EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of February 24, 2005, by and between Patron Systems, Inc.
("PARENT") and the investors listed on the signature pages hereto (the
"INVESTORS").
This Agreement is made pursuant to that certain Supplemental Agreement
(the "SUPPLEMENTAL AGREEMENT"), dated as of the date hereof, by and among
Parent, LL Acquisition I Corp. ("MERGERCO") and LucidLine, Inc. (the "COMPANY"),
including all documents incorporated by reference therein and all attachments,
schedules and exhibits thereto relating to the merger (the "MERGER") of Mergerco
with and into the Company.
Parent and each Investor hereby agree as follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined
herein shall have the meanings given such terms in the Supplemental Agreement.
As used in this Agreement, the following terms shall have the following
meanings:
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means common stock of Parent, $0.01 par value per share.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in SECTION
2(A).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may be,
from time to time of Registrable Securities (including any permitted assignee).
"INDEMNIFIED PARTY" shall have the meaning set forth in SECTION 5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in SECTION 5(c).
"LOSSES" shall have the meaning set forth in SECTION 5(a).
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"REGISTRABLE SECURITIES" means (i) the shares of Common Stock issuable
as merger consideration upon the closing of the Merger, (ii) the shares of
Common Stock issuable upon exercise of the Warrants issuable as merger
consideration, and (iii) any shares of Common Stock issued or issuable upon any
stock split, dividend or other distribution, recapitalization or similar event
with respect to the foregoing.
"REGISTRATION STATEMENT" means the registration statements filed
hereunder (which, at Parent's option, may be an existing registration statement
of Parent previously filed with the Commission, but not declared effective),
including (in each case) the Prospectus, amendments and supplements to the
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in the registration statement.
"RULE 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
Rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"RULE 424" means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
Rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"TRADING DAY" means a day on which the principal exchange on which the
Common Stock is then listed is open for purposes of trading securities.
2. REGISTRATION.
(a) REGISTRATIONS RIGHTS. If Parent shall, at any time,
or from time to time, determine to prepare and file with the Commission a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities to be issued in connection with stock option or other employee
benefit plans, then Parent shall include in such registration statement all or
any part of such Registrable Securities; PROVIDED, HOWEVER, that (i) if, prior
to the effective date of the registration statement filed in connection with
such registration, Parent determines for any reason not to proceed with such
registration, Parent will be relieved of its obligation to register any
Registrable Securities in connection with such registration, and (ii) in case of
a determination by Parent to delay registration of its securities, Parent will
be permitted to delay the registration of Registrable Securities for the same
period as the delay in registering such other securities.
(b) EFFECTIVENESS. Parent shall cause the Registration
Statement to become effective and remain effective as provided herein. Parent
shall use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as possible after the filing
thereof and shall use its best efforts to keep the Registration Statement
continuously effective under the Securities Act until the earlier date when all
Registrable Securities covered by the Registration Statement (a) have been sold
pursuant to the Registration Statement or an
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exemption from the registration requirements of the Securities Act or (b) may be
sold pursuant to Rule 144(k) (the "EFFECTIVENESS PERIOD").
(c) PLAN OF DISTRIBUTION. Any Registration Statement
filed hereunder shall contain the Plan of Distribution, attached hereto as ANNEX
A (which may be modified to respond to comments, if any, received by the
Commission).
3. REGISTRATION PROCEDURES. In connection with Parent's
registration obligations hereunder, Parent shall:
(a) Not less than five (5) business days prior to the
filing of the Registration Statement or any related Prospectus or any amendment
or supplement thereto, furnish to each Holder a draft of the Registration
Statement.
(b) (i) Prepare and file with the Commission such
amendments, including post-effective amendments, to the Registration Statement
and the Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; and (iii) respond to
any comments received from the Commission with respect to the Registration
Statement or any amendment thereto.
(c) Notify the Holders of Registrable Securities to be
sold as promptly as reasonably possible: (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to the Registration Statement
is proposed to be filed; (B) when the Commission notifies Parent whether there
will be a "review" of the Registration Statement and whenever the Commission
comments in writing on the Registration Statement (Parent shall upon request
provide true and complete copies thereof and all written responses thereto to
each of the Holders, subject, if appropriate, to the execution of
confidentiality agreements in form acceptable to Parent); and (C) with respect
to the Registration Statement or any post-effective amendment, when the same has
become effective; (ii) of any request by the Commission or any other Federal or
state governmental authority during the period of effectiveness of the
Registration Statement for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the Commission or any other federal or state governmental authority of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) of the receipt by Parent of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (v) of the occurrence of any
event or passage of time that makes the financial statements included in the
Registration Statement ineligible for inclusion therein or any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
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(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) Promptly deliver to each Holder no later than five
(5) business days after the Effectiveness Date, without charge, two (2) copies
of the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto (and, upon the request of any Holder such
additional copies as such Persons may reasonably request in connection with
resales by such Holder of Registrable Securities). Parent hereby consents to the
use of such Prospectus and each amendment or supplement thereto by each Holder
in connection with the offering and sale of the Registrable Securities covered
by such Prospectus and any amendment or supplement thereto, except after the
giving of any notice pursuant to SECTION 3(c).
(f) Prior to any resale of Registrable Securities by a
Holder, use its best efforts to register or qualify or cooperate with the
selling Holder in connection with the registration or qualification (or
exemption from the registration or qualification) of such Registrable Securities
for the resale by such Holder under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in
writing, to keep such registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and to do any and all other acts or
things reasonably necessary to enable the disposition in such jurisdictions of
the Registrable Securities covered by the Registration Statement; PROVIDED,
HOWEVER, that Parent shall not be required to qualify generally to do business
in any jurisdiction where it is not then so qualified, subject Parent to any
material tax in any such jurisdiction where it is not then so subject or file a
general consent to service of process in any such jurisdiction.
(g) Upon the occurrence of any event contemplated by
SECTION 3(c)(v), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(h) Use its best efforts to comply with all applicable
rules and regulations of the Commission relating to the registration of the
Registrable Securities pursuant to the Registration Statement or otherwise.
(i) Parent agrees that the Selling Stockholder
Questionnaire attached hereto as EXHIBIT A, satisfies all of the information
required to be provided by each Holder in connection with the Registration
Statement. Parent shall not be required to include the Registrable Securities of
any Holder that does not complete, date and execute a Selling Stockholder
Questionnaire.
(j) Parent shall either (a) cause all the Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange on which securities of the same class or series issued by Parent are
then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (b) secure designation and
quotation of all
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the Registrable Securities covered by the Registration Statement on the Nasdaq
National Market or the Nasdaq SmallCap Market, or, (c) if Parent is unsuccessful
in satisfying the preceding clauses (a) or (b), Parent shall secure the
inclusion for quotation on the Over the Counter Bulletin Board for such
Registrable Securities and, without limiting the generality of the foregoing, to
arrange for at least two (2) market makers to register with the National
Association of Securities Dealers ("NASD") as such with respect to such
Registrable Securities. Parent shall pay all fees and expenses in connection
with satisfying its obligation under this SECTION 3(j).
(k) Parent covenants that it shall file, within a
reasonable time after the date hereof, the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder so long as any Holder owns any Registrable
Securities, but in no event longer than two (2) years; PROVIDED, HOWEVER, Parent
shall take such further reasonable action as any Holder may reasonably request
(including, without limitation, promptly obtaining any required legal opinions
from Company counsel necessary to effect the sale of Registrable Securities
under Rule 144 and paying the related fees and expenses of such counsel), all to
the extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any Holder of
Registrable Securities, Parent will deliver to such Holder a written statement
as to whether it has complied with such requirements.
4. REGISTRATION EXPENSES. All fees and expenses incident to the
performance of or compliance with this Agreement by Parent shall be borne by
Parent whether or not any Registrable Securities are sold pursuant to the
Registration Statement, other than fees and expenses of counsel or any other
advisor retained by the Holders and discounts and commissions with respect to
the sale of any Registrable Securities by the Holders. The fees and expenses
referred to in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
(A) with respect to filings required to be made with the Trading Market on which
the Common Stock is then listed for trading, and (B) in compliance with
applicable state securities or Blue Sky laws), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is reasonably requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for
Parent, (v) Securities Act liability insurance, if Parent so desires such
insurance, and (vi) fees and expenses of all other Persons retained by Parent in
connection with the consummation of the transactions contemplated by this
Agreement.
5. INDEMNIFICATION
(a) INDEMNIFICATION BY PARENT. Parent shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents and employees of it, each Person
who controls such Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without
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limitation, reasonable attorneys' fees) and expenses (including the cost
(including without limitation, reasonable attorneys' fees) and expenses relating
to an Indemnified Party's actions to enforce the provisions of this SECTION 5)
(collectively, "LOSSES"), as incurred, to the extent arising out of or relating
to any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (1) such untrue statements or omissions are based
solely upon information regarding such Holder furnished (or in the case of an
omission, not furnished) in writing to Parent by or on behalf of such Holder
expressly for use therein, or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto (it being understood that
each Holder has approved Annex A hereto for this purpose), (2) in the case of an
occurrence of an event of the type specified in SECTION 3(c)(ii)-(v), the use by
any Holder of an outdated or defective Prospectus after Parent has notified such
Holder in writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in SECTION 6(b), or (3) the
failure of any Holder to deliver a prospectus prior to the confirmation of a
sale. Parent shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which Parent is aware in connection with the
transactions contemplated by this Agreement.
(b) INDEMNIFICATION BY HOLDERS. Each Holder shall
indemnify and hold harmless Parent, its directors, officers, agents and
employees, each Person who controls Parent (within the meaning of Section 15 of
the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to the fullest extent
permitted by applicable law, from and against all Losses, as incurred, to the
extent arising out of or based upon: (x) such Holder's failure to comply with
the prospectus delivery requirements of the Securities Act or (y) any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading (i) to
the extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished (or in the case of an omission, not
furnished) in writing by or on behalf of such Holder to Parent specifically for
inclusion in the Registration Statement or such Prospectus or (ii) to the extent
that (1) such untrue statements or omissions are based solely upon information
regarding such Holder furnished (or in the case of an omission, not furnished)
in writing to Parent by or on behalf of such Holder expressly for use therein,
or to the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities, such Prospectus or
such form of Prospectus or in any amendment or supplement thereto, or (2) in the
case of an occurrence of an event of the type specified in SECTION 3(c)(ii)-(v),
the use by such Holder of an outdated or defective Prospectus after Parent has
notified such Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in SECTION 6(b),
or (3) the failure of such Holder to deliver a Prospectus prior to the
confirmation of a sale. In no
6
event shall the liability of any selling Holder hereunder be greater in amount
than the net dollar amount received from the sale of the Registrable Securities.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify
the Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing,
and the Indemnifying Party shall have the right to assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with
defense thereof; PROVIDED, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that
such failure shall have materially prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and the reasonable fees and expenses of one
separate counsel for all Indemnified Parties in any matters related on a factual
basis shall be at the expense of the Indemnifying Party). The Indemnifying Party
shall not be liable for any settlement of any such Proceeding affected without
its written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All reasonable fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Trading Days of written notice thereof to the
Indemnifying Party; PROVIDED, that the Indemnified Party shall promptly
reimburse the Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is not entitled to
indemnification hereunder, determined based upon the relative faults of the
parties.
(d) CONTRIBUTION. If a claim for indemnification under
SECTION 5(a) or SECTION 5(b) is unavailable to an Indemnified Party (by reason
of public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such proportion
7
as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in SECTION 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission, except in the case of fraud by
such Holder.
The indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. MISCELLANEOUS.
(a) COMPLIANCE. Each Holder covenants and agrees that it
will comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
(b) DISCONTINUED DISPOSITION. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice from
Parent of the occurrence of any event of the kind described in SECTION 3(c),
such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement or
until it is advised in writing (the "ADVICE") by Parent that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies
of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. Parent
may provide appropriate stop orders to enforce the provisions of this paragraph.
(c) AMENDMENTS AND WAIVERS. The provisions of this
Agreement, including the provisions of this section, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in writing and
signed by Parent and each Holder of the then outstanding Registrable Securities.
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(d) NOTICES. Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the Trading Day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (ii) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
delivered and addressed as set forth in the Supplemental Agreement.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted assigns of each
of the parties and shall inure to the benefit of the Holders.
(f) EXECUTION AND COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and, all of which taken together shall constitute one
and the same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding obligation
of the party executing (or on whose behalf such signature is executed) the same
with the same force and effect as if such facsimile signature were the original
thereof.
(g) GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Delaware
without regard to the conflicts of laws principles thereof. The parties hereto
hereby irrevocably agree that any suit or proceeding arising directly and/or
indirectly pursuant to or under this Agreement shall be brought solely in a
federal or state court located in the City, County and State of Delaware. By
their execution hereof, the parties hereby covenant and irrevocably submit to
the IN PERSONAM jurisdiction of the federal and state courts located in the
City, County and State of Delaware and agree that any process in any such action
may be served upon any of them personally, or by certified mail or registered
mail upon them or their agent, return receipt requested, with the same full
force and effect as if personally served upon them in the State of Delaware. The
parties hereto waive any claim that any such jurisdiction is not a convenient
forum for any such suit or proceeding and any defense or lack of IN PERSONAM
jurisdiction with respect thereto. In the event of any such action or
proceeding, the party prevailing therein shall be entitled to payment from the
other party hereto of its reasonable counsel fees and disbursements.
(h) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(i) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
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(j) REMEDIES. In the event of a breach by Parent or by a
Holder, of any of their obligations under this Agreement, each Holder or Parent,
as the case may be, in addition to being entitled to exercise all rights granted
by law and under this Agreement, including recovery of damages, will be entitled
to specific performance of its rights under this Agreement. Parent and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
PARENT PATRON SYSTEMS, INC.
By: /S/ XXXXXX X. XXX, XX
-----------------------------------------
Name: Xxxxxx X. Xxx, XX
Title: Chairman of the Board
INVESTOR
If Business Entity: TEN X CONSULTING AND BUSINESS DEVELOPMENT
By: /S/ XXXXXXX XXXXXX
-----------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Manager
If Individual: /S/ XXXXX XXXXXXX
--------------------------------------------
Name: Xxxxx Xxxxxxx
/S/ AFI HASAN
--------------------------------------------
Name: Afi Hasan
/S/ XX. XXXXXX
--------------------------------------------
Name: Xx. Xxxxxx
/S/ XXXXX XXXXXX
--------------------------------------------
Name: Xxxxx Xxxxxx
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/S/ XXXX XXXXXX
--------------------------------------------
Name: Xxxx Xxxxxx
/S/ FAKHRI ISA
--------------------------------------------
Name: Fakhri Isa
/S/ XXXXX XXXXXX
--------------------------------------------
Name: Xxxxx Xxxxxx
/S/ XXXXX XXXXXXXX
--------------------------------------------
Name: Xxxxx Xxxxxxxx
/S/ XXXX XXXXX
--------------------------------------------
Name: Xxxx Xxxxx
/S/ NASRI ISA
--------------------------------------------
Name: Nasri Isa
/S/ XXXXX ISA
--------------------------------------------
Name: Xxxxx Isa
/S/ XXXXXXX XXXXXX
--------------------------------------------
Name: Xxxxxxx Xxxxxx
/S/ XXXXXXXX X'XXXX
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Name: Xxxxxxxx X'Xxxx
12
ANNEX A
PLAN OF DISTRIBUTION
The holders of Registrable Securities (the "SELLING STOCKHOLDERS") and
any of their pledgees, assignees and successors-in-interest may, from time to
time, sell any or all of their shares of Common Stock on any stock exchange,
market or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices. The Selling
Stockholders may use any one or more of the following methods when selling
shares:
o ordinary brokerage transactions and transactions in which the
broker/dealer solicits purchasers;
o 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;
o purchases by a broker/dealer as principal and resale by the
broker/dealer for its account;
o an exchange distribution in accordance with the Rules of the
applicable exchange;
o privately negotiated transactions;
o settlement of short sales;
o broker/dealers may agree with the Selling Stockholders to sell
a specified number of such shares at a stipulated price per
share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker/dealers engaged by the Selling Stockholders may arrange for
other brokers/dealers to participate in sales. Broker/dealers may receive
commissions from the Selling Stockholders (or, if any broker/dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions to exceed
what is customary in the types of transactions involved.
The Selling Stockholders may from time to time pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933
13
amending the list of Selling Stockholders to include the pledgee, transferee or
other successors in interest as Selling Stockholders under this prospectus.
The Selling Stockholders and any broker/dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker/dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions under the Securities Act. The Selling Stockholders have informed
Parent that they do not have any agreement or understanding, directly or
indirectly, with any person to distribute the Common Stock.
Parent is required to pay all fees and expenses incident to the
registration of the shares. Parent has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
14
EXHIBIT A
SELLING STOCKHOLDER QUESTIONNAIRE
Patron Systems, Inc.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
I acknowledge that I am a holder of securities of Patron Systems, Inc.
(the "COMPANY"). I understand that I will be named as a selling stockholder in
the prospectus that forms a part of the registration statement on Form S-1 (or
other applicable form) that the Company will file with the Securities and
Exchange Commission to register under the Securities Act of 1933, as amended,
the securities I expect to sell. The Company will use the information that I
provide in this Questionnaire to ensure the accuracy of the registration
statement and the prospectus.
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PLEASE ANSWER EVERY QUESTION.
IF THE ANSWER TO ANY QUESTION IS "NONE" OR "NOT APPLICABLE," PLEASE SO STATE.
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1. NAME. Type or print your name exactly as it should appear in the
Registration Statement.
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2. CONTACT INFORMATION. Provide the address, telephone number and fax
number where you can be reached during business hours.
ADDRESS:
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PHONE:
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FAX:
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3. RELATIONSHIP WITH THE COMPANY. Describe the nature of any position,
office or other material relationship you have had with the Company
during the past three years.
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4. ORGANIZATIONAL STRUCTURE. Please indicate or (if applicable) describe
how you are organized.
(a) Are you a NATURAL PERSON? Yes [_] No [_]
(IF SO, PLEASE XXXX THE BOX AND SKIP TO QUESTION 5)
(b) Are you a REPORTING COMPANY under the 1934 Act? Yes [_] No [_]
(IF SO, PLEASE XXXX THE BOX AND SKIP TO QUESTION 5)
(c) Are you a MAJORITY-OWNED SUBSIDIARY of a reporting company
under the 1934 Act? Yes [_] No [_]
(IF SO, PLEASE XXXX THE BOX AND SKIP TO QUESTION 5)
(d) Are you a REGISTERED INVESTMENT FUND under the 1940 Act?
Yes [_] No [_]
(IF SO, PLEASE XXXX THE BOX AND SKIP TO QUESTION 5)
If you have answered "no" to all of the foregoing questions, please describe:
(i) the exact legal description of your entity (e.g., corporation, partnership,
limited liability company, etc.); (ii) whether the legal entity so described is
managed by another entity and the exact legal description of such entity (repeat
this step until the last entity described is managed by a person or persons,
each of whom is described in any one of (a) through (d) above), (iii) the names
of each person or persons having voting and investment control over the
Company's securities that the entity owns (e.g., director(s), general
partner(s), managing member(s), etc.).
LEGAL DESCRIPTION OF ENTITY:
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NAME OF ENTITY(IES) MANAGING SUCH ENTITY (IF ANY):
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NAME OF ENTITY(IES) MANAGING SUCH ENTITY(IES) (IF ANY):
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NAME(S) OF NATURAL PERSONS HAVING VOTING OR INVESTMENT
CONTROL OVER THE SHARES HELD BY SUCH ENTITY(IES):
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5. OWNERSHIP OF THE COMPANY'S SECURITIES. This question covers your
beneficial ownership of the Company's securities. Please consult the
APPENDIX A to this Questionnaire for information as to the meaning of
"beneficial ownership." State the number of shares of the Company's
common stock that you beneficially owned as of the date this
Questionnaire is signed:
NO. OF SHARES OF STOCK _______________________________________
6. ACQUISITION OF SHARES. Please describe below the manner in which you
acquired your shares of Common Stock of the Company including, but not
limited to, the date, the name and address of the seller(s), the
purchase price and pursuant to which documents (the "ACQUISITION
DOCUMENTS"). Please forward such documents used to acquire your shares
as provided below.
7. PLAN OF DISTRIBUTION. I have reviewed the proposed "Plan of
Distribution" attached to this Registration Rights Agreement as ANNEX
A, and agree that the statements contained therein reflect my intended
method(s) of distribution or, to the extent these statements are
inaccurate or incomplete, I have communicated in writing to one of the
parties listed above my signature on page 6 any changes to the proposed
"Plan of Distribution" that are required to make these statements
accurate and complete. [_] (PLEASE CHECK THE BOX IF YOU HAVE MADE ANY
CHANGES TO APPENDIX B)
8. RELIANCE ON RESPONSES. I acknowledge and agree that the Company and its
legal counsel shall be entitled to rely on my responses in this
Questionnaire in all matters pertaining to the registration statement
and the sale of any shares of common stock of the Company pursuant to
the registration statement.
9. NASD. The National Association of Securities Dealers, Inc. ("NASD") may
request, in connection with their review of the Registration Statement
and Prospectus under the Securities Act of 1933, as amended, that the
Company inform them of the names of all persons who purchased
securities from the Company, together with any affiliations with the
NASD of such purchasers. In order to aid the Company in responding to
such request, the undersigned furnishes the following information:
PART A: DETERMINATION OF RESTRICTED PERSON STATUS:
PLEASE CHECK ALL APPROPRIATE CATEGORIES.
The undersigned is:
___ (i) a broker-dealer;
___ (ii) an officer, director, general partner,
associated person(1) or employee of a broker-dealer
(other than a limited business broker-dealer)(2);
___ (iii) an agent of a broker-dealer (other than a
limited business broker-dealer) that is engaged in
the investment banking or securities business;
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1 A person "associated with" a broker-dealer includes any natural person engaged
in the investment banking or securities business who is directly or indirectly
controlling or controlled by a broker-dealer, any partner, director, officer or
sole proprietor of a broker-dealer.
2 A limited business broker-dealer is any broker-dealer whose authorization to
engage in the securities business is limited solely to the purchase and sale of
investment company/variable contracts securities and direct participation
program securities.
___ (iv) an immediate family member(3) of a person
described in (ii) or (iii) above. Under certain
circumstances, if the undersigned checks this
category, he/she/it may be able to participate in New
Issue investments. The Company may request additional
information in order to determine the eligibility of
the undersigned under this Restricted Person
category;
___ (v) a finder or any person acting in a fiduciary
capacity to a managing underwriter, including, but
not limited to, attorneys, accountants and financial
consultants;
___ (vi) a person who has authority to buy or sell
securities for a bank, savings and loan institution,
insurance company, investment company, investment
advisor or collective investment account(4)
(including a private investment vehicle such as a
hedge fund or an offshore fund);
___ (vii) an immediate family member of a person
described in (v) or (vi) above who materially
supports(5), or receives material support from, the
undersigned;
___ (viii) a person listed or required to be listed in
Schedule A, B or C of a Form BD (other than with
respect to a limited business broker-dealer), except
persons whose listing on Schedule A, B or C is
related to a person identified by an ownership code
of less than 10% on Schedule A;
___ (ix) a person that (A) directly or indirectly
owns 10% or more of a public reporting company
listed, or required to be listed, in Schedule A of a
Form BD or (B) directly or indirectly owns 25% or
more of a public reporting company listed, or
required to be listed in Schedule B of a Form BD, in
each case (A) or (B), other than a reporting company
that is listed on a national securities exchange or
is traded on the Nasdaq National Market, or other
than with respect to a limited business
broker/dealer;
___ (x) an immediate family member of a person
described in (viii) or (ix) above. Under certain
circumstances, if the undersigned places a check next
to this category, he/she/it may be able to
participate in New Issue investments. The Company may
request additional information in order to determine
the eligibility of the undersigned under this
Restricted Person category;
___ (xi) any entity (including a corporation,
partnership, limited liability company, trust or
other entity) in which any person or persons listed
in (i)-(x) above has a beneficial interest(6); or
___ None of the above categories apply and the
undersigned is eligible to participate in New Issue
securities.
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3 The term "Immediate family" includes the lnvestor's: (i) parents, (ii)
mother-in-law or father-in-law. (iii) husband or wife, (iv) brother or sister,
(v) brother-in-law or sister-in-law, (vi) son-in-law or daughter-in-law, (vii)
children, and (viii) any other person who is supported, directly or indirectly,
to a material extent by an officer, director, general partner, employee, agent
of a broker-dealer or person associated with a broker-dealer.
4 A "collective investment account" is any hedge fund, investment corporation,
or any other collective investment vehicle that is engaged primarily in the
purchase and/or sale of securities. investment clubs (groups of individuals who
pool their money to invest in stock or other securities and who are collectively
responsible for making investment decisions) and family investment vehicles
(legal entities that are beneficially owned solely by immediate family members
(as defined above)) are NOT considered collective investment accounts.
5 The term "material" support" means directly or indirectly providing more than
25% of a person's income in the prior calendar year or living in the same
household with a member of one's Immediate family.
6 The term `beneficial interest" means any economic interest such as the right
to share in gains or losses. The receipt of a management or performance based
fee for operating a collective investment account, or other fee for acting in a
fiduciary capacity, is NOT considered a beneficial interest in the account;
however, if such fee is subsequently invested into the account (as a deferred
fee arrangement or otherwise), it is considered a beneficial interest in that
account.
PART B: DETERMINATION OF EXEMPTED ENTITY STATUS:
The undersigned is:
___ (i) a publicly-traded entity (other than a
broker-dealer or an affiliate of a broker-dealer,
where such broker-dealer is authorized to engage in
the public offering of New Issues either as a selling
group member or underwriter) that is listed on a
national securities exchange or traded on the Nasdaq
National Market or is a foreign issuer whose
securities meet the quantitative designation criteria
for listing on a national securities exchange or
trading on the Nasdaq National Market;
____ (ii) an investment company registered under the
Investment Company Act of 1940, as amended;
____ (iii) a corporation, partnership, limited
liability company, trust or any other entity
(including a private investment vehicle such as a
hedge fund or an offshore fund, or a broker-dealer
organized as an investment partnership) and
(A) the beneficial interests of Restricted
Persons do not exceed in the aggregate 10%
of such entity; or
(B) such entity limits participation by
Restricted Persons to not more than 10% of
the profits and losses of New Issues;
____ (iv) an investment company organized under the
laws of a foreign jurisdiction and
(A) the investment company is listed on a
foreign exchange or authorized for sale to
the public by a foreign regulatory
authority; and
(B) no person owning more than 5% of the
shares of the investment company is a
Restricted Person;
____ (v) (A) an employee benefits plan under the U.S.
Employee Retirement Income Security Act of 1974, as
amended, that is qualified under Section 401(a) of
the Internal Revenue Code of 1986, as amended (the
"CODE") and such plan is not sponsored solely by a
broker-dealer, (B) a state or municipal government
benefits plan that is subject to state and/or
municipal regulation or (C) a church plan under
Section 414(e) of the Code;
___ (vi) a tax exempt charitable organization under
Section 501(c)(3) of the Code;
___ (vii) a common trust fund or similar fund as
described in Section 3(a)(12)(A)(iii) of the
Securities Exchange Act of 1934, as amended, and the
Company
(A) has investments from 1,000 or more
accounts, AND
(B) does not limit beneficial interests in
the Company principally to trust accounts of
Restricted Persons; or
___ (viii) an insurance company general, separate or
investment account, and
(A) the account is funded by premiums from
1,000 or more policyholders, or, if a
general account, the insurance company has
1,000 or more policyholders, AND
(B) the insurance company does not limit the
policyholders whose premiums are used to
fund the account principally to Restricted
Persons, or, if a general account, the
insurance company does not limit its
policyholders principally to Restricted
Persons.
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Please acknowledge that your answers to the foregoing questions are
true and correct to the best of your information and belief by signing and
dating this Questionnaire where indicated below. Please return the completed
executed questionnaire VIA FAX to ___________________________
_________________________________ AS SOON AS POSSIBLE.
If at any time you discover that your answer to any question was
inaccurate, or if any event occurring after your completion hereof would require
a change in your answer to any questions, please immediately contact
____________________________.
Date: , 200
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(PRINT NAME OF SELLING STOCKHOLDER)
By:
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(SIGNATURE)
Name:
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(PRINT NAME)
Title:
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APPENDIX A
1. DEFINITION OF "BENEFICIAL OWNERSHIP"
(a) A "Beneficial Owner" of a security includes any person who,
directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares:
(1) Voting power which includes the power to vote, or to
direct the voting of, such security; and/or
(2) Investment power which includes the power to dispose,
or direct the disposition of, such security.
Please note that EITHER voting power OR investment power, OR
both, is sufficient for you to be considered the beneficial
owner of shares.
(b) Any person who, directly or indirectly, creates or uses a
trust, proxy, power of attorney, pooling arrangement or any
other contract, arrangement or device with the purpose or
effect of divesting such person of beneficial ownership of a
security or preventing the vesting of such beneficial
ownership as part of a plan or scheme to evade the reporting
requirements of the federal securities acts shall be deemed to
be the beneficial owner of such security.
(c) Notwithstanding the provisions of paragraph (a), a person is
deemed to be the "beneficial owner" of a security, if that
person has the right to acquire beneficial ownership of such
security within 60 days, including but not limited to any
right to acquire: (A) through the exercise of any option,
warrant or right; (B) through the conversion of a security;
(C) pursuant to the power to revoke a trust, discretionary
account or similar arrangement; or (D) pursuant to the
automatic termination of a trust, discretionary account or
similar arrangement; provided, however, any person who
acquires a security or power specified in paragraphs (A), (B)
or (C) above, with the purpose or effect of changing or
influencing the control of the issuer, or in connection with
or as a participant in any transaction having such purpose or
effect, immediately upon such acquisition shall be deemed to
be the beneficial owner of the securities which may be
acquired through the exercise or conversion of such security
or power.
