REGISTRATION RIGHTS AGREEMENT
Exhibit
99.12
This
Registration Rights Agreement (“Agreement”)
is
entered into as of December 7, 2006, between USTelematics, Inc., a Delaware
corporation with offices at 000 Xxxxxxx Xxxxx, Xxxx Xxxx XX 00000 (the
“Company”)
and
each of the parties listed under “Holders” hereto (each, a “Holder”).
WITNESSETH:
WHEREAS,
pursuant to that certain Securities Purchase Agreement, dated on or about the
date hereof, by and between the Company and each Holder (the “Purchase
Agreement”)
of the
9% Secured Convertible Debentures due December __, 2008 (the “Debentures”)
issued
by the Company, the Company has agreed to issue to the Holders, and the Holders
have agreed to acquire from the Company, (i) Debentures in the aggregate
principal amount of up to $6.0 million and (ii) Series A Warrants,
Series B Warrants and Exchange Bonus Warrants to purchase shares (“Shares”)
of the
Company’s Common Stock, par value $0.0001 per share (the “Common
Stock”),
subject
to the terms and conditions set forth therein; and
WHEREAS,
pursuant to that certain Placement Agency Agreement, dated on or about March
20,
2006, by and between the Company and Axiom Capital Management LLC (the
“Placement
Agreement”),
the
Company has agreed to issue the Placement Agent Warrant (together with the
Series A Warrants, the Series B Warrants and the Exchange Bonus Warrants, the
“Warrants”)
to
purchase shares of Common Stock, subject to the terms and conditions set forth
therein; and
WHEREAS,
the
Debentures will be convertible into shares of Common Stock and the Warrants
will
be exercisable for shares of Common Stock (the “Common
Shares”)
pursuant to the terms and conditions set forth therein.
NOW,
THEREFORE,
in
consideration of the mutual promises, representations, warranties, covenants
and
conditions set forth in the Debentures, the Purchase Agreement, the Placement
Agreement, the Warrants and this Agreement, the Company and each Holder agree
as
follows:
1.
Certain
Definitions.
Capitalized terms used herein and not otherwise defined shall have the meaning
ascribed thereto in the Purchase Agreement or the Debenture. As used in this
Agreement, the following terms shall have the following respective
meanings:
“Closing”
and
“Closing
Date”
shall
have the meanings ascribed to such terms in the Purchase Agreement.
“Commission”
or
“SEC”
shall
mean the Securities and Exchange Commission or any other federal agency at
the
time administering the Securities Act.
“Effectiveness
Date”
means,
with respect to the initial Registration Statement required to be filed
hereunder, the 90th
calendar
day following the date hereof (or the 120th
calendar
day following the date hereof in the event of a “full review” by the Commission
of the initial Registration Statement) and, with respect to any additional
Registration Statements which may be required hereunder, the 90th
calendar
day (or the 120th
calendar
day in the event of a “full review” by the Commission of such additional
Registration Statement) following the date on which the Company first knows,
or
reasonably should have known, that such additional Registration Statement is
required hereunder; provided,
however,
that in
the event the Company is notified by the Commission that one of the above
Registration Statements will not be reviewed or is no longer subject to further
review and comments, then the Effectiveness Date as to such Registration
Statement shall be the fifth Trading Day following the date on which the Company
is so notified if such date precedes the dates required above; provided, further,
if any
such Effectiveness Date falls on a day that is not a Trading Day, then such
Effectiveness Date shall be the Trading Day immediately prior to such
date.
“Filing
Date” means, with respect to the initial Registration Statement required
hereunder, the 40th calendar day following the date hereof and, with respect
to
any additional Registration Statements which may be required pursuant to Section
2, the 30th calendar day following the date on which the Company first knows,
or
reasonably should have known, that such additional Registration Statement is
required hereunder (but in no event sooner than the 180th calendar day following
the date the initial Registration Statement is first declared effective by
the
Commission unless the filing of such additional Registration Statement sooner
than such 180th calendar is permitted pursuant to Rule 415); provided, however,
if any such Filing Date falls on a day that is not a Trading Day, then such
Filing Date shall be the Trading Day immediately prior to such
date.
“Holder”
and
“Holders”
shall
include each Holder, Axiom Capital Management LLC and any permitted transferee
or transferees of Registrable Securities (as defined below), the Debentures
and/or Warrants which have not been sold to the public to whom the registration
rights conferred by this Agreement have been transferred in compliance with
this
Agreement and/or the Purchase Agreement.
The
terms
“register,”
“registered”
and
“registration”
shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness
of
such registration statement.
“Registrable
Securities”
shall
mean: (i) the Shares or other securities issued or issuable to each Holder
or
its permitted transferee or designee (a) upon conversion of the Debentures,
or
(b) upon any distribution with respect to, any exchange for or any replacement
of, a Debenture, (c) upon any conversion, exercise or exchange of any
securities issued in connection with any such distribution, exchange or
replacement, (d) as payment of any portion of the principal amount or interest
in lieu of cash with respect to the Debentures (even if not permitted under
the
terms of the Debentures or the Purchase Agreement), or (e) issued or issuable
to
such Holder or its permitted transferee or designee, under Favored Nations
4.25(d) provisions of the Purchase Agreement; (ii) securities issued or issuable
in respect of the foregoing upon any stock split, stock dividend,
recapitalization or similar event; and (iii) any other security issued as a
dividend or other distribution with respect to, in exchange for or in
replacement of the securities referred to in the preceding clauses; provided
that all such shares shall cease to be Registrable Securities at such time
as
they have been sold under a Registration Statement or pursuant to Rule 144
under
the Securities Act or otherwise or at such time as they are eligible to be
sold
pursuant to Rule 144(k).
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“Registration
Expenses”
shall
mean all expenses to be incurred in connection with each Holder’s registration
rights under this Agreement not included in Selling Expenses, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company and one counsel for the Holders, blue
sky fees and expenses, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company, which shall be paid in any event by the
Company).
“Registration
Statement”
shall
have the meaning set forth in Section 2(a) herein.
“Regulation
D”
shall
mean Regulation D as promulgated pursuant to the Securities Act, and as
subsequently amended.
“Rule
415”
means
Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same purpose and
effect as such Rule.
“Securities
Act”
or
“Act”
shall
mean the Securities Act of 1933, as amended.
“Selling
Expenses”
shall
mean all underwriting discounts and selling commissions applicable to the sale
of Registrable Securities.
2.
Registration
Requirements.
The
Company shall use its best efforts to effect the registration of the Registrable
Securities (including, without limitation, the execution of an undertaking
to
file post-effective amendments, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act) as would permit or facilitate
the
sale or distribution of all the Registrable Securities in the manner (including
manner of sale) and in all states reasonably requested by the Holders. The
best
efforts by the Company to effect the registration under each Registration
Statement shall include, without limitation, the following:
(a)
Shelf
Registration.
On or
prior to each Filing Date, the Company shall prepare and file with the
Commission a “Shelf” Registration Statement covering the resale of the
Registrable Securities not covered by an effective registration statement on
such Filing Date for an offering to be made on a continuous basis pursuant
to
Rule 415; provided,
however,
that if
such Registrable Securities hereunder shall equal or exceed 30% of the issued
and outstanding Common Stock of the Company (less any shares of Common Stock
held by Affiliates of the Company) on the actual filing date of the initial
Registration Statement, the initial Registration Statement shall register
at
a
minimum
a number
of shares of Common Stock which is equal to 30% of the issued and outstanding
shares of Common Stock of the Company (less any shares of Common Stock held
by
Affiliates of the Company) on such actual filing date, but not less than 100%
of
the Common Stock issuable upon conversion of the Debentures (the “Registration
Cap”)
and
the
remaining Registrable Securities shall be subject to registration at the next
succeeding Filing Date. In such event, the number of Registrable Securities
to
be registered for each Holder shall be reduced pro-rata among all Holders and
each Holder shall have the right to designate which of its Registrable
Securities shall be omitted from the initial Registration Statement.
Notwithstanding anything herein to the contrary, the Company shall continue
to
use best efforts to register all Registrable Securities as promptly as possible
and if requested by Holders holding at least 50% of the then outstanding
Registrable Securities not registered, shall seek to promptly register
Registrable Securities in excess of the Registration Cap, provided that no
Registration Statement filed pursuant to a request made under this sentence
shall be subject to a required Effectiveness Date. Subject to the terms of
this
Agreement and the preceding sentence, the Company shall use its best efforts
to
cause a Registration Statement to be declared effective under the Securities
Act
as promptly as possible after the filing thereof, but in any event prior to
the
applicable Effectiveness Date, and shall use its best efforts to keep such
Registration Statement continuously effective under the Securities Act until
all
Registrable Securities covered by such Registration Statement have been sold,
or
may be sold without volume restrictions pursuant to Rule 144(k), as determined
by the counsel to the Company pursuant to a written opinion letter to such
effect, addressed and acceptable to the Company’s transfer agent and the
affected Holders (the “Effectiveness
Period”).
The
Company shall telephonically request effectiveness of a Registration Statement
as of 5:00 p.m. New York City time on a Trading Day. The Company shall
immediately notify the Holders via facsimile of the effectiveness of a
Registration Statement on the same Trading Day that the Company telephonically
confirms effectiveness with the Commission, which shall be the date requested
for effectiveness of a Registration Statement. The Company shall, by 9:30 a.m.
New York City time on the Trading Day after the Effective Date (as defined
in
the Purchase Agreement), file a final Prospectus with the Commission as required
by Rule 424. Failure to so notify the Holder within 1 Trading Day of such
notification of effectiveness or failure to file a final Prospectus as foresaid
shall be deemed an Interfering Event under Section 2(d).
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(b)
The
Company shall, as expeditiously as possible after the Closing Date:
(i)
But
in
any event no later than thirty (30) days after the Closing Date, prepare and
file a registration statement with the Commission pursuant to Rule 415 under
the
Securities Act on Form SB-2 or Form S-3 under the Securities Act (or in the
event that the Company is ineligible to use such form, such other form as the
Company is eligible to use under the Securities Act provided that any other
form
shall be converted into an S-3 as soon as Form S-3 becomes available to the
Company) covering resales by the Holders as selling stockholders (not
underwriters) of the Registrable Securities (“Registration
Statement”),
which
Registration Statement, to the extent allowable under the Securities Act and
the
rules promulgated thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Debentures
and exercise of the Warrants. . Thereafter the Company shall use its best
efforts to cause such Registration Statement and other filings to be declared
effective as soon as possible, and in any event no later than the Effectiveness
Date.
Without
limiting the foregoing, the Company will promptly respond to all SEC comments,
inquiries and requests, and shall request acceleration of effectiveness at
the
earliest possible date.
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(ii)
Prepare
and file with the SEC such amendments and supplements to such Registration
Statement and the prospectus used in connection with such Registration Statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement and notify the Holders of the filing and effectiveness of such
Registration Statement and any amendments or supplements.
(iii)
The
Company shall sell additional Common Stock to at least that number of purchasers
that qualify as Accredited Investors as defined under Regulation D adopted
under
the Securities Act of 1933, as amended, in a manner which complies with Section
4.4 of the Purchase Agreement, such that the Company shall have no fewer than
50
holders of Common Stock of the Company not later than the earlier of: (i) the
date on which the Company takes the steps required by Section 4.12 (c) of the
Purchase Agreement, or (ii) the date by which the Company is required to file
the first registration statement described in Section 2(a)(i) above.
(iv)
Register
and qualify the securities covered by such Registration Statement under the
securities or “Blue Sky” laws of all domestic jurisdictions; provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process
in
any such states or jurisdictions.
(v)
Notify
promptly each Holder that has Registrable Securities included in the
Registration Statement of the happening of any event (but not the substance
or
details of any such event) of which the Company has knowledge as a result of
which the prospectus (including any supplements thereto or thereof) included
in
such Registration Statement, as then in effect, includes an untrue statement
of
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 (each an “Event”),
and
use its best efforts to promptly update and/or correct such prospectus. Each
Holder will hold in confidence and will not make any disclosure of any such
Event and any related information disclosed by the Company.
(vi)
Notify
each Holder of the issuance by the Commission or any state securities commission
or agency of any stop order suspending the effectiveness of the Registration
Statement or the threat or initiation of any proceedings for that purpose.
The
Company shall use its best efforts 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.
5
(vii)
Furnish
to each Holder that has Registrable Securities included in the Registration
Statement such numbers of copies of a current prospectus conforming with the
requirements of the Securities Act, copies of the Registration Statement, any
amendment or supplement thereto and any documents incorporated by reference
therein and such other documents as such Holder may reasonably require in order
to facilitate the disposition of Registrable Securities owned by such
Holder
(viii)
List
the
Registrable Securities covered by such Registration Statement with all
securities exchange(s) and/or markets on which the Common Stock is then listed
and prepare and file any required filings with any exchange or market where
the
Common Shares are traded.
(ix)
Take
all
steps reasonably necessary to enable Holders to avail themselves of the
prospectus delivery mechanism set forth in Rule 153 (or successor thereto)
under
the Act.
(x)
Furnish
to each Holder for review a copy of each draft of a registration statement
to be
filed under the Agreement at least 5 days before filing of an initial
registration, and at least two business days before filing of any amendment
to a
previously filed amendment.
(c)
Notwithstanding
the obligations under Section 2(b)(v) or any provision of this Agreement, if
(i)
in the good faith judgment of the Company, following consultation with legal
counsel, it would be detrimental to the Company and its stockholders for resales
of Registrable Securities to be made pursuant to the Registration Statement
due
to the existence of a material development or potential material development
involving the Company that the Company would be obligated to disclose in the
Registration Statement, which disclosure would be premature or otherwise
inadvisable at such time or would have a material adverse effect upon the
Company and its stockholders, or (ii) in the good faith judgment of the Company,
it would adversely affect or require premature disclosure of the filing of
a
Company-initiated registration of any class of its equity securities, then
the
Company will have the right to suspend the use of the Registration Statement
for
one period of not more than 30 calendar days in any 12 month period, but only
if
the Company reasonably concludes, after consultation with outside legal counsel,
that the failure to suspend the use of the Registration Statement as such would
create a of a material liability or violation under applicable securities laws
or regulations.
(d)
Set
forth
below in this Section 2(d) are (I) events that may arise that the Purchasers
consider will interfere with the full rights under this Agreement, the Purchase
Agreement, and the Debentures (the “Interfering
Events”),
and
(II) certain remedies applicable in each of these events.
6
(i)
Payments
by the Company.
If (i)
at any time after effectiveness of the Registration Statement, sales thereunder
during the registration period (as described in Section 5) cannot be made for
any reason, other than by reason of the operation of Section 2(c),
for
a period of more than 10 consecutive business days, (ii)
at
any time after effectiveness of the Registration Statement, sales thereunder
during the Registration Period cannot be made for
a
period of time that exceeds the limitations set forth in Section 2(c), or (iii)
at any time after the Registrable Securities are listed in accordance with
Section 2(b)(viii), the Common Stock is not listed or included for quotation
on
the Trading Market where shares of the Company’s common stock are then traded
for more than 10 consecutive calendar days, then the Company will thereafter
make a payment as liquidated damages to each Holder as set forth below (payable
in the manner described in Section 2(d)(ii) below for Late Registration
Payment). The amount of the payment made to each Holder will be equal to 2%
of
the purchase price paid for (i) the Debentures then held by the Holder and
not
previously converted into Registrable Securities and sold by the Holder and
(ii)
Registrable Securities obtained upon conversion of the Debentures for each
30
calendar days that sales cannot be made under the effective Registration
Statement or the Common Shares are not listed or included for quotation on
the
Trading Market where shares of the Company’s common stock are then traded (but
any day on which both conditions exist shall count as a single day and no day
taken into account for purposes of determining whether any payment is due under
Section 2 (d)(ii) shall be taken into account for purposes of determining
whether any payment is due under this Section 2(d)(i) or the amount of such
payment). The number of shares not previously sold as specified in the previous
sentence shall be determined as of the end of the respective 30-day period.
In
no event shall payment pursuant to this Section exceed 30% in the aggregate
of
the purchase price paid for (i) the Debentures then held by the Holder and
(ii)
Registrable Securities obtained upon conversion of the Debentures (including
such Holder’s predecessors and successors) for the entire registration period
(as described in Section 5). These payments will be prorated on a daily basis
during the 30-day period and will be paid to each Holder within ten business
days following the end of each 30-day period as to which payment is due
hereunder or provided that the respective Holder delivered to the Company at
least two business days prior thereto information with respect to the principal
amount of Debentures and number of Shares not previously sold by such Holder
(together with reasonable supporting documentation). The Holders may make a
claim for additional damages as a remedy for the Company’s failure to comply
with the timelines set forth in this Section, but acknowledgement of such right
in this Agreement shall not constitute an admission by the Company that any
such
damages exist or may exist. Nothing contained in the preceding sentence shall
be
read to limit the ability of the Holders to seek specific performance of this
Agreement.
7
(ii)
Effect
of Late Registration.
If the
Registration Statement: (i) has not been declared effective by the Required
Effective Date other than by reason of the operation of Section 2(c), or (ii)
the Company does not respond to comments received from the Securities and
Exchange Commission (“SEC”) on a Registration Statement filed as required under
this agreement within 10 business days after receipt and the registration
statement does not become effective by the Effectiveness Date, or (iii) the
Registration Statement does not become effective within 5 business days after
receipt of notice from the SEC that there will be no further review or no review
on a registration statement filed pursuant to this agreement, or (iv) if the
initial Registration Statement is not filed by the Filing Date, then the Company
will make a payment to each Holder as liquidated damages for such delay (each
a
“Late
Registration Payment”).
Each
Late Registration Payment will be equal to 2% of the purchase price paid for
(i)
the Debentures then held by the Holder and not previously converted into Shares
and sold by the Holder and (ii) Registrable Securities obtained upon conversion
of the Debentures, for the first 30 calendar days after the Effectiveness Date,
and 2% of such purchase price for each period of 30 calendar days thereafter
(but no day taken into account for purposes of determining whether any payment
is due under Section 2(d)(i) shall be taken into account for purposes of
determining whether any payment is due under this Section 2(d)(ii) or the amount
of such payment). The Late Registration Payment shall be made, at the option
of
the Company, in cash or registered Company Common Stock with a value per share
equal to the lowest reported closing bid price in the Trading Market for the
Common Stock during the 20 Trading Days immediately before accrual of the
obligation to make the payment. In no event shall payments pursuant to this
Section exceed 30% in the aggregate of the purchase price paid for (i) the
Debentures then held by the Holder and not previously converted into Shares
and
sold by the Holder and (ii) Registrable Securities obtained upon conversion
of
the Debentures (including such Holder’s predecessors and successors) for the
entire registration period (as described in Section 5). The Late Registration
Payments will be prorated on a daily basis during the 30-day period and will
be
paid to the initial Holders within ten business days following the end of each
30-day period as to which payment is due hereunder, provided that, upon request
from the Company, the respective Holder delivered to the Company within 3
business days prior thereto information with respect to the principal amount
of
Debentures and the number of Shares not previously sold by such Holder (together
with reasonable supporting documentation). The Holders may make a claim for
additional damages as a remedy for the Company’s failure to comply with the
timelines set forth in this Section, but acknowledgement of such right in this
Agreement shall not constitute an admission by the Company that any such damages
exist or may exist. Nothing contained in the preceding sentence shall be read
to
limit the ability of the Holders to seek specific performance of this Agreement.
8
(e)
During
the registration period, the Company will make available, upon reasonable
advance notice during normal business hours, for inspection by any Holder whose
Registrable Securities are being sold pursuant to a Registration Statement,
all
pertinent financial and other records, pertinent corporate documents and
properties of the Company (collectively, the “Records”)
as
reasonably necessary to enable each such Holder to exercise its due diligence
responsibility in connection with or related to the contemplated offering.
The
Company will cause its officers, directors and employees to supply all
information that any Holder may reasonably request for purposes of performing
such due diligence.
(f)
Each
Holder will hold in confidence, use only in connection with the contemplated
offering and not make any disclosure of all Records and other information that
the Company determines in good faith to be confidential, and of which
determination the Holders are so notified, unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (ii) the release of such Records is ordered pursuant
to
a subpoena or other order from a court or government body of competent
jurisdiction, (iii) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement (to the knowledge of the relevant Holder), (iv) the Records
or
other information were developed independently by the Holder without breach
of
this Agreement, (v) the information was known to the Holder before receipt
of
such information from the Company, or (vi) the information was disclosed to
the
Holder by a third party not under an obligation of confidentiality. However,
a
Holder may make disclosure of such Records and other information to any
attorney, adviser, or other third party retained by it that needs to know the
information as determined in good faith by the Holder (the “Holder
Representative”),
if
the Holder advises the Holder Representative of the confidentiality provisions
of this Section 2(f). The Company is not required to disclose any confidential
information in the Records to any Holder unless and until such Holder has
entered into a confidentiality agreement (in form and substance satisfactory
to
the Company) with the Company with respect thereto, substantially to the effect
of this Section 2(f). Unless legally prohibited from so doing, each Holder
will,
upon learning that disclosure of Records containing confidential information
is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the Company,
at
the Company’s expense, to undertake appropriate action to prevent disclosure of,
or to obtain a protective order for, the Records deemed confidential. Nothing
herein will be deemed to limit the Holder’s ability to sell Registrable
Securities in a manner that is otherwise consistent with applicable laws and
regulations.
(g)
The
Company shall file a Registration Statement with respect to any newly authorized
and/or reserved Registrable Securities consisting of Shares described in clause
(i) of the definition of Registrable Securities within ten (10) business days
of
any stockholders’ meeting authorizing same and shall use its best efforts to
cause such Registration Statement to become effective within ninety (90) days
of
such stockholders’ meeting. If the Holders become entitled, pursuant to an event
described in clause (ii) and (iii) of the definition of Registrable Securities,
to receive any securities in respect of Registrable Securities that were already
included in a Registration Statement, subsequent to the date such Registration
Statement is declared effective, and the Company is unable under the securities
laws to add such securities to the then effective Registration Statement, the
Company shall promptly file, in accordance with the procedures set forth herein,
an additional Registration Statement with respect to such newly Registrable
Securities. The Company shall use its best efforts to (i) cause any such
additional Registration Statement, when filed, to become effective within 30
days of that date that the need to file the Registration Statement arose. All
of
the registration rights and remedies under this Agreement shall apply to the
registration of such newly reserved shares and such new Registrable
Securities.
9
(h) If
at any
time during the term of this Agreement, the registration statement described
in
Section 2(a) is not effective with respect to some or all of the Registrable
Securities, the Holder shall have the following “piggyback” registration rights.
If the Company at any time following the Closing Date proposes for any reason
to
register Common Shares under the Securities Act (other than on Form S-4 or
Form S-8 promulgated under the Securities Act or any successor forms
thereto), it shall promptly give written notice to the Holder of its intention
to so register such equity securities and, upon the written request, given
within 20 days after delivery of such notice by the Company, of Holder to
include in such registration Registrable Securities held by the Holder (which
request shall specify the number of Registrable Shares proposed to be included
in such registration by the Holder and shall state the intended method of
disposition of such Registrable Securities by the Holder), the Company shall
use
its best efforts to cause all such Registrable Securities to be included in
such
registration on the same terms and conditions as the securities otherwise being
sold in such registration; provided,
however,
that if
the managing underwriter advises the Company in writing that the inclusion
of
all Registrable Securities proposed to be included in such registration would
interfere materially with the successful marketing (including pricing) of
primary shares (the “Primary
Shares”)
proposed to be registered by the Company, then the number of Primary Shares
and
Registrable Securities proposed to be included in such registration shall be
included in the following order:
(i) first,
the
Primary Shares; and
(ii) second,
the
Registrable Securities requested to be included in such registration pursuant
to
this Section 2(h)
provided,
that in
the case of any such underwritten offering of Common Shares by the Company
that
is in satisfaction of a demand registration pursuant to Section 2(i), the
order for inclusion of Primary Shares and Registrable Securities shall be as
set
forth in that section.
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(i) If
at any
time during the term of this Agreement, the registration statement described
in
Section 2(a) is not effective with respect to some or all of the Registrable
Securities, the Holder shall have the following demand registration rights.
If
the Company shall be requested in writing by the Holder to effect a registration
on Form S-1 or Form SB-2 under the Securities Act of Registrable
Securities, then the Company shall promptly use its best efforts to effect
such
registration under the Securities Act of such Registrable Securities which
the
Company has been so requested to register in the manner described in Section
2(a); provided,
however,
that
the Company shall not be obligated to effect any registration under this Section
2(i) except in accordance with the following provisions:
(i) The
Company shall not be obligated to use its best efforts to file and cause to
become effective (x) more than two
registration statements on Form S-1 or Form SB-2 with respect to
Registrable Securities initiated by a Holder pursuant to this Section 2(i)
in a 12 month period; (y) any registration statement covering less than $100,000
in value of Registrable Securities or (z) any registration statement during
any
period in which any other registration statement pursuant to which Shares are
to
be or were sold has been filed and not withdrawn or has been declared effective
within the prior 60 days;
(ii) The
Company may delay the filing or effectiveness of any registration statement
for
a period of up to 30 days after the date of a request for registration pursuant
to this Section 2(i) if the Company determines in good faith that (A) it is
in
possession of material, non-public information concerning an acquisition,
merger, recapitalization, consolidation, reorganization or other material
transaction by or of the Company or concerning pending or threatened litigation
and (B) disclosure of such information would jeopardize any such transaction
or
litigation or otherwise materially harm the Company; provided,
however,
that
the Company may not exercise such deferral right more than once in any twelve
month-period.
(iii) At
such
time as the Corporation shall have qualified for the use of Form S-3 promulgated
under the Securities Act or any successor form thereto, the Holder shall have
the right to request in writing registrations on Form S-3 or such successor
form
of Registrable Securities held by Purchaser in the manner described in Section
2(a), which request or requests shall (i) specify the number of Registrable
Securities held by the Holder intended to be sold or disposed of, (ii) state
the
intended method of disposition of such Registrable Securities held by the Holder
and (iii) relate to Registrable Shares having an anticipated aggregate offering
price of at least $500,000. A requested registration on Form S-3 or any such
successor form in compliance with Section 4 shall not count as a registration
statement initiated pursuant to Section 2(i) but shall otherwise be treated
as a
registration statement initiated pursuant to, and shall, except as otherwise
expressly provided in Section 4, be subject to Section 2.
3.
Expenses
of Registration. All
Registration Expenses in connection with any registration, qualification or
compliance with registration pursuant to this Agreement shall be borne by the
Company, and all Selling Expenses of a Holder shall be borne by such
Holder.
4.
Registration
on Form S-3.
The
Company shall use its reasonable best efforts to meet the “registrant
eligibility” requirements for a secondary offering set forth in the general
instructions to Form S-3 or any comparable or successor form or forms, or in
the
event that the Company is ineligible to use such form, such form as the Company
is eligible to use under the Securities Act, provided that if such other form
is
used, the Company shall convert such other form to a Form S-3 as soon as the
Company becomes so eligible.
11
5.
Registration
Period.
In the
case of the registration effected by the Company pursuant to this Agreement,
the
Company shall keep such registration effective and current until the earlier
of
(a) the date on which all the Holders have completed the sales or distribution
described in the Registration Statement relating thereto or, if earlier until
such Registrable Securities may be sold by the Holders under Rule 144(k)
(provided that the Company’s transfer agent has accepted an instruction from the
Company to such effect) and (b) the seventh (7th) anniversary of the Closing
Date.
6.
Indemnification.
(a)
Company
Indemnity.
The
Company will indemnify each Holder, each of its officers, directors, agents
and
partners, and each person controlling each of the foregoing, within the meaning
of Section 15 of the Securities Act and the rules and regulations thereunder
with respect to which registration, qualification or compliance has been
effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls, within the meaning of Section 15 of the Securities Act
and
the rules and regulations thereunder, any underwriter, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out
of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any final prospectus (as amended or supplemented if the
Company files any amendment or supplement thereto with the SEC), Registration
Statement filed pursuant to this Agreement or any post-effective amendment
thereof or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were
made,
or any violation by the Company of the Securities Act or any state securities
law or in either case, any rule or regulation thereunder applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will reimburse
each
Holder, each of its officers, directors, agents and partners, and each person
controlling each of the foregoing, for any reasonable legal fees of a single
counsel and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to a Holder to
the
extent that any such claim, loss, damage, liability or expense arises out of
or
is based on (i) any untrue statement or omission based upon written information
furnished to the Company by such Holder or underwriter (if any) therefor and
stated to be specifically for use therein, (ii) any failure by any Holder to
comply with prospectus delivery requirements or the Securities Act or Exchange
Act or any other law or legal requirement applicable to them or any covenant
or
agreement contained in the Purchase Agreement or this Agreement or (iii) an
offer or sale of Registrable Securities occurring during a period in which
sales
under the Registration Statement are suspended as permitted by this Agreement.
The indemnity agreement contained in this Section 6(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
will not be unreasonably withheld).
12
(b)
Holder
Indemnity.
Each
Holder will, severally but not jointly, if Registrable Securities held by it
are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors,
officers, agents and partners, and any other stockholder selling securities
pursuant to the Registration Statement and any of its directors, officers,
agents, partners, and any person who controls such stockholder within the
meaning of the Securities Act or Exchange Act and each underwriter, if any,
of
the Company’s securities covered by such a Registration Statement, each person
who controls the Company or such underwriter within the meaning of Section
15 of
the Securities Act and the rules and regulations thereunder, each other Holder
(if any), and each of their officers, directors and partners, and each person
controlling such other Holder(s) against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on (i)
any
untrue statement (or alleged untrue statement) of a material fact contained
in
any such final prospectus (as amended or supplemented if the Company files
any
amendment or supplement thereto with the SEC), Registration Statement filed
pursuant to this Agreement or any post-effective amendment thereof or based
on
any omission (or alleged omission) to state therein a material fact required
to
be stated therein or necessary to make the statement therein not misleading
in
light of the circumstances under which they were made or (ii) failure by any
Holder to comply with prospectus delivery requirements or the Securities Act
or
any other law or legal requirement applicable to them or any covenant or
agreement contained in the Purchase Agreement or this Agreement, and will
reimburse the Company and such other Holder(s) and their directors, officers
and
partners, underwriters or control persons for any reasonable legal fees or
any
other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to
the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such final prospectus
(as amended or supplemented if the Company files any amendment or supplement
thereto with the SEC), Registration Statement filed pursuant to this Agreement
or any post-effective amendment thereof in reliance upon and in conformity
with
written information furnished to the Company by such Holder and stated to be
specifically for use therein, and provided that the maximum amount for which
such Holder shall be liable under this indemnity shall not exceed the net
proceeds received by such Holder from the sale of the Registrable Securities
pursuant to the registration statement in question. The indemnity agreement
contained in this Section 6(b) shall not apply to amounts paid in settlement
of
any such claims, losses, damages or liabilities if such settlement is effected
without the consent of such Holder (which consent shall not be unreasonably
withheld).
(c)
Procedure.
Each
party entitled to indemnification under this Section 6 (the “Indemnified
Party”)
shall
give notice to the party required to provide indemnification (the “Indemnifying
Party”)
promptly after such Indemnified Party has actual knowledge of any claim as
to
which indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim in any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of such
claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld), and
the
Indemnified Party may participate in such defense at its own expense, and
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 6 except to the extent that the Indemnifying Party is
materially and adversely affected by such failure to provide notice. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such non-privileged information regarding itself
or the claim in question as an Indemnifying Party may reasonably request in
writing and as shall be reasonably required in connection with the defense
of
such claim and litigation resulting therefrom.
13
7.
Contribution.
If the
indemnification provided for in Section 6 herein is unavailable to the
Indemnified Parties in respect of any losses, claims, damages or liabilities
referred to herein (other than by reason of the exceptions provided therein),
then each such Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such losses, claims, damages or liabilities as between the
Company on the one hand and any Holder(s) on the other, in such proportion
as is
appropriate to reflect the relative fault of the Company and of such Holder(s)
in connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of any
Holder(s) on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission
or
alleged omission to state a material fact relates to information supplied by
the
Company or by such Holder(s).
In
no
event shall the obligation of any Indemnifying Party to contribute under this
Section 7 exceed the amount that such Indemnifying Party would have been
obligated to pay by way of indemnification if the indemnification provided
for
under Section 6(a) or 6(b) hereof had been available under the
circumstances.
The
Company and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Holders were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraphs. The amount
paid or payable by an Indemnified Party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraphs
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section, no Holder shall be required
to
contribute any amount in excess of the amount by which in the case of any
Holder, the net proceeds received by such Holder from the sale of Registrable
Securities pursuant to the registration statement in question. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
8.
Survival.
The
indemnity and contribution agreements contained in Sections 6 and 7 shall remain
operative and in full force and effect regardless of (i) any termination of
this
Agreement, the Purchase Agreement or the Placement Agreement and (ii) the
consummation of the sale or successive resales of the Registrable
Securities.
9.
Information
by Holders.
As a
condition to the obligations of the Company to complete any registration
pursuant to this Agreement with respect to the Registrable Securities of each
Holder, such Holder will furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended methods of
disposition of the Registrable Securities held by it as is reasonably required
by the Company to effect the registration of the Registrable Securities. At
least five business days prior to the first anticipated filing date of a
Registration Statement for any registration under this Agreement, the Company
will notify each Holder of the information the Company requires from that Holder
whether or not such Holder has elected to have any of its Registrable Securities
included in the Registration Statement. If the Company has not received the
requested information from a Holder by the business day prior to the anticipated
filing date, then the Company may file the Registration Statement without
including comments from, or requested of, that Holder.
14
10.
Further
Assurances.
Each
Holder will cooperate with the Company, as reasonably requested by the Company,
in connection with the preparation and filing of any Registration Statement
hereunder, unless such Holder has notified the Company in writing of such
Holder’s irrevocable election to exclude all of such Holder’s Registrable
Securities from such Registration Statement.
11.
Suspension
of Sales.
Upon
receipt of any notice from the Company under Section 2(b)(v) or 2(c), each
Holder will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until (i) it receives copies of a supplemented or amended prospectus
contemplated by Sections 2(b)(v) or (ii) the Company advises the Holder that
a
suspension of sales under Section 2(c) has terminated. If so directed by the
Company, each Holder will deliver to the Company (at the expense of the Company)
or destroy all copies in the Holder’ s possession (other than a limited number
of file copies) of the prospectus covering such Registrable Securities that
is
current at the time of receipt of such notice.
12.
Replacement
Certificates.
The
certificate(s) representing the Registrable Securities held by the Holder may
be
exchanged by the Holder at any time and from time to time for certificates
with
different denominations representing an equal aggregate number of Registrable
Securities of the same tenor, as reasonably requested by such Holder upon
surrendering the same. No service charge will be made for such registration
or
transfer or exchange. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of certificates
evidencing any Registrable Securities, and, in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to it, or upon surrender
and
cancellation of such certificate if mutilated, the Company will make and deliver
a new certificate of like tenor and dated as of such cancellation at no charge
to the holder.
13.
Transfer
or Assignment.
Except
as otherwise provided herein, this Agreement shall be binding upon and inure
to
the benefit of the parties and their successors and permitted assigns. The
rights granted to the Holder by the Company under this Agreement to cause the
Company to register Registrable Securities may be transferred or assigned (in
whole or in part) to a transferee or assignee of the Debenture, or Registrable
Securities, and all other rights granted to the Holder by the Company hereunder
may be transferred or assigned to any transferee or assignee of the Debenture,
or Registrable Securities; provided in each case that (i) the Company is given
written notice by the Holder at the time of or within a reasonable time after
such transfer or assignment, stating the name and address of said transferee
or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned; and provided further that the
transferee or assignee of such rights agrees in writing to be bound by the
registration provisions of this Agreement, (ii) such transfer or assignment
is
not made under the Registration Statement or Rule 144, (iii) such transfer
is
made according to the applicable requirements of the Purchase Agreement, and
(iv) the transferee has provided to the Company an investor questionnaire (or
equivalent document) evidencing that the transferee is a “qualified
institutional buyer” as defined in Rule 144A under the Securities Act or an
“accredited investor” as defined in Rule 501(a)(1),(2),(3), or (7) of Regulation
D.
15
14.
Miscellaneous.
(a)
Remedies.
The
Company and the Holders acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement
and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or
equity.
(b)
Jurisdiction.
The
Company and each Holder (i) hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court, the New York state courts
and
other courts of the United States sitting in New York County, New York for
the
purposes of any suit, action or proceeding arising out of or relating to this
Agreement and (ii) hereby waives, and agrees not to assert in any such suit
action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought
in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. The Company and the Holder consent to process being served in any
such
suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing in this paragraph shall affect or limit any right to serve
process in any other manner permitted by law.
(c)
Notices.
Any
notice or other communication required or permitted to be given hereunder shall
be in writing by facsimile, mail or personal delivery and shall be effective
upon actual receipt of such notice. The addresses for such communications shall
be:
to
the
Company:
USTelematics,
Inc.
000
Xxxxxxx Xxxxx
Xxxx
Xxxx, XX 00000
Attn:
Xxxxxx Xxxxxxxxx
Fax:
(000) 000-0000
with
a
copy to:
Xxxx
X.
Xxxxxx, LLC
0000
Xxxxxxx Xx, Xxx 0000
Xxxxxx
Xxxxxxxx 00000
16
If
to the
Purchasers, to the addresses set forth on Schedule I to the Purchase
Agreement:
with
a
copy to:
Xxxxxxxx
Xxxxx Deutsch LLP
000
Xxxxx
Xxxxxx, 00xx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Facsimile:
(000) 000-0000
Attn:
Xxxx X. Deutsch
Any
party
hereto may from time to time change its address for notices by giving at least
five days’ written notice of such changed address to the other parties hereto.
(d)
Waivers.
No
waiver by any party of any default with respect to any provision, condition
or
requirement of this Agreement shall be deemed to be a continuing waiver in
the
future or a waiver of any other provision, condition or requirement hereof,
nor
shall any delay or omission of any party to exercise any right hereunder in
any
manner impair the exercise of any such right accruing to it thereafter. The
representations and warranties and the agreements and covenants of the Company
and each Holder contained herein shall survive the Closing.
(e)
Execution
in Counterpart.
This
Agreement may be executed in two or more counterparts, all of which shall be
considered one and the same agreement, it being understood that all parties
need
not sign the same counterpart.
(f)
Signatures.
Facsimile signatures shall be valid and binding on each party submitting the
same.
(g)
Entire
Agreement; Amendment.
This
Agreement, together with the Purchase Agreement, the Debentures, , and the
agreements and documents contemplated hereby and thereby, contains the entire
understanding and agreement of the parties, and may not be amended, modified
or
terminated except by a written agreement signed by the Company plus the Holders
of 85% of the Registrable Securities (determined on a fully-diluted, as
converted basis).
(h)
Governing
Law.
This
Agreement and the validity and performance of the terms hereof shall be governed
by and construed in accordance with the laws of the State of New York applicable
to contracts executed and to be performed entirely within such state, except
to
the extent that the law of the State of Delaware regulates the Company’s
issuance of securities.
(i)
Jury
Trial.
EACH
PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY.
(j)
Titles.
The
titles used in this Agreement are used for convenience only and are not to
be
considered in construing or interpreting this Agreement.
17
(k)
No
Strict Construction.
The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent, and no rule of strict construction
will
be applied against any party.
IN
WITNESS WHEREOF,
the
undersigned have caused this Agreement to be executed as of the date first
written above.
COMPANY:
USTELEMATICS,
INC.
By:
Name:
Xxxxxx X. Xxxxxxxxx
Title:
Chief Executive Officer, President
18
COUNTERPART
SIGNATURE PAGE
DATED
DECEMBER __, 2006,
AMONG
USTELEMATICS, INC. AND
THE
“HOLDERS” IDENTIFIED THEREIN
The
undersigned hereby executes and delivers the Registration Rights Agreement
to
which this Signature Page is attached, which, together with all counterparts
of
the Registration Rights Agreement and Signature Pages of the Company and other
“Holders” under the Registration Rights Agreement, shall constitute one and the
same document in accordance with the terms of the Registration Rights
Agreement.
| |
HOLDER: |
|
|
By:
|
||
|
Name: |
||
| Title: | ||
19
