FORM OF REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made effective as
of ____________, 1999 by and among XXxxxxxxxxx.xxx, a Nevada corporation having
its principal place of business at 00000 Xxxxx Xxxxx Xxxx, Xxxxx 00, Xxxxxxxxx,
Xxxxxxxx 00000 (the "Company"), and each of the individuals and entities listed
on Exhibit A to this Agreement (the "Investor(s)").
RECITALS
A. Each Investor listed in Exhibit A has subscribed for shares of
common stock of the Company ("Shares"), pursuant to a non-public offering of
such Shares by the Company.
B. As partial consideration for purchase of the Shares by the Investors
the Company has offered to provide the Investors with certain registration
rights as set forth herein.
In consideration of the foregoing and the promises and covenants
contained herein, the parties agree as follows:
SECTION 1
DEFINITIONS
As used in this Agreement the following terms shall have the following
meanings:
1.1 "AFFILIATE" shall mean any person that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with a specified person.
1.2 "COMMON STOCK" shall mean the $.001 par value Common Stock of the
Company.
1.3 "COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
1.4 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.5 "HOLDER" OR "HOLDERS" shall mean any Investor owning Shares or any
permitted transferee thereof in accordance with Section 2.10 hereof.
1.6 "INITIAL CLOSING" shall mean the initial closing of the Private
Placement in which the Shares were sold, pursuant to a Private Placement
Memorandum dated August 2, 1999.
1.7 "INITIATING HOLDERS" shall mean the Investors or permitted
transferees of the Investors under Section 2.10 hereof who, in the aggregate,
are Holders of not less than fifty percent (50%) of the outstanding Shares.
1.8 "INVESTOR(S)" shall mean the individuals and entities listed in
Exhibit A to this Agreement.
1.9 The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
1.10 "REGISTRATION EXPENSES" shall mean all expenses incurred in
complying with registrations, filings or qualification under Sections 2.1 and
2.2 hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursement of counsel
for the Company, blue sky fees and expenses, the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company and Selling Expenses).
1.11 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.12 "SELLING EXPENSES" shall mean all underwriting documents and
selling commissions applicable to the sale and all fees and disbursements of
special counsel for any Holder (except as provided in Section 1.10).
1.13 "SHARES" shall mean the shares of Common Stock sold pursuant to
the Private Placement Memorandum dated August 2, 1999.
SECTION 2
REGISTRATION RIGHTS
2.1 DEMAND REGISTRATION.
(a) DEMAND FOR REGISTRATION. In case the Company shall receive
from Initiating Holders a written demand that the Company effect any
Registration with respect to all or a part of the Shares at any time after six
months, and until two years and six months from the Initial Closing, the Company
will:
(i) promptly give written notice of the proposed
Registration to all other Holders; and
(ii) use its diligent efforts to effect such Registration
within 90 days of receipt of such written demand
(including, without limitation, the execution of an
undertaking to file post-effective amendments and
appropriate compliance with applicable regulations
issued under the Securities Act and any other
governmental requirements or regulations), as may be so
requested and as would permit or facilitate the public
offer and sale, for a period of not less than nine (9)
consecutive months (the "Effectiveness Period") of all
or such portion of such Shares as are specified in such
request in writing received by the Company within
fifteen (15) days after receipt of such written notice
from the Company; provided, that the Company shall not
be obligated to take any action to effect any such
Registration pursuant to this Section 2.1:
A) In any particular jurisdiction in which
the Company would be required to execute
a general consent to service of process
in effecting such Registration unless
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the Company is already subject to
service in such jurisdiction and except
as may be required by the Securities
Act;
B) If the Shares have been Registered
pursuant to Section 2.2 of this
Agreement; or
C) After the Company has effected one (1)
such Registration pursuant to this
Section 2.1(a), such Registration has
been declared or ordered effective and
the securities offered pursuant to such
Registration have been sold.
Subject to the foregoing clauses (A) through (C), the Company
shall file a registration statement covering the Shares so requested pursuant to
this Section 2.1(a).
(b) UNDERWRITING. If the Initiating Holders intend to
distribute the Shares covered by their request by means of an underwriting, they
shall so advise the Company as part of their request made pursuant to Section
2.1 and the Company shall include such information in the written notice
referred to in Section 2.1(a)(i). The right of any Holder to Registration
pursuant to Section 2.1 shall then be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's Shares in
the underwriting to the extent requested and provided herein.
The Company shall (together with all Holders and other parties
proposing to distribute their Shares through such underwriting) enter into an
underwriting agreement in customary form with the representative(s) of the
underwriter or underwriters (the "Underwriter's Representative") selected for
such underwriting by the Initiating Holders. Notwithstanding any other provision
of this Section 2.1, if the Underwriter's Representative advises the Initiating
Holders in writing that marketing factors require a limitation of the number of
Shares to be underwritten, the Initiating Holders shall so advise all holders of
Shares, and the underwriter may limit the number of Shares to be included in the
Registration and underwriting on a pro rata basis based on the total number of
Shares entitled to Registration held by the participating Holders. The Company
and/or the Underwriter's Representative may, in their sole discretion, round the
number of Shares offered hereunder to the nearest 100 Shares. No Shares excluded
from the underwriting by reason of the Underwriter's Representative marketing
limitation shall be included in such Registration.
If any Holder of Shares disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom prior to effectiveness
of the registration statement by written notice to the Company, the
Underwriter's Representative and the Initiating Holders. The Shares so withdrawn
shall also be withdrawn from Registration; provided, however, that, if by the
withdrawal of such Shares a greater number of Shares held by other participating
Holders may be included in such registration (up to the maximum of any
limitation imposed by the Underwriter's Representative), then the Company shall
allocate such greater number of Shares to such Holders in proportion, as nearly
as practicable, to the respective amount of Shares held by such participating
Holders.
If the Underwriter's Representative has not limited the number
of Shares to be underwritten, the Company may include securities for its own
account or for the account of other shareholders of the Company in such
Registration if the Underwriter's Representative so agrees.
2.2 COMPANY REGISTRATION. If at any time or from time to time, the
Company shall determine to Register any of its securities, either for its own
account or the account of a security holder or holders exercising their
respective demand registration rights, other than (i) a registration on Form S-8
(or a similar or successor form) relating solely to employee stock option, stock
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purchase or other benefit plans, or (ii) a registration on Form S-4 (or similar
or successor form) relating solely to a transaction pursuant to Rule 145, as
promulgated by the Commission, the Company will:
(a) give to each Holder written notice of its intention at
least 20 days before filing each such registration statement with respect
thereto; and
(b) include in such Registration all the Shares specified in a
written request or requests, made within fifteen (15) days after receipt by such
Holder of the notice given pursuant to 2.1(a). The Company shall register the
Shares "for the shelf", that is, for future sale, not as part of the
underwriting. Except for the first such underwriting, the provisions of Section
2.1(b) shall apply to any other Registration under this Section 2.2.
(c) notwithstanding the provisions of this Section 2.2, the
Company has the right at any time after giving notice pursuant to Section 2.2(a)
to elect not to file, or to withdraw, such Registration prior to effectiveness.
2.3 DELAY PERIODS, SUSPENSION OF SALES.
(a) If at any time prior to the expiration of the
Effectiveness Period, counsel to the Company (which counsel shall be experienced
in securities laws matters) has determined in good faith that it is reasonable
to conclude that the filing of a registration statement pursuant to Section
2.1(a) or the compliance by the Company with its disclosure obligations in
connection with such registration statement may require the disclosure of
information which the Board of Directors of the Company has identified as
material and which the Board of Directors has determined that the Company has a
BONA FIDE business purpose for preserving as confidential, then the Company may
delay the filing or the effectiveness of such registration statement (if not
then filed or effective, as applicable) and shall not be required to maintain
the effectiveness thereof or amend or supplement such registration statement for
a period (an "Information Delay Period") expiring three business days after the
earlier to occur of (A) the date on which such material information is disclosed
to the public or ceases to be material or the Company is able to so comply with
its disclosure obligations and Commission requirements or (B) up to 90 days
after the Company notifies the Holders of the Shares included therein of such
good faith determination. Each such Information Delay Period begun during the
Effectiveness Period shall suspend the Effectiveness Period until the end of
each such Information Delay Period. There shall be permitted no more than two
Information Delay Periods during any twelve month period.
(b) If at any time prior to the expiration of the
Effectiveness Period, the Company is advised by a nationally recognized
investment banking firm selected by the Company that, in such firm's written
reasonable opinion addressed to the Company (a copy of which shall be delivered
to each Holder of Shares Registered under the registration statement), sales of
Shares pursuant to such registration statement at such time would materially
adversely affect any immediately planned underwritten public equity financing by
the Company, the Company shall not be required to maintain the effectiveness of
such registration statement or amend or supplement such registration statement
for a period (a "Transaction Delay Period") commencing on the date of pricing of
such equity financing and expiring three business days after the earliest to
occur of (A) the abandonment of such financing or (B) 90 days after the
completion of such financing. Each such Transaction Delay Period begun during
the Effectiveness Period shall suspend the Effectiveness Period until the end of
each such Transaction Delay Period. There shall be permitted no more than two
Transaction Delay Periods during any twelve month period.
(c) A Transaction Delay Period and an Information Delay Period
are hereinafter collectively referred to as "Delay Periods" or a "Delay Period."
The Company will give prompt written notice to each Holder of Shares included in
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the registration statement of each Delay Period. Such notice shall be given (A)
in the case of an Information Delay Period, as soon as practicable after the
Board of Directors makes the determination referenced in Section 2.3(a), and (B)
in the case of a Transaction Delay Period, at least 20 days in advance of the
commencement of such Delay Period. Such notice shall state to the extent, if
any, as is practicable, an estimate of the duration of such Delay Period. Each
such Holder, be acceptance of any Shares, agrees that upon receipt of such
notice of Delay Period such Holder will (x) forthwith discontinue disposition of
Shares pursuant to such Registration statement and (y) not deliver any
prospectus forming a part of the registration statement in connection with any
sale of Shares until the expiration of such Delay Period.
2.4 BLUE SKY QUALIFICATION. The Company hereby covenants to take all
reasonable efforts to qualify or register the Shares included in a registration
statement for offering and sale under the securities or blue sky laws of such
states as are reasonably requested by the Holders in writing; provided, however,
that the Company shall not be obligated to execute or file any consent to
service of process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction.
2.5 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any Registration pursuant to Section 2.1 or Section 2.2 shall be
borne by the Company and all Selling Expenses relating to securities registered
by the Holders shall be borne by the Holders of such securities pro rata on the
basis of the number of securities so registered; provided, however, that the
participating Holders shall pay, pro rata, all expenses of any registration
proceeding begun pursuant to Section 2.1 if the Registration request is
subsequently withdrawn at any time at the request of the Holders of a majority
of the Shares to be Registered, unless such withdrawal is due to material
adverse information pertaining to the Company as of the date of filing the
Registration which was previously not known to the Holders.
2.6 REGISTRATION PROCEDURES. In the case of each Registration effected
by the Company pursuant to this Section 2, the Company will keep each Holder
advised in writing as to the initiation of each Registration and as to the
completion thereof. At its expense the Company will:
(a) Keep such Registration effective until the earlier to
occur of (A) the completion of the Effectiveness Period or (B) the Holder or
Holders have completed the distribution described in the registration statement
relating thereto; and
(b) Furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request.
2.7 INDEMNIFICATION.
(a) The Company will indemnify and hold harmless, and does
hereby undertake to indemnify and hold harmless, each Holder, each of its
officer, directors and partners, and each person controlling such Holder within
the meaning of Section 15 of the Securities Act, with respect to which
Registration has been effected pursuant to this Section 2.5, and each
underwriter, if any, and each person who controls any underwriter within the
meaning of Section 15 of the Securities of the Securities Act, against all
expenses, claims, losses, damages and liabilities (or actions in respect thereof
to which they may become subject), including settlement of any litigation,
commenced or threatened, to which they may become subject under the Securities
Act, the Exchange Act, or other federal or state law, arising out of this
Agreement or based on any alleged untrue statement or a material fact contained
in any registration statement, prospectus, offering circular or other document
or amendments thereto, or based on any alleged omission to state therein a
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material fact required of the Company in connection with any such Registration,
or any violation by the Comoany of any federal, state or common law rule or
regulation applicable to Company and relating to action or inaction required of
Company in connection with any such Registration. Further, the Company will
reimburse each such Holder, each of its officers, directors and partners, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal or any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extend that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by an instrument
executed by such Holder or underwriter.
(b) Each Holder will, if Shares held by such Holder are
included in the securities as to which such Registration is being effected,
indemnify and hold harmless the Company, each of its directors and officers,
agents and employees, each underwriter, if any, of the Company's securities
covered by such a registration statement, each person who controls the Company
or such underwriter within the meaning of Section 15 of the Securities Act, and
each other such Holder, each of its officers, directors and partners and each
person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof to which they may become subject), including settlement of
any litigation under the Securities Act, the Exchange Act, or other federal or
state law arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or amendments thereto, which
material fact was provided in writing by the Holder for inclusion in any such
documents, or any violation by the Holder of any federal, state or common law
rule or regulation applicable to such Holder and relating to action or inaction
required of such Holder in connection with any such Registration. Further, each
Holder will reimburse the Company, such other Holders, such directors, officers,
persons, underwriters or control persons of the Company, such other Holders or
the underwriters, for any legal or any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, in each case (other than a violation of law, rule
or regulation) to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by an instrument executed by such Holder. Notwithstanding the foregoing,
the obligations of such Holders hereunder shall be limited to an amount equal to
the proceeds to each such Holder of Shares from the sale of such Shares as
contemplated herein.
(c) Each party entitled to indemnification under this Section
2.5 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
deliver written notice to the Indemnifying Party of commencement thereof. The
Indemnifying Party, at its sole option, may participate in or assume the defense
of any such claim or any litigation resulting therefrom with counsel reasonably
satisfactory to the Indemnified Party and the Indemnified Party may participate
in such defense at such party's expense. The failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligation under this Section 2.6 except to the extend that such failure to give
notice shall materially adversely affect the Indemnifying Party in the defense
of any such litigation. No Indemnifying Party, in the defense of any such claim
or litigation shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term a release from all liability in respect to such claim or
litigation by the claimant or plaintiff to such Indemnified Party.
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2.8 INFORMATION BY HOLDER. Each Holder of Shares included in any
Registration shall furnish to the Company such information regarding such Holder
and the distribution proposed by such Holder as the Company may request in
writing and as shall be required in connection with any Registration referred to
in this Section 2.
2.9 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of Shares which are Restricted Securities to the public without
registration, the Company agrees:
(a) To make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act;
(b) To use its diligent efforts to file with the Commission in
a timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act at all times after it has become subject
to such reporting requirements; and
The Company further shall furnish forthwith upon request a
written statement as to its compliance with the reporting requirements of said
Rule. The Company shall provide forthwith upon written request a copy of the
most recent annual or quarterly report of the Company, and such other reports
and documents of the Company as Investors may reasonably request in availing
itself of any rule or regulation of the Commission allowing Investor to sell any
such Shares without registration.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights granted each
Investor under this Agreement may not be assigned except: (i) to a purchaser of
more than 5,000 Shares (as appropriately adjusted for stock dividends, stock
splits, stock combinations, recapitalizations, consolidations and the like);
(ii) to a successor entity to an Investor pursuant to a reorganization or
recapitalization of an Investor, (iii) to an Affiliate of an Investor, or (iv)
to the partners of an Investor or to the estate or heirs of such a partner or to
a trust for the benefit of such a partner, his or her spouse or descendants;
provided, that the Company receives notice within twenty (20) days following
such assignment.
2.11 TERMINATION OF REGISTRATION RIGHTS.The rights granted pursuant to
this Agreement shall terminate as to each Investor (and permitted transferee
under Section 2.10 above) upon the occurrence of any of the following:
a) At such time as all Shares held by such Investor or permitted
transferee can be sold pursuant to Rule 144 (or its successor
provision) within the three-month time period referred to in Rule
144(e);
b) At such time as all Shares held by such Holder can be sold under
Rule 144(k) (or its successor provision);
2.12 "MARKET STAND-OFF" AGREEMENT. Each Holder agrees not to sell or
otherwise to transfer or dispose of any Shares held by such Holder during the
period not to exceed two hundred seventy (270) days as requested by the managing
underwriter following the effective date of the first registration statement of
the Company filed under the Securities Act after the Initial Closing, provided
that all officers and directors enter into similar agreements. Such agreement
shall be confirmed in writing in a form satisfactory to the Company and such
underwriter. The Company may impose stop-transfer instructions with respect to
the Shares subject to the foregoing restriction until the end of such period.
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SECTION 3
MISCELLANEOUS
3.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Colorado.
3.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Investor and the closing
of the transactions contemplated hereby.
3.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein and
subject to compliance with the provisions herein, the provisions hereof shall
inure to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties thereto.
3.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subject matter hereto. This
Agreement may only be amended or waived by a writing signed by all parties to
this Agreement; provided, however, that Holders of a majority of the Shares then
held by the Holders or any permitted transferee thereof, acting together, may
waive or amend (either generally or in a particular instance and either
retroactively or prospectively), on behalf of all Investors, Holders and
permitted transferees, any provisions hereof affecting Investors, so long as the
effect thereof will be that all such Investors, Holders and permitted
transferees will be treated equally.
3.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to an Investor, at such Investor's address set forth on Exhibit
A, or at such other address as Investor shall have furnished to the Company in
writing, or (b) if to any other holder of any Registerable Securities, at such
address as such holder shall have furnished the Company in writing, or, until
any such holder so furnishes an address to the Company, then to and at the
address of the last holder of such Registerable Securities who has so furnished
an address to the Company, or (c) if to the Company, one copy should be sent to
the attention of the President. If notice is provided by mail, notice shall be
deemed to be given upon proper deposit in the mail (and if outside the United
States, sent by airmail).
3.6 DELAY OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Registerable Securities upon any
breach or default of the Company under this agreement, shall impair any such
right, power or remedy of such holder nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein, or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing or as provided in Section 3.4
of this Agreement. All remedies, either under this Agreement, or by law or
otherwise afforded to any holder, shall be cumulative and not alternative.
3.7 EXPENSES. Except as provided in Section 2, the Company and each
Investor shall bear its own expenses and legal fees incurred on its behalf with
respect to this Agreement and the transactions contemplated hereby.
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3.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one instrument, and each of
which may be executed by less than all of the parties to this Agreement.
3.9 SEVERABILITY. In the event that any provisions of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided, that no such severability shall be effective
if it materially changes the economic benefit of this Agreement to any party.
3.10 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
XXXXXXXXXXX.XXX
By _______________________________
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