Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as
of February 23, 2000 between ADVANCED COMMUNICATIONS GROUP, INC., a Delaware
corporation with offices at 000 X. Xxxxx Xxxx Xxxx, Xxxxx 000, Xx. Xxxxx, XX
00000 (the "Company") and each of the entities listed under "Investors" on
the signature page hereto (each an "Investor" and collectively the
"Investors"), each with offices at the address listed under such Investor's
name on Schedule I hereto.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Convertible Debenture Purchase
Agreement by and between the Company and the Investors (the "Purchase
Agreement"), the Company has agreed to sell and issue to the Investors, and
the Investors have agreed to purchase from the Company, an aggregate of $20
million principal amount of the Company's 5% Convertible Debentures Due
February 23, 2006 (the "Initial Debentures" and, together with the Subsequent
Debentures (as defined below), the "Debentures") on the terms and conditions
set forth therein;
WHEREAS, pursuant to Purchase Agreement, in addition to the
foregoing, the Investors may elect and/or be required (by the Company) to
purchase from the Company, an aggregate of $10 million principal amount of
additional debentures (the "Subsequent Debentures");
WHEREAS, the Purchase Agreement contemplates that the Debentures
will be convertible into shares (the "Common Shares") of common stock, par
value $.0001, of the Company ("Common Stock") pursuant to the terms and
conditions set forth in the Debentures;
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investors' agreement to enter into the Purchase Agreement, the Company
has agreed (i) to issue warrants exercisable for 572,350 shares of Common
Stock of the Company (the "Initial Warrants") in connection with the issuance
of the Initial Debentures (shares of Common Stock issuable under the Initial
Warrants and the Option Warrants (as defined below) are referred to herein as
the "Warrant Shares") and (ii) upon the issuance of Subsequent Debentures, to
issue additional warrants as set forth in the Purchase Agreement ("Option
Warrants" and, together with the Initial Warrants, the "Warrants") to provide
the Investors with certain registration rights with respect to the Common
Shares and Warrant Shares and certain other rights and remedies with respect
to the Debentures as set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the
Purchase Agreement and this Agreement, the Company and the Investors agrees
as follows:
1. CERTAIN DEFINITIONS; SUBORDINATION.
(a) CERTAIN DEFINITIONS. Capitalized terms used herein and
not otherwise defined shall have the meaning ascribed thereto in the Purchase
Agreement, the Warrants or the Debentures. 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.
"CONVERSION PRICE" shall have meaning ascribed to such term in
Section 5(c) of the Debenture.
"COMMISSION" or "SEC" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act.
"COMPANY NOTICE" shall have the meaning set forth in Section
2(b)(i)(B).
"DEFAULT PAYMENT RATE" shall have the meaning set forth in Section
2(b)(i)(B).
"DEFAULT PERIOD" shall have the meaning set forth in Section 2(b)(i).
"DEBENTURE AMOUNT" shall have the meaning set forth in Section
2(b)(i)(B).
"HOLDER" and "HOLDERS" shall mean the Investor or the Investors,
respectively, and any transferee of the Debentures, Warrants, Warrant Shares
or Common Shares or Registrable Securities 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.
"INTERFERING EVENTS" shall have the meaning set forth in Section 2(b).
"MARKET PRICE FOR SHARES OF COMMON STOCK" shall have the meaning
ascribed to such term in the Debentures.
"OUTSTANDING PRINCIPAL AMOUNT" shall have the meaning ascribed to such
term in the Debentures.
"POTENTIAL MATERIAL EVENT" means any of the following: (a) the
possession by the Company of material information not ripe for disclosure in
a registration statement, as reasonably determined in good faith by the Chief
Executive Officer or the Board of Directors of the Company that disclosure of
such information in a Registration Statement would be materially detrimental
to the business and affairs of the Company; and (b) any material engagement
or activity by the Company which would, in the reasonable good faith
determination of the Chief Executive Officer or the Board of Directors of the
Company, be materially adversely affected by disclosure in a registration
statement at such time, which reasonable determination shall be accompanied
by a reasonable good
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faith determination by the Chief Executive Officer or the Board of Directors
of the Company that the applicable Registration Statement would be materially
misleading absent the inclusion of such information.
"PREMIUM REDEMPTION PRICE" shall have the meaning set forth in
Section 2(b)(i)(B).
"PUT NOTICE" shall have the meaning set forth in Section 2(b)(i)(B).
"REGISTRABLE SECURITIES" shall mean: (i) the Common Shares and
Warrant Shares issued or issuable to each Holder or its permitted transferee
or designee upon conversion of the Debentures (including, without limitation,
the Subsequent Debentures) or exercise of the Warrants (including, without
limitation, the Option Warrants), as applicable, or upon any stock split,
stock dividend, recapitalization or similar event with respect to such Common
Shares or Warrant Shares; (ii) any securities issued or issuable to each
Holder upon the conversion, exercise or exchange of any Debentures, Warrants,
Warrant Shares, or Common Shares; and (iii) any other security of the Company
issued as a dividend or other distribution with respect to, conversion or
exchange of, or in replacement of, Registrable Securities.
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.
"REGISTRATION EXPENSES" shall mean all expenses to be incurred by
the Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, "Blue
Sky" fees and expenses, reasonable fees and disbursements of counsel to
Holders (using a single counsel selected by a majority in interest of the
Holders) for a "due diligence" examination of the Company and review of the
Registration Statement and related documents (up to a maximum of $100,000
less the amount of Investor legal expenses previously paid by the Company
under Section 3.4 of the Purchase Agreement), 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.
"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 and all fees and
disbursements of counsel for Holders not included within "Registration
Expenses".
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"SUBORDINATION AGREEMENT" shall have the meaning set forth in
Section 1(b) herein.
(b) SUBORDINATION. The rights of the Holders under this
Agreement are subject to the terms of the Subordination Agreement dated
February 23, 2000, among the Senior Lenders (as defined therein) and, among
others, the Investors (the "Subordination Agreement").
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 U.S. jurisdictions. Such best efforts by the
Company shall include the following:
(a) The Company shall, as expeditiously as reasonably
possible after the Closing Date:
(i) But in any event within 60 days thereafter, prepare
and file a registration statement with the Commission
pursuant to Rule 415 under the Securities Act on 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) covering
the Registrable Securities (such registration statement,
including any amendments or supplements thereto and
prospectuses contained therein, is referred to herein as the
"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 number of
additional shares of Common Stock as may become issuable to
prevent dilution resulting from stock splits, stock dividends
or similar events. The number of shares of Common Stock
initially included in such Registration Statement shall be no
less than the sum of (A) two times the sum of the number of
Common Shares that are as of the date of this Agreement
issuable upon conversion of the Debentures (assuming, for
purposes of this calculation, that 10,000,000 principal
amount of the Subsequent Debentures were issued and
outstanding) plus (B) one and one-half times the number of
Warrant Shares issuable upon exercise of the Warrants
(assuming, for purposes of this calculation, that the Option
Warrants were issued and outstanding) in each case without
regard to any limitation on the Investor's ability to convert
the Debentures or Warrants. Thereafter, the Company shall use
its best efforts to cause such Registration Statement to be
declared effective as soon as practicable, and in any event
prior to 120 days following the Closing Date. The Company
shall provide Holders and their legal counsel
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reasonable opportunity to review any such Registration
Statement or amendment or supplement thereto prior to
filing.
(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 Act with respect to the disposition of all securities
covered by such Registration Statement in accordance with the
intended methods of disposition by the seller thereof as set
forth in the Registration Statement and notify the Holders of
the filing and effectiveness of such Registration Statement
and any amendments or supplements.
(iii) Furnish to each Holder such numbers of copies of
a current prospectus conforming with the requirements of the
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.
(iv) Use its best efforts to register and qualify the
securities covered by such Registration Statement under such
other securities or "Blue Sky" laws of all U.S.
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 each Holder immediately of the happening
of any event as a result of which the prospectus (including
any supplements thereto or thereof and any information
incorporated or deemed to be incorporated by reference
therein) 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, and, pursuant to
Section 2(f), use its best efforts to promptly update and/or
correct such prospectus.
(vi) Notify each Holder immediately 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 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.
(vii) Permit a single firm of counsel, designated as
Holders' counsel by the Holders of a majority of the
Registrable Securities included in the Registration
Statement, to review the Registration Statement and all
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amendments and supplements thereto within a reasonable period
of time prior to each filing, and shall not file any document
in a form to which such counsel reasonably objects.
(viii) Use its best efforts to 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 the National Association of Securities Dealers,
Inc. or any exchange or market where the Common Stock is
then traded.
(ix) If applicable, take all steps necessary to
enable Holders to avail themselves of the prospectus
delivery mechanism set forth in Rule 153 (or successor
thereto) under the Act.
(b) Set forth below in this Section 2(b) are (I) events
that may arise that the Investors consider will interfere with the full
enjoyment of their rights under the Debentures, the Purchase Agreement and
this Agreement (the "Interfering Events"), and (II) certain remedies
applicable in each of these events.
Paragraphs (i) through (iv) of this Section 2(b) describe the
Interfering Events, provide a remedy to the Investors if an
Interfering Event occurs and provide that the Investors may
require that the Company redeem outstanding Debentures at a
specified price if certain Interfering Events are not timely
cured.
Paragraph (vi) provides, INTER ALIA, that if cash payments
required as the remedy in the case of certain of the
Interfering Events are not paid when due, the Company may be
required by the Investors to redeem outstanding Debentures at
a specified price.
Paragraph (viii) provides, INTER ALIA, that the Investors
have the right to specific performance.
The preceding paragraphs in this Section 2(b) are meant to serve only
as an introduction to this Section 2(b), are for convenience only, and are not
to be considered in applying, construing or interpreting this Section 2(b).
(i) DELAY IN EFFECTIVENESS OF REGISTRATION STATEMENT.
(A) In the event that the Registration Statement
has not been declared effective within 120 days from the
Closing Date, then the Conversion Price shall be reduced by
1% during and after the 30-day period (the "Default Period")
from and after the 120th day following the Closing Date
during any part of which such Registration Statement is not
effective, and such Conversion Price shall be further reduced
by additional 1.5% amounts during and after each Default
Period thereafter. For example, if the Registration Statement
does not become effective until 150
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days from the Closing Date, the Conversion Price from and
after day 121 from the Closing Date shall be multiplied by
99%. If the Registration Statement is not effective until
the 180th day after the Closing Date, the Conversion Price
from and after day 151 from the Closing Date shall be
multiplied by 97.5%. In each case, the Conversion Price
shall be subject to further adjustment as set forth in the
Debentures and the Purchase Agreement; provided, that once
the Registration Statement first becomes effective, there
can be no further adjustment to the Conversion Price under
this Section 2(b)(i).
(B) If the Registration Statement has not been
declared effective within 180 days after the Closing Date
and provided that such Holder is not able to freely sell
the Registrable Securities pursuant to Rule 144(k) of the
Act, then each Holder may, in its sole discretion, put to
the Company in writing (the "Put Notice") the two options
set forth below, of which the Company must select one by
providing the Holder with written notice (the "Company
Notice") of its selection within 3 business days of its
receipt of the Put Notice.
OPTION ONE: The Company shall redeem the
Debentures, Common Shares and/or Warrant Shares (in whole or
in part, as selected by the Holder in the Put Notice) at the
Premium Redemption Price (as defined below) on a date
specified by the Holder in the Put Notice, which shall be at
least 5 business days from the date thereof (the "Redemption
Date"). The "Premium Redemption Price" shall be equal to (A)
as to the Debentures, the greater of (x) 120% of the
Outstanding Principal Amount of the Debentures plus any
accrued but unpaid or unrecognized interest or default
payments and (y) the value that the Holder would be entitled
to receive upon conversion of the Debenture at the Conversion
Price then in existence, without reference to Section 12
thereof, and the subsequent sale of the Common Shares
received thereby at the Market Price for Shares of Common
Stock then in existence and (B) as to the Common Shares
and/or Warrant Shares, 120% of the dollar amount which is
the product of (x) the number of shares so to be redeemed
pursuant to this paragraph, and (y) the Market Price for
Shares of Common Stock at the time such shares were
received pursuant to conversion of Debentures or exercise
of the Warrants. Nothing herein shall be construed as
precluding the Holder from exercising its conversion rights
under the Debenture unless the Company redeems the Debenture
and pays the Premium Redemption Price in full pursuant to
this Option One. Default payments shall no longer accrue on
Debentures after such Debentures have been redeemed by the
Company pursuant hereto. If the Company fails to pay the
Premium Redemption Price in full on the Redemption Date in
immediately available funds, in addition to any other rights
or remedies it may have, (i) the Holder shall have the right
to require the Company to repurchase the Debentures, Common
Shares
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and/or Warrant Shares (in whole or in part, as selected by
Holder) at a price equal to 110% of the Premium Redemption
Price; and (ii) the Company shall pay in cash to each Holder
the default payment set forth in Option Two below for each
30-day period (or portion thereof) that the Company fails to
pay 110% of the Premium Redemption Price, except that such 3%
default payment shall not be subject to the 18% cap, set
forth in Option Two. In the event that the Company selects
Option One but the Holder is prevented from exercising its
redemption rights by reason of the Subordination Agreement,
then the Company shall be deemed to have selected Option Two
for all purposes hereunder.
OPTION TWO: The Company shall pay a cash default
payment at a rate (the "Default Payment Rate") equal to three
(3 %) of the sum of (x) the Outstanding Principal Amount of,
(y) the accrued but unpaid interest on, and (z) the accrued
but unpaid or unrecognized default payments on the Debentures
(the "Debenture Amount") held by such Holder for each 30-day
period (or portion thereof) that the Registration Statement
has not been declared effective until the Registration
Statement has been declared effective, which such 3% default
payment shall not exceed, in the aggregate, 18% of the
Debenture Amount in any 365-day period. Such default payments
shall be made in accordance with Section 2(b)(v) and (vi)
hereof.
If the Company fails to provide the Holder with the
Company Notice within 3 business days of its receipt of the
Put Notice, then the Company will be deemed to have selected
OPTION TWO.
(ii) NO LISTING; PREMIUM PRICE REDEMPTION FOR
DELISTING OF CLASS OF SHARES.
(A) In the event that the Company fails,
refuses or is unable to cause the Registrable Securities
covered by the Registration Statement to be listed with
the Approved Market and each other securities exchange and
market on which the Common Stock is then traded at all
times during the period ("Listing Period") commencing the
earlier of the effective date of the Registration Statement
or the 120th day following the Closing Date, and continuing
thereafter for so long as the Debentures are outstanding,
then the Company shall pay in cash to each Holder a default
payment at the Default Payment Rate on the Debenture Amount
for the Debentures held by such Holder for each 30-day period
(or portion thereof) during the Listing Period from and after
such failure, refusal or inability to so list the Registrable
Securities until the Registrable Securities are so listed,
which such 3% default payment shall not exceed, in the
aggregate, 18% of the Debenture in any 365-day period. Such
default payments shall be made in accordance with Section
2(b)(v) and (vi) hereof.
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(B) In the event that shares of Common Stock
of the Company are delisted from the Approved Market at any
time following the Closing Date and remain delisted for
5 consecutive business days, then at the option of each
Holder and to the extent such Holder so elects, the Company
shall on 2 business days notice either (1) pay in cash to
such Holder a default payment at the Default Payment Rate on
the Debenture Amount for the Debentures held by such Holder
for each 30-day period that the shares are delisted or (2)
redeem the Debentures and/or Common Shares and/or Warrant
Shares held by such Holder, in whole or in part, at a
redemption price equal to the Premium Redemption Price
(as defined above); PROVIDED, however, that such Holder may
revoke such request at any time prior to receipt of payment
of such default payments or Premium Redemption Price, as the
case may be. Default payments shall no longer accrue on
Debentures after such Debentures have been redeemed by the
Company pursuant to the foregoing provision.
(iii) BLACKOUT PERIODS. In the event any Holder is
unable to sell Registrable Securities under the Registration
Statement for more than (A) ten (10) consecutive days or (B)
thirty (30) days in any calendar year ("Suspension Grace
Period"), as may be extended pursuant to the following
sentence, including without limitation by reason of a
suspension of trading of the Common Stock on the Approved
Market, any suspension or stop order with respect to the
Registration Statement or the fact that an event has
occurred as a result of which the prospectus (including any
supplements thereto) included in such Registration Statement
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, or
the number of shares of Common Stock covered by the
Registration Statement is insufficient at such time to make
such sales, then the Company shall pay in cash to each Holder
a default payment at the Default Payment Rate of the
Debenture Amount for the Debentures held by such Holder for
each 30-day period (or portion thereof) from and after the
expiration of the Suspension Grace Period which such 3%
default payment shall not exceed, in the aggregate, 18% of
the Debenture in any 365-day period; provided, however, that
under the following circumstances not more than once in any
12 month period the Suspension Grace Period may be extended
for up to 30 days or if earlier the date upon which the
circumstances giving rise to such extension ceases to exist:
(A) the Company has filed or proposes to file a Registration
Statement with respect to any of its securities to be
distributed in a firm commitment underwritten public offering
that results in gross aggregate cash proceeds to the Company
of not less than 30 million dollars and it is advised by its
lead or managing underwriter that an offering by a Holder of
Registrable Securities would materially adversely affect the
distribution of such securities, or (B) the fulfillment of
such obligations would require the
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Company to prepare financial statements under the Act that
would not otherwise be required to be prepared by the Company
in order to comply with its obligations under the Exchange
Act. In the event that the Suspension Grace Period has been
extended as provided above, the Company shall deliver a
certificate in writing, signed by an officer of the Company,
to each Holder, which shall state that the Suspension Grace
Period hereunder has been extended in accordance with this
Section 3(b)(iii). Alternatively, a Holder shall have the
right but not the obligation to have the Company redeem its
Debentures and Common Shares and Warrant Shares at the price
and on the terms set forth in Section 2(b)(ii)(B) above.
(iv) CONVERSION DEFICIENCY; PREMIUM PRICE REDEMPTION
FOR CONVERSION DEFICIENCY. To the extent that Section 3.14 of
the Purchase Agreement does not apply, in the event that the
Company does not have a sufficient number of Common Shares
available to satisfy the Company's obligations to any Holder
upon receipt of a Conversion Notice (as defined in the
Debenture) or is otherwise unable or unwilling to issue such
Common Shares (including without limitation by reason of the
limit described in Section 10 below) in accordance with the
terms of the Debenture for any reason after receipt of a
Conversion Notice, then:
(A) The Company shall pay in cash to each
Holder a default payment at the Default Payment Rate on the
Debenture Amount for the Debentures held by such Holder for
each 30-day period (or portion thereof) that the Company
fails or refuses to issue Common Shares in accordance with
the Debenture terms which such 3% default payment shall not
exceed, in the aggregate, 18% of the Debenture in any 365-day
period; and
(B) At any time five days after the
commencement of the running of the first 30-day period
described above in clause (A) of this paragraph (iv), at
the request of any Holder pursuant to a redemption notice,
the Company promptly (1) shall purchase from such Holder, at
a purchase price equal to the Premium Redemption Price, the
Debenture Amount of Debentures equal to such Holder's pro
rata share of the "Deficiency" (as such term is defined
below), if the failure to issue Common Shares results from
the lack of a sufficient number thereof and (2) shall
purchase all (or such portion as such Holder may elect) of
such Holder's Debentures at such Premium Redemption Price if
the failure to issue Common Shares results from any other
cause. The "Deficiency" shall be equal to the Debenture
Amount of Debentures that would not be able to be converted
for Common Shares, due to an insufficient number of Common
Shares available, if all the outstanding Debentures were
submitted for conversion at the Conversion Price set forth
in the Debentures as of the date such Deficiency is
determined. Any request by
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a Holder pursuant to this paragraph (iv)(B) shall be
revocable by that Holder at any time prior to its receipt
of the Premium Redemption Price.
(v) DEFAULT PAYMENT TERMS; STATUS OF UNPAID
DEFAULT PAYMENTS. All default payments (which payments
shall be pro rata on a per diem basis for any period of
less than 30 days) required to be made in connection with
the above provisions shall be paid in cash at any time upon
demand, and whether or not a demand is made, by the tenth
(10th) day of each calendar month for each partial or full
30-day period occurring prior to that date. Until paid as
required in this Agreement, default payments shall be
deemed added to, and a part of, the Outstanding Principal
Amount of a Holder's Debentures.
(vi) PREMIUM PRICE REDEMPTION FOR CASH PAYMENT
DEFAULTS. In the event that the Company fails or refuses to
pay any default payment or honor any discount provided for
in the foregoing paragraphs (i) through (iv) when due, at
any Holder's request and option the Company shall purchase
all or a portion of the Debentures, Common Shares and/or
Warrant Shares held by such Holder (with default payments
accruing through the date of such purchase), within five
(5) days of such request, at a purchase price equal to the
Premium Redemption Price (as defined above); PROVIDED that
such Holder may revoke such request at any time prior to
receipt of such payment of such purchase price. Until such
time as the Company purchases such Debentures at the
request of such Holder pursuant to the preceding sentence,
at any Holder's request and option the Company shall as to
such Holder pay such amount by adding and including the
amount of such default payment to the Outstanding Principal
Amount of a Holder's Debentures.
Notwithstanding anything contained herein to the contrary,
the Company shall be obligated to redeem Common Shares or
Warrant Shares only from available funds in accordance with
Section 160 of Delaware General Corporation Law, as may be
amended from time to time.
(vii) CUMULATIVE REMEDIES. Each default payment
triggered by an Interfering Event provided for in the
foregoing paragraphs (ii) through (iv) shall be in addition
to each other default payment triggered by another
Interfering Event; PROVIDED, however, that in no event
shall the Company be obligated to pay to any Holder default
payments in an aggregate amount greater than the Default
Payment Rate of the Outstanding Principal Amount of the
Debentures held by such Holder for any 30-day period (or
portion thereof). The default payments and mandatory
redemptions provided for above are in addition to and not
in lieu or limitation of any other rights the Holders may
have at law, in equity or under the terms of the
Debentures, the Purchase Agreement, the Warrants or this
Agreement, including without limitation the right to
specific
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performance. Each Holder shall be entitled to specific
performance of any and all obligations of the Company in
connection with the registration rights of the Holders
hereunder.
(viii) CERTAIN ACKNOWLEDGMENTS. The Company
acknowledges that any failure, refusal or inability by the
Company described in the foregoing paragraphs (i) through
(iv) and paragraph (vi) will cause the Holders to suffer
damages in an amount that will be difficult to ascertain,
including without limitation damages resulting from the
loss of liquidity in the Registrable Securities and the
additional investment risk in holding the Registrable
Securities. Accordingly, the parties agree that it is
appropriate to include in this Agreement the foregoing
provisions for default payments, discounts and mandatory
redemptions in order to compensate the Holders for such
damages. The parties acknowledge and agree that the default
payments, discounts and mandatory redemptions set forth
above represent the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount
of such default payments, discounts and mandatory
redemptions are reasonable and will not constitute a
penalty. The parties agree that the provisions of this
clause (viii) consist of certain acknowledgments and
agreements concerning the remedies of the Holders set forth
in clauses (i) through (iv) and paragraph (vi) of this
paragraph; nothing in this clause (viii) imposes any
additional default payments, discounts and mandatory
redemptions for violations under this Agreement.
(c) If the Holder(s) intend to distribute the
Registrable Securities by means of an underwriting, the Holder(s) shall so
advise the Company. Any such underwriting may only be administered by
investment bankers reasonably satisfactory to the Company. The Company shall
only be obligated to permit one underwritten offering, which offering shall
be determined by a majority-in-interest of the Holders.
(d) The Company shall enter into such customary
agreements for secondary offerings (including a customary underwriting
agreement with the underwriter or underwriters, if any) and take all such
other reasonable actions reasonably requested by the Holders in connection
therewith in order to expedite or facilitate the disposition of such
Registrable Securities. In the event that the offering in which the
Registrable Securities are to be sold is deemed to be an underwritten
offering or an Investor selling Registrable Securities is deemed to be an
underwriter, the Company shall:
(i) make such representations and warranties to
the Holders and the underwriter or underwriters, if any, in
form, substance and scope as are customarily made by
issuers to underwriters in secondary offerings;
(ii) cause to be delivered to the sellers of
Registrable Securities and the underwriter or underwriters,
if any, opinions of independent counsel to the Company, on
and dated as of the effective day (or in the
12
case of an underwritten offering, dated the date of
delivery of any Registrable Securities sold pursuant
thereto) of the Registration Statement, and within ninety
(90) days following the end of each fiscal year thereafter,
which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the Holders and the
underwriter(s), if any, and their counsel and covering,
without limitation, such matters as the due authorization
and issuance of the securities being registered and
compliance with securities laws by the Company in
connection with the authorization, issuance and
registration thereof and other matters that are customarily
given to underwriters in underwritten offerings, addressed
to the Holders and each underwriter, if any.
(iii) cause to be delivered, immediately prior to
the effectiveness of the Registration Statement (and, in
the case of an underwritten offering, at the time of
delivery of any Registrable Securities sold pursuant
thereto), and at the beginning of each fiscal year
following a year during which the Company's independent
certified public accountants shall have reviewed any of the
Company's books or records, a "comfort" letter from the
Company's independent certified public accountants
addressed to the Holders and each underwriter, if any,
stating that such accountants are independent public
accountants within the meaning of the Securities Act and
the applicable published rules and regulations thereunder,
and otherwise in customary form and covering such financial
and accounting matters as are customarily covered by
letters of the independent certified public accountants
delivered in connection with secondary offerings; such
accountants shall have undertaken in each such letter to
update the same during each such fiscal year in which such
books or records are being reviewed so that each such
letter shall remain current, correct and complete
throughout such fiscal year; and each such letter and
update thereof, if any, shall be reasonably satisfactory to
the Holders.
(iv) if an underwriting agreement is entered
into, the same shall include customary indemnification and
contribution provisions to and from the underwriters and
procedures for secondary underwritten offerings;
(v) deliver such documents and certificates as
may be reasonably requested by the Holders of the
Registrable Securities being sold or the managing
underwriter or underwriters, if any, to evidence compliance
with clause (i) above and with any customary conditions
contained in the underwriting agreement, if any; and
(vi) deliver to the Holders on the effective day
(or in the case of an underwritten offering, dated the date
of delivery of any Registrable Securities sold pursuant
thereto) of the Registration Statement, and at the
beginning of each fiscal quarter thereafter, a certificate
in form and
13
substance as shall be reasonably satisfactory to the
Holders, executed by an executive officer of the Company
and to the effect that all the representations and
warranties of the Company contained in the Purchase
Agreement are still true and correct except as disclosed in
such certificate; the Company shall, as to each such
certificate delivered at the beginning of each fiscal
quarter, update or cause to be updated each such
certificate during such quarter so that it shall remain
current, complete and correct throughout such quarter; and
such updates received by the Holders during such quarter,
if any, shall have been reasonably satisfactory to the
Holders.
(e) The Company shall make available for inspection by
the Holders, representative(s) of all the Holders together, any underwriter
participating in any disposition pursuant to a Registration Statement, and
any attorney or accountant retained by any Holder or underwriter, all
financial and other records customary for purposes of the Holders' due
diligence examination of the Company and review of any Registration
Statement, all SEC Documents (as defined in the Purchase Agreement) filed
subsequent to the Closing, pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with such Registration
Statement, provided that such parties agree to keep such information
confidential.
(f) Subject to Section 2(b)(iii) above, if at any time
or from time to time after the effective date of the Registration Statement,
the Company has delivered to the Holders a notice under Section 2(a)(v) or
has notified the Holders in writing of the existence of a Potential Material
Event, the Holders shall not offer or sell any Registrable Securities or
engage in any other transaction involving or relating to Registrable
Securities, from the time of the giving of the notice until the Holders
receive written notice from the Company that use of the prospectus may be
resumed. The Company will use its best efforts to cause such suspension to
terminate at the earliest possible date.
(g) The Company shall file a Registration Statement
with respect to any newly authorized and/or reserved shares within ten (10)
business days of any shareholders meeting authorizing or reserving same and
shall use its best efforts to cause such Registration Statement to become
effective within seventy-five (75) days of such shareholders meeting. If the
Holders become entitled, pursuant to an event described in clause (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 under the
Securities Act, and (ii) keep such additional Registration Statement
effective during the period described in Section 5 below. All of the
registration rights and remedies under this
14
Agreement shall apply to the registration of such newly reserved shares and
such new Registrable Securities, including without limitation the provisions
providing for default payments contained herein.
3. EXPENSES OF REGISTRATION. All Registration Expenses incurred 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; OTHER FORMS. The Company shall use
its best efforts to qualify for registration on 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.
5. REGISTRATION PERIOD. In the case of the registration effected
by the Company pursuant to this Agreement, the Company will use its best
efforts to keep such registration effective until the later to occur of (i)
sales are permitted of all Registrable Securities without registration under
Rule 144(k) or (ii) such time as there are no longer any Warrants outstanding.
6. INDEMNIFICATION.
(a) THE COMPANY INDEMNITY. The Company will indemnify each
Holder, each of its officers, directors and partners, and each person
controlling each Holder, 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 prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, 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, 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 and partners, and each person
controlling such Holder, each such underwriter and each person who controls
any such underwriter, for any legal 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 any untrue statement or
omission based upon written information furnished to the Company by such
Holder or the underwriter (if any) therefor and stated to be specifically for
use therein.
15
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).
(b) HOLDER INDEMNITY. Each Holder will, severally and 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, partners, 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 any untrue statement
(or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or
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, and will reimburse the Company and such other Holder(s) and their
directors, officers and partners, underwriters or control persons for any
legal 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 registration statement, prospectus, offering circular or other
document 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. 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 such party's
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 Article 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
16
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 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.
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 each of such Indemnified Parties, shall contribute to the
amount paid or payable by each such Indemnified Party as a result of such
losses, claims, damages or liabilities as between the Company on the one hand
and any Holder on the other, in such proportion as is appropriate to reflect
the relative fault of the Company and of such Holder 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 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.
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 or the underwriters 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 or underwriter shall be required to contribute any amount in excess of
the amount by which (i) in the case of any Holder, the net proceeds received
by such Holder from the sale of Registrable Securities or (ii) in the case of
an underwriter, the total price at which the Registrable Securities purchased
by it and distributed to the public were offered to the public exceeds, in
any such case, the amount of any damages that such Holder or underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. 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.
17
8. SURVIVAL. The indemnity and contribution agreements contained
in Sections 6 and 7 and the representations and warranties of the Company
referred to in Section 2(d)(i) shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement or the Purchase
Agreement or any underwriting agreement, (ii) any investigation made by or on
behalf of any Indemnified Party or by or on behalf of the Company, and (iii)
the consummation of the sale or successive resales of the Registrable
Securities.
9. INFORMATION BY HOLDERS. Each Holder shall reasonably promptly
furnish to the Company such information regarding such Holder and the
distribution and/or sale proposed by such Holder as the Company may
reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement. The intended method or methods of disposition and/or sale
(Plan of Distribution) of such securities as so provided by such Investor
shall be included without alteration in the Registration Statement covering
the Registrable Securities and shall not be changed without written consent
of such Holder, except that such Holder may not require an intended method of
disposition which violates applicable securities law.
10. NYSE LIMIT ON STOCK ISSUANCES. Section 3.14 of the Purchase
Agreement shall govern limits imposed by NYSE rules on the conversion of
Debentures or the exercise of Warrants.
11. REPLACEMENT CERTIFICATES. The certificate(s) representing the
Common Shares or Warrant Shares held by the Investor (or then Holder) may be
exchanged by the Investor (or such Holder) at any time and from time to time
for certificates with different denominations representing an equal aggregate
number of Common Shares or Warrant Shares, as reasonably requested by the
Investor (or such Holder) upon surrendering the same. No service charge will
be made for such registration or transfer or exchange.
12. 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
Investors 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 Debentures or Warrants, and all other
rights granted to the Investors by the Company hereunder may be transferred
or assigned to any transferee or assignee of any Debentures or Warrants;
provided in each case that the Company must be given written notice by the
such Investor at the time of or within a reasonable time after said 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 provisions of
this Agreement.
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13. MISCELLANEOUS.
(a) REMEDIES. The Company and the Investors 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 of the Investors (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 each of the Investors consents 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:
Advanced Communications Group, Inc.
000 X. Xxxxx Xxxx Xxxx, Xxxxx 000
Xx. Xxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxx
to the Investors:
To each Investor at the address and/or fax number set
forth on Schedule I of this Agreement
19
with copies to:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Any party hereto may from time to time change its address for
notices by giving at least 10 days' written notice of such changed address to
the other parties hereto.
(d) INDEMNITY. Each party shall indemnify each other party
against any loss, cost or damages (including reasonable attorney's fees)
incurred as a result of such parties' breach of any representation, warranty,
covenant or agreement in this Agreement.
(e) 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 Investor
contained herein shall survive the Closing.
(f) EXECUTION. 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.
(g) PUBLICITY. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of any Investor
without its express written approval, unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement. The Company agrees to deliver a copy of any public announcement
regarding the matters covered by this Agreement or any agreement or document
executed herewith to each Investor and any public announcement including the
name of an Investor to such Investor, prior to the publication of such
announcements.
(h) ENTIRE AGREEMENT. This Agreement, together with the
Purchase Agreement, the Debentures, the Warrants and the agreements and
documents contemplated hereby and thereby, contains the entire understanding
and agreement of the parties, and may not be modified or terminated except by
a written agreement signed by both parties.
(i) GOVERNING LAW. This Agreement and the validity and
performance of the terms hereof shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York
applicable to contracts executed and to be performed entirely in such State.
20
(j) SEVERABILITY. The parties acknowledge and agree that the
Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investors
hereunder are several and not joint, that no Investor shall have any
responsibility or liability for the representations, warrants, agreements,
acts or omissions of any other Investor, and that any rights granted to
"Investors" hereunder shall be enforceable by each Investor hereunder.
(k) JURY TRIAL. EACH PARTY HERETO WAIVES THE RIGHT TO A
TRIAL BY JURY.
(l) TITLES. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement.
SIGNATURE PAGE FOLLOWS
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
ADVANCED COMMUNICATIONS GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President
INVESTORS:
HALIFAX FUND, L.P.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
XXXXXXX ASSOCIATES, L.P.
By: /s/ Xxxx Xxxxxx
----------------------------------
Name: Xxxx Xxxxxx
Title:
WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc.,
Attorney-in-Fact
By: /s/ Xxxx Xxxxxx
----------------------------------
Name: Xxxx Xxxxxx
Title:
Signature page to Advanced Communications Group, Inc. Registration
Rights Agreement
22
