Exhibit 10.3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated this 18th day of July 1997 (this
"Agreement"), between COMPOSITECH LTD., a Delaware Corporation, with principal
executive offices located at 000 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx 00000 (the
"Company"), and the undersigned (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement dated July 17, 1997, between the Initial Investor and the
Company (the "Securities Purchase Agreement"), the Company has agreed to issue
and sell to the Initial Investor $960,000 aggregate principal amount of its 5%
Convertible Debentures due May 31, 2000 (the "Debentures") which, upon the terms
and subject to the conditions thereof, are convertible into shares of the common
stock, $.01 par value, of the Company (the "Common Stock"); and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common Stock issued or issuable upon conversion of the Debentures certain
registration rights under the Securities Act;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the meanings:
(i) "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.
(ii) "Commission" means the Securities and Exchange Commission.
(iii) "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.
(iv) "Investor" means the Initial Investor and any transferee or
assignee of Registrable Securities who agrees to become bound by all of the
terms and provisions of this Agreement in accordance with Section 8 hereof.
(v) "Person" means any individual, partnership, corporation, limited
liability company, joint stock company, association, trust, unincorporated
organization, or a government or agency or political subdivision thereof.
(vi) "Prospectus" means the prospectus (including, without limitation,
any preliminary prospectus and any final prospectus filed pursuant to Rule
424(b) under the Securities Act, including 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.
(vii) "Registrable Securities" means the Common Stock issued or
issuable upon conversion of the Debentures; provided, however, a share of
Common Stock shall cease to be a Registrable Security for purposes of this
Agreement when it no longer is a Restricted Security.
(viii) "Registration Statement" means a registration statement of the
Company filed on an appropriate form 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.
(ix) "Restricted Security" means any share of Common Stock issued or
issuable upon conversion of the Debentures except any such share that (i)
has been registered pursuant to an effective registration statement under
the Securities Act and sold in a manner contemplated by the Prospectus
included in the Registration Statement, (ii) has 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 a new share
of Common Stock not subject to transfer restrictions under the Securities
Act has been delivered by or on behalf of the Company.
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(x) "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 Securities Purchase Agreement.
2. Registration.
(a) Filing and Effectiveness of Registration Statement. The Company shall
prepare and file with the Commission not later than the 60th day after the
Closing Date, a Registration Statement relating to the offer and sale of the
Registrable Securities (provided however that if the Company files a
Registration Statement earlier than such date (the "Filing Date"), the Company
shall include in such Registration Statement the Registrable Securities) and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but not
later than 120 days after the Closing Date (as defined in the Securities
Purchase Agreement), assuming for purposes hereof a Conversion Price under the
Debentures of $2.25 per share.
(b) Underwritten Offering. If the offering pursuant to a Registration
Statement contemplated by Section 2(a) hereof involves an underwritten offering,
the Investors who hold a majority-in-interest of the Registrable Securities
subject to such underwritten offering shall have the right to select one legal
counsel to represent their interests, and an investment banker (or bankers) and
manager (or managers) to administer the offering, which investment banker (or
bankers) or manager (or managers) shall be reasonably satisfactory to the
Company. The Investors who hold the Registrable Securities to be included in
such underwriting shall pay all underwriting discounts and commissions of such
investment banker (or bankers) and manager (or managers) so selected in
accordance with this Section 2(b) with respect to their Registrable Securities.
(c) Registration Default. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not (i) filed with the Commission by the 60th day after the
Closing Date (or if earlier, by the Filing Date) or (ii) declared effective by
the Commission within 150 days after the Closing Date (either of which, an
"Initial Date"), then the Company shall make the payments to the Initial
Investor as provided in the next sentence. The amount to be paid by the Company
to the Initial Investor shall be determined as of each Computation Date, and
such amount shall be equal to 3% of the Purchase Price (as defined in the
Securities Purchase Agreement) from the Initial Date to the first Computation
Date and for each Computation Date thereafter, calculated on a pro rata basis to
the date on which the Registration Statement is filed with (in the event of an
Initial Date pursuant to (c)(i) above) or declared effective by (in the event of
an Initial Date pursuant to (c)(ii) above) the Commission (the "Periodic
Amount"). The full Periodic Amount shall be paid by the Company to the Initial
Investor by wire transfer of immediately available funds within three days after
each Computation Date.
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As used in this Section 2(c), "Computation Date" means the date which is 30
days after the Initial Date and, if the Registration Statement required to be
filed by the Company pursuant to Section 2(a) has not theretofore been declared
effective by the Commission, each date which is 30 days after the previous
Computation Date until such Registration Statement is so declared effective.
(d) Eligibility for Use of Form S-3. The Company agrees that at such time
as it meets all the requirements for the use of Securities Act Registration
Statement on Form S-3 it shall file all reports and information required to be
filed by it with the Commission in a timely manner and take all such other
action so as to maintain such eligibility for the use of such form.
(e) In the event the Current Market Price under the Debentures declines to
$3.00, the Company shall file an additional Registration Statement with the
Commission for such additional number of Registrable Securities as would be
issuable upon conversion of the Debentures, in addition to those previously
registered, assuming a Conversion Price of $1.00 per share. The Company shall
prepare and file with the Commission not later than the 30th day thereafter, a
Registration Statement relating to the offer and sale of such Registrable
Securities and shall use its best efforts to cause the Commission to declare
such Registration Statement effective under the Securities Act as promptly as
practicable but not later than 60 days thereafter.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall:
(a) 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 Investors for resales of the Registrable
Securities for a period of two years from the date on which 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 (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 provisions of this Section 3(a), the Company may,
during the Registration Period, suspend the use of the Prospectus for a period
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not to exceed 60 days (whether or not consecutive) in any 12-month period if the
Board of Directors of the Company determines in good faith that because of valid
business reasons, including pending mergers or other business combination
transactions, the planned acquisition or divestiture of assets, pending material
corporate developments and similar events, it is in the best interests of the
Company to suspend such use, and prior to or contemporaneously with suspending
such use the Company provides the Investors with written notice of such
suspension, which notice need not specify the nature of the event giving rise to
such suspension. At the end of any such suspension period, the Company shall
provide the Investors with written notice of the termination of such suspension.
(b) During the Registration Period, comply with the provisions of the
Securities Act with respect to the disposition of all 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 Investors 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
to the Investors and reflect in such documents all such comments as the
Investors (and their counsel) reasonably may propose and (ii) furnish to each
Investor whose Registrable Securities are included in the Registration Statement
and its legal counsel identified to the Company, (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
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
(d) (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (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;
(e) As promptly as practicable after becoming aware of such event, notify
each Investor of the occurrence of any event, as a result of which the
Prospectus included in
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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 Investor as such Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such event, notify
each Investor 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 at the earliest possible time and take all lawful action
to effect the withdrawal, recession or removal of such stop order or other
suspension;
(g) (i) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange, and
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 Investors 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 Investors reasonably may
request and registered in such names as the Investors 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 Investors whose Registrable
Securities are included in such Registration Statement) an appropriate
instruction and opinion of such counsel;
(j) Take all such other lawful actions reasonably necessary to expedite and
facilitate the disposition by the Investors 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 securityholders as soon as practicable,
but in any event not later than 18 months after (i) the effective date (as
defined in Rule 158(c) under the Securities Act) of the Registration Statement,
and (ii) the effective 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);
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(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) Enter into such customary agreements (including an underwriting
agreement in customary form in the event of an underwritten offering) and take
such other lawful and reasonable action to expedite and facilitate the
registration and disposition of the Registrable Securities, and in connection
therewith, if an underwriting agreement is entered into, cause the same to
contain indemnification provisions and procedures substantially identical to
those set forth in this Agreement;
(n) (i) Make reasonably available for inspection by Investors, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material non-public information shall be kept
confidential by such Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided further that, if the foregoing inspection and information gathering
would otherwise disrupt the Company's conduct of its business, such inspection
and information gathering shall, to the maximum extent possible, be coordinated
on behalf of the Investors and the other parties entitled thereto by one firm of
counsel designed by and on behalf of the Investors and other parties;
(o) In connection with any underwritten offering, make such representations
and warranties to the Investors 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;
(p) 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
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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 Effective Time of the
Registration Statement 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);
(q) 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;
(r) In connection with any underwritten offering, deliver such documents
and certificates as may be reasonably required by the managers, if any.
(s) 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 5 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.
4. Obligations of the Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities
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of a particular Investor that such Investor 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. As least seven days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
each Investor of the information the Company requires from each such Investor
(the "Requested Information") if such Investor elects to have any of its
Registrable Securities included in the Registration Statement. If at least two
business days prior to the anticipated filing date the Company has not received
the Requested Information from an Investor (a "Non-Responsive Investor"), then
the Company may file the Registration Statement without including Registrable
Securities of such Non-Responsive Investor and have no further obligations to
the Non-Responsive Investor;
(b) Each Investor 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 Investor has notified the Company
in writing of its election to exclude all of its Registrable Securities from the
Registration Statement; and
(c) Each Investor 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
Investor's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(e) and, if so directed by the Company, such Investor
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
Investor'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 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 Investor 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 Investor or underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act (each such person being
sometimes hereinafter referred to as an "Indemnified Person") from and against
any losses, claims, damages or liabilities, joint or several, to which such
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
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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 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 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 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 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 Indemnified Person
of an outdated or defective Prospectus after the Company has provided to such
Indemnified Person an updated Prospectus correcting the untrue statement or
alleged untrue statement or omission or alleged omission giving rise to such
loss, claim, damage or liability.
(b) Indemnification by the Investors and Underwriters. Each Investor
agrees, as a consequence of the inclusion of any of its Registrable Securities
in a Registration Statement, and 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 consent, is named in the Registration
Statement as a director nominee of the Company), its officers who sign any
Registration Statement 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, 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.
(c) 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
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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 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 Indemnifying 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.
(d) 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 Indemnified 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
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would not be just and equitable if contribution pursuant to this Section 6(d)
were determined by pro rata allocation (even if the Investors 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 Investors
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.
(e) Notwithstanding any other provision of this Section 6, in no event
shall any (i) Investor be required to undertake liability to any person under
this Section 6 for any amounts in excess of the dollar amount of the proceeds to
be received by such Investor from the sale of such Investor's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are to be registered under the Securities Act and (ii) underwriter be
required to undertake liability to any Person hereunder for any amounts in
excess of the aggregate discount, commission or other compensation payable to
such underwriter with respect to the Registrable Securities underwritten by it
and distributed pursuant to the Registration Statement.
(f) 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 Investors 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 Investors 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.
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8. Assignment. The rights to have the Company register Registrable
Securities pursuant to this Agreement shall be automatically assigned by the
Investors to any transferee of all or any portion of such securities (or all or
any portion of any Debenture of the Company which is convertible into such
securities) of Registrable Securities only if: (a) the Investor 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 Agreement may be amended and
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a majority-in-interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Investor and the Company.
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, 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 Agreement, then the
Company forthwith shall grant (by means of an amendment to this Agreement or
otherwise) identical registration rights to all Investors hereunder.
(c) Notices required or permitted to be given hereunder shall be in writing
and shall be deemed to be sufficiently given when personally delivered (by hand,
by courier, by telephone line facsimile transmission, receipt confirmed) or sent
by certified mail, return receipt requested, properly addressed and with proper
postage pre-paid (i) if to the Company, to COMPOSITECH LTD., 000 Xxxxxxxxx Xxxx,
Xxxxxxxxx, Xxx Xxxx 00000, ATT: Xxxxxx X. Xxxxx, with a copy to Xxxxxxx Leisure
Xxxxxx & Irvine, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, ATT: Xxxxxx X.
Xxx, (ii) if to the Initial Investor, at the address set forth in the Securities
Purchase Agreement and (iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company, or at such other address
as each such party furnishes by notice given in accordance with this Section
10(b), and shall be effective,
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when personally delivered, upon receipt and, when so sent by certified mail,
four calendar days after deposit with the United States Postal Service.
(d) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(e) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
(f) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provision,
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 Agreement 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 majority in number 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 subject in all respect 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 Agreement.
(h) This Agreement constitutes 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 Agreement supersedes all prior agreements and undertakings among
the parties hereto with respect to the subject matter hereof.
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(i) Subject to the requirements of Section 8 hereof, this Agreement 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 Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
(l) The Company acknowledges that any failure by the Company to perform its
obligations under Section 3, or any delay in such performance could result in
direct damages to the Investors and the Company agrees that, in addition to any
other liability the Company may have by reason of any such failure or delay, the
Company shall be liable for all direct damages caused by such failure or delay.
(m) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
COMPOSITECH LTD.
By:
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Name:
Title:
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By:
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Name:
Title:
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