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EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of October 9, 1997, between Wave Systems Corp., a Delaware
corporation (the "Company"), and Combination Inc., a British Virgin Islands
corporation (the "Purchaser").
This Agreement is made pursuant to the Convertible Preferred
Stock Purchase Agreement, dated as of the date hereof by and among the
Company and the Purchaser (the "Purchase Agreement"). The execution of this
Agreement is a condition to the closing of the transactions contemplated by
the Purchase Agreement.
The Company and the Purchaser hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in
this Agreement, the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(o).
"Affiliate" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control,"
when used with respect to any Person, means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities,
by contract or otherwise; and the terms of "affiliated," "controlling" and
"controlled" have meanings correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
City of New York generally are authorized or required by law or other
government actions to close.
"Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Class A Common Stock, par
value $.01 per share.
"Effectiveness Date" means the 60th day following the Filing Date.
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"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the 10th day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
6(c).
"Indemnifying Party" shall have the meaning set forth in Section
6(c).
"Losses" shall have the meaning set forth in Section 6(a).
"New York Courts" shall have the meaning set forth in Section
8(h).
"Permitted Third Party Financings" shall have the meaning set
forth in the Purchase Agreement.
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Stock" means the shares of Series F Convertible
Preferred Stock, par value $.01 per share, of the Company issued to the
Purchaser pursuant to the Purchase Agreement.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
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 Registrable
Securities covered by the 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.
"Purchaser Warrant" means the Common Stock purchase warrant
issued to the Purchaser, entitling the Purchaser to purchase up to 70,000
shares of Common Stock on the terms and subject to the conditions set forth
therein.
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"Registrable Securities" means the shares of Common Stock
issuable upon (a) conversion of all shares of Preferred Stock and as payment
of dividends in respect thereof to the extent such dividends are paid in
shares of Common Stock, (b) exercise in full of the Purchaser Warrant, and
(c) exercise in full of Common Stock purchase warrants issued by the Company
to Xxxxxxx Capital Partners, Ltd. in connection with the transactions
contemplated by the Purchase Agreement; provided, however that in order to
account for the fact that the number of shares of Common Stock that are
issuable upon conversion of shares of Preferred Stock is determined in part
upon the market price of the Common Stock at the time of conversion,
Registrable Securities shall initially include a number of shares of Common
Stock equal to no less than the sum of (1) two times the number of shares of
Common Stock issuable upon conversion in full of the Preferred Stock,
assuming such conversion occurred on the Closing Date, (2) such number of
shares of Common Stock to permit the Company to pay dividends in respect of
the Preferred Stock in shares of Common Stock for a period of one year from
the Closing Date, and (3) such number of shares of Common Stock contemplated
by clauses (b) and (c) above, or such other number of shares of Common Stock
as agreed to by the parties to the Purchase Agreement (the "Initial
Minimum"). Notwithstanding anything herein contained to the contrary, if the
shares of Common Stock to be issued as required by the first sentence of this
definition exceeds the Initial Minimum, the term "Registrable Securities"
shall be deemed to include such additional shares of Common Stock as is equal
to two times the number of shares of Common Stock as would then be issuable
upon conversion in full of the then outstanding shares of Preferred Stock,
plus the shares referenced in clauses (b) and (c) above and the Company shall
promptly file appropriate amendments to the Registration Statement to
evidence such increase or the Company shall file one or more additional
Registration Statements covering such additional shares of Common Stock, in
either case, in the time contemplated herein for filing of appropriate
amendments or additional Registration Statements in accordance with the terms
hereof.
"Registration Statement" means the registration statement,
contemplated by Section 2(a), including the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
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"Rule 415" means Rule 415 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means any special counsel to the Holders, for
which the Holders will be reimbursed by the Company pursuant to the terms
hereof.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to
an underwriter for reoffering to the public pursuant to an effective
registration statement.
2. Shelf Registration
(a) On or prior to the Filing Date, the Company shall prepare
and file with the Commission a "Shelf" Registration Statement covering all
Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3 (or
another appropriate form approved by the Holders of a majority of the
Registrable Securities that permit registration of Registrable Securities for
resale by the Holders in the manner or manners designated by them (including,
without limitation, public or private sales and one or more Underwritten
Offerings)). The Company shall (i) not permit any securities other than the
Registrable Securities, and the securities specified in Section 8(c), to be
included in the Registration Statement and (ii) use its best efforts to cause
the Registration Statement to be declared effective under the Securities Act
as promptly as practicable after the filing thereof, but in any event prior
to the Effectiveness Date, and to keep such Registration Statement
continuously effective under the Securities Act until the date which is three
years after the date that such Registration Statement is declared effective
by the Commission or such earlier date when all Registrable Securities
covered by such Registration Statement have been sold or may be sold pursuant
to Rule 144 as determined by the counsel to the Company pursuant to a written
opinion letter, addressed to the Holders, to such effect (the "Effectiveness
Period"); provided, however, that the Company shall not be deemed to have
used its best efforts to keep the Registration Statement effective during the
Effectiveness Period if it voluntarily takes any action that would result in
the Holders not being able to sell the Registrable Securities covered by such
Registration Statement during the Effectiveness Period, unless such action is
required under applicable law or the Company has filed a post-effective
amendment to the Registration Statement and the Commission has not declared
it effective.
(b) If the Holders of a majority of the Registrable Securities
so elect, an offering of Registrable Securities pursuant to the Registration
Statement may be effected in the form of an Underwritten Offering. In such
event, and if the managing underwriters advise the Company and such Holders
in writing that in their opinion the amount of Registrable Securities
proposed to be sold in such Underwritten Offering exceeds the amount
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of Registrable Securities which can be sold in such Underwritten Offering, there
shall be included in such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such managing underwriters can be sold, and
such amount shall be allocated pro rata among the Holders proposing to sell
Registrable Securities in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by the
Holders of a majority of the Registrable Securities included in such
offering. No Holder may participate in any Underwritten Offering hereunder
unless such Person (i) agrees to sell its Registrable Securities on the basis
provided in any underwriting agreements approved by the Persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such arrangements.
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date a Registration Statement on Form S-3 in accordance with the
method or methods of distribution thereof as specified by the Holders, and
cause the Registration Statement to become effective and remain effective as
provided herein; provided, however, that not less than five (5) Business Days
prior to the filing of the Registration Statement or any related Prospectus
or any amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall (i) furnish to the Holders, their Special Counsel and any managing
underwriters, copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be incorporated by
reference) will be subject to the review of such Holders, their Special
Counsel and such managing underwriters, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the opinion of respective counsel to
such Holders and such underwriters, to conduct a reasonable investigation
within the meaning of the Securities Act. The Company shall not file the
Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities, their Special Counsel, or any managing underwriters, shall
reasonably object on a timely basis.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to all
Registrable Securities for the applicable time period and prepare and file with
the Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable
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Securities; (ii) cause the related Prospectus to be amended or supplemented
by any required Prospectus supplement, and as so supplemented or amended to
be filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; (iii) respond as promptly as
practicable to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto; and (iv) comply with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration
Statement during the applicable period in accordance with the intended
methods of disposition by the Holders thereof set forth in the Registration
Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold,
their Special Counsel and any managing underwriters immediately (and, in the
case of (i)(A) below, not less than five (5) days prior to such filing) and
(if requested by any such Person) confirm such notice in writing no later
than one (1) Business Day following the day (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to the Registration
Statement is proposed to be filed; and (B) with respect to the Registration
Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission or any other Federal or
state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv) if at
any time any of the representations and warranties of the Company contained
in any agreement (including any underwriting agreement) contemplated hereby
ceases to be true and correct in all material respects; (v) of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of
any Proceeding for such purpose; and (vi) of the occurrence of any event that
makes any statement made in the Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it 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
therein, in light of the circumstances under which they were made, not
misleading. The Company will provide to the Purchaser (a) notice of all oral
or written comments received by or on behalf of the Company from the
Commission in connection with any Registration Statement hereunder (and, if
such comments are in writing, will provide copies thereof to the Purchaser),
and (b) copies of any response letters submitted by or on its behalf in
respect of such comments.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness
of the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale
in any jurisdiction, at the earliest practicable moment.
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(e) If requested by any managing underwriter or the Holders of
a majority of the Registrable Securities to be sold in connection with an
Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as
such managing underwriters and such Holders reasonably agree, and which is
reasonably acceptable to the Company, should be included therein and (ii)
make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment; provided, however, that the Company
shall not be required to take any action pursuant to this Section 3(e) that
would, in the opinion of counsel for the Company, violate applicable law.
(f) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested
by such Person (including those previously furnished or incorporated by
reference) promptly after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and
any underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders and any underwriters in
connection with the offering and sale of the Registrable Securities covered
by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling
Holders, any underwriters and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter reasonably requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided,
however, that the Company shall not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(i) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall be free of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such managing
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underwriters or Holders may request at least two Business Days prior to any sale
of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as practicable, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document
so that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the Nasdaq National
Market and any other securities exchange, market or over-the-counter bulletin
board, if any, on which similar securities issued by the Company are then
listed.
(l) Enter into such agreements (including, in the case of an
Underwritten Offering, an underwriting agreement in form, scope and substance
as is customary in Underwritten Offerings) and take all such other actions in
connection therewith (including those reasonably requested by any managing
underwriters and the Holders of a majority of the Registrable Securities
being sold) in order to expedite or facilitate the disposition of such
Registrable Securities, and if an underwriting agreement is entered into, (i)
make such representations and warranties to such Holders and such
underwriters as are customarily made by issuers to underwriters in
underwritten public offerings, and confirm the same if and when requested;
(ii) obtain and deliver copies thereof to each Holder and the managing
underwriters, if any, of opinions of counsel to the Company and updates
thereof addressed to each selling Holder and each such underwriter, in form,
scope and substance reasonably satisfactory to any such managing underwriters
and Special Counsel to the selling Holders covering the matters customarily
covered in opinions requested in Underwritten Offerings and such other
matters as may be reasonably requested by such Special Counsel and
underwriters; (iii) immediately prior to the effectiveness of the
Registration Statement at the time of delivery of any Registrable Securities
sold pursuant thereto, obtain and deliver copies to the Holders and the
managing underwriters, if any, of "cold comfort" letters and updates thereof
from the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data is, or is required to be,
included in the Registration Statement), addressed to each selling Holder and
each of the underwriters, if any, in form and substance as are customary in
connection with Underwritten Offerings; (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and
procedures no less favorable to the selling Holders and the underwriters, if
any, than those set forth in Section 7 (or such other provisions and
procedures acceptable to the managing underwriters, if any, and holders of a
majority of Registrable Securities participating in such Underwritten Offering;
and (v) deliver such documents and certificates as may be reasonably requested
by the Holders of a majority of
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the Registrable Securities being sold, their Special Counsel and any managing
underwriters to evidence the continued validity of the representations and
warranties made pursuant to clause 3(l)(i) above and to evidence compliance with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
(m) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant
retained by such selling Holders or underwriters, at the offices where
normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors, agents and employees of the
Company and its subsidiaries to supply all information in each case requested
by any such Holder, representative, underwriter, attorney or accountant in
connection with the Registration Statement; provided, however, that any
information that is determined in good faith by the Company in writing to be
of a confidential nature at the time of delivery of such information shall be
kept confidential by such Persons, unless (i) disclosure of such information
is required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities; (ii) disclosure of such information, in
the opinion of counsel to such Person, is required by law; (iii) such
information becomes generally available to the public other than as a result
of a disclosure or failure to safeguard by such Person; or (iv) such
information becomes available to such Person from a source other than the
Company and such source is not known by such Person to be bound by a
confidentiality agreement with the Company.
(n) Comply with all applicable rules and regulations of the
Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 not later than 45 days after the end of any 12-month period (or
90 days after the end of any 12-month period if such period is a fiscal year)
(i) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm commitment or best efforts
Underwritten Offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which
statement shall cover said 12-month period, or end shorter periods as is
consistent with the requirements of Rule 158.
(o) Provide a CUSIP number for all Registrable Securities, not
later than the effective date of the Registration Statement.
The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration
Statement and the Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish such
information within a reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (i)
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the inclusion therein of language, in form and substance reasonably satisfactory
to such Holder, to the effect that the ownership by such Holder of such
securities is not to be construed as a recommendation by such Holder of the
investment quality of the Company's securities covered thereby and that such
ownership does not imply that such Holder will assist in meeting any future
financial requirements of the Company, or (ii) if such reference to such Holder
by name or otherwise is not required by the Securities Act or any similar
Federal statute then in force, the deletion of the reference to such Holder in
any amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not offer or
sell any Registrable Securities under the Registration Statement until it has
received copies of the Prospectus as then amended or supplemented as
contemplated in Section 3(g) and notice from the Company that such
Registration Statement and any post-effective amendments thereto have become
effective as contemplated by Section 3(c) and (ii) the Purchaser and its
officers, directors or Affiliates, if any, will comply with the prospectus
delivery requirements of the Securities Act as applicable to them in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence
of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of
such Registrable Securities until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 3(j), or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
4. Intentionally Deleted.
5. Registration Expenses.
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing
fees (including, without limitation, fees and expenses (A) with respect to
filings required to be made with the National Association of Securities
Dealers, Inc. and (B) in compliance with state securities or Blue Sky laws
(including, without limitation, fees and disbursements of counsel for the
underwriters or Holders in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of the
Registrable Securities for investment under the laws of such jurisdictions as
the managing underwriters, if any, or Holders of a majority of Registrable
Securities may designate)), (ii) printing expenses
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(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriters, if any, or by the
holders of a majority of the Registrable Securities included in the Registration
Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company as provided in Section 5(b) below, (v)
fees and disbursements of all independent certified public accountants referred
to in Section 3(l)(iii) (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (vi) Securities Act liability insurance, if the Company so desires
such insurance, and (vii) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange on which similar securities issued by the Company are then
listed.
(b) In connection with the Registration Statement, the Company
shall reimburse the Holders for the reasonable fees and disbursements of one
firm of attorneys chosen by the Holders of a majority of the Registrable
Securities, it being expressly understood that such fees and disbursements
shall not exceed $5,000.
6. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding termination of this Agreement and without limitation as to
time, indemnify and hold harmless each Holder, the officers, directors,
agents (including any underwriters retained by such Holder in connection with
the offer and sale of Registrable Securities), brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment
advisors and employees of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) and the officers, directors, agents and employees of
each such controlling Person, to the fullest extent permitted by applicable
law, from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, costs of preparation and attorneys' fees) and
expenses (collectively, "Losses"), as incurred, arising out of or relating to
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading, except
to the extent, but only to the extent, that such untrue statements or
omissions are based solely upon information regarding such Holder furnished
in writing to the Company by or on behalf of such Holder expressly for use
therein, which information was reasonably relied on by the Company for use
therein or to
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the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto. The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding of which the Company
is aware in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. In connection with the
Registration Statement, each Holder shall furnish to the Company in writing
such information as the Company reasonably requests for use in connection
with the Registration Statement or any Prospectus and agrees, severally and
not jointly, to indemnify and hold harmless the Company, their directors,
officers, agents and employees, each Person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from
and against all Losses (as determined by a court of competent jurisdiction in
a final judgment not subject to appeal or review) arising solely out of or
based solely upon any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus, or arising
solely out of or based solely upon any omission of a material fact required
to be stated therein or necessary to make the statements therein not
misleading to the extent, but only to the extent, that such untrue statement
or omission is contained in any information so furnished in writing by such
Holder to the Company specifically for inclusion in the Registration
Statement or such Prospectus and that such information was reasonably relied
upon by the Company for use in the Registration Statement, such Prospectus or
such form of prospectus or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form
of Prospectus. In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving
rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "Indemnified Party"), such Indemnified Party promptly shall
notify the Person from whom indemnity is sought (the "Indemnifying Party") in
writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except
(and only) to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such
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counsel shall be at the expense of such Indemnified Party or Parties unless: (1)
the Indemnifying Party has agreed to pay such fees and expenses; or (2) the
Indemnifying Party shall have failed promptly to assume the defense of such
Proceeding and to employ counsel reasonably satisfactory to such Indemnified
Party in any such Proceeding; or (3) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that a conflict of interest is likely to exist if the same counsel were
to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within 10 Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided,
that the Indemnifying Party may require such Indemnified Party to undertake
to reimburse all such fees and expenses to the extent it is finally
judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section
6(a) or 6(b) is unavailable to an Indemnified Party or is insufficient to
hold such Indemnified Party harmless for any Losses in respect of which this
Section would apply by its terms (other than by reason of exceptions provided
in this Section), 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 Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material
fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include, subject to the
limitations set forth in Section 6(c), any attorneys' or other fees or
expenses incurred by such party in connection with any Proceeding to the
extent
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such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 6(d), the
Purchaser shall not be required to contribute, in the aggregate, any amount
in excess of the amount by which the proceeds actually received by the
Purchaser from the sale of the Registrable Securities subject to the
Proceeding exceeds the amount of any damages that the Purchaser has otherwise
been required to pay 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.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may
have to the Indemnified Parties.
7. Rule 144
The Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act in a timely manner and, if at
any time the Company is not required to file such reports, they will, upon
the request of any Holder, make publicly available other information so long
as necessary to permit sales of its securities pursuant to Rule 144. The
Company further covenants that it will take such further action as any Holder
may reasonably request, all to the extent required from time to time to
enable such Holder to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by Rule
144. Upon the request of any Holder, the Company shall deliver to such
Holder a written certification of a duly authorized officer as to whether it
has complied with such requirements.
8. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would not
provide adequate compensation for any losses incurred by reason of a breach
by it of any of the provisions of this Agreement and hereby further agrees
that, in the event of any action for specific performance in respect of such
breach, it shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Except for 360,000 shares of
Common Stock (which have an exercise price of $6.50 per share) to be
registered in accordance with
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piggy-back rights granted to Xxxxxxxxx & Co. for warrants under the Warrant
Agreement dated September 8, 1994, shares of Common Stock issuable upon
conversion of the Company's securities issued and sold in Permitted Third Party
Financings, and other shares, not to exceed 50,000 shares of Common Stock, to be
registered in accordance with piggy-back rights granted pursuant to other
agreements, neither the Company nor any of its subsidiaries has, as of the date
hereof, nor shall the Company or any of its subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except as specified in the
immediately preceding sentence, neither the Company nor any of its subsidiaries
has previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person. Without limiting the generality
of the foregoing, without the written consent of the Holders of a majority of
the then outstanding Registrable Securities, the Company shall not grant to any
Person the right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Holders set forth herein, and are
not otherwise in conflict or inconsistent with the provisions of this Agreement.
In addition, in any case, the Company may not register for resale under the
Securities Act the any securities of the Company held by any Person prior to the
expiration of the 60th day following the date that the Registration Statement
has been declared effective by the Commission, provided that if the
effectiveness of such Registration Statement is suspended for any reason (or if
the Underlying Shares are not listed for trading on the Nasdaq National Market
or the Nasdaq SmallCap Market) such 60-day period shall be increased to include
any such days.
(c) No Piggyback on Registrations. Except for 360,000 shares
of Common Stock (which have an exercise price of $6.50 per share) to be
registered in accordance with piggy-back rights granted to Xxxxxxxxx & Co.
for warrants under the Warrant Agreement dated September 8, 1994, shares of
Common Stock issuable upon conversion of the Company's securities issued and
sold in Permitted Third Party Financings, and other shares, not to exceed
50,000 shares of Common Stock, to be registered in accordance with piggy-
back rights granted pursuant to other agreements, neither of the Company nor
any of its security holders (other than the Holders in such capacity pursuant
hereto) may include securities of the Company in the Registration Statement
other than the Common Stock to be issued under the Purchase Agreement, and
the Company shall not enter into any agreement providing any such right to
any of its securityholders.
(d) Piggy-Back Registrations. If at any time the Company shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under
the Securities Act of any of its equity securities, other than on Form S-4 or
Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable
in connection with stock option or other employee benefit plans, the Company
shall send to each holder of Registrable Securities written notice of such
determination and, if within twenty (20) days after receipt of such notice,
any such holder shall so request in writing, the Company shall include in
such
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registration statement all or any part of the Registrable Securities such holder
requests to be registered, except that if, in connection with any Underwritten
Offering for the account of the Company the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock which may be
included in the registration statement because, in such underwriter(s)'
judgment, such limitation is necessary to effect an orderly public distribution
of securities covered thereby, then the Company shall be obligated to include in
such registration statement only such limited portion of the Registrable
Securities for to which such holder has requested inclusion hereunder. Any
exclusion of Registrable Securities shall be made pro rata among the holders
seeking to include Registrable Securities, in proportion to the number of
Registrable Securities sought to be included by such holders; provided, however,
that the Company shall not exclude any Registrable Securities unless the Company
has first excluded all outstanding securities the holders of which are not
entitled by right to inclusion of securities in such registration statement; and
provided, further, however, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the right to include such
securities in such registration statement. No right to registration of
Registrable Securities under this Section shall be construed to limit any
registration otherwise required hereunder.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the same shall be in writing and signed by
the Company and the Holders of at least a majority of the then outstanding
Registrable Securities; provided, however, that, for the purposes of this
sentence, Registrable Securities that are owned, directly or indirectly, by
the Company, or an Affiliate of the Company are not deemed outstanding.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights
of other Holders may be given by Holders of at least a majority of the
Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified,
or supplemented except in accordance with the provisions of the immediately
preceding sentence.
(f) Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to
have been received (a) upon hand delivery (receipt acknowledged) or delivery
by telex (with correct answer back received), telecopy or facsimile (with
transmission confirmation report) at the address or number designated below
(if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery
(if delivered other than on a business day during normal business hours where
such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to
such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
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If to the Company: Wave Systems Corp.
000 Xxxxxxxx Xxxxxx
Xxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx Xxxxxxx
With copies to: Xxxxxx Xxxxxx-Xxxxxxx, Colt & Mosle
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxx
If to the Purchaser: Combination Inc.
x/x Xxxxx Xxxxxx
Xxxxxx Xxxxxxx 00
Xxxxx Xxx Xxxxxx
with copies to: Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxx
If to any other Person who is then the registered Holder:
To the address of such Holder as it
appears in the stock transfer books
of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each
of the parties and shall inure to the benefit of each Holder. The Company
may not assign its rights or obligations hereunder without the prior written
consent of each Holder. The rights of the Purchaser hereunder, including the
right to have the Company register for resale Registrable Securities in
accordance with the terms of this Agreement, shall be automatically
assignable by the Purchaser to any assignee or transferee of all or a portion
of the shares of Preferred Stock, the Warrant or the Registrable Securities
if: (i) the Purchaser 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 such
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registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees restricted under the Securities Act and applicable state
securities laws, (iv) at or before the time the Company receives the written
notice contemplated by clause (ii) of this Section, the transferee or assignee
agrees in writing with the Company to be bound by all of the provisions of this
Agreement, and (v) such transfer shall have been made in accordance with the
applicable requirements of the Purchase Agreement. The rights to assignment
shall apply to the Purchaser's (and to subsequent) successors and assigns.
(h) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(i) Governing Law; Submission to Jurisdiction;. This Agreement
shall be governed by and construed in accordance with the laws of the State
of New York, without regard to principles of conflicts of law. The Company
hereby irrevocably submits to the jurisdiction of any New York state court
sitting in the Borough of Manhattan in the City of New York or any federal
court sitting in the Borough of Manhattan in the City of New York
(collectively, the "New York") in respect of any Proceeding arising out of or
relating to this Agreement, and irrevocably accepts for itself and in respect
of its property, generally and unconditionally, jurisdiction of the New York
Courts. The Company irrevocably waives to the fullest extent it may
effectively do so under applicable law any objection that it may now or
hereafter have to the laying of the venue of any such Proceeding brought in
any New York Court and any claim that any such Proceeding brought in any New
York Court has been brought in an inconvenient forum. Nothing herein shall
affect the right of any Holder to serve process in any manner permitted by
law or to commence legal proceedings or otherwise proceed against the company
in any other jurisdiction.
(j) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable efforts to find and employ
an alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
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(l) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(m) Shares Held by The Company and its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company
or its Affiliates (other than the Purchaser or transferees or successors or
assigns thereof if such Persons are deemed to be Affiliates solely by reason
of their holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
WAVE SYSTEMS CORP.
By:
-------------------------------
Name:
Title:
COMBINATION INC.
By:
-------------------------------
Name:
Title:
