EXHIBIT 10.70
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement (the "Agreement"), dated as of June 23,
2004, by and between GK Intelligent Systems, Inc., a corporation organized
under the laws of State of Delaware, with its principal executive office at
with its principal executive office at GK Intelligent Systems, Inc., 0000
Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxx, 00000, (the "Company"), and Dutchess Private
Equities Fund, II, L.P., a Delaware limited partnership with its principal
office at 000 Xxxxxx Xxxxxx, Xxxxxx, XX 00000 (the "Investor").
Whereas, in connection with the Investment Agreement by and between the
Company and the Investor of even date herewith (the "Investment Agreement"),
the Company has agreed to issue and sell to the Investor an indeterminate
number of shares of the Company's Common Stock, .001 par value per share (the
"Common Stock"), to be purchased pursuant to the terms and subject to the
conditions set forth in the Investment Agreement; and
Whereas, to induce the Investor to execute and deliver the Investment
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"),
and applicable state securities laws, with respect to the shares of Common
Stock issuable pursuant to the Investment Agreement.
Now therefore, in consideration of the foregoing premises and the mutual
covenants contained hereinafter and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investor hereby agree as follows:
Section 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
"Execution Date" means the date first written above.
"Investor" means Dutchess Private Equities Fund, II, L.P., a Delaware
limited partnership.
"Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
"Potential Material Event" means any of the following: (i) the possession
by the Company of material information not ripe for disclosure in a
Registration Statement, which shall be evidenced by determinations in good
faith by the Board of Directors of the Company that disclosure of such
information in the Registration Statement would be detrimental to the business
and affairs of the Company, or (ii) any material engagement or activity by the
Company which would, in the good faith determination of the Board of Directors
of the Company, be adversely affected by disclosure in a Registration
Statement at such time, which determination shall be accompanied by a good
faith determination by the Board of Directors of the Company that the
Registration Statement would be materially misleading absent the inclusion of
such information.
"Principal Market" shall mean The American Stock Exchange, National
Association of Securities Dealer's, Inc. Over-the-Counter electronic bulletin
board, the Nasdaq National Market or The Nasdaq SmallCap Market whichever is
the principal market on which the Common Stock is listed.
"Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing one or more Registration Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or
any successor rule providing for offering securities on a continuous basis
("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement(s) by the United States Securities and Exchange
Commission (the "SEC").
"Registrable Securities" means (i) the shares of Common Stock issued or
issuable pursuant to the Investment Agreement, and (ii) any shares of capital
stock issued or issuable with respect to such shares of Common Stock, if any,
as a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise, which have not been (x) included in a Registration
Statement that has been declared effective by the SEC or (y) sold under
circumstances meeting all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the 1933 Act.
"Registration Statement" means a registration statement of the Company
filed under the 1933 Act covering the Registrable Securities.
All capitalized terms used in this Agreement and not otherwise defined
herein shall have the same meaning ascribed to them as in the Investment
Agreement.
Section 2. REGISTRATION.
(a) On or before the execution of this Agreement, the Company shall have
provided a draft of the Registration Statement covering the Registrable
Securities to the Investor. The Company shall, as soon as practicable, but not
later than thirty calendar days following the Execution Date, file with the
SEC a Registration Statement or Registration Statements (as is necessary) on
Form SB-2 (or, if such form is unavailable for such a registration, on such
other form as is available for such a registration), covering the resale of
all of the Registrable Securities, which Registration Statement(s) shall state
that, in accordance with Rule 416 promulgated under the 1933 Act, such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon stock splits, stock
dividends or similar transactions. The Company shall initially register for
resale 100,000,000 shares of Common Stock which would be issuable on the date
preceding the filing of the Registration Statement based on the closing bid
price of the Company's Common Stock on such date and the amount reasonably
calculated that represents Common Stock issuable to other parties as set forth
in the Investment Agreement except to the extent that the SEC requires the
share amount to be reduced as a condition of effectiveness..
(b) The Company shall use commercially reasonable efforts to have the
Registration Statement(s) declared effective by the SEC within 120 calendar
days after the Execution Date.
(c) The Company agrees not to include any other securities in the
Registration Statement covering the Registrable Securities without Investor's
prior written consent which Investor may withhold in its sole discretion.
Furthermore, the Company agrees that it will not file any other Registration
Statement for other securities, until thirty calendar days after the
Registration Statement for the Registrable Securities is declared effective by
the SEC.
Section 3. RELATED OBLIGATIONS.
At such time as the Company is obligated to prepare and file a
Registration Statement with the SEC pursuant to Section 2(a), the Company will
effect the registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, with respect thereto, the Company
shall have the following obligations:
(a) The Company shall use commercially reasonable efforts to cause such
Registration Statement relating to the Registrable Securities to become
effective within 120 days after the Execution Date and shall keep such
Registration Statement effective until the earlier to occur of (i) the date as
of which the Investor may sell all of the Registrable Securities without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto); or (ii) the date on which (A) the Investor shall have sold
all the Registrable Securities; and (B) the Investor has no right to acquire
any additional shares of Common Stock under the Investment Agreement (the
"Registration Period"). The Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain
any 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 in which they were made, not misleading. The
Company shall use its best efforts to respond to all SEC comments within seven
business days from receipt of such comments by the Company. The Company shall
use its best efforts to cause the Registration Statement relating to the
Registrable Securities to become effective no later than three business days
after notice from the SEC that the Registration Statement may be declared
effective. The Investor agrees to provide all information which it is
required by law to provide to the Company, including the intended method of
disposition of the Registrable Securities, and the Company's obligations set
forth above shall be conditioned on the receipt of such information.
(b) The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the Investor
thereof as set forth in such Registration Statement. In the event the number
of shares of Common Stock covered by a Registration Statement filed pursuant
to this Agreement is at any time insufficient to cover all of the Registrable
Securities, the Company shall amend such Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable),
or both, so as to cover all of the Registrable Securities, in each case, as
soon as practicable, but in any event within 30 calendar days after the
necessity therefor arises (based on the then Purchase Price of the Common
Stock and other relevant factors on which the Company reasonably elects to
rely), assuming the Company has sufficient authorized shares at that time, and
if it does not, within 30 calendar days after such shares are authorized. The
Company shall use commercially reasonable efforts to cause such amendment
and/or new Registration Statement to become effective as soon as practicable
following the filing thereof.
(c) The Company shall make available to the Investor whose Registrable
Securities are included in any Registration Statement and its legal counsel
without charge (i) promptly after the same is prepared and filed with the SEC
at least one copy of such Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated
therein by reference and all exhibits, the prospectus included in such
Registration Statement (including each preliminary prospectus) and, with
regards to such Registration Statement(s), any correspondence by or on behalf
of the Company to the SEC or the staff of the SEC and any correspondence from
the SEC or the staff of the SEC to the Company or its representatives; (ii)
upon the effectiveness of any Registration Statement, the Company shall make
available copies of the prospectus included in such Registration Statement and
all amendments and supplements thereto; and (iii) such other documents,
including copies of any preliminary or final prospectus, as the Investor may
reasonably request from time to time in order to facilitate the disposition of
the Registrable Securities.
(d) The Company shall use commercially reasonable efforts to (i)
register and qualify the Registrable Securities covered by a Registration
Statement under such other securities or "blue sky" laws of such states in the
United States as any Investor reasonably requests; (ii) prepare and file in
those jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period; (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other 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 (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), or (y) subject
itself to general taxation in any such jurisdiction. The Company shall
promptly notify each Investor who holds Registrable Securities of the receipt
by the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.
(e) As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor in writing of the happening of any event as
a result of which the prospectus included in a Registration Statement, as then
in effect, includes an untrue statement of a material fact or omission 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 ("Registration Default") and use all diligent efforts to
promptly prepare a supplement or amendment to such Registration Statement and
take any other necessary steps to cure the Registration Default, (which, if
such Registration Statement is on Form S-3, may consist of a document to be
filed by the Company with the SEC pursuant to Section 13(a), 13(c), 14 or
15(d) of the 1934 Act (as defined below) and to be incorporated by reference
in the prospectus) to correct such untrue statement or omission, and make
available copies of such supplement or amendment to each Investor. The Company
shall also promptly notify each Investor (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(the Company will prepare notification of such effectiveness which shall be
delivered to the Investor on the same day of such effectiveness and by
overnight mail), additionally, the Company will promptly provide to the
Investor a copy of the effectiveness order prepared by the SEC once it is
received by the Company; (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related prospectus or related
information, (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate,
(iv) in the event the Registration Statement is no longer effective, or (v) if
Registration Statement is stale as a result of the Company's failure to timely
file its financials or otherwise. The Company acknowledges that its failure to
cure the Registration Default within ten business days will cause the Investor
to suffer damages in an amount that will be difficult to ascertain.
Accordingly, the parties agree that it is appropriate to include a provision
for liquidated damages. The parties acknowledge and agree that the liquidated
damages provision set forth in this section represents the parties' good faith
effort to quantify such damages and, as such, agree that the form and amount
of such liquidated damages are reasonable and will not constitute a penalty.
It is the intention of the parties that interest payable under any of the
terms of this Agreement shall not exceed the maximum amount permitted under
any applicable law. If a law, which applies to this Agreement which sets the
maximum interest amount, is finally interpreted so that the interest in
connection with this Agreement exceeds the permitted limits, then: (1) any
such interest shall be reduced by the amount necessary to reduce the interest
to the permitted limit; and (2) any sums already collected (if any) from the
Company which exceed the permitted limits will be refunded to the Company.
The Investor may choose to make this refund by reducing the amount that the
Company owes under this Agreement or by making a direct payment to the
Company. If a refund reduces the amount that the Company owes the Investor,
the reduction will be treated as a partial payment. In case any provision of
this Agreement is held by a court of competent jurisdiction to be excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, so that it is enforceable to the maximum
extent possible, and the validity and enforceability of the remaining
provisions of this Agreement will not in any way be affected or impaired
thereby.
(f) The Company shall use commercially reasonable efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify the Investor who holds Registrable
Securities being sold of the issuance of such order and the resolution
thereof or its receipt of actual notice of the initiation or threat of any
proceeding for such purpose.
(g) The Company shall permit the Investor and one legal counsel,
designated by the Investor, to review and comment upon a Registration
Statement and all amendments and supplements thereto at least seven business
days prior to their filing with the SEC, and not file any document in a form
to which such counsel reasonably objects. The Company may request to shorten
the Investor's review period and the Investor will, if possible, attempt to
comply with the accelerated review period. The Company shall not submit to
the SEC a request for acceleration of the effectiveness of a Registration
Statement or file with the SEC a Registration Statement or any amendment or
supplement thereto without the prior approval of such counsel, which approval
shall not be unreasonably withheld.
(h) At the request of the Investor, the Company shall cause to be
furnished to such Investor, on the date of the effectiveness of a Registration
Statement, a legal opinion, in form and substance reasonably acceptable to
Investor's counsel, dated as of such date, of counsel representing the Company
for purposes of such Registration Statement.
(i) The Company shall make available for inspection by (i) the Investor
and (ii) one legal counsel and one firm of accountants or other agents
retained by the Investor (collectively, the "Inspectors"), all pertinent
financial and other records, and pertinent corporate documents and properties
of the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably
request; provided, however, that each Inspector shall hold in strict
confidence and shall not make any disclosure (except to a Investor) or use of
any Record or other information which the Company determines in good faith to
be confidential, and of which determination the Inspectors are so notified,
unless (a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement or is otherwise
required under the 1933 Act, (b) the release of such Records is ordered
pursuant to a final, non-appealable subpoena or order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the Inspector
has knowledge. Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential.
(j) The Company shall hold in confidence and not make any disclosure of
information concerning a Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to
the public other than by disclosure in violation of this Agreement or any
other agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning a Investor is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt written notice to such Investor and allow such Investor, at the
Investor's expense, to undertake appropriate action to prevent disclosure of,
or to obtain a protective order for, such information.
(k) The Company shall use commercially reasonable efforts to maintain
designation and quotation of all the Registrable Securities covered by any
Registration Statement on the Principal Market. If, despite the Company's
best efforts, the Company is unsuccessful in satisfying the preceding
sentence, it shall use commercially reasonable efforts to cause all the
Registrable Securities covered by any Registration Statement to be listed on
each other national securities exchange and automated quotation system, if
any, on which securities of the same class or series issued by the Company are
then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange or system. The Company shall pay
all fees and expenses in connection with satisfying its obligation under this
Section 3(k).
(l) The Company shall cooperate with the Investor to facilitate the
prompt preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Investor may reasonably
request.
(m) The Company shall provide a transfer agent for all the Registrable
Securities not later than the effective date of the first Registration
Statement filed pursuant hereto.
(n) If requested by the Investor, the Company shall (i) as soon as
reasonably practical incorporate in a prospectus supplement or post-effective
amendment such information as such Investor reasonably determine should be
included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the
offering of the Registrable Securities to be sold in such offering; (ii) make
all required filings of such prospectus supplement or post-effective amendment
as soon as reasonably possible after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) supplement or make amendments to any Registration Statement if
reasonably requested by such Investor.
(o) The Company shall use commercially reasonable efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.
(p) The Company shall otherwise use commercially reasonable efforts to
comply with all applicable rules and regulations of the SEC in connection with
any registration hereunder.
(q) Within one business day after the Registration Statement which
includes Registrable Securities is declared effective by the SEC, the Company
shall deliver to the transfer agent for such Registrable Securities, with
copies to the Investor, confirmation that such Registration Statement has been
declared effective by the SEC.
(r) At or prior to the date of the first Put Notice (as that term is
defined in the Investment Agreement) and at such other times as the Investor
may reasonably request, the Company shall cause to be delivered, letters from
the Company's independent certified public accountants (i) addressed to the
Investor that such accountants are independent public accountants within the
meaning of the 1933 Act and the applicable published rules and regulations
thereunder, and (ii) in customary form and covering such financial and
accounting matters as are customarily covered by letters of independent
certified public accountants delivered to underwriters in connection with
public offerings.
(s) The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investor of Registrable Securities
pursuant to a Registration Statement.
Section 4. OBLIGATIONS OF THE INVESTOR.
(a) At least five calendar days prior to the first anticipated filing
date of a Registration Statement the Company shall notify the Investor in
writing of the information the Company requires from each such Investor if
such Investor elects to have any of such Investor's Registrable Securities
included in such Registration Statement. 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 of a particular Investor
that such Investor shall furnish in writing 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
reasonably be 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. Each Investor covenants
and agrees that, in connection with any sale of Registrable Securities by it
pursuant to a Registration Statement, it shall comply with the "Plan of
Distribution" section of the current prospectus relating to such Registration
Statement.
(b) The Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
(c) The Investor agrees that, upon receipt of written notice from the
Company of the happening of any event of the kind described in Section 3(f) or
the first sentence of 3(e), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until such Investor's
receipt of the copies of the supplemented or amended prospectus contemplated
by Section 3(f) or the first sentence of 3(e).
Section 5. EXPENSES OF REGISTRATION.
All expenses, other than underwriting discounts and commissions and other
than as set forth in the Investment Agreement, incurred in connection with
registrations including comments, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printing and accounting fees, and fees and disbursements
of counsel for the Company or for the Investor shall be paid by the Company.
Section 6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
(a) To the fullest extent permitted by law, the Company will, and hereby
does, indemnify, hold harmless and defend each Investor who holds such
Registrable Securities, the directors, officers, partners, employees, counsel,
agents, representatives of, and each Person, if any, who controls, any
Investor within the meaning of the 1933 Act or the Securities Exchange Act of
1934, as amended (the "1934 Act") (each, an "Indemnified Person"), against any
losses, claims, damages, liabilities, judgments, fines, penalties, charges,
costs, attorneys' fees, amounts paid in settlement or expenses, joint or
several (collectively, "Claims"), incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or
appeal taken from the foregoing by or before any court or governmental,
administrative or other regulatory agency, body or the SEC, whether pending or
threatened, whether or not an indemnified party is or may be a party thereto
("Indemnified Damages"), to which any of them may become subject insofar as
such Claims (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of a material fact in a Registration Statement or any
post-effective amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other "blue sky" laws of
any jurisdiction in which the Investor has requested in writing that the
Company register or qualify the Shares ("Blue Sky Filing"), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which the statements therein were made, not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in the
final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or
alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or
alleged violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Investor and each such controlling
person, promptly as such expenses are incurred and are due and payable, for
any reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of
or based upon a Violation which is due to the inclusion in the Registration
Statement of the information furnished to the Company by any Indemnified
Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto;
(ii) shall not be available to the extent such Claim is based on (a) a failure
of the Investor to deliver or to cause to be delivered the prospectus made
available by the Company or (b) the Indemnified Person's use of an incorrect
prospectus despite being promptly advised in advance by the Company in writing
not to use such incorrect prospectus; (iii) any claims based on the manner of
sale of the Registrable Securities by the Investor or of the Investor's
failure to register as a dealer under applicable securities laws; (iv) any
omission of the Investor to notify the Company of any material fact that
should be stated in the Registration Statement or prospectus relating to the
Investor or the manner of sale; and (v) any amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of the Indemnified Person and shall survive the resale of the
Registrable Securities by the Investor pursuant to the Registration Statement.
(b) In connection with any Registration Statement in which a Investor is
participating, each such Investor agrees to severally and jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement, each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act and
the Company's agents (collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim or Indemnified Damages arise out of or are based upon
any Violation, in each case to the extent, and only to the extent, that such
Violation is due to the inclusion in the Registration Statement of the written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and, subject to Section 6(c),
such Investor will reimburse any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent
shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Section 6(b) for only that amount of a
Claim or Indemnified Damages as does not exceed the net proceeds to such
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the resale of the Registrable Securities by the Investor
pursuant to the Registration Statement. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of
material fact contained in the preliminary prospectus were corrected on a
timely basis in the prospectus, as then amended or supplemented. This
indemnification provision shall apply separately to each Investor and
liability hereunder shall not be joint and several.
(c) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof
is to be made against any indemnifying party under this Section 6, deliver to
the indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if,
in the reasonable opinion of counsel retained by the Indemnified Person or
Indemnified Party, the representation by counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal
counsel for the Indemnified Persons or the Indemnified Parties, as applicable,
and such counsel shall be selected by the Investor, if the Investor are
entitled to indemnification hereunder, or the Company, if the Company is
entitled to indemnification hereunder, as applicable. The Indemnified Party
or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or Claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully appraised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or enter into
any settlement or other compromise which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
or Indemnified Person of a release from all liability in respect to such
Claim. Following indemnification as provided for hereunder, the indemnifying
party shall be surrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under
this Section 6, except to the extent that the indemnifying party is prejudiced
in its ability to defend such action.
(d) The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
Section 7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that: (i) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (ii) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 0000
Xxx) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of fraudulent misrepresentation; and (iii)
contribution by any seller of Registrable Securities shall be limited in
amount to the net amount of proceeds received by such seller from the sale of
such Registrable Securities.
Section 8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investor the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investor to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long
as the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 5(c) of the
Investment Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and
(c) furnish to the Investor, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements
of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be reasonably
requested to permit the Investor to sell such securities pursuant to Rule 144
without registration.
Section 9. NO ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall not be assignable.
Section 10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended only with the written consent
of the Company and Investor. No such amendment shall be effective to the
extent that it applies to less than all of the Investor of the Registrable
Securities.
Section 11. MISCELLANEOUS.
(a) Any notices or other communications required or permitted to be
given under the terms of this Agreement that must be in writing will be deemed
to have been delivered (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided a confirmation of transmission is
mechanically or electronically generated and kept on file by the sending
party); or (iii) one day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to the Company:
GK Intelligent Systems, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
With Copy to:
Xxxxxxx Business Law
Attn: Xxx Xxxxxxx
0000 Xxxxxx Xxxxxx, Xxxxx 0
Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Investor:
Dutchess Private Equities Fund, II, LP
000 Xxxxxx Xx, Xxxxx Xxxxx
Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Each party shall provide five business days prior notice to the other
party of any change in address, phone number or facsimile number.
(b) 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.
(c) The laws of the Commonwealth of Massachusetts shall govern all
issues arising from or related to this Agreement without regard to the
principles of conflict of laws. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
Boston, County of Suffolk, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
(d) This Agreement and the Transaction Documents constitute the entire
agreement among the parties hereto with respect to the subject matter hereof
and thereof. There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein and therein.
(e) This Agreement and the Transaction Documents supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
(f) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof. Whenever required
by the context of this Agreement, the singular shall include the plural and
masculine shall include the feminine. This Agreement shall not be construed
as if it had been prepared by one of the parties, but rather as if all the
parties had prepared the same.
(g) This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a
party, may be delivered to the other party hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
(h) Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.
* * *
SIGNATURE PAGE OF REGISTRATION RIGHTS AGREEMENT
Agreed as of the date first written above.
DUTCHESS PRIVATE EQUITIES FUND, II, L.P.,
BY ITS GENERAL PARTNER,
DUTCHESS CAPITAL MANAGEMENT, LLC
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Xxxxxxx X. Xxxxxxxx, Managing
Member
GK Intelligent Systems, inc.,
By /s/ Xxxx Xxxxxxx
-------------------------------------
Xxxx Xxxxxxx, Chief Executive Officer
