EXHIBIT 4.12
MOBILITY ELECTRONICS, INC.
(A Delaware corporation)
FORM OF SERIES C PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
MOBILITY ELECTRONICS, INC., a Delaware corporation (the "Company"), whose
address is 0000 Xxxxxx Xxxxxxxxx X.X., Xxxxx 0, Xxxxxxxxxxx, Xxx Xxxxxx 00000,
hereby agrees with the undersigned Purchaser as follows:
1. TRANSACTION
The Company, by due action of its Board of Directors, has authorized the
offer and sale to you under this Series C Preferred Stock and Warrants Purchase
Agreement ("Agreement" or "Purchase Agreement") and to other purchasers under
similar or different Series C Preferred Stock and Warrant Purchase Agreements
("Other Purchasers") of up to $5 million of shares of Series C Preferred Stock,
par value $0.01 per share, of the Company (the "Series C Stock"), at a price of
$6.00 per share. A copy of the Certificate of the Designations, Preferences,
Rights and Limitations of Series C Stock is attached hereto as Exhibit A. For
each share of Series C Stock purchased, you will receive, at no additional cost,
a warrant to purchase two (2) shares of the common stock, par value $ .01 per
share, of the Company (the "Common Stock"), the form of which is attached hereto
as Exhibit B (the "Warrant"). The Series C Stock and Warrant are sometimes
collectively referred to herein as the "Securities". The minimum subscription
amount is $25,000 per investor, unless agreed to by the Company. The Company may
pay commissions to brokers, if any, involved in this offering of Securities.
2. PURCHASE AND SALE
2.1 The Securities. Subject to all of the terms and conditions of this
Agreement, the Company will issue and sell to you (sometimes referred to as
"Holder") the number of shares of Series C Stock shown on the signature page
hereof (in which event you will also be deemed to have purchased the Warrant for
the applicable number of shares of Common Stock as provided above for no
additional consideration) and you will purchase the same from the Company;
provided that all other terms and conditions set forth in this Purchase
Agreement are satisfied.
2.2 Closing. The purchase by and sale and delivery to you of the Securities
(the "Closing") shall take place at the executive offices of the Company as set
forth above at such date and time as determined by the Company (such date being
hereinafter called the "Closing Date"). At the Closing, the Company shall
deliver to you: (i) a certificate representing the number of shares of Series C
Stock to be issued to you which was accepted by the Company; (ii) a Warrant on
the terms provided for in Section 1 above; and (iii) such other items as are
required to be delivered to it pursuant to this Purchase Agreement. The
Securities are being offered by the Company subject to the right of the Company
to reject, at its discretion, any subscription, in whole or in part, for any
reason, and to accept subscriptions notwithstanding the order in which they are
received. Any portion of a subscription not accepted by the Company shall be
promptly returned to you, without interest or deduction.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY
As an inducement to you to enter into this Agreement, the Company
represents, warrants and agrees that:
3.1 Corporate Power. The Company has all required corporate power and
authority to own its own properties and to carry on its business as presently
conducted. The Company has all required power and authority to execute and
deliver this Agreement, to issue and sell the Securities, and to carry out the
transactions contemplated by this Agreement.
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3.2 Authority for Agreement. This Agreement has been duly authorized by all
necessary action of the Company and, when executed and delivered by the Company,
will be a legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, except to the extent that the enforceability hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights generally or by general principles of equity,
and except that the indemnification provisions of the Agreement may be held to
be violative of public policy under either federal or state laws in the context
of the offer or sale of securities.
3.3 Validity of Stock. The shares of Series C Stock to be issued to your
hereunder have been duly authorized and when issued, will be legally and validly
issued shares of Series C Stock. The shares of Common Stock issuable upon
exercise of the Series C Stock and the Warrant will, when issued in accordance
with the terms of the Series C Stock and Warrant, respectively, be duly
authorized, legally and validly issued shares of Common Stock.
3.4 No Conflicting Rights. The holders of the outstanding capital stock of
the Company are not entitled to pre-emptive or other rights to subscribe for the
Securities.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS BY YOU
You hereby represent, warrant and agree that:
4.1 Authority. You have full power and authority to enter into this
Agreement and it constitutes your legal, valid and binding obligation,
enforceable in accordance with its terms.
4.2 Purchase For Own Account. You are acquiring the Securities for your own
account, for investment purposes and not for resale or with a view to any
distribution, or in connection with any distribution thereof you are able to (i)
bear the economic risk of your investment in the Securities, (ii) hold the
Securities for an indefinite period of time, and (iii) afford a complete loss of
your investment.
4.3 Investment Experience. You have the requisite knowledge and experience
in financial and business matters, including investments of this type, to be
capable of evaluating the merits and risks of an investment in the Securities
and of making an informed investment decision with respect thereto.
4.4 Receipt Of Information. You have received from the Company all of the
information concerning the Company which you consider to be material in making
your investment decision, which information has been requested by you if not
already furnished by the Company. You have had full access to the books and
records of the Company and to its officers, directors and accountants for the
purpose of obtaining and verifying such information and you have had an
opportunity to ask questions and receive answers from the officers of the
Company regarding the terms and conditions of this transaction and the Company's
business and financial condition. No representations or warranties, oral or
otherwise, have been made to you, including without limitation, any
representations concerning the future prospects of the Company, by the Company
or any agent, employee or affiliate of the Company, and in entering into this
action you are not relying upon any information other than the results of your
own independent investigation. You have obtained sufficient information to
evaluate the merits and risks of your investment and to make an informed
investment decision.
4.5 Restricted Securities. You understand and acknowledge that the
Securities (including underlying shares of Common Stock) you are purchasing
hereunder are "restricted securities" under United States federal and state
securities laws insofar as they have not been registered under the Securities
Act of 1933, as amended (the "Act"), or the securities laws of any other
jurisdiction, that they may not be resold or transferred without compliance with
the registration or qualification provisions of the Act or applicable federal
and state securities laws of any state or other jurisdiction or an opinion of
counsel acceptable to the Company that an exemption from such registration and
qualification requirements is available.
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4.6 Limitations on Disposition. Without in any way limiting the
representations set forth above, you further agree not to make any disposition
of all or any portion of the Securities (including underlying shares of Common
Stock) unless and until: (i) there is then in effect a registration statement
under the Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or (ii) you shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition and you have
furnished the Company with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of such securities
under the Act and applicable securities laws of any state or other jurisdiction.
4.7 Illiquid Investments. Your overall commitment to investments which are
not readily marketable is not disproportionate to your net worth and your
investment in the Securities will not cause such overall commitment to become
excessive. You have adequate means of providing for your current needs and
personal contingencies.
4.8 Accredited Investor. You are an "Accredited Investor" as that term is
defined in Section 501(a) of Regulation D promulgated under the Act ("Regulation
D").
4.9 Company Reliance. You understand, acknowledge and agree that the
Company, in entering into and performing under this Agreement, is relying on the
accuracy of the responses by you in this Agreement, which responses you warrant
to be true, complete and correct.
5. CONDITIONS TO YOUR OBLIGATIONS
Your obligations to purchase the Securities under this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions:
5.1 Representations and Warranties. The representations and warranties of
the Company contained in Section 3 above shall be true on and as of the Closing
with the same effect as though made on and as of the date thereof.
5.2 Company Performance. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement, which
performance or compliance are required of it on or before the Closing.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligations of the Company to sell and issue the Securities to you are
subject to the fulfillment on or before the Closing of each of the following
conditions by you:
6.1 Representations and Warranties. Your representations and warranties
contained in Section 4 above shall be true on and as of the Closing with the
same effect as though made on and as of the date thereof.
6.2 Payment. You shall have delivered to the company an executed copy of
this Agreement, together with the payment of the subscription price for the
Securities being purchased by you.
6.3 Blue Sky Qualification. The Company shall have received any permits or
authorization from any state securities law authority which may be necessary to
qualify the offer and sale of the Securities to you.
7. REGISTRATION RIGHTS
The Company hereby grants to Holder the registration rights set forth in
Appendix I attached hereto, subject to the remainder of this Agreement. Appendix
I is incorporated into, and made a part of, this Agreement.
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8. FURTHER AGREEMENTS
You agree that:
8.1 No Transfer or Assignment. You will not transfer or assign this
Agreement or any of your interest herein except as provided in Section 4.6
above.
8.2 Successors and Assigns. You may not cancel or revoke this Agreement and
this Agreement shall be binding upon your successors and assigns, except as
provided by certain state laws.
8.3 Indemnification. You shall indemnify, hold harmless and defend the
Company and its affiliates and agents with respect to any and all loss, damage,
expense, claim, action or liability any of them may incur as a result of the
breach or untruth of any representations or warranties made by you herein, and
you agree that in the event of any breach or untruth of any representations or
warrants made by you herein, the Company may, at its option, forthwith rescind
the sale of the Securities to you, in addition to any other rights or remedies
which the Company may have.
8.4 Legend. A legend in substantially the following form will be placed on
all documents or certificates evidencing the Securities and the shares of Common
Stock underlying the Series C Stock and Warrant:
"THE SECURITIES EVIDENCED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAW OF ANY STATE OR OTHER JURISDICTION AND SUCH SECURITIES MAY NOT BE SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT, AND
APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED."
8.5 Investment Protection. In the event that the Company undertakes a
private placement of securities on or prior to June 30, 2000, (excluding any
refinancing of the Company's senior debt or any debt offering to a financial
institution or institutional investor (including warrants), unless other
non-institutional investors participate therein), Holder will have a ten (10)
day period following notice of such offering from the Company to exchange the
securities Holder received in this offering (including any underlying shares of
Common Stock) for the same type of securities issued in the subsequent offering,
and in the aggregate dollar amount of Holder's investment
9. GENERAL AND MISCELLANEOUS
9.1 Survival. The warranties, representations and covenants of the parties
contained in this Agreement shall survive the execution and delivery of this
Agreement and the Closing.
9.2 Entire Agreement. This Agreement constitutes the entire agreement among
the parties with respect to the subject matter hereof, and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, guarantees or covenants except as specifically set forth in
this Agreement. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
9.3 Governing Law. This Agreement shall be governed by and construed under
the internal laws of the State of Delaware without regard to conflicts of law.
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9.4 Notices . All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom notice is to be
given, or on the tenth day after the date of mailing if mailed to the party to
whom notice is to be given, by first class mail, registered or certified,
postage prepaid, and properly addressed as follows: if to the purchaser, at his
address as shown in the Company records; and if to the Company, at its principal
office. Any party may change its address for purposes of this paragraph by
giving the other party written notice of the new address in the manner set forth
above.
9.5 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
9.6 Acceptance. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of completed Purchase Agreements will
be determined by the Company, which determination will be final and binding. The
Company reserves the absolute right to reject any Purchase Agreement, in its
sole and absolute discretion. The Company also reserves the right to waive any
irregularities in, or conditions of, the submission of any Purchase Agreements,
and the Company's interpretation of the terms and conditions for the purchase of
Securities (including these instructions) shall be final and binding. The
Company shall be under no duty to give any notification of irregularities in
connection with any attempted subscription for Securities or incur any liability
for failure to give such notification. Until such irregularities have been cured
or waived, no subscription for Securities shall be deemed to have been made. Any
Purchase Agreement that is not properly completed and as to which defects have
not been cured or waived will be returned by the Company to the subscriber as
soon as practicable.
9.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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PURCHASE AGREEMENT GENERAL INSTRUCTIONS
GENERAL INSTRUCTIONS
This Purchase Agreement contains all documents necessary to subscribe for
Securities. You may subscribe for Securities by completing the Purchase
Agreement in the following manner:
1. On line (a) of the signature page state the number of shares of Series C
Stock you wish to purchase (at a price of $6.00 per share), and the
aggregate purchase price for such shares.
2. Sign and state your address, telephone number and social security or other
taxpayer identification number on the lines provided on the signature page
to the Purchase Agreement and deliver the completed Purchase Agreement to
the Company with payment of the entire purchase price of the Securities
subscribed for in the following manner:
A wire transfer or check payable to the order of the Company:
Wire transfer instructions are as follows:
United Missouri Bank of Kansas City, X.X.
00xx & Xxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
ABA # 0000-0000-0
Zurich Yieldwise
Bank Account # 9870838818
To the benefit of
Electronics Accessory Specialists
Account # 80-00000000-1
Checks should be sent overnight to:
Xx. Xxxxxxx X. Xxxxx
Mobility Electronics, Inc.
0000 Xxxxxx Xxxx., X.X., Xxxxx 0
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Following receipt of your completed subscription documents and check, the
Company will accept or reject your subscription, in its sole discretion. If
your subscription is rejected, your funds will be returned to you promptly,
without any interest paid thereon. The Company may reject a subscription
for any reason in its sole discretion.
3. Send all documents to:
Xx. Xxxxxxx X. Xxxxx
Mobility Electronics, Inc.
0000 Xxxxxx Xxxx., X.X., Xxxxx 0
Xxxxxxxxxxx, Xxx Xxxxxx 00000
THE COMPLETED SUBSCRIPTION AGREEMENT SHOULD BE RETURNED IN ITS ENTIRETY TO THE
COMPANY AT THE ADDRESS DESIGNATED ABOVE.
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SUBSCRIPTION AGREEMENT SIGNATURE PAGE
PLEASE PRINT OR TYPE. USE INK ONLY. (ALL PARTIES MUST SIGN)
The undersigned investor hereby certifies that he or she (i) agrees to all
the terms and conditions of this Purchase Agreement, (ii) meets the suitability
standards set forth in this Purchase Agreement and (iii) is a resident of the
state or foreign jurisdiction indicated below.
(a) THE UNDERSIGNED IRREVOCABLY SUBSCRIBES FOR ____________ SHARES OF
SERIES C STOCK, AT A PURCHASE PRICE OF $6.00 PER SHARE ($______________________
IN THE AGGREGATE).
--------------------------------------------
Name of Subscriber (Print) if other than individual check
one and indicate capacity of
signatory under the signature:
[ ] Trust
--------------------------------------------
Name of Joint Subscriber (if any) (Print) [ ] Estate
[ ] Uniform Gifts to Minors
Act of State of
X [ ] Attorney-in-fact
--------------------------------------------
Signature of Subscriber [ ] Corporation
[ ] Other
X
--------------------------------------------
Signature of Joint Subscriber (if any) If Joint Ownership, check one:
[ ] Joint Tenants with Right
of Survivorship
--------------------------------------------
Capacity of Signatory (if applicable) [ ] Tenants in Common
[ ] Tenants by the Entirety
[ ] Community Property
--------------------------------------------
Social Security or Taxpayer
Identification Number
Backup Withholding Statement:
Please check this box only if
-------------------------------------------- the investor is subject to:
Residence Address [ ] backup withholding.
Foreign Person:
--------------------------------------------
City State Zip Code [ ] nonresident alien, foreign
corporation, foreign
partnership, foreign trust or
foreign estate
Telephone ( )___________________
The investor agrees to the terms of this Purchase Agreement and, as required by
the Regulations pursuant to the Internal Revenue Code, certifies under penalty
of perjury that (1) the Social Security Number or Taxpayer Identification Number
and address provided above is correct, (2) the investor is not subject to backup
withholding (unless the Backup Withholding Statement box is checked) either
because he has not been notified that he is subject to backup withholding as a
result of a failure to report all interest or dividends or because the Internal
Revenue Service has notified him that he is no longer subject to backup
withholding and (3) the investor (unless the Foreign Person box above is
checked) is not a nonresident alien, foreign partnership, foreign trust or
foreign estate.
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THE SUBSCRIPTION FOR __________________ SHARES OF SERIES C STOCK AT A PRICE
OF $6.00 PER SHARE ($____________________ IN THE AGGREGATE) OF MOBILITY
ELECTRONICS, INC. BY THE ABOVE NAMED SUBSCRIBER(S) IS ACCEPTED AS OF THE
_________ DAY OF _________________, 1999.
MOBILITY ELECTRONICS, INC.
By:
-----------------------------------------
Xxxxxxx X. Xxxxx, Chief Executive Officer
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Appendix I
Registration Rights
1. Registration Rights. The Company covenants and agrees with you as follows:
1.1 Definitions. For purposes of this Appendix I:
(a) The term "Holder" means any person owning or having the right to
acquire Registerable Securities or any assignee thereof in accordance with
Section 1.11 hereof.
(b) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(c) The term "Public Company" means a corporation which has a class of
equity securities registered pursuant to Section 12 of the 1934 Act, or
which is required to file periodic reports pursuant to Section 15(d) of the
1934 Act.
(d) The term "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(e) The term "Registerable Securities" means (i) the shares of Common
Stock issued or issuable upon the exercise of the Series C Stock and the
Warrants and (ii) any Common Stock issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange
for or in replacement of the shares referenced in (i) above, excluding in
all cases, however, any Registerable Securities (I) sold by a person in a
transaction in which his rights under this Section 1 are not assigned (II)
registered under the Act, the registration statement in connection
therewith has been declared effective, and such shares have been disposed
by such holder pursuant to such registration statement; provided, however,
that in either case of (i) or (ii) above, any such securities shall cease
to be Registerable Securities if the registration rights granted hereunder
are not transferred in accordance with the provisions of Section 1.11
below.
(f) The number of shares of "Registerable Securities then outstanding"
shall be determined by the number of shares of Common Stock issued or
issuable upon exercise of the Series C Stock and Warrants which are
Registerable Securities.
(g) The term "SEC" shall mean the Securities and Exchange Commission.
(h) All other capitalized terms used herein which are not defined
herein shall have the meaning given elsewhere in this Agreement.
1.2 Demand Registration.
(a) From and after January 1, 2001, the Holders of at least 66 2/3% of
the then outstanding Registerable Securities may notify the Company in
writing that such Holders desire for the Company to cause all or a portion
of such notifying Holders' Registerable Securities to be registered for
sale to the public under the Act. Upon receipt of such written request, the
Company will promptly notify in writing all other Holders of Registerable
Securities of such request, which Holders shall within twenty days
following such notice from the Company, notify the Company in writing
whether such persons desire to have Registerable Securities held by them
included in such offering. The Company will, promptly following the
expiration of such twenty day period, prepare and file subject to the
provisions of this Section 1, and use its best efforts to prosecute to
effectiveness, an appropriate filing with the SEC of a registration
statement covering such Registerable Securities and the proposed sale or
distribution thereof under the Act.
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(b) Notwithstanding anything in this Section 1.2 to the contrary, the
Company shall not be obligated to prepare or file any registration
statement pursuant to this Section 1.2 or to prepare or file any amendment
or supplement thereto, at any time when the Company, in the good faith
judgment of its Board of Directors, reasonably believes that the filing
thereof at the time requested, or the offering of securities pursuant
thereto, (i) would materially adversely affect a pending or proposed public
offering of the Company's securities, or an acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction,
negotiations, discussions or pending proposals with respect thereto or (ii)
would materially adversely affect the business or prospects of the Company
in view of the disclosures that may be required thereby of information
about the business, assets, liabilities or operations of the Company not
theretofore disclosed; provided, however, that the filing of a registration
statement, or any supplement or amendment thereto, by the Company may be
deferred pursuant to this Section 1.2 for no longer than 180 days (but only
once in every twelve month period) after the delivery of such demand
notice.
(c) Notwithstanding anything in this Section 1.2 to the contrary: (i)
the Company shall not be required to effect the registration of the
Registerable Securities pursuant to this Section 1.2 more than one time;
and (ii) the Company shall not be required to effect any such registration
unless at least $5 million of Registerable Securities are to be sold in
such registration (with such amount being determined based on the market
price of the Common Stock on the date of the initiating Holder(s) request).
If any registration pursuant to this Section 1.2 is in the form of an
underwritten offering, the Company will select and obtain the investment
banker or investment bankers and manager or managers that will administer
the offering, which investment bankers must offer terms which are
reasonably competitive in the marketplace for similar size companies and
similar offerings. The Company shall (together with all Holders proposing
to distribute Registerable Securities through such underwriting) enter into
an underwriting agreement, containing usual and customary terms, with the
managing underwriter selected for such underwriting. If any holder of
Registerable Securities disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the Company and
the managing underwriter. The Registerable Securities so withdrawn shall
also be withdrawn from registration.
(d) If any registration statement under this Section 1.2 is not
declared effective (except for the reasons specified in Section 1.9 below
and except as a result of Holders withdrawing Registerable Securities),
then the holders of Registerable Securities may request an additional
registration under this Section 1.2.
(e) No registrations effected under this Section 1.2 shall relieve the
Company of its obligations to effect any registrations under, and pursuant
to the terms of, Sections 1.3 and 1.4 hereof.
1.3 S-3 Registrations.
(a) Once the Company is eligible to effect a registration of its
securities under Form S-3 (or successor form), the Holders will have the
right to request and have effected (but only one registration per twelve
month period) registrations of Registerable Securities on Form S-3 as long
as the aggregate proposed offering price is not less $3 million for any
such registration. Upon written request of Holders holding at least $3
million of Registerable Securities, the Company will promptly notify in
writing all other Holders of Registerable Securities of such request, which
Holders shall within twenty days following such notice from the Company,
notify the Company in writing whether such persons desire to have
Registerable Securities held by them included in such offering. Following
the expiration of such twenty day period, the Company will use all
reasonable efforts to cause the registration of all Registerable Securities
proposed to be included in the offering on Form S-3 or such successor form
to the extent so requested. Notwithstanding the above, the Company shall
not be required under this Section 1.3 to include any of the Holders'
Registerable Securities in any offering on Form S-3 which involves an
underwriting unless such Holders accept the terms of such underwriting as
agreed upon between the Company and the underwriters selected by it.
(b) Notwithstanding anything in this Section 1.3 to the contrary, the
Company shall not be obligated to prepare or file any registration
statement pursuant to this Section 1.3 or to prepare or file any amendment
or supplement thereto, at any time when the Company, in the good faith
judgment of its Board of Directors, reasonably believes that the filing
thereof at the time requested, or the offering of securities pursuant
thereto, (i)
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would materially adversely affect a pending or proposed public offering of
the Company's securities, or an acquisition, merger, recapitalization,
consolidation, reorganization or similar transaction, negotiations,
discussions or pending proposals with respect thereto or (ii) would
materially adversely affect the business or prospects of the Company in
view of the disclosures that may be required thereby of information about
the business, assets, liabilities or operations of the Company not
theretofore disclosed; provided, however, that the filing of a registration
statement, or any supplement or amendment thereto, by the Company may be
deferred pursuant to this Section 1.3 for no longer than 180 days (but only
once in every twelve month period) after the delivery of such demand
notice.
1.4 Piggyback Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its Common Stock
or other securities under the Act in connection with the public offering of such
securities solely for cash (other than an initial public offering, registration
relating solely to the sale of securities to participants in a Company stock
option, stock purchase or similar employee benefit plan, a registration on any
form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registerable Securities (including Form S-4 or any form substitution thereof) or
a registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities which are also being registered or a
SEC Rule 145 transaction), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty days after mailing of such notice by the Company, the
Company shall, subject to the provisions of Section 1.8, use all reasonable
efforts to cause to be registered under the Act and any applicable state
securities laws all of the Registerable Securities that each such Holder has
requested to be registered.
1.5 Obligations of the Company. Whenever under this Section 1 the Company
effects the registration of any Registerable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC on any appropriate form a
registration statement with respect to the Registerable Securities proposed
to be registered and use its best efforts to cause such registration
statement to become effective;
(b) Unless such registration is a firm commitment underwriting,
prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Act with respect to the disposition of all Registerable Securities and
other securities covered by such registration statement for a period of 180
days.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registerable Securities owned by them.
(d) Use its best efforts to register or qualify all Registerable
Securities and other securities covered by such registration statement
under such other securities or "blue sky" laws of such jurisdictions as the
underwriter or such sellers (not to exceed ten jurisdictions) shall
reasonably request and do any and all other acts and things as may be
reasonably necessary to consummate the disposition in such jurisdictions of
the Registerable Securities covered by such registration statement, except
that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, or to subject itself to taxation in respect
of doing business in any such jurisdiction, or to consent to general
service of process in any such jurisdiction.
(e) Immediately notify each seller of Registerable Securities covered
by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing or if its is necessary, in the
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opinion of counsel to the Company, to amend or supplement such prospectus
to comply with law, and at the request of any such seller prepare and to
such seller a reasonable number of copies of a supplement to or any
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registerable Securities, such
prospectus shall not include 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 not misleading in the light of the circumstances
then existing and shall otherwise comply in all material respects with law
and so that such prospectus, as amended or supplemented, will comply with
law.
(f) Otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, any make available to its securityholders, as
soon as reasonably practicable, an earnings statement covering the period
of at least twelve (12) months, beginning with the first month of the first
fiscal quarter after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section 11 (a) of
the Act.
(g) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(h) Notify each Holder of Registerable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing.
(i) Cause all such Registerable Securities registered pursuant
hereunder to be listed on each securities exchange or automated trading
system on which similar securities issued by the Company are then listed.
(j) Provide a transfer agent and registrar for all Registerable
Securities registered pursuant hereunder and a CUSIP number for all such
Registerable Securities, in each case not later than the effective date of
such registration.
1.6 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registerable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registerable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registerable
Securities.
1.7 Expenses of Registration. All expenses incurred in connection with
registrations, filings or qualifications pursuant to this Section 1, in
connection with one demand registration, all piggyback registrations and all S-3
registrations including, without limitation, all registration, filing and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company (but excluding underwriter's commissions and fees and
any fees of others employed by a selling Holder) shall be borne by the Company.
1.8 Underwriting Requirements; Cut-backs.
(a) In connection with any offering involving an underwriting of
shares of the Company's capital stock, the Company shall not be required to
include any Holders' Registerable Securities in such underwriting unless
they accept the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it (or by other persons entitled
to select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not materially
jeopardize or in any way reduce the success of the offering by the Company.
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(b) The Company has previously granted "piggyback" registration rights
to certain of its securityholders (the "Other Holders"). Notwithstanding
any thing in this Section 1 to the contrary, in the event of any request
for registration hereunder, the Company shall provide each Other Holder the
notice required with respect to their registration rights and will allow
such Other Holders to participate in any such registration to the extent of
such registration rights; it being acknowledged and agreed that if the
total amount of securities, including Registerable Securities, requested by
security holders to be included in such offering exceeds the amount of
securities that the underwriters determine in their sole discretion is
compatible with the success of the offering (excluding any securities to be
offered by the Company), then the Company shall be required to include in
the offering only that number of such securities, including Registerable
Securities, which the underwriters determine in their sole discretion will
not jeopardize the success of the offering (the securities so included to
be apportioned pro rata among the selling security holders (including
Holders) according to the total amount of securities entitled to be
included therein owned by each selling shareholder (including Holders) or
in such other proportions as shall mutually be agreed to by such selling
shareholders (including Holders)).
1.9 Delay of Registration. No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.10 Indemnification. In the event any Registerable Securities are included
in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the 1934 Act against any losses, claims,
damages, or liabilities, joint or several) to which they may become subject
under the Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions
or violations (collectively a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to
be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of
the Act, the 1934 Act, any state securities law or any rule or regulation
promulgated under the, the 1934 Act or any state securities law; and,
subject to subsection 1.10 (c) below, the Company will pay to each such
Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this subsection 1.10(a)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the
consent of the Company (which consent shall not be reasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person.
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(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers
who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, and any agent
of the Company, against any losses, claims, damages, or liabilities joint
or several) to which any of the foregoing persons may become subject, under
the Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent
(and only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this subsection 1.10(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement
contained in this subsection 1.10(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent
shall not be reasonably withheld; provided, that, in no event shall any
indemnity under this subsection 1.10(b) exceed the gross proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
1.10, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party receiving similar notice, to
assume the defense thereof with counsel reasonably satisfactory to the
parties; provided, however, that an indemnified party (together with all
other indemnified party which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees
and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by such
counsel in such proceeding; otherwise, the indemnified party shall be
responsible for the fees and expenses of its counsel. The failure to
deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability
to the indemnified party under this Section 1.10.
(d) Except as provided in the last sentence of subsection 1.10(c)
above, if the indemnification provided for in this Section 1.10 is held by
a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, claim,
damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense
as well as any other relevant equitable considerations. The relative fault
of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this Section 1.10
shall survive the completion of any offering of Registerable Securities
pursuant to a registration statement under this Section 1.
1.11 Assignment of Registration Rights. The registration rights of the
Holders under this Section 1 may be assigned (but only with all related
obligations) by a Holder to a transferee or assignee of such securities who
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purchases from such Holder at least 10,000 shares of Registerable Securities
(subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations), provided: (a) the Company is promptly
after such transfer, furnished with written notice of the name and address of
such transferee or assignee and the securities with respect to which such
piggyback registration rights are being assigned; (b) such transferee or
assignee agrees in writing to be bound by and subject to the terms and
conditions of this Agreement, including without limitation the provisions of
Section 1. 12 below; and (c) such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act.
1.12 Lock-up Agreement. Each Holder hereby agrees that if requested by the
Company or the underwriters in any underwritten offering, such Holder shall not,
for the period of 180 days after the effective date of an underwritten public
offering of shares of Common Stock, without the prior written approval of the
Company or such underwriters (as the case may be), directly or indirectly, sell,
offer to sell, contract to sell (including without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of any shares of
Common Stock underlying the Warrants legally or beneficially owned by such
Holder; provided, however, in the event of an initial public offering of Common
Stock, no request shall be necessary, with the consent of such Holder to the
above provisions in this Section 1.12 being hereby granted and accepted,
provided that if the managing underwriter in such initial public offering
requests that Holder execute and deliver a lock-up letter, Holder agrees to do
so, which lock-up letter shall be in such managing underwriter's customary form.
In order to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Registerable Securities of each Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
1.13 Termination of Registration Rights. Notwithstanding anything in this
Section 1 to the contrary, no Holder shall be entitled to exercise any right
provided for in this Section 1: (i) at any time more than four (4) years
following the date after the Company becomes a Public Company or (ii) at such
time as such Holder is able to sell all of such Holder's Registerable Securities
in a single three-month period in compliance with Rule 144.
1.14 Amendments and Waivers. Any term or provision of the registration
rights stated in this Section 1 may be amended and the observance of any term of
such rights may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company and the holders of at a majority of the Registerable Securities then
outstanding. Any amendment or waiver effected in accordance with this Section
1.14 shall be binding upon each holder of any Registerable Securities then
outstanding, each future holder of any Registerable Securities, and the Company.
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