EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Registration Rights
Agreement"), dated as of August 7, 1998, by and between Iterated Systems, Inc.,
a Georgia corporation (the "Company"), and MCI Telecommunications Corporation,
a Delaware corporation ("MCI").
WHEREAS, MCI and Iterated are parties to that certain Warrant
Agreement (the "Warrant Agreement") dated of even date herewith;
WHEREAS, pursuant to the Warrant Agreement, the Holder (as defined
below) has been issued, warrants (the "Warrants") to purchase shares of the
Company's Common Stock, par value $0.01 per share (the "Common Stock");
WHEREAS, to induce MCI to enter into the Master License Agreement (as
defined in the Warrant Agreement) and the Warrant Agreement, the Company has
agreed to grant the registration and other rights contained in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms have the
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meanings indicated:
(a) the term "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration after the date hereof effected by preparing and filing a
registration statement or similar document in compliance with the Securities Act
of 1933, as amended (the "Act"), and the declaration or ordering of
effectiveness of such registration statement or document;
(b) the term "REGISTRABLE SECURITIES" means the Common Stock and any
other capital stock of the Company, which is part of a series or class of
securities that is (i) publicly traded or (ii) subject to a registration rights
agreement, in each case issued or issuable by the Company upon the exercise of
the Warrants issued or issuable under the Warrant Agreement (including shares
received from the Company with respect to or in replacement of such shares by
reason of splits, dividends, combinations and recapitalizations), and any
capital stock of the Company into which such Common Stock or other capital stock
of the Company may be changed and securities of any successor or acquiring
corporation received by or distributed to the holders of such Common Stock or
other capital stock (such securities, together with the Company's Common Stock,
shall collectively be referred to hereinafter as, the "Common Stock"), but
excluding any securities which at any time may be resold by the Holder owning
such securities without restriction pursuant to Rule 144 or other comparable
provision of the Act
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("Rule 144"), provided, however, that the Company delivers information
reasonably satisfactory to the Holder to allow the Holder to make a
determination as to the availability of such rules;
(c) the "REGISTRABLE SECURITIES THEN OUTSTANDING" will be determined
by the number of shares outstanding which are, and the number of shares issuable
pursuant to then exercisable Warrants which are, Registrable Securities;
(d) the term "CAPITAL STOCK" means any and all shares, interests,
participations, or other equivalents (however designated) of capital stock, or
any and all equivalent ownership interests;
(e) the term "HOLDER" means MCI, or any assignee thereof in accordance
with SECTION 10;
(f) "MARKET VALUE" as of any date with respect to any security means
the average of the Quoted Prices of such security for the twenty (20)
consecutive days such securities are traded ("Trading Days") (or, if such
security is publicly traded but has been so traded for less than twenty (20)
consecutive Trading Days, such shorter period in which such security has been
publicly traded) immediately preceding such date; provided, however, that, if an
event described in clauses (i) through (iii) of SECTION 3(A) of the applicable
Warrant occurs with respect to such security during the period from the first of
such consecutive Trading Days through the last of such consecutive Trading Days,
the computation of Market Value shall be appropriately adjusted to take account
of such event. "Quoted Price" of any security for any date shall be the last
reported sales price of such security as reported by the principal national
securities exchange on which such security is listed or traded, or as reported
by the Nasdaq Stock Market, Inc. ("Nasdaq"), or if such security is neither so
reported nor listed or traded, the average of the last reported bid and ask
prices of such security in the over-the-counter market on such date. If such
security is not listed or traded on any national securities exchange or quoted
on Nasdaq or otherwise in the over-the-counter market, the Market Value shall be
deemed an amount mutually agreed upon between the Company and MCI, and if no
agreement can be reached, then the Market Value of such security as of any date
shall be the fair market value thereof as determined by an independent
nationally recognized investment banking firm selected by investment banking
firms representing each of the Company and MCI. The Company and MCI shall share
equally all costs of all determinations of fair market value by such nationally
recognized investment banking firm.
2. S-3 Demand Registration Rights.
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(a) In the event that the Company completes an initial registered
public offering (an "IPO") of Registrable Securities then, commencing on the
first anniversary of the closing date of such IPO, the Holders holding at least
a majority of the Registrable Securities then held by all Holders may request in
writing that the Company effect a registration in accordance with the provisions
of the Act of all or a portion of such Holder's Registrable Securities (which
written request by the Holders will specify the aggregate number of shares of
Registrable Securities requested to be registered), and the Company shall, upon
receipt of such request, use its best efforts to file and have declared
effective a registration statement covering such Holder's Registrable Securities
requested to be registered; provided, however, that the Company will not be
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required to take any action pursuant to this SECTION 2(A) if the Company has
failed to meet the then-current eligibility requirements for the use of Form
S-3, unless any failure to meet such eligibility requirements results from any
action or inaction on the part of the Company.
provided further, however, that the Company will be permitted to satisfy its
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obligations under this SECTION 2(A) by amending (to the extent permitted by
applicable law) any registration statement previously filed by the Company under
the Act so that such registration statement (as amended) will permit the
disposition (in accordance with the intended methods of disposition specified as
aforesaid) of all of the Registrable Securities for which a demand for
registration has been made under this SECTION 2(A). If the Company so amends a
previously filed registration statement, it will be deemed to have effected a
registration for purposes of this SECTION 2(A).
(b) The Holders delivering such request may distribute the Registrable
Securities covered by such request by means of an underwritten offering or any
other means, as reasonably determined by such Holders (the "Selling Holders").
In connection with any underwritten offering pursuant to a registration
statement filed pursuant to a demand made pursuant to SECTION 2(A), the Selling
Holders of a majority in number of the Registrable Securities to be included in
the registration statement will have the right to select a managing underwriter
or underwriters to administer the offering, which managing underwriter or
underwriters will be reasonably satisfactory to the Company. Notwithstanding
any other provision of this SECTION 2, if the Underwriter advises the Selling
Holders and the Company in writing that marketing factors require a limitation
of the number of shares to be underwritten, then the Company will so advise the
Selling Holders, and the number of shares of Registrable Securities that may be
included in the underwriting will be allocated among all requesting Selling
Holders thereof, in proportion (as nearly as practicable) to the amount of
Registrable Securities then outstanding owned by each such Selling Holder;
provided, however, that the number of shares of Registrable Securities to be
included in such underwriting will not be reduced unless all other securities
are first entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, the Company is obligated to effect
only a registration pursuant to this SECTION 2 if in the twelve (12) months
prior to the date of such request the Company shall not have effected a
registration for the Holder; provided, however, a registration shall not count
as a registration pursuant to this SECTION 2 unless (i) the Selling Holders are
able to register all of the Registrable Securities requested to be included in
such
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registration; and (ii) the registration has become effective and remained
effective in compliance with the provisions of the Act with respect to the
disposition of all Registrable Securities requested to be registered for a
period not to exceed ninety (90) days or such earlier time as all of the
Registrable Securities have been either (A) disposed of by the Holder pursuant
to a registration statement, or (B) sold pursuant to Rule 144 or otherwise
without compliance with the registration requirements of the Act; and, provided
further, that the Company will pay all registration expenses in connection with
any registration initiated at the request of a Holder to the extent provided
below in SECTION 6.
(d) Notwithstanding the foregoing, if the Company furnishes to the
Selling Holders requesting a registration statement pursuant to SECTION 2(B), a
certificate signed by the President of the Company stating that in the good
faith judgment of the Company, it would be materially detrimental to the Company
and its stockholders for a registration statement to be filed or for sales to
occur under an effective registration statement and it is therefore essential to
defer the filing of or sales under such registration statement, the Company will
have the right to (i) defer taking action with respect to such filing, for a
period of not more than one hundred twenty (120) days after receipt of the
request of the Selling Holders; or (ii) if the registration statement is
effective, request each Holder of securities thereunder not to (and upon receipt
of such request each such Holder agrees not to) make any sales pursuant thereto
for a period not to exceed five (5) days following such request; provided,
however, that during either such period, the Company shall not be entitled to
file any other registration statement relating to the Company's securities
pursuant to any other outstanding registration rights agreement or for any other
secondary offering; and provided further, that the Company shall not have the
right to so defer such action more than once in each case in any twelve (12)
month period and the period of effectiveness in paragraph (c) above shall be
extended for each day sales are suspended pursuant to clause (ii) above.
3. Company Registration. If at any time after the IPO (but without any
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obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for stockholders other than the
Holders) any of its Common Stock under the Act in connection with the public
offering of such securities solely for cash (other than a registration on Form
S-4 or S-5 relating to a reorganization, sale of assets or business combination
transaction, Form S-8 relating solely to the sale of securities to or by
participants in a Company stock option or other employee benefit plan, or a
registration on any other form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company will, at such
time, promptly give each Holder written notice of such registration no less than
forty-five (45) days prior to the proposed effective date of such registration.
Upon the written request of each Holder given within twenty (20) days after the
mailing of such notice by the Company, the Company will, subject to the
provisions of SECTION 7, cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be registered.
The registration expenses of the Holders of the Registrable Securities incurred
pursuant to this SECTION 3 shall be paid by the Company to the extent provided
in SECTION 6 below.
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4. Obligations of the Company. Whenever required under this Agreement to
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effect the registration of any Registrable Securities then outstanding, the
Company will, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, subject to applicable law, keep
such registration statement effective until such time as the Company has filed
and there has been declared effective a Form S-3 registration statement covering
such Registrable Securities and the intended disposition thereof, and in the
case of a Form S-3 registration statement filed pursuant to SECTION 2, to keep
such registration statement effective for the period set forth herein, to the
extent permitted by and subject to applicable law.
(b) 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.
(c) Furnish to the Holders such numbers of copies of the registration
statement, each amendment and supplement thereto, the prospectus included in
such registration statement, including a preliminary prospectus, in conformity
with the requirements of the Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify by no later than the
effective date of the registration statement the securities covered by such
registration statement under such other securities or Blue Sky laws of such
jurisdictions as will be reasonably requested in writing by the Holders, and
take all other actions which may be reasonably necessary or advisable to enable
the disposition of the Registrable Securities of the Holder in such
jurisdictions covered by such registration statement; provided that the Company
will 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.
(e) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(f) Use its commercially reasonable efforts to obtain all other
approvals, covenants, exemptions or authorizations from such governmental
agencies or authorities as may be necessary to enable the Holder to consummate
the disposition of such Registrable Securities.
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(g) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting will also enter into and perform its obligations under such
an agreement.
(h) Use its best efforts to furnish, at the request of the Holders
requesting registration of Registrable Securities pursuant to this Agreement, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Agreement, if such
securities are being sold through underwriters, or, in the case of (ii) below,
if such securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in such an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable
Securities, and (ii) a letter dated such date, from the independent certified
public accountants of the Company, in form and substance as is customarily given
by independent certified public accountants to underwriters in such an
underwritten public offering, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities.
(i) Cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed not later than the effective date of such registration statement, or, if
similar securities are reported on Nasdaq, cause all such Registrable Securities
to be reported on Nasdaq. If such Registrable Securities are not then listed on
a national securities exchange or reported on Nasdaq, use reasonable efforts to
facilitate the listing or reporting of such Registrable Securities on a national
securities exchange or Nasdaq, as the case may be.
(j) Provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement.
(k) Make available for reasonable inspection by any Holder
participating in such registration, any underwriter participating in any
disposition pursuant to such registration statement, any accountant or other
agent retained by MCI on behalf of such Holders or any one counsel selected by
MCI on behalf of such Holders as a group, all financial and other records,
pertinent corporate documents and properties of the Company reasonably
requested, and cause the Company's officers, directors, employees and
independent accountants to supply information reasonably requested by any Holder
or any such underwriter, attorney, accountant or agent in connection with such
registration statement; provided that the Company shall be under no obligation
to disclose proprietary or privileged non-public information that the Company,
in the opinion of the Company's counsel, is not required to be disclosed in such
registration statement or in any prospectus in connection therewith.
(l) Advise the Holders participating in such registration after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the SEC suspending the
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effectiveness of such registration statement or the initiation or threatening of
any proceeding for such purpose and promptly use all reasonable efforts to
prevent the issuance of any stop order or to obtain its withdrawal if such stop
order should be issued.
(m) Within a reasonable period prior to the filing of any registration
statement or prospectus, or any amendment or supplement to such registration
statement or prospectus, furnish a copy thereof to the Holders participating in
such registration and, except with respect to any registration pursuant to
SECTION 3, refrain from filing any such registration statement, prospectus,
amendment or supplement to which one counsel, selected by MCI on behalf of such
Holders as a group, shall have reasonably objected to on the grounds that such
document does not comply in all material respects with the requirements of the
Act or the rules and regulations thereunder, unless, in the case of an amendment
or supplement, in the opinion of counsel for the Company the filing of such
amendment or supplement is reasonably necessary to protect the Company from any
liabilities under the applicable federal or state law and such filing will not
violate applicable laws.
(n) Otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve (12) months beginning with the first day of the
Company's first full fiscal quarter after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of SECTION
11(A) of the Act and Rule 158 thereunder.
5. Furnishing of Information. It will be a condition precedent to the
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obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Securities of any Selling Holder that such Holder
will furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as will be required to effect the registration of such Holder's Registrable
Securities.
6. Expenses of Registration. The Company shall bear all expenses other
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than Selling Holder Expenses (as defined below) incurred in any Registration,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the NASD), messenger and delivery expenses,
fees and expenses of complying with federal and state securities and Blue Sky
laws, printing expenses and fees and disbursements of the independent certified
public accountants (including for any special audits) and fees for the Company's
counsel. Each Selling Holder shall bear his or her equitable share of any
Selling Holder Expenses. "Selling Holder Expenses" shall consist of (i) Selling
Holder's legal, accounting, consulting and advisory fees and costs and (ii) any
proportionate share of brokerage or underwriting fees, expenses or commissions.
7. Underwriting Requirements. In connection with any offering involving
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an underwriting of shares of the Company's Capital Stock, the Company will not
be required under SECTION 3 to include any of the Holders' securities in such
underwriting unless they accept the
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terms of the underwriting as agreed upon between the Company and the
underwriters selected by the Company (or by other persons entitled to select the
underwriters). If the underwriter delivers a written opinion to the Selling
Holders and the Company that the total amount of securities, including
Registrable Securities, requested by such Selling Holders to be included in such
offering exceeds the amount of securities to be sold other than by the Company
that the underwriters determine in their sole reasonable discretion is
compatible with the success of the offering, then the Company will be required
to include in the offering only that number of Registrable Securities, if any,
and securities of other stockholders which the underwriters determine in their
sole reasonable discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among all selling stockholders
according to the total number of registrable securities owned by each selling
stockholder or in such other proportions as will mutually be agreed to by such
selling stockholders); provided, however, no shares being sold by a stockholder
exercising a demand registration right similar to that granted in SECTION 2
shall be required to be excluded from such offering unless all other securities
are first entirely excluded from the underwriting.
8. Indemnification. If any Registrable Securities are included in a
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registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, their respective partners, officers, employees,
directors and agents, any underwriter (as defined in the Act) for such Holder
and each person, if any, who controls such Holder or underwriter ("Controlling
Person") within the meaning of the Act or the Securities Exchange Act of 1934,
as amended (the "1934 Act"), against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the Act, or the 1934
Act, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in (A) such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or (B) any
application or other document, or amendment or supplement thereto, executed by
the Company or based upon written information furnished by or on behalf of the
Company filed in any jurisdiction in order to qualify the Registrable Securities
under the Blue Sky or securities thereof or filed with the SEC or any securities
association or securities exchange (each an "Application"), or (ii) the omission
or alleged omission to state in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or any Application a material fact required to be stated
therein, or necessary to make the statements therein not misleading; and the
Company will pay to each such Holder, underwriter or Controlling Person, any
legal or other expenses reasonably incurred by them (as incurred) in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
SUBSECTION 8(A) will 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 or
delayed), nor will the Company be liable in any such case to any Holder for any
such loss, claim,
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damage, liability, or action to the extent that it arises out of or is based
upon a Violation (other than alleged violations) as ultimately determined by a
final judgment of a court of competent jurisdiction which occurs in reliance
upon and in conformity with written information furnished expressly for use in
connection with such registration by such Holder.
(b) To the extent permitted by law, each Selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers and
agents who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act or the 1934 Act, any
underwriter, any other Holder selling securities in such registration statement
and any Controlling Person of any such underwriter or other Holder, against any
losses, claims, damages or liabilities (joint or several) to which any of the
foregoing persons may become subject under the Act, or the 1934 Act, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any Violation (other than alleged violations), in
each case to the extent (and only to the extent) that such Violation consists of
omission of material facts or material falsity in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in such registration statement as ultimately determined by a final judgment of a
court of competent jurisdiction; and each such Holder will pay any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this SUBSECTION 8(B) (as incurred), in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this SUBSECTION 8(B) will not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Holder,
which consent will not be unreasonably withheld or delayed; and, provided
further, that in no event will any indemnity under this SUBSECTION 8(B) exceed
the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this SECTION
8 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this SECTION 8, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party will have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) will have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party is inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, will relieve such
indemnifying party of any liability to the indemnified party under this SECTION
8, but the omission so to deliver written notice to the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this SECTION 8. The payments required by this SECTION 8
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will be made periodically throughout the course of investigation or defense, as
and when bills are received or expenses incurred, provided that the indemnified
party seeking reimbursement of expenses hereunder undertakes in a writing
reasonably satisfactory to the indemnifying party, to repay all amounts
previously paid over to the indemnified party if it is ultimately determined (by
a final judgment of a court of competent jurisdiction) that such party is not
entitled to indemnification hereunder.
(d) If the indemnification provided for in this SECTION 8 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party to
this Agreement, will contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party will be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement will
control.
(f) The obligations of the Company and Holders under this SECTION 8
will survive the completion of any offering of Registrable Securities in a
registration statement under this Agreement, and otherwise.
9. Reports Under Securities Exchange Act of 1934. With a view to making
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available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of the Company to the public without registration or pursuant to
a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times after ninety (90) days after
the effective date of the first registration statement filed by the Company for
the offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the 1934 Act; and
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(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon written request (i) a written statement by the
Company that it has complied in all material respects with the reporting
requirements of Rule 144 (at any time after ninety (90) days after the effective
date of the first registration statement filed by the Company), the Act and the
1934 Act (at any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company with the SEC, and (iii) such other
information as may be reasonably requested in availing any Holder of any rule or
regulation of the SEC which permits the selling of any such securities without
registration or pursuant to such form.
10. Assignment of Registration Rights. The rights to cause the Company to
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register Registrable Securities pursuant to this Agreement may be assigned (but
only with all related obligations) by a Holder to transferee(s) or assignee(s)
of such securities. The Holder shall furnish the Company within a reasonable
time after such transfer, with written notice of the name and address of such
transferee(s) or assignee(s) and the securities with respect to which such
registration rights are being assigned. Notwithstanding any assignment by a
Holder of its registration and other rights hereunder in connection with its
transfer of Registrable Securities, such Holder shall retain all such
registration and other rights under this Agreement in respect of those
Registrable Securities that it continues to hold.
11. No Inconsistent Agreements; Limitations on Subsequent Registration
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Rights.
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(a) The Company represents and warranties to MCI that it is not a
party to any agreement with respect to its securities which would prohibit it
from fully performing its obligations hereunder.
(b) From and after the date of this Agreement, if the Company enters
into any agreement granting any person rights (i) to demand that the Company
register securities of the Company under the Act or (ii) to have securities of
the Company included in a registration statement, which are more favorable than
these registration rights provisions in any regard (including, without
limitation, those relating to the expenses to be borne by the Company), the
rights granted herein shall be deemed to be amended to include such particular
more favorable rights in lieu of the corresponding rights set forth herein.
12. "Market Stand-Off" Agreement. Each Holder hereby agrees that if an
---------------------------
offering is made by means of a proposed underwriting, during the period of
duration specified by the Company and an underwriter of the Common Stock or
other securities of the Company, following the effective date of a registration
statement of the Company filed under the Act, it will not, to the extent
requested by such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of any securities of the
Company held by it at any time during such period (except the Registrable
Securities included in such registration) not to exceed one hundred eighty
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(180) days in the case of the Company's IPO and not to exceed ninety (90) days
in the case of all subsequent registration statements for underwritten
offerings; provided, however, that all officers and directors of the Company and
all other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements; and provided further, however, that
notwithstanding the foregoing provision, the Holders shall be afforded at least
ninety (90) days during a twelve (12) month period in which they shall not be
subject to the restrictions of this SECTION 12, and in any event, the Holders
may sell, transfer or otherwise dispose of the Warrants if the purchaser or
donee thereof agrees to be bound by this SECTION 12 in respect of securities
issuable upon exercise of the Warrants.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
13. Adjustments Affecting Registrable Securities. The Company will not
--------------------------------------------
take any action, or permit any change to occur, with respect to its securities
which would adversely affect the ability of the Holders to include Registrable
Securities in a registration undertaken pursuant hereto. However, nothing in
this Agreement shall limit the Company's ability to register, offer and sell
securities.
14. Amendments. The approval by each of (i) the Company and (ii) Holders
----------
of a majority of the Registrable Securities then outstanding hereunder shall be
required to amend, modify or waive the provisions of this Agreement.
15. Notices. All notices, demands, requests, or other communications
-------
which may be or are required to be given or made by any party to any other party
pursuant to this Agreement shall be in writing and shall be hand delivered, or
mailed first-class registered or certified mail, return receipt requested,
postage pre-paid, or delivered by overnight air courier, or transmitted by
facsimile transmission addressed as follows:
If to MCI:
MCI Telecommunications Corporation
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Chief Financial Officer
Fax: 000-000-0000
with a copy to:
MCI Communications Corporation
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
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Attn: General Counsel
Fax: 000-000-0000
If to Iterated:
Iterated Systems, Inc.
0000 Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: President and CEO
Fax: 000-000-0000
with a copy to:
Xxxxxx Xxxxxxx & Xxxxxx, LLP
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxx, Esq.
Fax: 000-000-0000
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be given, served or sent. Each
notice, demand, request or communication which shall be mailed, delivered, or
transmitted in the manner described above shall be deemed sufficiently given,
served, sent or received for all purposes as such time as it is delivered to the
addressees (with the return receipt, the facsimile confirmed receipt, the
delivery receipt or affidavit of messenger being deemed conclusive evidence of
such delivery) or at such time as delivery is refused by the addressee upon
presentation.
17. Waiver. Any term or condition of this Agreement may be waived at any
------
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party
of any term or condition of this Agreement, in any one or more instances, shall
be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by law or otherwise afforded, will be cumulative and not
alternative.
18. Headings. The headings used in this Agreement have been inserted for
--------
convenience of reference only and do not define or limit the provisions hereof.
19. Severability; Reformation. Should any one or more of the provisions
-------------------------
of this Agreement or of any agreement entered into pursuant to this Agreement be
determined by an arbitrator or court of proper jurisdiction to be illegal or
unenforceable, then such illegal or unenforceable provision shall be modified by
the proper court or arbitrator to the extent
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necessary and possible to make such provision enforceable, and such modified
provision and all other provisions of this Agreement and of each other agreement
entered into pursuant to this Agreement
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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shall be given effect separately from the provision or portion thereof
determined to be illegal or unenforceable and shall not be affected thereby.
20. Governing Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of New York, without giving effect to the
conflict of laws provisions thereof.
21. Counterparts. To facilitate execution, this Agreement may be executed
-------------
in counterparts; and it shall not be necessary that the signatures of, or on
behalf of, each party, or the signatures of all persons required to bind a
party, appear on each counterpart; but it shall be sufficient that the signature
of, or on behalf of, each party, or the signatures of the persons required to
bind any party, appear on the counterparts. All counterparts shall collectively
constitute a single agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
ITERATED SYSTEMS, INC.
By:__________________________
Name:
Title:
MCI TELECOMMUNICATIONS CORPORATION
By:__________________________
Name:
Title:
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