REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated January 4,
2000, is made by and among Nexsan Technologies Incorporated, a Delaware
corporation (the "Company"), and the persons named on Schedule A hereto (each an
"Investor' and, collectively, the "Investors").
W I T N E S S E T H:
WHEREAS, the Company and the Investors are parties to certain Stock
Purchase Agreement dated the date hereof (the "Stock Purchase Agreement"); and
WHEREAS, in order to induce the Company to enter into the Stock Purchase
Agreement, and to induce the Investors to invest funds in the Company pursuant
to the Stock Purchase Agreement, the Investors and the Company hereby agree that
this Agreement shall govern the rights of the Investors to cause the Company to
register the shares of Common Stock purchased by the Investors and certain other
matters set forth herein.
NOW, THEREFORE, THE PARTIES HERBY AGREE AS FOLLOWS:
ARTICLE I
CERTAIN DEFINITIONS
1.01 Definitions. For purposes of this Agreement, the following terms shall
have the meaning ascribed to them below:
The terms "Affiliate" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common control
with such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York generally are authorized or required by law or other government actions
to close.
"Effectiveness Date" means the 120th day following the Closing Date.
"Effectiveness Period" shall have the meaning set forth in Section 2.01(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means the 45th day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case may be, from
time to time of Registrable Securities.
"Holders' Representative" means the Beechtree Capital, Ltd. the entity
acting as the representative of the Holders in connection with negotiating this
Agreement.
"Indemnified Party" shall have the meaning set forth in Section 2.05(c).
"Indemnifying Party" shall have the meaning set forth in Section 2.05(c).
"Losses" shall have the meaning set forth in Section 2.05(a).
"New York Courts" shall have the meaning set forth in Section 4.09.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"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 (a) the Shares of Common Stock issuable to
the Investors as contemplated hereby, and (b) up to 413,000 shares of Common
Stock which may be registered by the Company and/or the certain persons named in
Schedule B hereto
"Registration Statement" means the registration statement contemplated by
Section 2.01(a), including the Prospectus, amendments and supplements to such
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 such registration statement.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means one law firm acting as counsel to the Holders, for
which the Holders will be reimbursed by the Company pursuant to Section 5.01.
"Transactions Documents" means this Registration Rights Agreement and the
Stock Purchase Agreement heretofore defined.
The plural of any defined term shall have a meaning
correlative to such defined term.
ARTICLE II
REGISTRATION RIGHTS
2.01 Registration of Shares. (a) On or prior to the Filing Date the Company
shall prepare and file with the SEC a Registration Statement covering all
Registrable Securities. The Registration Statement shall be on Form SB-2 (or,
if, for any reason, the Company does not register the resale of the Registrable
Securities on Form SB-2, the Registration Statement shall be on such other
appropriate form in accordance herewith as the Holders owning a majority in
interest of the Registrable Securities may consent). The Company 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 such Registration Statement continuously effective
under the Securities Act until the date which is two years after the date that
such Registration Statement is declared effective by the SEC or such earlier
date when all Registrable Securities covered by such Registration Statement have
been sold or may be sold without volume restrictions pursuant to Rule 144(k)
promulgated under the Securities Act, as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent (the "Effectiveness Period");
provided, however, that the Company shall not be deemed to have used its best
efforts to keep the Registration Statement effective during the Effectiveness
Period if it voluntarily takes any action that would result in the Holders not
being able to sell the Registrable Securities covered by such Registration
Statement during the Effectiveness Period, unless such action is required under
applicable law or the Company has filed a post-effective amendment to the
Registration Statement and the SEC has not declared it effective.
(b) Right to Postpone or Interrupt the Effective Date of the Registration
Statement. The Company will be entitled to postpone or interrupt the effective
date of the Registration Statement filed in connection with such registration
(and the use of the prospectus contained therein) if the Company determines, in
its best judgment, after consultation with counsel, that such Registration
Statement would require
the premature announcement of any material financing, acquisition, corporate
reorganization or other material corporate transaction or development involving
the Company which, in the Company's reasonable determination, would be
materially detrimental to the interests of the Company and all of its
stockholders. Any such postponement or interruption will be for a minimum period
reasonably required to avoid such premature disclosure. The Company promptly
will give the Holders written notice of such postponement or interruption.
2.02 Registration Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:
(a) Prepare and file with the SEC on or prior to the Filing Date, a
Registration Statement (and any additional Registration Statements as may be
required) in accordance with Section 2.01, and cause the Registration Statement
to become effective and remain effective as provided herein; provided, however,
that 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 (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish to the Holders
and their Special Counsel, copies of all such documents proposed to be filed,
which documents (other than those incorporated or deemed to be incorporated by
reference) will be subject to the review of such Holders and their Special
Counsel, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary,
in the opinion of respective counsel to such Holders, to conduct a reasonable
investigation within the meaning of the Securities Act (subject to customary
confidentiality arrangements in the event that any such investigation requests
the release of material non-public information concerning the Company, its
business or operations). The Company shall not file the Registration Statement
or any such Prospectus or any amendments or supplements thereto to which the
Holders of a majority of the Registrable Securities or their Special Counsel
shall reasonably object on a timely basis.
(b)(i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement 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 (or any
similar provisions then in force) promulgated under the Securities Act; (iii)
respond as promptly as practicable to any comments received from the SEC with
respect to the Registration Statement or any amendment thereto and promptly
provide the Holders true and complete copies of all correspondence from and to
the SEC relating to the Registration Statement; and (iv) comply with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration Statement as so
amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold and their
Special Counsel immediately (and, in the case of (i)(A) below, not less than
five (5) days prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than one (1) Business Day following the
day: (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
SEC notifies the Company whether there will be a "review" of such Registration
Statement and whenever the SEC comments in writing on such Registration
Statement (the Company shall provide true and complete copies thereof and all
written responses thereto to each of the Holders) 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 SEC or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the SEC of any stop order suspending the effectiveness of the Registration
Statement covering any or all of the Registrable Securities or the initiation of
any Proceeding for that purpose; (iv) if at any time any of the representations
and warranties of the Company contained in the Transaction Documents or in any
agreement contemplated hereby ceases to be true and correct in all material
respects; (v) of the receipt by the Company 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 (vi) of the occurrence of
any event that makes 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.
(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) Furnish to each Holder and their Special Counsel, without charge,
at least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent reasonably requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the SEC.
(f) Promptly deliver to each Holder and their Special Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each
amendment or supplement thereto as such Persons may reasonably request; and the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders and any underwriters in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
(g) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders and
their Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions as any Holder requests in writing, to keep each such registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement; provided, however, that the Company shall
not be required to qualify generally to do business in any jurisdiction where it
is not then so qualified or to take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject or
subject the Company to any material tax in any such jurisdiction where it is not
then so subject.
(h) Cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold
pursuant to a Registration Statement, which certificates shall be free of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such managing underwriters or
Holders may request at least three Business Days prior to any sale of
Registrable Securities.
(i) Upon the occurrence of any event contemplated by Section
2.02(c)(vi), as promptly as practicable, 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.
(j) Use its best efforts to cause all Registrable Securities relating
to such Registration Statement to be quoted on the over-the-counter bulletin
board and, at such time as it meets listing criteria, use its best efforts to
cause all Registrable Securities relating to such Registration Statement to be
listed on the American Stock Exchange.
(k) Make available for inspection by the selling Holders, a
representative of such Holders, and an attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case requested by any
such Holder, representative, attorney or accountant in connection with the
Registration Statement; provided, however, that any information that is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential by
such Persons, unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not known by such
Person to be bound by a confidentiality agreement with the Company.
(l) Comply with all applicable rules and regulations of the SEC and
any state securities authority.
(m) The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities and the beneficial ownership of Common Stock held by such selling
Holder as is required by law to be disclosed in the Registration Statement, and
the Company may exclude from such registration the Registrable Securities of any
such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or otherwise as
the holder of any securities of the Company, then such Holder shall have the
right to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar Federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder agrees by its acquisition of such Registrable Securities that
(i) it will not offer or sell any Registrable Securities under the Registration
Statement until it has received copies of the Prospectus as then amended or
supplemented as contemplated in Section 3(g) and notice from the Company that
such Registration Statement and any post-effective amendments thereto have
become effective as contemplated by Section 2.02(c) and (ii) 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.
Each Holder agrees by its acquisition of such Registrable Securities that,
upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 2.02(c)(ii), 2.02(c)(iii), 2.02(c)(iv), 2.02(c)(v) or
2.02(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 2.03(i), or until it is advised in writing (the "Advice") by the Company
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.
2.03 Registration Expenses (a) All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not the Registration Statement is filed or becomes
effective and whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The Investors' Representative and Direct Brokerage Inc.
shall pay all of said fees directly in the Company's behalf as they become due;
provided, however, that the Company shall repay the Investors' Representative
the entire amount of the fees incurred by it in the Company's behalf upon the
earlier of (i) the sale by the Company of a minimum of $4 million of its
securities or six (6) months from the date hereof. The fees and expenses
referred to in this Section 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 OTC electronic bulletin
board. and each other securities exchange or market on which Registrable
Securities are required hereunder to be listed and (B) in compliance with state
securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Holders in connection with Blue Sky
qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Holders of a majority of Registrable Securities may
designate, (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriters, if any,
or 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 the Company and Special Counsel for the
Holders, in the case of the Special Counsel, to a maximum amount of $5,000, (v)
Securities Act liability insurance, if the Company so desires such insurance,
and (vi) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement. In addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit, the fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities exchange as
required hereunder. The Company's covenant and promise to repay the Investors'
Representative the fees and expenses incurred in behalf of the Company shall be
unconditional, irrevocable, without set-off or counterclaim and shall require no
further notice on the part of the Investors' Representative.
2.04 Reports under the Exchange Act. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the Act and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the Registration Statement filed by the Company for
the offering of the Registrable Securities;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the Exchange Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the effective date of the
Registration Statement;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the Registration Statement),
the Securities Act and the Exchange Act (at any time after it has become subject
to such reporting requirements), or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (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 in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
2.05 Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents (including any underwriters retained by such Holder
in connection with the offer and sale of Registrable Securities), brokers
(including brokers who offer and sell Registrable Securities as principal as a
result of a pledge or any failure to perform under a margin call of Common
Stock), investment advisors and employees of each of them, each Person who
controls any 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, settlements, judgments, costs (including, without limitation, costs
of preparation and reasonable attorneys' fees) and expenses (collectively,
"Losses"), as incurred, 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 such untrue
statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company 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 Registerable 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. The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding of which the Company
is aware in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (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
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or arising solely out of or based solely
upon any omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading to the extent, but only to the
extent, that such untrue statement or omission is contained in any information
so furnished in writing by such Holder to the Company specifically for inclusion
in the Registration Statement or such Prospectus 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. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(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 promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall 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 it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely 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; or (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 such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected 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 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 10 Business
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 2.05(a)
or 2.05(b) is unavailable to an Indemnified Party because of a failure or
refusal f a governmental authority to enforce such indemnification in accordance
with its terms (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 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
2.05(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
contribution pursuant to this Section 2.05(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 2.05(d), the Holders shall not be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by the Investors from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that the Holders have otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
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.
(e) The obligations of the Company and the Holders under this Section
2.05 shall survive the completion of any offering of Registerable Securities in
a registration statement under this Article II, and otherwise.
2.06 Assignment of Registration Rights. The rights of a Holder hereunder,
including the right to have the Company register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be
automatically assignable by such Holder to any assignee or transferee of all or
a portion of the Shares referenced in the definition of Registrable Securities
without the consent of the Company if: (i) such Holder 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 such registration rights are
being transferred or assigned, (iii) at or before the time the Company receives
the written notice contemplated by clause (ii) of this Section, the transferee
or assignee agrees in writing with the Company to be bound by all of the
provisions of this Agreement, and (iv) such transfer shall have been made in
accordance with the applicable requirements of the Stock Purchase Agreements.
The rights to assignment shall apply to the Holders' (and to subsequent)
successors and assigns.
2.07 No Registration of Other Securities. Except for the Registrable
Securities, the Company shall not, without the prior written consent of the
Holders holding not less than fifty percent (50%) of the then outstanding
Shares, register for
resale any securities of the Company for a period of not less than 90 days after
the date that the Registration Statement is declared effective by the SEC.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Holder as follows:
3.01 Corporate Organization; Etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to carry on its business as
it is now being conducted and to own the properties and assets it now owns; is
duly qualified or licensed to do business as a foreign corporation in good
standing in the jurisdictions listed in Section 3.01 of the Disclosure Schedule,
which are all the jurisdictions in which such qualification is required except
jurisdictions in which the Company's failure to qualify to do business will have
no material adverse effect on the business, prospects, operations, properties,
assets or condition (financial or otherwise) of the Company or any of its
subsidiaries.
3.02 Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations
hereunder. The execution and delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of the Company. This Agreement
has been duly executed by the Company and when delivered in accordance with the
terms hereof shall constitute the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate of incorporation, by-laws or other charter documents.
3.03 No Violation. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate any
provision of the Certificate of Incorporation or By-Laws of the Company or any
subsidiary of the Company ("Company Subsidiary"), or violate, or be in conflict
with, or constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or cause the acceleration of the
maturity of any debt or obligation pursuant to, or result in the creation or
imposition of any security interest, lien or other encumbrance upon any property
or assets of the Company or any Company Subsidiary under, any agreement or
commitment to which the
Company or any Company Subsidiary is a party or by which the Company or any
Company Subsidiary is bound, or to which the property of the Company or any
Company Subsidiary is subject, or violate any statute or law or any judgment,
decree, order, regulation or rule of any court or governmental authority.
ARTICLE IV
COVENANTS OF THE COMPANY
4.01 Delivery of Financial Statements. The Company shall deliver to each
Holder:
(a) as soon as practicable, but in any event within ninety (90) days
after the end of each fiscal year of the Company, an income statement for such
fiscal year, a balance sheet of the Company and statement of shareholder's
equity as of the end of such year, and a schedule as to the sources and
applications of funds for such year, such year-end financial reports to be in
reasonable detail, prepared in accordance with United States generally accepted
accounting principles ("GAAP"), and audited and certified by independent public
accountants of nationally recognized standing selected by the Company;
(b) as soon as practicable, but in any event within forty-five (45)
days after the end of each of the first three (3) quarters of each fiscal year
of the Company, an unaudited profit or loss statement, schedule as to the
sources and application of funds for such fiscal quarter and an unaudited
balance sheet and a statement of shareholder's equity as of the end of such
fiscal quarter and a statement showing the number of shares of each class and
series of capital stock and securities convertible into or exercisable for
shares of capital stock outstanding at the end of the period, the number of
common shares issuable upon conversion or exercise of any outstanding securities
convertible or exercisable for common shares and the exchange ratio or exercise
price applicable thereto, all in sufficient detail as to permit the Holder to
calculate its percentage equity ownership in the Company.
(c) within thirty (30) days of the end of each month, an unaudited
income statement and schedule as to the sources and application of funds and
balance sheet for and as of the end of such month, in reasonable detail;
(d) as soon as practicable, but in any event thirty (30) days prior to
the end of each fiscal year, a budget and business plan for the next fiscal
year, prepared on a monthly basis, including balance sheets and sources and
applications of unds statements for such months and, as soon as prepared, any
other budgets or revised budgets prepared by the Company;
(e) with respect to the financial statements called for in subsections
(b) and (c) of this Section 3.01, an instrument executed by the Chief Financial
Officer or President of the Company and certifying that such financial
statements were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment;
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Holder or any
assignee of the Holder may from time to time request, provided, however, that
the Company shall not be obligated under this subsection (f) or any other
subsection of Section 4.01 to provide information which it deems in good faith
to be a trade secret or similar confidential information.
4.02 Inspection. The Company shall permit each Holder, at such Holder's
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the Company's affairs, finances and accounts
with its officers, all at such reasonable times as may be requested by the
Holder; provided, however, that the Company shall not be obligated pursuant to
this Section 4.02 to provide access to any information which it reasonably
considers to be a trade secret or similar confidential information.
4.03 Termination of Information and Inspection Covenants. The covenants set
forth in subsections 4.01(c), (d) and (f) and Section 4.02 shall terminate as to
Holders and be of no further force or effect when the Company first becomes
subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the
Exchange Act.
4.04 Negative Covenants. So long as not less than twenty percent (20%) of
the Shares are still outstanding in the hands of the Holders, the Company shall
not, without the prior written consent of the Holders holding not less than
fifty one percent (51%) of such outstanding Shares:
(a) Authorize or issue any other class or series of stock in addition
to Common Stock;
(b) Declare or pay any dividends on Common Stock;
(c) Make, or permit any subsidiary to make, any loan or advance to, or
own any stock or other securities of, any subsidiary or other corporation,
partnership, or other entity unless it is wholly owned by the Company;
(d) Make, or permit any subsidiary to make, any loan or advance to any
person, including, without limitation, any employee, officer, agent or director
of the Company or any Company Subsidiary.
4.05 Key-Man Insurance. The Company shall obtain and maintain in full force
and effect, term life insurance on the lives of Xxxxxx Xxxxx, and Xxxx Xxxxxx
and Diamond Lauffin, in an amount of no less than $1,000,000 and no more than
$3,000,000, as may be determined by the Board of Directors of the Company, with
proceeds payable
to the Company until such time as the Board of Directors determines that such
insurance should be discontinued.
4.06 Positive Covenants. So long as not less than twenty percent (20%) of
the Shares remain outstanding in the hands of the Holders, the Company agrees as
follows:
(a) The Company will promptly pay and discharge, or cause to be paid
and discharged, when due and payable, all lawful taxes, assessments, and
governmental charges or levies imposed upon the income, profits, property, or
business of the Company or any subsidiary; provided, however, that any such tax,
assessment, charge, or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company shall have set aside on its books adequate reserves with respect
thereof, and provided further, that the Company will pay all such taxes,
assessments, charges, or levies forthwith upon the commencement of proceedings
to foreclose any lien that may have attached as security therefor. The Company
will promptly pay or cause to be paid when due, or in conformance with customary
trade terms, all other indebtedness incident to the operations of the Company;
(b) The Company will keep its properties and those of its subsidiaries
in good repair, working order, and condition, reasonable wear and tear excepted,
and from time to time make all needful and proper repairs, renewals,
replacements, additions, and improvements thereto; and the Company and its
subsidiaries will at all times comply with the provisions of all material leases
to which any of them is a party or under which any of them occupies property so
as to prevent any loss or forfeiture thereof or thereunder;
(c) The Company will keep its assets and those of its subsidiaries
that are of an insurable character insured by financially sound and reputable
insurers against loss or damage by fire, extended coverage, and explosion
insurance in amounts customary for companies in similar businesses similarly
situated; and the Company will maintain, with financially sound and reputable
insurers, insurance against other hazards, risks, and liabilities to persons and
property to the extent and in the manner customary for companies in similar
businesses similarly situated;
(d) The Company will keep true records and books of account in which
full, true, and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with generally accepted
accounting principles applied on a consistent basis;
(e) The Company and all its subsidiaries shall duly observe and
conform to all valid requirements of governmental authorities relating to the
conduct of their businesses or to their property or assets; and
(f) The Company shall maintain in full force and effect its corporate
existence, rights, and franchises and all licenses and other rights to use
patents,
processes, licenses, trademarks, trade names, or copyrights owned or possessed
by it or any subsidiary and deemed by the Company to be necessary to the conduct
of its business.
(g) The Company will retain independent public accountants of
recognized national standing who shall certify the Company's financial
statements at the end of each fiscal year. In the event the services of the
independent public accountants so selected, or any firm of independent public
accountants hereafter employed by the Company are terminated, the Company will
promptly thereafter notify the Holders and will request the firm of independent
public accountants whose services are terminated to deliver to the Holders a
letter from such firm setting forth the reasons for the termination of their
services. In the event of such termination, the Company will promptly thereafter
engage another firm of independent public accountants of recognized national
standing. In its notice to the Holders the Company shall state whether the
change of accountants was recommended or approved by the Board of Directors of
the Company or any committee thereof.
(h) The Company and all its subsidiaries shall duly observe and
conform to all valid requirements of governmental authorities relating to the
conduct of their businesses or to their properties or assets.
(i) The Company will cause each person now or hereafter employed by it
or any subsidiary with access to confidential information to enter into a
proprietary information and inventions agreement substantially in the form
approved by the Board of Directors.
ARTICLE V
MISCELLANEOUS
5.01 Aggregation of Stock. All shares of Registrable Securities held or
acquired by persons who are Affiliates shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
5.02 Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto, contains the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters.
5.03 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 date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 4:30 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later
than 4:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New
York City time) on such date, (iii) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as follows:
If to the Company: Nexsan Technologies Incorporated
Xxx Xxxxxxxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn.: Xxxx Xxxxxxx
Facsimile No.: (000) 000-0000
With copies to: Xxxxx Xxxx LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn.: Xxxxxxx Xxxxx, Esq.
Xxxxx Xxxxxx & Xxxxxxx
5 St. Michael's Court
St. Michael's Lane
Derby DE1 3JH
England
Attn.: Mr. Xxxxxx Xxxxxxx
Facsimile no. 000 00 (0)0000 000000
Ruffa & Ruffa, P.C.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
If to a Holder: To the address set forth on Exhibit A
With copies to Beechtree Capital, LLC
Xxx Xxxxxxxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn. Xxxxxx Xxxxx, Esq.
Facsimile No.: (000) 000-0000
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
5.04 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and the Investors; or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
5.05 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.06 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Investors. Except as set forth
in Section 3.1(a), neither Investor may assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Company. The
assignment by a party of this Agreement or any rights hereunder shall not affect
the obligations of such party under this Agreement.
5.07 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and, other than with respect to permitted assignees under Section 4.6,
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
5.08 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan (the "New York
Courts"), for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.
5.09 Survival. The representations, warranties, agreements and covenants
contained in this Agreement shall survive the Closing.
5.10 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and 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
page were an original thereof.
5.11 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW.]
IN WITNESS WHEREOF, the parties set their hands hereunto as of the date
first above written.
NEXSAN TECHNOLOGIES INCORPORATED
By: /s/ Xxxxxx Xxxxx
----------------------------
AS TO SECTION 2.03:
BEECHTREE CAPITAL, LTD.
By: /s/ Xxxxxx Xxxxx
----------------------------
SCHEDULE A
LIST OF INVESTORS
Name(s) and Address Signature No. of Shares
------------------- --------- -------------
---------------------------
Print name
---------------------------
Signature
---------------------------
Address
---------------------------
---------------------------
---------------------------
Print name
---------------------------
Signature
---------------------------
Address
---------------------------
---------------------------
SCHEDULE B
OTHER PERSONS ENTITLED TO REGISTER
SECURITIES IN THE REGISTRATION STATEMENT
Name and Address No. of Shares
Xxxxxx Xxxxx 230,000 ________________________
5 Duck Island Signature
Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxx XX00 0XX
Xxxxxx Xxxxxxx
Xxxx Xxxxxx 183,000 ________________________
00 Xxxxxxxxxx Xxxx Xxxxxxxxx
Xxxxxxxxxx, XX00 0XX
Xxxxxx Xxxxxxx
