EXHIBIT 10.30
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement dated as of October 30, 2002 (this
"Agreement") by and between PayStar Corporation, a Nevada corporation,
with principal executive offices located at 0000 X. Xxxxxxxxx Xxxx,
Xxxxx 00, Xxxx, Xxxxxxxxxx 00000 (the "Company"), and La Jolla Cove
Investors, Inc. (the "Initial Investor").
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement dated as of October 30, 2002, by and
between the Initial Investor and the Company (the "Securities Purchase
Agreement"), the Company has agreed to issue and sell to the Initial
Investor a 8 3/4% Convertible Debenture (the "Debenture") of the
Company in the aggregate principal amount of $150,000 which, upon the
terms of and subject to the conditions contained therein, is
convertible into shares of the Company's Common Stock (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 upon conversion of the
Debenture and the Warrant Shares 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:
(1) "Affiliate" of any specified Person means any
other Person who directly, or indirectly through one or more
intermediaries, is in control of, is controlled by, or is under common
control with, such specified Person. For purposes of this definition,
control of a Person means the power, directly or indirectly, to direct
or cause the direction of the management and policies of such Person
whether by contract, securities, ownership or otherwise; and the terms
"controlling" and "controlled" have the respective meanings
correlative to the foregoing.
(2) "Closing Date" means October 30, 2002.
(3) "Commission" means the Securities and Exchange
Commission.
(4) "Exchange Act" means the Securities Exchange Act
of 1934, as amended, and the rules and regulations of the Commission
thereunder, or any similar successor statute.
(5) "Investor" means each of the Initial Investor and
any transferee or assignee of Registrable Securities which agrees to
become bound by all of the terms and provisions of this Agreement in
accordance with Section 8 hereof.
(6) "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.
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(7) "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.
(8) "Public Offering" means an offer registered with
the Commission and the appropriate state securities commissions by the
Company of its Common Stock and made pursuant to the Securities Act.
(9) "Registrable Securities" means the Common Stock
issued or issuable (i) upon conversion or redemption of the Debenture,
(ii) exercise of the Conversion Warrants (iii) pursuant to the terms
and provisions of the Debenture or the Securities Purchase Agreement,
(iv) in connection with any distribution, recapitalization, stock-
split, stock adjustment or reorganization of the Company; 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.
(10) "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 to and other material incorporated by
reference in such registration statement and Prospectus.
(11) "Restricted Security" means any share of Common
Stock issued upon conversion or redemption of the Debenture 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 such 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.
(12) "Securities Act" means the Securities Act of 1933,
as amended, and the rules and regulations of the Commission
thereunder, or any similar successor statute.
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(B) All capitalized terms used and not defined herein have
the respective meaning assigned to them in the Securities Purchase
Agreement or the Debenture.
2. Registration
(A) Filing and Effectiveness of Registration Statement.
The Company shall prepare and file with the Commission as soon as
practicable a Registration Statement relating to the offer and sale of
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 in no event later than
ninety (90) days after the Closing Date. The Company shall promptly
(and, in any event, no more than 24 hours after it receives comments
from the Commission), notify the Buyer when and if it receives any
comments from the Commission on the Registration Statement and
promptly forward a copy of such comments, if they are in writing, to
the Buyer. At such time after the filing of the Registration
Statement pursuant to this Section 2(A) as the Commission indicates,
either orally or in writing, that it has no further comments with
respect to such Registration Statement or that it is willing to
entertain appropriate requests for acceleration of effectiveness of
such Registration Statement, the Company shall promptly, and in no
event later than two (2) business days after receipt of such
indication from the Commission, request that the effectiveness of such
Registration Statement be accelerated within forty-eight (48) hours of
the Commission's receipt of such request. The Company shall notify
the Initial Investor by written notice that such Registration
Statement has been declared effective by the Commission within 24
hours of such declaration by the Commission.
(B) Eligibility for Use of Form S-3 or an SB-2. 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 or SB-2
and 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.
(C) Additional Registration Statement. In the event the
Current Market Price declines to a price per share the result of which
is that the Company cannot satisfy its conversion obligations to
Initial Investor hereunder, the Company shall, to the extent required
by the Securities Act (because the additional shares were not covered
by the Registration Statement filed pursuant to Section 2(a)), as
reasonably determined by the Initial Investor, file an additional
Registration Statement with the Commission for such additional number
of Registrable Securities as would be issuable upon conversion of the
Debenture (the "Additional Registrable Securities") in addition to
those previously registered. The Company shall, to the extent
required by the Securities Act, as reasonably determined by the
Initial Investor, prepare and file with the Commission not later than
the 30th day thereafter, a Registration Statement relating to the
offer and sale of such Additional 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 90 days thereafter. The Company shall
not include any other securities in the Registration Statement
relating to the offer and sale of such Additional Registrable
Securities.
(D) (i) If the Company proposes to register any of
its warrants, Common Stock or any other shares of common stock of the
Company under the Securities Act
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(other than a registration (A) on Form S-8 or S-4 or any successor or
similar forms, (B) relating to Common Stock or any other shares of
common stock of the Company issuable upon exercise of employee share
options or in connection with any employee benefit or similar plan of
the Company or (C) in connection with a direct or indirect acquisition
by the Company of another Person or any transaction with respect to
which Rule 145 (or any successor provision) under the Securities Act
applies), whether or not for sale for its own account, it will each
such time, give prompt written notice at least 20 days prior to the
anticipated filing date of the registration statement relating to such
registration to each Investor, which notice shall set forth such
Investor's rights under this Section 2(D) and shall offer such Investor
the opportunity to include in such registration statement such number of
Registrable Securities as such Investor may request. Upon the written
request of any Investor made within 10 days after the receipt of notice
from the Company (which request shall specify the number of Registrable
Securities intended to be disposed of by such Investor), the Company
will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities that the Company has been
so requested to register by each Investor, to the extent requisite to
permit the disposition of the Registrable Securities so to be
registered; provided, however, that (A) if such registration involves
a Public Offering, each Investor must sell its Registrable Securities
to any underwriters selected by the Company with the consent of such
Investor on the same terms and conditions as apply to the Company and
(B) if, at any time after giving written notice of its intention to
register any Registrable Securities pursuant to this Section 2 and
prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any
reason not to register such Registrable Securities, the Company shall
give written notice to each Investor and, thereupon, shall be relieved
of its obligation to register any Registrable Securities in connection
with such registration. The Company's obligations under this Section
2(D) shall terminate on the date that the registration statement to be
filed in accordance with Section 2(A) is declared effective by the
Commission.
(ii) If a registration pursuant to this Section
2(D) involves a Public Offering and the managing underwriter thereof
advises the Company that, in its view, the number of shares of Common
Stock that the Company and the Investors intend to include in such
registration exceeds the largest number of shares of Common Stock that
can be sold without having an adverse effect on such Public Offering
(the "Maximum Offering Size"), the Company will include in such
registration only such number of shares of Common Stock as does not
exceed the Maximum Offering Size, and the number of shares in the
Maximum Offering Size shall be allocated among the Company, the
Investors and any other sellers of Common Stock in such Public
Offering ("Third-Party Sellers"), first, pro rata among the Investors
until all the shares of Common Stock originally proposed to be offered
for sale by the Investors have been allocated, and second, pro rata
among the Company and any Third-Party Sellers, in each case on the
basis of the relative number of shares of Common Stock originally
proposed to be offered for sale under such registration by each of the
Investors, the Company and the Third-Party Sellers, as the case may
be. If as a result of the proration provisions of this Section
2(D)(ii), any Investor is not entitled to include all such Registrable
Securities in such registration, such Investor may elect to withdraw
its request to include any Registrable Securities in such
registration. With respect to registrations pursuant to this Section
2(D), the number of securities required to satisfy any underwriters'
over-allotment option shall be allocated among the Company, the
Investors and any Third Party Seller pro rata on the basis of the
relative number of securities offered for sale under such registration
by each of the Investors, the Company and any such Third Party Sellers
before the exercise of such over-allotment option.
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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 five (5) 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;
(B) During the Registration Period, comply with the
provisions of the Securities Act with respect to the Registrable
Securities of the Company covered by the Registration Statement until
such time as all of such Registrable Securities have been disposed of
in accordance with the intended methods of disposition by the
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 (A) draft copies thereof to the Investors and
reflect in such documents all such comments as the Investors (and
their counsel) reasonably may propose and (B) to the Investors a copy
of the accountant's consent letter to be included in the filing 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
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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 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) 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 Investor may request; and, within
three (3) 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, to the extent
necessary, an opinion of such counsel;
(J) Take all such other lawful actions reasonably necessary
to expedite and facilitate the disposition by the Investors of their
Registrable Securities in accordance with the intended methods
therefor provided in the Prospectus which are customary under the
circumstances;
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(K) Make generally available to its security holders as
soon as practicable, but in any event not later than three (3) months
after (i) the effective date (as defined in Rule 158(c) under the
Securities Act) of the Registration Statement and (ii) the effective
date of each post-effective amendment to the Registration Statement,
as the case may be, an earnings statement of the Company and its
subsidiaries complying with Section 11 (a) of the Securities Act and
the rules and regulations of the Commission thereunder (including, at
the option of the Company, Rule 158);
(L) In the event of an underwritten offering, promptly
include or incorporate in a Prospectus supplement or post-effective
amendment to the Registration Statement such information as the
managers reasonably agree should be included therein and to which the
Company does not reasonably object and make all required filings of
such Prospectus supplement or post-effective amendment as soon as
practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective
amendment;
(M) (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
nonpublic 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 majority in interest
of Investors and other parties;
(N) 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;
(O) In connection with any underwritten offering, obtain
opinions of counsel to the Company (which counsel and opinions (in
form, scope and substance) shall be reasonably satisfactory to the
managers) addressed to the underwriters, covering such matters as are
customarily covered in opinions requested in secondary underwritten
offerings (it being agreed that the matters to be covered by such
opinions shall include, without limitation, as of the date of the
opinion and as of the Effective Time of the Registration Statement or
most recent post-
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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);
(P) 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;
(Q) In connection with any underwritten offering, deliver
such documents and certificates as may be reasonably required by the
managers, if any, and
(R) In the event that any broker-dealer registered under
the Exchange Act shall be an "Affiliate" (as defined in Rule
2729(b)(1) of the rules and regulations of the National Association of
Securities Dealers, Inc. (the "NASD Rules") (or any successor
provision thereto)) of the Company or has a "conflict of interest" (as
defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite,
participate as a member of an underwriting syndicate or selling group
or assist in the distribution of any Registrable Securities covered by
the Registration Statement, whether as a holder of such Registrable
Securities or as an underwriter, a placement or sales agent or a
broker or dealer in respect thereof, or otherwise, the Company shall
assist such broker-dealer in complying with the requirements of the
NASD Rules, including, without limitation, by (A) engaging a
"qualified independent underwriter" (as defined in Rule 2720(b)(15) of
the NASD Rules (or any successor provision thereto)) to participate in
the preparation of the Registration Statement relating to such
Registrable Securities, to exercise usual standards of due diligence
in respect thereof and to recommend the public offering price of such
Registrable Securities, (B) indemnifying such qualified independent
underwriter to the extent of the indemnification of underwriters
provided in Section 6 hereof and (C) providing such information to
such broker-dealer as may be required in order for such broker-dealer
to comply with the requirements of the NASD Rules.
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 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
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Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request;
(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) Indemnification by the Company. 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 based upon an 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 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
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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) Notice of Claims, etc. Promptly after receipt by a
party seeking indemnification pursuant to this Section 6 (an
"Indemnified Party") of written notice of any investigation, claim,
proceeding or other action in respect of which indemnification is
being sought (each, a "Claim"), the Indemnified Party promptly shall
notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the
Indemnified Party, except to the extent that the Indemnifying Party is
materially prejudiced and forfeits substantive rights and defenses by
reason of such failure. In connection with any Claim as to which both
the Indemnifying Party and the Indemnified Party are parties, the
Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the
Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of
such Claim, and the Indemnifying Party shall bear the reasonable fees,
out-of-pocket costs and expenses of such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall
have agreed to pay such fees, costs and expenses, (y) the Indemnified
Party and the Indemnifying Party shall reasonably have concluded that
representation of the Indemnified Party by the Indemnifying Party by
the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of
the defense of such Claim, or if there may be legal defenses available
to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party or (z) the Indemnifying
Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances
other than as described in clauses (x), (y) or (z) above, the fees,
costs and expenses of such legal counsel shall be borne exclusively by
the Indemnified Party. Except as provided above, the Indemnifying
Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than one
firm of counsel for the Indemnified Party (together with appropriate
local counsel). The Indemnified Party shall not, without the prior
written consent of the Indemnifying Party (which consent shall not
unreasonably be withheld), settle or compromise any Claim or consent
to the entry of any judgment that does not include an unconditional
release of the Indemnifying Party from all liabilities with respect to
such Claim or judgment.
(C) Contribution. If the indemnification provided for in
this Section 6 is unavailable to or insufficient to hold harmless an
Indemnified Person under subsection (A) 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
10
which resulted in such losses, claims, damages or liabilities (or actions
in respect thereof), as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall
be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contribution pursuant
to this Section 6(D) were determined by pro rata allocation (even if
the 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.
(D) 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.
(E) 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 use its best efforts to:
(1) comply with the provisions of paragraph (c) (1) of Rule
144 and
(2) 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
11
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 Investor, make available other information as
required by, and so long as necessary to permit sales of, its Registrable
Securities pursuant to Rule 144.
8. Assignment
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assigned by the
Investors to any permitted transferee of all or any portion of such
Registrable Securities (or all or any portion of the Debenture or
Warrant of the Company which is convertible into such 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. Changes in Common Stock
If, and as often as, there are any changes in the Common Stock by
way of stock split, stock dividend, reverse split, combination or
reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall
be made in the provisions hereof, as may be required, so that the
rights and privileges granted hereby shall continue with respect to
the Common Stock as so changed.
11. Miscellaneous
(A) A person or entity shall be deemed to be a holder of
Registrable Securities whenever such person or entity owns of record
such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or
entities with respect to the same Registrable Securities, the Company
shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(B) If, after the date hereof and prior to the Commission
declaring the Registration Statement to be filed pursuant to Section
2(a) effective under the Securities Act, the Company grants to any
Person any registration rights with respect to any Company securities
which are more favorable to such other Person than those provided in
this Agreement, then the
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Company forthwith shall grant (by means of an amendment to this
Agreement or otherwise) identical registration rights to all Investors
hereunder.
(C) Except as may be otherwise provided herein, any notice
or other communication or delivery required or permitted hereunder
shall be in writing and shall be delivered personally, or sent by
telecopier machine or by a nationally recognized overnight courier
service, and shall be deemed given when so delivered personally, or by
telecopier machine or overnight courier service as follows:
(1) if to the Company, to:
PayStar Corporation
0000 X. Xxxxxxxxx Xxxx, Xxxxx 00
Xxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
(2) if to the Buyer, to:
La Jolla Cove Investors, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
(3) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company.
The Company, the Initial Investor or any Investor may change the
foregoing address by notice given pursuant to this Section 11(C).
(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 California. Each of the
parties consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of San Diego or the state
courts of the State of California sitting in the City of San Diego 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) Should any party hereto employ an attorney for the
purpose of enforcing or construing this Agreement, or any judgment
based on this Agreement, in any legal proceeding whatsoever, including
insolvency, bankruptcy, arbitration, declaratory relief or other
litigation,
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the prevailing party shall be entitled to receive from the other party
or parties thereto reimbursement for all reasonable attorneys' fees and
all reasonable costs, including but not limited to service of process,
filing fees, court and court reporter costs, investigative costs, expert
witness fees, and the cost of any bonds, whether taxable or not, and that
such reimbursement shall be included in any judgment or final order issued
in that proceeding. The "prevailing party" means the party determined by
the court to most nearly prevail and not necessarily the one in whose favor
a judgment is rendered.
(G) 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, provisions, covenants and
restrictions set forth herein shall remain in full force and effect
and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction.
It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(H) 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 interest
of the Registrable Securities, the Company shall not grant to any
person the right to request it to register any of its securities under
the Securities Act unless the rights so granted are 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. The restrictions on the
Company's rights to grant registration rights under this paragraph
shall terminate on the date the Registration Statement to be filed
pursuant to Section 2(A) is declared effective by the Commission.
(I) This Agreement, the Securities Purchase Agreement, the
Debenture and the Conversion Warrants Agreement, of even date herewith
among the Company and the Initial Investor constitute the entire
agreement among the parties hereto with respect to the subject matter
hereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein. These
Agreements supersede all prior agreements and undertakings among the
parties hereto with respect to the subject matter hereof.
(J) 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.
(K) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may
require.
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(L) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning
thereof.
(M) 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.
(N) This Agreement may be executed in counterparts, each of
which shall be deemed an original but both of which shall constitute
one and the same agreement. A facsimile transmission of this signed
Agreement shall be legal and binding on the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly caused this
Agreement to be executed and delivered on the date first above
written.
PayStar Corporation
By: /s/ Xxxxxxx Xxxxx
Name: Xxxxxxx Xxxxx
Title: CEO
La Jolla Cove Investors, Inc.
By: /s/ Xxxxxx Xxxx
Name: Xxxxxx Xxxx
Title: Portfolio Mgr.
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