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EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement"), is made and
entered into as of October 24, 1996, by and among Infinity Investors, Ltd., a
corporation organized and existing under the laws of Nevis, West Indies
("Infinity"), Seacrest Capital Limited, a corporation organized and existing
under the laws of Nevis, West Indies ("Seacrest") (Infinity and Seacrest are
each a "Purchaser" and collectively are the "Purchasers") and Compression Labs,
Incorporated, a Delaware corporation (the "Company").
This Agreement is made pursuant to the Convertible Preferred Stock
Purchase Agreement, dated October 24, 1996, by and among the Purchasers and the
Company (the "Purchase Agreement"). The execution of this Agreement is a
condition to the closing of the transactions contemplated by the Purchase
Agreement.
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 4.
"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.
"Closing Date" shall mean the Series C Closing Date, the Series D
Closing Date or the Series E Closing Date, as applicable, as further defined in
the Purchase Agreement.
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"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, $.001 par value per
share.
"Effectiveness Date" means, with respect to a Registration Statement,
the 90th day following the applicable Closing Date.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Event" shall have the meaning set forth in Section 6.
"Event Date" shall have the meaning set forth in Section 6.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means, with respect to a Registration Statement, the 30th
day following the applicable Closing Date.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 8(c).
"Indemnifying Party" shall have the meaning set forth in Section 8(c).
"Losses" shall have the meaning set forth in Section 8(a).
"New York Courts" shall have the meaning set forth in Section 10(i).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Preferred Shares" means the Series C Shares, Series D Shares and
Series E Shares.
"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
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promulgated under to 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) with respect to the Registration
Statement to be filed after the Series C Closing Date, the Warrant Shares
issuable upon exercise of the Warrants to be delivered in connection with the
closing for the Series C Shares and the shares of Common Stock issuable upon
conversion of the shares of Series C Preferred issued and sold at the closing
for the Series C Shares; and (b) with respect to the Registration Statement to
be filed after the Series D Closing Date, the Warrant Shares issuable upon
exercise of the Warrants to be delivered in connection with the closing for the
Series D Shares and the shares of Common Stock issuable upon conversion of the
shares of Series D Preferred issued and sold at the closing for the Series D
Preferred; and (c) with respect to the Registration Statement to be filed after
the Series E Closing Date, the shares of Common Stock issuable upon conversion
of the shares of Series E Preferred issued and sold at the closing for the
Series E Preferred; provided, however, that in order to account for adjustments
in the conversion ratios, in the case of each of (a), (b) and (c), Registrable
Securities shall include a number of shares of Common Stock equal to no less
than two times the number of shares of Common Stock into which the particular
series of Preferred Stock are convertible assuming conversion in full on the
based the particular Closing Date for such series of Preferred Shares, together
with, in the case of (a) and (b) above, such number of Warrant Shares issuable
upon exercise of the Warrants issued on the particular Closing Date, or such
other number of shares of Common Stock as agreed to by the parties to the
Purchase Agreement. Notwithstanding anything herein contained to the contrary,
if the number of shares of Common Stock into which Preferred Shares are
convertible exceeds twice the number of shares of Common Stock into which the
particular series of Preferred Shares is convertible based upon a computation as
at a particular Closing Date, then the term "Registrable Securities" shall be
deemed to include such additional shares and the Company shall promptly file
appropriate amendments to such Registration Statements to evidence such increase
in the time contemplated herein for filing of appropriate amendments in
accordance with the terms hereof.
"Registration Statement" means the registration statement, contemplated
by Section 2(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.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
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"Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Series C Shares" means the shares of the Company's Series C
Convertible Preferred Stock, par value $.001 per share, to be issued and sold
pursuant to the Purchase Agreement.
"Series D Shares" means the shares of the Company's Series D
Convertible Preferred Stock, par value $.001 per share, to be issued and sold
pursuant to the Purchase Agreement.
"Series E Shares" means the shares of the Company's Series E
Convertible Preferred Stock, par value $.001 per share, to be issued and sold
pursuant to the Purchase Agreement.
"Special Counsel" means any special counsel to the Holders, for which
the Holders will be reimbursed by the Company pursuant to Section 7.
"Underwritten Registration" or "Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
"Warrants" means the Common Stock purchase warrants issued in
accordance with the terms of the Purchase Agreement.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
2. Shelf Registration
(a) On or prior to the Filing Date, the Company shall prepare and file
with the Commission a "Shelf" Registration Statement covering all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-1 or another appropriate form
permitting registration of Registrable Securities for resale by the Holders in
the manner or manners designated by them (including, without limitation, public
or private sales and one or more Underwritten Offerings). The Company shall (i)
not permit any securities other than the Registrable Securities to be included
in the Registration Statement and
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(ii) use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as practicable after the filing
thereof, but in any event prior to the Effectiveness Date, and to keep such
Registration Statement continuously effective under the Securities Act until the
date which is three years after the date of this Agreement or such earlier date
when all Registrable Securities covered by such Registration Statement have been
sold or may be sold pursuant to Rule 144 as determined by the counsel to the
Company pursuant to a written opinion letter, addressed to the Holders, to such
effect (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
Commission has not declared it effective.
(b) If the Holders of a majority of the Registrable Securities so
elect, an offering of Registrable Securities pursuant to the Registration
Statement may be effected in the form of an Underwritten Offering. In such
event, and if the managing underwriters advise the Company and such Holders in
writing that in their opinion the amount of Registrable Securities proposed to
be sold in such offering exceeds the amount of Registrable Securities which can
be sold in such offering, there shall be included in such Underwritten Offering
the amount of such Registrable Securities which in the opinion of such managing
underwriters can be sold, and such amount shall be allocated pro rata among the
Holders proposing to sell Registrable Securities in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority of the Registrable Securities included in such offering and the
Company shall be advised in advance of the identity of any underwriter and the
general terms of the proposed offering. No Holder may participate in any
Underwritten Offering hereunder unless such Person (i) agrees to sell its
Registrable Securities on the basis provided in any underwriting agreements
approved by the Persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
arrangements.
3. Hold-Back Agreements
(a) Restrictions on Public Sale by the Holders. Subject to paragraph
(b) of this Section 3, each Purchaser hereby understands and agrees that its
registration rights pursuant to this Agreement and its ability to offer and sell
Registrable Securities pursuant to the Registration Statement are limited by the
provisions of the immediately following sentence. If the Company determines in
its good faith judgment that the filing of a Registration Statement in
accordance with Section 2 or the use of any Prospectus would require the
disclosure of material information relating to a significant merger or
acquisition to which the Company is a party and to which the
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Company has a bona fide business purpose for preserving as confidential or the
disclosure of which would impede the Company's ability to consummate such
significant transaction, upon written notice of such determination by the
Company, the rights of each Purchaser to offer, sell or distribute any
Registrable Securities pursuant to a Registration Statement or to require the
Company to take action with respect to the registration or sale of any
Registrable Securities pursuant to a Registration Statement (including any
action contemplated by Section 4) will, for up to 60 days in respect of a single
such notice or event or series of related events in any 12-month period, be
suspended until the date upon which the Company notifies the Holders in writing
that suspension of such rights for the grounds set forth in this Section 3(a) is
no longer necessary.
(b) Limitation on Blackouts. Notwithstanding anything contained herein
to the contrary, the aggregate number of days (whether or not consecutive)
during which the Company may delay the effectiveness of a Registration Statement
or prevent offerings, sales or distributions by a Purchaser pursuant to
paragraph (a) above or the last paragraph of Section 4 (collectively, a
"Blackout") shall in no event exceed 60 days during any 12-month period, and no
Blackout may continue in consecutive 12 month periods.
4. Registration Procedures
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission within the time period set
forth in Section 2 a Registration Statement on Form S-1 or another appropriate
form permitting registration of Registrable Securities for resale by the Holders
in accordance with the method or methods of distribution thereof as specified by
the Holders, and cause the Registration Statement to become effective and remain
effective as provided herein; provided, however, that not less than 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, their Special Counsel and any managing
underwriters, 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, their Special Counsel and such
managing underwriters, 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 and such
underwriters, to conduct a reasonable investigation within the meaning of the
Securities Act. 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, their Special Counsel, or any managing
underwriters, 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
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Registration Statement continuously effective for the applicable time 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 Commission with respect to the Registration Statement or any
amendment thereto; 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, their
Special Counsel and any managing underwriters immediately (and, in the case of
(i)(A) below, not less than 5 days prior to such filing) and (if requested by
any such Person) confirm such notice in writing no later than one 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;
and (B) with respect to the Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any request by the
Commission or any other Federal or state governmental authority for amendments
or supplements to the Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement (including any underwriting 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) If requested by any managing underwriter or the Holders of a
majority of the Registrable Securities to be sold in connection with an
Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as such
managing underwriters and such Holders reasonably agree
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should be included therein and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; provided, however, that the
Company shall not be required to take any action pursuant to this Section 4(e)
that would, in the opinion of counsel for the Company, violate applicable law.
(f) Furnish to each Holder, their Special Counsel and any managing
underwriters, without charge, at least one complete 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 requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and any
underwriters, 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.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders, any
underwriters and their respective 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 within the United States as any Holder or underwriter
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.
(i) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, 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 two Business Days prior to any sale of
Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section 4(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
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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.
(k) Use its best efforts to cause all Registrable Securities relating
to such Registration Statement to be listed on the Nasdaq National Market and
any other securities exchange, market or over-the-counter bulletin board, if
any, on which similar securities issued by the Company are then listed.
(l) Enter into such agreements (including an underwriting agreement in
form, scope and substance as is customary in Underwritten Offerings) and take
all such other actions in connection therewith (including those reasonably
requested by any managing underwriters and the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities, and whether or not an underwriting
agreement is entered into, (i) make such representations and warranties to such
Holders and such underwriters as are customarily made by issuers to underwriters
in underwritten public offerings, and confirm the same if and when requested;
(ii) obtain and deliver copies thereof to each Holder and the managing
underwriters, if any, of opinions of counsel to the Company and updates thereof
addressed to each selling Holder and each such underwriter, in form, scope and
substance reasonably satisfactory to any such managing underwriters and Special
Counsel to the selling Holders covering the matters customarily covered in
opinions requested in Underwritten Offerings and such other matters as may be
reasonably requested by such Special Counsel and underwriters; (iii) immediately
prior to the effectiveness of the Registration Statement, and, in the case of an
Underwritten Offering, at the time of delivery of any Registrable Securities
sold pursuant thereto, obtain and deliver copies to the Holders and the managing
underwriters, if any, of "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data is, or is required to be, included in the Registration
Statement), addressed to each selling Holder and each of the underwriters, if
any, in form and substance as are customary in connection with Underwritten
Offerings; (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
selling Holders and the underwriters, if any, than those set forth in Section 8
(or such other provisions and procedures acceptable to the managing
underwriters, if any, and holders of a majority of Registrable Securities
participating in such Underwritten Offering; and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority of the
Registrable Securities being sold, their Special Counsel and any managing
underwriters to evidence the continued validity of the representations and
warranties made pursuant to clause 4(l)(i) above and to evidence compliance with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
(m) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any disposition
of Registrable Securities, and any
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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, underwriter, 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.
(n) Comply with all applicable rules and regulations of the Commission
and make generally available to its security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
not later than 45 days after the end of any 12-month period (or 90 days after
the end of any 12-month period if such period is a fiscal year) (i) commencing
at the end of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or best efforts Underwritten Offering and (ii)
if not sold to underwriters in such an offering, commencing on the first day of
the first fiscal quarter of the Company after the effective date of the
Registration Statement, which statement shall cover said 12-month period, or end
shorter periods as is consistent with the requirements of Rule 158.
(o) Use its best efforts to cause its legal counsel to render an
opinion at the time the Registration Statement is declared effective by the
Commission, which opinion shall set forth that such legal counsel has
participated in the preparation of the Registration Statement or prospectus
thereunder, as the case may be, and to the knowledge of such legal counsel there
is no reason to believe that the Registration Statement or prospectus
thereunder, as the case may be, contains any untrue statement of material fact
required to be stated therein or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading
(except, in the case of the Registration Statement or prospectus thereunder, for
the financial statements, notes thereto and other financial information and
schedules contained therein).
(p) Provide a CUSIP number for all Registrable Securities, not later
than the effective date of the Registration Statement.
The Company may require each selling Holder to furnish to the Company
such information regarding the distribution of such Registrable Securities as is
required by law to be disclosed in the Registration Statement and the Company
may exclude from such registration the
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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 (i) the inclusion therein of language, in form and substance
reasonably satisfactory to such Holder, to the effect that the ownership by such
Holder of such securities is not to be construed as a recommendation by such
Holder of the investment quality of the Company's securities covered thereby and
that such ownership does not imply that such Holder will assist in meeting any
future financial requirements of the Company, or (ii) 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 Purchaser covenants and agrees 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 4(g) and notice from the Company that such Registration
Statement and any post-effective amendments thereto have become effective as
contemplated by Section 4(c) and (ii) each Purchaser and its officers, directors
or Affiliates, if any, will comply with the prospectus delivery requirements of
the Securities Act as applicable to them 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 4(c)(ii), 4(c)(iii), 4(c)(iv), 4(c)(v) or
4(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 4(j),
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.
5. Required Registrations. If at any time after the date which is three
years from the date of this Agreement, a holder or holders of (in the aggregate)
at least 30% of the Warrant Shares (including holders of Warrants who have not
exercised their right to receive Warrant Shares under such Warrants) shall
notify the Company in writing that it or they desire to offer or cause to be
offered for public sale Warrant Shares having a minimum market value of not less
than $100,000, the Company will so notify all holders of Warrants and
outstanding Warrant Shares. Upon written request of any holder given within 15
days after the receipt by such holder from the Company of such notification, the
Company will use its best efforts to cause such of the Warrant Shares as may be
requested by any holder thereof (including the holder or holders giving the
initial notice of intent to offer) to be registered under the Securities Act as
expeditiously as possible and to keep such registration continuously effective
under the Securities Act until the
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date which is five years from the date of this Agreement. The Company shall not
be required to effect more than two registrations pursuant to this Section 5.
6. Liquidated Damages. The Company acknowledges and agrees that the
Holders will suffer damages, and that it would not be feasible to ascertain the
extent of such damages with precision, if the Company fails to fulfill its
obligations hereunder and (a) a Registration Statement is not filed with the
Commission on or prior to the Filing Date, or (b) a Registration Statement is
not declared effective by the Commission on or prior to the Effectiveness Date
or (c) a Registration Statement is filed and declared effective but thereafter
ceases to be effective at any time during the Effectiveness Period without being
succeeded within 10 Business Days by a subsequent Registration Statement filed
with and declared effective by the Commission (any such failure being
hereinafter referred to as an "Event", and for purposes of clauses (a) and (b)
the date on which such Event occurs, or for purposes of clause (c) the date on
which such 10-day limit is exceeded, being hereinafter referred to as an "Event
Date").
Upon the occurrence of an Event specified in (a) or (b) above, the
Company shall pay to each Holder of Preferred Shares for each month after each
Event Date, two percent (2%) of the aggregate Stated Value of the Preferred
Shares held by each such Holder. Such two percent (2%) monthly payment shall be
paid in advance to each Holder in cash on the monthly anniversary of such Event
Date (commencing the Event Date itself) as liquidated damages, and not as a
penalty. Upon the occurrence of an Event specified in (a) above, the Company
will pay liquidated damages as set forth in the Series C Terms; provided, that
such liquidated damages will, in each case, cease to accrue (subject to the
occurrence of another Event) on the date in which the applicable Registration
Statement is no longer subject to an order suspending the effectiveness thereof
or Proceedings relating thereto or a subsequent Shelf Registration is declared
effective.
The Company shall notify each Holder within five (5) days of each Event
and Event Date. The Company shall pay the liquidated damages due on the
Registrable Securities to each Holder of record as at the Event Date on the
first Business Day of each month in which such liquidated damages shall accrue
by check delivered to the address for notice of such Holder set forth herein.
7. 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 fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with the
National Association of Securities Dealers, Inc. and (B) in compliance with
state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the underwriters or Holders in connection with Blue
Sky qualifications of the Registrable Securities and determination
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of the eligibility of the Registrable Securities for investment under the laws
of such jurisdictions as the managing underwriters, if any, or 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
(subject to the provisions of Section 7(b)), (v) fees and disbursements of all
independent certified public accountants referred to in Section 4(a)(ii)
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (vi) Securities
Act liability insurance, if the Company so desires such insurance, and (vii)
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 on which similar
securities issued by the Company are then listed.
(b) In connection with the Registration Statement, the Company shall
reimburse the Holders for the reasonable fees and disbursements of one firm of
attorneys chosen by the Holders of a majority of the Registrable Securities.
8. Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding
termination of this Agreement and without limitation as to time, indemnify and
hold harmless each Holder, the officers, directors, agents (including any
underwriters retained by such Holder in connection with the offer or sale of
Registrable Securities), brokers, 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, costs (including, without limitation, costs of preparation
and 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, which information was reasonably relied on by the Company for use
therein or to the extent that such information relates to such Holder or such
Holder's pro-
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posed method of distribution of Registrable Securities and was reviewed and
expressly approved 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. In connection with the Registration
Statement, each Holder shall furnish to the Company in writing such information
as the Company reasonably requests for use in connection with the Registration
Statement or any Prospectus and agrees, severally and not jointly, to indemnify
and hold harmless the Company, their 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 and that such information was reasonably relied
upon by the Company for use in the Registration Statement, such Prospectus or
such form of 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
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agreed 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 8(a) or
8(b) is unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section would
apply by its terms (other than by reason of exceptions provided in this
Section), 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 8(c), any attorneys' or other
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.
-15-
16
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(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 8(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Purchaser has 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.
9. Rule 144
The Company shall file the reports required to be filed by it under the
Securities Act and the Exchange Act in a timely manner and, if at any time the
Company is not required to file such reports, they will, upon the request of any
Holder, make publicly available other information so long as necessary to permit
sales of its securities pursuant to Rule 144. The Company further covenants that
it will take such further action as any Holder may reasonably request, all to
the extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144. Upon the request of any Holder, the
Company shall deliver to such Holder a written certification of a duly
authorized officer as to whether it has complied with such requirements.
10. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a Holder,
of any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. None of the Company nor any of its
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any of its subsidiaries has previously entered into
-16-
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any agreement granting any registration rights with respect to any of its
securities to any Person. Without limiting the generality of the foregoing,
without the written consent of the Holders of a majority of the then outstanding
Registrable Securities, the Company shall not grant to any Person the right to
request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subject in all respects to the
prior rights in full of the Holders set forth herein, and are not otherwise in
conflict or inconsistent with the provisions of this Agreement.
(c) No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statement other than the
Common Stock to be issued under the Purchase Agreement, and the Company shall
not enter into any agreement providing any such right to any of its security
holders.
(d) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and the
Holders of at least a majority of the then outstanding Registrable Securities;
provided, however, that, for the purposes of this sentence, Registrable
Securities that are owned, directly or indirectly, by the Company, or an
Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(e) Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company: Compression Labs, Incorporated
000 X. Xxxxxxxx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attn: Corporate Secretary
Tel: (000) 000-0000
Fax: (000) 000-0000
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With copies to: Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Purchasers: Infinity Investors, Ltd.
00 Xxxxxxxxxx Xxxx
Xxxx, Xxxxxxx
Attn: X. X. Xxxxxxxx
Fax: 000-00-000-000-0000
-and-
Seacrest Capital Limited
00 Xxxxxxxxxx Xxxx
Xxxx, Xxxxxxx
Attn: X. X. Xxxxxxxx
Fax: 000-00-000-000-0000
With copies to Xx. Xxxxxx Xxxxxxxxx
c/o HW Finance
000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Xxxxx Xxxxxxx, LLC
Carnegie Hall Tower
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
-and-
Xxxxxxxx Xxxxxxxxx Xxxxxx
Aronsohn & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
and Xxxx X. Xxxxx Esq.
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19
Fax: (000) 000-0000
If to any other Person who is
then the registered Holder:
To the address of such Holder as it appears in the stock transfer books of the
Company or such other address as may be designated in writing hereafter, in the
same manner, by such Person.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(h) Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York, without regard to principles of conflicts of law. The
Company hereby irrevocably submits to the jurisdiction of any New York state
court sitting in the Borough of Manhattan in the City of New York or any federal
court sitting in the Borough of Manhattan in the City of New York (collectively,
the "New York Courts") in respect of any Proceeding arising out of or relating
to this Agreement, and irrevocably accepts for itself and in respect of its
property, generally and unconditionally, jurisdiction of the New York Courts.
The Company irrevocably waives to the fullest extent it may effectively do so
under applicable law any objection that it may now or hereafter have to the
laying of the venue of any such Proceeding brought in any New York Court and any
claim that any such Proceeding brought in any New York Court has been brought in
an inconvenient forum. Nothing herein shall affect the right of any Holder to
serve process in any manner permitted by law or to commence legal proceedings or
otherwise proceed against the company in any other jurisdiction.
(i) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(j) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction.
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20
It is hereby stipulated and declared to be the intention of the parties
that they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(k) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(l) Shares Held by The Company and its Affiliates. Whenever the consent
or approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its Affiliates
(other than a Purchaser or transferees or successors or assigns thereof if such
Persons are deemed to be Affiliates solely by reason of their holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPRESSION LABS, INCORPORATED
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President, Finance and
Chief Accouning Officer
Purchasers:
INFINITY INVESTORS, LTD.
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Director
SEACREST CAPITAL LIMITED
By: /s/ Xxxxx X. Xxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
