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EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of July 20, 2000, among Level 8 Systems, Inc., a Delaware
corporation (the "Company"), and the parties who have executed this Agreement
and whose names appear on Schedule I hereto (each party listed on Schedule I
hereto is sometimes individually referred to herein as a "Purchaser" and all
such parties are sometimes collectively referred to herein as the "Purchasers").
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" has meaning set forth in Section 3(o).
"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 "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Aggregate Price" has the meaning set forth in Section 2(d).
"AMEX" has the meaning set forth in Section 2(d).
"Average Price" has the meaning set forth in the Certificate
of Designations.
"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.
"Certificate of Designations" has the meaning set forth in the
Purchase Agreement.
"Closing Date" shall mean the Closing Date as such term is
defined in the Purchase Agreement.
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"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value
$0.001 per share.
"Effectiveness Date" means the earlier of (i) the 120th day
following the Closing Date if filing on Form S-3 is available or, if filing on
Form S-3 is unavailable, the 135th day following the Closing Date, or (ii) the
fifth day after the Company has received notice (written or oral) from the
Commission that the Commission Staff will not be reviewing the Registration
Statement or has no further comments on the Registration Statement, unless the
Required Holders consent in writing to a longer period, such consent not to be
unreasonably withheld.
"Effectiveness Period" has the meaning set forth in Section
2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Event" has the meaning set forth in Section 2(d).
"Filing Date" means as soon as practicable but in no event (i)
later than the 30th day following the Closing Date if filing on Form S-3 is
available or (ii) if filing on Form S-3 is unavailable, no later than the 45th
day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" has the meaning set forth in Section 5(c).
"Indemnifying Party" has the meaning set forth in Section
5(c).
"Initial Registration Statement" has the meaning set forth in
Section 2(a).
"Losses" has the meaning set forth in Section 5(a).
"Nasdaq" has the meaning set forth in Section 2(d).
"NYSE" has the meaning set forth in Section 2(d).
"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.
"Preferred Stock" means the Company's Series B 4% Convertible
Preferred Stock issuable at the Closing (as defined in the Purchase Agreement)
pursuant to the Purchase Agreement.
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"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 the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Registrable Securities" means the shares of Common Stock
issued or issuable upon (i) conversion of or with respect to the Preferred
Stock, (ii) payment of dividends or any other payments in respect of the
Preferred Stock, (iii) exercise of Warrants for an aggregate 1,047,382 shares of
Common Stock, and (iv) any shares of the Company's capital stock issued with
respect to (i), (ii) or (iii) as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise.
"Registration Delay Payment" has the meaning set forth in
Section 2(d).
"Registration Statement" means the Initial Registration
Statement and any additional registration statements contemplated by Sections
2(a), 2(b) and 7(d), 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.
"Required Holders" has the meaning set forth in the
Certificates of Designation.
"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.
"Special Counsel" means one special counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section 4.
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"Standstill Notice" has the meaning set forth in Section 2(e).
"Standstill Period" has the meaning set forth in Section 2(e).
"Trading Day" means a day on which Nasdaq (or such other
securities market on which the Common Stock is listed) is open for trading.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of the Preferred Stock and exercise of the Warrants.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
"Warrants" means the warrants issuable pursuant to the
Purchase Agreement.
2. Registration Requirements
(a) On or prior to the Filing Date, the Company shall
prepare and file with the Commission a Registration Statement (the "Initial
Registration Statement") which shall cover all Registrable Securities for an
offering to be made on a continuous basis pursuant to a "Shelf" registration
statement under Rule 415. The Initial Registration Statement shall be on Form
S-3 or any successor form (except if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith,
subject to the reasonable consent of the original Holders of the Registrable
Securities). The Company shall use its best efforts to cause the Initial
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event on or prior to
the Effectiveness Date, and to keep such Initial Registration Statement
continuously effective under the Securities Act until the date which is four
years after the date that such Initial Registration Statement is declared
effective by the Commission or such earlier date when all Registrable Securities
covered by such Initial Registration Statement have been sold or may be sold
without volume restrictions pursuant to Rule 144 as determined by counsel to the
Company pursuant to a written opinion letter, addressed to the Holders and the
Company's transfer agent to such effect (the "Effectiveness Period"). The number
of shares of Common Stock initially included in the Initial Registration
Statement shall be no less than 100% of the aggregate number of shares of Common
Stock that are then issuable upon conversion of the Preferred Stock (based on
the Conversion Price (as defined in the Preferred Stock ) as would then be in
effect at such time) and the exercise of the Warrants, without regard to any
limitation on the Investor's ability to convert the Preferred Stock or exercise
the Warrants.
(b) In addition to the Initial Registration Statement,
if the Holders of a majority of the Registrable Securities covered by a
Registration Statement so elect on or after September 30, 2000, an offering of
Registrable Securities pursuant to such Registration Statement may be effected
on no more than two (2) occasions in the form of an Underwritten Offering of at
least one million shares of Common Stock. In such event, and if the managing
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underwriters advise the Company and such Holders in writing that in their
opinion the amount of Registrable Securities proposed to be sold in such
Underwritten Offering exceeds the amount of Registrable Securities which can be
sold in such Underwritten Offering, there shall be included in such Underwritten
Offering the amount of such Registrable Securities which in the opinion of such
managing underwriters can be sold, and such amount shall be allocated pro rata
among all selling security holders proposing to sell securities of the Company
in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold
in an Underwritten Offering, the investment banker in interest that will
administer the offering will be selected by the Holders of a majority of the
Registrable Securities included in such offering, subject to the consent of the
Company, which will not be unreasonably withheld. No Holder may participate in
any Underwritten Offering hereunder unless such Holder (i) agrees to sell its
Registrable Securities on the basis provided in any underwriting agreements
approved by the Persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
arrangements.
(d) If (i) the Initial Registration Statement covering
all the applicable Registrable Securities and required to be filed by the
Company pursuant to this Agreement is not (A) filed with the Commission on or
before the Filing Date or (B) declared effective by the Commission on or before
the applicable Effectiveness Date, (ii) on any day after the Registration
Statement has been declared effective by the Commission (A) sales of all the
Registrable Securities required to be included on a Registration Statement
cannot be made pursuant to the Registration Statement (including, without
limitation, because of a failure to keep the Registration Statement effective,
to disclose such information as is necessary for sales to be made pursuant to
the Registration Statement, or to register sufficient shares of Common Stock) or
(B) the Common Stock is not listed or included for quotation on either the
Nasdaq SmallCap Market or the Nasdaq National Market of the Nasdaq Stock Market
("Nasdaq"), the New York Stock Exchange ("NYSE") or the American Stock Exchange
(the "AMEX") or (iii) the Company shall otherwise fail to file a Registration
Statement required by Section 2(a), (each such event specified in (i), (ii) and
(iii) above, an "Event"), then, as partial relief for the damages to any Holder
by reason of any such delay in or reduction of its ability to sell the
Registrable Securities (which remedy shall not be exclusive of any other
equitable remedies), after a 60-day period commencing on the date of the Event,
the Company shall pay to each Holder an amount in cash (a "Registration Delay
Payment") equal to the purchase price of Preferred Stock as set forth in
Schedule I the Purchase Agreement (the "Aggregate Price") multiplied by .015
times the sum of: (i) the number of months (rounded upwards to the nearest 30
day increment for partial months) after the end of the Effectiveness Date and
prior to the date the Registration Statement is declared effective by the
Commission, provided, however, that there shall be excluded from such period any
delays which are primarily attributable to changes required by the Purchasers in
the Registration Statement with respect to information relating to the
Purchasers, or to the failure of the Purchasers to conduct their review of the
Registration Statement pursuant to Section 3(a); (ii) the number of months
(rounded upwards to the nearest 30 day increment for partial months) that sales
cannot be made pursuant to the Registration Statement after the Registration
Statement has been declared effective (including, without limitation, when sales
cannot be made by reason of the Company's failure to properly supplement or
amend the Prospectus in accordance with the terms
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of this Agreement, or otherwise, but excluding when such sales cannot be made
solely by reason of any act or omission primarily attributable to the
Purchasers); and (iii) the number of months (rounded upwards to the nearest 30
day increment for partial months) that the Common Stock is not listed or
included for quotation on the Nasdaq, NYSE or AMEX or that trading thereon is
halted after the Registration Statement has been declared effective. The Company
shall pay any Required Registration Delay Payments to each Holder in cash on the
last Business Day of each month during which an Event has occurred and is
continuing. In the event the Company fails to make a Registration Delay Payment
in a timely manner, such Registration Delay Payment shall bear interest at the
rate of 1.5% per month (rounded upwards to the nearest 30 day increment for
partial months) until paid in full. No Standstill Period (as defined in
paragraph (e)) shall be included in the period an Event is deemed to be
continuing pursuant to this Section 2(d). Notwithstanding anything in this
Agreement to the contrary, in lieu of cash payment described above during the
sixty (60) day period described below, if the Event is the Company's failure to
file the Initial Registration Statement on or before the Filing Date, the
Company shall issue to the Holders Warrants to purchase additional 59,850 shares
of Common Stock for each 30-day period that passes following the Filing Date up
to a maximum of two such 30-day periods, if the Event is the failure to have the
Registration Statement declared effective on or before the Effectiveness Date,
the Company shall issue to the Holders Warrants to purchase an additional 59,850
shares of Common Stock for each 30-day period that passes following the
Effectiveness Date up to a maximum of two such 30-day periods. The Warrant
issued to each Holder shall be to purchase a portion of the aggregate number of
shares of Common Stock on a pro rata basis equal to its percentage ownership of
the then outstanding number of shares of Preferred Stock. In the case of an
occurrence on an Event specified in (ii)(B) above, the Holders shall be
obligated to elect to receive the Registration Delay Payments set forth in this
paragraph or, alternatively, the redemption or dividend adjustment set forth in
Section 7.1(f) of the Certificate of Designation and the adjustment set forth in
Section 6(f) in the Warrant. Such election shall be made by the holders of a
majority of the outstanding Preferred Stock (excluding Preferred Stock held by
Affiliates of the Company, other than persons who are Affiliates solely as a
result of the Preferred Stock and Warrants held by such person) and the Company
shall not be obligated to effect such payment or adjustment until such election
is made. The Company shall have no liability to any Holder for actions taken in
accordance with such election by the holders of a majority of the Preferred
Stock.
(e) Notwithstanding anything to the contrary herein, the Company
may delay preparing, filing any Registration Statement, and may withhold efforts
to cause the Registration Statement to become effective, and may delay the
filing of any supplement or amendment if the Company determines in good faith
that such supplement or amendment might, in the reasonable judgment of the
Company (i) interfere with or affect the negotiation or completion of a
transaction that is being contemplated by the Company (whether or not a final
decision has been made to undertake such transaction) or (ii) involve initial or
continuing disclosure obligations that are not in the best interests of the
Company's stockholders at such time; provided however, that (x) the Company will
give notice (a "Standstill Notice") of any such delay no less than five (5)
Business Days prior to such delay (other than an Event specified in Section
2(d)(ii)(B)), (y) such delay shall not extend for a period of more than fifteen
(15) Trading Days without the written consent of the Holder and (z) the Company
may utilize such delay no more than an aggregate of thirty (30) Trading Days in
each calendar year (each a "Standstill Period"). Each Holder agrees, upon
receipt of a Standstill Notice, forthwith to cease making offers and sales of
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the Shares pursuant to any Registration Statement that is effective or
deliveries of the prospectus contained therein and to return to the Company, for
modification and exchange, the copies of such prospectus not theretofore
delivered by such Holder; provided that the Company shall forthwith prepare and
deliver to such Holder after such delay a reasonable number of copies of any
supplement to or amendment of such prospectus that may be necessary so that such
prospectus does 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 light of the circumstances then existing.
No Registration Delay Payments shall be payable nor any Warrants issued pursuant
to Section 2(d) hereof with respect to any Standstill Period.
(f) Although the Company does not currently meet the
registrant eligibility and transaction requirements for the use of Form S-3 for
the registration of the sale of Registrable Securities by the Purchasers and any
other Holders, the Company represents and warrants that it has taken, and will
take, all actions necessary and will use its best efforts to reestablish such
eligibility and, thereafter, the Company shall file all reports required to be
filed by the Company with the Commission in a timely manner so as to maintain
such eligibility for the use of Form S-3.
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Subject to Section 2(e), prepare and file with the
Commission on or prior to the Filing Date a Registration Statement on Form S-3
or its successor form (or if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3 such registration shall be on
another appropriate form in accordance herewith (which shall include a Plan of
Distribution substantially in the form of Exhibit A annexed hereto, unless in
connection with an Underwritten Offering) or in connection with an Underwritten
Offering hereunder, such other form agreed to by the Company and by a
majority-in-interest of Holders of Registrable Securities to be covered by such
Registration Statement) (except if otherwise directed by the Holders), and use
its best efforts to cause the Registration Statement to become effective and
remain effective as provided herein; provided, however, that 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 (including any
document that would be incorporated therein by reference), the Company shall, if
reasonably practicable (i) furnish to the Holders, their Special Counsel and any
managing underwriters, copies of all such documents proposed to be filed
(including documents incorporated by reference), which documents will be subject
to the review of such Holders, their Special Counsel and such managing
underwriters, and (ii) use its best efforts to 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 respective counsel
to such Holders and such underwriters, 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, their
Special Counsel or any managing underwriters shall reasonably object, and will
not request acceleration of such Registration Statement without prior notice to
such counsel and in either event no Registration Delay Payment shall be payable
nor
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any Warrants issued pursuant to Section 2(d) hereof. The sections of such
Registration Statement covering information with respect to the Holders, the
Holder's beneficial ownership of securities of the Company or the Holders
intended method of disposition of Registrable Securities shall conform to the
information provided to the Company by each of the Holders.
(b) (i) Prepare and file with the Commission such
amendments, including post-effective amendments, to the Registration Statement
as may be necessary to keep the Registration Statement continuously effective
for the Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424 (or any
similar provisions then in force) promulgated under the Securities Act; (iii)
respond as promptly as possible to any comments received from the Commission
with respect to the Registration Statement or any amendment thereto and as
promptly as 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. In the event the number of shares available under
a Registration Statement filed pursuant to this Agreement is insufficient to
cover 100% of the Registrable Securities issued or issuable upon conversion of
the Preferred Stock and exercise of the Warrants, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
available therefore, if applicable), or both, so as to cover 100% of the
Registrable Securities, in each case, as soon as practicable, but in any event
within twenty (20) Business Days after the necessity therefor arises (based on
the Conversion Price of the Preferred Stock and other relevant factors on which
the Company reasonably elects to rely). The Company shall use its best efforts
to cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. The provisions of Section 2(d)
above shall be applicable with respect to such obligation, with the time periods
specified therein running from the day after the date on which the Company
reasonably first determines (or reasonably should have determined) the need
therefor.
(c) Notify the Holders of Registrable Securities to be
sold, their Special Counsel and any managing underwriters as promptly as
possible (and, in the case of (i)(A) below, not less than three (3) Business
Days prior to such filing and, in the case of (i)(C) below, not later than the
first Business Day after effectiveness) and (if requested by any such Person)
confirm such notice in writing no later than two (2) Business Days following the
day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (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; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the
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issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) 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 (v) of the occurrence of any event that makes any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the
Holders of a majority in interest of the Registrable Securities to be sold in
connection with an Underwritten Offering, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment to the Registration Statement
such information as the Company reasonably agrees should be included therein
under applicable law and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; provided, however, that the
Company shall not be required to take any action pursuant to this Section 3(e)
that would, in the opinion of counsel for the Company, violate applicable law.
(f) Furnish to each Holder, their Special Counsel, and
any managing underwriters, upon request and without charge, at least one
conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special
Counsel, and any underwriters, 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 and any underwriters in connection with the offering and sale of
the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto; unless the Company notifies the Holders on any event
described in Sections 3(c)(ii) through 3(c)(v).
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(h) Prior to any public offering of Registrable
Securities, use its best efforts to register or qualify to the extent required
or to cooperate with the selling Holders or any underwriters and their 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 or underwriter requests in writing, to keep each
such registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; provided, however, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(i) Cooperate with the Holders and any managing
underwriters 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 such managing underwriters or Holders may request at least two
(2) Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by
Section 3(c)(v), 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 light of the circumstances under which they were made,
not misleading.
(k) Use its best efforts to cause all Registrable
Securities relating to such Registration Statement to be listed on Nasdaq and
any other securities exchange, quotation system, market or over-the-counter
bulletin board, if any, on which similar securities issued by the Company are
then listed as and when required pursuant to the Purchase Agreement.
(l) In the case of an Underwritten Offering (i) enter
into such agreements (including an underwriting agreement in form, scope and
substance as is customary in Underwritten Offerings) and take all such other
actions in connection therewith (including those reasonably requested by any
managing underwriters and the Holders of a majority of the Registrable
Securities being sold) in order to expedite or facilitate the Underwritten
Offering of such Registrable Securities, (ii) make such representations and
warranties to such Holders and such underwriters as are customarily made by
issuers to underwriters in underwritten public offerings, and confirm the same
if and when requested; (iii) obtain and deliver copies thereof to the managing
underwriters, if any, or in the case of non-Underwritten Offerings, if
reasonably requested by the selling Holders, to use its best efforts to obtain
and deliver copies thereof to
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such selling Holders, of opinions of counsel to the Company and updates thereof
addressed to each such underwriter, in form, scope and substance reasonably
satisfactory to any such managing underwriters and Special Counsel to the
selling Holders covering the matters customarily covered in opinions requested
in Underwritten Offerings and such other matters as may be reasonably requested
by such Special Counsel and underwriters; (iv) immediately prior to the
effectiveness of the Registration Statement, at the time of delivery of any
Registrable Securities sold pursuant thereto, and, in the case of
non-Underwritten Offerings, at such time as the selling Holders may reasonably
request, to use its best efforts to obtain and deliver copies to the Holders and
the managing underwriters, if any, of "cold comfort" letters and updates thereof
from the independent certified public accountants of the Company (and, if
required, any other independent certified public accountants of any subsidiary
of the Company or of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included in the
Registration Statement), addressed to each of the underwriters, if any, in form
and substance as are customary in connection with Underwritten Offerings; (v) if
an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the selling
Holders and the underwriters, if any, than those set forth in Section 5 (or such
other provisions and procedures acceptable to the managing underwriters, if any,
and holders of a majority of Registrable Securities participating in such
Underwritten Offering; and (vi) deliver such documents and certificates as may
be reasonably requested by the Holders of a majority of the Registrable
Securities being sold, their Special Counsel and any managing underwriters to
evidence the continued validity of the representations and warranties made
pursuant to clause 3(1)(ii) above and to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company.
(m) Make available for inspection by the selling
Holders, any representative of such Holders, any underwriter participating in
any disposition of Registrable Securities, and no more than two (2) law firms
and one accounting firm retained by such selling Holders or underwriters, at the
offices where normally kept, during reasonable business hours, all financial and
other records, pertinent corporate documents and properties of the Company and
its subsidiaries, and cause the officers, directors, agents and employees of the
Company and its subsidiaries to supply all information in each case reasonably
requested by any such Holder, representative, underwriter, attorney or
accountant in connection with the Registration Statement; provided, however,
that if any information is determined in good faith by the Company in writing to
be of a confidential nature at the time of delivery of such information, then
prior to delivery of such information, the Company and the Holders shall enter
into a confidentiality agreement reasonably acceptable to the Company and the
Holders providing that such information shall be kept confidential, unless (i)
disclosure of such information is required by court or administrative order or
is necessary to respond to inquiries of regulatory authorities (provided,
however, that the Company shall be given notice of any such pending disclosure
so that the Company may seek a protective order); (ii) disclosure of such
information, in the opinion of counsel to such Person, is required by law; (iii)
such information becomes generally available to the public other than as a
result of a disclosure or failure to safeguard by such Person; or (iv) such
information becomes available to such Person from a source other than the
Company and such source is not known by such Person to be bound by a
confidentiality agreement with the Company.
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(n) Use its best efforts to comply in all material
respects with all applicable rules and regulations of the Commission and make
generally available to its securityholders earning 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 12-month period (or 90 days after the end of any
12-month period if such period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which Registrable Securities are sold to underwriters in a
firm commitment or best efforts Underwritten Offering and (ii) if not sold to
underwriters in such an offering, commencing on the first 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.
(o) Each selling Holder shall furnish to the Company
information regarding such Holder and the distribution of such Registrable
Securities as is required by law 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
after receiving such request. Each selling Holder shall also use its best
efforts to cooperate with the Company in connection with the preparation and
filing of any Registration Statement including Registrable Securities.
The Company shall hold in confidence and not make any
disclosure of information concerning a Holder provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning a Holder
is sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to such Holder prior to making such
disclosure, and allow the Holder, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, such
information.
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 amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
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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)(ii), 3(c)(iii), 3(c)(iv) or
3(c)(v), such Holder will forthwith discontinue offers and dispositions 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. Notwithstanding anything
to the contrary, the Company shall cause its transfer agent to deliver
unlegended shares of Common Stock to a bona fide transferee of a Holder in
accordance with the terms of the Securities Purchase Agreement in connection
with any sale of Registrable Securities with respect to which an Holder has
entered into a contract for sale in good faith prior to the Holder's receipt of
a notice from the Company of the happening of any event of the kind described in
Section 3(c)(ii), 3(c)(iii), 3(c)(iv) or 3(c)(v) and for which the Holder has
not yet settled.
(p) The Company agrees to respond fully and completely
to any and all comments on a Registration Statement received from the Commission
staff as promptly as possible but, for non-Underwritten Offerings, in no event
later than ten (10) Business Days of the receipt of such comments, regardless of
whether such comments are in oral or written form.
(q) Within two (2) Business Days after a Registration
Statement which covers applicable 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 such Registration Statement has been
declared effective by the Commission in the form attached hereto as Exhibit B.
4. Registration Expenses
All fees and expenses of the Company incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company, whether or not pursuant to an Underwritten Offering and 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 Nasdaq and each other securities exchange or market on which Registrable
Securities are required hereunder to be listed and (B) in compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel for the Holders in connection with Blue Sky
qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the managing underwriters, if any, or 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 prospectuses if the printing of prospectuses is requested by the
managing underwriters, if any, or
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by the holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company, (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and expenses
of all other Persons retained by the Company in connection with the consummation
of the transactions contemplated by this Agreement. In addition, the Company
shall be responsible for all of its internal expenses incurred in connection
with the consummation of the transactions contemplated by this Agreement
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, and the fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange as required hereunder. The
Holder shall pay all underwriting discounts and fees and commissions, brokerage
fees and commissions, any fees and expenses of counsel to the Holders and
Holders' out of pocket expense.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), 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 joint or
several losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, "Losses"), as
incurred, arising out of or relating to (i) any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary Prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading (in the case of any Prospectus or form of
prospectus or supplement thereto, in light of the circumstances under which they
were made), except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon and in conformity with information
regarding a Holder furnished in writing to the Company by a 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 such Holder or such
Holder's proposed method of distribution of Registrable Securities 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 (provided that the Company amended any
disclosure with respect to the method of distribution upon written notice from
the Holders that such section of the Prospectus should be revised in any way) or
(ii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of
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Registrable Securities. The Company shall not, however, be liable for any Losses
to any Holder with respect to any untrue or alleged untrue statement of material
fact or omission or alleged omission of material fact if such statement or
omission was made in a preliminary Prospectus or form of prospectus which has
subsequently been amended or supplemented and such Holder did receive a copy of
the final Prospectus (or any amendment or supplement thereto) at or prior to the
confirmation of the sale of the Registrable Securities in any case where such
delivery is required by the Securities Act and the untrue or alleged untrue
statement of material fact or omission or alleged omission of material fact
contained in such preliminary Prospectus was corrected in the final Prospectus
(or any amendment or supplement thereto), unless the failure to deliver such
final Prospectus (as amended or supplemented) was a result of noncompliance by
the Company with Section 3(g) of this Agreement. The Company shall notify the
Holders promptly of the institution, threat or assertion of any Proceeding of
which the Company is aware in connection with the transactions contemplated by
this Agreement.
(b) Indemnification by Holders. Each Holder shall,
severally and not jointly, indemnify and hold harmless the Company, the
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and
against all Losses, as incurred, arising solely out of or based solely upon any
untrue statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or arising solely out of or based solely
upon any omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading to the extent, but only to the
extent, that such untrue statement or omission is contained in 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 such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was furnished by such Holder or,
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of prospectus;
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 such Holder, which consent
shall not be unreasonably withheld. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation; unless such Holder withholds
consent to a settlement offered at a lower amount.
(c) Conduct of Indemnification Proceedings. If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an "Indemnified Party"), such Indemnified Party promptly shall notify
the Person from whom indemnity is sought (the "Indemnifying Party") in writing,
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all reasonable fees and expenses incurred in connection with defense
thereof; provided, however, 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
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only) to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; 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 the Indemnifying Party shall bear the fees
and expenses for one such counsel for all of the Indemnified Parties). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within thirty (30) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) Contribution. If a claim for indemnification under
Section 5(a) or 5(b) is unavailable to an Indemnified Party because of a failure
or refusal of a court of competent jurisdiction 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,
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
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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. In no event shall any selling Holder be required to
contribute an amount under this Section 5(d) in excess of the net proceeds
received by such Holder upon sale of the Registrable Securities pursuant to the
Registration Statement giving rise to such contribution obligation.
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.
6. Rule 144
As long as any Holder owns Registrable Securities, 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 and to promptly furnish the Holders with true and complete copies of all
such filings. As long as any Holder owns Registrable Securities, 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. Upon the request of any
Holder, the Company shall deliver to such Holder a written certification of a
duly authorized officer as to whether it has complied with such requirements.
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 Underlying Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act.
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,
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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. Neither the Company nor
any of its subsidiaries has, as of the date hereof, 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. Except as disclosed in Schedule 2.1(c) of the Purchase
Agreement, neither the Company nor any of its subsidiaries has previously
entered into any agreement granting any registration rights with respect to any
of its securities to any Person. 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 subordinated in all respects
to the rights in full of the Holders set forth in Section 2 herein, and are not
otherwise in conflict or inconsistent with the provisions of this Agreement.
This Agreement, together with the Purchase Agreement, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters.
(c) No Piggyback on Registrations. Except as disclosed on
Schedule 2.1(c) of the Purchase Agreement, neither the Company nor any of its
securityholders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statements and the Company
shall not after the date hereof enter into any agreement providing such right to
any of its securityholders, unless the right so granted is on parity with or
subordinated in all respects to the rights in full of the Holders set forth
herein, and is not otherwise in conflict or inconsistent with the provisions of
this Agreement.
(d) Piggy-Back Registrations. Except as provided herein
if, at any time when there is not an effective Registration Statement covering
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 their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, the Company shall send to each Holder of Registrable Securities
written notice of such determination and, if within ten (10) 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
Purchasers), the Company will use reasonable efforts to effect the registration
under the Securities Act of all Registrable Securities which the Company has
been so requested to register by the Holder, to the extent requisite 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
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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), 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; provided, however, that the
Company shall not be required to register any Registrable Securities pursuant to
this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the
Securities Act. In the case of an underwritten public offering, if the Company
after consultation with the Underwriter's representative 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 Registrable Securities then proposed to be sold by 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) 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).
Notwithstanding the foregoing, the Company shall not file any registration
statement under the Securities Act (other than on Form X-0, Xxxx X-0, Form S-3
or Form S-1 for resale of private placement securities and proposed Underwritten
Offerings registered on the available form) relating to the offer and sale of
any equity securities of the Company, or offer or sell any equity securities of
the Company in a transaction exempt from registration pursuant to Regulation S
under the Securities Act other than pursuant to an Underwritten Offering, until
such time as the Initial Registration Statement has been effective for a period
of sixty (60) Trading Days, which period shall be tolled if the effectiveness of
the Initial Registration Statement is suspended for any reason whatsoever. In
connection with any underwritten offering of securities proposed by the Company
(other than pursuant to an employee benefit plan, pursuant to a merger, exchange
offer or a transaction described in Rule 145 under the Securities Act or
pursuant to a "shelf registration"), each Holder of Registrable Securities
agrees that it shall not effect any sale or distribution of any Registrable
Securities similar to the securities offered in such underwritten offering, or
convertible into or exchangeable for such securities, during the 10-day period
prior to, and during a period beginning on the effective date of such
registration and not to exceed 90 days, and hereby agrees to execute a "lock-up
letter" in form and substance customary for transactions of such type if so
requested by the managing underwriter for such underwritten offering.
(e) 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
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writing and signed by the Company and the Holders of at least two thirds of the
then outstanding Registrable Securities; provided, however, that for the
purposes of this sentence, Registrable Securities that are owned, directly or
indirectly, by the Company, or an Affiliate of the Company are not deemed
outstanding. 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 at least a majority 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.
(f) Notices. Any notice or other communication required
or permitted to be given hereunder shall be in writing and shall be deemed to
have been received (a) upon hand delivery (receipt acknowledged) or delivery by
telex (with correct answer back received), telecopy or facsimile (with
transmission confirmation report) at the address or number designated below (if
received by 5:00 p.m. eastern time where such notice is to be received), or the
first Business Day following such delivery (if received after 5:00 p.m. eastern
time where such notice is to be received) or (b) on the second Business Day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications are (i) if to the
Company to Level 8 Systems, Inc., 0000 Xxxxxxx Xxxxxxx, Xxxx, Xxxxx Xxxxxxxx
00000, Telephone: (000) 000-0000, Facsimile: (000) 000-0000, Attention: Xxxxxx
XxXxxxxx, with copies to Powell, Goldstein, Xxxxxx & Xxxxxx LLP, 16th Floor, 000
Xxxxxxxxx Xxxxxx, Xxxxxxx, XX 00000, Attention: Xxxxx X. Xxxxx, Esq., Facsimile:
(000) 000-0000 and (ii) if to any Purchaser to the address set forth on Schedule
I hereto with copies to the addressees set forth on Schedule II hereto or such
other address as may be designated in writing hereafter, in the same manner, by
such Person.
(g) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder. The Company
may not assign its rights or obligations hereunder without the prior written
consent of each Holder. Each Holder may assign its rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement. In
addition, 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 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 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, 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 and
applicable law. The rights to assignment shall apply to the Holders (and to
subsequent) successors and assigns.
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(h) Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and 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.
(i) Governing Law. The corporate laws of the State of
Delaware shall govern all issues concerning the relative rights of the Company
and the Purchasers as its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of 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. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consent to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.
(j) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(l) Headings; References. The headings in this Agreement
are for convenience of reference only and shall not limit or otherwise affect
the meaning hereof. References in this Agreement to Sections are to Sections of
this Agreement, unless otherwise expressly provided.
(m) Shares Held by The Company and its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by the
Company or its Affiliates (other than any Holder or transferees or successors or
assigns thereof if such Holder is deemed to be an Affiliate solely by reason of
its
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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.
(n) Revision of SEC Position on Warrants. In the event
the rules and regulations of the Commission or the policies of the staff of the
Commission are modified and as a result thereof the Company determines in good
faith that it may be practicable and in the interests of the Company and the
Holders to register the exercise of the Warrants so that the Warrant Shares may
be freely resold without maintaining an effective registration statement under
the Securities Act for resales, the Company and the Holders agree to cooperate
in good faith to effect such amendments to this Agreement as may be appropriate
to provide that the Company may fulfill its obligations hereunder with respect
to the Warrants and the Warrant Shares by maintaining an effective registration
statement under the Securities Act covering the exercise of the Warrants rather
than the resale of the Warrant Shares.
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
LEVEL 8 SYSTEMS, INC.
By: /s/ Xxxxxx Xxxxxxxxxxx
---------------------------------
Name: Xxxxxx Xxxxxxxxxxx
Title: President
XXXXX XXXXXXX PARTNERS I, LTD.
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxx
Title: Attorney-in-Fact
SENECA CAPITAL, L.P.
By: Seneca Capital Advisors, LLC, its general partner
By: /s/ Xxxx Xxxxxx
---------------------------------
Name: Xxxx Xxxxxx
Title: Managing Partner
SENECA CAPITAL INTERNATIONAL, LTD.
By: /s/ Xxxx Xxxxxx
---------------------------------
Name: Xxxx Xxxxxx
Title: Managing Partner
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SCHEDULE I
Company
LEVEL 8 SYSTEMS, INC.
0000 Xxxxxxx Xxxxxxx
Xxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx XxXxxxxx
Facsimile: (000) 000-0000
Purchasers:
XXXXX XXXXXXX PARTNERS I, LTD.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxx
Fax: (000) 000-0000
SENECA CAPITAL, L.P.
c/o Seneca Capital Advisors, LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxx Xxxx
SENECA CAPITAL INTERNATIONAL, LTD.
c/o Seneca Capital Advisors, LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxx Xxxx
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SCHEDULE II
Purchasers:
In the case of notice to Xxxxx Xxxxxxx Partners I, Ltd., with a copy to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxx
Facsimile: (000) 000-0000
In the case of notice to Seneca Capital, L.P. or Seneca Capital International,
Ltd., with a copy to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
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EXHIBIT A
PLAN OF DISTRIBUTION
Our company is registering the shares of common stock on
behalf of the selling stockholders. All costs, expenses and fees in connection
with the registration of the shares offered by this prospectus will be borne by
the Company, other than brokerage commissions and similar selling expenses, if
any, attributable to the sale of shares which will be borne by the selling
stockholders. Sales of shares may be effected by selling stockholders from time
to time in one or more types of transactions (which may include block
transactions) on the Nasdaq National Market, in the over-the-counter market, in
negotiated transactions, through put or call options transactions relating to
the shares, through short sales of shares, or a combination of such methods of
sale, at market prices prevailing at the time of sale, or at negotiated prices.
Such transactions may or may not involve brokers or dealers. The selling
stockholders have advised our company that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities, nor is there an
underwriter or coordinated broker acting in connection with the proposed sale of
shares by the selling stockholders.
The selling stockholders may enter into hedging transactions
with broker-dealers or other financial institutions. In connection with such
transactions, 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 selling stockholders.
The selling stockholders may also enter into options or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealers or other financial institutions of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as amended or supplemented to reflect such
transaction).
The selling stockholders may make these transactions by
selling shares directly to purchasers or to or through broker-dealers, which may
act as agents or principals. Such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from selling stockholders and/or
the purchasers of shares for whom such broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The selling stockholders and any broker-dealers that act in
connection with the sale of shares are "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers or any profit on the resale of the shares sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act. The selling stockholders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of the shares against certain liabilities, including liabilities arising under
the Securities Act.
Because selling stockholders are "underwriters" within the
meaning of Section 2(11) of the Securities Act, the selling stockholders will be
subject to the prospectus delivery
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requirements of the Securities Act. Our company has informed the selling
stockholders that the anti-manipulative provisions of Regulation M promulgated
under the Exchange Act may apply to their sales in the market.
Selling stockholders 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 our company being notified by a selling stockholder that
any 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, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing:
- the name of each such selling stockholder and of the
participating broker-dealer(s);
- the number of shares involved;
- the initial price at which such shares were sold;
- the commissions paid or discounts or concessions
allowed to such 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.
In addition, upon our company being notified by a selling stockholder that a
donee or pledgee intends to sell more than 500 shares, a supplement to this
prospectus will be filed.
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EXHIBIT B
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn.:
Re: Level 8 Systems, Inc.
Ladies and Gentlemen:
We are counsel to Level 8 Systems, a New York corporation (the
"Company"), and have represented the Company in connection with that certain
Securities Purchase Agreement (the "Purchase Agreement") entered into by and
among the Company and the buyers named therein (collectively, the "Holders")
pursuant to which the Company issued to the Holders its Series B 4% convertible
preferred stock, par value $0.001 per share (the "Preferred Stock"), convertible
into shares of the Company's common stock, par value $0.01 per share (the
"Common Stock"), and Warrants (the "the Warrants") to acquire shares of Common
Stock. Pursuant to the Purchase Agreement, the Company also has entered into a
Registration Rights Agreement with the Holders (the "Registration Rights
Agreement") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the shares of Common Stock issuable upon conversion of the
Preferred Stock and exercise of the Warrants, under the Securities Act of 1933,
as amended (the "1933 Act"). In connection with the Company's obligations under
the Registration Rights Agreement, on _______________, 2000, the Company filed a
Registration Statement on [Form S-3] (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 stockholder 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,
[ISSUER'S COUNSEL]
CC: [LIST NAMES OF HOLDERS]
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EXHIBIT 10.1
===============================================================================
SECURITIES PURCHASE AGREEMENT
Among
LEVEL 8 SYSTEMS, INC.
and
THE PURCHASERS LISTED ON SCHEDULE I
Dated as of July ___, 2000
===============================================================================
