REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
EACH OF THE STOCKHOLDERS REFERRED TO HEREIN,
ENTERPRISE TECHNOLOGY GROUP, INC.
AND
COMPUTER OUTSOURCING SERVICES, INC.
Dated as of December 18, 1998
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of December 18, 1998
(the "Effective Date"), by and among Computer Outsourcing Services, Inc., a New
York corporation (the "Company"), Enterprise Technology Group, Incorporated, a
New Jersey corporation ("ETG") and each of the Stockholders (defined below).
WHEREAS, the Company, COSI Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of the Company ("CAC"), ETG, and certain
of the stockholders of ETG (the "Stockholder(s)") have entered into the Asset
Purchase Agreement (the "Asset Purchase Agreement"), dated as of December 16,
1998, pursuant to which CAC desires to purchase from ETG and ETG desires to sell
to CAC, certain assets of ETG; and
WHEREAS, the Company desires to grant certain registration
rights to the Stockholders with respect to the shares of Common Stock issued to
ETG in connection the Asset Purchase Agreement.
NOW, THEREFORE, in consideration on the foregoing premises and
for other good and valuable consideration, the adequacy and receipt of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1 Definitions. The following terms shall have the meanings
ascribed to them below:
"Agreement" means this Agreement, as amended, modified or
supplemented from time to time, in accordance with the terms hereof, together
with any exhibits, schedules or other attachments thereto.
"Asset Purchase Agreement" means Asset Purchase Agreement as
defined in the introduction hereof.
"Business Day" means any day that is not a Saturday, Sunday or
a day on which banking institutions in New York, New York are authorized or
obligated by law, executive order or government decree to be closed.
"Commission" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Common Stock" means the common stock, par value $.01 per share,
of the Company.
"Company" means Company as defined in the introduction hereof.
"Controlling Person" means a Controlling Person as defined in
Section 4.1.
"Damages" means Damages as defined in Section 4.1.
"Demand Registration" means a Demand Registration as defined in
Section 2(a).
"Effective Date" means Effective Date as defined in the
introduction hereof.
"ETG" has the meaning ascribed thereto in the introduction
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"First Post-Closing Adjustment Issue Date" means First Post-
Closing Adjustment Issue Date as defined in Section 2(a) hereof.
"Indemnified Party" means an Indemnified Party as defined in
Section 4.3.
"Indemnifying Party" means an Indemnifying Party as defined in
Section 4.3.
"Person" means any individual, entity or group, including
without limitation, individual, corporation, limited liability company, limited
or general partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof.
"Prospectus" means the prospectus included in any Registration
Statement (including without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the securities covered by such Registration
Statement, and all other amendments and supplements to the prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such prospectus.
"Registrable Securities" means the shares of Common Stock issued
pursuant to the Asset Purchase Agreement until (i) a Registration Statement
covering such shares of Common Stock has been declared effective by the
Commission and such shares of Common Stock have been disposed of pursuant to
such effective Registration Statement, or (ii) such shares of Common Stock would
be saleable pursuant to Rule 144 under the Securities Act (or any similar
provisions then in force), without regard to the volume limitations set forth
in Rule 144(e), or (iii) such shares of Common Stock have been otherwise
transferred and the Company has delivered a new certificate or other evidence of
ownership for such Common Stock not bearing a restrictive legend and not subject
to any stop transfer or similar restrictive order and all of such Common Stock
may be resold by the Person receiving such certificate without complying with
the registration requirements of the Securities Act.
"Registration Statement" means any registration statement of
the Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits and all material incorporated by reference in such registration
statement.
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"Request" means a Request as defined in Section 2(a) hereof.
"Second Post-Closing Adjustment Issue Date" means Second Post-
Closing Adjustment Issue Date as defined in Section 2(a) hereof.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Selling Stockholder" means a Stockholder who is selling
Registrable Securities pursuant to a Registration Statement under the Securities
Act.
"Selling Stockholders Counsel" means the counsel selected to
represent the Selling Stockholders as set forth in Section 3.1(c).
"Stockholder(s)" has the meaning ascribed thereto in the
introduction hereof.
"Underwriter" means a securities dealer who purchases any
Registrable Securities as principal in an underwritten offering and not as part
of such dealer's market-making activities.
"Underwritten Offering" means a registration in which securities
of the Company are sold to an Underwriter for reoffering to the public.
ARTICLE II.
REGISTRATION RIGHTS
Section 2.1 Demand Registration.
(a) Request for Registration. A majority-in-interest of the
Stockholders then holding outstanding shares of Registrable Securities or to
whom a majority-in-interest of Registrable Securities are attributable, if such
Registrable Securities have not been distributed by ETG to such Stockholders,
may make a written request (a "Request") once (i) between the Effective Date
and the earlier of (A) March 1, 2000 and (B) the date the stock portion of the
First Post-Closing Adjustment (as defined in the Asset Purchase Agreement) is
issued to ETG (the earlier of such dates shall be referred to herein as the
"First Post-Closing Adjustment Issue Date"); and once again (ii) between the
First Post-Closing Adjustment Issue Date and the earlier of (A) March 1, 2001
and (B) the date the stock portion of the Second Post-Closing Adjustment (as
defined in the Asset Purchase Agreement) is issued to ETG (the earlier of such
dates shall be referred to herein as the "Second Post-Closing Adjustment Issue
Date"); and once again (iii) between the Second Post-Closing Adjustment Issue
Date and the earlier of (A) March 1, 2002 and (B) the date the stock portion of
the Third Post-Closing Adjustment (as defined in the Asset Purchase Agreement)
is issued to ETG, that the Company effect under the Securities Act and state
securities laws the registration of the offer and sale of not less than all of
the Registrable Securities then owned by or attributable to all of the
Stockholders (each such registration being referred to herein as a "Demand
Registration"). Any request for a Demand Registration will specify the number
of Registrable Securities proposed to be sold and the intended method(s) of
disposition thereof and shall also state the firm intent of the Stockholders to
offer Registrable Securities for sale.
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Notwithstanding the foregoing, the Company shall not be requested to effect a
Demand Registration unless the Request has been made at least one hundred eighty
(180) days since the last Registration Statement (other than a shelf
registration under Rule 415 of the Securities Act or a Registration Statement on
Form S-8) was filed by the Company.
(b) Effective Registration. A registration will not be deemed to
have been effected as a Demand Registration unless the Registration Statement
relating thereto has been declared effective by the Commission and the Company
has complied in all material respects with its obligations under this Agreement
with respect thereto; provided that if, after the Registration Statement has
become effective, the offering and/or sale of Registrable Securities pursuant
to such Registration Statement is or becomes the subject of any stop order,
injunction or other order or requirement of the Commission or any other
governmental or administrative agency, or if any court or other governmental or
quasi-governmental agency prevents or otherwise limits the offer and/or sale of
the Registrable Securities pursuant to the Registration Statement, other than
in each case primarily as a result of acts or omissions of the Stockholders or
any agent thereof, such registration will be deemed not to have been effected.
If (i) a registration requested pursuant to this Section 2 is deemed not to have
been effected or (ii) the Registration Statement relating to a Demand
Registration requested pursuant to this Section 2 does not remain effective for
a period of at least ninety (90) consecutive days beyond the effective date
thereof or, with respect to an Underwritten Offering of Registrable Securities,
until forty five (45) days after the commencement of the distribution by the
Stockholders of the Registrable Securities included in such Registration
Statement, then the Company shall continue to be obligated to effect such
Registration pursuant to this Section 2.
(c) Selection of Underwriter. If the Selling Stockholders
participating in a Demand Registration so elect, the offering of such
Registrable Securities pursuant to such Demand Registration shall be in the form
of an Underwritten Offering. The Company shall select, with the consent of the
Selling Stockholders, which consent shall not be unreasonably withheld, the
investment bankers to act as the lead managing Underwriter or Underwriters in
connection with such offering.
(d) Deferral of Registration. Notwithstanding any other provision
of this Section 2, the Company shall not be obligated to effect the filing of a
Registration Statement pursuant to Section 2(a) hereof (i) during any period
when there exists an effective Registration Statement covering the Registrable
Securities, or (ii) for a period not to exceed ninety (90) days, if the Company
shall furnish to the Stockholders requesting a Registration Statement under
Section 2(a) hereof a certificate, signed by the Company, stating that in the
good faith judgment of the Board of Directors of the Company it would be
detrimental to the best interests of the Company and its stockholders generally
for such Registration Statement to be filed at that time; provided that in such
event, the Stockholders initiating the request for registration will be entitled
to withdraw such request.
(e) Reduction of Offering. The Company may include in a Demand
Registration pursuant to Section 2 securities of the same class as the
Registrable Securities for the account of the Company and any other Persons who
hold securities of the same class as the Registrable Securities on the same
terms and conditions as the Registrable Securities to be included therein;
provided, however, that (i) if the lead managing Underwriter or Underwriters of
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any Underwritten Offering described in this Section 2 have informed the Company
in writing that it is their opinion that the total number of Registrable
Securities, and securities of the same class as the Registrable Securities which
Stockholders, the Company and any other Persons desiring to participate in such
registration intend to include in such offering is such as to materially and
adversely affect the success of such offering, then the number of shares to be
offered for the account of the Company and for the account of all such other
Persons (other than the Stockholders) participating in such registration shall
be reduced or limited pro rata in proportion to the respective number of shares
requested to be registered to the extent necessary to reduce the total number of
shares requested to be included in such offering to the number of shares, if
any, recommended by such managing Underwriter or Underwriters, and (ii) if the
offering is not an Underwritten Offering, no other Person, including the
Company, shall be permitted to offer securities under any such Demand
Registration unless the Selling Stockholders owning a majority-in-interest of
Common Stock to be sold consent to the inclusion of such shares therein.
(f) Holdback Agreements. If any registration of Registrable
Securities shall be in connection with an underwritten public offering, each
Stockholder agrees not to effect any public sale or distribution, including any
sale pursuant to Rule 144 under the Securities Act, of any Registrable
Securities, and not to effect any such public sale or distribution of any other
equity security of the Company or of any security convertible into or
exchangeable or exercisable for any equity security of the Company (in each
case, other than as part of such underwritten public offering) during the seven
(7) days prior to, and during the ninety (90) day period beginning on, the
effective date of such Registration Statement (except as part of such
registration).
ARTICLE III.
REGISTRATION PROCEDURES
Section 3.1 Filings; Information. Whenever the Company is required
to effect or cause the registration of the offer and sale of Registrable
Securities pursuant to Section 2 hereof, the Company will effect the
registration of the offer and the sale of such Registrable Securities in
accordance with the intended method(s) of disposition thereof as quickly as
practicable, and in connection with any such request:
(a) The Company will prepare and file with the Commission a
Registration Statement with respect to the offer and sale of such securities and
use its good faith efforts to cause such Registration Statement to become and
remain effective until the completion of the distribution contemplated thereby;
provided, however, the Company shall not be required to keep such Registration
Statement effective for more than ninety (90) days (or such shorter period which
will terminate when all Registrable Securities covered by such Registration
Statement have been sold, but not prior to the expiration of the applicable
period referred to in Section 4(3) of the Securities Act and Rule 174
thereunder, if applicable); provided, further, that the Company shall file with
the Commission a Registration Statement as soon as is practicable after the date
of the Request for the Demand Registration and in any event no later than sixty
(60) days after the date of the Request for the Demand Registration and shall
cause such Registration Statement to be declared effective as soon as is
practicable after the date of filing.
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(b) The Company will prepare and file with the Commission such
amendments and post-effective amendments to the Registration Statement as may be
necessary to keep such Registration Statement effective for as long as such
registration is required to remain effective pursuant to the terms hereof; cause
the Prospectus to be supplemented by any required Prospectus supplement, and, as
so supplemented, to be filed pursuant to Rule 424 under the Securities Act; and
comply with the provisions of the Securities Act applicable to it with respect
to the disposition of all Registrable Securities covered by such Registration
Statement during the applicable period in accordance with the intended methods
of disposition by the Selling Stockholders set forth in such Registration
Statement or supplement to the Prospectus.
(c) The Company, at least ten (10) Business Days prior to filing a
Registration Statement or at least five (5) Business Days prior to filing a
Prospectus or any amendment or supplement to such Registration Statement or
Prospectus, will furnish to (i) ETG, if ETG holds Registrable Securities on
behalf of any Selling Stockholders; (ii) each Selling Stockholder, (iii) not
more than one counsel representing all Selling Stockholders ("Selling
Stockholders Counsel"), to be selected by a majority-in-interest of such Selling
Stockholders, and (iv) each Underwriter, if any, of the Registrable Securities
covered by such Registration Statement copies of such Registration Statement as
proposed to be filed, together with exhibits thereto, which documents will be
subject to review and approval by each of the foregoing within five (5) Business
Days after delivery (except that such review and approval of any Prospectus or
any amendment or supplement to such Registration Statement or Prospectus must be
within three (3) Business Days after delivery), and thereafter, furnish to such
Selling Stockholders, Selling Stockholders Counsel and Underwriters, if any,
such number of conformed copies of such Registration Statement, each amendment
and supplement thereto (in each case including all exhibits thereto and
documents incorporated by reference therein), the Prospectus included in such
Registration Statement (including each preliminary Prospectus) and such other
documents or information as such Selling Stockholders, Selling Stockholders
Counsel or Underwriters may reasonably request in order to facilitate the
disposition of the Registrable Securities (it being understood that the Company
consents to the use of the Prospectus and any amendment or supplement thereto by
each Selling Stockholder and the Underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by such Prospectus or
any amendment or supplement thereto).
(d) On or prior to the date on which the Registration Statement is
declared effective, use its good faith efforts to register or qualify such
Registrable Securities under such other securities or "blue sky" laws of such
jurisdictions as any Selling Stockholder, Selling Stockholders Counsel or
Underwriter reasonably requests and do any and all other acts and things which
may be necessary or advisable to enable such Selling Stockholder to consummate
the disposition in such jurisdictions of such Registrable Securities owned by
such Selling Stockholder; use its good faith efforts to keep each such
registration or qualification (or exemption therefrom) effective during the
period which the Registration Statement is required to be kept effective; and
use its good faith efforts to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by the applicable Registration Statement; provided, that the
Company will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph (d), (ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction.
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(e) The Company will notify ETG (if ETG hold any Registrable
Securities on behalf of any Selling Stockholders) and each Selling Stockholder,
Selling Stockholders Counsel and any Underwriter and (if requested by any such
Person) confirm such notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective, (ii) of the issuance by the Commission of any stop order suspending
the effectiveness of a Registration Statement or the initiation or threatening
of any proceedings for that purpose, (iii) of the issuance by any state
securities commission or other regulatory authority of any order suspending
the qualification or exemption from qualification of any of the Registrable
Securities under state securities or "blue sky" laws or the initiation of any
proceedings for that purpose, and (iv) of the happening of any event which makes
any statement made in a Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated by reference therein untrue
in a material respect or which requires the making of any changes in such
Registration Statement, Prospectus or documents so that they will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements in the
Registration Statement and Prospectus not misleading in light of the
circumstances in which they were made; and, as promptly as practicable
thereafter, prepare and file with the Commission and furnish a supplement or
amendment to such Prospectus so that, as thereafter deliverable to the buyers of
such Registrable Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(f) The Company will make generally available an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act covering the
12-month period beginning with the first day of the Company's first fiscal
quarter commencing after the effective date of a Registration Statement, which
requirement will be deemed to be satisfied if the Company timely files complete
and accurate information on Forms 10-Q, 10-K and 8-K under the Exchange Act and
otherwise complies with Rule 158 under the Securities Act.
(g) The Company will enter into customary agreements reasonably
satisfactory to the Company (including, if applicable, an underwriting agreement
in customary form and which is reasonably satisfactory to the Company) and take
such other actions as are reasonably required in order to expedite or facilitate
the disposition of such Registrable Securities.
(h) The Company, during the period when the Prospectus is required
to be delivered under the Securities Act, will file all documents required to be
filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act.
The Company may require ETG (if ETG holds Registrable Securities
on behalf of any Selling Stockholders) and each Selling Stockholder to promptly
furnish in writing to the Company such information regarding the distribution of
the Registrable Securities as the Company may from time to time reasonably
request and such other information as may be legally required in connection with
such registration including, without limitation, all such information as may be
requested by the Commission or the National Association of Securities Dealers,
Inc.
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ETG (if ETG holds Registrable Securities on behalf of any
Selling Stockholders) and each Selling Stockholder agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 3.1(e) hereof, such Selling Stockholder will forthwith discontinue
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until such Selling Stockholder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
3.1(e) hereof, and, if so directed by the Company, ETG (if ETG holds Registrable
Securities on behalf of any Selling Stockholders) and such Selling Stockholder
will deliver to the Company all copies, other than permanent file copies then
in such Selling Stockholder's possession, of the most recent Prospectus covering
such Registrable Securities at the time of receipt of such notice. In the event
the Company shall give such notice, the Company shall extend the period during
which such Registration Statement shall be maintained effective (including the
period referred to in Section 3.1(a) hereof) by the number of days during the
period from and including the date of the giving of notice pursuant to Section
3.1(e) hereof to the date when the Company shall make available to ETG and the
Selling Stockholders covered by such Registration Statement a Prospectus
supplemented or amended to conform with the requirements of Section 3.1(e)
hereof.
Section 3.2 Registration Expenses. The Company shall pay all
expenses incident to the Company's performance of or compliance with this
Agreement including, without limitation: (i) all registration and filing fees,
(ii) the fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (iii) all printing, messenger and
delivery expenses, (iv) the Company's internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), (v) the fees and expenses incurred in connection
with the listing or quotation, as appropriate, of the Registrable Securities,
(vi) the fees and disbursements of counsel for the Company and the fees and
expenses for independent certified public accountants retained by the Company
(including the expenses of any special audit or cold comfort letters), and (vii)
the fees and expenses of any special experts retained by the Company in
connection with such registration. The Company shall have no obligation to pay
any underwriting fees, discounts, commissions or fees and expenses of ETG or the
Selling Stockholders' Counsel attributable to the sale of Registrable Securities
and any of the expenses incurred by Selling Stockholders which are not payable
by the Company, such costs to be borne by ETG or the Selling Stockholder or
Selling Stockholders.
ARTICLE IV.
INDEMNIFICATION AND CONTRIBUTION
Section 4.1 Indemnification by the Company. The Company agrees to indemnify
and hold harmless, to the fullest extent permitted by law, ETG. If ETG holds
Registrable Securities on behalf of Selling Stockholders and each Selling
Stockholder, its partners, officers, directors, employees, advisors and agents,
and each Person, if any, who controls such Selling Stockholder within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
together with the partners, officers, directors, employees, advisors and agents
of such controlling Person (collectively, the "Controlling Persons"), from and
against any loss, claim, damage, liability, attorneys' fees, cost or expense
and costs and expenses of investigating and defending any such claim
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(collectively, the "Damages") and any action in respect thereof to which such
Selling Stockholder, its partners, officers, directors, employees, advisors and
agents, and any such Controlling Person may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such Damages (or proceedings in
respect thereof) arise out of, or are based upon, any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus or any preliminary Prospectus, or arise out of, or are
based upon, any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are based upon information furnished in
writing to the Company by ETG or a Selling Stockholder expressly for use
therein, and shall reimburse ETG and each Selling Stockholder, its partners,
officers, directors, employees, advisors and agents, and each such Controlling
Person for any legal and other expenses reasonably incurred by that Selling
Stockholder, its partners, officers, directors, employees, advisors and agents,
or any such Controlling Person in investigating or defending or preparing to
defend against any such Damages or proceedings; provided, however, that the
Company shall not be liable to ETG or any Selling Stockholder or other
indemnitee to the extent that any such Damages arise out of or are based upon
an untrue statement or omission made in any preliminary Prospectus if (i) such
Selling Stockholder failed to send or deliver a copy of the final Prospectus
with or prior to the delivery of written confirmation of the sale by such
Selling Stockholder to the Person asserting the claim from which such Damages
arise in any case where such delivery of the Prospectus (as amended or
supplemented) is required by the Securities Act, and (ii) the final Prospectus
would have corrected such untrue statement or such omission, where such failure
to deliver the Prospectus was not a result of non-compliance by the Company
under Section 3.1(e) of this Agreement. The Company also agrees to indemnify
any Underwriters of the Registrable Securities, their officers and directors and
each Person who controls such Underwriters on substantially the same basis as
that of the indemnification of the Selling Stockholders provided in this Section
4.1.
Section 4.2 Indemnification by Selling Stockholders. Each Selling
Stockholder agrees, severally but not jointly, to indemnify and hold harmless
the Company, its officers, directors, employees, advisors and agents and each
Person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, together with the partners,
officers, directors, employees, advisors and agents of such Controlling Person,
to the same extent as the foregoing indemnity from the Company to such Selling
Stockholder, but only with reference to information related to such Selling
Stockholder, or its plan of distribution, furnished in writing by such Selling
Stockholder expressly for use in any Registration Statement or Prospectus, or
any amendment or supplement thereto, or any preliminary Prospectus; provided,
however, that such Selling Stockholder shall not be liable in any such case to
the extent that prior to the filing of any such Registration Statement or
Prospectus or amendment or supplement thereto, such Selling Stockholder has
furnished in writing to the Company information expressly for use in such
Registration Statement or Prospectus or any amendment or supplement thereto
which corrected or made not misleading information previously furnished to the
Company. In case any action or proceeding shall be brought against the Company
or its officers, directors, employees, advisors or agents or any such
Controlling Person or its officers, directors, employees or agents, in respect
of which indemnity may be sought against such Selling Stockholder, such Selling
Stockholder shall have the rights and duties given to the Company, and the
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Company or its officers, directors, employees or agents, or such Controlling
Person, or its officers, directors, employees, advisors or agents, shall have
the rights and duties given to such Selling Stockholder, by the preceding
paragraph.
Section 4.3 Conduct of Indemnification Proceedings. Promptly after
receipt by any Person in respect of which indemnity may be sought pursuant to
Section 4.1 or 4.2 (an "Indemnified Party") of notice of any claim or the
commencement of any action, the Indemnified Party shall, if a claim in respect
thereof is to be made against the Person against whom such indemnity may be
sought (an "Indemnifying Party"), notify the Indemnifying Party in writing of
the claim or the commencement of such action; provided that the failure to
notify the Indemnifying Party shall not relieve it from any liability which it
may have to an Indemnified Party otherwise than under Section 4.1 or 4.2 except
to the extent of any actual prejudice resulting therefrom. If any such claim or
action shall be brought against an Indemnified Party, and it shall notify the
Indemnifying Party thereof, the Indemnifying Party shall be entitled to
participate therein, and, to the extent that it wishes, jointly with any other
similarly notified Indemnifying Party, to assume the defense thereof with
counsel reasonably satisfactory to the Indemnified Party. After notice from the
Indemnifying Party to the Indemnified Party of its election to assume the
defense of such claim or action, the Indemnifying Party shall not be liable to
the Indemnified Party for any legal or other expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation; provided that the Indemnified Party shall
have the right to employ separate counsel to represent the Indemnified Party and
its Controlling Persons who may be subject to liability arising out of any claim
in respect of which indemnity may be sought by the Indemnified Party against the
Indemnifying Party, but the fees and expenses of such counsel shall be for the
account of such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the retention of such counsel or
(ii) in the opinion of counsel to such Indemnified Party, representation of both
parties by the same counsel would be inappropriate due to actual or potential
conflicts of interest between them, it being understood, however, that the
Indemnifying Party shall not, in connection with any one such claim or action or
separate but substantially similar or related claims or actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all Indemnified
Parties. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any claim or pending or threatened
proceeding in respect of which the Indemnified Party is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Party,
unless such settlement includes an unconditional release of such Indemnified
Party from all liability arising out of such claim or proceeding. Whether or
not the defense of any claim or action is assumed by the Indemnifying Party,
such Indemnifying Party will not be subject to any liability for any settlement
made without its consent, which consent will not be unreasonably withheld..
Section 4.4 Contribution. If the indemnification provided for in
this Article 4 is unavailable to the Indemnified Parties in respect of any
Damages referred to herein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Damages in such proportion
as is appropriate to reflect the relative benefits received by the Company on
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the one hand and the Selling Stockholders on the other from the offering of the
Registrable Securities, or if such allocation is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits but also the relative fault of the Company on the one hand and the
Selling Stockholders on the other in connection with the statements or omissions
which resulted in such Damages, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of each
Selling Stockholder on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company, ETG and the Selling Stockholders agree that it
would not be just and equitable if contribution pursuant to this Section 4.4
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an Indemnified
Party as a result of the Damages referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.4, no Selling Stockholder shall
be required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Selling Stockholder were
offered to the public exceeds the amount of any damages which such Selling
Stockholder has otherwise paid by reason of such untrue or alleged untrue
statement or omission or alleged omission. 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. Each Selling Stockholder's obligations to
contribute pursuant to this Section 4.4 is several in the proportion that the
proceeds of the offering received by such Selling Stockholder bears to the total
proceeds of the offering received by all the Selling Stockholders and not joint.
ARTICLE V.
MISCELLANEOUS
Section 5.1 Participation in Underwritten Registrations. No Person
may participate in any underwritten registration hereunder unless such Person
(a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and these
registration rights.
Section 5.2 Rule 144 and 144A. The Company covenants that it will
file any reports required to be filed by it under the Securities Act and the
Exchange Act and that it will take such further action as ETG or any Stockholder
may reasonably request, all to the extent required from time to time to enable
Stockholders to sell Registrable Securities without registration under the
11
Securities Act within the limitation of the exemptions provided by (a) Rule 144
or Rule 144A under the Securities Act, or (b) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any Stockholder, the
Company will deliver to such Stockholder a written statement as to whether it
has complied with such requirements.
Section 5.3 Amendment and Modification. Any provision of this
Agreement may be waived, provided that such waiver is set forth in a writing
executed by the party against whom the enforcement of such waiver is sought.
This Agreement may not be amended, modified or supplemented other than by a
written instrument signed by the holders of at least a majority-in-interest of
the Registrable Securities; provided, however, that without the consent of all
the Stockholders, no amendment or modification which materially and adversely
affects the ability of such Stockholders to have the offer and sale of
securities registered hereunder may be effected. No course of dealing between
or among any Persons having any interest in this Agreement will be deemed
effective to modify, amend or discharge any part of this Agreement or any rights
or obligations of any Person under or by reason of this Agreement.
Section 5.4 Successors and Assigns; Third Party Beneficiaries. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto, each subsequent Stockholder and their
respective successors and assigns and executors, administrators and heirs..
Section 5.5 Entire Agreement. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
Section 5.6 Headings. Subject headings are included for convenience
only and shall not affect the interpretation of any provisions of this
Agreement.
Section 5.7 Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if personally served or sent by
telecopy, on the business day after notice is delivered to a courier or mailed
by express mail if sent by courier delivery service or express mail for next day
delivery and on the third day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered, return receipt
requested, postage prepaid and addressed as follows:
If to the Company to:
Computer Outsourcing Services, Inc.
0 Xxxxxxxx Xxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: President
Fax: (000) 000-0000
With a copy to:
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq
Fax: (000) 000-0000
12
If to ETG to:
Xxxxxx X. Xxxxxx
c/o Enterprise Technology Group, Incorporated
0 Xxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000
If to a Stockholder, to the Stockholder
at the most current address given by such
Stockholder to the Company in writing.
Section 5.8 Governing Law; Forum; Process. This Agreement shall be
construed in accordance with, and governed by, the laws of the State of New York
as applied to contracts made and to be performed entirely in the State of New
York without regard to principles of conflicts of law. Each of the parties
hereto hereby irrevocably and unconditionally submits to the exclusive
jurisdiction of any court of the State of New Jersey or any federal court
sitting in the State of New Jersey for purposes of any suit, action or other
proceeding arising out of this Agreement (and agrees not to commence any action,
suit or proceedings relating hereto except in such courts). Each of the parties
hereto agrees that service of any process, summons, notice or document by U.S.
registered mail at its address set forth herein shall be effective service of
process for any action, suit or proceeding brought against it in any such court.
Each of the parties hereto hereby irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement, which is brought by or against it, in the courts of the State
of New Jersey or any federal court sitting in the State of New Jersey and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
Section 5.9 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all of which
together shall constitute a single agreement.
Section 5.10 Severability. In the event that any one or more of the
immaterial provisions contained in this Agreement shall for any reason be held
to be invalid, illegal or unenforceable, the same shall not affect any other
provision of this Agreement, but this Agreement shall be construed in a manner
which, as nearly as possible, reflects the original intent of the parties..
Section 5.11 No Prejudice. The terms of this Agreement shall not be
construed in favor of or against any party on account of its participation in
the preparation hereof.
Section 5.12 Words in Singular and Plural Form. Words used in the
singular form in this Agreement shall be deemed to import the plural, and vice
versa, as the sense may require.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COMPUTER OUTSOURCING SERVICES, INC.:
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx, President
ENTERPRISE TECHNOLOGY GROUP,
INCORPORATED
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Xxxxxx X. Xxxxxx, President
STOCKHOLDERS:
/s/ Xxxxxx X. Xxxxxx
------------------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxxx Xxxxxx
------------------------------------
Xxxxx Xxxxxx
/s/ Xxxxxx Xxxx
------------------------------------
Xxxxxx Xxxx
/s/ Xxxxxx Xxxxxx
------------------------------------
Xxxxxx Xxxxxx
