Exhibit 3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May__,
2000, by and among XXXXXXXXX.XXX, a Nevada corporation, with its principal place
of business at 000 Xxxxxxx Xxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxx 00000 (the
Company"), and INTELLECT CAPITAL GROUP, LLC, a Delaware limited liability
company with its principal place of business at 00000 Xxxxx Xxxxxx Xxxxxxxxx,
Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000 ("Investor").
WHEREAS:
A. In connection with that certain Stock Purchase Agreement by and among
the parties of even date herewith (the "Stock Purchase Agreement"), the Company
has agreed, upon the terms and subject to the conditions of the Stock Purchase
Agreement, (i) to issue and sell to the Investor shares of the Company's Series
B Preferred Stock (the "Preferred Stock"), which will be convertible into shares
of the Company's common stock, $.00l par value per share (the "Common Stock")
(as converted, the "Conversion Shares") in accordance with the terms of the
Company's Certificate of Designations, Preferences and Rights of the Preferred
Stock (the "Certificate of Designations"); and
B. To induce the Investor to execute and deliver the Stock Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investor hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "INITIATING INVESTOR" means any Investor or Investors who in the
aggregate hold not less than fifty percent (50%) of the outstanding Securities.
b. "INVESTOR" means the original Investor and any transferee or
assignee thereof to whom Investor assigns its rights under this Agreement and
who agrees to become bound by the provisions of this Agreement in accordance
with Section 9.
c. "OTHER STOCKHOLDERS" means persons other than Investors who, by
virtue of agreements with the Company, are entitled to include their securities
in certain registrations hereunder.
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d. "PERSON" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
e. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement(s) by the United States Securities and Exchange
Commission (the "SEC").
f. "SECURITIES" means the Conversion Shares issued or issuable upon
conversion of the Preferred Stock and any shares of capital stock issued or
issuable with respect to the Conversion Shares or the Preferred Stock as a
result of any stock split, stock dividend, recapitalization, exchange or similar
event.
g. "REGISTRATION STATEMENT" means a registration statement of the
Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Stock Purchase Agreement.
2. REGISTRATION.
a. REQUESTED REGISTRATION.
(i) If the Company shall receive from the Initiating Holders
at any time after six (6) months after the date of this
Agreement a written request that the Company effect any
registration with respect to at least fifty percent
(50%) of the Securities, the Company will: (A) promply
give written notice of the proposed registration to all
other Investors; and (B) as soon as practicable, use its
best efforts to effect such registration (including,
without limitation, those obligations set forth in
Section 3 hereof) as would permit or facilitate the sale
and distribution of all or such portion of such
Securities as are specified in such request, together
with all or such portion of the Securities of any
Investor or Investors joining in such request as are
specified in a written request received by the Company
within twenty (20) days after the written notice
referenced above is mailed or delivered.
(ii) The Company shall not be obligated to effect, or to take
any action to effect, any such registration pursuant to
this Section 2a:
(A) in any particular jurisdiction in which the
Company would be required to execute a general
consent to service of process in
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effecting such registration, qualification or
compliance, unless the Company is already
subject to service in such jurisdiction and
except as may be required by the 1933 Act;
(B) after the Company has initiated one (1) such
registration pursuant to this Section 2a
(counting for these purposes only registrations
which have been declared or ordered effective
and pursuant to which securities have been sold
and registrations which have been withdrawn by
the Investors as to which the Investors have not
elected to bear the registration expenses set
forth in Section 5 hereof);
(C) during the period starting with the date sixty
(60) days prior to the Company's good faith
estimate of the date of filing of, and ending on
a date one hundred eighty (180) days after the
effective date of, a Company-initiated
registration, provided that the Company is
actively employing in good faith all reasonable
efforts to cause such registration statement to
become effective; or
(D) if the Initiating Investors propose to dispose
of Securities which may be immediately
registered on Form S-3 pursuant to a request
made under Section 2d hereof.
(iii) Subject to the foregoing clauses (i) and (ii), the
Company shall file a registration statement covering the
Securities so requested to be registered as soon as
practicable after the receipt of the request of the
Initiating Investors; provided, however, that if (A) in
the good faith judgment of the Board of Directors of the
Company, such registration would be seriously
detrimental to the Company and the Board of Directors
concludes, as a result, that it is essential to defer
the filing of such registration statement, then the
Company shall have the right to defer such a filing for
the period during which such disclosure would be
seriously detrimental, provided that (except as provided
in clause (ii) (C) above), the Company may not defer the
filing for a period of more than ninety (90) days after
receipt of the request of the Initiating Investors, and
provided further that the Company shall not defer its
obligation in this manner more than once in any twelve
(12) month period. The registration statement filed
pursuant to the request of the Initiating Investors may,
subject to the provisions of this clause (iii) and
Section 3p hereof, include other securities of the
Company, with respect to which registration rights have
been granted, and may include securities of the Company
being sold for the account of the Company.
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(iv) If any offering pursuant to a Registration Statement
pursuant to this Section 2(a) involves an underwritten
offering, the right of any Investor to registration
pursuant to this Section 2(a) shall be conditioned upon
such Investor's participation in such underwriting and
the inclusion of such Investor's Securities in the
underwriting to the extent provided herein. An Investor
may elect to include in such underwriting all or a part
of the Securities he or she holds.
(v) If the Company shall request inclusion in any
registration pursuant to this Section 2(a) securities
sold for its own account, or if any Other Stockholders
shall request inclusion in any registration pursuant to
this Section 2, the Initiating Investors shall, on
behalf of all Investors, offer to include such
securities in the underwriting and may condition such
offer on their acceptance of the further applicable
provisions of this Agreement. The Company shall
(together with all Investors and Other Stockholders)
enter into an underwriting agreement in customary form
with the representative of the underwriter or
underwriters selected for such underwriting by a
majority in interest of the Initiating Investors, but
subject to the Company's reasonable approval.
Notwithstanding any other provision of this Section 2,
if the representative of the underwriters advises the
Initiating Investors in writing that marketing factors
require a limitation on the number of shares to be
underwritten, the number of shares to be included in the
underwriting or registration shall be allocated as set
forth in Section 3p hereof. If a person who has
requested inclusion in such registration as provided
above does not agree to the terms of any such
underwriting, such person shall be excluded therefrom by
written notice from the Company, the underwriter or the
Initiating Investors. Any Securities or other securities
held by the person so excluded shall also be withdrawn
from the registration. If shares are so withdrawn from
the registration and if the number of shares to be
included in such registration was previously reduced as
a result of marketing factors pursuant to this clause
(v), then the Company shall offer to all Investors who
have retained rights to include securities in the
registration the right to include additional securities
in the registration in an aggregate amount equal to the
number of shares so withdrawn, with such shares to be
allocated among such Investors requesting additional
inclusion in accordance with Section 3p hereof.
(vi) Penalty - Registration Statement. If a Registration
Statement is not filed with the SEC on or before the
sixtieth (60th) day following the Requested
Registration, then, as partial relief for the damages to
Investor by reason of any such delay in or
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reduction of its ability to sell the underlying shares
of Common Stock (which remedy shall not be exclusive of
any other remedies at law or in equity), the Company
will pay as liquidated damages a cash amount of Twenty
Thousand Dollars ($20,000) per month, pro rated daily
for each partial month for which the filing of the
Registration Statement is delayed.
b. COMPANY REGISTRATION.
(i) If the Company shall determine to register any of its
securities either for its own account or for the account
of a security holder or holders exercising their
respective demand rights (other than pursuant to Section
2a hereof), other than a registration relating solely to
employee benefit plans, or a registration relating
solely to a transaction under Rule 145 of the 1933 Act,
or a registration on any registration form that does not
permit secondary sales, the Company will: (A) promply
give to each Investor written notice thereof; and (B)
use its best efforts to include in such registration
(and any related qualification under blue sky laws),
except as set forth in Section 2c(ii) hereof, and in any
underwriting involved therein, all the Securities
specified in a written request or requests made by any
Investor and received by the Company within twenty (20)
days after the written notice from the Company described
above is mailed or delivered by the Company. Such
written request may specify all or a part of an
Investor's Securities. No right to registration of
Securities under this Section 2b shall be construed to
limit any registration required under Section 2a.
(ii) If the registration of which the Company gives notice is
for a registered public offering involving an
underwriting, the Company shall so advise the Investors
as a part of the written notice given pursuant to
Section 2b(i) above. In such event, the right of any
Investor to registration pursuant to this Section 2b
shall be conditioned upon such Investor's participation
in such underwriting. All Investors proposing to
distribute their securities through such underwriting
shall (together with the Company and the Other
Stockholders distributing their securities through such
underwriting) enter into an underwriting agreement in
customary form with the representative of the
underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section 2b,
if the representative of the underwriters advises the
Company in writing that in their reasonable good faith
opinion, marketing or other factors dictate that a
limitation on the number of shares of Common Stock which
may be included in the registration statement is
necessary to facilitate and not adversely affect the
proposed offering, then the Company shall include in
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such registration: (1) first, all securities the Company
proposes to sell for its own account, (2) second, up to
the full number of securities proposed to be registered
for the account of the holders of securities entitled to
inclusion of their securities in the registration
statement by reason of demand registration rights, and
(3) third, the securities requested to be registered by
the Investors and other holders of securities entitled
to participate in the registration, drawn from them pro
rata based on the number each has requested to be
included in such registration. If any person does not
agree to the terms of any such underwriting, he or she
shall be excluded therefrom by written notice from the
Company or the underwriter. Any Securities or other
securities so excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
If shares are so withdrawn and if the number of shares
of Securities to be included in such registration was
previously reduced as a result of marketing factors, the
Company shall then offer to all persons who have
retained the right to include securities in the
registration the right to include additional securities
in the registration in an aggregate amount equal to the
number of shares so withdrawn, with such shares to be
allocated among the persons requesting additional
inclusion in accordance with Section 3p hereof.
c. REGISTRATION ON FORM S-3. The Company is currently not eligible
for the use of Form S-3. Therefore (i) the Company, with the
consent of each Investor pursuant to Section 2a, shall register
the sale of the Securities on another appropriate form, such as
Form S-1 or Form SB-2, and (ii) the Company shall use its best
efforts to qualify for registration on Form S-3 or any
comparable or successor form or forms. After the Company has
qualified for the use of Form S-3, in addition to the rights
contained in the foregoing provisions of this Section 2, the
Investors shall have the right to request registrations on Form
S-3 (such requests shall be in writing and shall state the
number of shares of Securities to be disposed of and the
intended methods of disposition of such shares by such Investor
or Investors), provided, however, that the Company shall not be
obligated to effect any such registration if (i) the Investors,
together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell
Securities and such other securities (if any) on Form S-3 at an
aggregate price to the public of less than $500,000, or (ii) in
a given twelve (12) month period, after the Company has effected
one (1) such registration in any such period. The provisions of
Section 2a and 2b shall also apply to any such registration
under this Section 2c.
3. RELATED OBLIGATIONS.
In the case of each registration effected by the Company pursuant to
Section 2 hereof, the Company will keep each Investor advised in writing as to
the initiation of
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such registration and as to the completion thereof. The Company shall have the
following obligations:
a. Keep such registration effective for a period of one hundred
twenty (120) days or until the Investor or Investors have completed the
distribution described in the registration statement relating thereto, which
ever first occurs; provided, however, that (i) such one hundred twenty (120) day
period shall be extended for a period of time equal to the period the Investor
refrains from selling any Securities included in such registration at the
request of an underwriter of Common Stock or other securities of the Company;
and (ii) in the case of any registration of Securities on Form S-3 or other form
which are intended to be offered on a continuous or delayed basis, such one
hundred twenty (120) day period shall be extended, if necessary, to keep the
registration statement effective until all such Securities are sold, provided
that Rule 415, or any successor rule under the 1933 Act, permits an offering on
a continuous or delayed basis; and provided further that the right of any
Investor to request registration or inclusion in any registration pursuant to
Section 2 hereof shall terminate on the earlier of (x) the date as of which such
Investor may sell all of his or her Securities without restriction pursuant to
Rule 144(k) promulgated under the 1933 Act (or successor thereto) or (y) the
date on which (A) the Investor shall have sold all of his or her Securities and
(B) none of the Preferred Stock is outstanding (the "Registration Period") No
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) to be utilized in such registration shall
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement(s) and the prospectus(es) used in connection with the Registration
Statement(s), which prospectus(es) are to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep the Registration
Statement(s) effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Securities of the Company covered by the Registration
Statement(s).
c. The Company shall furnish to each Investor whose Securities are
included in the Registration Statement(s) and its legal counsel without charge
(i) promptly after the same is prepared and filed with the SEC at least one copy
of the Registration Statement and any amendment thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits, the prospectus(es) included it such Registration Statement(s)
(including each preliminary prospectus) and, with regards to the Registration
Statement, any correspondence by or on behalf of the Company to the SEC or the
staff of the SEC and any correspondence from the SEC or the staff of the SEC to
the Company or its representatives, (ii) upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably request) and (iii) such other
documents, including any preliminary
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prospectus, as such Investor may reasonably request in order to facilitate the
disposition of the Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and
qualify the Securities covered by the Registration Statement(s) under such other
securities or "blue sky" laws of such jurisdictions in the United States as any
Investor reasonably requests, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to quality the 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 3d, (B) subject itself to general taxation in any such
jurisdiction, or (C) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify each Investor who holds
Securities of the receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the Securities for
sale under the securities or "blue sky" laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.
e. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor in writing of the happening of any event,
of which the Company has knowledge, as a result of which the prospectus included
in a Registration Statement, as then in effect, includes an untrue statement of
a material fact or omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and promptly prepare a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission, and deliver ten (10) copies of such supplement or
amendment to each Investor (or such other number of copies as such Investor may
reasonably request). The Company shall also promptly notify each Investor in
writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a Registration Statement or any
post-effective amendment has become effective (notification of such
effectiveness shall be delivered to each Investor by facsimile on the same day
of such effectiveness and by overnight mail) (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
f. The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a Registration
Statement, or the suspension of the qualification of any of the Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify each Investor who holds Securities being sold
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(and, in the event of an underwritten offering, the managing underwriters) of
the issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.
g. The Company shall permit the Investors a single firm of counsel
or such other counsel as thereafter designated as selling stockholders' counsel
by the Investors who hold a majority of the Securities then being sold, to
review and comment upon the Registration Statement(s) and all amendments and
supplements thereto at least three (3) days prior to their filing with the SEC,
and not file any document in a form to which such counsel reasonably objects.
The Company shall not submit a request for acceleration of the effectiveness of
a Registration Statement(s) or any amendment or supplement thereto without the
prior approval of such counsel, which consent shall not be unreasonably
withheld.
h. At the request of the Investor(s) who hold a majority of the
Securities being sold, the Company shall furnish, on the date that Securities
are delivered to an underwriter, if any, for sale in connection with the
Registration Statement (i) if required by an underwriter, a letter, dated such
date, from the Company's independent certified public accountants in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to such underwriters,
and (ii) an opinion, dated as of such date, of counsel representing the Company
for purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
underwriters and the Investor(s).
i. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence provided, however, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, unless (A) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the 1933 Act, (B) the release of such Records is ordered pursuant
to a final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (C) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other agreement. Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its
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expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential.
j. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
k. The Company shall use its best efforts to cause all the
Securities covered by a Registration Statement to be listed on each national
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Securities is then
permitted under the rules of such exchange, and to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. as such with respect to such Securities. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 3(i).
l. The Company shall cooperate with the Investors who hold
Securities being offered and, to the extent applicable, any managing underwriter
or underwriters, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the Securities to
be offered pursuant to a Registration Statement and enable such certificates to
be in such denominations or amounts, as the case may be, as the managing
underwriter or underwriters, if any, or, if there is no managing underwriter or
underwriters, the Investor may reasonably request and registered in such names
as the managing underwriter or underwriters, if any, or the Investor may
request. Not later than the date on which any Registration Statement registering
the resale of Securities is declared effective, the Company shall deliver to its
transfer agent instructions, accompanied by any reasonably required opinion of
counsel, that permits sales of unlegended securities in a timely fashion that
complies with then mandated securities settlement procedures for regular way
market transactions.
m. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Securities pursuant to a
Registration Statement.
n. The Company shall use its best efforts to cause the Securities
covered by the applicable Registration Statement to be registered with or
approved by such other
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governmental agencies or authorities as may be necessary to consummate the
disposition of such Securities.
o. The Company shall provide a transfer agent and registrar of all
such Securities not later than the effective date of such Registration
Statement.
p. If requested by the managing underwriters or an Investor, the
Company shall immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and the
Investor agree should be included therein relating to the sale and distribution
of Securities, including, without limitation, information with respect to the
number of Securities being sold to such underwriters, the purchase price being
paid therefore by such underwriters and with respect to any other terms of the
underwritten (or best efforts underwritten) offering of the Securities to be
sold in such offering; make all required filings of such prospectus supplement
or post-effective amendment as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
supplement or make amendments to any Registration Statement if requested by a
shareholder or any underwriter of such Securities.
q. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.
4. OBLIGATIONS OF THE INVESTOR(S).
a. At least seven (7) days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify each Investor in
writing of the information the Company requires from each such Investor if such
Investor elects to have any of such Investor's Securities included in the
Registration Statement. Each Investor desiring to participate in a registration
hereunder shall furnish to the Company such information regarding itself, the
Securities held by it and the intended method of disposition of the Securities
held by it as shall be reasonably required to effect the registration of such
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request.
b. Each Investor, by such Investor's acceptance of the Securities,
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of the Registration Statement(s)
hereunder, unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Securities from a
Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), such Investor will immediately discontinue the disposition of Securities
pursuant to the Registration Statement(s) covering such 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
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the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy all copies in such Investor's possession, of the prospectus
covering such Securities current at the time of receipt of such notice.
d. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Securities on
the basis provided in any underwriting arrangements approved by the Investor
entitled hereunder to approve such arrangements, (ii) completes and executes ail
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company shall be borne by the Company.
6. INDEMNIFICATION
In the event any Securities are included in a Registration Statement
under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor who holds such
Securities, the directors, officers, partners, employees, agents and each
Person, if any, who controls any Investor within the meaning of the 1933 Act or
the Securities Exchange Act of 1934, as amended (the "1934 ACT"), and any
underwriter (as defined in the 0000 Xxx) for the Investor, and the directors and
officers of, and each Person, if any, who controls, any such underwriter within
the meaning of the 1933 Act or the 1934 Act (each, an "INDEMNIFIED PERSON"),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, attorneys' fees, amounts paid in settlement or expenses, joint
or several, (collectively, "CLAIMS") incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto "INDEMNIFIED
DAMAGES"), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other "blue sky" laws of any jurisdiction
in which Securities are offered ("BLUE SKY FILING"), or the omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in
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light of the circumstances under which the statements therein were made, not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used. prior to the effective
date of such Registration Statement, or contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to state
therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were made, not
misleading, or (iii) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"VIOLATIONS"), Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the Investor
and each such underwriter or controlling person, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by any
Indemnified Person or underwriter for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(c); (ii) with respect to any
preliminary prospectus, shall not inure to the benefit of any such person from
whom the person asserting any such Claim purchased the Securities that are the
subject thereof (or to the benefit of any person controlling such person) if the
untrue statement or mission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or supplemented, if
such prospectus was timely made available by the Company pursuant to Section
3(c), and the Indemnified Person was promptly advised in writing not to use the
incorrect prospectus prior to the use giving rise to a violation and such
Indemnified Person, notwithstanding such advice, used it; (iii) shall not be
available to the extent such Claim is based on a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the Company
(i) and (iv) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investor pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim or Indemnified Damages to which any of them
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may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as
such Claim or Indemnified Damages arise out of or are based upon any Violation,
in each case to the extent, and only to the extent, that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and, subject to Section 6(d), such Investor will reimburse any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and Section 7 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld;
provided, further, however, that the Investor shall be liable under this Section
6(b) for only that amount of a Claim or Indemnified Damages as does not exceed
the net proceeds to such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investor pursuant to Section 9. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any Indemnifying Party under this Section 6,
deliver to the Indemnifying Party a written notice of the commencement thereof,
and the Indemnifying Party shall have the right to participate in, and, to the
extent the Indemnifying Party so desires, jointly with any other Indemnifying
Party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the Indemnifying Party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the Indemnifying Party, if, in
the reasonable opinion of counsel retained by the Indemnifying Party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the Indemnifying Party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for only one separate legal counsel for the Investor, and
such legal counsel shall be selected by the Investor holding a majority in
interest of the
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Registrable Securities included in the Registration Statement to which the Claim
relates. The Indemnified Party or Indemnified Person shall cooperate fully with
the Indemnifying Party in connection with any negotiation or defense of any such
action or claim by the Indemnifying Party and shall furnish to the Indemnifying
Party all information reasonably available to the Indemnified Party or
Indemnified Person, which relates to such action or claim. The Indemnifying
Party shall keep the Indemnified Party or Indemnified Person fully apprised at
all times as to the status of the defense or any settlement negotiations with
respect thereto. No Indemnifying Party shall be liable for any settlement of any
action, claim or proceeding effected without its written consent, provided,
however, that the Indemnifying Party shall not unreasonably withhold, delay or
condition its consent. No Indemnifying Party shall, without the consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from ail liability in
respect to such claim or litigation. Following indemnification as provided for
hereunder, the Indemnifying Party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to ail third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the Indemnifying Party within a
reasonable time of the commencement of any such action shall not relieve such
Indemnifying Party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the Indemnifying Party is
prejudiced in its ability to defend such action.
e. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
f. The indemnity agreements contained herein shall be in addition
to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the Indemnifying Party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an Indemnifying Party is prohibited
or limited by law, the Indemnifying Party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; (iii) contribution by any seller of
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Securities; and (iii) contribution by the
Company shall be limited as to the gross proceeds received from the sale of the
Securities.
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8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investor the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investor to sell securities of the Company
to the public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Investor to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable Securities pursuant
to this Agreement shall be automatically assignable by an Investor to any
transferee of all or any portion of Securities if: (i) 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; (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such securities
by the transferee or assignee is restricted under the 1933 Act and applicable
state securities laws; (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein; (v) such transfer shall have been made in accordance with the
applicable requirements of the Stock Purchase Agreement; (vi) such transferee
shall be an "accredited investor" as that term is defined in Rule 501 of
Regulation D promulgated under the 1933 Act; and (vii) in the event the
assignment occurs subsequent to the date of effectiveness of the Registration
Statement required to be filed pursuant to Section 2(a), the transferee agrees
to pay all reasonable expenses of amending or supplementing such Registration
Statement to reflect such assignment.
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10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions 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 two-thirds of the Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
11. MISCELLANEOUS
a. A person or entity is deemed to be a holder of Securities
whenever such person or entity owns of record such Securities. If the Company
receives conflicting instructions, notices or elections from two or more persons
or entities with respect to the same Securities, the Company shall act upon the
basis of instructions, notice or election received from the registered owner of
such Securities.
b. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile, provided a copy is mailed
by U.S. certified mail, return receipt requested; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (d) one (1) day
after deposit with a nationally recognized overnight delivery, service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Xxxxxxxxx.xxx
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
With Copy to:
Xxxxxxx X. Xxxxx, Esq.
Silicon Valley Law Group
000 Xxxxx 0xx Xxxxxx
Xxxxx 000
Xxx Xxxx, Xxxxxxxxxx 00000
If to an Investor, to its address and facsimile number on Schedule A,
with copies to such Investor's counsel as set forth on Schedule A. Each party
shall provide five (5) days' prior written notice to the other party of any
change in address or facsimile number.
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c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California without regard to the
principles of conflict of laws. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. This Agreement and the Stock Purchase Agreement constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the Stock Purchase Agreement supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit and of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
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IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the day and year first above written.
COMPANY: INVESTOR:
XXXXXXXXX.XXX INTELLECT CAPITAL GROUP, LLC
By: By:
------------------------------------ -------------------------------
Name: Xxxx Xxxxxxxx Name:
Its: President Its:
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SCHEDULE A
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Investor's Name Address/Facsimile Number of
Investor
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