REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of 16 day of June, 2005 by and among Adsouth Partners, Inc, a
corporation organized and existing under the laws of the State of Nevada
("Adsouth" or the "Company"), and Xxxxxx Partners L.P., a Delaware limited
partnership (hereinafter referred to as the "Purchasers") Xxxxxx Venture Capital
("Xxxxxx") and Xxxxxxx Xxxxxxxx ("Xxxxxxxx"), with the Purchasers, Xxxxxx and
Xxxxxxxx being collectively referred to as the "Purchasers" and each,
individually, as a "Purchaser." The Purchasers are not investing as an equity
group and each of the investors have independently made their own decision with
regards to the purchase of the securities. Unless defined otherwise, capitalized
terms herein shall have the identical meaning as in the Preferred Stock Purchase
Agreement (the "Preferred Stock Purchase Agreement") dated June 16, 2005 by and
among the Company and the Purchasers.
PRELIMINARY STATEMENT
WHEREAS, pursuant to the Preferred Stock Purchase Agreement, the
Purchasers are purchasing shares of Series B Preferred Stock and Warrants, which
upon conversion and exercise of which the Purchasers will receive Shares of the
Company; and
WHEREAS, the ability of the Purchasers to sell their Shares of Common
Stock is subject to certain restrictions under the 1933 Act; and
WHEREAS, as a condition to the Purchasers' obligations to purchase the
Series B Preferred Stock and the Warrants, Adsouth has agreed to provide the
Purchasers with a mechanism that will permit such Purchasers, subject to a
market stand-off agreement, to sell its Shares of Common Stock in the future, as
set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements, and subject to the terms and conditions herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
INCORPORATION BY REFERENCE, SUPERSEDER
1.1 Incorporation by Reference. The foregoing recitals and the Exhibits
attached hereto and referred to herein, are hereby acknowledged to be true and
accurate, and are incorporated herein by this reference.
1.2 Supersedes Other Documents. This Agreement, to the extent that it is
inconsistent with any other instrument or understanding among the parties
governing the affairs of the Company, shall supersede such instrument or
understanding to the fullest extent permitted by law. A copy of this Agreement
shall be filed at the Company's principal office.
ARTICLE II
DEMAND REGISTRATION RIGHTS
2.1 "Registrable Securities" means and includes the Shares of the Company
issuable upon conversion of the Series B Preferred Stock and upon exercise of
the Warrants issued pursuant to the Preferred Stock Purchase Agreement. As to
any particular Registrable Securities, such securities will cease to be
Registrable Securities when (a) they have been effectively registered under the
1933 Act and disposed of in accordance with the registration statement covering
them, (b) they are or may be freely traded without registration pursuant to Rule
144 under the 1933 Act (or any similar provisions that are then in effect), or
(c) they have been otherwise transferred and new certificates for them not
bearing a restrictive legend have been issued by Adsouth and Adsouth shall not
have "stop transfer" instructions against them. "Shares" shall mean,
collectively, the shares of Common Stock of the Company issuable upon conversion
of the Preferred Stock and those shares of Common Stock of the Company issuable
to the Purchasers upon exercise of the Warrants.
2.2 Registration of Registrable Securities. The Company shall prepare and
file within thirty (30) days following the date hereof (the "Filing Date") a
registration statement (the "Registration Statement") covering the sale of such
number of shares of the Registrable Securities as the Purchasers shall elect by
written notice to the Company, and absent such election, covering the sale of
all of the Registrable Securities. The Company shall use its best efforts to
cause the Registration Statement to be declared effective by the SEC on the
first to occur of (i) 120 days following the Filing Date with respect to the
Registration Statement, (ii) ten (10) days following the receipt of a "No
Review" or similar letter from the SEC or (iii) the third (3rd) business day
following the day the Company receives notice from the SEC that the SEC has
determined that the Registration Statement eligible to be declared effective
without further comments by the SEC (the "Required Effectiveness Date"). Nothing
contained herein shall be deemed to limit the number of Registrable Securities
to be registered by the Company hereunder. As a result, should the Registration
Statement not relate to the maximum number of Registrable Securities acquired by
(or potentially acquirable by) the holders of the Shares of the Company issued
to the Purchasers pursuant to the Preferred Stock Purchase Agreement and the
Warrants, other than as a result of the election by the holder thereof not to
have Shares included in the Registration Statement, the Company shall be
required to promptly file a separate registration statement (utilizing Rule 462
promulgated under the 1933 Act, if applicable) relating to such Registrable
Securities which then remain unregistered. The provisions of this Agreement
shall relate to any such separate registration statement as if it were an
amendment to the Registration Statement.
2.3 Demand Registration. Subject to the limitations of Section 2.2, at any
time and from time to time, the Purchasers may request the registration under
the 1933 Act of all or part of the Registrable Shares then outstanding (a
"Demand Registration"). Subject to the conditions of Section 3, the Company
shall use its commercially reasonable best efforts to file such registration
statement under the 1933 Act as promptly as practicable after the date any such
request is received by the Company and to cause such registration statement to
be declared effective. The Company shall notify the Purchasers promptly when any
such registration statement has been declared effective. If more than eighty
percent (80%) of the Shares issuable under the Preferred Stock Purchase
Agreement have been registered or sold, the Company's obligations under this
Article II shall terminate.
2.4 Registration Statement Form. Registrations under Section 2.2 and Section
2.3 shall be on the appropriate registration form of the SEC as shall permit the
disposition of such Registrable Securities in
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accordance with the intended method or methods of disposition specified in the
Registration Statement; provided, however, such intended method of disposition
shall not include an underwritten offering of the Registrable Securities.
2.5 Expenses. The Company will pay all registration expenses in connection
with any registration required by under Sections 2.2 and Section 2.3 herein.
2.6 Effective Registration Statement. A registration requested pursuant to
Sections 2.2 and 2.3 shall not be deemed to have been effected (i) unless a
registration statement with respect thereto has become effective, provided that
a registration which does not become effective after the Company filed a
registration statement with respect thereto solely by reason of the refusal to
proceed of any holder of Registrable Securities (other than a refusal to proceed
based upon the advice of counsel in the form of a letter signed by such counsel
and provided to the Company relating to a disclosure matter unrelated to such
holder) shall be deemed to have been effected by the Company, (ii) if, after it
has become effective, such registration becomes subject to any stop order,
injunction or other order or extraordinary requirement of the SEC or other
governmental agency or court for any reason and such stop order or other action
continues in effect for five trading days or (iii) if, after it has become
effective, such registration ceases to be effective for more than the allowable
Black-Out Periods (as defined herein).
2.7 Plan of Distribution. The Company hereby agrees that the Registration
Statement shall include a plan of distribution section reasonably acceptable to
the Purchasers; provided, however, such plan of distribution section shall be
modified by the Company so as to not provide for the disposition of the
Registrable Securities on the basis of an underwritten offering.
2.8 Liquidated Damages. If the Company does not register Registrable
Securities pursuant to the requirements of Section 2.2 herein, or if the
Registration Statement filed pursuant to Section 2.2 herein is not declared
effective, or if the Registrable Securities are registered pursuant to an
effective Registration Statement and such Registration Statement or other
Registration Statement(s) demanded by Purchasers including the Registrable
Securities is not effective in the period from the Required Effective Date
through two years following the date hereof, the Company shall, for each such
day in which a Registration Statement is not so effective, pay the Purchasers in
kind, as liquidated damages and not as a penalty, an amount equal to twenty four
percent (24%) of the Purchase Price per annum; and for any such day, such
payment shall be made no later than the first business day of the calendar month
next succeeding the month in which such day occurs. All payments shall be made
in shares of Preferred Stock at the Initial Purchase Price. In addition, if the
Company has not filed a registration statement within the thirty day period
after closing as specified in Section 2.2, the Company shall, for each such day
after thirty days from closing and until the filing of a registration statement,
pay the Purchaser in kind, as liquidated damages and not as a penalty, an amount
equal to thirty six (36%) of the Purchase Price per annum; and for any such day,
such payment shall be made no later than the first business day of the calendar
month next succeeding the month in which such day occurs. All payments shall be
made in shares of Preferred Stock at the Initial Purchase Price. As long as the
Registration Statement is declared effective by the Required Effective Date, any
liquidated damages that accrued pursuant to this Section 2.8 as a result of the
failure of the Company to file the Registration Statement by the Filing Date
shall be waived, and no payment pursuant to this Section 2.8 shall be made prior
to the earlier of (i) the effective date of the registration statement or (ii)
the Required Effective Date (unless the failure to be declared effective is for
a reason set forth in the following sentence). In no event shall the Company be
required to pay any liquidated damages in the event that the failure of the
registration statement to be declared effective on the Required Effective Date
results in whole or in part from either (i) the failure of
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any Purchaser to provide information relating to such Purchaser and his or its
proposed method of sale or any other information concerning the Purchaser that
is required to be included in the registration statement or (ii) any delays
resulting from questions raised by the SEC or any other regulatory agency,
market or exchange concerning any Purchaser or the affiliates of any Purchaser.
The parties agree that the only damages payable for a violation of the terms of
this Agreement with respect to which liquidated damages are expressly provided
shall be such liquidated damages. Nothing shall preclude the Purchasers from
pursuing or obtaining specific performance or other equitable relief with
respect to this Agreement.
The parties hereto agree that the liquidated damages provided for in this
Section 2.8 constitute a reasonable estimate of the damages that may be incurred
by the Purchasers by reason of the failure of the Registration Statement(s) to
be filed or declared effective in accordance with the provisions hereof.
The obligation of the Company terminates when the Purchasers no longer holds
more than twenty percent (20%) of the Registrable Securities, based on the
number of Registrable Securities initially issuable pursuant to the Preferred
Stock Purchase Agreement and any shares issued due to adjustments in these
transaction documents and the Warrants.
ARTICLE III
INCIDENTAL REGISTRATION RIGHTS
3.1 Right To Include ("Piggy-Back") Registrable Securities. Provided that
the Registrable Securities have not been registered or if a registration
statement has not been filed with respect to the Registrable Securities, if at
any time after the date hereof but before the second anniversary of the date
hereof, the Company proposes to register any of its securities under the 1933
Act (other than by a registration in connection with an acquisition in a manner
which would not permit registration of Registrable Securities for sale to the
public, on Form S-8, or any successor form thereto, on Form S-4, or any
successor form thereto and other than pursuant to Section 2), on an underwritten
basis (either best-efforts or firm-commitment), then, the Company will each such
time give prompt written notice to all holders of Registrable Securities of its
intention to do so and of such holders of Registrable Securities' rights under
this Section 3.1. Upon the written request of any such holders of Registrable
Securities made within ten (10) days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
such holders of Registrable Securities and the intended method of disposition
thereof), the Company will, subject to the terms of this Agreement, use its
commercially reasonable best efforts to effect the registration under the 1933
Act of the Registrable Securities, to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
such Registrable Securities so to be registered, by inclusion of such
Registrable Securities in the registration statement which covers the securities
which the Company proposes to register, provided that if, at any time after
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 either not to register
or to delay registration of such securities, the Company may, at its election,
give written notice of such determination to each holders of Registrable
Securities and, thereupon, (i) in the case of a determination not to register,
shall be relieved of this obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith), without prejudice, however, to
the rights of any holder or holders of Registrable Securities entitled to do so
to request that such registration be effected as a registration under Section 2,
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities, for the same period as the
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delay in registering such other securities. No registration effected under this
Section 3.1 shall relieve the Company of its obligation to effect any
registration upon request under Section 2 except to the extent that Registrable
Securities are registered and sold pursuant thereto. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this Section 3.1.
3.2 Priority In Incidental Registrations. If the managing underwriter of the
underwritten offering contemplated by this Section 3 shall inform the Company
and holders of the Registrable Securities requesting such registration by letter
of its belief that the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering, then the
Company will include in such registration, to the extent of the number which the
Company is so advised can be sold in such offering, (i) first securities
proposed by the Company to be sold for its own account, and (ii) second to
holders of securities having demand registration rights and exercising such
rights in connection with such registration statement, (iii) third Registrable
Securities and securities of other selling security holders requested to be
included in such registration (other than affiliates of the Company), on a pari
passu basis, and (iv) to affiliates of the Company.
ARTICLE IV
REGISTRATION PROCEDURES
4.1 Registration Procedures. If and whenever the Company is required to
effect the registration of any Registrable Securities under the 1933 Act as
provided in Section 2.2 and, as applicable, 2.3, the Company shall, as
expeditiously as possible:
(i) prepare and file with the SEC the Registration Statement, or
amendments thereto, to effect such registration (including such audited
financial statements as may be required by the 1933 Act or the rules and
regulations promulgated thereunder) and thereafter use its commercially
reasonable best efforts to cause such registration statement to be declared
effective by the SEC, as soon as practicable, but in any event no later than the
Required Effectiveness Date (with respect to a registration pursuant to Section
2.2); provided, however, that before filing such registration statement or any
amendments thereto, the Company will furnish to one counsel selected by the
holders of Registrable Securities which are to be included in such registration,
copies of all such documents proposed to be filed;
(ii) with respect to any registration statement pursuant to Section 2.2
or Section 2.3, prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities covered by such registration statement until the earlier
to occur of thirty six (36) months after the date of this Agreement (subject to
the right of the Company to suspend the effectiveness thereof for not more than
15 consecutive Trading Days or an aggregate of 20 Trading Days during any
calendar year (each a "Black-Out Period")) or such time as all of the securities
which are the subject of such registration statement cease to be Registrable
Securities (such period, in each case, the "Registration Maintenance Period");
(iii) furnish to each holder of Registrable Securities covered by such
registration statement such
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number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits), such
number of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the 1933 Act, in conformity with the
requirements of the 1933 Act, and such other documents, as such holder of
Registrable Securities and underwriter, if any, may reasonably request in order
to facilitate the public sale or other disposition of the Registrable Securities
owned by such holder of Registrable Securities;
(iv) use its commercially reasonable best efforts to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other U.S. federal or state securities laws or U.S. state
blue sky laws as any U.S. holder of Registrable Securities thereof shall
reasonably request, to keep such registrations or qualifications in effect for
so long as such registration statement remains in effect, and take any other
action which may be reasonably necessary to enable such holder of Registrable
Securities to consummate the disposition in such jurisdictions of the securities
owned by such holder of Registrable Securities, except that the Company shall
not for any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not but for the
requirements of this subdivision (iv) be obligated to be so qualified or to
consent to general service of process in any such jurisdiction;
(v) use its commercially reasonable best efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the U.S. holder of Registrable Securities thereof to consummate the
disposition of such Registrable Securities;
(vi) furnish to each holder of Registrable Securities a signed
counterpart, addressed to such holder of Registrable Securities, and the
underwriters, if any, of an opinion of counsel for the Company, dated the
effective date of such registration statement (or, if such registration includes
an underwritten public offering, an opinion dated the date of the closing under
the underwriting agreement), reasonably satisfactory in form and substance to
such holder of Registrable Securities), such opinion to be in the form filed as
Exhibit 5 to the registration statement, and
(vii) notify the Purchasers and its counsel promptly and confirm such
advice in writing promptly after the Company has knowledge thereof:
(A) when the Registration Statement, the prospectus or any
prospectus supplement related thereto or post-effective amendment to the
Registration Statement has been filed, and, with respect to the Registration
Statement or any post-effective amendment thereto, when the same has become
effective;
(B) of any request by the SEC for amendments or supplements to
the Registration Statement or the prospectus or for additional information;
(C) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
by any Person for that purpose; and
(D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable Securities for
sale under the securities or blue sky laws of any jurisdiction or the initiation
or threat of any proceeding for such purpose;
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(viii) notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, upon discovery that, or upon the
happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material facts required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of any such holder of
Registrable Securities promptly prepare and furnish to such holder of
Registrable Securities a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(ix) use its commercially reasonably best efforts to obtain the withdrawal
of any order suspending the effectiveness of the Registration Statement at the
earliest possible moment;
(x) otherwise use its commercially reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first full calendar month after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;
(xi) enter into such agreements and take such other actions as the
Purchasers shall reasonably request in writing (at the expense of the requesting
or benefiting Purchasers) in order to expedite or facilitate the disposition of
such Registrable Securities; and
(xii) use its commercially reasonable best efforts to list all Registrable
Securities covered by such registration statement on any securities exchange on
which any of the Registrable Securities are then listed.
The Company may require each holder of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such holder of Registrable Securities and the distribution of such
securities as the Company may from time to time reasonably request in writing,
including:
(a) furnish the information as to any shares of Common Stock or other
securities of the Company owned by the holder, the holder's proposed plan of
distribution, any relationship between the holder and the Company and any other
information which the Company reasonably requests in connection with the
preparation of the registration statement and update such information
immediately upon the occurrence of any events or condition which make the
information concerning the Seller inaccurate in any material respect;
(b) not sell any Registrable Securities pursuant to the registration
statement except in the manner set forth in the Registration Statement;
(c) comply with the prospectus delivery requirements and the provisions
of Regulation M of the SEC pursuant to the 1933 Act to the extent that such
regulation is applicable to the holder;
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(d) not sell or otherwise transfer or distribute any Registrable
Securities if the holder possesses any material nonpublic information concerning
the Company
4.2 The Company will not file any registration statement pursuant to Section
2.2 or Section 2.3, or amendment thereto or any prospectus or any supplement
thereto to which the Purchasers shall reasonably object, provided that the
Company may file such documents in a form required by law or upon the advice of
its counsel.
4.3 The Company represents and warrants to each holder of Registrable
Securities that it has obtained all necessary waivers, consents and
authorizations necessary to execute this Agreement and consummate the
transactions contemplated hereby other than such waivers, consents and/or
authorizations specifically contemplated by the Preferred Stock Purchase
Agreement.
4.4 Each holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the occurrence of any event of the kind described in
subdivision (viii) of Section 4.1, such Holder will forthwith discontinue such
holder of Registrable Securities' disposition of Registrable Securities pursuant
to the Registration Statement relating to such Registrable Securities until such
holder of Registrable Securities' receipt of the copies of the supplemented or
amended prospectus contemplated by subdivision (viii) of Section 4.1 and, if so
directed by the Company, will deliver to the Company (at the Company's expense)
or destroy all copies, other than permanent file copies, then in such Holder's
possession of the prospectus relating to such Registrable Securities current at
the time of receipt of such notice.
ARTICLE V
UNDERWRITTEN OFFERINGS
5.1 Incidental Underwritten Offerings. If the Company at any time proposes
to register any of its securities under the 1933 Act as contemplated by Section
3.1 and such securities are to be distributed by or through one or more
underwriters, the Company will, if requested by any holder of Registrable
Securities as provided in Section 3.1 and subject to the provisions of Section
3.2, use its commercially reasonable best efforts to arrange for such
underwriters to include all the Registrable Securities to be offered and sold by
such holder among the securities to be distributed by such underwriters. In no
event shall any Purchasers be deemed an underwriter for purposes of this
Agreement. This Article V shall not apply to any Registrable Securities
theretofore registered pursuant to Article II of this Agreement.
5.2 Participation In Underwritten Offerings. No holder of Registrable
Securities may participate in any underwritten offering under Section 3.1 unless
such holder of Registrable Securities (i) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements approved,
subject to the terms and conditions hereof, by the holders of a majority of
Registrable Securities to be included in such underwritten offering and (ii)
completes and executes all questionnaires, indemnities, underwriting agreements
and other documents (other than powers of attorney) required under the terms of
such underwriting arrangements. Notwithstanding the foregoing, no underwriting
agreement (or other agreement in connection with such offering) shall require
any holder of Registrable Securities to make a representation or warranty to or
agreements with the Company or the underwriters other than representations and
warranties contained in a writing furnished by such holder of Registrable
Securities expressly for use in the related registration statement or
representations, warranties or agreements regarding such holder of Registrable
Securities, such holder's Registrable Securities and such holder's
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intended method of distribution and any other representation required by law.
5.3 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the 1933 Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, and their respective
counsel and accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
SEC, and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
reasonable opinion of such holders' and such underwriters' respective counsel,
to conduct a reasonable investigation within the meaning of the 1933 Act.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Company. In the event of any registration of any
securities of the Company under the 1933 Act, the Company will, and hereby does
agree to indemnify and hold harmless the holder of any Registrable Securities
covered by such registration statement, its directors and officers, each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such holder or any such
underwriter within the meaning of the 1933 Act against any losses, claims,
damages or liabilities, joint or several, to which such holder or any such
director or officer or underwriter or controlling person may become subject
under the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the 1933 Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Company will reimburse such holder
and each such director, officer, underwriter and controlling person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding, provided that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability, (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such holder or
underwriter stating that it is for use in the preparation thereof and, provided
further that the Company shall not be liable to any Person who participates as
an underwriter in the offering or sale of Registrable Securities or to any other
Person, if any, who controls such underwriter within the meaning of the 1933
Act, in any such case to the extent that any such loss, claim, damage, liability
(or action or proceeding in respect thereof) or expense arises out of such
Person's failure to send or give a copy of the final prospectus, as the same may
be then supplemented or amended, within the time required by the 1933 Act to the
Person asserting the existence of an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final
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prospectus or an amendment or supplement thereto. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such holder or any such director, officer, underwriter or controlling person and
shall survive the transfer of such securities by such holder.
6.2 Indemnification by the Purchasers. Each Purchaser hereby agrees and each
other holder of Registrable Securities shall, as a condition to the including of
the holder's Registrable Securities in any registration statement, agree, by an
undertaking satisfactory to the Company, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 6.1) the Company,
each director of the Company, each officer of the Company and each other Person,
if any, who controls the Company within the meaning of the 1933 Act, with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such holder of Registrable
Securities specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Any such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by such Purchasers. The indemnification by the
Purchasers shall be limited to fifty thousand dollars ($50,000).
6.3 Notices Of Claims, Etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in Sections 6.1 and Section 6.2, such indemnified party will, if
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action, provided that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under Sections 6.1 and Section
6.2, except to the extent that the indemnifying party is actually prejudiced by
such failure to give notice. In case any such action is brought against an
indemnified party, unless in such reasonable judgment of counsel to the
indemnified party, a conflict of interest, as hereinafter defined, between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability, or a covenant not to xxx, in respect to such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party. If the
defendants in any action covered by this Section 6.3 include both the
indemnified party and the indemnifying party and counsel for the indemnified
party shall have reasonably concluded that there may be reasonable defenses
available to it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party
(collectively, a "conflict of interest"), the indemnified parties, as a group,
shall have the right to select one separate counsel and to assume such legal
defenses
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and otherwise to participate in the defense of such action, with the reasonable
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party. Such counsel shall be
selected by the holders of a majority of the shares of Common Stock having an
indemnity claim against the Company, whether pursuant to this Agreement or any
other agreements which provide such or similar indemnity.
6.4 Other Indemnification. Indemnification similar to that specified in
Sections 6.1 and Section 6.2 (with appropriate modifications) shall be given by
the Company and each holder of Registrable Securities (but only if and to the
extent required pursuant to the terms herein) with respect to any required
registration or other qualification of securities under any Federal or state law
or regulation of any governmental authority, other than the 1933 Act.
6.5 Indemnification Payments. The indemnification required by Sections 6.1
and Section 6.2 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
expense, loss, damage or liability is incurred.
6.6 Contribution. If the indemnification provided for in Sections 6.1 and
Section 6.2 is unavailable to an indemnified party in respect of any expense,
loss, claim, damage or liability referred to therein, 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 expense,
loss, claim, damage or liability (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
holder of Registrable Securities or underwriter, as the case may be, on the
other from the distribution of the Registrable Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the holder of Registrable Securities or underwriter, as the
case may be, on the other in connection with the statements or omissions which
resulted in such expense, loss, damage or liability, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the holder of Registrable Securities or underwriter, as the
case may be, on the other in connection with the distribution of the Registrable
Securities shall be deemed to be in the same proportion as the total net
proceeds received by the Company from the initial sale of the Registrable
Securities by the Company to the purchasers bear to the gain, if any, realized
by all selling holders participating in such offering or the underwriting
discounts and commissions received by the underwriter, as the case may be. The
relative fault of the Company on the one hand and of the holder of Registrable
Securities or underwriter, as the case may be, on the other shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission to state a material fact relates to
information supplied by the Company, by the holder of Registrable Securities or
by the underwriter and the parties' relative intent, knowledge, access to
information supplied by the Company, by the holder of Registrable Securities or
by the underwriter and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission,
provided that the foregoing contribution agreement shall not inure to the
benefit of any indemnified party if indemnification would be unavailable to such
indemnified party by reason of the provisions contained herein, and in no event
shall the obligation of any indemnifying party to contribute under this Section
6.6 exceed the amount that such indemnifying party would have been obligated to
pay by way of indemnification if the indemnification provided for hereunder had
been available under the circumstances.
The Company and the holders of Registrable Securities agree that it
would not be just and
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equitable if contribution pursuant to this Section 6.6 were determined by pro
rata allocation (even if the holders of Registrable Securities and any
underwriters were treated as one entity for such purpose) or by any other method
of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth herein, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 6.6, no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities in the
applicable Registration Statement or (ii) in the case of an underwriter, the
total price at which the Registrable Securities purchased by it and distributed
to the public were offered to the public exceeds, in any such case, the amount
of any damages that such holder or underwriter has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 0000 Xxx) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
ARTICLE VII
RULE 144
7.1 Rule 144. The Company shall use its commercially reasonable efforts to
file in a timely manner the reports required to be filed by it under the 1933
Act and the 1934 Act (including but not limited to the reports under Sections 13
and 15(d) of the Exchange Act referred to in subparagraph (c) of Rule 144
adopted by the SEC under the 0000 Xxx) and the rules and regulations adopted by
the SEC thereunder (or, if the Company is not required to file such reports,
will, upon the request of any holder of Registrable Securities, make publicly
available other information) and will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the 1933 Act within the limitation of the exemptions provided
by (a) Rule 144 under the 1933 Act, as such Rule may be amended from time to
time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon
the request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with the
requirements of this Section 7.1.
ARTICLE VIII
MISCELLANEOUS
8.1 Amendments And Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders fifty-one percent (51%) or more of the sum of the shares of (i)
Registrable Securities issued at such time, plus (ii) Registrable Securities
issuable upon exercise or conversion of the Securities then constituting
derivative securities (if such Securities were not fully exercised or converted
in full as
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of the date such consent if sought). Each holder of any Registrable Securities
at the time or thereafter outstanding shall be bound by any consent authorized
by this Section 8.1, whether or not such Registrable Securities shall have been
marked to indicate such consent.
8.2 Nominees For Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof shall be treated as the holder of such Registrable
Securities for purposes of any request or other action by any holder or holders
of Registrable Securities pursuant to this Agreement or any determination of any
number of percentage of shares of Registrable Securities held by a holder or
holders of Registrable Securities contemplated by this Agreement. The Company
may require assurances reasonably satisfactory to it of such owner's beneficial
ownership or such Registrable Securities.
8.3 Notices. Except as otherwise provided in this Agreement, all notices,
requests and other communications to any Person provided for hereunder shall be
in writing and shall be given to such Person (a) in the case of a party hereto
other than the Company, addressed to such party in the manner set forth in the
Preferred Stock Purchase Agreement or at such other address as such party shall
have furnished to the Company in writing, or (b) in the case of any other holder
of Registrable Securities, at the address that such holder shall have furnished
to the Company in writing, or, until any such other holder so furnishes to the
Company an address, then to and at the address of the last holder of such
Registrable Securities who has furnished an address to the Company, or (c) in
the case of the Company, at the address set forth on the signature page hereto,
to the attention of its Chief Financial Officer or other officer designated by
the Company, or at such other address, or to the attention of such other
officer, as the Company shall have furnished to each holder of Registrable
Securities at the time outstanding. Each such notice, request or other
communication shall be effective (i) upon receipt if given by mail, or (ii) if
given by any other means (including, without limitation, by fax or air courier),
when delivered at the address specified above, provided that any such notice,
request or communication shall not be effective until received, provided, that
notice by fax shall not be deemed received unless receipt is acknowledged.
8.4 Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto. In addition, and whether or
not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties hereto other than the Company
shall also be for the benefit of and enforceable by any subsequent holder of any
Registrable Securities. Each of the holders of the Registrable Securities
agrees, by accepting any portion of the Registrable Securities after the date
hereof, to the provisions of this Agreement including, without limitation,
appointment of the Investor or the Investor's designated representative to act
on behalf of such holder pursuant to the terms hereof which such actions shall
be made in the good faith discretion of the Investors' representative and be
binding on all persons for all purposes.
8.5 Descriptive Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for reference only and shall not
limit or otherwise affect the meaning hereof.
8.6 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
applicable principles of conflicts of law.
8.7 Jurisdiction. If any action is brought among the parties with respect to
this Agreement or otherwise, by way of a claim or counterclaim, the parties
agree that in any such action, and on all issues, the parties irrevocably waive
their right to a trial by jury. Exclusive jurisdiction and venue for any such
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action shall be the State or Federal Courts serving the City, State and County
of New York. In the event suit or action is brought by any party under this
Agreement to enforce any of its terms, or in any appeal therefrom, it is agreed
that the prevailing party shall be entitled to reasonable attorneys fees to be
fixed by the court.
8.8 Entire Agreement. This Agreement, together with the Preferred Stock
Purchase Agreement, embodies the entire agreement and understanding between the
Company and each other party hereto relating to the subject matter hereof and
supercedes all prior agreements and understandings relating to such subject
matter.
8.9 Severability. If any provision of this Agreement, or the application of
such provisions to any Person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
8.10 Binding Effect. All the terms and provisions of this Agreement whether
so expressed or not, shall be binding upon, inure to the benefit of, and be
enforceable by the parties and their respective administrators, executors, legal
representatives, heirs, successors and assignees.
8.11 Preparation of Agreement. This Agreement shall not be construed more
strongly against any party regardless of who is responsible for its preparation.
The parties acknowledge each contributed and is equally responsible for its
preparation.
8.12 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty, covenant or agreement herein, nor
shall nay single or partial exercise of any such right preclude other or further
exercise thereof or of any other right. All rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
8.13 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement. A facsimile transmission
of this signed Agreement shall be legal and binding on all parties hereto.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the Purchasers and the Company have as of the date
first written above executed this Agreement.
ADSOUTH PARTNERS, INC
________________________
By: ____________________
Title: _________________
PURCHASERS
XXXXXX PARTNERS LP
_________________________________
Xxxxxx Xxxxxx Xxxxxx
President, General Partner of
Xxxxxx Partners LP
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx XX 00000
XXXXXX VENTURE CAPITAL
_________________________________
Name: Xx. Xxxxx X. Xxxxx
_________________________________
Xxxxxxx Xxxxxxxx
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