REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (this “Agreement”)
is
made and entered into as of July 31, 2007, by and among Wherify Wireless, Inc.
(the “Company”),
a
Delaware corporation and each purchaser signatory hereto (each a “Purchaser”
and
collectively, the “Purchasers”)
of the
Company’s Units and Xxxxxxx & Company (UK) Ltd., who received warrants (the
“Agent
Warrants”)
in
connection with the Offering as defined herein below.
This
Agreement is made pursuant to the Subscription Agreement by and between the
Company and the Purchasers (the “Subscription
Agreement”), submitted in accordance with and subject to the terms
and conditions described in the Subscription Agreement and the Confidential
Information Memorandum of the Company dated as of May 11, 2007, including all
documents incorporated by reference therein and all attachments, schedules
and
exhibits thereto (the “PPM”), relating to the offering
(the “Offering”) by the Company, on an “any or all”
basis of up to twenty five (25) units (each a “Unit,”
and, collectively, the
“Units”),
at a price of $100,000
per Unit for a total aggregate principal amount of $2,500,000. Each Unit
consists of (i) one hundred (100) shares of Series B Preferred Stock and (ii)
a
warrant (the “Investor Warrants”), to purchase that
number of Warrant Shares equal to 25% of the number of Conversion Shares
issuable upon conversion of the Series B Preferred.
The
Company and the Purchaser hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein that are defined in
the
Subscription Agreement shall have the meanings given such terms in the
Subscription Agreement. As used in this Agreement, the following terms shall
have the following meanings:
“Business
Day”
means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday or a day on which banking institutions in the State of New York are
authorized or required by law or other governmental action to
close.
“Commission”
means
the United States Securities and Exchange Commission.
“Common
Stock”
means the Company’s common stock par value $0.01 per share.
“Conversion
Shares” means the shares of Common Stock issuable upon conversion
of the Series B Preferred.
“Effectiveness
Period”
shall
have the meaning set forth in Section 2(a).
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Closing
Date”
shall
mean the closing of the Offering.
“Holder”
or “Holders”
means the holder or holders, as the case may be, from time to time of
Registrable Securities (including any permitted assignee).
“Indemnified
Party”
shall have the meaning set forth in Section 5(c).
“Indemnifying
Party”
shall have the meaning set forth in Section 5(c).
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“Losses”
shall have the meaning set forth in Section 5(a).
“Series
B Preferred”
means the Series B Convertible Preferred Stock of the Company with a per share
stated value of $1,000 included in the Units sold in the Offering.
“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
“Prospectus”
means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by any prospectus supplement, with respect to the terms of the offering of
any
portion of the Registrable Securities covered by the Registration Statement,
and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
“Registrable
Securities”
means (i) the Underlying Shares, and (ii) any shares of Common Stock issued
or
issuable upon any stock split, dividend or other distribution, recapitalization,
anti-dilution adjustment or similar event with respect to the foregoing or
in
connection with any provisions in the Series B Preferred and/or
Warrants.
“Registration
Statement”
means the registration statement required to be filed hereunder (which, at
the
Company's option, may be an existing registration statement of the Company
previously filed with the Commission, but not declared effective), including
(in
each case) the Prospectus, amendments and supplements to the registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in the registration statement.
“Rule
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.
“Rule 415”
means Rule 415 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar
Rule or regulation hereafter adopted by the Commission having substantially
the same effect as such Rule.
“Rule 424”
means Rule 424 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar
Rule or regulation hereafter adopted by the Commission having substantially
the same effect as such Rule.
“Securities
Act”
means the Securities Act of 1933, as amended.
“Share
Increase”
means
an authorized increase of Common Stock of no less than 100 million additional
shares of Common Stock.
“Trading
Day”
means
(i) a day on which the Common Stock is traded on a Trading Market, or
(ii) if the Common Stock is not quoted on a Trading Market, a day on which
the Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding to its functions of reporting price); provided, that in the event
that the Common Stock is not listed or quoted as set forth in (i), and
(ii) hereof, then Trading Day shall mean a Business Day;
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“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the American Stock Exchange, the New York
Stock Exchange, the NASDAQ Global Market or the NASDAQ Capital Market, the
OTC
Bulletin Board or the Pink Sheets.
“Underlying
Shares”
means all
(i) Conversion Shares, and (ii) Warrant Shares issued to the Holders, its
successors and assigns, and Xxxxxxx & Company (UK) Ltd and its successors or
assigns in each case as contemplated in the offering.
“Warrant
Shares” means the shares of Common Stock issuable upon exercise of
the Warrants.
“Warrants”
means the Investor Warrants and the Agent Warrants.
2. Registration.
(a) Mandatory
Registration.
The
Company shall, no later than fifteen (15) Business Days from the date of the
Share Increase, file with the Commission a Registration Statement covering
the
resale of all of the Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement required
hereunder shall be on Form S-1, Form SB-2 or Form S-3 (except if the Company
is
not then eligible to register for resale the Registrable Securities on Form
S-1,
Form SB-2 or Form S-3, in which case the Registration shall be on another
appropriate form in accordance herewith). The Registration Statement required
hereunder shall contain the Plan of Distribution in substantially the form
attached hereto as Annex
A
(which
may be modified to respond to comments, if any, received by the Commission).
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 the Registration Statement
continuously effective under the Securities Act until the date which is the
earliest of (i) such time as all of the Registrable Securities covered by the
Registration Statement have been sold pursuant to the Registration Statement
or
an exemption from the registration requirements of the Securities Act, or (ii)
such time as all of the Registrable Securities covered by such Registration
Statement can have all SEC restrictive legends removed may be sold by the
Holders pursuant to Rule 144(k) and legal counsel acceptable to the Holders
and
the Company’s then transfer agent, providing such transfer agent and such
Holders a legal opinion authorizing the removal of all Rule 144 restrictive
legends and indicating all such Registrable Securities may be sold and/or
transferred without restrictions and/or limitations (the “Effectiveness
Period”).
(b) Piggyback
Registrations Rights.
If, at any time during the Effectiveness Period, there is not an effective
Registration Statement covering the Registrable Securities and the Company
shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under
the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or any post-effective
amendment to existing registration statements or their then equivalents relating
to equity securities to be issued solely in connection with any acquisition
of
any entity or business or equity securities issuable in connection with stock
option or other employee benefit plans, then the Company shall send to each
Holder a written notice of such determination at least twenty (20) days prior
to
the filing of any such registration statement and shall automatically include
in
such registration statement all Registrable Securities; provided,
however,
that (i) if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company determines
for
any reason not to proceed with such registration, the Company will be relieved
of its obligation to register any Registrable Securities in connection with
such
registration, and (ii) in case of a determination by the Company to delay
registration of its securities, the Company will be permitted to delay the
registration of Registrable Securities for the same period as the delay in
registering such other securities.
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(c) Filing
Default Damages, Etc.
If a
Registration Statement covering the resale of the Registrable Securities (i)
is
not declared effective by the Commission on or before December 31, 2007 (the
“Required
Effective Date”),
and
the failure to have such Registration Statement declared effective by the SEC
was not the direct result (as evidenced in the Commission’s written comments) by
GPS Associates, LLC (“GPS”)
inclusion for resale of the shares of Common Stock issuable upon conversion
of
shares of Series A Convertible Preferred Stock of the Company owned by GPS
in
such Registration Statement, and/or (ii) is declared effective by the
Commission, but the Holders of Registrable Securities cannot sell their
respective Registrable Securities thereunder (each being a “Registration
Failure”),
then
the Company in each such case shall pay to the Holders of Registrable
Securities, for each thirty (30) day period (or proportionally for any shorter
period) of each Registration Failure, an amount in cash, as partial liquidated
damages and not as a penalty, equal to one (1%) percent of the aggregate gross
proceeds paid
by the Holders for the Units.
All
liquidation damages as a result of such Registration Failure shall be paid
on
the 31st
day
following each initial Registration Failure and on each 30th
day
thereafter until such Registration Failure is cured by the Company. If the
Company fails to pay any required liquidated damages pursuant to this
Section
2(c)
in full
by each required payment date, the Company shall pay interest thereon at a
rate
of 14% per annum (or such lesser maximum amount that is permitted to be paid
by
applicable law) to the Holders, accruing daily from the date such partial
liquidated damages are due until such amounts, plus all such accrued but unpaid
interest thereon, are paid in full.
(d) Selling
Shareholder Questionnaire.
Notwithstanding paragraphs (a), (b), and (c) above, the Company shall not be
required to register any Registrable Securities or be liable for any damages
to
any particular Purchaser or successor who does not respond fully to the
questionnaire as provided to each selling shareholder, including each supplement
thereto necessary for the Company to comply with applicable legal requirements
and reasonably respond to comments, if any, received by the
Commission.
3. Registration
Procedures.
In connection with the Company's registration obligations hereunder, the Company
shall:
(a) Not
less than three (3) business days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto,
the
Company shall furnish to the Holder a draft of the Registration
Statement.
(b) (i)
Use its best efforts to prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period; (ii) cause the related Prospectus
to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; and (iii) respond
to any comments received from the Commission with respect to the Registration
Statement or any amendment thereto.
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(c) Notify
the Holders of Registrable Securities to be sold as promptly as reasonably
possible: (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a “review” of
the Registration Statement and whenever the Commission comments in writing
on
the Registration Statement (the Company shall upon request provide true and
complete copies thereof and all written responses thereto to each of the
Holders, subject, if appropriate, to the execution of confidentiality agreements
in form acceptable to the Company); and (C) when the Registration Statement
or
any post-effective amendment has become effective; (ii) of any request by the
Commission or any other Federal or state governmental authority during the
period of effectiveness of the Registration Statement for amendments or
supplements to the Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission or any other federal or
state governmental authority of any stop order suspending the effectiveness
of
the Registration Statement covering any or all of the Registrable Securities
or
the initiation of any Proceedings for that purpose; (iv) of the receipt by
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 (v) of the occurrence of any event or passage of time that makes
the financial statements included in the Registration Statement ineligible
for
inclusion therein or any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein
by
reference untrue in any material respect or that requires any revisions to
the
Registration Statement, Prospectus or other documents so that, in the case
of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.
(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) Prior
to any resale of Registrable Securities by a Holder, use its best efforts to
register or qualify or cooperate with the selling Holders in connection with
the
registration or qualification (or exemption from the registration or
qualification) of such Registrable Securities for the resale by the Holder
under
the securities or Blue Sky laws of such jurisdictions within the United States
as any Holder reasonably requests in writing, to keep such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do such other acts or things reasonably necessary to enable the
disposition in such jurisdictions of the Registrable Securities covered by
the
Registration Statement; provided,
however,
that the Company shall not be required to qualify generally to do business
in
any jurisdiction where it is not then so qualified, subject the Company to
any
material tax in any such jurisdiction where it is not then so subject or file
a
general consent to service of process in any such jurisdiction.
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(f) Upon
the occurrence of any event contemplated by Section 3(c)(v),
as promptly as reasonably possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to
the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.
(g) Use
its commercially reasonable efforts to comply with all applicable rules and
regulations of the Commission relating to the registration of the Registrable
Securities pursuant to the Registration Statement or otherwise.
(h) The
Company shall use its best efforts to either (a) cause all the Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (b) either the Nasdaq Global
Market or the Nasdaq Capital Market, or a stock exchange, or secure the
inclusion for quotation on the OTC Bulletin Board for such Registrable
Securities and, without limiting the generality of the foregoing, to arrange
for
at least two (2) market makers to register with the National Association of
Securities Dealers, Inc. (“NASD”)
as such with respect to such Registrable Securities, or, the “Pink Sheets.” The
Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(i).
(i)The
Company covenants that it shall file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder so long as the Holder owns any Registrable
Securities; provided,
however,
the Company may delay any such filing but only pursuant to Rule 12b-25
under the Exchange Act, and the Company shall take such further reasonable
action as the Holder may reasonably request (including, without limitation,
promptly obtaining any required legal opinions from Company counsel necessary
to
effect the sale of Registrable Securities under Rule 144 and paying the
related fees and expenses of such counsel), all to the extent required from
time
to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission.
4. Registration
Expenses.
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 any
Registrable Securities are sold pursuant to the Registration Statement, other
than fees and expenses of counsel or any other advisor retained by the Holders
and discounts and commissions with respect to the sale of any Registrable
Securities by the Holders. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing
fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities
or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements
of
counsel for the Company, (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.
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5. Indemnification
(a) Indemnification
by the Company.
The Company shall, notwithstanding any termination of this Agreement, indemnify
and hold harmless the Holder, the officers, directors, agents and employees
of
it, each Person who controls the 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, reasonable
attorneys' fees) and expenses relating to an Indemnified Party’s actions to
enforce the provisions of this Section
5)
(collectively, “Losses”),
as incurred, to the extent arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in the Registration Statement,
any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or
form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except if (1) such untrue statements or
omissions are based solely upon information regarding such Holder furnished
(or
in the case of an omission, not furnished) to the Company by or on behalf of
such Holder for use therein, or to the extent that such information relates
to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form
of
Prospectus or in any amendment or supplement thereto (it being understood that
the Holder has approved Annex A hereto for this purpose), (2) in the case of
an
occurrence of an event of the type specified in Section 3(c)(ii)-(v),
the use by such Holder of an outdated or defective Prospectus after the Company
has notified such Holder in writing that the Prospectus is outdated or defective
or (3) the failure of the Holder to deliver a prospectus prior to the
confirmation of a sale.
(b) Indemnification
by Holder.
The Holder shall 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 incurred, to the extent arising out of or based upon:
(x)
the Holder's failure to comply with the prospectus delivery requirements of
the
Securities Act or (y) any untrue or alleged untrue statement of a material
fact
contained in any Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission
of
a material fact required to be stated therein or necessary to make the
statements therein not misleading (i) to the extent, but only to the extent,
that such untrue statement or omission is contained in any information so
furnished (or in the case of an omission, not furnished) in writing by or on
behalf of such Holder to the Company specifically for inclusion in the
Registration Statement or such Prospectus or (ii) to the extent that (1) such
untrue statements or omissions are based solely upon information regarding
such
Holder furnished (or in the case of an omission, not furnished) in writing
to
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 Registrable Securities, such Prospectus or such form
of Prospectus or in any amendment or supplement thereto, or (2) in the case
of
an occurrence of an event of the type specified in Section 3(c)(ii)-(v),
the use by such Holder of an outdated or defective Prospectus after the Company
has notified such Holder in writing that the Prospectus is outdated or defective
and prior to the receipt by such Holder of the Advice contemplated in
Section 6(d),
or (3) the failure of the Holder to deliver a Prospectus prior to the
confirmation of a sale. 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 the Holder from the offering in connection with such Registration
Statement.
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(c) Conduct
of Indemnification Proceedings.
If any Proceeding shall be brought or asserted against any Person entitled
to
indemnity hereunder (an “Indemnified
Party”),
such Indemnified Party shall promptly notify the Person from whom indemnity
is
sought (the “Indemnifying
Party”)
in writing, and the Indemnifying Party shall have the right to assume the
defense thereof, including the employment of counsel reasonably satisfactory
to
the Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided,
that the failure of any Indemnified Party to give such notice shall not relieve
the Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that such failure shall have
materially prejudiced the Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ competent counsel in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects
to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
the reasonable fees and expenses of one separate counsel for all Indemnified
Parties in any matters related on a factual basis shall be at the expense of
the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding affected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of
any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party
from
all liability on claims that are the subject matter of such
Proceeding.
All
reasonable fees and expenses of the Indemnified Party (including reasonable
fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
Trading Days of written notice thereof to the Indemnifying Party; provided,
that the Indemnified Party shall promptly reimburse the Indemnifying Party
for
that portion of such fees and expenses applicable to such actions for which
such
Indemnified Party is not entitled to indemnification hereunder, determined
based
upon the relative faults of the parties.
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6. Miscellaneous.
(a) Compliance.
The Holder covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement.
(b) 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.
(c) Notices.
Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (i) the Trading Day following the date of mailing,
if sent by nationally recognized overnight courier service, (ii)
the
third Trading Day following the date of mailing, if sent by first-class,
registered or certified mail, postage prepaid, (iii) the Trading Day following
transmission by electronic mail with receipt confirmed or
acknowledged,
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 delivered and
addressed as set forth in the Subscription Agreement.
(d) Discontinued
Disposition.
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 3(c),
such
Holder will forthwith discontinue disposition of such Registrable Securities
under the Registration Statement until such Holder’s receipt of the copies of
the supplemented Prospectus and/or amended Registration Statement or until
it is
advised in writing (the “Advice”)
by 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. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph. Notwithstanding anything to the
contrary provided herein or elsewhere, this Section
6(d)
does not
directly and/or indirectly relieve the Company of any of its obligations set
forth in this Agreement or relieve the Company of any liability resulting from
any breach of this Agreement by it.
(e) Successors
and Assigns.
This Agreement shall inure to the benefit of and be binding upon the successors
and permitted assigns of each of the parties and shall inure to the benefit
of
the Holder.
(f) Execution
and Counterparts.
This Agreement may be executed in any number of counterparts, each of which
when
so executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature
is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
(g) Governing
Law.
This Agreement shall be governed by and construed exclusively in accordance
with
the internal laws of the State of New York without regard to the conflicts
of
laws principles thereof. The parties hereto hereby irrevocably agree that any
suit or proceeding arising directly and/or indirectly pursuant to or under
this
Agreement, shall be brought solely in a federal or state court located in the
City, County and State of New York. By its execution hereof, the parties hereby
covenant and irrevocably submit to the in personam
jurisdiction of the federal and state courts located in the City, County and
State of New York and agree that any process in any such action may be served
upon any of them personally, or by certified mail or registered mail upon them
or their agent, return receipt requested, with the same full force and effect
as
if personally served upon them in New York City. The parties hereto waive any
claim that any such jurisdiction is not a convenient forum for any such suit
or
proceeding and any defense or lack of in
personam
jurisdiction with respect thereto. In the event of any such action or
proceeding, the party prevailing therein shall be entitled to payment from
the
other party hereto of its reasonable counsel fees and
disbursements.
9
(h) Severability.
If any term, provision, covenant or restriction of this Agreement is held by
a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be
hereafter declared invalid, illegal, void or unenforceable.
(i) Headings.
The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.
[Remainder
of page intentionally left blank]
10
IN
WITNESS WHEREOF,
the parties have executed this Registration Rights Agreement as of the date
first written above.
WHERIFY
WIRELESS, INC.
By:
Name:
Title:
See
Omnibus Signature Page of Subscription Agreement for Purchasers’
Signatures
ANNEX
A
Plan
of Distribution
The
selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which
the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
| · |
ordinary
brokerage transactions and transactions in which the broker/dealer
solicits purchasers;
|
| · |
block
trades in which the broker/dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
| · |
purchases
by a broker/dealer as principal and resale by the broker/dealer for
its
account;
|
| · |
an
exchange distribution in accordance with the Rules of the applicable
exchange;
|
| · |
privately
negotiated transactions;
|
| · |
broker/dealers
may agree with the Selling Stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
| · |
a
combination of any such methods of sale;
and
|
| · |
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker/dealers
engaged by the selling stockholders may arrange for other brokers/dealers to
participate in sales. Broker/dealers may receive commissions from the selling
stockholders (or, if any broker/dealer acts as agent for the purchaser of
shares, from the purchaser) in amounts to be negotiated. The selling
stockholders do not expect these commissions to exceed what is customary in
the
types of transactions involved.
The
selling stockholders may from time to time pledge or grant a security interest
in some or all of the shares of common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock from time to time under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act of 1933 amending the list
of
selling stockholders to include the pledgee, transferee or other successors
in
interest as Selling Stockholders under this prospectus.
Annex
A -
1
In
connection with the sale of our common stock or interests therein, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction). The selling
stockholders may not use shares registered on this registration statement to
cover short sales of common stock made prior to the date on which this
registration statement shall have been declared effective by the Commission.
The
aggregate proceeds to the selling stockholders from the sale of the common
stock
offered by them will be the purchase price of the common stock less discounts
or
commissions, if any. Each of the selling stockholders reserves the right to
accept and, together with their agents from time to time, to reject, in whole
or
in part, any proposed purchase of common stock to be made directly or through
agents. We will not receive any of the proceeds from this offering. Upon any
exercise of the warrants by payment of cash, however, we will receive the
exercise price of the warrants.
The
selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act of 1933,
provided that they meet the criteria and conform to the requirements of that
rule.
The
selling stockholders and any underwriters, broker-dealers or agents that
participate in the sale of the common stock or interests therein may be
"underwriters" within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities Act.
Selling stockholders who are "underwriters" within the meaning of Section 2(11)
of the Securities Act will be subject to the prospectus delivery requirements
of
the Securities Act. If a selling stockholder is deemed to be an underwriter,
the
selling stockholder may be subject to certain statutory liabilities including,
but not limited to Sections 11, 12 and 17 of the Securities Act and Rule 10b-5
under the Exchange Act. Selling stockholders who are deemed underwriters within
the meaning of the Securities Act will be subject to the prospectus delivery
requirements of the Securities Act. The SEC staff is of a view that selling
stockholders who are registered broker-dealers or affiliates of registered
broker-dealers may be underwriters under the Securities Act. We will not pay
any
compensation or give any discounts or commissions to any underwriter in
connection with the securities being offered by this prospectus.
To
the
extent required, the shares of our common stock to be sold, the names of the
selling stockholders, the respective purchase prices and public offering prices,
the names of any agents, dealer or underwriter, any applicable commissions
or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this
prospectus.
In
order
to comply with the securities laws of some states, if applicable, the common
stock may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the common stock may not be
sold
unless it has been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied
with.
Annex
A -
2
We
have
advised the selling stockholders that the anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of shares in the market and to
the
activities of the selling stockholders and their affiliates. In addition, we
will make copies of this prospectus (as it may be supplemented or amended from
time to time) available to the selling stockholders for the purpose of
satisfying the prospectus delivery requirements of the Securities Act. The
selling stockholders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
We
are
required to pay certain fees and expenses incident to the registration of the
shares. We have agreed to indemnify the selling stockholders against
liabilities, including liabilities under the Securities Act and state securities
laws, relating to the registration of the shares offered by this
prospectus.
We
have
agreed with the selling stockholders to keep the registration statement of
which
this prospectus constitutes a part effective until the earlier of (i) the date
when the selling stockholders may sell all securities registered under the
registration statement under Rule 144 without volume or other restrictions
or
limits, and (ii) such time as all securities registered under the registration
statement are eligible to have all restrictive legends removed pursuant to
Rule
144(k) and legal counsel acceptable to the stockholders and the Company’s then
transfer agent provides such transfer agent and stockholders a legal opinion
authorizing the removal of all restrictive legends and indicating all such
securities may be sold and/or transferred without restrictions and/or
limitations and (iii) the date the selling stockholders no longer own any of
the
securities registered under the registration statement.
Annex
A -
3
EXHIBIT
A
SELLING
STOCKHOLDER QUESTIONNAIRE
Ladies
and Gentlemen:
The
undersigned beneficial owner of securities of Wherify Wireless, Inc. (the
“Company”)
understands that the Company has filed or intends to file with the Securities
and Exchange Commission (the “Commission”) a registration statement on Form S-1,
Form SB-2 (or other applicable form) (the “Registration
Statement”)
for
the registration and resale under Rule 415 of the Securities Act of 1933, as
amended certain shares of the Company’s common stock (the “Registrable
Securities”)
in
accordance with the terms of the Registration Rights Agreement, dated
[___________] among the Company and the Purchasers named therein.
I
understand that I will be named as a selling stockholder (a “Selling
Stockholder”)
in the
prospectus (the “Prospectus”) that forms a part of the Registration Statement
and that the Company will use the information that I provide in this
Questionnaire to ensure the accuracy of the Registration Statement and the
Prospectus.
Certain
legal consequences arise from being named as a Selling Stockholder in the
Registration Statement and the related Prospectus. Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a Selling Stockholder in the Registration Statement and the related
prospectus.
Enclosed
with this Questionnaire is a draft of the Plan of Distribution section of the
Registration Statement.
Please
complete and return
one
executed copy of this Questionnaire, together with any comments you may have
on
the Plan of Distribution, as soon as possible and in any event no
later than [ ] (Pacific time) on [ ], 2007, to [ ],
which
date must be no earlier than ten (10) business days prior to the expressly
stated filing date of the Registration Statement.
Please
keep an extra copy of the completed Questionnaire, since as described on the
signature page of the Questionnaire, you
must promptly update your answers to the Questionnaire if your answers
change,
by
providing updated information to the person indicated at the end of this
Questionnaire.
Exhibit
A
- 1
The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
|
Please
answer every question.
If
the answer to any question is “NONE” or “NOT APPLICABLE,” please so
state.
Please
Type or Print all Responses
|
| 1. |
Name.
|
(a) Full
legal name of Selling Stockholder exactly as it should appear in the
Registration Statement:
__________________________________________________________________
(b) Full
legal name of registered holder (if not the same as (a) above through which
the
Registrable Securities listed in Item 6 are held:
__________________________________________________________________
(c) For
Selling Stockholders that are not natural persons, full legal name of natural
person who directly or indirectly alone or with others has power to vote or
dispose of the securities covered by this Questionnaire:
__________________________________________________________________
|
2.
|
Manner
of Ownership of Registrable Securities:
|
Individual
_______ Community Property ________ Tenants
in Common _______
Joint
Tenants with Rights of Survivorship ________ Corporate
________
Partnership
______ Trust ________ Other ___________________________
|
3.
|
Contact
Information for Notices to Selling Stockholder.
|
Provide
the address, telephone number, fax number and email address where you can
be
reached during business hours.
| Address: | |
| Phone: | |
| Fax: |
Exhibit
A
- 2
Email:
| 4. |
Relationship
with the Company. Describe
the nature of any position, office or other material relationship
you or
your affiliate(s) have had with the Company during the past three
years,
or arrangements with the Company to be performed in the
future.
|
|
5.
|
Organizational
Structure.
Please indicate or (if applicable) describe how you are organized.
|
| (a) |
Are
you a natural
person?
(if
so, please xxxx the box and go to Question 6)
|
¨
Yes ¨
No
|
| (b) |
Are
you a reporting
company
under the 1934 Act?
(if
so, please xxxx the box and go to Question 6)
|
¨
Yes ¨
No
|
| (c) |
Are
you a majority-owned
subsidiary
of
a reporting company under the 1934 Act?
(if
so, please xxxx the box and go to Question 6)
|
¨
Yes ¨
No
|
| (d) |
Are
you a registered
investment fund
under the 1940 Act?
(if
so, please xxxx the box and go to Question 6)
|
¨
Yes ¨
No
|
If
you
have answered "no" to all of the foregoing questions, please describe: (i)
the
exact legal description of your entity (e.g., corporation, partnership, limited
liability company, etc.); (ii) whether the legal entity so described is managed
by another entity and the exact legal description of such entity (repeat this
step until the last entity described is managed by a person or persons, each
of
whom is described in any one of (a) through (d) above), (iii) the names of
each
person or persons having voting and investment control over the Registrable
Securities that the entity owns (e.g., director(s), general partner(s), managing
member(s), etc.).
|
Legal
Description of Entity:
|
|
|
Name
of Entity(ies) Managing Such Entity (if any):
|
|
|
Name
of Entity(ies) Managing such Entity(ies) (if any):
|
|
|
Name(s)
of Natural Persons Having Voting or Investment
|
Exhibit
A
- 3
|
Control
Over the Shares Held by such Entity(ies):
|
|
| 6. |
Ownership
of the Company’s Securities.
This question covers your beneficial ownership of the Company’s securities
as of the date this Questionnaire is signed. Please consult Appendix
A
to
this Questionnaire for information as to the meaning of “beneficial
ownership.” In particular, please note that the right to acquire a
security within 60 days may deem you a beneficial owner of the underlying
shares.
|
|
(a)
|
State
the number of shares of the Company’s securities that you beneficially
own:
|
|
(b)
|
State
the number of shares of the Company’s securities that you have the right
to acquire under any Warrants, Options or other rights, or upon conversion
of any security convertible into securities. Please list each Warrant,
Option, right, or convertible security separately below (attach additional
sheets if necessary):
|
|
Option,
Warrant,
Right,
or
Convertible
Security
|
Number
of
Shares
which
May
be
Acquired
on
Exercise
or
Conversion
|
Exercise
or
Conversion
Price
|
Date
First
Exercisable
or
Convertible
|
Termination
Date
|
|
(c)
|
As
to the securities indicated as being beneficially owned, does any
person
other than you have either: (i) the sole or shared power to vote
or to
direct the vote of any of such securities and (ii) the sole or shared
power to dispose or to direct the disposition of any of such securities?
If the answer is “yes” to either of the foregoing questions, please set
forth the name,
address and title/capacity (e.g.,
parent, legal guardian, joint owners (if securities are held jointly),
executor, etc.) of each person who has such power or with whom the
indicated beneficial owner shares such power, together with the
number
of shares
to
which such right relates.
|
Exhibit
A
- 4
| (d) |
As
to the securities indicated as being beneficially owned, if you or
the
beneficial owners listed in response to (c) immediately above are
entities
(e.g., trusts, corporations, partnerships, LLCs, etc.) rather than
individuals, please set forth the name,
address and title/capacity
(e.g., trustee, president, partner, etc.) of each individual who
has (i)
the sole or shared power to vote or to direct the vote of any of
such
securities or (ii) the sole or shared power to dispose or to direct
the
disposition of any of such securities, together with the number
of shares
to
which such right relates. Please also indicate the state
or other jurisdiction
in
which the entity is organized or
domiciled.
|
|
(e)
|
State
the number of shares of Registrable Securities proposed to be
sold under
the Registration Statement (including shares of Registrable Securities
underlying Warrants and Options, rights or convertible
securities):
|
|
(f)
|
Have
you agreed to act in concert with any other persons or affiliates
of the
Company for the purpose of selling the Registrable
Securities?
|
Yes
_____ No
_____
|
If
“Yes,” give full details.
|
| 7. |
Acquisition
of Registrable Securities.
Please describe below the manner in which you acquired your Registrable
Securities including, but not limited to, the date, the name and
address
of the seller(s), the purchase price and pursuant to which documents.
|
|
8.
|
Plan
of Distribution.
I
have reviewed the proposed “Plan of Distribution” attached hereto as
Annex
A,
and agree that the statements contained therein reflect my intended
method(s) of distribution or, to the extent these statements are
inaccurate or incomplete, I have attached to this Questionnaire any
changes to the proposed “Plan
of Distribution”
that are required to make these statements accurate and complete.
¨ (Please
check the box if you have made any changes to Annex
A)
|
Exhibit
A
- 5
|
9.
|
Short
Positions.
Do you currently have open, or since the time you became aware of
the
Company’s offering, have you participated in any short position in the
Company’s shares? ¨
Yes ¨
No. If yes, please describe all material terms such as dates, amounts,
etc. [Note: Each subscriber in the Registration Rights Agreement
agreed
not to short]
|
|
10.
|
Reliance
on Responses.
I
acknowledge and agree that the Company and its legal counsel shall
be
entitled to rely on my responses in this Questionnaire in all matters
pertaining to the Registration Statement and the sale of any shares
of
Registrable Securities of the Company pursuant to the Registration
Statement.
|
|
11.
|
BROKER-DEALER
STATUS.
The Commission may request, in connection with its review of the
Registration Statement and Prospectus that the Company inform them
of the
names of all Selling Stockholders that are members of the National
Association of Securities Dealers, Inc. (“NASD”)
and/or affiliates or associated persons of members of the NASD. In
order
to aid the Company in responding to such request, please state
whether:
|
| (a) |
You
or any of your affiliates or any members of your Immediate Family
are a
Member of the NASD
|
Yes
¨
No
|
| (b) |
You
or any of your affiliates or any members of your Immediate Family
are a
Person Associated with a Member of the NASD
|
Yes
¨
No
|
| (c) |
You
or any of your affiliates or any members of your Immediate Family
are an
affiliate of a Member of the NASD
|
Yes
¨
No
|
| (d) |
You
or any of your affiliates own stock or other securities of any Member
of
the NASD or an affiliate of a Member of the NASD.
|
Yes
¨
No
|
| (e) |
You
or any of your affiliates have made a subordinated loan to any Member
of
the NASD
|
Yes
¨
No
|
If
you
marked “Yes” to any of the questions above, please complete the
following:
(a) Please
briefly describe the facts below, giving the names of the Members of the NASD
to
which your answer refers (including, for example, percentage of ownership,
amount of loan and interest payable, applicable dates, names of affiliates,
immediate family, etc.).
.
Exhibit
A
- 6
(b)
Did
you receive your Registrable Securities as compensation for investment banking
services to the Company?
Yes
_____ No
_____
Note:
If
the answer to the forgoing is “No”, the Commission's staff has indicated that
Selling Stockholders who are broker-dealers or their affiliates should be
identified as underwriters in the Registration Statement.
(c)
If
you are an affiliate of a broker-dealer, do you certify that you purchased
the
Registrable Securities in the ordinary course of business, and at the time
of
the purchase of the Registrable Securities to be resold, you had no agreements
or understandings, directly or indirectly, with any person to distribute the
Registrable Securities?
Yes
_____ No
_____
Note:
If
the answer to the foregoing is “No”, the Commission's staff has indicated that
the Selling Stockholder should be identified as an underwriter in the
Registration Statement.
Please
acknowledge that your answers to the foregoing questions are true and correct
to
the best of your information and belief by signing and dating this Questionnaire
where indicated below. Please return the completed executed Questionnaire to
the
undersigned by [___________].
Exhibit
A
- 7
If
at any
time you discover that your answer to any question was inaccurate, or if any
event occurring after your completion hereof would require a change in your
answer to any questions, please immediately contact
[______________]l.
Date: `
(Print
name of selling stockholder)
By:
(Signature)
Name:
(Print
name)
Title:
Exhibit
A
- 8
APPENDIX
A
|
1.
|
Definition
of “Beneficial Ownership”
|
|
(a)
|
A
“Beneficial Owner” of a security includes any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship
or otherwise has or shares:
|
|
(1)
|
Voting
power which includes the power to vote, or to direct the voting of,
such
security; and/or
|
|
(2)
|
Investment
power which includes the power to dispose, or direct the disposition
of,
such security.
|
Please
note that either
voting
power or
investment power, or
both, is
sufficient for you to be considered the beneficial owner of shares.
|
(b)
|
Any
person who, directly or indirectly, creates or uses a trust, proxy,
power
of attorney, pooling arrangement or any other contract, arrangement
or
device with the purpose or effect of divesting such person of beneficial
ownership of a security or preventing the vesting of such beneficial
ownership as part of a plan or scheme to evade the reporting requirements
of the federal securities acts shall be deemed to be the beneficial
owner
of such security.
|
|
(c)
|
Notwithstanding
the provisions of paragraph (a), a person is deemed to be the “beneficial
owner” of a security, if that person has the right to acquire beneficial
ownership of such security within 60 days, including but not limited
to
any right to acquire: (A) through the exercise of any option, warrant
or right; (B) through the conversion of a security; (C) pursuant
to the power to revoke a trust, discretionary account or similar
arrangement; or (D) pursuant to the automatic termination of a trust,
discretionary account or similar arrangement; provided, however,
any
person who acquires a security or power specified in paragraphs (A),
(B)
or (C) above, with the purpose or effect of changing or influencing
the
control of the issuer, or in connection with or as a participant
in any
transaction having such purpose or effect, immediately upon such
acquisition shall be deemed to be the beneficial owner of the securities
which may be acquired through the exercise or conversion of such
security
or power.
|
Exhibit
A
- 1
