EXHIBIT 10.52
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is made and
entered into as of December 22, 2005 among Xxxxxxx.xxx, Inc., a Delaware
corporation (the "Company"), and each of the purchasers executing this Agreement
and listed on Schedule 1 attached hereto (collectively, the "Purchasers").
This Agreement is being entered into pursuant to the Preferred
Stock and Warrant Purchase Agreement, dated as of the date hereof, by and among
the Company and the Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions.
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Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" shall have the meaning set forth in Section 3(m).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Blackout Period" shall have the meaning set forth in Section
3(n).
"Board" shall have the meaning set forth in Section 3(n).
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York generally are authorized or required by law or other
government actions to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value
$0.001 per share.
"Effectiveness Period" shall have the meaning set forth in
Section 2.
"Event" shall have the meaning set forth in Section 7(e).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the 30th day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities, including without
limitation the Purchasers and their assignees.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in any 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 such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Registrable Securities" means (a) the Conversion Shares and
the Warrant Common Stock (without regard to any limitations on beneficial
ownership contained in the Certificates of Designation or Warrants) or other
securities issued or issuable to each Purchaser or its transferee or designee
(i) upon conversion of the Series D Preferred Stock and/or upon exercise of the
Warrants (other than Series B Preferred Stock issued upon exercise of the
Warrants), or (ii) upon conversion of the Warrant Shares, or (iii) upon any
distribution with respect to, any exchange for or any replacement of such Series
D Preferred Stock, Conversion Shares, Warrant Common Stock, Warrant Shares or
Warrants or (iv) upon any conversion, exercise or exchange of any securities
issued in connection with any such distribution, exchange or replacement; (b)
securities issued or issuable upon any stock split, stock dividend,
recapitalization or similar event with respect to the foregoing; and (c) any
other security issued as a dividend or other distribution with respect to, in
exchange for, in replacement or redemption of, or in reduction of the
liquidation value of, any of the securities referred to in the preceding
clauses; provided, however, that such securities shall cease to be Registrable
Securities when such securities have been sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction or
when such securities may be sold without any restriction pursuant to Rule 144(k)
as determined by the counsel to the Company pursuant to a written opinion
letter, addressed to the Company's transfer agent to such effect as described in
Section 2 of this Agreement.
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"Registration Statement" means the registration statements and
any additional registration statements contemplated by Section 2, 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 in such
registration statement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Series B Preferred Stock" means the Series B Convertible
Preferred Stock of the Company, par value $0.001 per share, issuable upon
exercise of the Warrants prior to the Automatic Conversion Date (as defined in
the Series B Certificate of Designation).
"Series D Preferred Stock" means the Series D Convertible
Preferred Stock of the Company, par value $0.001 per share, issued pursuant to
the Purchase Agreement.
"Special Counsel" means Xxxxxx and Xxxx LLP.
"Warrants" means the stock purchase warrants issued pursuant
to the Purchase Agreement.
"Warrant Common Stock" means, as applicable, the shares of
Common Stock issued or issuable upon exercise of the Warrants and any shares of
Common Stock issued or issuable upon conversion of Series B Preferred Stock
issued or issuable upon exercise of the Warrants.
"Warrant Shares" means the shares of Series B Preferred Stock
issued or issuable upon exercise of the Warrants and, if applicable, any Warrant
Common Stock issued or issuable upon exercise of the Warrants.
2. Registration. As soon as possible following the Closing
Date (but not later than the Filing Date), the Company shall prepare and file
with the Commission a "shelf" Registration Statement covering all Registrable
Securities for a secondary or resale offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be
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on Form S-3 (or if such form is not available to the Company on another form
appropriate for such registration in accordance herewith). The Company shall use
its best efforts to cause the Registration Statement to be declared effective
under the Securities Act not later than one hundred and sixty-five (165) days
after the Closing Date (including filing with the Commission a request for
acceleration of effectiveness in accordance with Rule 461 promulgated under the
Securities Act within five (5) Business Days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission that a
Registration Statement will not be "reviewed," or not be subject to further
review) and to keep such Registration Statement continuously effective under the
Securities Act until such date as is the earlier of (x) the date when all
Registrable Securities covered by such Registration Statement have been sold or
(y) with respect to any Holder, such time as all Registrable Securities held by
such Holder may be sold without any restriction pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion letter,
addressed to the Company's transfer agent to such effect (the "Effectiveness
Period"). For purposes of the obligations of the Company under this Agreement,
no Registration Statement shall be considered "effective" with respect to any
Registrable Securities unless such Registration Statement lists the Holders of
such Registrable Securities as "Selling Stockholders" and includes such other
information as is required to be disclosed with respect to such Holders to
permit them to sell their Registrable Securities pursuant to such Registration
Statement, unless any such Holder is not included as a "Selling Stockholder"
pursuant to Section 3(m). Such Registration Statement also shall cover, to the
extent allowable under the Securities Act and the Rules promulgated thereunder
(including Securities Act Rule 416), such indeterminate number of additional
shares of Common Stock resulting from stock splits, stock dividends or similar
transactions with respect to the Registrable Securities.
3. Registration Procedures.
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In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement on Form S-3 (or if such form is not
available to the Company on another form appropriate for such registration in
accordance herewith) (which shall include a Plan of Distribution substantially
in the form of Exhibit A attached hereto), and cause the Registration Statement
to become effective and remain effective as provided herein; provided, however,
that not less than three (3) Business Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto, the Company shall (i) furnish to the Special Counsel, copies of all
such documents proposed to be filed, which documents (other than those
incorporated by reference) will be subject to the review of such Special
Counsel, and (ii) at the request of any Holder cause its officers and directors,
counsel and independent certified public accountants to respond to such
inquiries as shall be necessary, in the reasonable opinion of counsel to such
Holders, to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement or any
such Prospectus or any amendments or supplements thereto to which the Holders of
a majority of the Registrable Securities or the Special Counsel shall reasonably
object within three (3) Business Days after their receipt
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thereof. In the event of any such objection, the Holders shall provide the
Company with any requested revisions to such prospectus or supplement within two
(2) Business Days of such objection.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and to the extent
any Registrable Securities are not included in such Registration Statement for
reasons other than the failure of the Holder to comply with Section 3(m) hereof,
shall prepare and file with the Commission such amendments to the Registration
Statement or such additional Registration Statements in order to register for
resale under the Securities Act all Registrable Securities; (ii) cause the
related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
(iii) respond as promptly as possible, and in no event later than ten (10)
Business Days to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as reasonably
possible provide the Holders true and complete copies of all correspondence from
and to the Commission relating to the Registration Statement; and (iv) comply in
all material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify Holders of Registrable Securities to be sold and
the Special Counsel as promptly as possible (A) when a Prospectus or any
Prospectus supplement or post-effective amendment to the Registration Statement
is proposed to be filed (but in no event in the case of this subparagraph (A),
less than three (3) Business Days prior to date of such filing); (B) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement; and (C) with respect to the Registration Statement or
any post-effective amendment, when the same has become effective, and after the
effectiveness thereof: (i) of any request by the Commission or any other Federal
or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (ii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iii) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (iv) if the financial statements included in the Registration
Statement become ineligible for inclusion therein or of the occurrence of any
event that makes any statement made in the Registration Statement or Prospectus
or any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material
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fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Without limitation to any remedies
to which the Holders may be entitled under this Agreement, if any of the events
described in Section 3(c)(C)(i), 3(c)(C)(ii) and 3(c)(C)(iii) occur, the Company
shall use its best efforts to respond to and correct the event.
(d) Use its best efforts to avoid the issuance of, or, if
issued, use best efforts to obtain the withdrawal of, (i) any order suspending
the effectiveness of the Registration Statement or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable time.
(e) If requested by any Holder of Registrable Securities, (i)
promptly incorporate in a Prospectus supplement or post-effective amendment to
the Registration Statement such information as the Company reasonably agrees
should be included therein and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment.
(f) Furnish to each Holder and the Special Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, and all
exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.
(g) Promptly deliver to each Holder and the Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders and the Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
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(i) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to a Registration Statement, which certificates shall be free,
to the extent permitted by applicable law and the Purchase Agreement, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any Holder may request at least
two (2) Business Days prior to any sale of Registrable Securities. In connection
therewith, the Company shall promptly after the effectiveness of the
Registration Statement cause an opinion of counsel to be delivered to and
maintained with its transfer agent, together with any other authorizations,
certificates and directions required by the transfer agent, which authorize and
direct the transfer agent to issue such Registrable Securities without legend
upon sale by the Holder of such shares of Registrable Securities under the
Registration Statement.
(j) Following the occurrence of any event contemplated by
Section 3(c)(C)(iv), as promptly as possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(k) Cause all Registrable Securities relating to such
Registration Statement to be listed on any United States securities exchange,
quotation system, market or over-the-counter bulletin board, if any, on which
similar securities issued by the Company are then listed.
(l) Comply in all material respects with all applicable rules
and regulations of the Commission and make generally available to its security
holders earnings statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 3-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(m) Request each selling Holder to furnish to the Company
information regarding such Holder and the distribution of such Registrable
Securities as is required by law or the Commission to be disclosed in the
Registration Statement, and the Company may exclude from such registration the
Registrable Securities of any such Holder who fails to furnish such information
within a reasonable time prior to the filing of each Registration Statement,
supplemented Prospectus and/or amended Registration Statement.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar federal statute then in
force) the deletion of the reference to such Holder in any
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amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(C)(i), 3(c)(C)(ii),
3(c)(C)(iii), 3(c)(C)(iv), or 3(n), such Holder will forthwith discontinue
disposition of such Registrable Securities under the Registration Statement
until such Holder's receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement contemplated by Section 3(j), or until it is
advised in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement.
(n) If (i) there is material non-public information regarding
the Company which the Company's Board of Directors (the "Board") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose and which the Company would be required to disclose
under the Registration Statement, then the Company may postpone or suspend
filing or effectiveness of a registration statement for a period not to exceed
30 consecutive days, provided that the Company may not postpone or suspend its
obligation under this Section 3(n) for more than 60 days in the aggregate during
any 12 month period (each, a "Blackout Period").
4. Registration Expenses.
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All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to be
made with any securities exchange, quotation system, market or over-the-counter
bulletin board on which Registrable Securities are required hereunder to be
listed, (B) with respect to filings required to be made with the Commission, and
(C) in compliance with state securities or Blue Sky laws (including, without
limitation, reasonable and documented fees and disbursements of Special Counsel
in connection with Blue Sky qualifications of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the Holders of a majority of Registrable
Securities may designate)), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities and of
printing or photocopying prospectuses), (iii) messenger, telephone and delivery
expenses, (iv) Securities Act liability insurance, if the Company so desires
such insurance, (v) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this
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Agreement, including, without limitation, the Company's independent public
accountants (including, in the case of an underwritten offering, the expenses of
any comfort letters or costs associated with the delivery by independent public
accountants of a comfort letter or comfort letters) and legal counsel, and (vi)
reasonable and documented fees and expenses of the Special Counsel in connection
with any Registration Statement hereunder. In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.
5. Indemnification.
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(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and reasonable attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained or incorporated by
reference in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
amendment or supplement thereto, in the light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (i) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, which information was reasonably relied on by the
Company for use therein or to the extent that such information relates to (x)
such Holder and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
prospectus or in any amendment or supplement thereto or (y) such Holder's
proposed method of distribution of Registrable Securities as set forth in
Exhibit A (or as such Holder otherwise informs the Company in writing); or (ii)
in the case of an occurrence of an event of the type described in Section
3(c)(C)(ii), 3(c)(C)(iii), 3(c)(C)(iv) or 3(n), the use by a Holder of an
outdated or defective Prospectus after the delivery to the Holder of written
notice from the Company that the Prospectus is outdated or defective and prior
to the receipt by such Holder of the Advice contemplated in Section 3(m);
provided, however, that the indemnity agreement contained in this Section 5(a)
shall not apply to amounts paid in settlement of any Losses if such settlement
is effected without the prior written consent of the Company, which consent
shall not be unreasonably withheld. The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which the
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Company is aware in connection with the transactions contemplated by this
Agreement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of an Indemnified Party (as defined in
Section 5(c) to this Agreement) and shall survive the transfer of the
Registrable Securities by the Holders.
(b) Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents and employees of such controlling Persons,
to the fullest extent permitted by applicable law, from and against all Losses,
as incurred, arising solely out of or based solely upon any untrue statement of
a material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising solely
out of or based solely upon any omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that (i) such untrue statement or omission is contained in
or omitted from any information so furnished in writing by such Holder to the
Company specifically for inclusion in the Registration Statement or such
Prospectus and that such information was reasonably relied upon by the Company
for use in the Registration Statement, such Prospectus, or in any amendment or
supplement thereto, or to the extent that such information relates to (x) such
Holder and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus, or such form
of prospectus or in any amendment or supplement thereto or (y) such Holder's
proposed method of distribution of Registrable Securities as set forth in
Exhibit A (or as such Holder otherwise informs the Company in writing) or (ii)
in the case of an occurrence of an event of the type described in Section
3(c)(C)(ii), 3(c)(C)(iii), 3(c)(C)(iv) or 3(n), the use by a Holder of an
outdated or defective Prospectus after the delivery to the Holder of written
notice from the Company that the Prospectus is outdated or defective and prior
to the receipt by such Holder of the Advice contemplated in Section 3(m);
provided, however, that the indemnity agreement contained in this Section 5(b)
shall not apply to amounts paid in settlement of any Losses if such settlement
is effected without the prior written consent of the Holder, which consent shall
not be unreasonably withheld. Notwithstanding anything to the contrary contained
herein, the Holder shall be liable under this Section 5(b) for only that amount
as does not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall have the right to assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all reasonable fees and expenses incurred in connection
with defense thereof; provided, that the failure of any Indemnified Party to
give such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further
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review) that such failure shall have proximately and materially adversely
prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the reasonable
expense of the Indemnifying Party). The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding and does not impose any monetary or other obligation or
restriction on the Indemnified Party.
All reasonable fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection
with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party, which notice shall be delivered no more frequently than on a
monthly basis (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
11
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms. Notwithstanding anything to the contrary contained
herein, the Holder shall be required to contribute under this Section 5(d) for
only that amount as does not exceed the net proceeds to such Holder as a result
of the sale of Registrable Securities pursuant to such Registration Statement.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties. The indemnity and contribution agreements herein are
in addition to and not in diminution or limitation of any indemnification
provisions under the Purchase Agreement.
6. Rule 144.
--------
As long as any Holder owns Series D Preferred Stock,
Conversion Shares, Warrants, Warrant Common Stock or Warrant Shares, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act. As long as any Holder owns Series D Preferred Stock, Conversion Shares,
Warrants, Warrant Common Stock or Warrant Shares, if the Company is not required
to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will
prepare and furnish to the Holders and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act annual and quarterly
financial statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby, in
the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any Holder may reasonably request, all to the extent required
from time to time to enable such Person to sell Series D Preferred Stock,
Conversion Shares, Warrants, Warrant Shares and Warrant Common Stock without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including compliance
with the provisions of the Purchase Agreement relating to the transfer of the
Series D Preferred Stock, Conversion Shares, Warrants, Warrant Shares and
Warrant Common Stock. Upon the request of any Holder, the Company shall deliver
to such Holder a
12
written certification of a duly authorized officer as to whether it has complied
with such requirements.
7. Miscellaneous.
-------------
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Except as otherwise disclosed
in the Purchase Agreement, neither the Company nor any of its subsidiaries is a
party to an agreement currently in effect, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Without limiting the generality of the foregoing, without the written consent of
the Holders of a majority of the then outstanding Registrable Securities, the
Company shall not grant to any Person the right to request the Company to
register any securities of the Company under the Securities Act unless the
rights so granted are subject in all respects to the rights of the Holders set
forth herein, and are not otherwise in conflict with the provisions of this
Agreement.
(c) Notice of Effectiveness. Within two (2) Business Days
after the Registration Statement which includes the Registrable Securities is
ordered effective by the Commission, 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 Holders whose Registrable Securities
are included in such Registration Statement) confirmation that the Registration
Statement has been declared effective by the Commission in the form attached
hereto as Exhibit B.
(d) Piggy-Back Registrations. If at any time when there is not
an effective Registration Statement covering all of the Registrable Securities,
the Company shall determine to prepare and file with the Commission a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or its then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, the Company shall send to each Holder of Registrable Securities written
notice of such determination and, if within seven (7) Business Days after
receipt of such notice, any such Holder shall so request in writing (which
request shall specify the Registrable Securities intended to be disposed of by
the Holder), the Company will cause the registration under the Securities Act of
all
13
Registrable Securities which the Company has been so requested to register by
the Holder, to the extent required to permit the disposition of the Registrable
Securities so to be registered, provided that if at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to such Holder and, thereupon, (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay expenses in accordance with Section 4 hereof),
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities being registered pursuant to
this Section 7(d) for the same period as the delay in registering such other
securities. The Company shall include in such registration statement all or any
part of such Registrable Securities such Holder requests to be registered. In
the case of an underwritten public offering, if the managing underwriter(s) or
underwriter(s) should reasonably object to the inclusion of the Registrable
Securities in such registration statement, then if the Company after
consultation with the managing underwriter should reasonably determine that the
inclusion of such Registrable Securities, would materially adversely affect the
offering contemplated in such registration statement, and based on such
determination recommends inclusion in such registration statement of fewer or
none of the Registrable Securities of the Holders, then (x) the number of
Registrable Securities of the Holders included in such registration statement
shall be reduced pro-rata among such Holders (based upon the number of
Registrable Securities requested to be included in the registration), if the
Company after consultation with the underwriter(s) recommends the inclusion of
fewer Registrable Securities, or (y) none of the Registrable Securities of the
Holders shall be included in such registration statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities; provided, however, that if securities are being offered
for the account of other persons or entities as well as the Company, such
reduction shall not represent a greater fraction of the number of Registrable
Securities intended to be offered by the Holders than the fraction of similar
reductions imposed on such other persons or entities (other than the Company).
(e) Failure to File Registration Statement and Other Events.
The Company and the Holders agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the thirtieth (30th) day
following the Closing Date and maintained in the manner contemplated herein
during the Effectiveness Period. The Company and the Holders further agree that
it would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement is not filed on or prior to the
thirtieth (30th) day following the Closing Date, or (ii) the Company fails to
file with the Commission a request for acceleration in accordance with Rule 461
promulgated under the Securities Act within five (5) Business Days of the date
that the Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or not subject
to further review, or (iii) the Registration Statement is filed with and
declared effective by the Commission but thereafter ceases to be effective as to
all Registrable Securities at any time prior to the expiration of the
Effectiveness Period, without being succeeded immediately by a subsequent
Registration Statement filed with the Commission, except as otherwise permitted
by this Agreement, including pursuant to
14
Section 3(n), or (iv) the Company has not effected an Authorized Share Increase
(as defined in the Series D Certificate of Designation) within one hundred and
thirty (130) days following the Closing Date (unless such failure results from a
delay in the applicable regulatory response and not from a failure on the
Company's part to make any applicable filings in a timely manner), or (v)
trading in the Common Stock shall be suspended or if the Common Stock is
delisted from any securities exchange, quotation system, market or
over-the-counter bulletin board on which Registrable Securities are required
hereunder to be listed (each an "Exchange"), without immediately being listed on
any other Exchange, for any reason for more than one (1) Business Day, other
than pursuant to Section 3(n), or (vi) the rights of the Holders to exercise
into Warrant Shares are suspended for any reason without the consent of the
particular Holder (any such failure or breach being referred to as an "Event"),
the Company shall pay in cash as liquidated damages for such failure and not as
a penalty to each Holder an amount equal to (A) three percent (3%) of such
Holder's Subscription Amount (which shall be payable one time only with respect
to each occurrence or continued occurrence of a particular Event) and (B) one
and one-half percent (1.5%) of such Holder's Subscription Amount for each
subsequent thirty (30) day period until the applicable Event has been cured
which shall be pro rated for such periods less than thirty days (the "Periodic
Amount"). Payments to be made pursuant to this Section 7(e) shall be due and
payable immediately upon demand in immediately available cash funds. The parties
agree that the Periodic Amount represents a reasonable estimate on the part of
the parties, as of the date of this Agreement, of the amount of damages that may
be incurred by the Holders if the Registration Statement is not filed on or
prior to the thirtieth (30th) day following the Closing Date and maintained in
the manner contemplated herein during the Effectiveness Period or if any other
Event as described herein has occurred. Notwithstanding the foregoing, the
Company shall remain obligated to cure the breach or correct the condition that
caused the Event, and the Holder shall have the right to take any action
necessary or desirable to enforce such obligation.
(f) Failure of Registration Statement to Become Effective. The
Company and the Holders agree that the Holders will suffer damages if the
Registration Statement is not declared effective on or prior to the one hundred
and sixty-fifth (165th) day following the Closing Date. The Company and the
Holders further agree that it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, if the Registration Statement is not
declared effective within one-hundred and sixty-five (165) days after the date
on which the Registration Statement is originally filed with the Commission, the
Company shall pay in cash as liquidated damages for such failure and not as a
penalty to each Holder an amount equal to (i) three percent (3%) of such
Holder's Subscription Amount and (ii) one and one-half percent (1.5%) of such
Holder's Subscription Amount for each subsequent thirty (30) day period (which
shall be pro rated for such periods less than thirty (30) days) until either (x)
the Registration Statement is declared effective or (y) the twelfth (12th) month
after the Closing Date has ended. Payments to be made pursuant to this Section
7(f) shall be due and payable immediately upon demand in immediately available
cash funds. The parties agree that the amounts set forth in this Section 7(f)
represent a reasonable estimate on the part of the parties, as of the date of
this Agreement, of the amount of damages that may be incurred by the Holders if
the Registration Statement is not declared effective on or prior to the one
hundred and sixty-fifth (165th) day following the date on which the Registration
Statement is originally filed with the Commission. At any time that
15
amounts continue to accrue pursuant to Section 7(e), such amounts shall be
credited against any amounts that simultaneously accrue pursuant to this Section
7(f) such that the Company shall in no event be obligated to make any payments
under this Section 7(f) with respect to any period for which it is obligated to
pay the Periodic Amount under Section 7(e). Notwithstanding the foregoing, the
Company shall remain obligated to cause the Registration Statement to become
effective, and the Holders shall have the right to take any action necessary or
desirable to enforce this obligation.
(g) Specific Enforcement, Consent to Jurisdiction.
---------------------------------------------
(i) The Company and the Holders acknowledge
and agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent
or cure breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may
be entitled by law or equity.
(ii) Each of the Company and the Holders (i)
hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts located in New York City, New
York for the purposes of any suit, action or proceeding
arising out of or relating to this Agreement and (ii) hereby
waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Each of
the Company and the Holders consents to process being served
in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing in this Section 7(g) shall affect or limit
any right to serve process in any other manner permitted by
law.
(h) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least a majority of the Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(i) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., New York
City time, on a Business Day, (ii) the next Business Day after the date of
16
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Business Day
or later than 5:00 p.m., New York City time, on any date and earlier than 11:59
p.m., New York City time, on such date, (iii) the Business Day following the
date of mailing, if sent by nationally recognized overnight courier service such
as Federal Express or (iv) actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be with
respect to each Holder at its address set forth under its name on Schedule 1
attached hereto, or with respect to the Company, addressed to:
Xxxxxxx.xxx, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Attention: President
Facsimile No.: 000-000-0000
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Company shall be sent to:
Xxxxxxxx Xxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile No.: 212-704-6160
Copies of notices to any Holder shall be sent to the addresses, if any, listed
on Schedule 1 attached hereto.
(j) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns and shall inure to the benefit of each Holder and its successors and
assigns; provided, that the Company may not assign this Agreement or any of its
rights or obligations hereunder without the prior written consent of each
Holder; and provided, further, that each Holder may assign its rights hereunder
in the manner and to the Persons as permitted under the Purchase Agreement.
(k) Assignment of Registration Rights. The rights of each
Holder hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the Series D Preferred Stock, the Conversion Shares, the
Warrants, the Warrant Shares, the Warrant Common Stock or the Registrable
Securities if: (i) the Holder agrees in writing with the transferee or assignee
to assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (a) the name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being transferred
or assigned, (iii) following such transfer or assignment the
17
further disposition of such securities by the transferee or assignees is
restricted under the Securities Act and applicable state securities laws, (iv)
at or before the time the Company receives the written notice contemplated by
clause (ii) of this Section 7(k), the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions of this Agreement, and (v)
such transfer shall have been made in accordance with the applicable
requirements of the Purchase Agreement. The rights to assignment shall apply to
the Holders (and to subsequent) successors and assigns.
The Company may require, as a condition of allowing such
assignment in connection with a transfer of Series D Preferred Stock, Conversion
Shares, Warrants, Warrant Shares, Warrant Common Stock or Registrable Securities
(i) that the Holder or transferee of all or a portion of the Series D Preferred
Stock, Conversion Shares, Warrants, Warrant Shares, Warrant Common Stock or
Registrable Securities as the case may be, furnish to the Company a written
opinion of counsel that is reasonably acceptable to the Company to the effect
that such transfer may be made without registration under the Securities Act,
(ii) that the Holder or transferee execute and deliver to the Company an
investment letter in form and substance acceptable to the Company and (iii) that
the transferee be an "accredited investor" as defined in Rule 501(a) promulgated
under the Securities Act.
(l) Counterparts; Facsimile. This Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed to be
an original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by electronic means or
facsimile transmission, such signature shall create a valid binding obligation
of the party executing (or on whose behalf such signature is executed) the same
with the same force and effect as if such facsimile signature were the original
thereof.
(m) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law thereof.
(n) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(o) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable in any respect, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
18
(p) Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
(q) Registrable Securities Held by the Company and its
Affiliates. Whenever the consent or approval of Holders of a specified
percentage of Registrable Securities is required hereunder, Registrable
Securities held by the Company or its Affiliates (other than any Holder or
transferees or successors or assigns thereof if such Holder is deemed to be an
Affiliate solely by reason of its holdings of such Registrable Securities) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(r) Obligations of Purchasers. The Company acknowledges that
the obligations of each Purchaser under this Agreement, are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under this Agreement. The decision of each Purchaser to enter into to
this Agreement has been made by such Purchaser independently of any other
Purchaser. The Company further acknowledges that nothing contained in this
Agreement, and no action taken by any Purchaser pursuant hereto, shall be deemed
to constitute the Purchasers as a partnership, an association, a joint venture
or any other kind of entity, or create a presumption that the Purchasers are in
any way acting in concert or as a group with respect to such obligations or the
transactions contemplated hereby. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation, the
rights arising out of this Agreement, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such
purpose.
Each Purchaser has been represented by its own separate legal
counsel in their review and negotiation of this Agreement and with respect to
the transactions contemplated hereby. For reasons of administrative convenience
only, this Agreement has been prepared by Special Counsel (counsel for North
Sound Capital LLC) and the Special Counsel will perform certain duties under
this Agreement. Such counsel does not represent all of the Purchasers but only
North Sound Capital LLC. The Company has elected to provide all Purchasers with
the same terms and Agreement for the convenience of the Company and not because
it was required or requested to do so by the Purchasers. The Company
acknowledges that such procedure with respect to this Agreement in no way
creates a presumption that the Purchasers are in any way acting in concert or as
a group with respect to this Agreement or the transactions contemplated hereby
or thereby.
[signature page follows]
19
IN WITNESS WHEREOF, the parties hereto have caused this
Investor Rights Agreement to be duly executed by their respective authorized
persons as of the date first indicated above.
COMPANY:
XXXXXXX.XXX, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
20
PURCHASERS:
Print Exact Name:_________________________________
By:_____________________________________________
Name:
Title:
[Omnibus Xxxxxxx.xxx, Inc.
Investor Rights Agreement Signature Page]
21
SCHEDULE 1
PURCHASERS
--------------------------------------------------------------------------------
Name and Address Copy of Notice to:
--------------------------------------------------------------------------------
North Sound Legacy International Ltd.
--------------------------------------------------------------------------------
North Sound Legacy Institutional Fund LLC
--------------------------------------------------------------------------------
Valesco Healthcare Partners I LP
--------------------------------------------------------------------------------
Valesco Healthcare Partners II LP
--------------------------------------------------------------------------------
Valesco Healthcare Overseas Fund, Ltd.
--------------------------------------------------------------------------------
22
EXHIBIT A
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the
selling security holders. Sales of shares may be made by selling security
holders, including their respective donees, transferees, pledgees or other
successors-in-interest directly to purchasers or to or through underwriters,
broker-dealers or through agents. Sales may be made from time to time on the OTC
Bulletin Board, any other exchange or market upon which our shares may trade in
the future, in the over-the-counter market or otherwise, at market prices
prevailing at the time of sale, at prices related to market prices, or at
negotiated or fixed prices. The shares may be sold by one or more of, or a
combination of, the following:
- a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction (including crosses in
which the same broker acts as agent for both sides of the transaction);
- purchases by a broker-dealer as principal and resale by such
broker-dealer, including resales for its account, pursuant to this
prospectus;
- ordinary brokerage transactions and transactions in which the broker
solicits purchases;
- through options, swaps or derivatives;
- in privately negotiated transactions;
- in making short sales or in transactions to cover short sales; and
- put or call option transactions relating to the shares.
The selling security holders may effect these transactions by
selling shares directly to purchasers or to or through broker-dealers, which may
act as agents or principals. These broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling security
holders and/or the purchasers of shares for whom such broker-dealers may act as
agents or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions). The
selling security holders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities.
The selling security holders may enter into hedging
transactions with broker-dealers or other financial institutions. In connection
with those transactions, the broker-dealers or other financial institutions may
engage in short sales of the shares or of securities convertible into or
exchangeable for the shares in the course of hedging positions they assume with
the selling security holders. The selling security holders may also enter into
options or other
23
transactions with broker-dealers or other financial institutions which require
the delivery of shares offered by this prospectus to those broker-dealers or
other financial institutions. The broker-dealer or other financial institution
may then resell the shares pursuant to this prospectus (as amended or
supplemented, if required by applicable law, to reflect those transactions).
The selling security holders and any broker-dealers that act
in connection with the sale of shares may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act of 1933, and any commissions
received by broker-dealers or any profit on the resale of the shares sold by
them while acting as principals may be deemed to be underwriting discounts or
commissions under the Securities Act. The selling security holders may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the shares against liabilities, including liabilities arising
under the Securities Act. We have agreed to indemnify each of the selling
security holders and each selling security holder has agreed, severally and not
jointly, to indemnify us against some liabilities in connection with the
offering of the shares, including liabilities arising under the Securities Act.
The selling security holders will be subject to the prospectus
delivery requirements of the Securities Act. We have informed the selling
security holders that the anti-manipulative provisions of Regulation M
promulgated under the Securities Exchange Act of 1934 may apply to their sales
in the market.
Selling security holders also may resell all or a portion of
the shares in open market transactions in reliance upon Rule 144 under the
Securities Act, provided they meet the criteria and conform to the requirements
of Rule 144.
Upon being notified by a selling security holder that a
material arrangement has been entered into with a broker-dealer for the sale of
shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, we will file a
supplement to this prospectus, if required pursuant to Rule 424(b) under the
Securities Act, disclosing:
- the name of each such selling security holder and of the participating
broker-dealer(s);
- the number of shares involved;
- the initial price at which the shares were sold;
- the commissions paid or discounts or concessions allowed to the
broker-dealer(s), where applicable;
- that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this
prospectus; and
- other facts material to the transactions.
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In addition, if required under applicable law or the rules or
regulations of the Commission, we will file a supplement to this prospectus when
a selling security holder notifies us that a donee or pledgee intends to sell
more than 500 shares of common stock.
We are paying all expenses and fees customarily paid by the
issuer in connection with the registration of the shares. The selling security
holders will bear all brokerage or underwriting discounts or commissions paid to
broker-dealers in connection with the sale of the shares.
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EXHIBIT B
FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT
[Name and Address of Transfer Agent]
Re: Xxxxxxx.xxx, Inc.
Dear [______]:
We are counsel to Xxxxxxx.xxx, Inc., a Delaware corporation
(the "Company"), and have represented the Company in connection with that
certain Preferred Stock and Warrant Purchase Agreement (the "Purchase
Agreement") dated as of __________________, 2005 by and among the Company and
the buyers named therein (collectively, the "Holders") pursuant to which the
Company issued to the Holders shares of its Series D Convertible Preferred
Stock, par value $0.001 per share (the "Series D Preferred Stock") convertible
into shares of the Company's common stock, par value $0.001 per share (the
"Common Stock"), and warrants to purchase either (i) shares of the Company's
Series B Convertible Preferred Stock, par value $0.001 per share (the "Series B
Preferred Stock") or shares of Common Stock (the "Warrants"). Pursuant to the
Purchase Agreement, the Company has also entered into an Investor Rights
Agreement with the Holders (the "Investor Rights Agreement") pursuant to which
the Company agreed, among other things, to register the shares of Common Stock
issuable upon conversion of the Series D Preferred Stock, the Common Stock
issuable upon exercise of the Warrants and the Common Stock issuable upon
conversion of the Series B Preferred Stock issuable upon exercise of the
Warrants, under the Securities Act of 1933, as amended (the "1933 Act"). In
connection with the Company's obligations under the Investor Rights Agreement,
on ____________ ___, 2005, the Company filed a Registration Statement on Form
S-__ (File No. 333-_____________) (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities which names each of the Holders as a selling securityholder
thereunder.
In connection with the foregoing, we advise you that a member
of the SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 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 1933 Act pursuant to the
Registration Statement.
Very truly yours,
By:__________________________________
cc: [LIST NAMES OF HOLDERS]
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