REGISTRATION RIGHTS AGREEMENT
This
REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of November 1,
2007, by and between Capital
Growth Systems, Inc.,
a
Florida corporation with headquarters located at 000 Xxxxx Xxxxxx Xxxxx, Xxxxx
000, Xxxxxxx, Xxxxxxxx 00000 (the “Company”), and the undersigned lender
(“Lender”).
RECITALS
A. In
connection with the Credit Agreement, dated as of January 19, 2007, by and
among
the 20/20 Technologies, Inc., a Delaware corporation; 20/20 Technologies I,
LLC,
a Delaware limited liability company; Centrepath, Inc., a Delaware corporation;
Frontrunner Network Systems Corp., a Delaware corporation; Global Capacity
Group, Inc., a Texas corporation, Nexvu Technologies, LLC a Delaware limited
liability company; the Company; and Magenta Netlogic Limited, a private limited
company organized under the laws of the United Kingdom and Lender (the “Credit
Agreement”), the Company issued to the Lender the Hilco Warrants (as defined in
the Credit Agreement) which as of the date hereof shall be exchanged for a
combined warrant (the “Combined Warrant”) and which will be exercisable to
purchase Warrant Shares (as defined in the Combined Warrant). The Combined
Warrant and any warrants issued in exchange therefor are collectively referred
to herein as the “Warrants”.
B. To
induce
the Lender to execute and deliver that certain Waiver and Amendment No. 1 to
Credit 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 “1933 Act”), and
applicable state securities laws.
AGREEMENT
NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Lender hereby
agree as follows:
1. Definitions.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Credit Agreement. As used in this
Agreement, the following terms shall have the following meanings:
(a) “Additional
Effectiveness Date” means the date an Additional Registration Statement is
declared effective by the SEC.
(b) “Additional
Filing Deadline” means, if Cutback Shares are required to be included in an
Additional Registration Statement, the date that is the earlier of (i) the
later
of (A) six (6) months from the Initial Effectiveness Date or the last Additional
Effectiveness Date, as applicable and (B) sixty (60) days after the Company
has
been informed that substantially all of the Registrable Securities held by
the
Investors included in any Registration Statements previously declared effective
hereunder have been sold in accordance therewith, or (ii) the first date on
which the Company is permitted by the SEC to register such Cutback
Shares.
(c) “Additional
Registrable Securities” means, (i) any Cutback Shares not previously included in
a Registration Statement and (ii) any shares of capital stock of the Company
issued or issuable with respect to such Cutback Shares, as applicable, as a
result of any stock split, stock dividend, recapitalization, exchange or similar
event or otherwise, without regard to any limitations on the exercise of the
Warrants.
(d) “Additional
Registration Statement” means a registration statement or registration
statements of the Company filed under the 1933 Act covering any Additional
Registrable Securities.
(e) “Additional
Required Registration Amount” means the lesser of (i) any Cutback Shares not
previously included in a Registration Statement, without regard to any
limitations on the exercise of the Warrants, and (ii) such number of Registrable
Securities as the Company is permitted by the SEC to register pursuant to Rule
415, after the Company has used its reasonable best efforts to register the
number set forth in the preceding clause (i), subject to Section
2(c).
(f) “Business
Day” means any day other than Saturday, Sunday or any other day on which
commercial banks in Chicago, Illinois are authorized or required by law to
remain closed.
(g) “Closing
Date” shall have the meaning set forth in the Credit Agreement.
(h) “Cutback
Shares” means any of the Initial Registrable Securities not included in all
Registration Statements previously declared effective hereunder as a result
of a
limitation on the maximum number of shares of Common Stock of the Company
permitted by the SEC to be registered pursuant to Rule 415.
(i) “Effectiveness
Date” means the Initial Effectiveness Date or an Additional Effectiveness Date,
as applicable.
(j) “Effectiveness
Deadline” means the Initial Effectiveness Deadline, an Additional Effectiveness
Deadline, or a Subsequent Effectiveness Deadline, as applicable.
(k) “Filing
Deadline” means the Initial Filing Deadline, an Additional Filing Deadline or a
Subsequent Filing Deadline, as applicable.
(l) “Initial
Effectiveness Date” means the date the Initial Registration Statement is
declared effective by the SEC.
(m) “Initial
Effectiveness Deadline” means the date which is 120 days (or 150 days if the
Registration Statement is reviewed by the SEC) after the Closing
Date.
(n) “Initial
Filing Deadline” means the date that sixty (60) days after the Closing Date.
(o) “Initial
Registrable Securities” means (i) the Warrant Shares issued or issuable upon
exercise of the Warrants; (ii) any capital stock of the Company issued or
issuable with respect to the Warrant Shares or the Warrants, including, without
limitation, (1) as a result of any share split, share dividend,
recapitalization, exchange or similar event or otherwise and (2) including
shares of capital stock of the Company into which shares of Common Stock (as
defined in the Warrant) are converted or exchanged and shares of capital stock
of a successor entity into which the Common Stock are converted or exchanged,
without regard to any limitations on exercises of Warrants; and (iii) the shares
of Common Stock of the Company issued in connection with its “Units Offering”
(pursuant to its private placement memorandum dated November 6, 2006, as
amended, including the mandatory notes converted into Units per the Units
Offering and the placement agent warrants) , as well as all of the shares of
Common Stock underlying warrants issued in connection with the Units offering
and all Common Stock otherwise subject to registration rights pursuant to
Exhibit A to the form of Registration Rights Agreement contained as an exhibit
to the Units Offering private placement memorandum—the “Prior Registration
Rights Agreement:”)—the aggregate number of shares subject to registration
pursuant to the Prior Registration Rights Agreement is referred to as the “Prior
Registration Rights Shares.”
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(p) “Initial
Required Registration Amount” means the lesser of (i) 100% of the number of
Warrant Shares issued and issuable pursuant to the Warrants as of the trading
day immediately preceding the applicable date of determination, without regard
to any limitations on exercise of the Warrants, or (ii) such maximum number
of
shares of Common Stock as the Company is permitted to register by the SEC
pursuant to Rule 415, after the Company has used its reasonable best efforts
to
register the number set forth in the preceding clause (i), subject to Section
2(c).
(q) “Initial
Registration Statement” means a registration statement or registration
statements of the Company filed under the 1933 Act pursuant to Section 2(a)
hereof covering the Initial Registrable Securities.
(r) “Investor”
or “Investors” means the Lender or any transferee or assignee of any Registrable
Securities or Warrants, as applicable, to whom the Lender assigns its rights
under this Agreement and who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof and any transferee or assignee
thereof to whom a transferee or assignee of any Registrable Securities or
Warrants, as applicable, assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section
9
hereof. Each Investor who may from time to time hold Registrable Securities
shall have the rights and be subject to the obligations created by this
Agreement.
(s) “Outstanding
Registrable Securities” means the number of Warrant Shares issued and issuable
pursuant to the Warrants as of the trading day immediately preceding the
applicable date of determination (without taking into account any limitations
on
the exercise of the Warrants (whether set forth in the Warrants or otherwise),
all subject to adjustment as provided in Section 2(e) hereof.
(t) “Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.
(u) “register,”
“registered,” and “registration” refer to a registration effected by preparing
and filing one or more Registration Statements (as defined below) in compliance
with the 1933 Act and pursuant to Rule 415 and the declaration of effectiveness
of such Registration Statement(s) by the SEC.
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(v) “Registrable
Securities” means the Initial Registrable Securities and any Additional
Registrable Securities.
(w) “Registration
Statement” means a registration statement or registration statements of the
Company filed under the 1933 Act covering the Registrable
Securities.
(x) “Required
Holders” means the holders of at least a majority of the Registrable
Securities.
(y) “Required
Registration Amount” means either the Initial Required Registration Amount or an
Additional Required Registration Amount, as applicable.
(z) “Rule
415” means Rule 415 under the 1933 Act or any successor rule providing for
offering securities on a continuous or delayed basis.
(aa) “SEC”
means the United States Securities and Exchange Commission.
(bb) “Unit
Offering Shares” means the shares of Common Stock of the Company issued by the
Company in its “Units Offering” (pursuant to its private placement memorandum
dated November 6, 2006, as amended, including the mandatory notes converted
into
Units per the Units Offering and the related placement agent warrants), as
well
as all of the shares of Common Stock underlying warrants issued in the Units
offering and all shares of Common Stock otherwise subject to registration rights
pursuant to Exhibit A to the form of Registration Rights Agreement contained
as
an exhibit to the Units Offering private placement memorandum (the “Prior
Registration Rights Agreement”).
2. Registration.
(a) Initial
Mandatory Registration.
The
Company shall prepare, and, as soon as practicable, but in no event later than
the Initial Filing Deadline, file with the SEC a Registration Statement on
Form
S-3 covering the resale of the Initial Registrable Securities. In the event
that
Form S-3 is unavailable for such a registration, the Company shall use such
other form as is available for such a registration on another appropriate form
reasonably acceptable to the Required Holders, subject to the provisions of
Section 2(d) hereof. The Initial Registration Statement prepared pursuant hereto
shall register for resale at least the number of shares of Common Stock (as
defined in the Warrant) equal to the Initial Required Registration Amount
determined as of the date the Registration Statement is initially filed with
the
SEC. The Registration Statement shall contain (except if otherwise directed
by
the Required Holders) the “Selling Stockholders” and “Plan of Distribution”
sections in substantially the form attached hereto as Exhibit B; provided that
the Company may make any changes to such sections as requested by the SEC and
subject to change by the Investors or by the placement agent for the Units
Offering, so long as none of such changes are materially inconsistent with
the
form attached hereto as Exhibit B or adversely affect any Investor (including,
without limitation, any restrictions on the manner of disposition). The Company
shall use its best efforts to have the Initial Registration Statement declared
effective by the SEC as soon as practicable, but in no event later than the
Initial Effectiveness Deadline. By 9:30 a.m. New York City time on the Business
Day immediately following the Effectiveness Date, the Company shall file with
the SEC in accordance with Rule 424 under the 1933 Act the final prospectus
to
be used in connection with sales pursuant to such Registration Statement.
Notwithstanding anything to the contrary contained in this Agreement, the
Company shall ensure that, when filed and at all times while effective, each
Registration Statement and the prospectus used in connection with such
Registration Statement will not contain any untrue statement of a material
fact
or omit to state a material fact necessary to make the statements made, in
light
of the circumstances under which such statements were made, not misleading.
The
requirements of this Section 2(a) (other than the requirements set forth in
the
immediately preceding sentence) shall terminate on the date as of which the
Investors may sell all of the Registrable Securities owned by the Investors
without restriction pursuant to Rule 144(k) (or successor thereto) promulgated
under the 1933 Act, as such rule may be amended from time to time, or the
Investors may sell all of such Registrable Securities owned by them without
restriction pursuant to Rule 144 without the requirement for compliance with
Rule 144(e), (f) or (h) (or successor thereto), as such rules may be amended
from time to time.
4
(b) Additional
Mandatory Registrations.
The
Company shall prepare, and, as soon as practicable, but in no event later than
each Additional Filing Deadline, file with the SEC an Additional Registration
Statement on Form S-3 covering the resale of the Additional Registrable
Securities not previously registered on a Registration Statement hereunder.
To
the extent the staff of the SEC does not permit the Additional Required
Registration Amount to be registered on an Additional Registration Statement,
the Company shall file Additional Registration Statements successively trying
to
register on each such Additional Registration Statement the maximum number
of
remaining Additional Registrable Securities until the Additional Required
Registration Amount has been registered with the SEC. In the event that Form
S-3
is unavailable for such a registration, the Company shall use such other form
as
is available for such a registration and reasonably acceptable to the Required
Holders, subject to the provisions of Section 2(d) hereof. Each Additional
Registration Statement prepared pursuant hereto shall register for resale at
least that number of shares of Common Stock equal to the Additional Required
Registration Amount as of date the Registration Statement is initially filed
with the SEC. The Company shall use its best efforts to have each Additional
Registration Statement declared effective by the SEC as soon as practicable
following the filing thereof, but in any event not later than 75 days following
the filing thereof or, if the Additional Registration Statement is subject
to a
full review by the staff of the SEC, the date that is 105 days following the
filing thereof (an “Additional Effectiveness Deadline”). Such requirement to
file an Additional Registration Statement shall terminate on the date as of
which the Investors may sell all of the Additional Registrable Securities owned
by them without restriction pursuant to Rule 144(k) (or successor thereto)
promulgated under the 1933 Act, as such rule may be amended from time to time,
or the Investors may sell all of the Additional Registrable Securities owned
by
them without restriction pursuant to Rule 144 without the requirement for
compliance with Rule 144(e), (f) or (h) (or successor thereto), as such rules
may be amended from time to time.
(c) Allocation
of Registrable Securities.
In no
event shall the Company include any securities other than Registrable Securities
and Unit Offering Shares on any Registration Statement without the prior written
consent of the Required Holders. The initial number of Registrable Securities
included in any Registration Statement and each increase in the number of
Registrable Securities included therein shall be allocated pro rata among the
Investors based on the number of such Registrable Securities held by each
Investor at the time the Registration Statement covering such initial number
of
Registrable Securities or increase thereof is declared effective by the SEC.
In
the event that an Investor sells or otherwise transfers any of such Investor’s
Registrable Securities, each transferee shall be allocated a pro rata portion
of
the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any Common Shares included in a
Registration Statement and which remain allocated to any Person which ceases
to
hold any Registrable Securities covered by such Registration Statement shall
be
allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement. For purposes hereof, the number of Registrable
Securities held by an Investor includes all Registrable Securities issuable
upon
the exercise of Warrants held by such Investor, without regard to any
limitations on exercise of the Warrants. Notwithstanding anything to the
contrary contained herein, any reduction in the number of Registrable Securities
and Unit Offering Shares that would otherwise be included in a Registration
Statement as a result of a limitation imposed by the SEC pursuant to Rule 415
shall be allocated pro rata among the Investors and the holders of the Unit
Offering Shares based upon the number of Registrable Securities or Unit Offer
Shares held by each such Investor or holder at the time the Registration
Statement is deemed effective.
5
(d) Legal
Counsel.
Subject
to Section 5 hereof, the Lender shall have the right to select one legal counsel
to review and oversee, solely on its behalf, any registration pursuant to this
Section 2 (“Legal Counsel”), which shall be Xxxxxx Xxxxxx Rosenman LLP or such
other counsel as thereafter designated by the Lender. The Company shall
reasonably cooperate with Legal Counsel in performing the Company’s obligations
under this Agreement.
(e) Ineligibility
for Form S-3.
In the
event that Form S-3 is not available for the registration of the resale of
Registrable Securities hereunder, the Company shall (i) register the resale
of
the Registrable Securities on Form S-1, Form SB-2 or another appropriate form
reasonably acceptable to the Required Holders and (ii) undertake to register
the
Registrable Securities on Form S-3 (by post-effective amendment to the existing
Registration Statement, or otherwise) as soon as such form is available for
such
registration, provided that the Company shall maintain the effectiveness of
the
existing Registration Statement then in effect until such time as a Registration
Statement (or post-effective amendment) on Form S-3 covering the Registrable
Securities has been declared effective by the SEC.
(f) Sufficient
Number of Shares Registered.
In the
event the number of shares available under a Registration Statement filed
pursuant to Section 2(a) hereof is insufficient to cover the resale of all
of
the Registrable Securities required to be covered by such Registration Statement
or an Investor’s allocated portion of the Registrable Securities pursuant to
Section 2(c) hereof, the Company shall, as soon as practicable, but in any
event
(other than with respect to Cutback Shares) not later than fifteen (15) days
after the necessity therefor arises (a “Subsequent Filing Deadline”) amend the
applicable Registration Statement, or file a new Registration Statement (on
the
short form available therefor, if applicable), or both, so as to cover at least
the Required Registration Amount as of the trading day immediately preceding
the
date of the filing of such amendment or new Registration Statement, in each
case, as soon as practicable, but in any event (other than with respect to
Cutback Shares) not later than fifteen (15) days, after the necessity therefor
arises. 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, but in any event (other than with respect to Cutback Shares)
not later than seventy-five (75) days following the filing thereof (a
“Subsequent Effectiveness Deadline”). For purposes of the foregoing provision,
the number of shares available under a Registration Statement shall be deemed
“insufficient to cover all of the Registrable Securities” if at any time the
number of shares of Common Stock (as defined in the Warrant) available for
resale under the Registration Statement is less than 110% of the Outstanding
Registrable Securities.
6
(g) Effect
of Failure to File and Obtain and Maintain Effectiveness of Registration
Statement.
If (i)
a Registration Statement covering the resale of all of the Registrable
Securities required to be covered thereby and required to be filed by the
Company pursuant to this Agreement is (A) not filed with the SEC on or before
the applicable Filing Deadline (a “Filing Failure”) (it being understood that if
the Company files a Registration Statement without affording an Investor the
opportunity to review and comment on the same as required by Section 3(c)
hereof, the Company shall not be deemed to have satisfied this clause (i)(A)
and
such event shall be deemed to be a Filing Failure) or (B) not declared effective
by the SEC on or before the applicable Effectiveness Deadline (an “Effectiveness
Failure”) (it being understood that if the Business Day immediately following
the Effectiveness Date the Company shall not have filed a “final” prospectus for
the Registration Statement with the SEC under Rule 424(b) in accordance with
Section 2(a) above (whether or not such a prospectus is technically required
by
such rule), the Company shall not be deemed to have satisfied this clause (i)(B)
and such event shall be deemed to be an Effectiveness Failure) or (ii) on any
day after the Effectiveness Date sales of all of the Registrable Securities
required to be included on such Registration Statement cannot be made (other
than during an Allowable Grace Period (as defined in Section 3(r) hereof)
pursuant to such Registration Statement (including because of a failure to
keep
such Registration Statement effective, to disclose such information as is
necessary for sales to be made pursuant to such Registration Statement, a
suspension or delisting of (or a failure to timely list) the shares of Common
Stock on its principal trading market or exchange, or to register a sufficient
number of shares of Common Stock) (a “Maintenance Failure”) (provided that if an
Investor transfers its rights hereunder pursuant to Section 9 hereof and the
transferee requests inclusion in such Registration Statement which requires
the
Company under applicable law to file a post-effective amendment to such
Registration Statement, then a Maintenance Failure shall not be deemed to have
occurred solely with respect to the filing of such post-effective amendment
only
if the Company is using its best efforts to file such amendment and have such
amendment declared effective as soon as practicable), 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 underlying shares of Common Stock (as defined in the
Warrant) (which remedy shall not be exclusive of any other remedies available
at
law or in equity) the Company shall pay to each holder of Registrable Securities
relating to such Registration Statement an amount in cash equal to two percent
(2%) of the initial aggregate principal amount of the Notes (as such term is
defined in the Credit Agreement) issued on the Closing Date with respect to
each
thirty (30) day period occurring after any applicable (X) Filing Failure; (Y)
Effectiveness Failure; or (Z) Maintenance Failure (in each case, pro rated
for
periods totaling less than thirty (30) days). The payments to which a holder
shall be entitled pursuant to this Section 2(f) are referred to herein as
“Registration Delay Payments”. Registration Delay Payments shall be paid on the
earlier of (a) the thirtieth (30th) day after the applicable Filing Failure,
Effectiveness Failure or Maintenance Failure, as the case may be, giving rise
to
the Registration Delay Payments has occurred and (b) the third (3rd) Business
Day after the applicable Filing Failure, Effectiveness Failure or Maintenance
Failure, as the case may be, giving rise to the Registration Delay Payments
is
cured. In the event the Company fails to make Registration Delay Payments in
a
timely manner in accordance with the foregoing, such Registration Delay Payments
shall bear interest at the rate of one and one-half percent (1.5%) per month
(prorated for partial months) until paid in full. Other than interest as
provided in the immediately preceding sentence, Registration Delay Payments
shall be capped at the amount accrued through such date as of which the
Investors may sell all of their Registrable Securities without restriction
pursuant to Rule 144(k) (or any successor rule thereto) promulgated under the
1933 Act, as such rule may be amended from time to time, or without restriction
pursuant to Rule 144 without the requirement for compliance with Rule 144(e),
(f) or (h) (or successor thereto), as such rules may be amended from time to
time.
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3. Related
Obligations.
The
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
(a) The
Company shall promptly prepare and file with the SEC a Registration Statement
with respect to the Registrable Securities (but in no event later than the
Filing Deadline) and use its best efforts to cause such Registration Statement
relating to the Registrable Securities to become effective as soon as
practicable after such filing (but in no event later than the Effectiveness
Deadline). Subject to allowable Grace Periods (as defined in Section 3(r)
below), the Company shall keep each Registration Statement effective pursuant
to
Rule 415 at all times until the earlier of (i) the date as of which the
Investors may sell all of the Registrable Securities required to be covered
by
such Registration Statement without restriction pursuant to Rule 144(k) (or
any
successor rule thereto) promulgated under the 1933 Act, as such rule may be
amended from time to time, or the Investors may sell all of such Registrable
Securities owned by them without restriction pursuant to Rule 144 without the
requirement for compliance with Rule 144(e) (f) or (h) (or successor thereto),
as such rules may be amended from time to time, or (ii) the date on which an
Investor shall have sold all of the Registrable Securities covered by such
Registration Statement (the “Registration Period”). The Company shall ensure
that each Registration Statement (including any amendments or supplements
thereto and prospectuses (preliminary, final, summary or free writing) contained
therein or related thereto) 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. The Company shall submit to the SEC, within
two
(2) Business Days after the later of the date that (i) the Company learns that
no review of a particular Registration Statement will be made by the staff
of
the SEC or that the staff has no further comments on a particular Registration
Statement (as the case may be) and (ii) the approval of Legal Counsel is sought
pursuant to Section 3(c) hereof (which approval is immediately sought), a
request for acceleration of effectiveness of such Registration Statement to
4:00
p.m. on the second (2nd) Business Day after the submission of such
request.
8
(b) Subject
to Section 3(r) of this Agreement, the Company shall prepare and file with
the
SEC such amendments (including post-effective amendments) and supplements to
a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant
to
this Section 3(b)) by reason of the Company filing a report on Form 10-Q (or
Form 10-QSB), or Form 10-K (or Form 10-KSB) or any analogous report under the
Securities Exchange Act of 1934, as amended (the “1934 Act”), the Company shall
have incorporated such report by reference into such Registration Statement,
if
applicable, or shall file such amendments or supplements with the SEC on the
same day on which the 1934 Act report is filed which created the requirement
for
the Company to amend or supplement such Registration Statement.
(c) The
Company shall (A) permit Legal Counsel to review and comment upon (i) a
Registration Statement at least five (5) Business Days prior to its filing
with
the SEC and (ii) all amendments and supplements to all Registration Statements
(except for Annual Reports on Form 10-K (or Form 10-KSB), Quarterly Reports
on
Form l0-Q (or Form 10-QSB), Current Reports on Form 8-K, and any similar or
successor reports) within a reasonable number of days prior to their filing
with
the SEC, and (B) not file any Registration Statement or amendment or supplement
thereto in a form to which Legal Counsel reasonably objects. The Company shall
not submit a request for acceleration of the effectiveness of a Registration
Statement or any amendment or supplement thereto without the prior approval
of
Legal Counsel, which consent shall not be unreasonably withheld. The Company
shall furnish to Legal Counsel, without charge, (i) copies of any correspondence
from the SEC or the staff of the SEC to the Company or its representatives
relating to any Registration Statement (but excluding any material non-public
information contained therein or implied thereby) promptly after the same is
prepared and filed with the SEC one copy of any Registration Statement and
any
amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, if requested by an Investor, and
all exhibits and (ii) upon the effectiveness of any Registration Statement,
one
copy of the prospectus included in such Registration Statement and all
amendments and supplements thereto. The Company shall reasonably cooperate
with
Legal Counsel in performing the Company’s obligations pursuant to this Section
3.
(d) The
Company shall furnish to each Investor whose Registrable Securities are included
in any Registration Statement, without charge, (i) promptly after the same
is
prepared and filed with the SEC, at least one copy of any Registration Statement
and any amendment(s) thereto, including financial statements and schedules,
all
documents incorporated therein by reference, if requested by an Investor, all
exhibits and each preliminary prospectus, (ii) upon the effectiveness of any
Registration Statement, at least one copy of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such
other
number of copies as such Investor may reasonably request from time to time)
and
(iii) such other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to time in order
to facilitate the disposition of the Registrable Securities owned by such
Investor.
9
(e) The
Company shall use its best efforts to (i) register and qualify, unless an
exemption from registration and qualification applies, the resale by the
Investors of the Registrable Securities covered by a Registration Statement
under such other securities or “blue sky” laws of all applicable jurisdictions
in the United States, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not
be
required in connection therewith or as a condition thereto to (x) qualify to
do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(e), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify Legal Counsel and each Investor
who holds Registrable Securities in writing of the receipt by the Company of
any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or “blue sky”
laws of any jurisdiction in the United States or its receipt of actual notice
of
the initiation or threatening of any proceeding for such purpose.
(f) The
Company shall promptly notify Legal Counsel and each Investor in writing of
the
happening of any event as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of
a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (provided that in no event shall
such
notice contain any material, nonpublic information), and, subject to Section
3(r) hereof, promptly prepare a supplement or amendment to such Registration
Statement to correct such untrue statement or omission and deliver at least
one
copy of such supplement or amendment to Legal Counsel and each Investor (or
such
other number of copies as Legal Counsel and such Investor may reasonably request
from time to time). The Company shall also promptly notify Legal Counsel and
each Investor in writing (i) when a prospectus or any prospectus supplement
or
post-effective amendment has been filed, when a Registration Statement or any
post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and each Investor by facsimile
or e-mail on the same day of such effectiveness and by overnight mail), and
when
the Company receives written notice from the SEC that a Registration Statement
or any post- effective amendment will be reviewed by the SEC, (ii) of any
request by the SEC for amendments or supplements to a Registration Statement
or
related prospectus or related information, and (iii) of the Company’s reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate.
10
(g) The
Company shall use its best efforts to prevent the issuance of any stop order
or
other suspension of effectiveness of a Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible moment and
to
notify in writing Legal Counsel and each Investor who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
(h) At
the
reasonable request (in the context of the securities laws) of any Investor,
the
Company shall furnish to such Investor, on the date of the effectiveness of
the
Registration Statement and thereafter from time to time on such dates as an
Investor may reasonably request (i) a letter, dated such date, from the
Company’s independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters
in
an underwritten public offering, addressed to the Investors, and (ii) an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the
Investors.
(i) At
the
reasonable request (in the context of the securities laws) of any Investor,
the
Company shall make available for inspection during regular business hours by
(i)
any Investor, (ii) Legal Counsel and (iii) one firm of accountants or other
agents retained by the Investors (collectively, the “Inspectors”), all pertinent
financial and other records, and pertinent corporate documents and properties
of
the Company (collectively, the “Records”), as shall be reasonably deemed
necessary by each Inspector, and cause the Company’s officers, directors and
employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall agree to hold in strict confidence
and shall not make any disclosure (except to an Investor) or use of any Record
or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement or is otherwise required
under the 1933 Act, (b) the release of such Records is ordered pursuant to
a
final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of
this
or any other agreement of which the Inspector has knowledge. Each Investor
agrees that it shall, upon learning that disclosure of such Records is sought
in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential. Nothing herein (or in
any
other confidentiality agreement between the Company and any Investor) shall
be
deemed to limit the Investors’ ability to sell Registrable Securities in a
manner that is otherwise consistent with applicable laws and regulations.
(j) The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor 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 final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to
the
public other than by disclosure in violation of this Agreement or any other
Related Transaction Document (as defined in the Credit Agreement). The Company
agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such Investor, at the Investor’s expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
11
(k) The
Company shall use its best efforts to (i) cause all the Registrable Securities
covered by a Registration Statement to be listed or quoted on each securities
exchange, quotation system or trading market on which securities of the same
class or series issued by the Company are listed or quoted, and without limiting
the generality of the foregoing, arrange for at least three market makers to
register with the National Association of Securities Dealers, Inc. (“NASD”) as
such with respect to such Registrable Securities. The Company shall pay all
fees
and expenses in connection with satisfying its obligation under this Section
3(k).
(l) The
Company shall cooperate with the Investors who hold Registrable Securities
being
offered and, to the extent applicable, facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing
the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case
may
be, as the Investors may reasonably request and registered in such names as
the
Investors may request.
(m) If
requested by an Investor, the Company shall as soon as practicable after receipt
of notice from such Investor and subject to Section 3(r) hereof, (i) incorporate
in a prospectus supplement or post-effective amendment such information as
such
Investor reasonably requests to be included therein relating to the sale and
distribution of Registrable Securities, including, without limitation,
information with respect to such Investor, the number of Registrable Securities
being offered or sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such offering;
(ii) make all required filings of such prospectus supplement or post-effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) supplement or
make
amendments to any Registration Statement if reasonably requested by such
Investor holding any Registrable Securities.
(n) The
Company shall use its best efforts to cause the Registrable Securities covered
by a Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to consummate the
disposition of such Registrable Securities.
(o) The
Company shall make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with, and in the
manner provided by, the provisions of Rule 158 under the 0000 Xxx) covering
a
twelve-month period beginning not later than the first day of the Company’s
fiscal quarter next following the effective date of a Registration
Statement.
12
(p) The
Company shall otherwise use its best efforts to comply with all applicable
rules
and regulations of the SEC in connection with any registration
hereunder.
(q) Within
one (1) Business Day after a Registration Statement which covers Registrable
Securities is declared effective by the SEC, the Company shall deliver, and
shall cause legal counsel for the Company to deliver, to the transfer agent
for
such Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit A.
(r) Notwithstanding
anything to the contrary herein (but subject to the last sentence of this
Section 3(r)), at any time after the Effectiveness Date, the Company may delay
the disclosure of material, non-public information concerning the Company the
disclosure of which at the time is not, in the good faith opinion of the Board
of Directors of the Company and its counsel, in the best interest of the Company
and not, in the opinion of counsel to the Company, otherwise required (a “Grace
Period”); provided, that the Company shall promptly (i) notify the Investors in
writing, of the existence of material, non-public information giving rise to
a
Grace Period (provided that in each notice the Company will not disclose the
content of such material, non-public information to the Investors) and the
date
on which the Grace Period will begin, and (ii) notify the Investors in writing
of the date on which the Grace Period ends; and, provided further, that no
Grace
Period shall exceed fifteen (15) consecutive days and during any three hundred
sixty-five (365) day period such Grace Periods shall not exceed an aggregate
of
forty (40) days and the first day of any Grace Period must be at least five
(5)
trading days after the last day of any prior Grace Period (each, an “Allowable
Grace Period”); provided, that no Allowable Grace Period may exist prior to the
Effectiveness Date or during the first sixty (60) Business Days after the
Effectiveness Date. For purposes of determining the length of a Grace Period
above, the Grace Period shall begin on and include the date the Investors
receive the notice referred to in clause (i) of this Section 3(r) and shall
end
on and include the later of the date the Investors receive the notice referred
to in clause (ii) of this Section 3(r) and the date referred to in such notice.
The provisions of Section 3(g) hereof shall not be applicable during the period
of any Allowable Grace Period. Upon expiration of the Grace Period, the Company
shall again be bound by the first sentence of Section 3(f) hereof with respect
to the information giving rise thereto unless such material, nonpublic
information is no longer applicable. Notwithstanding anything to the contrary
contained in this Section 3(r), the Company shall cause its transfer agent
to
deliver unlegended shares of Common Stock (as defined in the Warrant) to a
transferee of an Investor in accordance with the terms of the Warrant in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale, and delivered a copy of the
prospectus included as part of the applicable Registration Statement (unless
an
exemption from such prospectus delivery requirement exists), prior to the
Investors’ receipt of the notice of a Grace Period and for which the Investors’
have not yet settled.
(s) The
Company shall make such filings with the NASD (including providing all required
information and paying required fees thereto) as and when reasonably requested
by any Investors and make all other filings and take all other actions
reasonably necessary to expedite and facilitate disposition by the Investor
of
Registrable Securities pursuant to a Registration Statement, including
responding to any comments received from the NASD within five Business
Days.
13
(t) The
Company shall use its best efforts to maintain eligibility for use of Form
S-3
(or any successor form thereto) so that such form is available for the
registration of the resale of Registrable Securities.
4. Obligations
of the Investors.
(a) At
least
five (5) Business Days prior to the first anticipated filing date of a
Registration Statement and at least five (5) Business Days prior to the filing
of any amendment or supplement to a Registration Statement, the Company shall
notify each Investor in writing of the information the Company requires from
each such Investor. 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 and maintain
the effectiveness of the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company
may
reasonably request in writing.
(b) Each
Investor, by each 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 any 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 such Registration
Statement.
(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(g) hereof or the
first
sentence of Section 3(f) hereof, or written notice from the Company of an
Allowable Grace period, such Investor will immediately discontinue disposition
of Registrable Securities pursuant to any Registration Statement(s) covering
such Registrable Securities until such Investor’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(g) hereof or the
first sentence of Section 3(f) hereof or receipt of notice that no supplement
or
amendment is required or that the Allowable Grace Period has ended.
Notwithstanding anything to the contrary in this Section 4(c), the Company
shall
cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of an Investor in accordance with the terms of the Warrant in
connection with any sale of Registrable Securities with respect to which such
Investor has entered into a contract for sale prior to such Investor’s receipt
of a notice from the Company of the happening of any event of the kind described
in Section 3(g) hereof or the first sentence of Section 3(f) hereof and for
which such Investor has not yet settled.
(d) Each
Investor convents and agrees to deliver to the Company a Registration Statement
Questionnaire, in the form attached hereto as Exhibit C, no later than five
(5)
Business Days prior to the Filing Deadline.
14
5. Expenses
of Registration.
All
reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3 hereof, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements
of
counsel for the Company shall be paid by the Company. The Lender shall be
responsible for the fees and disbursements of Legal Counsel in connection with
registration, filing or qualification pursuant to Sections 2 and 3 of this
Agreement.
6. Indemnification.
In the
event any Registrable Securities are included in a Registration Statement under
this Agreement:
(a) To
the
fullest extent permitted by law, the Company will, and hereby does, indemnify,
hold harmless and defend each Investor, the directors, officers, members,
partners, employees, agents, representatives of, and each Person, if any, who
controls each Investor within the meaning of the 1933 Act or the 1934 Act (each,
an “Indemnified Person” and collectively, the “Indemnified Persons”), against
any losses, claims, damages, liabilities, judgments, fines, penalties, charges,
costs, reasonable attorneys’ fees, amounts paid in settlement or expenses, joint
or several, (collectively, “Claims”) incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an Indemnified Person is or may be a party thereto (“Indemnified
Damages”), to which any Indemnified Person may become subject insofar as such
Claims (or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or any
post-effective amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other “blue sky” laws of
any jurisdiction in which Registrable Securities are offered (“Blue Sky
Filing”), or the omission or alleged omission to state 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 any preliminary, final, summary or free writing 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 make the statements made therein, in
light of the circumstances under which the statements therein were made, not
misleading, (iii) any violation or alleged violation by the Company of the
1933
Act, the 1934 Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer
or
sale of the Registrable Securities pursuant to a Registration Statement or
(iv)
any violation of this Agreement (the matters in the foregoing clauses (i)
through (iv) being, collectively, “Violations”), Subject to Section 6(b) hereof,
the Company shall reimburse the Indemnified Persons, promptly as such expenses
are incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by such Indemnified Persons 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): (i) shall
not apply to a Claim by an Indemnified Person arising out of or based upon
a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person for such
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(d), and (ii) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld, conditioned or delayed. 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
any of the Registrable Securities by the Investors pursuant to Section 9
hereof.
15
(b) In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a) hereof, the Company, each of its directors, each of its
officers who signs the Registration Statement and each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act (each,
an “Indemnified Party”), against any Claim or Indemnified Damages to which any
Indemnified Party may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim or Indemnified Damages arise out of or are
based upon any Violation, in each case to the extent, and only to the extent,
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and, subject to Section 6(b)
hereof, such Investor will reimburse any legal or other expenses reasonably
incurred by an Indemnified Party in connection with investigating or defending
any such Claim; provided, however, that the indemnity agreement contained in
this Section 6(b) and the agreement with respect to contribution contained
in
Section 7 hereof shall not apply to amounts paid in settlement of any Claim
if
such settlement is effected without the prior written consent of such Investor,
which consent shall not be unreasonably withheld or delayed; provided, further,
however, that such Investor shall be liable under this Section 6(b) for only
that amount of a Claim or Indemnified Damages as does not exceed the net
proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to the Registration Statement giving rise to such Claim (and in no
event shall the aggregate liability of the Investors pursuant to this Agreement
(or otherwise) with respect to violations exceed the total net proceeds to
the
Investors from the sale of the Registrable Securities pursuant to the
Registration Statements). Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of any of the Registrable Securities by any
of
the Investors pursuant to Section 9.
16
(c) Promptly
after receipt by an Indemnified Person or Indemnified Party (as the case may
be)
under this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party (as the case may be) shall, if a Claim
in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party
and
the Indemnified Person or the Indemnified Party (as the case may be); provided,
however, that an Indemnified Person or Indemnified Party (as the case may be)
shall have the right to retain its own counsel with the fees and expenses of
such counsel to be paid by the indemnifying party if: (i) the indemnifying
party
has agreed in writing to pay such fees and expenses; (ii) the indemnifying
party
shall have failed promptly to assume the defense of such Claim and to employ
counsel reasonably satisfactory to such Indemnified Person or Indemnified Party
(as the case may be) in any such Claim; or (iii) the named parties to any such
Claim (including any impleaded parties) include both such Indemnified Person
or
Indemnified Party (as the case may be) and the indemnifying party, and such
Indemnified Person or such Indemnified Party (as the case may be) shall have
been advised by counsel that a conflict of interest is likely to exist if the
same counsel were to represent such Indemnified Person or such Indemnified
Party
and the indemnifying party (in which case, if such Indemnified Person or such
Indemnified Party (as the case may be) notifies the indemnifying party in
writing that it elects to employ separate counsel at the expense of the
indemnifying party, then the indemnifying party shall not have the right to
assume the defense thereof and such counsel shall be at the expense of the
indemnifying party), provided further, that in the case of clause (iii) above
the indemnifying party shall not be responsible for the reasonable fees and
expenses of more than one (1) separate legal counsel for such Indemnified Person
or Indemnified Party (as the case may be). In the case of an Indemnified Person,
legal counsel referred to in the immediately preceding sentence shall be
selected by the Investors holding at least a majority in interest of the
Registrable Securities included in the Registration Statement to which the
Claim
relates. The Indemnified Party or Indemnified Person (as the case may be) shall
reasonably cooperate with the indemnifying party in connection with any
negotiation or defense of any such action or Claim by the indemnifying party
and
shall furnish to the indemnifying party all information reasonably available
to
the Indemnified Party or Indemnified Person (as the case may be) which relates
to such action or Claim. The indemnifying party shall keep the Indemnified
Party
or Indemnified Person (as the case may be) reasonably apprised at all times
as
to the status of the defense or any settlement negotiations with respect
thereto. No indemnifying party shall be liable for any settlement of any action,
claim or proceeding effected without its prior written consent, provided,
however, that the indemnifying party shall not unreasonably withhold, delay
or
condition its consent. No indemnifying party shall, without the prior written
consent of the Indemnified Party or Indemnified Person (as the case may be),
consent to entry of any judgment or enter into any settlement or other
compromise with respect to any pending or threatened action or claim in respect
of which indemnification or contribution may be or has been sought hereunder
(whether or not the Indemnified Party or Indemnified Person is an actual or
potential party to such action or claim) which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person (as the case may be) of a release from
all liability in respect to such Claim or litigation, and such settlement shall
not include any admission as to fault on the part of the Indemnified Party.
Following indemnification as provided for hereunder, the indemnifying party
shall be subrogated to all rights of the Indemnified Party or Indemnified Person
(as the case may be) with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure
to
deliver written notice to the indemnifying party within a reasonable time of
the
commencement of any such action shall not relieve such indemnifying party of
any
liability to the Indemnified Person or Indemnified Party (as the case may be)
under this Section 6, except to the extent that the indemnifying party is
materially and adversely prejudiced in its ability to defend such
action.
17
(d) The
indemnification required by this Section 6 shall be made by periodic payments
of
the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Damages are incurred.
(e) The
indemnity agreements contained herein shall be in addition to (i) any cause
of
action or similar right of the Indemnified Party or Indemnified Person (as
the
case may be) against the indemnifying party or others, and (ii) any liabilities
the indemnifying party may be subject to pursuant to the law.
7. Contribution.
To the
extent any indemnification by an indemnifying party is prohibited or limited
by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 hereof
to
the fullest extent permitted by law; provided, however, that: (i) no Person
involved in the sale of Registrable Securities which Person is guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 0000
Xxx) in connection with such sale shall be entitled to contribution from any
Person involved in such sale of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited to an amount equal to the net amount of proceeds
received by such seller from the sale of such Registrable Securities pursuant
to
such Registration Statement giving rise to such action or claim for
indemnification less the amount of any damages that such seller has otherwise
been required to pay in connection with such sale.
8. Reports
Under the 1934 Act.
With a
view to making available to the Investors the benefits of Rule 144 promulgated
under the 1933 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 1934 Act so long as the Company remains subject to such
requirements (it being understood that nothing herein shall limit the Company’s
obligations under Section 4 of the Credit Agreement) and the filing of such
reports and other documents is required for the applicable provisions of Rule
144; and
(c) furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company, if true, that it has
complied with the reporting requirements of Rule 144 and the 1934 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 if such reports are not publicly
available via XXXXX, and (iii) such other information as may be reasonably
requested to permit the Investors to sell such securities pursuant to Rule
144
without registration.
9. Assignment
of Registration Rights.
The
rights under this Agreement shall be automatically assignable by any Investor
to
any transferee of all or any portion of such Investor’s Registrable Securities
if: (i) 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; (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) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the 1933
Act or applicable state securities laws if so required; (iv) at or before the
time the Company receives the written notice contemplated by clause (ii) of
this
sentence the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein; and (v) such transfer shall
have been made in accordance with the applicable requirements of the Warrant.
18
10. Amendment
of Registration Rights.
Provisions of this Agreement may be amended and the observance thereof may
be
waived (either generally or in a particular instance and either retroactively
or
prospectively), only with the written consent of the Company and the Required
Holders, provided that an Investor may give a waiver in writing as to itself.
Any amendment or waiver effected in accordance with this Section 10 shall be
binding upon the Investors (or, in the case of a waiver given by an Investor
with respect to itself, upon such Investor) and the Company. No such amendment
or waiver (unless given pursuant to the foregoing proviso) shall be effective
to
the extent that it applies to less than all of the Investors who are holders
of
the Registrable Securities. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of
any
of this Agreement unless the same consideration also is offered to all of the
parties to this Agreement.
11. Lender’s
Representations and Warranties.
The
Lender represents and warrants to the Company as follows:
(a) Investment
Purpose.
The
Lender (i) acquired the Notes pursuant to the Credit Agreement and is acquiring
the Warrant in exchange for the Hilco Warrants, which were issued pursuant
to
the Credit Agreement and (iii) upon any exercise of the Warrant issued to
Lender, will acquire the Warrant Shares issuable upon such exercise thereof
(the
Warrant Shares and the Notes being collectively referred to herein as the
“Securities”) for its own account and not with a view towards, or for offer or
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered under or exempted from the registration
requirements of the 1933 Act; provided, however, that by making the
representations herein, the Lender does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of
the
Securities at any time pursuant to a registration statement that has been
declared and is effective under the 1933 Act or in accordance with an exemption
from the registration requirements of the 1933 Act.
(b) Accredited
Investor Status.
The
Lender is an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D.
(c) Reliance
on Exemptions.
The
Lender understands and agrees that the Securities are being offered and sold
to
it in reliance on specific exemptions from the registration requirements of
the
United States federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and the Lender’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
the Lender set forth herein in order to determine the availability of such
exemptions and the eligibility of the Lender to acquire the Securities.
(d) Information.
The
Lender and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities that have been requested by the Lender.
The Lender and its advisors, if any, have been afforded the opportunity to
ask
questions of and receive answers from the Company. Neither such inquiries nor
any other due diligence investigations conducted by the Lender or its advisors,
if any, or its representatives shall modify, amend or affect the Lender’s right
to rely on the truth, accuracy and completeness of the Company’s representations
and warranties contained herein. The Lender understands that its investment
in
the Securities involves a high degree of risk. The Lender has such knowledge
and
experience in financial and business matters as to be capable of evaluating
the
merits and risks of an investment in the Securities. The Lender has sought
such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.
19
(e) No
Governmental Review.
The
Lender understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
(f) Transfer
or Resale.
The
Lender understands that, except as provided in the herein, (i) the Securities
have not been and are not being registered under the 1933 Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) the Lender shall have
delivered to the Company an opinion of counsel, in a generally acceptable form,
to the effect that such Securities to be sold, assigned or transferred may
be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) the Lender provides the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated
under the 1933 Act (or a successor rule thereto); (ii) any sale of the
Securities made in reliance on Rule 144 may be made only in accordance with
the
terms of Rule 144, and further, if Rule 144 is not applicable, any resale of
the
Securities under circumstances in which the seller may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of
the
SEC thereunder; and (iii) neither the Company nor any other person is under
any
obligation to register the Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption thereunder.
Notwithstanding the foregoing, the Securities may be pledged in connection
with
a bona fide margin account or other loan or financing arrangement secured by
the
Securities.
(g) Legends.
The
Lender understands that the certificates or other instruments representing
the
Warrant and, until such time as the sale of the Warrant Shares have been
registered under the 1933 Act as contemplated hereunder, the stock certificates
representing the Warrant Shares, except as set forth below, shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN
THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR
(B)
AN APPROPRIATE EXCEPTION UNDER SAID ACT OR APPLICABLE SECURITIES LAWS OR (II)
UNLESS SOLD PURSUANT TO RULE 144 OR 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
20
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which
it is
stamped if (i) such Securities are registered for resale under the 1933 Act,
(ii) in connection with a sale transaction, such holder provides the Company
with an opinion of counsel, in a generally acceptable form, to the effect that
a
public sale, assignment or transfer of the Securities may be made without
registration under the 1933 Act, (iii) such holder provides the Company with
reasonable assurance that the Securities can be sold pursuant to Rule 144(k)
promulgated under the 1933 Act (or a successor rule thereto), or (iv) such
holder provides the Company with reasonable assurance that the Securities have
been or are being sold pursuant to Rule 144.
(h) Authorization;
Enforcement; Validity.
This
Agreement has been duly and validly authorized, executed and delivered on behalf
of the Lender and is a valid and binding agreement of the Lender enforceable
against the Lender in accordance with its terms, except as enforceability may
be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting the enforcement
of
creditors’ rights generally and by general principles of equity relating to
enforceability (regardless of whether considered in a proceeding at law or
in
equity).
12. Company’s
Representations and Warranties.
The
Company represents and warrants to the Lender as follows:
(a) Organization
and Qualification.
Set
forth on Schedule 12(a) is a true and correct list of the entities in which
the
Company, directly or indirectly, owns capital stock or holds an equity or
similar interest, together with their respective jurisdictions of organization
and the percentage of the outstanding capital stock or other equity interests
of
such entity that is held by the Company or any Subsidiary of the Company. Other
than with respect to the entities listed on Schedule 12(a), the Company does
not, directly or indirectly, own any securities or beneficial ownership
interests in any other person (including through joint ventures or partnership
arrangements) or have any investment in any other person. Each of the Company
and its Subsidiaries is a corporation, limited liability company, partnership
or
other entity and is duly organized and validly existing in good standing under
the laws of the jurisdiction in which it is incorporated or organized and has
the requisite corporate, partnership, limited liability company or other
organizational power and authority to own its properties and to carry on its
business as now being conducted. The Company is duly qualified to do business
and is in good standing in every jurisdiction in which its ownership of property
or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect. Except as set forth
in
Schedule 12(a), the Company holds all right, title and interest in and to 100%
of the capital stock, equity or similar interests of each of its Subsidiaries,
in each case, free and clear of any Liens other than the Lien in favor or the
Lender (which upon payoff of the obligations owing to the Lender may be
transferred subject to a Lien in favor of a successor secured lender to the
Company), including any restriction on the use, voting, transfer, receipt of
income or other exercise of any attributes of free and clear ownership by a
current holder, and no such Subsidiary owns capital stock or holds an equity
or
similar interest in any other Person other than another Subsidiary in certain
instances.
21
(b) Authorization;
Enforcement; Validity.
The
Company has the requisite corporate power and authority to enter into and
perform its obligations under each of Credit Documents and each of the other
agreements to which it is a party or by which it is bound and which is entered
into by the parties hereto in connection with the transactions contemplated
hereby and thereby (collectively, the “Transaction Documents”), and to issue the
Securities in accordance with the terms hereof and thereof. Each Subsidiary
that
is a party to or bound by a Transaction Document has the requisite corporate
or
other organizational power and authority to enter into and perform its
obligations under each Transaction Document to which it is a party or by which
it is bound. The execution and delivery of the Transaction Documents by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby, including the issuance of the Notes and the Warrant and
the
reservation for issuance and the issuance of the Warrant Shares issuable upon
exercise thereof, have been duly authorized by the board of directors of the
Company (the “Board of Directors”) and no further consent or authorization is
required by the Company, its stockholders or the Board of Directors. To the
extent that a Subsidiary is a party to or bound by a Transaction Document,
the
execution and delivery of such Transaction Document by such Subsidiary and
the
consummation by such Subsidiary of the transactions contemplated thereby have
been duly authorized by the board of directors or equivalent body of such
Subsidiary and no further consent or authorization is required by such
Subsidiary, its equity holders or its board of directors or equivalent body.
This Agreement and the other Transaction Documents dated as of the date hereof
have been duly executed and delivered by Company and, if applicable, its
Subsidiaries and constitute the valid and binding obligations of such parties,
enforceable against such parties in accordance with their terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity relating to enforceability (regardless of whether
considered in a proceeding at law or in equity), and except to the extent that
indemnification provisions thereof may be limited by federal or state securities
laws. The Transaction Documents shall have been duly executed and delivered
by
the Company and, if applicable, its Subsidiaries and shall constitute the valid
and binding obligations of such parties, enforceable against such parties in
accordance with their terms except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting the enforcement of creditors’
rights generally and by general principles of equity relating to enforceability
(regardless of whether considered in a proceeding at law or in equity).
22
(c) Capitalization.
As of
October 9, 2007, the authorized capital stock of the Company consists of (i)
350,000,000 shares of common stock, par value $.0001 per share, of which
71,263,594 shares are issued and outstanding, (ii) 120,000 shares of series
AA
preferred stock, par value $.0001 per share, of which no shares are issued
and
outstanding, (iii) 100,000 shares of series A preferred stock, par value $.0001
per share, of which no shares are issued and outstanding and (iv) 100,000 shares
of series B preferred stock, par value $.0001 per share, of which no shares
are
issued and outstanding. All of such outstanding shares have been validly issued
and are fully paid and nonassessable. Except as disclosed in Schedule 12(c),
(A)
no shares of the capital stock of the Company are subject to preemptive rights
or any other similar rights or any Liens suffered or permitted by the Company;
(B) there are no outstanding options, warrants, scrip, rights to subscribe
to,
calls or commitments of any character whatsoever relating to, or securities
or
rights convertible into or exchangeable or exercisable for, any shares of
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of
its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries, or options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating
to,
or securities or rights convertible into or exercisable for, any shares of
capital stock of the Company or any of its Subsidiaries; (C) there are no
agreements or arrangements under which the Company or any of its Subsidiaries
is
obligated to register the sale of any of their securities under the 1933 Act
(except pursuant to this Agreement); (D) there are no outstanding securities
or
instruments of the Company or any of its Subsidiaries that contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company and no other
stockholder or similar agreements to which the Company is party; (E) there
are
no outstanding securities or instruments containing anti-dilution or similar
provisions that will or may be triggered by the issuance of the Securities;
and
(F) the Company does not have any stock appreciation rights or “phantom stock”
plans or agreements or any similar plan or agreement.
(d) Issuance
of Securities.
The
Notes have been duly authorized and, upon issuance shall be (i) free from all
taxes and Liens with respect to the issuance thereof and (ii) entitled to the
rights set forth therein. At least 3,500 000 shares of common stock have been
duly authorized and reserved for issuance upon exercise of the Warrant. Upon
exercise in accordance with the Warrant, the Warrant Shares will be validly
issued, fully paid and nonassessable and free from all taxes and Liens with
respect to the issuance thereof with the holders being entitled to all rights
accorded to a holder of common stock. Assuming the accuracy of the
representations and warranties of the Lender set forth herein, the issuance
by
the Company of the Notes and Warrants are, and the Warrant Shares upon exercise
in accordance with the Warrant will be, exempt from registration under the
1933
Act and applicable state securities laws.
(e) No
General Solicitation.
Neither
the Company, nor any of its Affiliates, nor any Person acting on its or their
behalf, has engaged or will engage in any form of general solicitation or
general advertising (within the meaning of Regulation D under the 0000 Xxx)
in
connection with the offer or sale of the Securities.
23
(f) No
Integrated Offering.
Neither
the Company, nor any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security
or
solicited any offers to buy any security under circumstances that would require
registration of any of the Securities under the 1933 Act or cause this offering
of the Securities to be integrated with prior offerings by the Company for
purposes of the 1933 Act or any applicable stockholder approval provisions
of
any authority, nor will the Company take any action or steps that would require
registration of the issuance of any of the Securities under the 1933 Act or
cause the offering of the Securities to be integrated with other offerings
for
purposes of the 1933 Act other than as contemplated in this
Agreement.
(g) No
Adverse Registration Rights.
As of
the date hereof, no Person has any registration rights with respect to shares
of
Common Stock or any other securities of the Company other than the registration
rights with respect to the Unit Offering Shares referenced in this Agreement,
which the Company represents and warrants are not inconsistent with the rights
granted to the Investors hereunder.
(h) Dilutive
Effect.
The
Company understands and acknowledges that the number of Warrant Shares issuable
upon exercise of the Warrant will increase in certain circumstances. The Company
further acknowledges that any obligation to issue the Warrant Shares upon
exercise of the Warrant in accordance with Warrants is absolute and
unconditional regardless of the dilutive effect that such issuance may have
on
the ownership interests of other stockholders of the Company. Taking the
foregoing into account, the Board of Directors has determined in its good faith
business judgment that the issuance of the Warrant and the consummation of
the
other transactions contemplated thereby are in the best interests of the Company
and its shareholders.
(i) Application
of Takeover Protections.
The
Company and the Board of Directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business combination
or other similar anti-takeover provision under the articles of incorporation
or
the laws of Florida that is or could become applicable to the Lender as a result
of the transactions contemplated by the Transaction Documents, including the
Company’s issuance of the Securities and the Lender’s ownership of the
Securities.
(j) Rights
Agreement.
The
Company has not adopted a stockholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of common stock or a change
in
control of the Company.
13. Miscellaneous.
(a) Solely
for purposes of this Agreement, a Person is deemed to be a holder of Registrable
Securities whenever such Person owns or is deemed to own of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from such record owner of such Registrable
Securities.
24
(b) Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
(iii) with respect to Section 3(c) hereof by electronic mail (provided
confirmation of transmission is electronically generated and kept on file by
the
sending party) or (iv) one (1) Business Day after deposit with a nationally
recognized overnight delivery service with next day delivery specified, in
each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
|
If
to the Company:
|
Capital
Growth Systems, Inc.
000
Xxxxx Xxxxxx Xxxxx -- Xxxxx 000
Xxxxxxx,
Xxxxxxxx 00000
Attention: Chief
Executive Officer
Facsimile: 000-000-0000
|
|
|
|
|
|
with
a copy to:
|
|
|
|
|
|
Xxxxxxx
& Xxxxxxxx Ltd.
000
Xxxx Xxxxxx Xxxxx - Xxxxx 0000
Xxxxxxx,
Xxxxxxxx 00000
Attention: Xxxxxxxx
X. Xxxxxxxxx
Facsimile: 000-000-0000
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|
|
|
|
If
to Lender:
|
Hilco
Financial, LLC
c/o
Hilco Trading Co., Inc.
0
Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx,
Xxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: CEO
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|
|
If
to Legal Counsel:
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Xxxxxx
Xxxxxx Xxxxxxxx LLP
000
X. Xxxxxx Xxxxxx
Xxxxxxx,
Xxxxxxxx 00000-0000
Telephone: 000-000-0000
Facsimile: 312-902-1061
Attention: Xxxxxx
X. Burn, Esq.
Xxxx
X. Xxxxxxxxx, Esq.
|
Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated
by
the sender’s facsimile machine or electronic mall transmission containing the
time, date, recipient facsimile number or electronic mail address and
an image
of the first page of such transmission or (C) provided by a courier or
overnight
courier service shall be rebuttable evidence of personal service, receipt
by
facsimile or receipt from a nationally recognized overnight delivery
service in
accordance with clause (i), (ii) or (iii) above, respectively.
25
(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) The
parties hereby agree that pursuant to 735 Illinois Compiled Statutes 105/5-5
they have chosen that all questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of Illinois, without giving effect to any choice
of
law or conflict of law provision or rule (whether of the State of Illinois
or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Illinois. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting
in
The City of Chicago, Xxxx County, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in
any
suit, action or proceeding, any claim that it is not personally subject to
the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding
is
improper. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under
this Agreement and agrees that such service shall constitute good and sufficient
service of process. and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
(e) This
Agreement and the Credit Documents (as defined in the Credit Agreement), the
schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement, the Credit Documents, the
schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof
(including but not limited to the original registration rights agreement and
the
original warrant issued to Lender in connection with the original funding of
the
loan from Lender to or for the benefit of Company and its Subsidiaries, which
originally issued warrant and registration rights agreement are deemed null
and
void).
(f) Subject
to the requirements of Section 9 hereof, this Agreement shall inure to the
benefit of and be binding upon the permitted successors and assigns of each
of
the parties hereto.
(g) The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof. Unless the context clearly
indicates otherwise, each pronoun herein shall be deemed to include the
masculine, feminine, neuter, singular and plural forms thereof. The terms
“including,” “includes,” “include” and words of like import shall be construed
broadly as if followed by the words “without limitation.” The terms “herein,”
“hereunder,” “hereof” and words of like import refer to this entire Agreement
instead of just the provision in which they are found.
26
(h) This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party.
In
the event that any signature is delivered by facsimile transmission or by an
e-mail which contains an electronic file of an executed signature page, such
signature page shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or electronic file signature page (as the case
may be) were an original thereof.
(i) Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(j) All
consents and other determinations required to be made by the Investors pursuant
to this Agreement shall be made, unless otherwise specified in this Agreement,
by the Required Holders.
(k) The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent and no rules of strict construction
will
be applied against any party.
(l) The
Investors shall have all rights and remedies set forth in the Credit Documents
and all rights and remedies that the Investors have been granted at any time
under any other agreement or contract and all of the rights that the Investors
have under any law. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security or proving actual damages), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
(m) This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, other than the Persons
referred to in Section 6 and 7 hereof.
(n) Except
with the prior written consent of the Required Holders, the Company shall not
grant any Person any registration rights subsequent to the date hereof with
respect to shares of Common Stock or any other securities of the Company other
than registration rights that will not adversely affect the rights of the
Investors hereunder (including by limiting in any way the number of Registrable
Securities that could be included in any Registration Statement pursuant to
Rule
415) and shall not otherwise enter into any agreement that is inconsistent
with
the rights granted to the Investors hereunder.
27
(o) The
obligations of each Investor under this Agreement and the other Credit Documents
are several and not joint with the obligations of any other Investor, and no
Investor shall be responsible in any way for the performance of the obligations
of any other Investor under this Agreement or any other Related Transaction
Document. Nothing contained herein or in any other Related Transaction Document,
and no action taken by any Investor pursuant hereto or thereto, shall be deemed
to constitute the Investors as a partnership, an association, a joint venture
or
any other kind of group or entity, or create a presumption that the Investors
are in any way acting in concert or as a group or entity with respect to such
obligations or the transactions contemplated by the Credit Documents or any
matters, and the Company acknowledges that the Investors are not acting in
concert or as a group with respect to such obligations or the transactions
contemplated by this Agreement or any of the other Credit Documents. Each
Investor shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or
out
of any other Credit Documents, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such purpose.
The use of a single agreement with respect to the obligations of the Company
contained was solely in the control of the Company, not the action or decision
of any Investor, and was done solely for the convenience of the Company and
not
because it was required or requested to do so by any Investor.
[SIGNATURE
PAGES FOLLOW]
28
IN
WITNESS WHEREOF, the Lender and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as
of
the date first written above.
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COMPANY:
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||
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Capital
Growth Systems, Inc.
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||
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By:
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||
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Name:
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||
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Title:
|
||
29
IN
WITNESS WHEREOF, the Lender and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as
of
the date first written above.
|
LENDER:
|
||
|
Hilco
Financial, LLC
|
||
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By:
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||
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Name:
|
Xxxxx
Xxxxx
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Title:
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Executive
Vice President
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30
EXHIBIT
A
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
_____________________
_____________________
_____________________
Attention:
____________
|
Re:
|
Capital
Growth Systems, Inc.
|
Ladies
and Gentlemen:
[We
are][I am] counsel to Capital Growth Systems, Inc., a Florida corporation (the
“Company”), and have represented the Company in connection with that certain
Credit Agreement (the “Credit Agreement”) entered into by and among the Company
and the Lender named therein (the “Holder”) pursuant to which the Company issued
to the Holder warrants exercisable for shares of Common Stock (as defined in
the
Warrant) (the “Warrants”). In conjunction with the Credit Agreement, the Company
also has entered into a Registration Rights Agreement with the Holder (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 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 _______________, 200_, 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 the Holder as a selling stockholder
thereunder.
In
connection with the foregoing, [we][I] advise you that a member of the SEC’s
staff has advised [us] [me] 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][I] have no
knowledge, 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.
You
are
hereby informed that the shares of Common Stock are freely transferable by
the
Holder pursuant to the Registration Statement, subject to the prospectus
delivery requirements of the 1933 Act, which the selling stockholders have
agreed to comply with to the extent applicable and which we have assumed
compliance with in issuing this letter.
|
Very
truly yours,
|
||
|
[ISSUER’S
COUNSEL]
|
||
|
By:
|
||
CC:
[LIST
NAMES OF HOLDER(S); # OF SHARES; CERTIFICATE #S]
A-1
EXHIBIT
B
SELLING
STOCKHOLDERS
The
shares of Common Stock being offered by the selling stockholders are issuable
upon exercise of the warrants. For additional information regarding the issuance
of the warrants, see “Private Placement of Notes and Warrants” above. We are
registering the shares of Common Stock in order to permit the selling
stockholders to offer the shares for resale from time to time. Except for the
ownership of the warrants issued pursuant to the Credit Agreement, the selling
stockholders have not had any material relationship with us within the past
three years.
The
table
below lists the selling stockholders and other information regarding the
beneficial ownership (as determined under Section 13(d) of the Securities
Exchange Act of 1934, as amended) of the shares of Common Stock by each of
the
selling stockholders. The second column lists the number of shares of Common
Stock beneficially owned by each selling stockholder, based on its ownership
of
the warrants, as of _________, 200__, assuming exercise of the warrants held
by
the selling stockholders on that date.
The
third
column lists the shares of Common Stock being offered by this prospectus by
the
selling stockholders.
In
accordance with the terms of a registration rights agreement with the selling
stockholders, this prospectus generally covers the resale of the maximum number
of shares of Common Stock issuable upon exercise of the warrants as of the
trading day immediately preceding the date the registration statement is
initially filed with the SEC, without taking into account any limitations on
the
exercise of the warrants. The fourth column assumes the sale of all of the
shares offered by the selling stockholders pursuant to this
prospectus.
Under
the
terms of the warrants, a selling stockholder may not exercise the warrants
to
the extent such exercise would cause such selling stockholder, together with
its
affiliates, to beneficially own a number of shares of Common Stock which would
exceed 9.99% of our then outstanding shares of Common Stock following such
exercise, excluding for purposes of such determination shares of Common Stock
issuable upon exercise of the warrants which have not been exercised. The number
of shares in the second column does not reflect this limitation. The selling
stockholders may sell all, some or none of their shares in this offering. See
“Plan of Distribution.”
|
Name
of Selling
Stockholder
|
Number
of shares of
Common
Stock
Owned
Prior to Offering
|
Maximum
Number of
Shares
of Common
Stock
to be Sold
Pursuant
to this
Prospectus
|
Number
of Shares
of
Common Stock
Owned
After
Offering
|
B-1
PLAN
OF DISTRIBUTION
We
are
registering the shares of Common Stock issuable upon exercise of the warrants
to
permit the resale of these shares of Common Stock by the holders of the warrants
from time to time after the date of this prospectus. We will not receive any
of
the proceeds from the sale by the selling stockholders of the shares of Common
Stock. We will bear all fees and expenses incident to our obligation to register
the shares of Common Stock.
The
selling stockholders may sell all or a portion of the shares of Common Stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the shares of
Common Stock are sold through underwriters or broker-dealers, the selling
stockholders will be responsible for underwriting discounts or commissions
or
agent’s commissions. The shares of Common Stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions,
| · |
on
any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of
sale;
|
| · |
in
the over-the-counter market;
|
| · |
in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
|
| · |
through
the writing of options, whether such options are listed on an options
exchange or otherwise;
|
| · |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
| · |
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
| · |
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
| · |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| · |
privately
negotiated transactions;
|
| · |
short
sales made after the date the Registration Statement is declared
effective
by the SEC;
|
| · |
sales
pursuant to Rule 144;
|
| · |
broker-dealers
may agree with the selling securityholders to sell a specified number
of
such shares at a stipulated price per
share;
|
B-2
| · |
a
combination of any such methods of sale;
and
|
| · |
any
other method permitted pursuant to applicable
law.
|
If
the
selling stockholders effect such transactions by selling shares of Common Stock
to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of Common Stock for whom they may act as agent or
to
whom they may sell as principal (which discounts, concessions or commissions
as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales
of
the shares of Common Stock or otherwise, the selling stockholders may enter
into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the shares of Common Stock in the course of hedging in positions they
assume. The selling stockholders may also sell shares of Common Stock short
and
deliver shares of Common Stock covered by this prospectus to close out short
positions and to return borrowed shares in connection with such short sales.
The
selling stockholders may also loan or pledge shares of Common Stock to
broker-dealers that in turn may sell such shares.
The
selling stockholders may pledge or grant a security interest in some or all
of
the warrants or shares of Common Stock owned by them and, if they default in
the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of Common Stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933, as amended, amending, if
necessary, the list of selling stockholders to include the pledgee, transferee
or other successors in interest as selling stockholders under this prospectus.
The selling stockholders also may transfer and donate the shares of Common
Stock
in other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
National
Securities Corporation (“NSC”) has indicated to us its willingness to act as
selling agent on behalf of the Selling Stockholders named in the Prospectus
under “Selling Security Holders,” other than [Hilco Financial, LLC], that
purchased the Company’s privately placed securities. All shares sold, if any, on
behalf of such Selling Stockholders by NSC would be in transactions executed
by
NSC on an agency basis and commissions charged to its customers in connection
with each transaction shall not exceed a maximum of 5% of gross proceeds. NSC
does not have an underwriting agreement with the Company and/or any Selling
Stockholders and no Selling Stockholders are required to execute transactions
with NSC.
The
selling stockholders and any broker-dealer participating in the distribution
of
the shares of Common Stock may be deemed to be “underwriters” within the meaning
of the Securities Act, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act. At the time a particular offering of
the
shares of Common Stock is made, a prospectus supplement, if required, will
be
distributed which will set forth the aggregate amount of shares of Common Stock
being offered and the terms of the offering, including the name or names of
any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to
broker-dealers.
B-3
Under
the
securities laws of some states, the shares of Common Stock may be sold in such
states only through registered or licensed brokers or dealers. In addition,
in
some states the shares of Common Stock may not be sold unless such shares have
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
There
can
be no assurance that any selling stockholder will sell any or all of the shares
of Common Stock registered pursuant to the shelf registration statement, of
which this prospectus forms a part.
National
Securities Corporation (“NSC”) has indicated to us its willingness to act as
selling agent on behalf of the Selling Stockholders named in the Prospectus
and
not comprising Investors under “Selling Security Holders” that purchased the
Company’s privately placed securities. All shares sold, if any, on behalf of
Selling Stockholders by NSC would be in transactions executed by NSC on an
agency basis and commissions charged to its customers in connection with each
transaction shall not exceed a maximum of 5% of gross proceeds. NSC does not
have an underwriting agreement with the Company and or any Selling Stockholders
an d no Selling Stockholders are required to execute transactions with
NSC.
The
selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of
1934,
as amended, and the rules and regulations thereunder, including, without
limitation, to the extent applicable, Regulation M of the Exchange Act, which
may limit the timing of purchases and sales of any of the shares of Common
Stock
by the selling stockholders and any other participating person. To the extent
applicable, Regulation M may also restrict the ability of any person engaged
in
the distribution of the shares of Common Stock to engage in market-making
activities with respect to the shares of Common Stock. All of the foregoing
may
affect the marketability of the shares of Common Stock and the ability of any
person or entity to engage in market-making activities with respect to the
shares of Common Stock.
We
will
pay all expenses of the registration of the shares of Common Stock pursuant
to
the registration rights agreement, estimated to be $[___________] in total,
including, without limitation, SEC filing fees and expenses of compliance with
state securities or “blue sky” laws; provided, however, that a selling
stockholder will pay all underwriting discounts and selling commissions, if
any.
We will indemnify the selling stockholders against liabilities, including some
liabilities under the Securities Act, in accordance with the registration rights
agreements, or the selling stockholders will be entitled to contribution. We
may
be indemnified by the selling stockholders against civil liabilities, including
liabilities under the Securities Act, that may arise from any written
information furnished to us by the selling stockholder specifically for use
in
this prospectus, in accordance with the related registration rights agreements,
or we may be entitled to contribution.
Once
sold
under the shelf registration statement, of which this prospectus forms a part,
the shares of Common Stock will be freely tradable in the hands of persons
other
than our affiliates.
B-4
EXHIBIT
C
CAPITAL
GROWTH SYSTEMS, INC.
(the
“Company”)
QUESTIONNAIRE
TO THE SELLING SHAREHOLDERS
This
Questionnaire is to be completed, signed and faxed to [____________], at [(___)
___ - ____] by no later than five (5) Business Days after receipt, by the person
or entity indicated on the cover of this Questionnaire (the “Selling
Shareholder”) whose common shares of the Company are being registered pursuant
to a Registration Statement on Form S-3. Retain a duplicate copy for your files.
If you do not return the Questionnaire by the foregoing deadline, your shares
may not be included in the Registration Statement.
If
you
are uncertain about any of the following questions as they apply to your
situation, please supply all relevant facts. Include separate sheets with
details if necessary. If you have any questions, please call the Company’s
counsel, [____________], at [(___) ___ - ____].
Please
notify me immediately if any of the information disclosed in your answers
changes. Please answer all questions. Indicate “none” or “not applicable” when
appropriate. Information should be given as of the date of this Questionnaire,
even if previously reported to the Company.
IN
ANSWERING THESE QUESTIONS, PLEASE REFER TO THE INSTRUCTIONS AT THE BEGINNING
OF
THIS QUESTIONNAIRE.
|
Name
of Selling Shareholder:
|
INSTRUCTIONS
AND DEFINITIONS
The
following instructions and definitions are furnished to aid you in preparing
your answers to this Questionnaire.
1. For
purposes of this Questionnaire the term “Company” means Capital Growth Systems,
Inc.
2. “Beneficial”
ownership. Beneficial ownership shall have the meaning ascribed to it in Section
13(d) of the Securities Exchange Act of 1934, as amended. The SEC has taken
the
position that if you have sole or shared voting power or dispositive power
or
the ability to acquire either sole or shared voting or dispositive power of
a
security within 60 days, you are the beneficial owner of that security, even
though that security is not registered in your name. Thus, for example, you
could be the beneficial owner of securities in a trust or estate of which you
are a trustee or executor, or of which you are one of the trustees or executors,
or you could be the beneficial owner of securities which you have a right to
purchase.
3. The
term
“affiliate” for purposes of this Questionnaire means any person directly or
indirectly controlling, controlled by, or under common control with the Selling
Shareholder.
4. An
example response has been provided to assist you in preparing your
response.
C-1
1. Broker-Dealer
Status.
(a) Are
you,
or are you an affiliate of, a broker-dealer registered under the Securities
Exchange Act of 1934?
|
YES
|
NO
|
If
“yes,”
please give details below.
(b) Please
confirm the following statement: The Company’s equity securities that are being
issued to you were acquired in the ordinary course of your business, and at
the
time the securities were issued to you, you did not have any agreement or
understanding, directly or indirectly, with any person to distribute the
securities.
|
CONFIRMED
|
CANNOT
CONFIRM
|
If
“cannot confirm,” please give details below.
2. Relationships
with the Company.
(a) Have
you
held any position or office with the Company, its predecessors or affiliates
within the last three years?
|
YES
|
NO
|
If
“yes,”
please give details below.
(b) Have
you
had any other material relationship with the Company, its predecessors or
affiliates within the last three years?
|
YES
|
NO
|
C-2
If
“yes,”
please give details below.
3. Equity
Securities Beneficially Owned By You.
(a) Please
state the number and type of equity securities of the Company beneficially
owned
(please see, instructions and definitions on page 2) by you as of the date
of
this Questionnaire, including securities which are exercisable or convertible
into equity securities within 60 days of the date of this
Questionnaire.
|
Class
of Security
|
Number
of Shares Beneficiary
Owned
|
|
(b) If
any
natural person or entity other than you holds or shares voting power or
dispositive power with respect to the Company’s equity securities listed in
response to Question 3(a), please provide the names of the natural persons
(including titles) or entities that hold or share such voting power or
dispositive power and indicate the number of the Company’s equity securities
covered thereby.
(c) With
respect to the Company’s equity securities listed in response to Questions 3(a)
and 3(b) for which an entity holds or shares voting power or dispositive power,
please provide the names of the natural persons (including titles) or entities
that control the entity or entities listed in response to Questions 3(a) and
3(b).
(d) Please
continue to list the natural persons or entities that control the entities
listed in response to Question 3(c) and the entities listed in response to
this
Question 3(d) until you have listed only natural persons (including titles)
that
control the applicable entity or entities.
C-3
(e) If
any
person or entity disclaims beneficial ownership of any of the equity securities
you have listed in response to Question 3, please so indicate:
C-4
EXAMPLE
RESPONSE
The
following is an example of a response to items 1 through 3. Please assume ABC
Corporation is the Selling Shareholder for purposes of this
example.
1. Broker-Dealer
Status.
ABC
Corporation is an affiliate of a broker-dealer because its sole shareholder,
DEF
Corporation, is a broker-dealer.
2. Relationships
with the Company.
(a) ABC
Corporation has not held any position or office with the Company, its
predecessors or affiliates within the last three years.
(b) ABC
Corporation provided consulting services to the Company in March 2006.
3. Equity
Securities Beneficially Owned By You.
Question
3(a).
|
Class
of Security
|
Number
of Shares
Beneficiary
Owned
|
|||
|
Common
Shares
|
100,000
|
|||
|
Warrants
to purchase Common Shares
|
200,000
|
|||
Question
3(b). Not applicable
Question
3(c). ABC Corporation is controlled by DEF Corporation, ABC Corporation’s sole
shareholder.
Question
3(d). DEF Corporation is controlled by XYZ Corporation, DEF Corporation’s sole
shareholder. XYZ Corporation is controlled by Xxxx Xxx, XYZ Corporation’s sole
shareholder and its President and Chief Executive Officer.
Question
3(e). Xxxx Xxx disclaims beneficial ownership of the 100,000 Common Shares
and
the Warrants to purchase 200,000 Common Shares.
C-5
The
undersigned hereby acknowledges that the information contained herein is true
to
the best of his knowledge and will notify the Company immediately of any changes
in such information.
|
DATED:
________, 200___
|
FOR
INDIVIDUALS:
|
|
|
Name
of Selling Shareholder [Please Print]
|
||
|
Signature
|
||
|
FOR
CORPORATIONS, PARTNERSHIPS
|
||
|
OR
TRUSTS:
|
||
|
Name
of Selling Shareholder [Please Print]
|
||
|
By:
|
||
|
Signature
|
||
|
Name:
|
||
|
[Please
Print]
|
||
|
Title:
|
||
|
[Please
Print]
|
||
C-6
