EXHIBIT 10.24
REGISTRATION RIGHTS AGREEMENT
WHEREAS, the Company has offered (the "Offering") a 7% promissory note in
the principal amount of $500,000 (the "Note") convertible into shares of the
Company's Common Stock (the "Note Shares") and a warrant (the "Warrant") to
purchase additional shares of Common Stock (the "Warrant Shares," the "Warrant
Shares and the Note Shares are hereinafter referred to as the Registrable
Securities");
WHEREAS, the Company is issuing shares of Common Stock and Warrants to
Cardinal Capital Management, Inc. and Josephberg, Groz & Co. (both included in
the definition of "Holders" OPEN ) as set forth in the Subscription Agreement
(as defined below);
WHEREAS, pursuant to the terms of and in order to induce the Holder to
enter into a certain subscription agreement dated the date hereof between the
Company and the Holder (the "Subscription Agreement") to purchase the Note and
the Warrants, the Company and the Holder have agreed to enter into this
Agreement;
WHEREAS, it is intended by the Company and the Holder that this Agreement
shall become effective immediately upon the acquisition by the Holder of the
Note and the Warrants (the ("Closing").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and in the Subscription Agreement, the Company hereby agrees as
follows:
1. Registration Rights
Mandatory Registration. (i) The Company shall prepare, and file with the
Securities and Exchange Commission (the "Commission"), within 30 days after the
date hereof, a Registration Statement or Registration Statements (as necessary)
on Form SB-2 or S-1 covering the resale of all of the Registrable Securities,
which Registration Statement(s), to the extent allowable under the Securities
Act and the rules promulgated thereunder (including without limitation Rule
416), shall state that such Registration Statement(s) also covers such
indeterminate
number of additional shares (the "Indeterminate Shares") of Common Stock as
may become issuable upon conversion of the Note to prevent dilution resulting
from stock splits, stock dividends or similar transactions. The Company agrees
to register pursuant to the Registration Statement a number of shares equal to
the sum of (i) 150% of the number of Note Shares issuable upon conversion of the
Note on the date of filing of the Registration Statement and (ii) 1,250,000.
(ii) To the extent the Indeterminate Shares for any reason can not be
registered under the Registration Statement(s) required under Section 1(i)
above, then with respect to such Indeterminate Shares, the Company shall
prepare, and, on or before the date that is fifteen (15) days after the
Indeterminate Shares become issuable, file with the Commission a Registration
Statement or Registration Statements (as necessary), covering the resale of all
of the Indeterminate Shares.
2. Registration Procedures. If and whenever the Company is required by any
of the provisions of this Agreement to use its best efforts to effect the
registration of any of the Registrable Securities under the Securities Act, the
Company shall (except as otherwise provided in this Agreement), as expeditiously
as possible:
(a) prepare and file with the Commission a registration statement and shall
use its best efforts to cause such registration statement to be declared
effective and remain effective until all the Registrable Securities are sold or
become capable of being publicly sold without registration under the Securities
Act.
(b) prepare and file with the Commission such amendments and supplements to
such offering or registration statement and the prospectus used in connection
therewith as may be necessary to keep such statement effective and to comply
with the provisions of the Securities Act with respect to the sale or other
disposition of all securities covered by such registration statement whenever
the Holder or Holders of such securities shall desire to sell or otherwise
dispose of the same (including prospectus supplements with respect to the sales
of securities or the conversion and/or exercise of the Promissory Note or
Warrants from time to time in connection with a registration statement pursuant
to Rule 415 of the Commission);
(c) furnish to each Holder such numbers of copies of a summary prospectus
or other prospectus, including a preliminary prospectus or any amendment or
supplement to any prospectus, in conformity with the requirements of the
Securities Act, and such other documents, as such Holder may reasonably request
in order to facilitate the public sale or other disposition of the securities
owned by such Holder;
(d) use its best efforts to register and qualify the securities covered by
such
registration statement under such other securities or blue sky laws of such
jurisdictions as each Holder shall reasonably request, and do any and all other
acts and things which may be necessary or advisable to enable such Holder to
consummate the public sale or other disposition in such jurisdictions of the
securities owned by such Holder, except that the Company shall not for any such
purpose be required to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified or to file therein any general
consent to service of process;
(e) list such securities on any securities exchange on which any securities
of the Company is then listed, if the listing of such securities is then
permitted under the rules of such exchange;
(f) enter into and perform its obligations under an underwriting agreement,
if the offering is an underwritten offering, in usual and customary form, with
the managing underwriter or underwriters of such underwritten offering;
(g) notify each Holder of Registrable Securities subject to such offering
statement or being registered by such registration statement, at any time when a
prospectus relating thereto covered by such registration statement is required
to be delivered under the Securities Act, of the happening of any event of which
it has knowledge 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; and
(h) take such other actions as shall be reasonably requested by any Holder
to facilitate the registration and sale of the Registrable Securities.
(i) The Company agrees that it shall declare the Registration Statement
effective within two Business Days after being informed by the Commission that
it may do so.
3. Expenses. All expenses incurred in any registration of the Holders'
Registrable Securities under this Agreement shall be paid by the Company,
including, without limitation, printing expenses, fees and disbursements of
counsel for the Company, expenses of any audits to which the Company shall agree
or which shall be necessary to comply with governmental requirements in
connection with any such registration, all registration and filing fees for the
Holders' Registrable Securities under federal and State securities laws, and
expenses of complying with the securities or blue sky laws of any jurisdictions
pursuant to Section 2(d); provided, however, the Company shall not be liable for
(a) any discounts or commissions to any underwriter; (b) any stock transfer
taxes incurred with respect to Registrable Securities sold in the Offering or
(c) the fees and expenses of counsel for any Holder, provided that the Company
will pay the costs and expenses of Company counsel when the Company's counsel is
representing any or all selling security holders.
4. Assignment of Registration Rights. The rights of the Holders under this
Agreement, including the rights to cause the Company to register Registrable
Securities may be assigned without the written prior consent of the Company,
provided that the assignee agrees in writing to be bound by the terms of this
Agreement and to provide the Company with such information as it may require in
order to register the Registrable Securities held by such assignee.
5. Indemnification. In the event any Registrable Securities are included in
a registration statement pursuant to this Agreement:
(a) Company Indemnity. Without limitation of any other indemnity provided
to any Holder, either in connection with the Offering or otherwise, to the
extent permitted by law, the Company shall indemnify and hold harmless each
Holder, the affiliates, officers, directors and partners of each Holder, any
underwriter (as defined in the Securities Act) for such Holder, and each person,
if any, who controls such Holder or underwriter (within the meaning of the
Securities Act or the Securities Exchange Act of 1934 (the "Exchange Act"),
against any losses, claims, damages or liabilities (joint or several) to which
they may become subject under the Securities Act, the Exchange 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 statements 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 under
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, and the Company shall reimburse
each such Holder, affiliate, officer or director or partner, underwriter or
controlling person for any legal or other expenses incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable to
any Holder 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 or any
other officer, director or controlling person thereof or any Violation which
arises from a violation by a Holder of the Securities Act, the Exchange Act or
any state securities law.
(b) Holder Indemnity. The Holder shall indemnify and hold harmless the
Company, its affiliates, officers, directors, and authorized representatives,
any underwriter (as defined in the Securities Act) and each person, if any, who
controls the Company or the underwriter (within the meaning of the Securities
Act or the Exchange Act), against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the Securities Act,
the Exchange Act or any state securities law, and the Company shall reimburse
each such Holder, affiliate, officer
or director or partner, underwriter or controlling person for any legal or
other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action; insofar as such losses,
claims, damages or liabilities (or actions and respect thereof) arise out of or
are based upon any untrue statements or untrue information provided by such
Holder to the Company in connection with the offer or sale of Registrable
Securities.
(c) Notice; Right to Defend. Promptly after receipt by an indemnified party
under this Section 5 of notice of the commencement of any action (including any
governmental action), such indemnified party shall, if a claim in respect
thereof is to be made against any indemnifying party under this Section 5,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in and if the
indemnifying party agrees in writing that it will be responsible for any costs,
expenses, judgments, damages and losses incurred by the indemnified party with
respect to such claim, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel mutually satisfactory to the
parties; 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 the indemnified party reasonably believes that
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 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 Agreement only if and to the extent that such failure is
prejudicial to its ability to defend such action, and 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 this Agreement.
(d) Contribution. If the indemnification provided for in this Agreement 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 thereunder, 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
hand in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the indemnifying party and 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 and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount any Holder shall be obligated to
contribute pursuant to the Agreement shall be limited to an amount equal to the
proceeds to such Holder of the Registrable Securities sold pursuant to the
registration statement which gives rise to such obligation to contribute (less
the aggregate amount
of any damages which the Holder has otherwise been required to pay in
respect of such loss, claim, damage, liability or action or any substantially
similar loss, claim, damage, liability or action arising from the sale of such
Registrable Securities).
(e) Survival of Indemnity. The indemnification provided by this Agreement
shall be a continuing right to indemnification and shall survive the
registration and sale of any Registrable Securities by any person entitled to
indemnification hereunder and the expiration or termination of this Agreement.
6 Remedies.
(a) Time is of Essence. The Company agrees that time is of the essence of
each of the covenants contained herein and that, in the event of a dispute
hereunder, this Agreement is to be interpreted and construed in a manner that
will enable the Holders to sell their Registrable Securities as quickly as
possible after such Holder have indicated to the Company that it desires its
Registrable Securities to be registered.
(b) Remedies Upon Default or Delay. - Liquidated Damages. The Company shall
use its best efforts to obtain effectiveness of the Registration Statement as
soon as practicable. If the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 1 hereof is
not declared effective by the Commission on or before March 31, 1999 (other than
by reason of any act or failure to act in a timely manner by the Holder or its
counsel) (the "Registration Deadline"), then (a "Delay") the Company will make
payments to the Holder, as liquidated damages and in such amounts and at such
times as shall be determined pursuant to this Section, an amount to be
determined as follows. The Company shall pay to the Holder, at the Holder's
option, cash in an amount for the first 30 days of such Delay equal to $5,000,
and $10,000 for each additional 30 day period. Such amounts shall be for (i) the
number of months (prorated for partial months beginning April 1, 1999 and ending
on the date the Registration Statement is declared effective by the Commission,
provided, however, that there shall be excluded from such period any delays
which are solely attributable to changes required by the Holder in the
Registration Statement with respect to information relating to the Holder,
including, without limitation, changes to the plan of distribution, or to the
failure of the Holder to conduct its review of the registration statement in a
reasonably prompt manner; (ii) the number of months (prorated for partial
months) that sales cannot be made pursuant to the Registration Statement after
the Registration Statement has been declared effective; and (iii) the number of
months (prorated for partial months) that the Common Stock is not listed or
included for quotation on the OTC Bulletin Board or another United States
national securities exchange after the Registration Statement has been declared
effective. The foregoing shall not relieve the Company from its obligations to
register the Registrable Securities pursuant to this Agreement. If the Company
does not remit the aforementioned to the Holders as set forth above, the Company
will pay the Holders' reasonable costs of collection, including attorneys fees,
in addition to the liquidated
damages. The registration of the Securities pursuant to this provision
shall not affect or limit Holder's other rights or remedies as set forth in this
Agreement.
7. Notices.
Any notice required by the provisions of this Agreement will be in writing
and will be deemed effectively given: (a) upon personal delivery to the party to
be notified; (b) when sent by confirmed telex or facsimile if sent during normal
business hours of the recipient; if not, then on the next business day; (c) five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt.
i. If to the Company, at:
Financial Intranet, Inc.
000 Xxx Xxxx Xxxxx Xxxx
Xxxxxxx, Xxx Xxxx 00000
Attn.: Xxxxxxx Xxxxxxxx
with a copy to:
Xxxxxx Xxxxxxxx, Esq.
XxXxxxxxxx & Xxxxx, LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ii. if to any Holder of any Registrable Securities, to the address of such
Holder as it appears on the signature page hereto.
or at such other address as it may have furnished in writing to the other
party to this Agreement
8. Successors and Assigns. Except as otherwise expressly provided herein,
this Agreement shall inure to the benefit of and be binding upon the successors
and permitted assigns of the Company and each of the Holders.
9. Amendment and Waiver. This Agreement may be amended, and the observance
of any term of this Agreement may be waived, but only with the written consent
of the Company and the Holders of Securities representing a majority of the
Registrable Securities; provided, however, that no such amendment or waiver
shall take away any registration right of any Holder of Registrable Securities
or reduce the amount of reimbursable costs to any Holder of Registrable
Securities in connection with any registration hereunder without the consent of
such Holder; further provided, however, that without the consent of any other
Holder of Registrable Securities, any Holder may from time to time enter into
one or more agreements amending, modifying or waiving the provisions
of this Agreement if such action does not adversely affect the rights or
interest of any other Holder of Registrable Securities. No delay on the part of
any party in the exercise of any right, power or remedy shall operate as a
waiver thereof, nor shall any single or partial exercise by any party of any
right, power or remedy preclude any other or further exercise thereof, or the
exercise of any other right, power or remedy.
10. Counterparts. One or more counterparts of this Agreement may be signed
by the parties, each of which shall be an original but all of which together
shall constitute one and same instrument.
11. Governing Law. This warrant will be construed and enforced in
accordance with, and the rights of the parties will be governed by, the laws of
the State of New York without regard to conflict of laws principles. Any
litigation based thereon, or arising out of, under, or in connection with, this
agreement or any course of conduct, course of dealing, statements (whether oral
or written) or actions of the Company or Holder shall be brought and maintained
exclusively in the court of the state of New York without reference to its
conflicts of laws rules or principles. The Company and the Holder hereby
expressly and irrevocably submits to the jurisdiction of the federal Courts of
the state of New York for the purpose of any such litigation as set forth above
and irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Holder further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Holder hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum.
12. Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
13. Headings. The headings in this Agreement are for convenience of
reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
IN WITNESS WHEREOF, the undersigned have executed this Registration Rights
Agreement as of the date first above written.
FINANCIAL INTRANET, INC.
By ____________________________
AHOOD F SHARBATLY
By /s/Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx, as Power of Attorney
CARDINAL CAPITAL MANAGEMENT, INC.
By_____________________________
JOSEPHBERG XXXXX & CO.
By:_____________________________
