ANNEX IV
TO
SECURITIES PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of May 13, 1999 (this
"Agreement"), is made by and between TTR TECHNOLOGIES, INC. (formerly known as
TTR INC.), a Delaware corporation, with headquarters located at 0000 Xxxxxxxx,
Xxx Xxxx, XX 00000 (the "Company"), and each entity named on a signature page
hereto (each, an "Initial Investor") (each agreement with an Initial Investor
being deemed a separate and independent agreement between the Company and such
Initial Investor, except that each Initial Investor acknowledges and consents to
the rights granted to each other Initial Investor under such agreement).
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement, dated as of May , 1999, between the Initial Investor and the
Company (the "Securities Purchase Agreement"; terms not otherwise defined herein
shall have the meanings ascribed to them in the Securities Purchase Agreement),
the Company has agreed to issue and sell to the Initial Investor one or more 10%
Convertible Debentures of the Company, in an aggregate principal amount not
exceeding $2,000,000 (the "Debentures"); and
WHEREAS, the Company has agreed to issue the Warrants to the Initial
Investor in connection with the issuance of the Debentures; and
WHEREAS, the Debentures are convertible into shares of Common Stock
(the "Conversion Shares"; which term, for purposes of this Agreement, shall
include shares of Common Stock of the Company issuable in lieu of accrued
interest on conversion as contemplated by the Debentures) upon the terms and
subject to the conditions contained in the Debentures and the Warrants may be
exercised for the purchase of shares of Common Stock (the "Warrant Shares") upon
the terms and conditions of the Warrants; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Conversion Shares and the Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
following meanings:
(a) "Investor" means the Initial Investor and any permitted transferee
or assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof and who holds Debentures, Warrants or
Registrable Securities.
(b) "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.
(c) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(d) "Registrable Securities" means the Conversion Shares and the
Warrant Shares.
(e) "Registration Statement" means a registration statement of the
Company under the Securities Act.
(f) "Required Effective Date" means the relevant Initial Required
Effective Date or Increased Required Effective Date (as those terms are defined
below).
2. Registration.
(a) Mandatory Registration.
(i) The Company shall prepare and file with the SEC, as soon as
possible after the Initial Closing Date but no later than June 15, 1999 (the
"Required Filing Date"), either a Registration Statement on Form SB-2 or an
amendment to an existing Registration Statement, in either event registering for
resale by the Investor a sufficient number of shares of Common Stock for the
Initial Investors to sell the Registrable Securities (or such lesser number as
may be required by the SEC, but in no event less than two hundred percent (200%)
of the aggregate
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number of shares (A) into which the Initial Debentures and the Additional
Debentures and all interest thereon through their respective Maturity Dates
would be convertible at the time of filing of such Registration Statement
(assuming for such purposes that the Additional Debentures had been issued at
such date and that all Debentures had been eligible to be converted, and had
been converted, into Conversion Shares in accordance with their terms, whether
or not such issuance, accrual of interest, eligibility or conversion had in fact
occurred as of such date) and (B) which would be issued upon exercise of all of
the Warrants at the time of filing of the Registration Statement (assuming for
such purposes that the Warrants issued in connection with the purchase and sale
of all Debentures had been issued and that all Warrants had been eligible to be
exercised for the maximum number of shares contemplated thereby and had been
exercised in accordance with their terms, whether or not such issuance,
eligibility or exercise had in fact occurred as of such date). The Registration
Statement (W) shall include only the Registrable Securities and, subject to the
provisions set forth below in subparagraph (iii), the shares specifically listed
on Exhibit 1 annexed hereto; and (X) shall also state that, in accordance with
Rule 416 and 457 under the Securities Act, it also covers such indeterminate
number of additional shares of Common Stock as may become issuable upon
conversion of the Debentures and the exercise of the Warrants to prevent
dilution resulting from stock splits, or stock dividends. The Company will use
its reasonable best efforts to cause such Registration Statement to be declared
effective on a date (the "Initial Required Effective Date") which no later than
is the earlier of (Y) five (5) days after notice by the SEC that it may be
declared effective or (Z) ninety (90) days after the Initial Closing Date.
(b) (ii) If at any time (an "Increased Registered Shares Date"), the
number of shares of Common Stock represented by the Registrable Shares, issued
or to be issued as contemplated by the Transaction Agreements, exceeds the
aggregate number of shares of Common Stock then registered, the Company shall,
within ten (10) business days after receipt of a written notice from any
Investor, either (X) amend the Registration Statement filed by the Company
pursuant to the preceding provisions of this Section 2, if such Registration
Statement has not been declared effective by the SEC at that time, to register
two hundred percent (200%) of such Registrable Shares, computed as contemplated
by the immediately preceding subparagraph (i), or (Y) if such Registration
Statement has been declared effective by the SEC at that time, file with the SEC
an additional Registration Statement on Form SB-2 or other appropriate
registration statement form (an "Additional Registration Statement") to register
two hundred percent (200%) of the shares of Common Stock represented by the
Registrable Shares, computed as contemplated by the immediately preceding
subparagraph (i), that exceed the aggregate number of shares of Common Stock
already registered. The Company will use its reasonable best efforts to cause
such Registration Statement to be declared effective on a date (each, an
"Increased Required Effective Date") which is no later than (Q) with respect to
a Registration Statement under clause (X) of this subparagraph (ii), the Initial
Required Effective Date and (R) with respect to an Additional Registration
Statement, the earlier of (I) five (5) days after notice by the SEC that it may
be declared effective or (II) thirty (30) days after the Increased Registered
Shares Date.
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(c) (iii) Except with respect to the party identified as the "Finder"
on Exhibit 1 annexed hereto, it shall be a condition to the inclusion in the
Registration Statement of the shares specifically listed on Exhibit 1 annexed
hereto that the holder of such shares (each such holder, other than the Finder,
an "Included Holder") agree in writing (an "Included Holder's Agreement"), which
writing shall be in favor of Buyer and enforceable against such holder by Buyer
(a copy of which Included Holder's Agreement shall be provided to Buyer no later
than the date the Registration Statement is first filed with the SEC), that such
Included Holder and any of such Included Holder's transferees other than a
Permitted Transferee (as defined below) will not sell or otherwise transfer,
individually or on a combined basis, more than twenty-five percent (25%) of such
Included Holder's shares listed in the Registration Statement during any
consecutive thirty (30) day period (the shares permitted to be transferred in
each such period are referred to as "Permitted Shares"). In addition to, and not
in lieu of the foregoing provisions of this subparagraph (iii), the Included
Holder's Agreement of any Included Holder who, as of the date of this Agreement,
holds a warrant to purchase Common Stock of the Company shall also provide that
such Included Holder agrees not to sell or otherwise transfer any of such
Included Holder's shares issued on exercise of such warrants prior to the date
which is thirty (30) days after the Effective Date, and that any sales and
transfers made thereafter will be made in compliance with the other terms and
conditions set forth in the Included Holder's Agreement. A "Permitted
Transferee" is a party acquiring all or a portion of the Permitted Shares in a
transaction made pursuant to the prospectus included in the Registration
Statement. The Buyer may require the Company to institute reasonable procedures
(such as, but not necessarily limited to, the establishment of an escrow
arrangement for the shares of each Included Holder) to assure compliance with
this provision.
(d) Payments by the Company.
(i) If the Registration Statement covering the Registrable Securities
is not filed in proper form with the SEC by the Required Filing Date, the
Company will make payment to the Initial Investor in such amounts and at such
times as shall be determined pursuant to this Section 2(b).
(ii) If the Registration Statement covering the Registrable Securities
is not effective by the relevant Required Effective Date or if the Investor is
restricted from making sales of Registrable Securities covered by a previously
effective Registration Statement at any time (the date such restriction
commences, a "Restricted Sale Date") after the Effective Date other than during
a Permitted Suspension Period (as defined below), then the Company will make
payments to the Initial Investor in such amounts and at such times as shall be
determined pursuant to this Section 2(b).
(iii) The amount (the "Periodic Amount") to be paid by the Company to
the Initial Investor shall be determined as of each Computation Date (as defined
below) and such amount shall be equal to the Periodic Amount Percentage (as
defined below) of the Purchase Price for all Debentures for the period from the
date following the relevant Required Filing Date, Required Effective Date or
Restricted Sale Date, as the case may be, to the first relevant
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Computation Date, and thereafter to each subsequent Computation Date. The
"Periodic Amount Percentage" means (A) two percent (2%) of the Purchase Price
for all the Debentures for the period from the date following the relevant
Required Filing Date, Required Effective Date or Restricted Sale Date, as the
case may be, to the first relevant Computation Date, and (B) three percent (3%)
of the Purchase Price of all Debentures to each Computation Date thereafter.
Anything in the preceding provisions of this paragraph (iii) to the contrary
notwithstanding, after the Effective Date the Purchase Price shall be deemed to
refer to the sum of (X) the principal amount of all Debentures not yet converted
and (Y) the Held Shares Value (as defined below). The "Held Shares Value" means,
for shares acquired by the Investor upon a conversion within the thirty (30)
days preceding the Restricted Sale Date, but not yet sold by the Investor, the
principal amount of the Debentures converted into such Conversion Shares;
provided, however, that if the Investor effected more than one conversion during
such thirty (30) day period and sold less than all of such shares, the sold
shares shall be deemed to be derived first from the conversions in the sequence
of such conversions (that is, for example, until the number of shares from the
first of such conversions have been sold, all shares shall be deemed to be from
the first conversion; thereafter, from the second conversion until all such
shares are sold). By way of illustration and not in limitation of the foregoing,
if the Registration Statement is timely filed but is not declared effective
until one hundred sixty-five (165) days after the Initial Closing Date, the
Periodic Amount will aggregate eight percent (8%) of the Purchase Price of the
Debentures (2% for days 91-120, plus 3% for days 121-150, plus 3% for days
151-165).
(iv) Each Periodic Amount will be payable by the Company in cash or
other immediately available funds to the Investor monthly, without requiring
demand therefor by the Investor.
(v) The parties acknowledge that the damages which may be incurred by
the Investor if the Registration Statement is not filed by the Required Filing
Date or if the Registration Statement has not been declared effective by a
Required Effective Date, including if the right to sell Registrable Securities
under a previously effective Registration Statement is suspended, may be
difficult to ascertain. The parties agree that the Periodic Amounts represent a
reasonable estimate on the part of the parties, as of the date of this
Agreement, of the amount of such damages.
(vi) Notwithstanding the foregoing, the amounts payable by the Company
pursuant to this provision shall not be payable to the extent any delay in the
effectiveness of the Registration Statement occurs because of an act of, or a
failure to act or to act timely by the Initial Investor or its counsel, or in
the event all of the Registrable Securities may be sold pursuant to Rule 144 or
another available exemption under the Act.
(vii) "Computation Date" means (A) the date which is the earlier of (1)
thirty (30) days after the Required Filing Date, any relevant Required Effective
Date or a Restricted Sale Date, as the case may be, or (2) the date after the
Required Filing Date, such Required Effective Date or Restricted Sale Date on
which the Registration Statement is filed (with respect to payments due as
contemplated by Section 2(b)(i) hereof) or is declared effective or has its
restrictions removed
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(with respect to payments due as contemplated by Section 2(b)(ii) hereof), as
the case may be, and (B) each date which is the earlier of (1) thirty (30) days
after the previous Computation Date or (2) the date after the previous
Computation Date on which the Registration Statement is filed (with respect to
payments due as contemplated by Section 2(b)(i) hereof) or is declared effective
or has its restrictions removed (with respect to payments due as contemplated by
Section 2(b)(ii) hereof), as the case may be.
(viii) Anything in the preceding provisions of this Section 2(b) to the
contrary notwithstanding, if, but only if, the Registration Statement is
declared effective within one hundred twenty (120) days following the Initial
Closing Date, the provisions of Section 2(b)(ii) shall not apply to the fact
that the Registration Statement was initially declared effective after the
Initial Required Effective Date, and the Company will not have any obligation to
pay any Periodic Amount to the Initial Investor with respect thereto; provided,
however, that the provisions of Section.2(b)(ii) shall continue to apply to all
other events described therein.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following.
(a) Prepare promptly, and file with the SEC by the Required Filing Date
a Registration Statement with respect to not less than the number of Registrable
Securities provided in Section 2(a) above, and thereafter use its reasonable
best efforts to cause such Registration Statement relating to Registrable
Securities to become effective by the Required Effective Date and keep the
Registration Statement effective at all times during the period (the
"Registration Period") continuing until the earliest of (i) the date that is two
(2) years after the last day of the calendar month following the month in which
the Effective Date occurs, (ii) the date when the Investors may sell all
Registrable Securities under Rule 144 or (iii) the date the Investors no longer
own any of the Registrable Securities, which Registration Statement (including
any amendments or supplements thereto and prospectuses contained therein) shall
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) The Company shall permit a single firm of counsel designated by the
Initial Investors to review the Registration Statement and all amendments and
supplements thereto a
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reasonable period of time (but not less than three (3) business days) prior to
their filing with the SEC, and not file any document in a form to which such
counsel reasonably objects.
(d) Notify each Investor, such Investor's legal counsel identified to
the Company (which, until further notice, shall be deemed to be Xxxxxxx &
Xxxxxx, ATTN: Xxxxxx Xxxxxxx, Esq.; each, an "Investor's Counsel"), and any
managing underwriters immediately (and, in the case of (i)(A) below, not less
than five (5) days prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than one (1) business day 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) whenever
the SEC notifies the Company whether there will be a "review" of such
Registration Statement; (C) whenever the Company receives (or a representative
of the Company receives on its behalf) any oral or written comments from the SEC
in respect of a Registration Statement (copies or, in the case of oral comments,
summaries of such comments shall be promptly furnished by the Company to the
Investors); and (D) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the SEC 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 issuance by the SEC 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) if at any time any of the representations or warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
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 (vi) of the occurrence of any event that to the
best knowledge of the Company 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. In addition, the Company shall furnish the Investors with
copies of all intended written responses to the comments contemplated in clause
(C) of this Section 3(d) not later than one (1) business day in advance of the
filing of such responses with the SEC so that the Investors shall have the
opportunity to comment thereon.
(e) Furnish to each Investor and such Investor's Counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one (1) copy of the Registration Statement, each
preliminary prospectus and prospectus, and each amendment or supplement thereto,
and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
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(f) As promptly as practicable after becoming aware thereof, notify
each Investor of the happening of any event of which the Company has knowledge,
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits 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, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;
(g) As promptly as practicable after becoming aware thereof, notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance by the SEC
of a Notice of Effectiveness or any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at the
earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Investor receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that the
Company may not so suspend the right to such holders of Registrable Securities
during the periods the Registration Statement is required to be in effect other
than during a Permitted Suspension Period. The term "Permitted Suspension
Period" means one or more suspension periods during any consecutive 12-month
period which suspension periods, in the aggregate, do not exceed fifty (50)
days, provided, however, that no one such suspension period shall either (i) be
for more than twenty (20) days or (ii) begin less than ten (10) business days
after the last day of the preceding suspension (whether or not such last day was
during or after a Permitted Suspension Period).
(i) Use its reasonable efforts to secure and maintain the designation
of all the Registrable Securities covered by the Registration Statement on the
"OTC Bulletin Board Market" of the National Association of Securities Dealers
Automated Quotations System ("NASDAQ") within the meaning of Rule 11Aa2-1 of the
SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the quotation of the Registrable Securities on The NASDAQ Bulletin Board
Market; and, without limiting the generality of the foregoing, to arrange for at
least two market makers to register with the National Association of Securities
Dealers, Inc. ("NASD") as such with respect to such Registrable Securities;
(j) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
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(k) Cooperate with the Investors to facilitate the timely preparation
and delivery of certificates for the Registrable Securities to be offered
pursuant to the Registration Statement and enable such certificates for the
Registrable Securities to be in such denominations or amounts as the case may
be, as the Investors may reasonably request, and, within three (3) business days
after a Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and opinion
of such counsel; and
(l) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
4. Obligations of the Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it, and the intended method of disposition of the Registrable Securities
held by it, as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least ten (10) days prior
to the first anticipated filing date of the Registration Statement, the Company
shall notify each Investor of the information the Company requires from each
such Investor (the "Requested Information") if such Investor elects to have any
of such Investor's Registrable Securities included in the Registration
Statement. If at least two (2) business days prior to the filing date the
Company has not received the Requested Information from an Investor (a
"Non-Responsive Investor"), then the Company may file the Registration Statement
without including Registrable Securities of such Non-Responsive Investor;
(b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or
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destroy (and deliver to the Company a certificate of destruction) all copies in
such Investor's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
5. Expenses of Registration.
(a) All reasonable expenses (other than underwriting discounts and
commissions of the Investor) incurred in connection with registrations, filings
or qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printers and accounting fees,
the fees and disbursements of counsel for the Company and a fee for a single
counsel for the Investors not exceeding, in the aggregate for all Investors,
$3,500, shall be borne by the Company.
(b) Except as and to the extent specifically set forth in Exhibit 1
attached hereto, neither the Company nor any of its subsidiaries has, as of the
date hereof, nor shall the Company nor 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 Investors in this Agreement
or otherwise conflicts with the provisions hereof. Except as and to the extent
specifically set forth in Exhibit 1 attached hereto, 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
Investors holding a majority of the 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 prior rights in full of the Investors set
forth herein, and are not otherwise in conflict or inconsistent with the
provisions of this Agreement and the other Transaction Agreements.
6. Indemnification. In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person" or "Indemnified Party"), against any
losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to state
therein any material fact necessary to
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make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation under the Securities Act, the Exchange
Act or any state securities law (the matters in the foregoing clauses (i)
through (iii) being, collectively, "Violations"). Subject to clause (b) of this
Section 6, the Company shall reimburse the Investors, promptly as such expenses
are incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (I) apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of any Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (II) be available to the extent such Claim is
based on a failure of the Investor to deliver or cause to be delivered the
prospectus made available by the Company; or (III) apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld. Each
Investor will indemnify the Company and its officers, directors and agents
(each, an "Indemnified Person" or "Indemnified Party") against any claims
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company, by or on behalf
of such Investor, expressly for use in connection with the preparation of the
Registration Statement, subject to such limitations and conditions as are
applicable to the Indemnification provided by the Company to this Section 6.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be. In case any such action is brought against any Indemnified Person
or Indemnified Party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein stated
and after notice from the indemnifying party to such Indemnified Person or
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Person or Indemnified
Party under this Section 6 for any legal or other reasonable out-of-pocket
expenses subsequently incurred by such Indemnified Person or Indemnified Party
in connection with the defense thereof other than reasonable costs of
11
investigation, unless the indemnifying party shall not pursue the action of its
final conclusion. The Indemnified Person or Indemnified Party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and reasonable out-of-pocket expenses of such
counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the Indemnified Person or Indemnified Party. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(a) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation; and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. Reports under Exchange Act.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
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9. Assignment of the Registration Rights.
The rights to have the Company register Registrable Securities pursuant
to this Agreement shall be automatically assigned by the Investors to any
transferee of the Registrable Securities (or all or any portion of any
unconverted Debenture or unexercised Warrant) only if: (a) the Investor 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, (b) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (i) the name and address of such
transferee or assignee and (ii) the securities with respect to which such
registration rights are being transferred or assigned, (c) immediately following
such transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, and (d) at or before the time the Company received the
written notice contemplated by clause (b) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein. In the event of any delay in filing or effectiveness of the
Registration Statement as a result of such assignment, the Company shall not be
liable for any damages arising from such delay, or the payments set forth in
Section 2(c) hereof arising from such delay.
10. Amendment of Registration Rights.
Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold an sixty-seven (67%) percent interest of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be given
in the manner contemplated by the Agreement, (i) if to the Company or to the
Initial Investor, to their respective address contemplated by the Agreement, and
(iii) if to any other Investor, at such address as such Investor shall have
provided in writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 11(b).
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Delaware for contracts to be wholly performed in
such state and without
13
iving effect to the principles thereof regarding the conflict of laws. Each of
the parties consents to the jurisdiction of the federal courts whose districts
encompass any part of the City of Wilmington or the state courts of the State of
Delaware sitting in the City of Wilmington in connection with any dispute
arising under this Agreement and hereby waives, to the maximum extent permitted
by law, any objection, including any objection based on forum non coveniens, to
the bringing of any such proceeding in such jurisdictions. To the extent
determined by such court, the Company shall reimburse the Buyer for any
reasonable legal fees and disbursements incurred by the Buyer in enforcement of
or protection of any of its rights under this Agreement.
(e) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
(j) The Company acknowledges that any failure by the Company to perform
its obligations under Section 3(a) hereof, or any delay in such performance
could result in loss to the Investors, and the Company agrees that, in addition
to any other liability the Company may have by reason of such failure or delay,
the Company shall be liable for all direct damages caused by any such failure or
delay, unless the same is the result of force majeure. Neither party shall be
liable for consequential damages.
(k) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COMPANY:
TTR TECHNOLOGIES, INC.
By:
Name:
Title:
INITIAL INVESTOR:
By:
Name:
Title:
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