Exhibit 10.2
PLACEMENT AGENCY AGREEMENT
This Placement Agency Agreement (this "Agreement") is made and entered
into as of September 15, 2006 (the "Effective Date"), by and between One IP
Voice, Inc., a Delaware corporation (the "Company"), and Stonegate Securities,
Inc., a Texas corporation ("Stonegate").
WHEREAS, the Company is in the process of raising a bridge financing of
$1-$3 million dollars with X.X. Xxxxx Securities, Inc. ("X.X. Xxxxx") as
placement agent ("Bridge Loan Financing") on or before September 22, 2006
("Bridge Loan Date") to provide working capital for the Company through November
2006, and
WHEREAS, a condition of the Bridge Loan Financing, the Company must engage
a nationally recognized securities firm to market a follow-on financing of at
least $10 million with institutional investors, and.
WHEREAS, the Stonegate is a nationally recognized broker dealer with
expertise in raising private placement funds from institutional investors and
WHEREAS, the Company desires to retain Stonegate as its placement agent,
and Stonegate is willing to act in such capacity, in each case subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and Stonegate (each a "Party" and collectively,
the "Parties") hereby agree as follows:
1. RETENTION OF STONEGATE; SCOPE OF SERVICES.
(a) Subject to the terms and conditions set forth herein, the Company
hereby retains Stonegate to act as the placement agent to the
Company during the Contract Period (as defined in Section 2 below),
and Stonegate hereby agrees to be so retained.
(b) During the Exclusivity Period (as defined in Section 2(a) below), as
the exclusive placement agent to the Company, Stonegate will have
the exclusive right to identify for the Company prospective
purchasers (collectively, the "Purchasers" and each individually, a
"Purchaser") in one or more placements (each, a "Placement" and
collectively, the "Placements") of debt and/or equity securities to
be issued by the Company, the type and dollar amount being as
mutually agreed to by the Parties (the "Securities"). During the
period of exclusivity Stonegate shall be the Company's sole and only
placement agent as to Securities. To cover certain common clients
and any investments made by current investors in the Company
("Series A Holders"), Stonegate will enter into a separate agreement
with X. X. Xxxxx with regard to commissions payable in the event
X.X. Xxxxx introduces its clients to Stonegate who subsequently
invest or any Series A Holder invests.
(c) After the Exclusivity Period, as the non-exclusive placement agent
to the Company, Stonegate will have the non-exclusive right during
the Contract Period to identify for
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the Company prospective Purchasers in one or more Placements of
Securities, the type and dollar amount being as mutually agreed to
by the Parties.
(d) Terms of the Placements shall be as set forth in subscription
documents, including any stock purchase or subscription agreement,
escrow agreement, registration rights agreement, warrant agreement
and/or other documents to be executed and delivered in connection
with each Placement (collectively, the "Subscription Documents").
The Placements are intended to be exempt from the registration
requirements of the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to Regulation D ("Regulation D") of the
rules and regulations of the Securities and Exchange Commission (the
"SEC") promulgated under the Securities Act.
(e) Stonegate will act on a best efforts basis and will have no
obligation to purchase any of the Securities offered in any
Placement. During the Contract Period, Stonegate shall have the
right to arrange for all sales of Securities in the Placements,
including without limitation the exclusive right to identify
potential buyers for the Securities. All sales of Securities in the
Placements shall be subject to the approval of the Company, which
approval may be withheld in the Company's sole discretion.
(f) The Company shall keep confidential this Agreement and the terms of
this Agreement, as well as all exhibits and attachments hereto, if
any. Additionally, the Company shall keep confidential all
information and documents provided to the Company by Stonegate,
including, but not limited to, the identity of any potential
investor, and the contents of any term sheet, solicitation, investor
list, investor indication of interest, road show list, and any
similar document.
(g) The Company shall notify Stonegate of any solicitations the Company
receives from a third party in regard to prospective Purchasers or
prospective Placements during the Exclusivity Period (the
"Exclusivity Period Contacts"). The foregoing applies only in the
event the solicitation contains proposed or possible terms of a
potential agreement. Additionally, for a period of one (1) year
after the end of the Contract Period, in the event that the Company
enters into any agreement, transaction or arrangement with any
Exclusivity Period Contact, the Company shall notify Stonegate in
writing of the agreement, transaction or arrangement, and pay
Stonegate a fee equal to the Agency Fee plus all other compensation
under Section 6 of this Agreement for securities of the Company sold
to the Exclusivity Period Contacts. The foregoing shall apply to all
Exclusivity Period Contacts, regardless as to when the agreement,
transaction or arrangement is ultimately consummated and regardless
as to whether the same occurs during or within one (1) year after
the Contract Period.
(h) The terms and provisions of Sections 1(f) and 1(g) specifically
shall survive the Contract Period.
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2. CONTRACT PERIOD AND TERMINATION.
(a) Stonegate shall act as the Company's exclusive placement agent under
this Agreement for a period commencing on the Bridge Loan Date and
continuing for a period of ninety (90) days (the "Exclusivity
Period"). Prior to the Exclusivity Period and thereafter, Stonegate
shall act as the Company's non-exclusive placement agent under this
Agreement continuing until terminated by either Party upon 10 days
notice to the other Party (the "Contract Period"). Provided,
however, that the Company shall not be allowed to terminate this
Agreement during the period that Stonegate is the exclusive
placement agent.
(b) Upon termination, neither party will have any further obligation
under this Agreement, except as provided in Sections 5, 6, 7, 8, 9
and 10 hereof.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The representations and warranties of the Company made to the Purchasers
as set forth in the Subscription Documents are hereby incorporated by
reference as of the date of consummation of the sale of the Securities
(the "Closing") and all such representations and warranties are hereby
deemed made by the Company directly to Stonegate as though set forth in
full herein. The company represents and warrants that it has full power
and authority to enter into this Agreement and to perform its obligations
hereunder. This Agreement is enforceable against the Company in accordance
with its terms, subject to applicable laws governing bankruptcy,
insolvency and creditors' rights generally. The Agreement does not
conflict with, violate, cause a default, right of termination, or
acceleration (whether through the passage of time or otherwise) under any
contract, agreement, or understanding binding upon the Company or any
subsidiary of the Company.
4. COVENANTS OF THE COMPANY.
The Company covenants and agrees as follows:
(a) Neither the Company nor any affiliate of the Company (as defined in
Rule 501(b) of Regulation D) will sell, offer for sale, or solicit
offers to buy, or otherwise negotiate in respect of any security (as
defined in the Securities Act) of the Company which will be
integrated with the sale of the Securities and cause the Placement
to be a deemed a public offering requiring registration under the
Securities Act.
(b) Any and all filings and documents required to be filed in connection
with or as a result of the Placements pursuant to federal and state
securities laws are the responsibility of the Company and will be
filed by the Company.
(c) Any press release to be issued by the Company announcing or
referring to any Placement in which Stonegate serves as the
placement agent shall be subject to the prior review of Stonegate,
and each such press release shall, at the request of Stonegate,
identify Stonegate as the placement agent. Stonegate shall be
permitted to publish a tombstone or similar advertisement upon
completion of each Placement
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identifying itself as the Company's placement agent with respect
thereto. This Agreement shall not be filed publicly by the Company
without the prior written consent of Stonegate, unless required by
applicable law or regulation.
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5. FURNISHING OF COMPANY INFORMATION; CONFIDENTIALITY.
(a) In connection with Stonegate's activities hereunder on the Company's
behalf, the Company shall furnish Stonegate with all reasonable
information concerning the Company and its operations that Stonegate
deems necessary or appropriate (the "Company Information") and shall
provide Stonegate with reasonable access to the Company's books,
records, officers, directors, employees, accountants and counsel.
The Company acknowledges and agrees that, in rendering its services
hereunder, Stonegate will be using and relying upon the Company
Information without independent verification thereof or independent
appraisal of any of the Company's assets and may, in its sole
discretion, use additional information contained in public reports
or other information furnished by the Company or third parties.
(b) Stonegate agrees that the Company Information will be used solely
for the purpose of performing its services hereunder. Subject to the
limitations set forth in subsection (c) below, Stonegate will keep
the Company Information provided hereunder confidential and will not
disclose such Company Information or any portion thereof, except (i)
to a third party contacted by Stonegate on behalf of, and with the
prior approval of, the Company pursuant hereto who has agreed to be
bound by a confidentiality agreement satisfactory in form and
substance to the Company, or (ii) to any other person for which the
Company's consent to disclose such Company Information has been
obtained.
(c) Stonegate's confidentiality obligations under this Agreement shall
not apply to any portion of the Company Information which (i) at the
time of disclosure to Stonegate or thereafter is generally available
to and known by the public (other than as a result of a disclosure
directly or indirectly by Stonegate in violation of this Agreement);
(ii) was available to Stonegate on a non-confidential basis from a
source other than the Company, provided that such source is not and
was not bound by a confidentiality agreement with the Company; (iii)
has been independently acquired or developed by Stonegate without
violating any of its obligations under this Agreement; or (iv) the
disclosure of which is legally compelled (whether by deposition,
interrogatory, request for documents, subpoena, civil or
administrative investigative demand or other similar process). In
the event that Stonegate becomes legally compelled to disclose any
of the Company Information, Stonegate shall provide the Company with
prompt prior written notice of such requirement so that the Company
may seek a protective order or other appropriate remedy and/or waive
compliance with the terms of this Agreement.
(d) The obligations of the Parties under this Section 5 shall survive
the termination of this Agreement for 12 months.
6. FEES AND EXPENSES.
(a) As compensation for services rendered by Stonegate in connection
with the Placements, the Company agrees to pay Stonegate a fee (the
"Agency Fee") of eight percent (8%) of the gross proceeds from the
sale of Securities in the Placements. However, in the event that any
Series A holder exercises its right of first refusal and
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acquires Securities in the Placements then Stonegate will receive a
fee of six percent (6%) of the gross proceeds from the sale of
Securities in the Placements to any existing Series A Holder. The
Agency Fee shall be paid immediately upon the closing of each sale
of Securities by the Company.
(b) In the event that any Placement includes warrants that are
subsequently exercised, any sums received by the Company as a result
of such exercise shall be included in and added to the gross
proceeds from the sale of Securities in the Placements. Upon the
exercise of any such warrant, regardless as to the timing of same,
the Company shall immediately notify Stonegate of the exercise and
shall pay to Stonegate all fees, including the above Agency Fee,
associated with the exercise of the warrants.
(c) In order to compensate Stonegate for its initial due diligence
efforts, the Company shall deliver to Stonegate (or Stonegate's
designee) 100,000 shares of fully paid non-assessable shares of
common stock of the Company (the "Shares"), such shares to vest as
follows: (i) 50,000 of such shares to vest immediately upon the
execution of this Agreement, (ii) 50,000 of such shares to vest when
Stonegate and the Company mutually agree to market the Company and
Stonegate makes the first introduction of Company to a prospective
Purchaser, either by a meeting or teleconference; but in any event
the Shares shall automatically vest upon the closing of a Placement.
The Shares will be issued pursuant to an exemption from the
registration requirements of the Securities Act of 1933, as amended.
The Shares will be subject to the registration rights provisions set
forth on Appendix I hereto. Under any circumstance, the shares shall
have piggy-back registration rights and be transferable. The Company
will issue the Shares to such affiliates of Stonegate and in such
denominations as will be designated by Stonegate.
(d) The Company shall also promptly reimburse Stonegate for all
reasonable out-of-pocket expenses incurred by Stonegate and its
directors, officers and employees in connection with the performance
of Stonegate's services under this Agreement. For these purposes,
"out-of-pocket expenses" shall include, but not be limited to,
attorneys' fees and costs, telephone conference charges, courier,
mail, supplies, travel, lodging, transportation, and similar
expenses.
(e) Upon closing of the Placement, the Company agrees to issue to
Stonegate a Securities Purchase Warrant (the "Representative's
Warrant") entitling the holder(s) thereof to purchase an amount of
Securities equal to ten percent (10%) of the total number of
Securities sold in the Placement for a period of five (5) years at
an exercise price per share equal to the price at which the
Securities are sold to Purchasers. The Representative's Warrant
shall otherwise be substantially in the form of Exhibit A attached
hereto. Under any circumstance, the Representative Warrant must
provide for cashless exercise, transferability, piggy-back
registration rights, and adjustments to warrant price and number of
shares subject to warrant.
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(f) The obligations of the Parties under this Section 6 shall survive
the termination of this Agreement for any reason.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold Stonegate harmless from and
against any and all losses, claims, damages or liabilities (or
actions, including securityholder actions, in respect thereof)
related to or arising out of Stonegate's engagement hereunder or its
role in connection herewith, and will reimburse Stonegate for all
reasonable expenses (including reasonable costs, expenses, awards
and counsel fees and/or judgments) as they are incurred by Stonegate
in connection with investigating, preparing for or defending any
such action or claim, whether or not in connection with pending or
threatened litigation in which Stonegate is a party. The Company
will not, however, be responsible for any claims, liabilities,
losses, damages or expenses which are finally judicially determined
to have resulted primarily from the bad faith, gross negligence or
willful misconduct of Stonegate. The Company also agrees that
Stonegate shall not have any liability to the Company for or in
connection with such engagement, except for any such liability for
losses, claims, damages, liabilities or expenses incurred by the
Company that result primarily from the bad faith, gross negligence
or willful misconduct of Stonegate. In the event that the foregoing
indemnity is unavailable (except by reason of the bad faith or gross
negligence of Stonegate), then the Company shall contribute to
amounts paid or payable by Stonegate in respect of its losses,
claims, damages and liabilities in such proportion as appropriately
reflects the relative benefits received by, and fault of, the
Company and Stonegate in connection with the matters as to which
such losses, claims, damages or liabilities relate, and other
equitable considerations. The foregoing shall be in addition to any
rights that Stonegate may have at common law or otherwise and shall
extend upon the same terms to and inure to the benefit of any
director, officer, employee, agent or controlling person of
Stonegate. The Company hereby consents to personal jurisdiction,
service and venue in any court in which any claim which is subject
to this agreement is brought against Stonegate or any other person
entitled to indemnification or contribution under this subsection
(a).
(b) Stonegate agrees to indemnify and hold the Company harmless from and
against any and all losses, claims, damages or liabilities (or
actions, including securityholder actions, in respect thereof) which
are finally judicially determined to have resulted primarily from
the bad faith, gross negligence or willful misconduct of Stonegate,
and will reimburse the Company for all reasonable expenses
(including reasonable costs, expenses, awards and counsel fees
and/or judgments) as they are incurred by the Company in connection
with investigating, preparing for or defending any such action or
claim, whether or not in connection with pending or threatened
litigation in which the Company is a party. In the event that the
foregoing indemnity is unavailable, then Stonegate shall contribute
to amounts paid or payable by the Company in respect of its losses,
claims, damages and liabilities in such proportion as appropriately
reflects the relative benefits received by, and fault of, the
Company and Stonegate in connection with the matters as to which
such losses, claims,
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damages or liabilities relate, and other equitable considerations.
The foregoing shall be in addition to any rights that the Company
may have at common law or otherwise and shall extend upon the same
terms to and inure to the benefit of any director, officer,
employee, agent or controlling person of the Company. Stonegate
hereby consents to personal jurisdiction, service and venue in any
court in which any claim, which is subject to this agreement, is
brought against the Company or any other person entitled to
indemnification or contribution under this subsection (b).
(c) The obligations of the Parties under this Section 7 shall survive
the termination of this Agreement.
8. NON-CIRCUMVENTION.
The Company hereby agrees that, for a period of one year from the end of
the Contract Period or other termination of this Agreement, the Company
will not enter into any agreement, transaction or arrangement with any of
the institutions (including their agents, principals and affiliates and
the accounts and funds which they manage or advise) which Stonegate has
introduced, directly or indirectly, to the Company pursuant to a direct
meeting, or telephone call as prospective purchasers of the Securities in
the Placements (collectively, the "Stonegate Contacts"), regardless of
whether a transaction is consummated with such prospective purchasers,
unless the Company notifies Stonegate in writing of the agreement,
transaction or arrangement, and pays Stonegate a fee equal to the Agency
Fee plus all other compensation under Section 6 of this Agreement for
securities of the Company sold to Stonegate Contacts.
9. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAWS
PROVISIONS THEREOF.
10. ARBITRATION.
Stonegate and the Company will attempt to settle any claim or controversy
arising out of this Agreement through consultation and negotiation in good
faith and a spirit of mutual cooperation. Any dispute which the parties
cannot resolve may then be submitted by either party to binding
arbitration in Dallas, Texas under the rules of the American Arbitration
Association for resolution. Nothing in this paragraph will prevent either
party from resorting to judicial proceedings if (a) good faith efforts to
resolve the dispute under these procedures have been unsuccessful or (b)
interim relief from a court is necessary to prevent serious and
irreparable injury.
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11. NO WAIVER.
The failure or neglect of any party hereto to insist, in any one or more
instances, upon the strict performance of any of the terms or conditions
of this Agreement, or waiver by any party of strict performance of any of
the terms or conditions of this Agreement, shall not be construed as a
waiver or relinquishment in the future of such term or condition, but the
same shall continue in full force and effect.
12. SUCCESSORS AND ASSIGNS.
The benefits of this Agreement shall inure to the benefit of the Parties,
their respective successors, assigns and representatives, and the
obligations and liabilities assumed in this Agreement by the Parties shall
be binding upon their respective successors and assigns. This Agreement
may not be assigned by either Party without the express written consent of
the other Party, which consent shall not be unreasonably withheld.
13. NOTICES.
All notices and other communications required or permitted to be given
under this Agreement shall be in writing and shall be delivered personally
or sent by certified mail, return receipt requested, recognized overnight
delivery service, or facsimile (with copy by first class mail) as follows:
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If to the Company:
-----------------
One IP Voice, Inc.
00 Xxxxxxxx Xxxx Xxxxxx
Xxxx Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxx-Xxxx Xxxxxxxxxxx , CEO
If to Stonegate:
---------------
Stonegate Securities, Inc.
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxxx, President
Either Party may change its address or facsimile number set forth above by
giving the other Party notice of such change in accordance with the
provisions of this Section 13. A notice shall be deemed given (a) if by
personal delivery, on the date of such delivery, (b) if by certified mail,
on the date shown on the applicable return receipt, (c) if by overnight
delivery service, on the day after the date delivered to the service, or
(d) if by facsimile, on the date of transmission.
14. NATURE OF RELATIONSHIP.
The Parties intend that Stonegate's relationship to the Company and the
relationship of each director, officer, employee or agent of Stonegate to
the Company shall be that of an independent contractor and not as an
employee of the Company or an affiliate thereof. Nothing contained in this
Agreement shall constitute or be construed to be or create a partnership
or joint venture between Stonegate and the Company or their respective
successors or assigns. Neither Stonegate nor any director, officer,
employee or agent of Stonegate shall be considered to be an employee of
the Company by virtue of the services provided hereunder.
15. MISCELLANEOUS
Stonegate's obligations under this Agreement are subject to the following
general conditions:
(a) All relevant terms, conditions, and circumstances relating to the
Placements will be reasonably satisfactory to Stonegate and its
counsel.
(b) Stonegate reserves the right to solicit the assistance of outside
dealers ("Dealers") to assist in the offer and sale of the
Placements; provided, however, that any such Dealers agree in
writing to be bound by the terms of the applicable Placement. It is
understood that Stonegate, in its sole discretion, shall be entitled
to pay over to any such Dealers any portion of the compensation
received by Stonegate hereunder. The
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Company shall have no financial liability for any fees or expenses
of any such Dealers.
16. CAPTIONS.
The Section titles herein are for reference purposes only and do not
control or affect the meaning or interpretation of any term or provision
hereof.
17. AMENDMENTS.
No alteration, amendment, change or addition hereto shall be binding or
effective unless the same is set forth in a writing signed by a duly
authorized representative of each Party.
18. PARTIAL INVALIDITY.
If it is finally determined that any term or provision hereof is invalid
or unenforceable, (a) the remaining terms and provisions hereof shall be
unimpaired, and (b) the invalid or unenforceable term or provision shall
be replaced by a term or provision that is valid and enforceable and that
comes as close as possible to expressing the intention of the invalid or
unenforceable term or provision.
19. ENTIRE AGREEMENT.
This Agreement embodies the entire agreement and understanding of the
Parties and supersedes any and all prior agreements, arrangements and
understandings relating to the matters provided for herein.
20. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be an original, but all of which together shall be considered one
and the same agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, this Agreement has been executed as of the date first
written above by duly authorized representatives of the Company and Stonegate.
ONE IP VOICE, INC.
By: /s/ Xxxx-Xxxx Xxxxxxxxxxx
-------------------------
Title: C.E.O.
STONEGATE SECURITIES, INC.
By: /s/ Xxxxx Xxxxxxxx
------------------
Title: President
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EXHIBIT A
---------
Form of Representative's Warrant
[See attached]
A-1
THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
SECURITIES LAWS, HAVE BEEN TAKEN FOR INVESTMENT, AND MAY NOT BE SOLD OR
TRANSFERRED OR OFFERED FOR SALE OR TRANSFER UNLESS A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS WITH RESPECT TO
SUCH SECURITIES IS THEN IN EFFECT, OR IN THE OPINION OF COUNSEL (WHICH OPINION
IS REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES), SUCH REGISTRATION
UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS IS NOT REQUIRED.
Date: ______________ Warrant to Purchase
***______***
Shares
ONE IP VOICE, INC.
(Incorporated under the laws of the State of Delaware)
REPRESENTATIVE'S WARRANT FOR THE PURCHASE OF SHARES OF
COMMON STOCK
Warrant Price: [price for the Securities sold in the placement]
$____ per share, subject to adjustment as provided below.
THIS IS TO CERTIFY that, for value received, Stonegate Securities, Inc.
("Stonegate") and its assigns (collectively, the "Holder"), is entitled to
purchase, subject to the terms and conditions hereinafter set forth, up to
***______*** shares of the common stock, par value $________ per share ("Common
Stock"), of One IP Voice, Inc., a Delaware corporation (the "Company"), and to
receive certificate(s) for the Common Stock so purchased.
1. Exercise Period and Vesting. The exercise period is the period
beginning on the date of this Warrant (the "Issuance Date") and ending at 5:00
p.m., Dallas, Texas time, five years from the Issuance Date (the "Exercise
Period"). This Warrant is vested in full as of the Issuance Date and is
immediately exercisable by Holder. This Warrant will terminate automatically and
immediately upon the expiration of the Exercise Period.
2. Exercise of Warrant; Cashless Exercise. This Warrant may be
exercised, in whole or in part, at any time and from time to time during the
Exercise Period. Such exercise shall be accomplished by tender to the Company of
the purchase price set forth above as the warrant price (the "Warrant Price"),
either (a) in cash, by wire transfer or by certified check or bank cashier's
check, payable to the order of the Company, or (b) by surrendering such number
of shares of Common Stock received upon exercise of this Warrant with a current
market price equal to the Warrant Price (a "Cashless Exercise"), together with
presentation and surrender to the Company of
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this Warrant with an executed subscription in substantially the form attached
hereto as Exhibit A (the "Subscription"). Upon receipt of the foregoing, the
Company will deliver to the Holder, as promptly as possible, a certificate or
certificates representing the shares of Common Stock so purchased, registered in
the name of the Holder or its transferee (as permitted under Section 3 below).
With respect to any exercise of this Warrant, the Holder will for all purposes
be deemed to have become the holder of record of the number of shares of Common
Stock purchased hereunder on the date this Warrant, a properly executed
Subscription and payment of the Warrant Price is received by the Company (the
"Exercise Date"), irrespective of the date of delivery of the certificate
evidencing such shares, except that, if the date of such receipt is a date on
which the stock transfer books of the Company are closed, such person will be
deemed to have become the holder of such shares at the close of business on the
next succeeding date on which the stock transfer books are open. Fractional
shares of Common Stock will not be issued upon the exercise of this Warrant. In
lieu of any fractional shares that would have been issued but for the
immediately preceding sentence, the Holder will be entitled to receive cash
equal to the current market price of such fraction of a share of Common Stock on
the trading day immediately preceding the Exercise Date. In the event this
Warrant is exercised in part, the Company shall issue a new Warrant to the
Holder covering the aggregate number of shares of Common Stock as to which this
Warrant remains exercisable for.
If the Holder elects to conduct a Cashless Exercise, the Company shall
cause to be delivered to the Holder a certificate or certificates representing
the number of shares of Common Stock computed using the following formula:
X = Y (A-B)
-----
A
Where:
X = the number of shares of Common Stock to be issued to Holder;
Y = the portion of the Warrant (in number of shares of Common
Stock) being exercised by Holder (at the date of such
calculation);
A = the fair market value of one share of Common Stock on the
Exercise Date (as calculated below); and
B = Warrant Price (as adjusted to the date of such calculation).
For purposes of the foregoing calculation, "fair market value of one share
of Common Stock on the Exercise Date" shall mean: (i) if the principal trading
market for such securities is a national or regional securities exchange, the
closing price on such exchange for the day immediately prior to such Exercise
Date; (ii) if sales prices for shares of Common Stock are reported by the Nasdaq
National Market System or Nasdaq Small Cap Market (or a similar system then in
use), the last reported sales price for the day immediately prior to such
Exercise Date; or (iii) if neither (i) nor (ii) above are applicable, and if bid
and ask prices for shares of Common Stock are reported in the over-the-counter
market by Nasdaq (or, if not so reported, by the National Quotation Bureau), the
average of the high bid and low ask prices so reported for the ten (10) trading
days immediately prior to such
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Exercise Date. Additionally, in the case of (i) or (ii) above, at the sole and
exclusive election of Stonegate, in any of the foregoing calculations of the
"fair market value of one share of Common Stock on the Exercise Date", Stonegate
may elect to use either: (a) the closing price or last reported sales price, as
the case may be, for the day immediately prior to the exercise date, OR (b) the
arithmetic mean average of the closing prices or last reported sales prices, as
the case may be, over the last ten (10) business days. Stonegate's election
shall be used in calculating "the fair market value of one share of Common Stock
on the Exercise Date" in the above calculation. Notwithstanding (i), (ii), and
(iii) above, if there is no reported closing price, last reported sales price,
or bid and ask prices, as the case may be, for the period in question, then the
current market price shall be determined as of the latest ten (10) day period
prior to such day for which such closing price, last reported sales price, or
bid and ask prices, as the case may be, are available, unless such securities
have not been traded on an exchange or in the over-the-counter market for 30 or
more days immediately prior to the day in question, in which case the current
market price shall be determined in good faith by, and reflected in a formal
resolution of, the Board of Directors of the Company. The Company acknowledges
and agrees that this Warrant was issued on the Issuance Date.
3. Transferability and Exchange.
(a) This Warrant, and the Common Stock issuable upon the exercise
hereof, may not be sold, transferred, pledged or hypothecated unless the
Company shall have been provided with an opinion of counsel, or other
evidence reasonably satisfactory to it, that such transfer is not in
violation of the Securities Act, and any applicable state securities laws.
Subject to the satisfaction of the aforesaid condition, this Warrant and
the underlying shares of Common Stock shall be transferable from time to
time by the Holder upon written notice to the Company. If this Warrant is
transferred, in whole or in part, the Company shall, upon surrender of
this Warrant to the Company, deliver to each transferee a Warrant
evidencing the rights of such transferee to purchase the number of shares
of Common Stock that such transferee is entitled to purchase pursuant to
such transfer. The Company may place a legend similar to the legend at the
top of this Warrant on any replacement Warrant and on each certificate
representing shares issuable upon exercise of this Warrant or any
replacement Warrants. Only a registered Holder may enforce the provisions
of this Warrant against the Company. A transferee of the original
registered Holder becomes a registered Holder only upon delivery to the
Company of the original Warrant and an original Assignment, substantially
in the form set forth in Exhibit B attached hereto.
(b) This Warrant is exchangeable upon its surrender by the Holder
to the Company for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of shares purchasable
hereunder, each of such new Warrants to represent the right to purchase
such number of shares as may be designated by the Holder at the time of
such surrender.
4. Adjustments to Warrant Price and Number of Shares Subject to
Warrant. The Warrant Price and the number of shares of Common Stock purchasable
upon the exercise of this Warrant are subject to adjustment from time to time
upon the occurrence of any of the events specified in this Section 4. For the
purpose of this Section 4, "Common Stock" means shares now or hereafter
authorized of any class of common stock of the Company and any other stock of
the Company, however designated, that has the right to participate in any
distribution of the assets or
3
earnings of the Company without limit as to per share amount (excluding, and
subject to any prior rights of, any class or series of preferred stock).
(a) In case the Company shall (i) pay a dividend or make a
distribution in shares of Common Stock or other securities, (ii)
subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares, or (iv) issue by reclassification of its shares
of Common Stock other securities of the Company, then the Warrant Price
in effect at the time of the record date for such dividend or on the
effective date of such subdivision, combination or reclassification,
and/or the number and kind of securities issuable on such date, shall be
proportionately adjusted so that the Holder of any Warrant thereafter
exercised shall be entitled to receive the aggregate number and kind of
shares of Common Stock (or such other securities other than Common Stock)
of the Company, at the same aggregate Warrant Price, that, if such
Warrant had been exercised immediately prior to such date, the Holder
would have owned upon such exercise and been entitled to receive by
virtue of such dividend, distribution, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any
event listed above shall occur.
(b) In case the Company shall fix a record date for the making of
a distribution to all holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in which
the Company is the surviving corporation) of cash, evidences of
indebtedness or assets, or subscription rights or warrants, the Warrant
Price to be in effect after such record date shall be determined by
multiplying the Warrant Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the current market
price per share of Common Stock on such record date, less the amount of
cash so to be distributed (or the fair market value (as determined in
good faith by, and reflected in a formal resolution of, the Board of
Directors of the Company) of the portion of the assets or evidences of
indebtedness so to be distributed, or of such subscription rights or
warrants, applicable to one share of Common Stock, and the denominator of
which shall be such current market price per share of Common Stock. Such
adjustment shall be made successively whenever such a record date is
fixed; and in the event that such distribution is not so made, the
Warrant Price shall again be adjusted to be the Warrant Price which would
then be in effect if such record date had not been fixed.
(c) For the purpose of any computation under any subsection of
this Section 4, the "current market price" per share of Common Stock on
any date shall be the per share price of the Common Stock on the trading
day immediately prior to the event requiring an adjustment hereunder and
shall be: (i) if the principal trading market for such securities is a
national or regional securities exchange, the closing price on such
exchange on such day; or (ii) if sales prices for shares of Common Stock
are reported by the Nasdaq National Market System or Small Cap Market
System (or a similar system then in use), the last reported sales price
so reported on such day; or (iii) if neither (i) nor (ii) above are
applicable, and if bid and ask prices for shares of Common Stock are
reported in the over-the-counter market by Nasdaq (or, if not so
reported, by the National Quotation Bureau), the average of the high bid
and low ask prices so reported on such day. Notwithstanding the
foregoing, if there is no reported closing price, last reported sales
price, or bid and ask prices, as the case may be, for the day in
question, then the current market price shall be determined as of the
latest date prior to such day for which such closing price, last reported
sales price, or bid and ask prices, as the case may be, are available,
unless such securities have not been traded on an exchange
4
or in the over-the-counter market for 30 or more days immediately prior to
the day in question, in which case the current market price shall be
determined in good faith by, and reflected in a formal resolution of, the
Board of Directors of the Company.
(d) Notwithstanding any provision herein to the contrary, no
adjustment in the Warrant Price shall be required unless such adjustment
would require an increase or decrease of at least 1% in the Warrant
Price; provided, however, that any adjustments which by reason of this
subsection (d) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 4 shall be made to the nearest cent or the nearest
one-hundredth of a share, as the case may be.
(e) In the event that at any time, as a result of an adjustment
made pursuant to subsection (a) above, the Holder of any Warrant
thereafter exercised shall become entitled to receive any shares of
capital stock of the Company other than shares of Common Stock,
thereafter the number of such other shares so receivable upon exercise of
any Warrant shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions with
respect to the shares of Common Stock contained in this Section 4, and
the other provisions of this Warrant shall apply on like terms to any
such other shares.
(f) If the Company merges or consolidates into or with another
corporation or entity, or if another corporation or entity merges into or
with the Company (excluding such a merger in which the Company is the
surviving or continuing corporation and which does not result in any
reclassification, conversion, exchange, or cancellation of the
outstanding shares of Common Stock), or if all or substantially all of
the assets or business of the Company are sold or transferred to another
corporation, entity, or person, then, as a condition to such
consolidation, merger, or sale (a "Transaction"), lawful and adequate
provision shall be made whereby the Holder shall have the right from and
after the Transaction to receive, upon exercise of this Warrant and upon
the terms and conditions specified herein and in lieu of the shares of
the Common Stock that would have been issuable if this Warrant had been
exercised immediately before the Transaction, such shares of stock,
securities, or assets as the Holder would have owned immediately after
the Transaction if the Holder had exercised this Warrant immediately
before the effective date of the Transaction.
5. Registration Rights. The Company hereby grants to Holder, with
respect to the shares of Common Stock underlying this Warrant, registration
rights identical to those that are granted to Purchasers in the Placement (as
such terms are defined in that certain Placement Agency Agreement, dated as of
September 15, 2006, by and between the Company and Stonegate); it being
specifically agreed and understood that the shares of Common Stock underlying
this Warrant will be included in any registration statement filed by the
Company which includes shares of Common Stock, or shares of Common Stock
underlying any securities, issued to Purchasers in the Placement.
6. Reservation of Shares. The Company agrees at all times to reserve
and hold available out of its authorized but unissued shares of Common Stock
the number of shares of Common Stock issuable upon the full exercise of this
Warrant. The Company further covenants and agrees that all shares of Common
Stock that may be delivered upon the exercise of this Warrant will, upon
delivery, be fully paid and nonassessable and free from all taxes, liens and
charges with respect to the purchase thereof hereunder.
5
7. Notices to Holder. Upon any adjustment of the Warrant Price (or
number of shares of Common Stock purchasable upon the exercise of this Warrant)
pursuant to Section 4, the Company shall promptly thereafter cause to be given
to the Holder written notice of such adjustment. Such notice shall include the
Warrant Price (and/or the number of shares of Common Stock purchasable upon the
exercise of this Warrant) after such adjustment, and shall set forth in
reasonable detail the Company's method of calculation and the facts upon which
such calculations were based. Where appropriate, such notice shall be given in
advance and included as a part of any notice required to be given under the
other provisions of this Section 7.
In the event of (a) any fixing by the Company of a record date with
respect to the holders of any class of securities of the Company for the
purpose of determining which of such holders are entitled to dividends or other
distributions, or any rights to subscribe for, purchase or otherwise acquire
any shares of capital stock of any class or any other securities or property,
or to receive any other right, (b) any capital reorganization of the Company,
or reclassification or recapitalization of the capital stock of the Company or
any transfer of all or substantially all of the assets or business of the
Company to, or consolidation or merger of the Company with or into, any other
entity or person, or (c) any voluntary or involuntary dissolution or winding up
of the Company, then and in each such event the Company will give the Holder a
written notice specifying, as the case may be (i) the record date for the
purpose of such dividend, distribution, or right, and stating the amount and
character of such dividend, distribution, or right; or (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, conveyance, dissolution, liquidation, or winding up is
to take place and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or such capital stock or securities receivable upon the
exercise of this Warrant) shall be entitled to exchange their shares of Common
Stock (or such other stock securities) for securities or other property
deliverable upon such event. Any such notice shall be given at least 10 days
prior to the earliest date therein specified.
8. No Rights as a Stockholder. This Warrant does not entitle the Holder
to any voting rights or other rights as a stockholder of the Company, nor to
any other rights whatsoever except the rights herein set forth.
9. Additional Covenants of the Company. For so long as the Common Stock
is listed for trading on any regional or national securities exchange or Nasdaq
(National Market or Small Cap System), the Company shall, upon issuance of any
shares for which this Warrant is exercisable, at its expense, promptly obtain
and maintain the listing of such shares. The Company shall also comply with the
reporting requirements of Sections 13 and 15(d) of the Exchange Act for so long
as and to the extent that such requirements apply to the Company.
The Company shall not, by amendment of its Articles of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant. Without limiting the generality of the foregoing, the Company (a) will
at all times reserve and keep available, solely for issuance and delivery upon
exercise of this Warrant, shares of Common Stock issuable from time to time
upon exercise of this Warrant, (b) will not increase the par value of any
shares of capital stock receivable upon exercise of this Warrant above the
amount payable therefor upon such exercise, and (c) will take all such actions
as may be necessary or
6
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable stock.
10. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Company, the Holder and their respective successors
and permitted assigns.
11. Notices. The Company agrees to maintain a ledger of the ownership of
this Warrant (the "Ledger"). Any notice hereunder shall be given by registered
or certified mail if to the Company, at its principal executive office and, if
to the Holder, to its address shown in the Ledger of the Company; provided,
however, that the Holder may at any time on three (3) days written notice to
the Company designate or substitute another address where notice is to be
given. Notice shall be deemed given and received after a certified or
registered letter, properly addressed with postage prepaid, is deposited in the
U.S. mail.
12. Severability. Every provision of this Warrant is intended to be
severable. If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the remainder of
this Warrant.
13. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Texas without giving effect to the
principles of choice of laws thereof.
14. Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Warrant, the prevailing party shall be entitled to recover
reasonable attorneys' fees in addition to its costs and expenses and any other
available remedy.
15. Entire Agreement. This Warrant (including the Exhibits attached
hereto) constitutes the entire understanding between the Company and the Holder
with respect to the subject matter hereof, and supersedes all prior
negotiations, discussions, agreements and understandings relating to such
subject matter.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer as of the date first set forth above.
ONE IP VOICE, INC.
By: ____________________________________
Title: _________________________________
7
Exhibit A
---------
SUBSCRIPTION FORM
(To be Executed by the Holder to Exercise the Rights To Purchase Common Stock
Evidenced by the Within Warrant)
The undersigned hereby irrevocably subscribes for _______ shares (the
"Stock") of the Common Stock of One IP Voice, Inc. (the "Company") pursuant to
and in accordance with the terms and conditions of the attached Warrant (the
"Warrant"), and hereby makes payment of $_______ therefor by [tendering cash,
wire transferring or delivering a certified check or bank cashier's check,
payable to the order of the Company] [surrendering _______ shares of Common
Stock received upon exercise of the Warrant, which shares have a current market
price equal to such payment as required in Section 2 of the Warrant]. The
undersigned requests that a certificate for the Stock be issued in the name of
the undersigned and be delivered to the undersigned at the address stated
below. If the Stock is not all of the shares purchasable pursuant to the
Warrant, the undersigned requests that a new Warrant of like tenor for the
balance of the remaining shares purchasable thereunder be delivered to the
undersigned at the address stated below.
In connection with the issuance of the Stock, I hereby represent to the
Company that I am acquiring the Stock for my own account for investment and not
with a view to, or for resale in connection with, a distribution of the shares
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
I understand that because the Stock has not been registered under the
Securities Act, I must hold such Stock indefinitely unless the Stock is
subsequently registered and qualified under the Securities Act or is exempt
from such registration and qualification. I shall make no transfer or
disposition of the Stock unless (a) such transfer or disposition can be made
without registration under the Securities Act by reason of a specific exemption
from such registration and such qualification, or (b) a registration statement
has been filed pursuant to the Securities Act and has been declared effective
with respect to such disposition. I agree that each certificate representing
the Stock delivered to me shall bear substantially the same as set forth on the
front page of the Warrant.
I agree that each certificate representing the Stock delivered to me
shall bear substantially the same legend as set forth on the front page of the
Warrant.
I further agree that the Company may place stop orders on the
certificates evidencing the Stock with the transfer agent, if any, to the same
effect as the above legend. The legend and stop transfer notice referred to
above shall be removed only upon my furnishing to the Company of an opinion of
counsel (reasonably satisfactory to the Company) to the effect that such legend
may be removed.
Date: _________________ Signed: ________________________________
Address: _______________________________
________________________________________
A-1
Exhibit B
---------
ASSIGNMENT
(To be Executed by the Holder to Effect Transfer of the Attached Warrant)
For Value Received __________________________ hereby sells, assigns and
transfers to _________________________ the Warrant attached hereto and the
rights represented thereby to purchase _________ shares of Common Stock in
accordance with the terms and conditions hereof, and does hereby irrevocably
constitute and appoint _________________________ as attorney to transfer such
Warrant on the books of the Company with full power of substitution.
Dated: ________________ Signed: ________________________________
Please print or typewrite Please insert Social Security
name and address of or other Tax Identification
assignee: Number of Assignee:
_____________________________ ________________________________________
_____________________________
_____________________________
2
APPENDIX I
----------
Registration Rights
1. Definitions.
(a) As used in this Appendix I, the following terms shall have the
meanings:
1. "Affiliate," of any specified Person means any other Person who
directly, or indirectly through one or more intermediaries, is in control of,
is controlled by, or is under common control with, such specified Person. For
purposes of this definition, control of a Person means the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such Person whether by contract, securities ownership or otherwise; and the
terms "controlling" and "controlled" have the respective meanings correlative
to the foregoing.
2. "Commission" means the Securities and Exchange Commission.
3. "Company" shall mean One IP Voice, Inc.
4. "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute.
5. "Holder" means Stonegate Securities, Inc. and any permitted
transferee or assignee of Registrable Securities who agrees to become bound by
all of the terms and provisions of this Appendix I.
6. "Person" means any individual, partnership, corporation, limited
liability company, joint stock company, association, trust, unincorporated
organization, or a government agency or political subdivision thereof.
7. "Placement" means any offering of securities of the Company pursuant
to which Holder serves as a placement agent or underwriter, whether on a best
efforts basis or otherwise.
8. "Prospectus" means the prospectus (including any preliminary
prospectus and/or any final prospectus filed pursuant to Rule 424(b) under the
Securities Act and any prospectus that discloses information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance on Rule 430A under the Securities Act) included in the Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by the Registration Statement and by all other amendments and
supplements to such prospectus, including all material incorporated by
reference in such prospectus and all documents filed after the date of such
prospectus by the Company under the Exchange Act and incorporated by reference
therein.
9. "Public Offering" means an offer registered with the Commission and
the appropriate state securities commissions by the Company of its Common Stock
and made pursuant to the Securities Act.
1
10. "Registrable Securities" means the shares of common stock issued to
Stonegate Securities, Inc. or its designated affiliates pursuant to the terms
of the Placement Agency Agreement; provided, however, a share of common stock
shall cease to be a Registrable Security for purposes of this Appendix I when
it no longer is a Restricted Security.
11. "Registration Statement" means a registration statement of the
Company filed on Form S-1 or Form S-3 under the Securities Act providing for
the registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities pursuant to Rule 415 under the
Securities Act, including the Prospectus contained therein and forming a part
thereof, any amendments to such registration statement and supplements to such
Prospectus, and all exhibits and other material incorporated by reference in
such registration statement and Prospectus. In the event that Form S-3 is
unavailable for such a registration, the Company shall use such other form as
is available for such a registration.
12. "Restricted Security" means any share of common stock except any
that (i) have been registered pursuant to an effective registration statement
under the Securities Act and sold in a manner contemplated by the prospectus
included in such registration statement, (ii) have been transferred in
compliance with the resale provisions of Rule 144 under the Securities Act (or
any successor provision thereto) or is transferable pursuant to paragraph (k)
of Rule 144 under the Securities Act (or any successor provision thereto), or
(iii) otherwise has been transferred and are not subject to transfer
restrictions under the Securities Act.
13. "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder, or any similar
successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Subscription Agreement.
2. Registration.
(a) Initial Registration Statement. The Company hereby grants to
Holder, with respect to the Registrable Securities, registration
rights identical to those granted to the purchasers in the
Placement and will include the Registrable Securities in any
registration statement filed for the purchasers in the Placement.
The Company agrees to keep such Registration Statement effective
until the earlier of: (i) the passage of two years from the
effective date of such Registration Statement; or (ii) the date on
which all Registrable Securities may be resold by the Holders by
reason of Rule 144(k) under the Securities Act or any other rule of
similar effect.
(b) Registration Default. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant
to Section 2(a) is not (i) filed with the Commission by the Filing
Deadline which shall be thirty days after the last Placement of
Registrable Securities ("Filing Deadline") , or (ii) declared
effective by the Commission within ninety (90) days after the
Filing Deadline ("Effectiveness Date"), then the Company shall make
the payments to the Holders of the Registrable Securities as
provided in the next sentence as liquidated damages and not as a
penalty ("Damages") . The amount to be paid by the Company to the
Holders shall be
2
determined as of each Computation Date (as defined below) and, as
applicable, the actual filing and effectiveness dates of the
Registration Statement, and such amount shall be equal to 2.5% (the
"Liquidated Damage Rate") of the Purchase Price (as defined in the
Subscription Agreement) for the period from the Effectiveness Date
to the first Computation Date, and for each 30-day period of any
subsequent Computation Dates thereafter, calculated on a pro rata
basis to the date on which the Registration Statement is filed with
(in the event of Effectiveness Date pursuant to clause (i) above)
or declared effective by (in the event of an Initial Date pursuant
to clause (ii) above) the Commission (the "Periodic Amount"). The
full Periodic Amount shall be paid by the Company to the Holders,
pro rata, by wire transfer of immediately available funds within
three days after each Computation Date and, as applicable, the
actual filing and effectiveness dates of the Registration
Statement. Not withstanding the foregoing, in the event that
Stonegate or any other broker-dealer has failed to obtain NASD
approval of the transaction from the NASD as set forth in Section 3
(q) below by the Effectiveness Date, then no Damages shall be
assessed against the Company.
As used in this Section 2(b), "Computation Date" means the date which is 60 days
after the Initial Date and, if the Registration Statement to be filed by the
Company pursuant to Section 2(a) has not theretofore been filed with the
Commission or declared effective by the Commission, as the case may be, each
date which is 60 days after the previous Computation Date until such
Registration Statement is so filed or declared effective, as the case may be.
Notwithstanding the above, if the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not filed with the Commission by the Filing Deadline, the Company
shall be in default of the terms of this Appendix I, and the Holders shall be
entitled to damages as set forth above.
(c) Piggyback Registration Rights.
(i) Whenever the Company proposes to register any of its
Common Shares or any other common shares of the Company under the
Securities Act (other than a registration (A) pursuant to a demand
registration under Section 2(a) herein, (B) on Form S-8 or S-4 or any
successor or similar forms, (C) relating to Common Shares or any other
common shares of the Company issuable upon exercise of employee or
consultant share options or in connection with any employee benefit or
similar plan of the Company or (D) in connection with a direct or
indirect acquisition by the Company of another Person or any transaction
with respect to which Rule 145 (or any successor provision) under the
Securities Act applies), whether or not for sale for its own account, it
will each such time, give prompt written notice at least 20 days prior to
the anticipated filing date of the registration statement relating to
such registration to the Holders, which notice shall set forth such
Holders' rights under this Section 2(c) and shall offer the Holders the
opportunity to include in such registration statement such number of
Registrable Securities as the Holders may request. Upon the written
request of a Holder made within 10 days after the receipt of notice from
the Company (which request shall specify the number of Registrable
Securities intended to be disposed of by such Holders), the Company will
use its best efforts to effect the registration under the Securities Act
of all Registrable Securities that the Company has been so requested to
register by the Holders, to the extent requisite to permit the
disposition of the Registrable Securities to be so registered; provided,
however, that (A) if such registration involves a Public Offering, the
Holders must sell their
3
Registrable Securities to the underwriters on the same terms and
conditions as apply to the Company and (B) if, at any time after giving
written notice of its intention to register any Registrable Securities
pursuant to this Section 2(c) and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such Registrable
Securities, the Company shall give written notice to the Holders and,
thereupon, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration. The
Company's obligations under this Section 2(c) shall terminate on the date
that the registration statement to be filed in accordance with Section
2(a) is declared effective by the Commission.
(ii) If a registration pursuant to this Section 2(c) involves a
Public Offering and the managing underwriter thereof advises the Company
that, in its view, the number of Common Shares, if any, or other Common
Shares that the Company and the Holders intend to include in such
registration exceeds the largest number of Common Shares (including any
other Common Shares or warrants of the Company) that can be sold without
having an adverse effect on such Public Offering (the "Maximum Offering
Size"), the Company will include in such registration only that number of
Common Shares which does not exceed the Maximum Offering Size, in the
following order of priorities: (1) first, all securities the Company
proposes to sell for its own account, (2) second, up to the full number
of securities proposed to be registered for the account of the holders of
securities entitled to inclusion of their securities in the Registration
Statement by reason of demand registration rights, and (3) third, the
securities requested to be registered by other holders of securities
entitled to participate in the registration, drawn from them pro-rata
based on the number of shares each has requested to be included in such
registration and the Holders pursuant to this Appendix I.
If as a result of the proration provisions of this Section 2(c)(ii), the
Holders are not entitled to include all such Registrable Securities in such
registration, such Holders may elect to withdraw their request to include any
Registrable Securities in such registration.
Notwithstanding the foregoing, the Company shall have no obligations under this
Section 2(c) hereof at any time that such Registrable Securities are the
subject of an effective registration statement.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall use its reasonable best efforts
to:
(a) Subject to the provisions of Section 3(r) hereof, promptly (i)
prepare and file with the Commission such amendments (including
post-effective amendments) to the Registration Statement and
supplements to the Prospectus as may be necessary to keep the
Registration Statement continuously effective and in compliance
with the provisions of the Securities Act applicable thereto so as
to permit the Prospectus forming part thereof to be current and
useable by Holders for resales of the Registrable Securities for a
period of two years from the date the Registration Statement is
first declared effective by the Commission (the "Effective Time")
or such shorter period that will terminate when all the Registrable
Securities covered by the Registration Statement have been sold
pursuant thereto in accordance with the plan of distribution
provided in the Prospectus, transferred pursuant to Rule 144 under
the Securities Act or otherwise transferred in a manner that
results in the delivery of new securities not subject to transfer
restrictions under the Securities Act
4
(the "Registration Period") and (ii) take all lawful action such
that each of (A) the Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, not misleading and (B) the Prospectus forming part of the
Registration Statement, and any amendment or supplement thereto,
does not at any time during the Registration Period include an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading. Notwithstanding the foregoing, the
Company's obligations hereunder shall terminate as to any Holder at
such time as that Holder's Registrable Securities can be sold under
Rule 144(k);
(b) During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the
Company covered by the Registration Statement until such time as
all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the Holders
as set forth in the Prospectus forming part of the Registration
Statement;
(c) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution
or delivery of any Prospectus (including any supplements thereto),
provide draft copies thereof (including a copy of the accountant's
consent letter to be included in the filing) to Stonegate
Securities, Inc. ("Stonegate") and reflect in such documents all
such comments as Stonegate reasonably may propose; and (ii) furnish
to each Holder whose Registrable Securities are included in the
Registration Statement, (A) promptly after the same is prepared and
publicly distributed, filed with the Commission, or received by the
Company, one copy of the Registration Statement, each Prospectus,
and each amendment or supplement thereto, and (B) such number of
copies of the Prospectus and all amendments and supplements thereto
and such other documents, as such Holder may reasonably request in
order to facilitate the disposition of the Registrable Securities
owned by such Holder;
(d) (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "Blue Sky" laws of
all jurisdictions requiring Blue Sky registration or qualification,
(ii) prepare and file in such jurisdictions such amendments
(including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain
the effectiveness thereof at all times during the Registration
Period, (iii) take all such other lawful actions as may be
necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take
all such other lawful actions reasonably necessary or advisable to
qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (A) qualify to do
business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (B) subject itself
to general taxation in any such jurisdiction or (C) file a general
consent to service of process in any such jurisdiction;
5
(e) As promptly as practicable after becoming aware of such event,
notify each Holder of the occurrence of any event, as a result of
which the Prospectus included in the 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, in light of the
circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and
supplement to the Prospectus to correct such untrue statement or
omission, and deliver a number of copies of such supplement and
amendment to each Holder as such Holder may reasonably request;
(f) Notify each Holder who holds Registrable Securities being sold (or,
in the event of an underwritten offering, the managing
underwriters) of the issuance by the Commission of any stop order
or other suspension of the effectiveness of the Registration
Statement on the date of receipt of any such stop order or other
suspension, and take all lawful action to effect the withdrawal,
recession or removal of such stop order or other suspension;
(g) Cause all the Registrable Securities covered by the Registration
Statement to be listed not later than the date that the
Registration Statement is declared effective by the Commission on
the principal national securities exchange, or included in an
inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series
issued by the Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective
date of the Registration Statement;
(i) Cooperate with the Holders who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant
to the registration statement and enable such certificates for the
Registrable Securities to be in such denominations or amounts, as
the case may be, as the Holders reasonably may request and
registered in such names as the Holder may request; and, within
three business days after a registration statement which includes
Registrable Securities is declared effective by the Commission,
deliver and cause legal counsel selected by the Company to deliver
to the transfer agent for the Registrable Securities (with copies
to the Holders whose Registrable Securities are included in such
registration statement) an appropriate instruction and, to the
extent necessary, an opinion of such counsel;
(j) Take all such other lawful actions reasonably necessary to expedite
and facilitate the disposition by the Holders of their Registrable
Securities in accordance with the intended methods therefor
provided in the Prospectus which are customary under the
circumstances;
(k) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after
(i) the effective date (as defined in Rule 158(c) under the
Securities Act) of the Registration Statement, and (ii) the
effective
6
date of each post-effective amendment to the Registration
Statement, as the case may be, an earnings statement of the Company
and its subsidiaries complying with Section 11(a) of the Securities
Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(l) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment
to the Registration Statement such information as the managers
reasonably agree should be included therein and to which the
Company does not reasonably object and make all required filings of
such Prospectus supplement or post-effective amendment as soon as
practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective
amendment;
(m) In connection with any underwritten offering, make such
representations and warranties to the Holders participating in such
underwritten offering and to the managers, in form, substance and
scope as are customarily made by the Company to underwriters in
secondary underwritten offerings;
(n) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the managers)
addressed to the underwriters, covering such matters as are
customarily covered in opinions requested in secondary underwritten
offerings (it being agreed that the matters to be covered by such
opinions shall include, without limitation, as of the date of the
opinion and as of the date the Registration Statement is first
declared effective or most recent post- effective amendment
thereto, as the case may be, the absence from the Registration
Statement and the Prospectus, including any documents incorporated
by reference therein, of an untrue statement of a material fact or
the omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were
made) not misleading, subject to customary limitations);
(o) In connection with any underwritten offering, obtain "cold comfort"
letters and updates thereof from the independent public accountants
of the Company (and, if necessary, from the independent public
accountants of any subsidiary of the Company or of any business
acquired by the Company, in each case for which financial
statements and financial data are, or are required to be, included
in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter
has provided such letter, representations or documentation, if any,
required for such cold comfort letter to be so addressed), in
customary form and covering matters of the type customarily covered
in "cold comfort" letters in connection with secondary underwritten
offerings;
(p) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the
managers, if any; and
7
(q) In connection with any underwritten offering, in the event that any
broker-dealer registered under the Exchange Act shall be an
"Affiliate" (as defined in Rule 2729(b)(1) of the rules and
regulations of the National Association of Securities Dealers, Inc.
(the "NASD Rules") (or any successor provision thereto)) of the
Company or has a "conflict of interest" (as defined in Rule
2720(b)(7) of the NASD Rules (or any successor provision thereto))
and such broker-dealer shall underwrite, participate as a member of
an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the
Registration Statement, whether as a holder of such Registrable
Securities or as an underwriter, a placement or sales agent or a
broker or dealer in respect thereof, or otherwise, the Company
shall assist such broker-dealer in complying with the requirements
of the NASD Rules, including, without limitation, by (A) engaging a
"qualified independent underwriter" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to
participate in the preparation of the Registration Statement
relating to such Registrable Securities, to exercise usual
standards of due diligence in respect thereof and to recommend the
public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent
of the indemnification of underwriters provided in Section 6
hereof, and (C) providing such information to such broker-dealer as
may be required in order for such broker-dealer to comply with the
requirements of the NASD Rules.
(r) Notwithstanding anything to the contrary in Section 3, at any time
after the Registration Statement has been declared effective, the
Company may delay the disclosure of material non-public information
concerning the Company, the disclosure of which at the time is not,
in the good faith opinion of the Company and its counsel, in the
best interest of the Company (a "Grace Period"); provided, that the
Company shall promptly (i) notify the Holders in writing of the
existence of material non-public information giving rise to a Grace
Period and the date on which the Grace Period will begin, and (ii)
notify the Holders in writing in advance of, or on the same date on
which, the Grace Period ends; and, provided further, that during
any consecutive 365 day period, there shall be only two Grace
Periods, such Grace Periods in total not to exceed 45 days. For
purposes of determining the length of a Grace Period above, the
Grace Period shall begin on and include the date the Holders
receive the notice referred to in clause (i) and shall end on and
include the date specified as the Grace Period ending date in the
notice referred to in clause (ii). If at any time after the
Registration Statement has been declared effective, the Company
delays disclosure of material non-public information concerning the
Company, other than during a permitted Grace Period as described
above, the Company shall make payments to the Holders as provided
in the next sentence as liquidated damages intended by the parties
to compensate the Holders in part for the incremental costs and
investment risks associated with holding the Registrable Securities
as restricted securities and not as a penalty. The amount of
payments shall be calculated at the Liquidated Damage Rate of the
Purchase Price in accordance with the provisions of Section 2(b)
(including its provision of a minimum amount of $34,000), and the
timing of payments shall also be determined in accordance with
Section 2(b). For the purposes of such calculations and
determinations of the amount and timing of payments: (i) the
Initial Date shall mean the first date that the Company delays
8
disclosure of material non-public information concerning the
Company other than during a permitted Grace Period and (ii) the
Computation Date shall mean the date that is 30 days after the
Initial Date and each date that is 30 days after the previous
Computation Date until such period of delay has ceased and the
Company has provided notice to the Holders of the end of such
period in accordance with the provisions of this section above.
Nothing herein shall limit the rights of any Holder to pursue
actual damages for the Holder's inability to sell any of the
Registrable Securities into the public market for any reason
described in this section.
Notwithstanding the foregoing, the Company shall have no obligations under
Section 3(l) through (q) unless it is effecting an underwritten offering
pursuant to Section 2(c).
4. Obligations of the Holders. In connection with the registration of the
Registrable Securities, the Holders shall have the following obligations,
which obligations shall be several and not joint:
(a) Prior to the first anticipated filing date of the Registration
Statement under Section 2(a) hereof, the Company shall provide the
Holders with a draft of the Registration Statement, including such
information about the Holder as has been provided in the
Questionnaire completed by the Holder, together with whatever
confirmations, certificates or consents as may be reasonably
requested by the Company. In connection with any other Registration
Statement including the Holders, it shall be a condition precedent
to the obligations of the Company to complete the registration
pursuant to this Appendix I with respect to the Registrable
Securities of a particular Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required
to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the
Company may reasonably request. At least ten business days prior to
the first anticipated filing date of the Registration Statement,
the Company shall notify each Holder and its counsel, whether
in-house or otherwise ("Counsel") of the information the Company
requires from each such Holder (the "Requested Information") if
such Holder elects to have any of its Registrable Securities
included in the Registration Statement. If at least four business
days prior to the anticipated filing date the Company has not
received the Requested Information from a Holder (a "Non-Responsive
Holder") or its Counsel, then the Company shall send such
Non-Responsive Holder and its Counsel a reminder of such
information request. If at least two business days prior to the
anticipated filing date the Company still has not received the
Requested Information from such Non-Responsive Holder or its
Counsel, then the Company may file the Registration Statement
without including Registrable Securities of such Non-Responsive
Holder. However, promptly upon receipt of the Requested
Information, and at the expense of the Non-Responsive Holder, the
Company shall file such amendment(s) to the Registration Statement
as may be necessary to include therein the Registrable Securities
of the Non-Responsive Holder.
9
(b) Each Holder by its acceptance of the Registrable Securities agrees
to cooperate with the Company in connection with the preparation
and filing of the Registration Statement hereunder, unless such
Holder has notified the Company in writing of its election to
exclude all of its Registrable Securities from the Registration
Statement; the Company shall, on its part, ensure that Item 507 of
Regulation S-K of the Securities Act (regarding information on the
selling security holders) be complied with in connection with its
preparation and filing of the Registration Statement hereunder;
(c) As promptly as practicable after becoming aware of such event,
notify the Company of the occurrence of any event, as a result of
which the Prospectus included in the 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, in light of the
circumstances under which they were made, not misleading; and
(d) Each Holder agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in
Section 3(e) or 3(f), it shall immediately discontinue its
disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until such Holder's
receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(e) and, if so directed by the Company,
such Holder shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Holder's possession, of the
Prospectus covering such Registrable Securities current at the time
of receipt of such notice.
5. Expenses of Registration. All expenses, other than underwriting discounts
and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation,
all registration, listing, and qualifications fees, printing and
engraving fees, accounting fees, and the fees and disbursements of
counsel for the Company, and the reasonable fees, not to exceed
$5,000.00, of one firm of counsel to the holders of a majority in
interest of the Registrable Securities shall be borne by the Company.
6. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each Holder and each
underwriter, if any, which facilitates the disposition of
Registrable Securities, and each of their respective officers and
directors and each person who controls such Holder or underwriter
within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act (a "Company Indemnified Person") from and
against any losses, claims, damages or liabilities, joint or
several, to which such Company Indemnified Person may become
subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement or an omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein, not misleading, or arise out of or
are based upon an untrue
10
statement or alleged untrue statement of a material fact contained
in any Prospectus or an omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company hereby
agrees to reimburse such Company Indemnified Person for all
reasonable legal and other expenses incurred by them in connection
with investigating or defending any such action or claim as and
when such expenses are incurred; provided, however, that the
Company shall not be liable to any such Company Indemnified Person
in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon (i) an untrue statement or
alleged untrue statement made in, or an omission or alleged
omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished
to the Company by such Company Indemnified Person expressly for use
therein or (ii) in the case of the occurrence of an event of the
type specified in Section 3(e), the use by the Company Indemnified
Person of an outdated or defective Prospectus after the Company has
provided to such Company Indemnified Person written notice that
such Prospectus is outdated or defective.
(b) Indemnification by the Holders. Each Holder agrees, as a
consequence of the inclusion of any of its Registrable Securities
in a Registration Statement, severally and not jointly, to (i)
indemnify and hold harmless the Company, its directors (including
any person who, with his or her consent, is named in the
Registration Statement as a director nominee of the Company), its
officers and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act ("Holder Indemnified Person"), against any
losses, claims, damages or liabilities to which the Holder
Indemnified Person may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement or Prospectus or arise out
of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein (in light of the circumstances under
which they were made, in the case of the Prospectus), not
misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission
or alleged omission was made by such Holder in reliance upon and in
conformity with written information furnished to the Company by
such holder expressly for use therein; provided, however, that no
Holder shall be liable under this Section 6(b) for any amount in
excess of the gross proceeds paid to such Holder in respect of
shares sold by it, and (ii) reimburse the Holder Indemnified Person
for any legal or other expenses incurred in connection with
investigating or defending any such action or claim as such
expenses are incurred.
(c) Indemnification by the Underwriters. Each underwriter, if any,
which facilitates the disposition of Registrable Securities shall
agree, as a consequence of facilitating such disposition of
Registrable Securities, severally and not jointly, to (i) indemnify
and hold harmless the Company, its directors (including any person
who, with his or her
11
consent, is named in the Registration Statement as a director
nominee of the Company), its officers and each person, if any, who
controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any
losses, claims, damages or liabilities to which the Company or such
other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement or Prospectus or arise out
of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein (in light of the circumstances under
which they were made, in the case of the Prospectus), not
misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company by such holder or
underwriter expressly for use therein; provided, however, that no
underwriter shall be liable under this Section 6(b) for any amount
in excess of the gross proceeds paid to such underwriter in respect
of shares sold by it, and (ii) reimburse the Company for any legal
or other expenses incurred by the Company in connection with
investigating or defending any such action or claim as such
expenses are incurred.
(d) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "Indemnified Party")
of written notice of any investigation, claim, proceeding or other
action in respect of which indemnification is being sought (each, a
"Claim"), the Indemnified Party promptly shall notify the party
against whom indemnification pursuant to this Section 6 is being
sought (the "Indemnifying Party") of the commencement thereof; but
the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is
materially prejudiced and forfeits substantive rights and defenses
by reason of such failure. In connection with any Claim as to which
both the Indemnifying Party and the Indemnified Party are parties,
the Indemnifying Party shall be entitled to assume the defense
thereof. Notwithstanding the assumption of the defense of any Claim
by the Indemnifying Party, the Indemnified Party shall have the
right to employ separate legal counsel and to participate in the
defense of such Claim, and the Indemnifying Party shall bear the
reasonable fees, out-of-pocket costs and expenses of such separate
legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, costs and
expenses, (y) the Indemnified Party and the Indemnifying Party
shall reasonably have concluded that representation of the
Indemnified Party by the Indemnifying Party by the same legal
counsel would not be appropriate due to actual or, as reasonably
determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available
to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party, or (z) the Indemnifying
Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the
Indemnified Party
12
employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and
expenses of such legal counsel shall be borne exclusively by the
Indemnified Party. Except as provided above, the Indemnifying Party
shall not, in connection with any Claim in the same jurisdiction,
be liable for the fees and expenses of more than one firm of
counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnified Party shall not, without the prior
written consent of the Indemnifying Party (which consent shall not
unreasonably be withheld), settle or compromise any Claim or
consent to the entry of any judgment that does not include an
unconditional release of the Indemnifying Party from all
liabilities with respect to such Claim or judgment.
(e) Contribution. If the indemnification provided for in this Section 6
is unavailable to or insufficient to hold harmless an Indemnified
Person under subsection (a) or (b) above in respect of any losses,
claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each Indemnifying Party shall contribute
to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party and the Indemnified
Party in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material
fact relates to information supplied by such Indemnifying Party or
by such Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. The parties hereto agree that
it would not be just and equitable if contribution pursuant to this
Section 6(d) were determined by pro rata allocation (even if the
Holders or any underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in this Section
6(d). The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any
such action or claim. 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. The
obligations of the Holders and any underwriters in this Section
6(d) to contribute shall be several in proportion to the percentage
of Registrable Securities registered or underwritten, as the case
may be, by them and not joint.
(f) Notwithstanding any other provision of this Section 6, in no event
shall any (i) Holder be required to undertake liability to any
person under this Section 6 for any amounts in excess of the dollar
amount of the gross proceeds to be received by such Holder from the
sale of such Holder's Registrable Securities pursuant to any
13
Registration Statement under which such Registrable Securities are
to be registered under the Securities Act.
(g) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to
any Indemnified Person and the obligations of any Indemnified
Person under this Section 6 shall be in addition to any liability
which such Indemnified Person may otherwise have to the Company.
The remedies provided in this Section 6 are not exclusive and shall
not limit any rights or remedies which may otherwise be available
to an indemnified party at law or in equity.
7. Rule 144. With a view to making available to the Holders the benefits of
Rule 144 under the Securities Act or any other similar rule or regulation
of the Commission that may at any time permit the Holders to sell
securities of the Company to the public without registration ("Rule 144"),
the Company agrees to:
(a) comply with the provisions of paragraph (c) (1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section
13 or 15(d) under the Exchange Act; and, if at any time it is not
required to file such reports but in the past had been required to
or did file such reports, it will, upon the request of any Holder,
make available other information as required by, and so long as
necessary to permit sales of, its Registrable Securities pursuant
to Rule 144.
8. Assignment. The rights to have the Company register Registrable
Securities pursuant to this Appendix I may be assigned or transferred
only with the prior written consent of the Company, and any such
assignment or transfer without such consent shall be void and of no
effect, which consent shall not be unreasonably withheld. Notwithstanding
the foregoing, such consent of the Company shall not be required with
respect to any assignment or transfer of Registrable Securities to an
affiliate of Subscriber, including for this purpose if Subscriber is an
investment company, any fund or account advised by Subscriber's
investment adviser or any affiliate thereof. In the event of any such
permitted assignment or transfer by the Holders to any permitted
transferee of all or any portion of such Registrable Securities such
transfer will be allowed only if: (a) the Holder agrees in writing with
the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or
assigned, (c) immediately following such transfer or assignment, the
securities so transferred or assigned to the transferee or assignee
constitute Restricted Securities, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this
sentence the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions contained herein.
9. Amendment and Waiver. Any provision of this Appendix I may be amended and
the observance thereof may be waived (either generally or in a particular
instance and either
14
retroactively or prospectively), only with the written consent of the
Company and Holders who hold a majority interest of the Registrable
Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Holder and the Company.
15
10. Miscellaneous.
(a) A person or entity shall be deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or
entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable
Securities.
(b) If after the date hereof and prior to the Commission declaring the
Registration Statement to be filed pursuant to Section 2(a)
effective under the Securities Act, the Company grants to any
Person any registration rights with respect to any Company
securities which are more favorable to such other Person than those
provided in this Appendix I, then the Company forthwith shall grant
(by means of an amendment to this Appendix I or otherwise)
identical registration rights to all Holders hereunder.
(c) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be
in writing and shall be delivered personally or sent by certified
mail, postage prepaid, or by a nationally recognized overnight
courier service as follows, and shall be deemed given when actually
received.
if to the Company, to: One IP Voice, Inc.
00 Xxxxxxxx Xxxx Xxxxxx
Xxxx Xxxxxxxx, XX 00000
Facsimile: ()
Attention: Xxxx - Xxxx
Stiegemeier___________ , CEO
if to the Holders, to: Stonegate Securities, Inc.
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxx Xxxxxxxx, President
The Company or any Holder may change the foregoing address by notice given
pursuant to this Section 10(c).
(d) Failure of any party to exercise any right or remedy under this
Appendix I or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof.
(e) This Appendix I shall be governed by and interpreted in accordance
with the laws of the State of Texas.
(f) The remedies provided in this Appendix I are cumulative and not
exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this
16
Appendix I is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
(g) The Company shall not enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the
holders of Registrable Securities in this Appendix I or otherwise
conflicts with the provisions hereof. The Company is not currently
a party to any agreement granting any registration rights with
respect to any of its securities to any person which conflicts with
the Company's obligations hereunder or gives any other party the
right to include any securities in any Registration Statement filed
pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the
foregoing, without the written consent of the holders of a 66 2/3%
interest of the Registrable Securities, the Company shall not grant
to any person the right to request it to register any of its
securities under the Securities Act unless the rights so granted
are pari pasu to the prior rights of the holders of Registrable
Securities set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Appendix I. The
restrictions on the Company's rights to grant registration rights
under this paragraph shall terminate on the date all Registrable
Securities have been registered pursuant to a Registration
Statement that has been declared effective by the Commission
(h) This Appendix I and the Subscription Agreements constitute the
entire agreement among the parties hereto with respect to the
subject matter hereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred
to herein. This Appendix I and the Subscription Agreements
supersede all prior agreements and undertakings among the parties
hereto with respect to the subject matter hereof.
(i) Subject to the requirements of Section 8 hereof, this Appendix I
shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties hereto.
(j) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(k) The headings in this Appendix I are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
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