EXHIBIT 99.2
================================================================================
REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
BRAINWORKS VENTURES, INC.
AND
STOCKHOLDERS OF BRAINWORKS VENTURES, INC. NAMED ON SCHEDULE 1
DATED AS OF APRIL 1, 2003
================================================================================
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of April 1, 2003, by and among Brainworks Ventures, Inc., a
Nevada corporation (the "Company") and the owners of shares of common stock of
the Company (the "Common Stock"), as listed on Schedule 1 hereto (each a
"Stockholder" and together the "Stockholders"). The parties to this Agreement
are referred to individually as a "Party" and collectively as the "Parties."
W I T N E S S E T H:
WHEREAS, the Stockholders will be entitled to receive the number of
shares of Common Stock set forth on Schedule 1 in connection with the merger of
a wholly-owned subsidiary of the Company with AssuranceAmerica Corporation (the
"Merger") under the laws of the state of Georgia;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt, adequate, and sufficiency of which is hereby
acknowledged, the Parties covenant and agree as follows:
1. CERTAIN DEFINITIONS.
As used in this Agreement, the following defined terms shall
have the meanings as set forth below:
(a) "Business Day" means any Monday, Tuesday, Wednesday,
Thursday or Friday that is not a day on which banking institutions in New York,
New York are authorized by law, regulation or executive order to close.
(b) "Commission" means the United States Securities and
Exchange Commission or any other federal agency at the time administering the
Securities Act.
(c) "Common Stock" means the common stock of the Company,
par value $.01 per share.
(d) "Company" means Brainworks Ventures, Inc. or any
Successor Entity.
(e) "Converting Preferred Stock" shall mean the Series A
converting preferred stock of AssuranceAmerica Corporation, no par value.
(f) "Demand Registration" means any registration of
Registrable Securities effected pursuant to Section 2 hereof.
(g) "Effective Date" means the effective date of the
registration statement with respect to a Qualified PO under the Securities Act.
(h) "Exchange Act" means the Securities Exchange Act of
1934, as amended (or any similar successor federal statute), and the rules and
regulations thereunder, as in effect from time to time.
(i) "Existing Registration Rights Agreement" means the
existing registration rights agreement with the Company, as described in Section
2(b) hereof.
(j) "Existing Securities" means those securities that are
subject to the Existing Registration Rights Agreement.
(k) "Majority Registered Stockholders" means in the case
of any registration statement, the Stockholders owning a majority of the
Registrable Securities proposed to be covered (or so covered) in such
registration statement.
(l) "Person" means any individual, partnership,
corporation (including a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture, or other entity, or a
government or any political subdivision or agency.
(m) "Piggy-Back Registration" means any registration of
Registrable Securities effected pursuant to Section 3 hereof.
(n) "Qualified PO" means the offer and sale by the
Company of Common Stock in a transaction underwritten by an investment banking
firm, following the completion of which (i) the Common Stock is listed for
trading on any national securities exchange or (ii) there are at least two
market makers who are making a market in the Common Stock through the National
Association of Securities Dealers Automated Quotation System.
(o) "Registrable Securities" means the Common Stock of
the Company held by a Stockholder, which was issued to the Stockholder in
connection with the Merger in exchange for such Stockholder's common stock of
AssuranceAmerica Corporation or any Common Stock of the Company issued to a
Stockholder upon the conversion the Converting Preferred Stock.
(p) "Rule 10b-6" means Rule 10b-6 promulgated by the
Commission under the Exchange Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.
(q) "Rule 144," "Rule 145," "Rule 415," "Rule 424" and
"Rule 462" mean, respectively, Rule 144, Rule 145, Rule 415, Rule 424 and Rule
462, each promulgated by the Commission under the Securities Act, in each case
as amended from time to time, or any similar successor rule thereto that may be
promulgated by the Commission.
(r) "Securities Act" means the Securities Act of 1933, as
amended (or any similar successor federal statute), and the rules and
regulations thereunder, as the same are in effect from time to time.
2
(s) "Stockholder" means a holder of Registrable
Securities who is a Party to this Agreement, including such bona fide
successors, assigns and transferees as acquire Registrable Securities, directly
or indirectly, from such Person.
(t) "Stockholders' Counsel" shall have the meaning set
forth in Section 7.
(u) "Successor Entity" means, with respect to the
Company, a Person who succeeds to its business by means of merger,
reorganization, consolidation, purchase of assets or equity securities or
otherwise or who becomes the owner of its business.
2. DEMAND REGISTRATION.
(a) DEMAND. At any time after the completion of the
Merger, upon written notice to the Company from Stockholders holding Registrable
Securities having a market value at the time of such notice of not less than
$5,000,000, such Stockholders shall have the right to request and have effected
a registration of Registrable Securities under the Securities Act for a public
offering of Registrable Securities ("Demand Registration"), so long as the
Registrable Securities having a market value of at least $5,000,000 at the time
of such notice are proposed to be included in such registration. Each request
for Demand Registration shall be in writing and shall state the number of shares
of Registrable Securities proposed to be disposed of and the intended method or
methods of disposition by such Stockholders. The Company shall promptly (but in
any event within 20 days) give written notice of such requested registration to
all Stockholders, and thereupon the Company shall, as expeditiously as possible,
use its best efforts to effect the registration under the Securities Act of the
Registrable Securities that the initiating stockholder has requested the Company
to register, for disposition in accordance with the intended method or methods
of disposition stated in the notice to the Company.
(b) INCLUSION OF OTHER SECURITIES. In addition to
registering Registrable Securities, the Company may register securities for its
own account in any Demand Registration. If any securities other than Registrable
Securities are so registered: (i) Registrable Securities of Stockholders shall
have equal priority with, (A) securities to be registered by the Company for
sale for its own account with aggregate estimated net proceeds therefrom to the
Company (at the time of filing such registration statement) of up to $5,000,000,
and (B) any securities subject to the Registration Rights Agreement by and among
the Company and each of the stockholders of Executive Venture Partners, Ltd., a
Massachusetts corporation, dated May 8, 2001 (the "Existing Registration Rights
Agreement" and the securities subject to the Existing Registration Rights
Agreement collectively referred to herein as the "Existing Securities"); and
(ii) Registrable Securities of Stockholders shall have absolute priority over,
(A) any securities to be registered by the Company for sale for its own account
other than securities referred to in clause (i), and (B) securities requested to
be registered by third parties, except for the Existing Securities.
(c) CUTBACK. Notwithstanding the provisions of Section
2(a) hereof, if the managing underwriter or underwriters of a proposed
underwritten Demand Registration (which may also include an offering of
securities for the account of the Company) deliver written advice to the
Stockholders requesting inclusion of their Registrable Securities stating that
the total
3
amount or kind of securities that they and any other Persons (other than the
Company) seek to include in such offering would adversely affect the success of
such offering, then the amount or kind of Registrable Securities to be offered
for the accounts of Stockholders shall be reduced pro rata along with any
Existing Securities to be registered, based on the number of Registrable
Securities and Existing Securities requested to be included in such Registration
by the Stockholders and the stockholders of the Existing Securities to the
extent necessary to reduce the total amount of Registrable Securities and
Existing Securities to be included in such offering to that recommended by such
managing underwriter or underwriters (which amount may be zero); provided,
however, that if the amount of any kind of Registrable Securities to be offered
for the accounts of Stockholders is reduced in accordance with this Section
2(c), the Company may not include in such offering any securities other than,
(i) Registrable Securities, (ii) Existing Securities, (iii) securities, if any,
that the Company is offering for sale for its own account in a primary
underwritten offering.
(d) BEST EFFORTS; DURATION. If at any time the Company
becomes eligible to use Form S-3 for resale of securities under the Securities
Act or a comparable successor form, the Company shall use its best efforts to
continue to qualify at all times for Registration on Form S-3 or such successor
form. The Company shall also use its best efforts to cause the Form S-3
qualification to remain effective until the earlier of, (A) one hundred and
eighty (180) days following the date on which such registration statement was
declared effective, and (B) the sale pursuant to such registration statement of
all of the Registrable Securities covered thereby.
(e) COMPANY'S RIGHT TO DELAY REGISTRATION.
Notwithstanding the foregoing, the Company may delay filing a registration
statement, and may withhold its efforts to cause the registration statement to
become effective, for the minimum period necessary in the reasonable good faith
judgment of the Company, if the Company determines in reasonable good faith that
such registration might, (i) interfere with or affect the negotiation or
completion of any material transaction that is then being actively contemplated
by the Company (whether or not a final decision has been made to undertake such
transaction) at the time the right to delay is exercised, or (ii) involve
initial or continuing disclosure obligations that might not be in the best
interests of the holders of the Company's equity securities.
3. PIGGY-BACK REGISTRATION.
(a) EFFECTIVE REGISTRATION. If the Company proposes to
file a registration statement under the Securities Act (for its own account or
for the account of others with respect to any class of equity securities, other
than in connection with the registration of equity securities issued or issuable
pursuant to an employee equity option, purchase, bonus or similar plan or
pursuant to a merger, exchange offer or transaction of the type specified in
Rule 145(a) under the Securities Act) at any time, then the Company shall give
written notice of such proposed filing to the Stockholders at least 20 days
before the anticipated filing date, and such notice shall offer the Stockholders
the opportunity to register such amount of Registrable Securities as each such
Stockholder may request. The Company shall use its best efforts to cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit the inclusion therein of any requesting Stockholder's Registrable
Securities, within 15 days after receiving written notice of the proposed filing
from the Company, and such inclusion shall be on the same terms and
4
conditions as any similar securities of the Company and any Existing Securities
so included. Any Stockholder's request for such inclusion may be withdrawn, in
whole or in part, at any time prior to the effective date of the registration
statement for such offering. The Company shall keep such registration effective
for a period of one hundred and eighty (180) days or until the holders have
completed the distribution described in the registration statement related
thereto, whichever first occurs.
(b) CUTBACK. Notwithstanding the provisions of Section
3(a), if the managing underwriter or underwriters of a proposed underwritten
offering as described in such Section 3(a) deliver written notice to the
Stockholders requesting inclusion of their Registrable Securities stating that
the total amount or kind of securities that they and any other Persons seeking
to include in such offering would materially and adversely affect the success of
such offering, then the amount or kind of Registrable Securities to be offered
for the accounts of Stockholders shall be reduced pro rata with the Existing
Securities based on the number of Registrable Securities and Existing Securities
then requested to be included by the Stockholders and the stockholders of the
Existing Securities to the extent necessary to reduce the total amount of
Registrable Securities and Existing Securities to be included in such offering
to that recommended by such managing underwriter or underwriters (which amount
may be zero); provided, however, that if the amount of Registrable Securities to
be offered for the accounts of Stockholders is reduced in accordance with this
Section 3(b), the Company may not include in such offering any securities other
than, (i) Registrable Securities, (ii) Existing Securities, and (iii)
securities, if any, that the Company is offering for sale for its own account in
a primary underwritten offering.
4. HOLDBACK AGREEMENTS.
(a) RESTRICTIONS ON PUBLIC SALES BY STOCKHOLDERS OF
REGISTRABLE SECURITIES. To the extent not inconsistent with applicable law, each
holder of Registrable Securities eligible for inclusion in a registration
statement that is timely notified in writing of such right by the managing
underwriter or underwriters of any securities being registered in an
underwritten offering (other than pursuant to an employee equity option,
purchase, bonus or similar plan, pursuant to a merger, exchange offer or a
transaction of the type specified in Rule 145(a) under the Securities Act),
shall not (if so requested by such managing underwriter or underwriters and
provided that all beneficial owners of ten percent (10%) or more of the
Company's securities are likewise restricted) effect any public sale or
distribution (including a sale pursuant to Rule 144) of any Registrable
Securities that are similar to any such securities or any Registrable Securities
convertible into or exchangeable or exercisable for any such securities, during
the period so requested, not to exceed the 180-day period beginning on, the
effective date of the applicable registration statement, except as part of such
Registration. Notwithstanding anything to the foregoing, nothing in this
Agreement shall prohibit any of the Stockholders from selling their Registrable
Securities in a private transaction exempt from the registration provision of
the Securities Act.
(b) RESTRICTIONS ON SALES BY THE COMPANY. If so requested
by the managing underwriter or underwriters, the Company shall not effect any
public sale of any securities of the Company similar to any Registrable
Securities being offered in an underwritten offering under a registration
statement filed pursuant to this Agreement or any securities of the Company
5
convertible into or exchangeable or exercisable for any such Registrable
Securities, during the period so requested, not to exceed the 90 day period
beginning on the effective date of the applicable registration statement, except
as part of such registration or pursuant to employee benefit plans maintained by
the Company at the beginning of such restricted period.
5. REGISTRATION PROCEDURES.
(a) COMPANY PROCEDURES. Whenever the Company is required
by this Agreement to effect the registration of any Registrable Securities under
the Securities Act pursuant to a registration statement, the Company shall use
its best efforts to effect each such registration to permit the sale of such
Registrable Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall, as soon as
practicable:
(i) prepare and file with the Commission (and
shall use its best efforts to file the same no later than 30 days after the
request for registration made in accordance with the Agreement) the requisite
registration statement to effect such registration and thereafter use its best
efforts to cause such registration statement to be declared effective as soon as
practicable and to remain continuously effective for the time period required by
this Agreement to the extent permitted under the Securities Act, provided that
as soon as practicable but in no event later than three (3) Business Days before
filing such registration statement, any related prospectus or any amendment or
supplement thereto (other than any amendment or supplement made solely as a
result of incorporation by reference of documents filed with the Commission
subsequent to the filing of such registration statement or a registration
statement filed pursuant to Rule 462), the Company shall deliver to the
Stockholders, the Stockholders' Counsel and the underwriters, if any, copies of
all such documents proposed to be filed, which documents shall be subject to the
review of such Stockholders, the Stockholders' Counsel and underwriters; the
Company shall not file any registration statement or amendment thereto or any
prospectus or any supplement thereto (other than any amendment or supplement
made solely as a result of incorporation by reference of documents filed with
the Commission subsequent to the filing of such registration statement) to which
the managing underwriters of the applicable offering, if any, or the Majority
Registered Stockholders shall have reasonably objected in writing within two (2)
Business Days after receipt of such documents to the effect that such
registration statement or amendment thereto or prospectus or supplement thereto
does not comply in all material respects with the requirements of the Securities
Act (provided that the foregoing shall not limit the right of any Stockholder
whose Registrable Securities are covered by a registration statement to
reasonably object, within two (2) Business Days after receipt of such documents,
to any particular information that is to be contained in such registration
statement, amendment, prospectus or supplement and relates specifically to such
Stockholder, including, without limitation, any information describing the
manner in which such Stockholder acquired such Registrable Securities and the
intended method or methods of distribution of such Registrable Securities), and
if the Company is unable to file any such document due to the objections of such
underwriters or such Stockholders, the Company shall use its best efforts to
cooperate with such underwriters and Stockholders to prepare, as soon as
practicable, a document that is responsive in all material respects to the
reasonable objections of such underwriters and Stockholders;
6
(ii) prepare and file with the Commission such
amendments and post-effective amendments to such registration statement as may
be necessary to keep such registration statement continuously effective and
current for the period required by this Agreement to the extent permitted under
the Securities Act; and cause each related prospectus to be supplemented by any
prospectus supplement as may be required, and as so supplemented to be filed
pursuant to Rule 424; and otherwise comply with the provisions of the Securities
Act as may be necessary to facilitate the disposition of all Registrable
Securities covered by such registration statement during the applicable period
in accordance with the intended method or methods of disposition by the selling
Stockholders thereof set forth in such registration statement or such prospectus
or prospectus supplement;
(iii) notify the Stockholders and the managing
underwriters, if any, of the applicable offering (providing, if requested by any
such Persons, confirmation in writing) as soon as practicable after becoming
aware of: (A) the filing of any prospectus or prospectus supplement or the
filing or effectiveness (or anticipated date of effectiveness) of such
registration statement or any post-effective amendment thereto; (B) any request
by the Commission for amendments or supplements to such registration statement
or the related prospectus or for additional information; (C) the issuance by the
Commission of any stop order suspending the effectiveness of such registration
statement or the initiation of any proceedings for that purpose; (D) the receipt
by the Company of any notification with respect to the suspension of the
qualification or registration (or exemption therefrom) of any Registrable
Securities for sale in any jurisdiction in the United States or the initiation
or threatening of any proceeding for such purposes; or (E) the happening of any
event that makes any statement made in such registration statement or in any
related prospectus, prospectus supplement, amendment or document incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in such registration statement or in any such prospectus,
supplement, amendment or other such document so that it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein (in the case of
any prospectus in the light of the circumstances under which they were made) not
misleading;
(iv) make every reasonable effort to obtain at
the earliest possible moment the withdrawal of any order or other action
suspending the effectiveness of any such registration statement or suspending
the qualification or registration (or exemption therefrom) of the Registrable
Securities for sale in any jurisdiction;
(v) if reasonably requested by the managing
underwriters, if any, of the applicable offering, or by the Majority Registered
Stockholders, as soon as practicable incorporate in a prospectus supplement or
post-effective amendment such information as such underwriters or the Majority
Registered Stockholders, as the case may be, agree should be included therein
relating to the sale and offering of the applicable Registrable Securities,
including, without limitation, information with respect to the number of
Registrable Securities being sold to any underwriters, the purchase price being
paid therefor by any such underwriters and any other terms of the offering of
the Registrable Securities; and make all required filings of such prospectus
supplement or post-effective amendment as soon as practicable following receipt
of notice of the matters to be incorporated therein;
7
(vi) as soon as practicable after filing such
documents with the Commission, furnish to the Stockholders, the Stockholders'
Counsel and each of the underwriters, if any, without charge, at least one
manually signed or conformed copy of such registration statement and any
post-effective amendment thereto, including financial statements and schedules;
and as soon as practicable after the request of any Stockholder, the
Stockholders' Counsel or underwriter, furnish to such Stockholder, the
Stockholders' Counsel or underwriter, as the case may be, at least one copy of
any document incorporated by reference in such registration statement or in any
related prospectus, prospectus supplement or amendment, together with all
exhibits thereto (including those previously furnished or incorporated by
reference);
(vii) deliver to the Stockholders, the
Stockholders' Counsel and to each of the underwriters, if any, without charge,
as many copies of the prospectus or prospectuses (including each preliminary
prospectus) and any amendment or supplement thereto as such Persons may
reasonably request; subject to Section 5(b)(i) hereof, the Company consents to
the use of any such prospectus or any amendment or supplement thereto by the
Stockholders and the underwriters, if any, in connection with the offering and
sale of the Registrable Securities covered by any such prospectus or any
amendment or supplement thereto;
(viii) prior to any public offering of Registrable
Securities, register or qualify (or obtain an exemption therefrom), or cooperate
with the Stockholders, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption therefrom) of,
such Registrable Securities for offer and sale under the securities or blue sky
laws of such jurisdictions in the United States as the Stockholders or the
underwriters, if any, shall reasonably request in writing; keep each such
registration or qualification (or exemption therefrom) effective during the
period during which such registration statement is required to be kept effective
pursuant to this Agreement; and do any and all other acts and things reasonably
necessary or advisable to facilitate the disposition in such jurisdictions of
the Registrable Securities covered by such registration statement; provided that
the Company shall not be required to qualify generally to do business in any
jurisdiction where it would not be required to qualify but for this Section
5(a)(viii);
(ix) cooperate with Stockholders participating in
such registration and the underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing the Registrable Securities
to be sold; and enable such Registrable Securities to be in such denominations
and registered in such names as the underwriters, if any, may request at least
two Business Days prior to any sale of Registrable Securities to the
underwriters;
(x) use its best efforts to cause the
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities in the
United States as may be reasonably necessary to enable the Stockholders or the
underwriters, if any, to consummate the disposition of such Registrable
Securities;
8
(xi) as soon as practicable after the occurrence
of any event described in Section 5(a)(iii)(E) hereof, prepare a supplement or
post-effective amendment to such registration statement or to the related
prospectus or any document incorporated therein by reference, or file any other
required document so that, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, such prospectus shall not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading; if any event described
in Section 5(a)(iii)(B) hereof occurs, use its best efforts to cooperate with
the Commission to prepare, as soon as practicable, any amendment or supplement
to such registration statement or such related prospectus and any other
additional information, or to take other action that may have been requested by
the Commission;
(xii) use its best efforts to cause the
Registrable Securities covered by such registration statement to be listed on
each securities exchange (or quotation system operated by a national securities
association) on which the equity securities of the Company of the same type and
class as the Registrable Securities are then listed (or included), if so
requested by the underwriters, if any, and enter into customary agreements
including, if necessary, a listing application and indemnification agreement in
customary form, and provide a transfer agent for such Registrable Securities no
later than the effective date of such registration statement; use its best
efforts to cause any other Registrable Securities covered by such registration
statement to be listed (or included) on each securities exchange (or quotation
system operated by a national securities association) on which securities of the
same class and series, if any, are then listed (or included) (or on any exchange
or quotation system on which any Person other than a Stockholder shall have the
right to have securities of the same class and series, if any, listed or
included), if so requested by the underwriters, if any, and enter into customary
agreements including, if necessary, a listing application and indemnification
agreement in customary form, and, if necessary, provide a transfer agent for
such securities no later than the effective date of such registration statement;
(xiii) enter into customary agreements (including,
in the case of an underwritten offering, an underwriting agreement in customary
form for the managing underwriters with respect to issuers of similar market
capitalization and reporting and financial histories) and take all such other
reasonable actions in connection therewith in order to expedite or facilitate
the disposition of the Registrable Securities included in such registration
statement and, in the case of an underwritten offering: (A) make representations
and warranties to each Stockholder of Registrable Securities participating in
such offering and to each of the underwriters, in such form, substance and scope
as are customarily made to the managing underwriter or underwriters by issuers
of similar market capitalization and reporting and financial histories and
confirm the same to the extent customary if and when requested; (B) use its best
efforts to obtain opinions of counsel to the Company and updates thereof
addressed to each Stockholder of Registrable Securities participating in such
offering and to each of the underwriters, such opinions and updates to be in
customary form and covering the matters customarily covered in opinions obtained
in underwritten offerings by the managing underwriter or underwriters for
issuers of similar market capitalization and reporting and financial histories;
(C) use its best efforts to obtain "comfort" letters and updates thereof from
the Company's independent certified public accountants addressed to each
Stockholder of Registrable Securities participating in such offering and to each
of the underwriters, such letters to be in customary
9
form and covering matters of the type customarily covered in "comfort" letters
to the managing underwriter or underwriters in connection with underwritten
offerings by them for issuers of similar market capitalization and reporting and
financial histories; (D) provide, in the underwriting agreement to be entered
into in connection with such offering, indemnification provisions and procedures
no less favorable than those set forth in Section 7 hereof with respect to all
parties to be indemnified pursuant to such Section 7; and (E) deliver such
customary documents and certificates as may be reasonably requested by the
Majority Sellers and the managing underwriter or underwriters to evidence
compliance with this paragraph (xiii) and with any customary conditions
contained in the underwriting agreement entered into by the Company in
connection with such offering;
(xiv) in the case of any non-underwritten
offering: (A) use its best efforts to obtain an opinion of counsel to the
Company at the time of effectiveness of such registration statement covering
such offering and an update thereof at the time of effectiveness of any
post-effective amendment to such registration statement (other than by reason of
incorporation by reference of documents filed with the Commission) addressed to
each Stockholder of any Registrable Securities covered by such registration
statement, covering matters that are no more extensive in scope than would be
customarily covered in opinions obtained in underwritten offerings by issuers
with similar market capitalization and reporting and financial histories; (B)
use its best efforts to obtain a "comfort" letter from the Company's independent
certified public accountants at the time of effectiveness of such registration
statement and, upon the request of the Majority Registered Stockholders, updates
thereof, in each case addressed to each Stockholder of Registrable Securities
participating in such offering and covering matters that are no more extensive
in scope than would be customarily covered in "comfort" letters and updates
obtained in underwritten offerings by issuers with similar market capitalization
and reporting and financial histories; and (C) deliver a certificate of a senior
executive officer of the Company at the time of effectiveness of such
registration statement and, upon the request of the Majority Sellers, updates
thereof, such certificates to cover matters no more extensive in scope than
those matters customarily covered in officers' certificates delivered in
connection with underwritten offerings by issuers with similar market
capitalization and reporting and financial histories;
(xv) make available, for inspection by the
Stockholders or stockholders counsel of the Registrable Securities included in
such registration, any underwriter participating in any disposition of
Registrable Securities pursuant to such registration statement, and any
attorney, accountant or other representative retained by such selling
Stockholders or by any such underwriter (subject to, if so requested by the
Company, appropriate confidentiality agreements), all pertinent financial and
other records, 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 Stockholder, underwriter, attorney, accountant
or other representative in connection with such registration;
(xvi) otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission relating to such
registration and the distribution of the securities being offered (including,
without limitation, Rule 10b-6, with respect to which the Company shall also use
its best efforts timely to apprise each Stockholder of any bids and
10
purchases by the Company, and of any known bids and purchases by each
"affiliated purchaser" (as defined in Rule 10b-6) of the Company, that would in
the opinion of the Company be prohibited under Rule 10b-6 in connection with a
"distribution" (as so defined) by such Stockholder) and make generally available
to its security Stockholders earning statements satisfying the provisions of
Section 11(a) of the Securities Act, no later than 60 days after the end of any
12-month period (or 90 days, if such period is a fiscal year) commencing at the
end of any fiscal quarter in which the Registrable Securities are sold to
underwriters in a firm commitment or best efforts underwritten offering, or, if
not sold to underwriters in such an offering, beginning with the first month of
the Company's first fiscal quarter commencing after the effective date of such
registration statement, which earning statements shall cover such 12-month
periods;
(xvii) cooperate and assist in any filings required
to be made with the National Association of Securities Dealers, Inc. and in the
performance of any customary or required due diligence investigation by any
underwriter; and
(xviii) use its best efforts to take all other
reasonable steps necessary and appropriate to effect such registration in the
manner contemplated by this Agreement.
(b) STOCKHOLDER PROCEDURES.
(i) Each Stockholder agrees, by acquisition of
the Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event described in Section 5(a) paragraphs (iii)(B),
(iii)(C), (iii)(D) or (iii)(E) hereof, such Stockholder shall forthwith
discontinue disposition of any Registrable Securities (but, in the case of an
event described in Section 5(a)(iii)(D), in the affected jurisdiction or
jurisdictions only) covered by the affected registration statement or prospectus
until such Stockholder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 5(a) paragraphs (iii) or (xi) hereof or until
such Stockholder is (it being agreed by the Company that the underwriters, if
any, shall also be) advised in writing (the "Advice") by the Company that the
use of the applicable prospectus may be resumed. If the Company shall have given
any such notice during a period when a Demand Registration is in effect, the
six-month period mentioned in Section 2(d) hereof, shall be extended by the
number of days from and including the date of the giving of such notice to and
including the date when each Stockholder of Registrable Securities included in
such Registration shall have received the copies of the supplemented or amended
prospectus contemplated by Section 5(a) paragraphs (iii) or (xi) hereof or the
Advice, as the case may be.
(ii) In connection with any underwritten public
offering of Registrable Securities pursuant to a Demand Registration in which
the Company does not include securities to be sold for its own account, the
managing underwriter or underwriters of such offering shall be an investment
banking firm or firms selected by the Company which shall be reasonably
acceptable to the Majority Registered Stockholders.
6. REGISTRATION EXPENSES.
All Registration Expenses, as hereinafter defined, shall be
borne by the Company. The term "Registration Expenses" shall mean all expenses
incident to the Company's
11
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications or registrations (or the
obtaining of exemptions therefrom) of the Registrable Securities), printing
expenses (including expenses of printing prospectuses), messenger and delivery
expenses, internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
fees and disbursements of its counsel and its independent certified public
accountants (including the expenses of any special audit or "comfort" or similar
letters or reports required by or incident to such performance or compliance),
securities acts liability insurance (if the Company elects to obtain such
insurance), reasonable fees and expenses of any special experts retained by the
Company in connection with any registration hereunder (if the Company elects to
obtain such experts); reasonable fees and expenses of other Persons retained by
the Company and up to $25,000 of fees and expenses of one counsel chosen by the
Majority Registered Stockholders to represent the Stockholders with respect to
such registration ("Stockholders' Counsel"); provided that Registration Expenses
shall not include any underwriting discounts, commissions or fees attributable
to the sale of the Registrable Securities or fees and expenses of counsel for
any of the Stockholders other than Stockholders' Counsel or out-of-pocket
expenses of any of the Stockholders. Stockholders' Counsel shall be entitled to
participate in all drafting sessions and due diligence sessions in which the
managing underwriter or underwriters and their counsel participate and to
receive information and documents pursuant to Section 5(a)(xv) hereof.
7. INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall
indemnify, to the full extent permitted by law, each Stockholder of Registrable
Securities, its officers, directors, managers, employees, partners, members and
agents, each Person who controls such Stockholder (within the meaning of the
Securities Act) and any investment adviser thereof, counsel or agent therefor,
against all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation and legal expenses) arising out of or based
upon any of the following statements, omissions or violations: (i) any untrue or
alleged untrue statement of a material fact contained in any registration
statement covering any Registrable Securities, any related prospectus or
preliminary prospectus, or any amendment or supplement thereto, (ii) any
omission or alleged omission to state in any thereof a material fact required to
be stated therein or necessary to make the statements therein (in the case of a
prospectus or prospectus supplement, in light of the circumstances under which
they were made) not misleading, or (iii) any violation or alleged violation by
the Company of the Securities Act, the Exchange Act, any state securities law or
any rule or regulation promulgated under the Securities Act, the Exchange Act or
any state securities law, except in each case the Company shall not be obligated
to indemnify a particular Stockholder insofar, but only insofar, as the same
arises out of or is based upon (i) an untrue statement or alleged untrue
statement of a material fact or an omission or alleged omission to state a
material fact in such registration statement, prospectus, preliminary
prospectus, amendment or supplement, as the case may be, made or omitted, as the
case may be, in reliance upon and in conformity with written information
furnished to the Company by such Stockholder expressly for use therein, or (ii)
a violation by such Stockholder of Section 5(b)(i) hereof. This indemnity is in
addition to any liability that the Company may otherwise have. The Company
12
shall, if requested by the managing underwriter or underwriters of such
offering, also indemnify any underwriters of the Registrable Securities, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution and their officers, directors and managers and
each Person who controls such underwriters or other Persons (within the meaning
of the Securities Act) to the same extent as provided above with respect to the
indemnification of Stockholders and other specified Persons.
(b) INDEMNIFICATION BY STOCKHOLDERS OF REGISTRABLE
SECURITIES. In connection with any registration statement covering Registrable
Securities, each Stockholder (severally, as to itself only, and not jointly with
any other Stockholder) any of whose Registrable Securities are covered thereby
shall furnish to the Company in writing such information and affidavits with
respect to such Stockholder as the Company reasonably requests for use in
connection with such registration statement, any related prospectus or
preliminary prospectus, or any amendment or supplement thereto, and shall
indemnify, to the full extent permitted by law, the Company, the Company's
directors, officers, employees and agents, each Person who controls the Company
(within the meaning of the Securities Act) and any investment adviser thereof or
agent therefor, against all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation and legal expenses) arising out of
or based upon (i) any untrue or alleged untrue statement of a material fact
contained in any registration statement covering any Registrable Securities, any
related prospectus or preliminary prospectus, or any amendment or supplement
thereto, or any omission or alleged omission to state in any thereof a material
fact required to be stated therein or necessary to make the statements therein
(in the case of a prospectus or prospectus supplement, in light of the
circumstances under which they were made) not misleading, in each case to the
extent, but only to the extent, that the same arises out of or is based upon an
untrue statement or alleged untrue statement of a material fact or an omission
or alleged omission to state a material fact in such registration statement or
in such related prospectus, preliminary prospectus, amendment or supplement, as
the case may be, made or omitted, as the case may be, in reliance upon and in
conformity with written information furnished to the Company by such Stockholder
expressly for use therein, or (ii) a violation by such Stockholder of Section
5(b)(i) hereof; provided, however, that in no event shall the liability of any
Stockholder for indemnification under this Section 7(b) exceed the net proceeds
received by such Stockholder from the sale of Registrable Securities under the
applicable registration statement and the Stockholder shall not indemnify for
any settlement made without the consent of such Stockholder, which consent shall
not be unreasonably withheld. This indemnity is in addition to any liability
that a Stockholder may otherwise have. Each Stockholder participating in an
offering of Registrable Securities shall, if requested by the managing
underwriter or underwriters of such offering, also (severally, as to itself
only, and not jointly with any other Stockholder) indemnify any underwriters of
such Registrable Securities, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution of such
Registrable Securities and their officers and directors and each Person who
controls such underwriters or other Persons (within the meaning of the
Securities Act) to the same extent as provided above with respect to the
indemnification of the Company and other specified Persons.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person
entitled to indemnification under this Section 7 agrees to give prompt written
notice to the indemnifying party after the receipt by such Person of any written
notice of the commencement of any action,
13
suit, proceeding or investigation or threat thereof made in writing for which
such Person will claim indemnification or contribution pursuant to this
Agreement and, unless in the reasonable judgment of such indemnified party a
conflict of interest may exist between such indemnified party and the
indemnifying party with respect to such claim, permit the indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to such
indemnified party. If the indemnifying party is not entitled to, or elects not
to, assume the defense of a claim, it shall not be obligated to pay the
reasonable fees and expenses of more than one counsel with respect to such
claim, unless in the reasonable judgment of counsel to such indemnified party,
expressed in a writing delivered to the indemnifying party, a conflict of
interest may exist between such indemnified party and any other indemnified
party with respect to such claim, in which event the indemnifying party shall be
obligated to pay the reasonable fees and expenses of such additional counsel or
counsels (which shall be limited to one counsel per indemnified party treating
as one each Stockholder and any of its officers and directors and each Person
who controls such Stockholder). The indemnifying party shall not be subject to
any liability for any settlement made without its consent, which consent shall
not be unreasonably withheld. The failure of any indemnified party to notify an
indemnifying party within a reasonable time of the commencement of any such
action, shall relieve such indemnifying party of liability to the indemnified
party under this Section 7 only to the extent that such failure to give notice
shall materially prejudice the indemnifying party in the defense of any such
claim or any such litigation, but the omission so to notify the indemnifying
party will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 7.
(d) CONTRIBUTION.
(i) If the indemnification provided for in this
Section 7 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
that resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations; provided, however, that in no
event shall the liability of any Stockholder for contribution under this Section
7(d) exceed the net proceeds received by such Stockholder from the sale of
Registrable Securities under the applicable registration statement. The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth above, any legal or
other fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
(ii) The parties hereto agree that it would not
be just and equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation or by any other
14
method of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. 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.
(iii) If indemnification is available under this
Section 7, the indemnifying parties shall indemnify each indemnified party to
the full extent provided in Section 7(a) and Section 7(b) hereof without regard
to the relative fault of said indemnifying party or indemnified party or any
other equitable consideration provided for in this Section 7(d).
8. RULE 144 REPORTING. With a view to making available the
benefits of Rule 144, the Company agrees at its cost and expense to use its best
efforts to:
(a) at all times the equity securities of the Company
shall be registered pursuant to the requirements of Section 12 of the Exchange
Act, make and keep public information available, as those terms are understood
within Rule 144;
(b) file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act; and
(c) furnish to each Stockholder of Registrable
Securities, forthwith upon request, a written statement by the Company as to its
compliance with the reporting requirements of such Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual and/or
quarterly report of the Company and such other information as may reasonably be
requested by a Stockholder to permit such Stockholder to avail itself of any
rule or regulation of the Commission that permits the selling of the Registrable
Securities without registration under the Securities Act.
9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
No Person may participate in any underwritten registration
hereunder unless such Person (a) agrees to sell such Person's securities on the
basis provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements, (b) timely completes, executes and
delivers all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (c) agrees to pay such Person's pro rata portion
of all underwriting discounts and commissions and the fees and expenses of such
Person's counsel (other than Stockholders' Counsel up to the amount specified in
Section 6).
10. COOPERATION WITH THE COMPANY.
Each Stockholder by the acceptance of Registrable Securities
agrees to use its reasonable best efforts to cooperate with the Company in all
reasonable respects in connection with the preparation and filing of
registration statements hereunder in which such Registrable Securities are
included or requested to be included.
15
11. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company shall not
hereafter enter into any agreement with respect to any of its securities that
contains provisions more favorable to the Stockholders thereof than the
provisions contained in this Agreement (including, without limitation, granting
to such Stockholders rights to register securities which have priority over the
rights of the Stockholders under this Agreement) without providing for the
granting of comparable rights to the Stockholders in this Agreement or that
contains provisions that conflict with the provisions hereof.
(b) REMEDIES. Each holder of Registrable Securities, in
addition to being entitled to exercise all rights in an action at law, including
recovery of damages, shall be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(c) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless signed by the Company and the Stockholders of a majority
of the securities then constituting Registrable Securities.
(d) NOTICES. All notices, requests, waivers, releases,
consents, and other communications required or permitted by this Agreement
(collectively, "Notices") shall be in writing. Notices shall be deemed
sufficiently given for all purposes under this Agreement when delivered in
person, when dispatched (upon written confirmation of receipt) by electronic
facsimile transmission or (upon written confirmation of receipt), when
dispatched by a nationally recognized overnight courier service, or three
Business Days after being deposited in the mail, postage prepaid, if mailed. All
Notices shall be delivered as follows: if to a Stockholder of Registrable
Securities, at the address indicated on Company's register relating to such
securities or at such other address as such Stockholder may have furnished to
the Company in writing and if to the Company, at: Brainworks Ventures, Inc.,
0000 Xxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000, Attention: President, with
a copy to G. Xxxxxxx Xxxxx, Esq., Powell, Goldstein, Xxxxxx & Xxxxxx LLP, 16th
Floor, 000 Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx, Xxxxxxx 00000, telephone (404)
000-0000, fax (000) 000-0000.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
Parties hereto, including any successors by merger to the Company. This
Agreement shall bind and apply to each Successor Entity as if it is the Company
hereunder. Stockholders may transfer their rights hereunder to any transferee of
Registrable Securities who agree in writing to become bound by the terms of this
Agreement.
(f) COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the Parties hereto in separate counterparts, each
of which when so executed
16
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(g) HEADINGS; CONSTRUCTION. The headings in this
Agreement are for convenience of reference only and shall not limit or otherwise
affect the meaning hereof. Unless the context otherwise requires, all references
to Sections are to Sections of this Agreement, "or" is inclusively disjunctive,
and words in the singular include the plural and vice versa. In computing any
period of time specified in this Agreement, the date of the act or event from
which such period of time is to be measured shall be included, any such period
shall expire at 5:00 p.m., Atlanta, Georgia time, on the last day of such
period, and any such period denominated in months shall expire on the date in
the last month of such period that has the same numerical designation as the
date of the act or event from which such period is to be measured; provided,
however, that if there is no date in the last month of such period that has the
same numerical designation as the date of such act or event, such period shall
expire on the last day of the last month of such period.
(h) GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Delaware,
without regard to the principles of conflicts of laws thereof.
(i) SEVERABILITY. If one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect, for any reason, the validity,
legality and enforceability of the remaining provisions contained herein shall
not be in any way affected or impaired thereby, and the provision held to be
invalid, illegal or unenforceable shall be reformed to the minimum extent
necessary, and in a manner as consistent with the purposes thereof as is
practicable, so as to render it valid, legal and enforceable, it being intended
that all of the rights and privileges of the Stockholders hereunder shall be
enforceable to the fullest extent permitted by law.
(j) AGREEMENT. This Agreement is intended by the Company
and the Stockholders to be a final expression thereof and is intended to be a
complete and exclusive statement of the agreement and understanding of the
Company and the Stockholders in respect of the subject matter contained herein.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings among the Company and any Stockholders with
respect to such subject matter.
17
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first above written.
BRAINWORKS VENTURES, INC.
By:______________________________
Name:________________________
Title:_______________________
STOCKHOLDERS
SERCAP HOLDINGS, LLC
By:______________________________
Name:________________________
Title:_______________________
_________________________________
Xxxxxx Xxxxxxxx
_________________________________
Xxxxxxx Xxxxxx
18
SCHEDULE 1
Number of shares of Number of shares of
Converting Preferred Common Stock of
Stock of AssuranceAmerica Total Shares of
AssuranceAmerica Corporation Held Brainworks
Name of Corporation Held on Immediately Prior to Ventures, Inc.
Stockholder Date of Agreement Merger Common Stock
----------- ----------------- ------ ------------
Sercap Holdings, LLC 23,045,383 19,344,617 42,390,000
Xxxxxx Xxxxxxxx 168,532 141,468 310,000
Xxxxxxx Xxxxxx 27,183 22,817 50,000
19
