EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of May 14,
2001, by and among NX Networks, Inc., a Delaware corporation, with its
headquarters located at 00000 Xxxxxx Xxxxxxxxxx Xxxxx, Xxxxxxx, XX 00000 (the
"COMPANY"), and each of the undersigned (together with their respective
affiliates and permitted assignees or transferees of all of their respective
rights hereunder, the "INITIAL INVESTORS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors (i) shares of its Series E
8% Convertible Preferred Stock (the "PREFERRED SHARES"), that are convertible
into shares of the Company's common stock, par value $.05 per share (the "COMMON
STOCK"), upon the terms and subject to the limitations and conditions set forth
in the Certificate of Designations with respect to the Preferred Shares (the
"CERTIFICATE OF DESIGNATION"), and (ii) warrants (the "WARRANTS") to acquire
380,000 shares of Common Stock, upon the terms and conditions and subject to the
limitations and conditions set forth in the Stock Purchase Warrant, dated May
14, 2001, issuable in connection with the Preferred Shares; and
B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Initial Investors hereby agree as follows:
1. Definitions.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "INVESTORS" means the Initial Investors and any permitted
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("RULE 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(iii) "REGISTRABLE SECURITIES" means (A) the Conversion Shares (as
defined in the Securities Purchase Agreement) issued or issuable upon conversion
of or otherwise pursuant to the Preferred Shares; (B) the Warrant Shares (as
defined in the Securities Purchase Agreement) issued or issuable upon exercise
of or otherwise pursuant to the Warrants; and (C) any shares of capital stock
issued or issuable as a dividend on or in exchange for or otherwise with respect
to any of the foregoing; provided, however, that Registrable Securities shall
not include shares in which the registration rights conferred by this Agreement
are not transferred as provided by Section 9 of this Agreement.
(iv) "REGISTRATION STATEMENT(S)" means a registration statement(s) of
the Company under the 0000 Xxx.
b. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
2. Registration.
a. MANDATORY REGISTRATION. The Company shall prepare, and, on or prior
to the date (the "FILING DATE") which is fifteen (15) business days after the
closing date with respect to the Closing under the Securities Purchase Agreement
(the "CLOSING DATE"), file with the SEC a Registration Statement on Form S-3
(or, if Form S-3 is not then available, on such form of Registration Statement
as is then available to effect a registration of the Registrable Securities,
subject to the consent of the Initial Investors, which consent will not be
unreasonably withheld) covering the resale of the Registrable Securities, which
Registration Statement, to the extent allowable under the 1933 Act and the rules
and regulations promulgated thereunder (including Rule 416), shall state that
such Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of or otherwise
pursuant to the Preferred Shares and exercise of or otherwise pursuant to the
Warrants to prevent dilution resulting from stock splits, stock dividends or
similar transactions. The number of shares of Common Stock initially included in
such Registration Statement shall be no less than one hundred fifty percent
(150%) of the aggregate number of Conversion Shares and Warrant Shares that are
then issuable upon conversion of or otherwise pursuant to the Preferred Shares
(based on the Conversion Price (as defined in the Certificate of Designation)
then in effect and assuming the Company does not default on any of its
obligations under this Agreement, the Certificate of Designation or the
Securities Purchase Agreement) and the exercise of or otherwise pursuant to the
Warrants (based on the Exercise Price (as defined in the Warrants) then in
effect), in each case without regard to any limitation on the Investor's ability
to convert the Preferred Shares or exercise the Warrants. The Company
acknowledges that the number of shares initially included in the Registration
Statement represents a good faith estimate of the maximum number of shares
issuable upon conversion of or otherwise pursuant to the Preferred Shares and
exercise of or otherwise pursuant to the Warrants. The Company shall provide the
Initial Investors and their counsel with a copy of the Registration Statement
and any pre- or post-effective amendment thereto not less than seven (7)
business days prior to the intended filing date and shall provide copies of any
supplements not less than two (2) business days prior to the intended filing
date.
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b. [Intentionally omitted]
c. PAYMENTS BY THE COMPANY. The Company shall use its best efforts to
obtain effectiveness of the Registration Statement as soon as practicable, but
in any event not later than the ninetieth (90th) calendar day after the Closing
Date (the "REGISTRATION DEADLINE"). If (i) the Registration Statement(s)
covering the Registrable Securities required to be filed by the Company pursuant
to Section 2(a) hereof is not filed by the Filing Date, (ii) the Registration
Statement(s) covering the Registrable Securities required to be filed by the
Company pursuant to Section 2(a) hereof is not declared effective by the SEC by
the Registration Deadline, (iii) after the Registration Statement has been
declared effective by the SEC, sales of all of the Registrable Securities cannot
be made pursuant to the Registration Statement, other than during such times as
the Company is seeking to amend its Registration Statement to register
additional shares pursuant to Section 3(b) hereof, or (iv) the Common Stock is
not listed or included for quotation on the Nasdaq SmallCap Market ("NASDAQ
SMALLCAP"), the Nasdaq National Market ("NNM"), the New York Stock Exchange (the
"NYSE") or the American Stock Exchange (the "AMEX") after being so listed or
included for quotation, then the Company will make payments to the Investors in
such amounts and at such times as shall be determined pursuant to this Section
2(c) as partial relief for the damages to the Investors by reason of any such
delay in or reduction of their ability to sell the Registrable Securities (which
remedy shall not be exclusive of any other remedies available at law or in
equity). The Company shall pay to each holder of the Preferred Shares or
Registrable Securities an amount of cash equal to the stated value of the
Preferred Shares then outstanding (and, in the case of holders of Registrable
Securities, the stated value of Preferred Shares from which such Registrable
Securities were converted) ("AGGREGATE SHARE PRICE") multiplied by three
hundredths (.03) times the sum of: (i) the number of months prorated for partial
months) after the Filing Date and prior to the date the Registration Statement
is filed with the SEC; provided, however, that there shall be excluded from such
period any delays which are solely attributable to changes required by the
Investors in the Registration Statement with respect to information relating to
the Investors, including, without limitation, changes to the plan of
distribution, the failure of the Investors to conduct their review of the
Registration Statement pursuant to Section 3(h) below in a reasonably prompt
manner or the failure of the Investors to provide information pursuant to
Section 4(a) hereof in a reasonably prompt manner; (ii) the number of months
(prorated for partial months) after the Registration Deadline and prior to the
date the Registration Statement is declared effective by the SEC; provided,
however, that there shall be excluded from such period any delays which are
solely attributable to changes required by the Investors in the Registration
Statement with respect to information relating to the Investors, including,
without limitation, changes to the plan of distribution, the failure of the
Investors to conduct their review of the Registration Statement pursuant to
Section 3(h) below in a reasonably prompt manner or the failure of the Investors
to provide information pursuant to Section 4(a) hereof in a reasonably prompt
manner; (iii) the number of months (prorated for partial months) during the
Registration Period (as defined below) that sales of all of the Registrable
Securities cannot be made pursuant to the Registration Statement after the
Registration Statement has been declared effective (including, without
limitation, when sales cannot be made by reason of the Company's failure to
properly supplement or amend the prospectus included therein in accordance with
the terms of this Agreement (including Section 3(b) hereof or otherwise), but
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excluding any days during an Allowed Delay (as defined in Section 3(f)); and
(iv) the number of months (prorated for partial months) that the Common Stock is
not listed or included for quotation on the Nasdaq SmallCap, the NNM, NYSE or
AMEX or that trading thereon is halted after the Registration Statement has been
declared effective. (For example, if the Registration Statement becomes
effective one (1) month after the end the Registration Deadline, the Company
would pay $30,000 for each $1,000,000 of Aggregate Share Price. If thereafter,
sales could not be made pursuant to the Registration Statement for an additional
period of one (1) month, the Company would pay an additional $30,000 for each
$1,000,000 of Aggregate Share Price.) Such amounts shall be paid in cash within
five (5) calendar days after the end of each period that gives rise to such
obligation, provided that, if any such period extends for more than thirty (30)
calendar days, interim payments shall be made for each such thirty (30) day
period.
d. ELIGIBILITY FOR FORM S-3. The Company represents and warrants that
it meets the registrant eligibility and transaction requirements for the use of
Form S-3 for registration of the resale by the Initial Investors and any other
Investors of the Registrable Securities and the Company shall file all reports
required to be filed by the Company with the SEC in a timely manner so as to
maintain such eligibility for the use of Form S-3.
3. Obligations of the Company.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC by the
Filing Date, a Registration Statement with respect to the number of Registrable
Securities provided in Section 2(a), and thereafter use its commercially
reasonable best efforts to cause such Registration Statement relating to
Registrable Securities to become effective as soon as possible after such filing
(but in no event later than the Registration Deadline), and, subject to any
Allowed Delay (as defined below), keep the Registration Statement effective
pursuant to Rule 415 at all times until such date as is the earliest of (i) the
date on which all of the Registrable Securities have been sold, (ii) the date on
which the Registrable Securities (in the opinion of counsel to the Initial
Investors) may be immediately sold to the public without registration or
restriction (including without limitation as to volume by each holder thereof)
under the 1933 Act and (iii) five (5) years from the Closing Date (the
"REGISTRATION PERIOD"), which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statements and the prospectus used in connection with the Registration
Statements as may be necessary to keep the Registration Statements 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 the Registration Statements
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until such time as all of such Registrable securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statements. In the event that on any
trading day (the "REGISTRATION TRIGGER DATE") the number of shares available
under a Registration Statement filed pursuant to this Agreement is insufficient
to cover all of the Registrable Securities issued or issuable upon conversion of
or otherwise pursuant to the Preferred Shares (based on the Conversion Price (as
defined in the Certificate of Designation) then in effect) and exercise of or
otherwise pursuant to the Warrants, in each case without giving effect to any
limitations on the Investors' ability to convert the Preferred Shares or
exercise the Warrants, the Company shall amend the Registration Statement, or
file a new Registration Statement (on the short form available therefore, if
applicable), or both, so as to cover one hundred fifty percent (150%) of all of
the Registrable Securities so issued or issuable (without giving effect to any
limitations on conversion or exercise contained in the Certificate of
Designation or Warrants, as applicable) as of the Registration Trigger Date, in
each case, as soon as practicable, but in any event within twenty (20) calendar
days after the necessity therefor arises (based on relevant factors on which the
Company reasonably elects to rely). The Company shall use its best efforts to
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof, but in any event within ninety
(90) calendar days of the Registration Trigger Date. The provisions of Section
2(c) above shall be applicable with respect to the Company's obligations under
this Section 3(b).
c. The Company shall furnish to each Investor whose Registrable
Securities are included in a Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of each Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other
than any portion of any thereof which contains information for which the Company
has sought confidential treatment), and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor. The Company will immediately notify each Investor by
facsimile or Federal Express of the effectiveness of each Registration Statement
or any post-effective amendment. The Company will promptly respond to any and
all comments received from the SEC, with a view towards causing each
Registration Statement or any amendment thereto to be declared effective by the
SEC as soon as practicable and shall file an acceleration request as soon as
practicable following the resolution or clearance of all SEC comments or, if
applicable, following notification by the SEC that any such Registration
Statement or any amendment thereto will not be subject to review.
d. The Company shall use reasonable efforts to (i) register and qualify
the Registrable Securities covered by the Registration Statements under such
other securities or "blue sky" laws of such jurisdictions in the United States
as the Investors who hold a majority in interest of the Registrable Securities
being offered reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
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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 file a general
consent to service of process in any such jurisdiction.
e. [Intentionally omitted]
f. As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor of the happening of any event, of which the
Company has knowledge, as a result of which the prospectus included in any
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 not misleading, and use its best
efforts promptly to prepare a supplement or amendment to any Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request; provided that, for not more than twenty (20) consecutive
Trading Days (or a total of not more than sixty (60) Trading Days in any twelve
(12) month period), the Company may delay the disclosure of material non-public
information concerning the Company (as well as prospectus or Registration
Statement updating) the disclosure of which at the time is not, in the good
faith opinion of the Company, in the best interests of the Company (an "ALLOWED
DELAY"); provided, further, that the Company shall promptly (A) notify the
Investors in writing of the existence of (but in no event, without the prior
written consent of an Investor (which consent will be accompanied by an
agreement to keep such information confidential), shall the Company disclose to
such Investor any of the facts or circumstances regarding) material non-public
information giving rise to an Allowed Delay and (B) advise the Investors in
writing to cease all sales under such Registration Statement until the end of
the Allowed Delay. Upon expiration of the Allowed Delay, the Company shall again
be bound by the first sentence of this Section 3(f) with respect to the
information giving rise thereto.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of any Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest possible moment and to notify each Investor who holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the resolution
thereof.
h. The Company shall permit a single firm of counsel designated by the
Initial Investors to review such Registration Statement, and all amendments and
supplements thereto (as well as all requests for acceleration or effectiveness
thereof and any correspondence between the Company and the SEC relating to the
Registration Statement) (collectively, the "REGISTRATION DOCUMENTS") a
reasonable period of time prior to their filing with the SEC, and not file (or
send) any Registration Documents in a form to which such counsel objects and
will not request acceleration of such Registration Statement without prior
notice to such counsel. The Investor agrees to review such Registration
Documents provided to it or its counsel and provide comments thereon, if any, to
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the Company within three (3) business days of its receipt thereof (in the case
of the Registration Statement), within seven (7) business days of its receipt
thereof (in the case of any pre- or post effective amendments thereto) or within
2 (two) business days of the receipt thereof (in the case of any supplements to
the Registration Statement or other correspondence), as applicable. The sections
of such Registration Statement covering information with respect to the
Investors, the Investor's beneficial ownership of securities of the Company or
the Investors intended method of disposition of Registrable Securities shall
conform to the information provided to the Company by each of the Investors.
i. The Company shall make generally available to its security holders
as soon as practicable, but not later than ninety (90) calendar days after the
close of the period covered thereby, an earnings statement (in form complying
with 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 the Registration Statement.
j. [Intentionally omitted]
k. The Company shall make available for inspection by (i) any Investor,
(ii) any underwriter participating in any disposition pursuant to a Registration
Statement, (iii) one firm of attorneys and one firm of accountants or other
agents retained by the Initial Investors, (iv) one firm of attorneys and one
firm of accountants or other agents retained by all other Investors, and (v) one
firm of attorneys retained by all such underwriters (collectively, the
"INSPECTORS") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively, the "RECORDS"), as shall
be deemed necessary by each Inspector to enable each Inspector to exercise its
due diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence. Nothing herein shall be deemed to limit the
Investor's ability to sell Registrable Securities in a manner which is otherwise
consistent with applicable laws and regulations.
l. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other 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 or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to such Investor prior to making such disclosure, and
allow the Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
m. The Company shall (i) cause all the Registrable Securities covered
by the Registration Statement to be listed on each national securities exchange
on which securities of the same class or series issued by the Company are then
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listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (ii) to the extent the securities of the
same class or series are not then listed on a national securities exchange,
secure the designation and quotation, of all the Registrable Securities covered
by the Registration Statement on the NNM or the Nasdaq SmallCap or, if not
eligible for the NNM or the Nasdaq SmallCap, on the OTC BB and, without limiting
the generality of the foregoing, to arrange for at least two market makers to
register with the National Association of Securities Dealers, Inc. ("NASD") as
such with respect to such Registrable Securities.
n. The Company shall provide a transfer agent and registrar, which may
be a single entity, for the Registrable Securities not later than the effective
date of the Registration Statement.
o. [Intentionally omitted]
p. At the request of the holders of a majority-in-interest of the
Registrable Securities, the Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and any prospectus used in connection with the
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.
q. [Intentionally omitted]
r. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement in accordance with the terms of this
Agreement.
s. The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including without limitation the 1933 Act and the 1934 Act and the rules and
regulations promulgated by the SEC).
4. Obligations of the Investors.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least seven (7) business
days prior to the first anticipated filing date of the Registration Statement,
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the Company shall notify each Investor of the information the Company requires
from each such Investor.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate in a timely manner with the Company as
reasonably requested by the Company in connection with the preparation and
filing of the Registration Statements hereunder, unless such Investor has
notified the Company in writing of such Investor's election to exclude all of
such Investor's Registrable Securities from the Registration Statements.
c. In the event Investors holding a majority-in-interest of the
Registrable Securities being registered (with the approval of the Initial
Investors) determine to engage the services of an underwriter, each Investor
agrees to enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f),
such Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(f) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below.
5. Expenses of Registration.
All 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
qualification fees, printers and accounting fees, the fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements (up to
$10,000) of one counsel selected by the Initial Investors pursuant to Section
3(h) hereof shall be borne by the Company.
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6. Indemnification.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities,
(ii) the directors, officers, partners, employees, agents and each person who
controls any Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 ACT"), if any, (iii) any underwriter
(as defined in the 0000 Xxx) for the Investors, and (iv) the directors,
officers, partners, employees and each person who controls any such underwriter
within the meaning of the 1933 Act or the 1934 Act, if any (each, an
"INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "CLAIMS") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated 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 light of the
circumstances under which the statements therein were made, not misleading; or
(iii) any violation or alleged violation by the Company of the 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 (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse the Indemnified Person, promptly as such expenses are incurred and are
due and payable, for any reasonable 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 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 any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of such Registration Statement or any such amendment thereof or
supplement thereto; (ii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld; and (iii) with
respect to any prospectus, shall not inure to the benefit of any Indemnified
Person if the untrue statement or omission of material fact contained in such
prospectus was corrected on a timely basis in an amendment or supplement, and
such corrected prospectus was timely made available by the Company pursuant to
Section 3(c) hereof, and the Indemnified Person was promptly advised by the
Company in writing not to use the incorrect prospectus prior to the use giving
rise to a Violation and such Indemnified Person, notwithstanding such advice,
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used it. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
b. In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees severally and not jointly to
indemnify, hold harmless and defend, to the same extent and in the same manner
set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement, each person, if any, who controls
the Company within the meaning of the 1933 Act or the 1934 Act, any underwriter
and any other stockholder selling securities pursuant to the Registration
Statement or any of its directors or officers or any person who controls such
stockholder or underwriter within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim to which any of them may become subject, under the 1933 Act,
the 1934 Act or otherwise, insofar as such Claim arises out of or is based upon
any Violation by such Investor, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement; and subject to Section 6(c),
such Investor will reimburse any legal or other expenses (promptly as such
expenses are incurred and are due and payable) reasonably incurred by them in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Agreement (including this Section 6(b) and Section 7) for only
that amount as does not exceed the net proceeds to such Investor 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 Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the 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 (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses 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
11
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal counsel
for the Indemnified Persons or the Indemnified Parties, as applicable, and such
legal counsel shall be selected by Investors holding a majority-in-interest of
the Registrable Securities included in the Registration Statement to which the
Claim relates (with the approval of a majority-in-interest of the Initial
Investors), if the Investors are entitled to indemnification hereunder, or the
Company, if the Company is entitled to indemnification hereunder, as applicable.
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
actually prejudiced in its ability to defend such action. The indemnification
required by this Section 6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.
7. Contribution.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. Reports under the 1934 Act.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
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c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.
9. Assignment of Registration Rights.
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of Registrable Securities
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) 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 contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, (vi) such transferee shall be, and shall certify that it is, an
"Accredited Investor" as that term defined in Rule 501 of Regulation D
promulgated under the 1933 Act and (vii) after such transfer, such transferee
will hold at least 50,000 Registrable Securities.
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 written consent of the Company, each
of the Initial Investors (to the extent such Initial Investor still owns
Registrable Securities) and Investors who hold a majority interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.
11. Miscellaneous.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms hereof
shall be sent by certified or registered mail (return receipt requested) or
delivered personally or by courier (including a recognized overnight delivery
13
service) or by facsimile and shall be effective five (5) calendar days after
being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery service) or by facsimile, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
NX Networks, Inc.
00000 Xxxxxx Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention:
Facsimile:
With copy to:
Xxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxx & Xxxxxx LLP
Two Stamford Plaza
000 Xxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Facsimile: 000-000-0000
If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement, with a copy to
all other Investors.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to agreements made and to be
performed in the State of Delaware (without regard to principles of conflict of
laws). Both parties irrevocably consent to the exclusive jurisdiction of the
United States federal courts and the state courts located in Delaware with
respect to any suit or proceeding based on or arising under this Agreement, the
agreements entered into in connection herewith or the transactions contemplated
hereby or thereby and irrevocably agree that all claims in respect of such suit
or proceeding may be determined in such courts. Both parties irrevocably waive
the defense of an inconvenient forum to the maintenance of such suit or
proceeding. Both parties further agree that service of process upon a party
mailed by first class mail shall be deemed in every respect effective service of
process upon the party in any such suit or proceeding. Nothing herein shall
affect either party's right to serve process in any other manner permitted by
law. Both parties agree that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
e. This Agreement and the Securities Purchase Agreement (including all
schedules and exhibits thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
14
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the Securities
Purchase Agreement 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 hereof, this Agreement
shall inure to the benefit of and be binding upon the 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 two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by 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 the 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. Except as otherwise provided herein, all consents and other
determinations to be made by the Investors pursuant to this Agreement shall be
made by Investors holding a majority of the Registrable Securities, determined
as if all of the Preferred Shares and Warrants then outstanding have been
converted into or exercised for Registrable Securities.
k. Notwithstanding anything herein to the contrary, each Investor is
acting in its separate and individual capacity without intent to act in concert
with any other Investor with respect to its rights and obligations hereunder.
l. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to each Investor by vitiating the intent
and purpose of the transactions contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for breach of its obligations hereunder will
be inadequate and agrees, in the event of a breach or threatened breach by the
Company of any of the provisions hereunder, that each Investor shall be
entitled, in addition to all other available remedies in law or in equity, to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof, without
the necessity of showing economic loss and without any bond or other security
being required.
m. 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.
15
n. In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any
provision hereof which may prove invalid or unenforceable under any law shall
not affect the validity or enforceability of any other provision hereof.
o. The initial number of Registrable Securities included in any
Registration Statement and each increase to the number of Registrable Securities
included therein shall be allocated pro rata among the Investors based on the
number of Registrable Securities held by each Investor at the time of such
establishment or increase, as the case may be. In the event an Investor shall
sell or otherwise transfer any of such holder's Registrable Securities, each
permitted transferee shall be allocated a pro rata portion of the number of
Registrable Securities included in a Registration Statement for such transferor.
Any shares of Common Stock included on a Registration Statement and which remain
allocated to any person or entity which does not hold any Registrable Securities
shall be allocated to the remaining Investors, pro rata based on the number of
shares of Registrable Securities then held by such Investors. For the avoidance
of doubt, the number of Registrable Securities held by an Investor shall be
determined as if all Preferred Shares and Warrants then outstanding and held by
an Investor were converted into or exercised for Registrable Securities.
[signature page follows]
16
IN WITNESS WHEREOF, the Company and the Initial Investors have caused
this Agreement to be duly executed as of the date first above written.
NX NETWORKS INC.
BY:
--------------------------------
[BUYER]
BY:
--------------------------------
