Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
September 1, 2005, by and among Catuity Inc., a Delaware corporation, with
headquarters located at 0000 X. Xxxxxxxxx Xxxxxx, Xxxxxxx, XX 00000 (the
"COMPANY"), and the undersigned buyers (each, a "BUYER", and collectively, the
"BUYERS").
WHEREAS:
A. In connection with the several Subscription Agreements by and among
the parties hereto of even date herewith (the "SUBSCRIPTION AGREEMENTS"), the
Company has agreed to issue and sell shares of the Common Stock of the Company
(the "SHARES").
B. To induce the Buyers to execute and deliver the Subscription
Agreements, 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.
NOW, THEREFORE, the Company and each of the Buyers hereby agree as
follows:
1. Definitions.
As used in this Agreement, the following terms shall have the
following meanings:
a. "BUSINESS DAY" means any day other than Saturday, Sunday or
any other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.
b. "CLOSING DATE" shall be the date upon which the Buyers have
accepted and paid for the Shares.
c. "EFFECTIVE DATE" means the date the Registration Statement has
been declared effective by the SEC.
d. "EFFECTIVENESS DEADLINE" means (i) if the Registration
Statement has been selected for review (full or partial) by the SEC, the date
which is 90 days after the date the Registration Statement is filed (but not
later than 120 days after the Closing Date), and (ii) if the Registration
Statement has not been selected for review by the SEC, 30 days after date the
Registration Statement is filed (but not later than 60 days after the Closing
Date).
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e. "FILING DEADLINE" means 30 days after the Closing Date.
f. "BUYER" means a Buyer or any transferee or assignee thereof to
whom a Buyer has transferred its Registrable Securities and has assigned its
rights under this Agreement and who agrees to become bound by the provisions of
this Agreement in accordance with Section 9 and any transferee or assignee
thereof to whom a transferee or assignee assigns its rights under this Agreement
and who agrees to become bound by the provisions of this Agreement in accordance
with Section 9.
g. "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.
h. "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 or ordering of effectiveness of such Registration
Statement(s) by the SEC.
i. "REGISTRABLE SECURITIES" means the Shares issued pursuant to
the Subscription Agreements, but a Share shall cease to be a "Registrable
Security" if and when it has been sold or otherwise transferred pursuant to the
Registration Statement or otherwise under circumstances which render the Share
freely saleable without restriction under the 1933 Act.
j. "REGISTRATION STATEMENT" means a registration statement or
registration statements of the Company filed under the 1933 Act which includes
the Registrable Securities.
k. "REQUIRED HOLDERS" means the holders of Registrable Securities
representing at least a majority the Registrable Securities then outstanding.
l. "RULE 415" means Rule 415 under the 1933 Act or any successor
rule providing for offering securities on a continuous or delayed basis.
m. "SEC" means the United States Securities and Exchange
Commission.
2. Registration.
a. Mandatory Registration. The Company shall prepare, and, as
soon as practicable but in no event later than the Filing Deadline, file with
the SEC the Registration Statement on Form S-3 covering the resale of all of the
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(c). The Registration Statement
shall contain "Selling Shareholders" and "Plan of Distribution" sections in
substantially the form attached hereto as Exhibit B. The Company shall use its
best efforts to have the Registration Statement declared effective by the SEC as
soon as practicable, but in no event later than the Effectiveness Deadline.
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b. Legal Counsel. Pursuant to a certain Registration Rights
Agreement among the Company and certain other Company stockholders, such other
Company stockholders currently have the right to select one legal counsel to
review and oversee any registration pursuant to the prior Registration Rights
Agreement. The Company agrees that such counsel ("LEGAL COUNSEL") shall also act
for the benefit of Buyers hereunder in connection with any Registration
Statement hereunder. The Company and Legal Counsel shall reasonably cooperate
with each other in performing the Company's obligations under this Agreement.
c. 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 another appropriate form reasonably acceptable to the Required
Holders and (ii) undertake to register the Registrable Securities on Form S-3 as
soon as such form is available, provided that the Company shall maintain the
effectiveness of the Registration Statement then in effect until such time as a
Registration Statement on Form S-3 covering the Registrable Securities has been
declared effective by the SEC.
d. Effect of Failure to File and Obtain and Maintain
Effectiveness of Registration Statement. If (i) a Registration Statement
covering 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 respective Filing Deadline (a "FILING FAILURE") or
(B) not declared effective by the SEC on or before the respective Effectiveness
Deadline (an "EFFECTIVENESS FAILURE") or (ii) on any day after the Effective
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)) pursuant to such Registration Statement
(including, without limitation, 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 or to register a sufficient
number of Shares) (a "MAINTENANCE FAILURE") then, unless such failure or delay
has been directly caused by the failure of one or more Buyers to meet their
obligations hereunder or is the direct result of delays resulting from the
actions or inactions of the Legal Counsel, in connection 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 (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 one and one half percent (1.5%) of the aggregate
Purchase Price paid for such Buyer's Registrable Securities included in such
Registration Statement on each of the following dates: (i) on the thirtieth day
(pro rated for periods totaling less than thirty days) after the initial day of
a Filing Failure and every thirtieth day (pro rated for periods totaling less
than thirty days) thereafter until such Filing Failure is cured; (ii) on the
thirtieth day (pro rated for periods totaling less than thirty days) after the
initial day of an Effectiveness Failure and on every thirtieth day (pro rated
for periods totaling less than thirty days) thereafter until such Effectiveness
Failure is cured; (iii) on the thirtieth day (pro rated for periods totaling
less than thirty days) after the initial day of a Maintenance Failure and on
every thirtieth day (pro rated for periods totaling less than thirty days)
thereafter until such Maintenance Failure is cured. 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 (I) the last day of the calendar month during which such
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Registration Delay Payments are incurred and (II) the third Business Day after
the event or failure giving rise to the Registration Delay Payments is cured. In
the event the Company fails to make Registration Delay Payments in a timely
manner, such Registration Delay Payments shall bear interest at the rate of one
percent (1.0%) per month (prorated for partial months) until paid in full.
3. Related Obligations.
In connection with the filing of the Registration Statement with the
SEC pursuant to Section 2(a), 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 submit to the SEC, within two (2) Business
Days after the Company learns that no review of the 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, a request for
acceleration of effectiveness of such Registration Statement to a time and date
not later than 48 hours after the submission of such request. 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 Buyers may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or any successor thereto) promulgated under
the 1933 Act or (ii) the date on which the Buyers 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 contained therein) shall
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein, or necessary to make the statements therein
(in the case of prospectuses, in the light of the circumstances in which they
were made) not misleading.
b. 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-QSB, 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.
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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-KSB, and Reports
on Form 10-QSB 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 (if any is appointed), which
consent shall not be unreasonably withheld. The Company shall furnish to Legal
Counsel (if any is appointed), 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, (ii) 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 a Buyer, and all
exhibits and (iii) 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 Buyer whose Registrable
Securities are included in the Registration Statement, without charge, (i)
promptly after the same is prepared and filed with the SEC, at least one copy of
the Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, if
requested by a Buyer, all exhibits and each preliminary prospectus, (ii) upon
the effectiveness of the Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Buyer may reasonably
request) and (iii) such other documents, including copies of any preliminary or
final prospectus, as such Buyer may reasonably request from time to time in
order to facilitate the disposition of the Registrable Securities owned by such
Buyer.
e. The Company shall use its best efforts to (i) register and
qualify, unless an exemption from registration and qualification applies, the
resale by Buyers of the Registrable Securities covered by the 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 Buyer who holds Registrable Securities 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
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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 notify Legal Counsel and each Buyer in
writing of the happening of any event, as promptly as practicable after becoming
aware of such 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), promptly prepare a supplement or amendment to such Registration Statement
to correct such untrue statement or omission, and deliver ten (10) copies of
such supplement or amendment to Legal Counsel and each Buyer (or such other
number of copies as Legal Counsel or such Buyer may reasonably request). The
Company shall also promptly notify Legal Counsel and each Buyer in writing (i)
when a prospectus or any prospectus supplement or post-effective amendment has
been filed, and when a Registration Statement or any post-effective amendment
has become effective (notification of such effectiveness shall be delivered to
Legal Counsel and each Buyer by facsimile on the same day of such effectiveness
and by overnight mail), (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.
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 Legal Counsel (if any is appointed) and each Buyer
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 of any Buyer, the Company shall
furnish to such Buyer, on the date of the effectiveness of the Registration
Statement and thereafter from time to time on such dates as a Buyer 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 Buyers, 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 Buyers.
i. The Company shall make available for inspection by (i) any
Buyer, (ii) Legal Counsel (if any is appointed) and (iii) one firm of
accountants or other agents retained by the Buyers (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
a Buyer) or use of any Record or other information which the Company
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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 Buyer 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 Buyer) shall be deemed to limit the Buyers' ability to sell
Registrable Securities in a manner which is otherwise consistent with applicable
laws and regulations.
j. The Company shall hold in confidence and not make any
disclosure of information concerning a Buyer 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
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning a Buyer is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to such Buyer and allow such Buyer, at the Buyer's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
k. The Company shall use its best efforts to secure the inclusion
for quotation on The Nasdaq SmallCap Market for the 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 Buyers 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 Buyers may reasonably request and
registered in such names as the Buyer may request.
m. If requested by a Buyer, the Company shall (i) as soon as
practicable incorporate in a prospectus supplement or post-effective amendment
such information as a Buyer reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without
limitation, information with respect to 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) as soon as practicable 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
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amendment; and (iii) as soon as practicable, supplement or make amendments to
any Registration Statement if reasonably requested by a Buyer holding any
Registrable Securities to the effect of the foregoing.
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.
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 two (2) Business Days after a Registration Statement
which covers Registrable Securities is ordered 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 Buyers 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, at any time
after the Registration Statement has been declared effective by the SEC, 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, in the opinion of counsel to the Company, otherwise
required (a "GRACE PERIOD"); provided, that the Company shall promptly (i)
notify the Buyers 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 Buyers) and the date on which the Grace Period will begin, and (ii)
notify the Buyers in writing of the date on which the Grace Period ends; and,
provided further, that no Grace Period shall exceed five (5) consecutive days
and during any three hundred sixty five (365) day period such Grace Periods
shall not exceed an aggregate of twenty (20) days and the first day of any Grace
Period must be at least two (2) trading days after the last day of any prior
Grace Period (each, an "ALLOWABLE GRACE PERIOD"). For purposes of determining
the length of a Grace Period above, the Grace Period shall begin on and include
the date the Buyers receive the notice referred to in clause (i) and shall end
on and include the later of the date the Buyers receive the notice referred to
in clause (ii) 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) with respect to the information
giving rise thereto unless such material, non-public information is no longer
applicable. Notwithstanding anything to the
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contrary, the Company shall cause its transfer agent to deliver unlegended
Shares to a transferee of a Buyer in connection with any sale of Registrable
Securities with respect to which a Buyer has entered into a contract for sale,
and delivered a copy of the prospectus included as part of the applicable
Registration Statement, prior to the Buyer's receipt of the notice of a Grace
Period and for which the Buyer has not yet settled.
4. Obligations of the Buyers.
a. At least five (5) Business Days prior to the first anticipated
filing date of a Registration Statement, the Company shall notify each Buyer in
writing of the information the Company requires from each such Buyer if such
Buyer elects to have any of such Buyer's Registrable Securities included in such
Registration Statement. 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 Buyer that such Buyer shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the
effectiveness of the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.
b. Each Buyer, by such Buyer'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 Buyer has notified the Company in writing of
such Buyer's election to exclude all of such Buyer's Registrable Securities from
such Registration Statement.
c. Each Buyer agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g) or
the first sentence of 3(f), such Buyer will immediately discontinue disposition
of Registrable Securities pursuant to any Registration Statement(s) covering
such Registrable Securities until such Buyer's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(g) or the first
sentence of 3(f) or receipt of notice that no supplement or amendment is
required. Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to deliver unlegended Shares to a transferee of a Buyer in
connection with any sale of Registrable Securities with respect to which a Buyer
has entered into a contract for sale prior to the Buyer's receipt of a notice
from the Company of the happening of any event of the kind described in Section
3(g) or the first sentence of 3(f) and for which the Buyer has not yet settled.
d. Each Buyer covenants and agrees that it will comply with the
prospectus delivery requirements of the 1933 Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
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, including, without limitation, all
registration, listing and qualifications fees, printers and
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accounting fees, and fees and disbursements of counsel for the Company shall be
paid by the Company.
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 Buyer, the directors,
officers, members, partners, employees, agents, representatives of, and each
Person, if any, who controls any Buyer within the meaning of the 1933 Act or the
1934 Act (each, an "INDEMNIFIED PERSON"), 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
party is or may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of them
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 prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in the 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(c), 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 them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (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); (ii) with respect to any preliminary prospectus, shall not inure
to the benefit of any such Person from whom the Person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of
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any Person controlling such Person) if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected in the
prospectus, as then amended or supplemented, if such prospectus was timely made
available by the Company pursuant to Section 3(d), and the Indemnified Person
was promptly advised in writing not to use the incorrect prospectus prior to the
use giving rise to a violation and such Indemnified Person, notwithstanding such
advice, used it or failed to deliver the correct prospectus as required by the
1933 Act and such correct prospectus was timely made available pursuant to
Section 3(d); (iii) shall not be available to the extent such Claim is based on
a failure of the Buyer to deliver or to cause to be delivered the prospectus
made available by the Company, including a corrected prospectus, if such
prospectus or corrected prospectus was timely made available by the Company
pursuant to Section 3(d); and (iv) 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 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
the Registrable Securities by the Buyers pursuant to Section 9.
b. In connection with any Registration Statement in which a Buyer
is participating, each such Buyer 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), 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 of
them 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 Buyer expressly for use in connection with such
Registration Statement; and, subject to Section 6(c), such Buyer 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 shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Buyer, which consent shall not be unreasonably withheld
or delayed; provided, further, however, that the Buyer 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 Buyer as a result of the sale of Registrable
Securities pursuant to such Registration Statement. 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 the Registrable
Securities by the Buyers pursuant to Section 9. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party 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 shall, if a Claim in respect
thereof is to be made against any indemnifying party under this
11
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 shall have the right to
retain its own counsel with the fees and expenses of not more than one counsel
for such Indemnified Person or Indemnified Party to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. In the case of an Indemnified Person, legal counsel referred to in
the immediately preceding sentence shall be selected by the Buyers 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 shall cooperate fully 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 which
relates to such action or Claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person 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, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such Claim or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person 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 under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
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 against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
12
7. Contribution.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(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 in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities pursuant to
such Registration Statement.
8. Reports Under the 1934 Act.
With a view to making available to the Buyers 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 Buyers 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 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and
c. furnish to each Buyer so long as such Buyer 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, the 1933
Act and the 1934 Act, (ii) a copy of the most recent annual report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Buyers 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
the Buyers to any transferee of all or any portion of such Buyer's Registrable
Securities if: (i) the Buyer 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 and applicable state securities laws; (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
13
contained herein; and (v) such transfer shall have been made in accordance with
the applicable requirements of law.
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. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Buyer and the Company. No such
amendment shall be effective to the extent that it applies to less than all of
the 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. Miscellaneous.
a. 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 the such record owner of such Registrable Securities.
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); or (iii) one Business Day after deposit with
a nationally recognized overnight delivery service, 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:
Catuity, Inc.
0000 X. Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
Copy to:
Jaffe, Raitt, Heuer, & Xxxxx, Professional Corporation
00000 Xxxxxxxx Xx Xxx 0000
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxx
14
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached hereto, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers, or to such other address and/or facsimile number
and/or to the attention of such other Person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change. 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
containing the time, date, recipient facsimile number 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.
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. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
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.
15
e. This Agreement and the Subscription Agreements 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 Subscription
Agreements 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.
f. Subject to the requirements of Section 9, 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.
h. This Agreement may be executed in identical counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
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 Buyers 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. 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.
m. The obligations of each Buyer hereunder are several and not
joint with the obligations of any other Buyer, and no provision of this
Agreement is intended to confer any obligations on any Buyer vis-a-vis any other
Buyer. Nothing contained herein, and no action taken by any Buyer pursuant
hereto, shall be deemed to constitute the Buyers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Buyers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated herein.
* * * * * *
16
[SIGNATURES ON FOLLOWING PAGES]
17
IN WITNESS WHEREOF, each Buyer 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.
COMPANY:
CATUITY, INC.
By:
------------------------------------
Name:
------------------------------
Title:
-----------------------------
18
IN WITNESS WHEREOF, each Buyer 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.
BUYER:
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
19
SCHEDULE OF BUYERS
BUYER'S REPRESENTATIVE'S
BUYER'S ADDRESS ADDRESS
BUYER AND FACSIMILE NUMBER AND FACSIMILE NUMBER
----- -------------------- ------------------------
20
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
[ADDRESS]
Attention:
Re: Catuity Inc.
Ladies and Gentlemen:
We are counsel to Catuity, Inc., a Delaware corporation (the
"COMPANY"), and have represented the Company in connection with that certain
Subscription Agreement (the "SUBSCRIPTION AGREEMENT") entered into by and among
the Company and the buyers named therein (collectively, the "HOLDERS") pursuant
to which the Company issued to the Holders Notes and Warrants, each convertible
into or exerciseable for shares of common stock of the Company (the "SHARES").
Pursuant to the Subscription Agreement, the Company also has entered into a
Registration Rights Agreement with the Holders (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), 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 each of the Holders as a selling shareholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Based on the foregoing, this letter shall serve as our standing
opinion to you that the Shares are freely transferable by the Holders pursuant
to the Registration Statement. You need not require further letters from us to
effect any future legend-free issuance or reissuance of Shares to the Holders as
contemplated by the Company's Irrevocable Transfer Agent Instructions dated
________ __, 2005.
Very truly yours,
[ISSUER'S COUNSEL]
CC: [LIST NAMES OF HOLDERS]
A-1
EXHIBIT B
SELLING SHAREHOLDERS
The Shares being offered by the selling shareholders were issued pursuant
to the Subscription Agreements. We are registering the Shares in order to permit
the selling shareholders to offer the shares for resale from time to time.
Except for the ownership of the Common Shares, the selling shareholders have not
had any material relationship with us within the past three years.
The table below lists the selling shareholders and other information
regarding the beneficial ownership of the Shares by each of the selling
shareholders. The second column lists the number of Shares beneficially owned by
each selling shareholder, as of ________, 200_.
The third column lists the Shares being offered by this prospectus by the
selling shareholders.
In accordance with the terms of registration rights agreements with the
selling shareholders, this prospectus generally covers the resale of all of the
Shares issued pursuant to the subscription agreements. The fourth column assumes
the sale of all of the shares offered by the selling shareholders pursuant to
this prospectus.
The selling shareholders may sell all, some or none of their shares in this
offering. See "Plan of Distribution."
MAXIMUM NUMBER OF SHARES
NUMBER OF SHARES OWNED TO BE SOLD PURSUANT TO THIS NUMBER OF SHARES OWNED
NAME OF SELLING SHAREHOLDER PRIOR TO OFFERING PROSPECTUS AFTER OFFERING
--------------------------- ---------------------- --------------------------- ----------------------
0
[ ]
[ ]
[ ]
[ ]
PLAN OF DISTRIBUTION
We are registering the Shares to permit the resale of these Shares by the
holders from time to time after the date of this prospectus. We will not receive
any of the proceeds from the sale by the selling shareholders of the Shares. We
will bear all fees and expenses incident to our obligation to register the
Shares.
B-1
The selling shareholders may sell all or a portion of the Shares
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 are
sold through underwriters or broker-dealers, the selling shareholders will be
responsible for underwriting discounts or commissions or agent's commissions.
The Shares 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;
- 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;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
If the selling shareholders effect such transactions by selling Shares 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 shareholders or commissions from
purchasers of the Shares for whom they may act as agent or to whom they
B-2
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 or otherwise, the selling shareholders may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales of the
Shares in the course of hedging in positions they assume. The selling
shareholders may also sell Shares short and deliver Shares covered by this
prospectus to close out short positions and to return borrowed shares in
connection with such short sales. The selling shareholders may also loan or
pledge Shares to broker-dealers that in turn may sell such shares.
The selling shareholders may pledge or grant a security interest in some or
all of the convertible notes, warrants or Shares 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 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 shareholders to include the pledgee, transferee
or other successors in interest as selling shareholders under this prospectus.
The selling shareholders also may transfer and donate the Shares 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.
The selling shareholders and any broker-dealer participating in the
distribution of the Shares 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 is made, a prospectus supplement, if required, will be distributed which
will set forth the aggregate amount of Shares 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 shareholders and any discounts, commissions or concessions allowed or
reallowed or paid to broker-dealers.
Under the securities laws of some states, the Shares may be sold in such
states only through registered or licensed brokers or dealers. In addition, in
some states the Shares 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 shareholder will sell any or all
of the Shares registered pursuant to the shelf registration statement, of which
this prospectus forms a part.
The selling shareholders 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, Regulation M of the Exchange Act, which may limit the timing
of purchases and sales of any of the Shares by the selling shareholders and any
other participating person. Regulation M may also restrict the ability of any
person engaged in the distribution of the Shares to engage in market-making
activities with respect to the Shares. All of the foregoing may affect the
marketability of the Shares and the ability of any person or entity to engage in
market-making activities with respect to the Shares.
B-3
We will pay all expenses of the registration of the Shares pursuant to the
registration rights agreement, estimated to be $[___] in total, including,
without limitation, Securities and Exchange Commission filing fees and expenses
of compliance with state securities or "blue sky" laws; provided, however, that
a selling shareholder will pay all underwriting discounts and selling
commissions, if any. We will indemnify the selling shareholders against
liabilities, including some liabilities under the Securities Act, in accordance
with the registration rights agreements, or the selling shareholders will be
entitled to contribution. We may be indemnified by the selling shareholders
against civil liabilities, including liabilities under the Securities Act, that
may arise from any written information furnished to us by the selling
shareholder 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 will be freely tradable in the hands of persons other
than our affiliates.
B-4
