding. The Indemnified Party or Indemnified
Person shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the Indemnified Party or Indemnified Person which relates to such action or
claim. The indemnifying party shall keep the Indemnified Party or
Indemnified Person fully apprised at all times as to the status of the defense
or any settlement negotiations with respect thereto. No indemnifying
party shall be liable for any settlement of any action, claim or proceeding
effected without its prior written consent; provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written
consent of the Indemnified Party or Indemnified Person, consent to entry of any
judgment or enter into any settlement or other compromise which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such claim or litigation. Following indemnification as
provided for hereunder, the indemnifying party shall be subrogated to all rights
of the Indemnified Party or Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which indemnification
has been made. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.
(d) The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Damages are incurred.
(e) The
indemnity agreements contained herein shall be in addition to (i) any cause
of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the
extent any indemnification by an indemnifying party is prohibited or limited by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however, that: (i) no
seller of Registrable Securities guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE EXCHANGE
ACT.
With a
view to making available to the Buyers the benefits of Rule 144 promulgated
under the Securities Act or any similar rule or regulation of the SEC that may
at any time permit the Buyers to sell securities of the Company to the public
without registration (“Rule 144”) the
Company agrees for a period of two (2) years from the Filing Date
to:
(a) make and
keep public information available, as those terms are understood and defined in
Rule 144;
(b) file with
the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act so long as the Company
remains subject to such requirements and the filing of such reports and other
documents as are required by the applicable provisions of Rule 144;
and
(c) furnish
to the Buyer so long as such Buyer owns Registrable Securities, promptly upon
request, (i) a written statement by the Company that it has complied with the
reporting requirements of Rule 144, the Securities Act and the Exchange Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested to permit the Buyers to sell such
securities pursuant to Rule 144 without registration.
9. AMENDMENT OF REGISTRATION
RIGHTS.
Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and
Buyer. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon the Buyer and the Company. No
such amendment shall be effective to the extent that it applies to fewer than
all of the holders of the Registrable Securities. No consideration
shall be offered or paid to any Person to amend or consent to a waiver or
modification of any provision of any of this Agreement unless the same
consideration also is offered to all of the parties to this
Agreement.
10. MISCELLANEOUS.
(a) A Person
is deemed to be a holder of Registrable Securities whenever such Person owns or
is deemed to own of record such Registrable Securities or owns the right to
receive the Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two (2) or more Persons with
respect to the same Registrable Securities, the Company shall act upon the basis
of instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Piggy-Back
Registrations. If at any time there is not an effective
Registration Statement covering all of the Registrable Securities and the
Company shall determine to prepare and file with the SEC a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (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 the stock option or other employee benefit plans, and Rule 415
allows for additional shares to be registered, then the Company shall send to
the Buyer a written notice of such determination and, if within fifteen (15)
days after the date of such notice, any such Buyer shall so request in writing,
the Company shall include in such registration statement all or any part of such
Registrable Securities such Buyer requests to be registered; provided, however, that, the
Company shall not be required to register any Registrable Securities pursuant to
this Section 10(c) that are eligible for resale pursuant to Rule 144(1)(b)
promulgated under the Securities Act or that are the subject of a then effective
Registration Statement.
(c) 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 (a) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth on the signature
pages attached hereto prior to 6:30 p.m. (New York City time) on a Trading Day,
(b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto on a day that is not a Trading Day or later
than 6:30 p.m. (New York City time) on any Trading Day, or (c) upon actual
receipt by the party to whom such notice is required to be given. The addresses
and facsimile numbers for such communications shall be:
|
If
to the Company, to:
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LML
Payment Systems, Inc.
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0000
- 0000 Xxxx Xxxxxx Xxxxxx
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Xxxxxxxxx,
XX X0X 0X0
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Attention: Chief
Executive Officer
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Telephone: (000)
000-0000
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Facsimile: (000)
000-0000
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With
Copy to:
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Xxxxx
Xxxxxx LLP
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#800,
000 X. Xxxxxxx Xxxxxx
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Xxxxxx
X0X 0X0
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Attention: Xxxxxxx
Xxxxxx, Esq.
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Telephone: 000-000-0000
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Facsimile:000-000-0000
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To
the Buyer:
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Millennium
Partners, L.P.
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c/o
Millennium Management LLC
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000
Xxxxx Xxxxxx, 0xx Xxxxx
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Xxx
Xxxx, XX 00000
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Tel:
(000) 000-0000
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Fax: (000)
000-0000
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Attn:
Xxxxx Xxxxxx
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Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by a
courier or overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
(d) Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as a
waiver thereof.
(e) The laws
of the State of New York shall govern all issues concerning the relative rights
of the Company and the Buyers as its stockholders. All other
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
New York. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the Superior Courts of the State of New York, and federal courts
for the District of New York 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 suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
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. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.
(f) This
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto. The Buyer may assign the
rights attached to this Agreement to a third party (the “Transferee”) in
conjunction with the sale of all or a portion of the Buyer’s Common Stock,
provided that the transfer is permitted under applicable securities laws and
rules, and provided the Transferee agrees to be bound by the terms of this
Agreement. In such case, reference to the “Buyer” will also include such
Transferees, as applicable.
(g) The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
(h) This
Agreement may be executed in identical counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
(i) Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(j) The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent and no rules of strict construction will
be applied against any party.
(k) This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
IN WITNESS WHEREOF, the Buyer
and the Company have caused their signature page to this Registration Rights
Agreement to be duly executed as of the date first above written.
|
COMPANY:
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LML
PAYMENT SYSTEMS, INC.
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|
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By: /s/ Xxxxxxx X.
Xxxxxx
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Name:
Xxxxxxx X. Xxxxxx
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Title:
President and Chief Executive Officer
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BUYER:
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MILLENNIUM
PARTNERS, L.P.
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|
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By:
Millennium Management LLC
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/s/
Xxxxx Xxxxxx
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Name:
Xxxxx Xxxxxx
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Title:
Chief Operating Officer
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SCHEDULE
I
SCHEDULE OF
BUYERS
|
Address/Facsimile
|
Address/Facsimile
|
|
|
Buyer
|
Number
of Buyer
|
Number
of Buyer’s Representative
|
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Millennium
Partners, L.P.
|
Millennium
Partners, L.P.
|
Millennium
Partners, L.P.
|
|
c/o
Millennium Management LLC
|
c/o
Millennium Management LLC
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|
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000
Xxxxx Xxxxxx, 0xx Xxxxx
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000
Xxxxx Xxxxxx, 0xx Xxxxx
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|
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Xxx
Xxxx, XX 00000
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Xxx
Xxxx, XX 00000
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Tel:
(000) 000-0000
|
Tel:
(000) 000-0000
|
|
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Fax: (000)
000-0000
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Fax: (000)
000-0000
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|
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Attn:
Xxxxx Xxxxxx
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Attn:
Xxxxx Xxxxxx
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EXHIBIT
A
SELLING
STOCKHOLDERS
AND PLAN OF
DISTRIBUTION
Selling
Stockholders
As per
Schedule of Buyers attached.
Plan of
Distribution
Each
Selling Stockholder (the “Selling
Stockholders”) of the common stock and any of their pledgees, assignees
and successors-in-interest may, from time to time, sell any or all of their
shares of common stock on the NASDAQ Capital Market or any other stock exchange,
market or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated
prices. A Selling Stockholder may use any one or more of the
following methods when selling shares:
|
·
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ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
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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;
|
|
·
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purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
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|
·
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an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
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privately
negotiated transactions;
|
|
·
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broker-dealers
may agree with the Selling Stockholders to sell a specified number of such
shares at a stipulated price per
share;
|
|
·
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through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
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|
·
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a
combination of any such methods of sale;
or
|
|
·
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any
other method permitted pursuant to applicable
law.
|
The
Selling Stockholders may also sell shares under Rule 144 under the Securities
Act of 1933, as amended (the “Securities Act”), if
available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or
discounts from the Selling Stockholders (or, if any broker-dealer acts as agent
for the purchaser of shares, from the purchaser) in amounts to be negotiated,
but, except as set forth in a supplement to this Prospectus, in the case of an
agency transaction not in excess of a customary brokerage commission in
compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.
The
Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each Selling
Stockholder has informed the Company that it does not have any written or oral
agreement or understanding, directly or indirectly, with any person to
distribute the Common Stock.
The
Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the shares. The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because
Selling Stockholders may be deemed to be “underwriters” within the meaning of
the Securities Act, they will be subject to the prospectus delivery requirements
of the Securities Act including Rule 172 thereunder. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 under the Securities Act may be sold under Rule 144 rather than under this
prospectus. There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the Selling
Stockholders.
EXHIBIT
B
FORM
OF NOTICE OF EFFECTIVENESS
OF REGISTRATION
STATEMENT
Attention:
|
|
Re:
|
LML
PAYMENT SYSTEMS, INC.
|
Ladies
and Gentlemen:
We are
counsel to LML Payment Systems, Inc., a Yukon corporation (the “Company”), and have
represented the Company in connection with that certain Securities Purchase
Agreement (the “Securities Purchase
Agreement”) entered into by and among the Company and the Buyers named
therein (collectively, the “Buyers”) pursuant to
which the Company issued to the Buyers shares of its Common Stock, no par value
per share (the “Common
Stock”). Pursuant to the Purchase Agreement, the Company also
has entered into a Registration Rights Agreement with the Buyers (the “Registration Rights
Agreement”) pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement) under the Securities Act of 1933, as amended (the “Securities
Act”). In connection with the Company’s obligations under the
Registration Rights Agreement, on ____________ ____, the Company filed a
Registration Statement on Form ________ (File No. 333-_____________) (the
“Registration
Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the
Registrable Securities which names each of the Buyers as a selling stockholder
thereunder.
In
connection with the foregoing, we advise you that the Registration Statement has
become effective under the Securities Act at [ENTER TIME OF EFFECTIVENESS]
on [ENTER DATE OF
EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a
member of the SEC’s staff, that any stop order suspending its effectiveness has
been issued or that any proceedings for that purpose are pending before, or
threatened by, the SEC and the Registrable Securities are available for resale
under the Securities Act pursuant to the Registration Statement.
Very
truly yours,
[Law
Firm]
By:
cc: [LIST NAMES OF BUYERS]
