AUGMENT SYSTEMS, INC.
REGISTRATION RIGHTS AGREEMENT
for 1998 Private Placement
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made by Augment
Systems, Inc., a corporation formed under the laws of the State of Delaware (the
"Company"), for the benefit of the investors listed on Schedule I hereto
(collectively, the "Investors" and, individually, an "Investor").
RECITALS
A. The Investors desire to purchase from the Company, and the
Company desires to issue and sell to the Investors, a minimum
of $4,000,000 and a maximum of $8,000,000 in shares of Common
Stock, par value $0.01 (the "Shares") in a private placement
(the "Private Placement") conducted in accordance with the
Securities Act of 1933, as amended, and the rules and
regulations thereunder (collectively, the "Securities Act").
The Shares referenced in this Recital A are herein called the
"Shares".
B. As further inducement for the Investors to purchase the Shares
from the Company, the Company desires to undertake to register
under the Securities Act, the Shares, in accordance with the
terms hereof.
AGREEMENTS
The Company and the Investors covenant and agree as follows:
1. DEFINITIONS. For the purposes of this Agreement:
(a) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
statements or similar documents in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement or
document by the Securities and Exchange Commission (the "SEC").
(b) The term "Registrable Securities" means (i) the Investors' Shares
(as defined in the Subscription Agreement, if any), (ii) Shares, if any, issued
to Sunrise Securities Corp. in satisfaction of the selling commission and
expense allowance and (iii) any Shares issued as (or issuable upon the
conversion or exercise of any convertible security, 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, including, but not limited
to, the shares underlying the Placement Agent's Warrants, and excluding in all
cases, however, any Registrable Securities sold by an Investor in a transaction
in which its registration rights under this Agreement are not assigned pursuant
to Section 9 of this Agreement.
(c) The term "Investor" includes (i) each Investor (as defined above)
and (ii) each person who is a permitted transferee or assignee of the
Registrable Securities pursuant to Section 9 of this Agreement.
2. DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION ON FORM OTHER THAN FORM S-3. Subject to
the terms of this Agreement, in the event that the Company shall receive from
the holders of at least fifty percent (50%) of the Registrable Securities (the
"Initiating Holders"), at any time after the earlier of (i) five (5) years after
the initial closing date of the Private Placement, or (ii) ninety (90) days
after the effective date of any public offering under the Securities Act of the
Shares by the Company for its account (the "Public Offering"), a written request
that the Company effect any registration with respect to all or a part of the
Registrable Securities on an applicable Securities Act form other than Form S-3
for an offering covering the registration of Registrable Securities having a
reasonably anticipated aggregate offering price to the public in excess of five
million dollars ($5,000,000), the Company shall (A) promptly give written notice
of the proposed registration to all other holders of the Registrable Securities,
and (B) as soon as practicable, and in any event within ninety (90) days after
such request, use its best efforts to effect registration of the Registrable
Securities specified in such request, together with any Registrable Securities
of any holder thereof joining in such request as are specified in a written
request given within twenty (20) days after written notice from the Company. The
Company shall not be obligated to take any action to effect any such
registration pursuant to this Section 2(a): (i) within six (6) months after the
effective date of a registration of the Shares initiated by the Company; or (ii)
after the Company has effected two such registrations pursuant to this Section
2(a) and such registrations have been declared effective by the SEC and, if
underwritten, have closed.
(b) RIGHT OF DEFERRAL OF REGISTRATION ON FORM OTHER THAN FORM S-3. If
the Company shall furnish to all the holders of Registrable Securities who
joined in the request for registration pursuant to Section 2(a) above a
certificate signed by the President of the Company stating that, in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company for any registration to be effected as requested
under Section 2(a), then the Company shall have the right to defer the filing of
a registration statement under the Securities Act with respect to such requested
offering for a period of not more than ninety (90) days from delivery of the
request of the Initiating Holders; provided, however, that the Company may not
utilize this right more than once in any twelve-month period.
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(c) REQUEST FOR REGISTRATION ON FORM S-3. Subject to the terms
of this Agreement, if the Company receives from holders of Registrable
Securities, at a time when the Company is eligible to register securities for a
secondary offering by its stockholders on SEC Securities Act Form S-3 (or any
successor form to Form S-3, regardless of its designation), a written request
that the Company effect any registration on Form S-3 (or any successor form to
Form S-3, regardless of its designation) for an offering of Registrable
Securities the reasonably anticipated aggregate offering price to the public of
which would exceed $500,000, then the Company will promptly give written notice
of the proposed registration to all the holders of Registrable Securities and
will, as soon as practicable, use its best efforts to effect registration of the
Registrable Securities specified in such request, together with all or such
portion of the Registrable Securities of any holder joining in such request as
are specified in a written request delivered to the Company within twenty (20)
days after written notice from the Company of the proposed registration.
(d) REGISTRATION OF OTHER SECURITIES IN DEMAND REGISTRATION.
Any registration statement filed pursuant to the request of the Initiating
Holders under this Section 2 may, subject to the provisions of Sections 2(e),
(f), (g), (h) and (i), include securities of the Company other than Registrable
Securities.
(e) NOTICE OF UNDERWRITING. If the Initiating Holders intend
to distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to this Section 2, and the Company shall include such information in
the written notice referred to in Section 2(a). The right of any holder to
registration pursuant to Section 2(a) shall be conditioned upon such holder's
agreement to participate in such underwriting and the inclusion of such holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such holder with respect to
such participation and inclusion).
(f) INCLUSION OF OTHER HOLDERS IN DEMAND REGISTRATION. If the
Company, officers or directors of the Company holding the Shares other than
Registrable Securities or holders of securities of the Company other than
Registrable Securities shall request inclusion in such registration, then, on
behalf of all holders of Registrable Securities, the Initiating Holders shall
offer (to the extent they deem advisable and consistent with the goals of such
registration and subject to the allocation provisions of Section 3(b) below) to
any or all of the Company, such officers or directors and such holders of other
securities, to include such securities held thereby in the underwriting. The
Initiating Holders may condition such offer on the acceptance by such persons of
the terms of this Section 2.
(g) SELECTION OF UNDERWRITER IN DEMAND REGISTRATION. The
Company shall (together with all holders proposing to distribute their
securities through such underwriting) enter into and perform its obligations
under an underwriting agreement in usual and customary form with the
representative of the underwriter or underwriters (the "Underwriter's
Representative") selected for such underwriting by the holders of a majority of
the Registrable Securities being registered by the Initiating Holders and
consented to by the Company (which consent shall not be unreasonably withheld).
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(h) MARKETING LIMITATION IN DEMAND REGISTRATION. In the event
the Underwriter's Representative advises the Initiating Holders in writing that
market factors (including, without limitation, the aggregate number of Shares
requested to be registered, the general condition of the market, and the status
of the persons proposing to sell securities pursuant to the registration)
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all holders of Registrable Securities, and
the number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all holders in
proportion, as nearly as practicable, to the number of shares proposed to be
included in such registration by such holders; provided, however, that the
number of shares of Registrable Securities to be included in such underwriting
shall not be reduced unless all other securities (including those proposed to be
included by the Company) are first entirely excluded from the underwriting. No
Registrable Securities or other securities excluded from the underwriting by
reason of this Section 2(h) shall be included in such Registration Statement.
(i) RIGHT OF WITHDRAWAL IN DEMAND REGISTRATION. If any holder
of Registrable Securities, or a holder of other securities entitled (upon
request) to be included in such registration, disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the underwriter and the Initiating Holders delivered at least seven
(7) days prior to the effective date of the registration statement. The
securities so withdrawn shall also be withdrawn from the Registration Statement.
3. PIGGYBACK REGISTRATION.
(a) NOTICE OF PIGGYBACK REGISTRATION AND INCLUSION OF
REGISTRABLE SECURITIES. Subject to the terms of this Agreement, in the event the
Company decides to register any of its Shares (either for its own account or the
account of a security holder or holders (other than in connection with a
registration being effected pursuant to Section 2 hereof)) on an SEC form that
would be suitable for a registration involving solely Registrable Securities,
the Company will: (i) promptly give each holder of Registrable Securities
written notice thereof (which shall include a list of the jurisdictions in which
the Company intends to qualify such securities under the applicable Blue Sky or
other state securities laws) and (ii) include in such registration (and in any
related qualification under Blue Sky laws or other state securities laws), and
in any underwriting involved therein, all the Registrable Securities specified
in a written request delivered to the Company by any holder of Registrable
Securities within twenty (20) days after delivery of such written notice from
the Company.
(b) NOTICE OF UNDERWRITING IN PIGGYBACK REGISTRATION. If the
registration of which the Company gives notice pursuant to Section 3(a) is for a
registered public offering involving an underwriting, then the Company shall so
advise the holders of Registrable Securities as a part of the written notice
given pursuant to Section 3(a). In such event, the right of any such holder to
registration shall be conditioned upon such underwriting and the inclusion of
such holder's Registrable Securities in such underwriting to the extent provided
in this Section 3. All holders of Registrable Securities proposing to distribute
their securities through such underwriting shall (together with the Company and
the other holders distributing their securities through such underwriting) enter
into an underwriting agreement with the Underwriter's Representative for such
offering; provided that such holders of Registrable Securities shall have no
right to participate in the selection of the underwriters for an offering
pursuant to this Section 3.
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(c) MARKETING LIMITATION IN PIGGYBACK REGISTRATION. In the
event the Underwriter's Representative advises the holders seeking registration
of Registrable Securities pursuant to this Section 3 in writing that market
factors (including, without limitation, the aggregate number of Shares requested
to be registered, the general condition of the market, and the status of the
persons proposing to sell securities pursuant to the registration) require a
limitation of the number of shares to be underwritten, the Underwriter's
Representative may limit the number of shares of Registrable Securities to be
included in such registration and underwriting to not less than twenty percent
(20%) of the total number of shares included in such registration. In either
such event, the Underwriter's Representative shall so advise all holders of the
number of shares of Registrable Securities (if any) that may be included in the
registration and underwriting. The number of shares of Registrable Securities to
be so included shall not be reduced unless all other securities (other than
those to be sold by the Company) are first entirely excluded from the
underwriting. No Registrable Securities or other securities excluded from the
underwriting by reason of this Section 3(c) shall be included in the applicable
Registration Statement.
(d) Withdrawal in Piggyback Registration. If any holder of
Registrable Securities, or a holder of other securities entitled (upon request)
to be included in such registration, disapproves of the terms of any such
underwriting, then such holder may elect to withdraw therefrom by written notice
to the Company and the underwriter delivered at least seven (7) days prior to
the effective date of the registration statement. Any Registrable Securities or
other securities excluded or withdrawn from such underwriting shall be withdrawn
from such registration.
4. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities pursuant to this Agreement, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC, within thirty (30) days
after (i) the close of the Company's Private Placement or (ii) the date of
issuance of any Registrable Securities issued thereafter, as the case may be, a
registration statement or registration statements (the "Registration Statement")
with respect to all Registrable Securities included therein, and use its best
efforts to cause the Registration Statement to become effective as soon as
reasonably possible after such filing, and, with respect to any registration
that does not involve an underwriting, to keep the Registration Statement
effective pursuant to Rule 415 under the Securities Act for a period of at least
two years after the close of the Company's Private Placement, or such shorter
period as prescribed by Rule 144 promulgated under the Securities Act or during
which the Registrable Securities are sold, which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
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(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and any
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective (i) for such period as
may be required by the Securities Act with respect to an underwritten offering
and (ii) for at least two years after the close of the Company's Private
Placement, or such shorter period as prescribed by Rule 144, with respect to a
non-underwritten offering, and during such periods to comply with the provisions
of the Securities Act with respect to the disposition of all securities covered
by the Registration Statement
(c) Furnish promptly to each Investor whose Registrable
Securities are included in the Registration Statement such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, and of such other documents as such Investor may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by such Investor.
(d) Use its reasonable efforts to register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or Blue Sky laws of such jurisdiction as shall be reasonably
requested by the Investors who hold a majority in interest of the Registrable
Securities covered by the Registration Statement and, with respect to a
non-underwritten offering, prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements and to take
such other actions as may be necessary to maintain such registration and
qualification in effect at all times for a period of at least two years after
the close of the Company's Private Placement, or such shorter period as
prescribed by Rule 144 or during which the Registrable Securities are sold, and
to take all other actions necessary or advisable to enable the disposition of
such securities in such jurisdictions; provided, however, that the Company shall
not be required in connection therewith or as a condition thereto to (i) qualify
to do business, file a general consent to service of process or subject itself
to general taxation in any such states or jurisdictions or (ii) provide any
undertaking or make any change in its Certificate of Incorporation or bylaws.
(e) If the Registration Statement relates to an underwritten
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the Underwriter's
Representative.
(f) Notify the Investors who hold Registrable Securities being
sold (or in the event of an underwritten offering, the Underwriter's
Representative), at any time when a prospectus relating to Registrable
Securities covered by the Registration Statement is required to be delivered
under the Securities Act, of the happening of any event as a result of which the
prospectus included in the 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 light of the circumstances then existing. The Company shall use
its best efforts promptly to amend or supplement the Registration Statement to
correct any such untrue statement or omission.
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(g) Notify the Investors who hold Registrable Securities being
sold (or in the event of an underwritten offering, the Underwriter's
Representative) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose. The Company will make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible time.
(h) Permit a single firm of counsel, designated as selling
shareholders' counsel by the holders of a majority in interest of the
Registrable Securities being sold, to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time prior to their
filing, and shall not file any document in a form to which such counsel
reasonably objects.
(i) Make generally available to its security holders as soon
as practicable, but not later than forty five (45) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
(j) At the request of the Investors who hold a majority in
interest of the Registrable Securities being sold, furnish to the underwriters,
if any, on the date that Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this
Agreement (i) an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, and (ii) a letter, dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters.
(k) Make available for inspection by any underwriters
participating in the offering and the counsel, accountants or other agents
retained by such underwriter, all pertinent financial and other records,
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by such underwriters in connection with the Registration Statement.
(l) If the Shares are then listed on a national securities
exchange, use its best efforts to cause the Registrable Securities to be listed
on such exchange if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or if the Shares are not then listed on a
national securities exchange, use its best efforts to facilitate the quotation
of the Shares on NASDAQ, and use its best efforts to cause continued listing of
the Shares so long as the Registration Statement is in effect under the
Securities Act.
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(m) Provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement.
(n) Take all actions reasonably necessary to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities sold pursuant to the
Registration Statement and to enable such certificates to be in such
denominations and registered in such names as the Investors or any underwriters
may reasonably request.
(o) Take all other actions reasonably necessary to expedite
and facilitate disposition by the Investors of the Registrable Securities
pursuant to the Registration Statement.
(p) Notwithstanding anything contained in this Section 4 to
the contrary, the Company shall have no obligation pursuant to Sections 2 or 3
for the registration of Registrable Securities held by any Investor (i) where
such Investor would then be entitled to sell under Rule 144 within any
three-month period (or such other unitary period prescribed under Rule 144 as
may be provided by amendment thereof) all of the Registrable Securities then
held by such Investor, and (ii) where the number of Registrable Securities held
by such Investor is within the volume limitations under paragraph (e) of Rule
144 (calculated as if such Investor were an affiliate of the Company within the
meaning of Rule 144).
5. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities pursuant to this Agreement, the
Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Agreement with respect to each
Investor that such Investor shall furnish to the Company such information
regarding itself, the Registrable Securities held by it, and the intended
methods of disposition of such securities as shall be reasonably required to
effect the registration of the Registrable Securities and shall execute such
documents in connection with such registration as the Company may reasonably
request. At least thirty (30) days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if it elects to have any of his Registrable Securities included in
the Registration Statement. If within seven (7) business days of the filing date
the Company has not received the Requested Information from an Investor (a "Non-
Responsive Investor"), then the Company may file the Registration Statement
without including Registrable Securities of such Non-Responsive Investor.
(b) Each Investor by his acceptance of the Registrable
Securities agrees to cooperate with the Company in connection with the
preparation and filing of any Registration Statement hereunder, unless such
Investor has notified the Company in writing of its election to exclude all of
its Registrable Securities from the Registration Statement.
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(c) In the event Investors holding a majority in interest of
the Registrable Securities select underwriters for the offering, each Investor
agrees to enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations and market stand-off obligations,
with the managing underwriter of such offering and to take such other actions as
are reasonably required in order to expedite or facilitate the disposition of
the Registrable Securities, unless such Investor has notified the Company in
writing of its election to exclude all of his Registrable Securities from the
Registration Statement.
(d) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 4(f),
such Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 4(f) and, if so desired by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of such destruction) all copies, other
than the permanent file copies then in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
(e) No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements, and (iii) agrees to pay such Investor's pro
rata portion of all underwriting discounts and commissions.
6. Expenses of Registration. All expenses other than
underwriting discounts and commissions incurred in connection with registration,
filings or qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing, filing and qualification fees, printers
and accounting fees, the fees and disbursements of counsel for the Company and
the reasonable fees and disbursements of one firm of counsel for the Investors
shall be borne by the Company.
7. Indemnification. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor, the directors, if any, of such Investor, the
officers, if any, of such Investor who sign the Registration Statement, each
person, if any, who controls such Investor, any underwriter (as defined in the
Securities Act) for the Investors and each person, if any, who controls any such
underwriter within the meaning of the Securities Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), against any losses, claims,
damages, expenses or liabilities, joint or several) to which any of them may
become subject under the Securities Act, the Exchange Act, other federal or
state law or otherwise, insofar as such losses, claims, damages, expenses or
liabilities (or actions or proceedings, whether commenced or threatened, 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
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or alleged untrue statement of a material fact contained in the 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, in light of the circumstances in which
they were made, not misleading or (iii) any violation or alleged violation by
the Company of the Securities Act, the Exchange Act, any state securities law or
any rule or regulation promulgated under the Securities Act, the Exchange Act or
any state securities law. Subject to the restrictions set forth in Section 7(c)
with respect to the number of legal counsel, the Company will reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred, for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding. Notwithstanding anything contained in this
Agreement to the contrary, the indemnity agreement contained above in this
Section 7(a): (I) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the prior written consent of the Company, which consent shall not be
unreasonably withheld, (II) shall not apply to any such case for any such loss,
claim, damage, liability or action arising out of or 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 the
Investors or any such underwriter or controlling person, as the case may be, and
(III) with respect to any preliminary prospectus, shall not inure to the benefit
of any person from whom the person asserting any such claim purchased the
Registrable Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of material
fact contained the preliminary prospectus was corrected in the prospectus, as
then amended or supplemented. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Investors or
any such underwriter or controlling person and shall survive the transfer of the
Registrable Securities by an Investor pursuant to Section 9.
(b) To the extent permitted by law, each Investor, severally
and not jointly, will indemnify and hold harmless, to the same extent and in the
same manner set forth in Section 7(a), the Company, each of its directors, each
of its officers who have signed the Registration Statement, each person, if any,
who controls the Company within the meaning of the Securities Act or the
Exchange Act, any underwriter and any other stockholder selling securities
pursuant to the Registration Statement or any of its directors or officers or
any person who controls such holder or underwriter, against any losses, claims,
damages or liabilities, joint or several) to which any of them may become
subject, under the Securities Act, the Exchange Act, other federal or state law
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) 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 Investor
expressly for use in connection with such registration; and such Investor will
reimburse any legal or other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Investor shall be liable under
this Section 7(b) for only that amount of losses, claims, damages and
liabilities as does not exceed the proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such registration. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on
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behalf of such indemnified party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. The Company shall
be entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, to the same extent as provided above, with respect to information
about such persons so furnished in writing by such persons expressly for
inclusion in the Registration Statement
(c) Promptly after receipt by an indemnified party under this
Section 7 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 7, deliver to
the indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
satisfactory to the indemnifying party; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if, in the reasonable opinion of counsel
for the indemnifying party, 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. The Company shall pay for
only one legal counsel for the Investors. Such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall relieve such
indemnifying party of any liability to the indemnified party under this Section
7 only to the extent prejudicial to its ability to defend such action, but the
omission so to deliver written notice to the indemnifying party will not relieve
it of any liability that it may have to any indemnified party otherwise than
under section 7. The indemnification required by this Section 7 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, promptly as such expense, loss, damage or liability is incurred and
is due and payable.
(d) To the extent any indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under this Section 7 to the extent permitted by law; provided, however,
that (i) no contribution shall be made under circumstances where the maker would
not have been liable for indemnification under the fault standards set forth in
this Section 7, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11 of the Securities Act) shall
be entitled to contribution from any seller of Registrable Securities who was
not guilty of such fraudulent misrepresentation, and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view
to making available to the Investors the benefits of Rule 144 and any other rule
or regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration, the Company agrees
to:
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(a) Make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public.
(b) File with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act.
(c) Furnish to each Investor, so long as such Investor owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of Rule 144 (at
any time after 90 days after the effective date of the first registration
statement filed by the Company), the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), (ii) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as may
be reasonably requested in availing the Investors of any rule or regulation of
the SEC which permits the selling of any such securities without registration.
9. ASSIGNMENTS OF REGISTRATION RIGHTS. The rights to have the
Company register securities pursuant to this Agreement may be assigned by the
Investors to transferees or assignees of such securities provided that (i) the
Company is, within a reasonable time 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 registration rights are being assigned, (ii) such
assignment is in accordance with and permitted by all other agreements between
the Company and the transferor or assignor, and (iii) such assignments shall be
effective only if immediately following such transfer the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act. The term "Investors" as used in this Agreement shall include permitted
assignees.
10. MISCELLANEOUS.
(a) Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered or sent by registered mail, return receipt requested, addressed (i) if
to the Company, Augment Systems, Inc., 0 Xxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxxxx
00000, Attention: President, and (ii) if to an Investor, at the address set
forth under his or her name in the subscription agreement executed by such
Investor in connection with its investment, or at such other address as each
such party furnishes by notice given in accordance with this Section 10(a).
(b) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, will not operate as a waiver thereof. No waiver will be effective unless
and until it is in writing and signed by the party giving the waiver.
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(c) This Agreement shall be enforced, governed and construed
in all respects in accordance with the laws of the State of New York, as such
laws are applied by New York courts to agreements entered into and to be
performed in New York by and between residents of New York. This Agreement shall
be binding upon each Investor and its heirs, estate, legal representatives,
successors and permitted assignees and shall inure to the benefit of the Company
and its successors and assigns. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
(d) This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof. Any provision of
this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only by a writing executed by the Company and Investors who hold
a majority in interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10(d) shall be binding upon such
Investor and the Company.
(e) Any such person is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, then the Company shall be entitled to act upon the basis
of the instructions, notice or election received from the registered owner of
such Registrable Securities.
Dated this ___ day of June, 1998.
AUGMENT SYSTEMS, INC.
By:_____________________________________
Name:
Title:
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