REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement"), dated as of the
25th day of April 2001 is entered into between INSYNQ, Inc., a Delaware
corporation (the "Company") and International Fluid dynamics, Inc. ("Holder").
WHEREAS, there are currently outstanding 29,392,830 shares of Common Stock of
the Company;
WHEREAS, pursuant to a Subscription Agreement dated April 25, 2001 (the
"Subscription Agreement"), by and among the Company and Holder, Holder has
purchased 315,000 shares (the "Shares" which designation is collective and
shall include shares underlying the warrants described below) of common stock,
$0.001 par value per share (the "Common Stock"), of the Company;
WHEREAS, pursuant to a Warrant Agreement dated April 25, 2001 (the
"Warrant Agreement"), by and among the Company and Holder, Holder has warrants
purchased from Company to purchase 315,000 shares of common stock (the "Shares"
which designation is collective and inclusive of the Shares described in the
preceding paragraph above) at an exercise price of $0.07 per share; and
WHEREAS, in order to insure liquidity in the future the Holder wishes to
have the Shares (which includes the Shares underlying the Warrants) registered
and the Company wishes to grant such registration rights.
NOW, THEREFORE, in consideration of ten (10) dollars and other
consideration including mutual covenants and obligations hereinafter set forth,
the parties hereto, intending to be legally bound, agree as follows:
DEFINITIONS. As used herein, the following terms have the following
meanings:
"Register," "registered" and "registration" refer to a registration
effected by filing a registration statement in compliance with the Securities
Act of 1933, as amended (the "Securities Act") and the declaration or ordering
by the Securities and Exchange Commission (the "Commission") of effectiveness
of the registration statement, other than any registration statement on
Form X-0, Xxxx X-0 or as otherwise contemplated under Rule 145 of the Act, the
"Shares" shall refer to and include the shares of common stock purchased plus
the shares underlying the warrants described above.
1. PIGGYBACK REGISTRATION RIGHTS.
(a) If the Company at any time proposes to register any of its
shares of Common Stock under the Act, whether of its own accord or at the
demand of any holders of other such securities pursuant to an agreement
with respect to the registration thereof, and if the form of registration
statement proposed to be used may be used for the registration of the
Shares as contemplated hereunder, the Company will give notice to Holder
not less than 10 days nor more than 30 days prior to the filing of such
registration statement of its intention to proceed with the proposed
registration (the "Registration"), and, upon written request of the Holder
made within ten (10) days after the receipt of any such notice (which
request will specify the number of Shares intended to be disposed of by
the Holder and state the intended method of disposition thereof other than
for shares underlying the Warrant Agreement), the Company will use its
best efforts to cause all Shares of Holder as to which registration has
been requested to be registered under the Act, provided that if such
Registration is in connection with an underwritten public offering,
Holder's Shares to be included in such Registration shall be offered upon
the same terms and conditions as applied to any other securities included
in such Registration. Notwithstanding anything contained in this
Section 1(a) to the contrary, the Company shall have no obligation to
cause Shares to be registered with respect to any Shares which shall be
then currently eligible for resale under Rule 144 of the Act.
(b) If a Registration is a primary registration on behalf of the
Company and is in connection with an underwritten public offering, and if
the managing underwriters using reasonable judgment and good faith advise
the Company in writing that in their opinion the amount of securities
requested to be included in such Registration (whether by the Company, the
Holder, or other holders of the Company's securities pursuant to any other
rights granted by the Company to participate in such Registration) exceeds
the amount of such securities which can be successfully sold in such
offering, the Company will include in such Registration the amount of
securities requested to be included which in the opinion of such
underwriters can be sold, in the following order (A) first, all of the
securities the Company reasonably and in good faith proposes to sell, and
(B) second, any other securities held by holders with registration rights
requested to be included in such Registration, pro rata among the holders
thereof on the basis of the amount of such securities then owned by such
holders.
(c) If a Registration is a secondary registration on behalf of
holders of securities of the Company and is in connection with an
underwritten public offering, and if the managing underwriters using
reasonable judgment and good faith advise the Company in writing that in
their opinion the amount of securities requested to be included in such
Registration (whether by such holders, by the Holder, or by holders of the
Company's securities pursuant to any other rights granted by the Company
to participate in such Registration) exceeds the amount of such securities
which can be sold in such offering, the Company will include in such
Registration the amount of securities requested to be included which in
the opinion of such underwriters can be sold, in the following order (A)
first, all of the securities requested to be included by holders with
demand registration rights who are demanding such Registration, pro rata
among the holders thereof on the basis of the amount of such securities
then owned by such holders, and (B) second, any other securities held by
holders with piggyback registration rights, requested to be included in
such Registration, pro rata among the holders thereof on the basis of the
amount of such securities then owned by such holders.
2. DEMAND REGISTRATION RIGHTS
(a) Holder has the right to one demand registration right on or
after June 30, 2001. Subject to (i) the registration procedures outlined
in Section (b) below and (ii) the Common Stock of the Company being
publicly traded at the time of the request set forth below, the Company
shall, upon the request of Holder,
(b) Prepare and file with the SEC a Registration Statement on
Form S-3 (or any other form of registration statement on which it may file
for registration under the Securities Act) registering resales of the
Common Shares by the Holder from time to time through the over-the-counter
quotation system of the Nasdaq Market or the facilities of any national
securities exchange or the Nasdaq National Market if the Common Stock is
then listed or quoted thereon or in privately-negotiated transactions.
The Registration Statement shall register (i) all of the Common Shares and
(ii) such number of additional shares of Common Stock as may become
issuable as Common Shares as a result of the anti-dilution provisions of
the Common Shares or the entire exercise of Holder's warrants. The
Company will use commercially reasonable efforts to cause the initial
Registration Statement to be declared effective by the SEC as soon as
possible after the filing thereof. The Company hereby agrees that it
shall (i) prepare and file such post-amendments to the initial
Registration Statement and/or such additional Registration Statements as
may be necessary to ensure that at all times there shall be registered
with the SEC for resale by the Holder from time to time as provided in
this Section 2 sufficient shares of Common Stock to account for all Common
Shares which become issuable from time to time with respect to the Common
Shares (as a result of anti-dilution provisions or exercise of Holder's
warrants), and (ii) cause such post-effective amendments to the initial
Registration Statement and/or such additional Registration Statements to
be declared effective as soon as possible after the filing thereof.
The Company agrees to use diligent efforts to keep the Registration
Statement(s) continuously effective and usable for resale of Registration
Securities until two years (the "Effectiveness Period") from the Closing Date
or from the date of filing of any registration or such shorter period which
will terminate when all Common Shares have ceased to be Registrable Securities.
(c) REGISTRATION PROCEDURES
In connection with the Company's obligation to file Registration
Statements as provided in Section 3 hereof, the Company will as
expeditiously as possible:
(i) Prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement, and such
supplements to the Prospectus, as may be required by the rules,
regulations or instructions applicable to the registration form
utilized by the Company or by the Securities Act or rules and
regulations thereunder for shelf registration or otherwise necessary
to keep the Registration Statement effective for the applicable
period and cause the Prospectus as so supplemented to be filed
pursuant to Rule 424 under the Securities Act; and comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such Registration Statement during the
applicable period in accordance with the methods of disposition by
the sellers thereof set forth in such Registration Statement or
supplement to the Prospectus;
(ii) Notify the Holder of Registrable Securities promptly, and
confirm such advice in writing with confirmed receipt,
(a) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to
the Registration Statement or any post-effective amendment, when
the same has become effective,
(b) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose, and
(c) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose;
(iii) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement
at the earliest possible moment;
(iv) furnish, promptly without charge, to Holder at least one
conformed copy of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits
(including those incorporated by reference);
(v) deliver to Holder promptly without charge, as many copies
of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as Holder may reasonably request; the
Company consents to the use of the Prospectus or any amendment or
supplement thereto by Holder in connection with the offering and sale
of the Registrable Securities covered by the Prospectus or any
amendment or supplement thereto;
(vi) use its reasonable efforts to cause the Registrable
Securities covered by the Registration Statement to be registered
with or approved by such governmental agencies or authorities as may
be necessary to enable the Holder thereof to consummate the
disposition of such Registrable Securities in such jurisdictions as
the Holder may reasonably specify in response to inquiries to be made
by the Company, provided that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action which would subject it to
general service of process in any such jurisdiction where it is not
then so subject;
(vii) if any event shall occur as a result of which it is
necessary, in the opinion of counsel for the Company, to amend or
supplement the Prospectus in order to make the Prospectus not
misleading in the light of the circumstances existing at the time it
is delivered by Holder, prepare a supplement or post-effective
amendment to the Registration Statement or the related Prospectus or
any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the Holders of
the Registrable Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(viii) obtain a CUSIP number for all Registrable Securities
(unless already obtained);
(ix) make available for inspection during normal business
hours by a representative of the Holder and any attorney or
accountant retained by such representative, all financial and other
records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply
all information reasonably requested by Holder or any such attorney
or accountant in connection with the Registration Statement; provided
that all such records, information or documents shall be kept
confidential by Holder or any such attorney or accountant unless
disclosure of such records, information or documents is required by
court or administrative order or is generally available to the public
other than as a result of disclosure in violation of this
paragraph (ix);
(x) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make generally
available to its security holders an earnings statement satisfying
the provisions of Section 11(a) of the Securities Act (in accordance
with Rule 158 thereunder or otherwise), no later than 45 days after
the end of the 12-month period (or 90 days, if such period is a
fiscal year) beginning with the first month of the Company's first
fiscal quarter commencing after the Effective Date, which statements
shall cover said 12-month period;
(xi) if at any time an event of the kind described in
Section 4(g) shall occur, notify Holder that the use of the
Prospectus must be discontinued (the Company will not declare any
such "black-out" periods in excess of twenty business days during any
twelve month period, unless otherwise required.
Holder agrees, as a condition to the registration obligations
with respect to such Holder provided herein, to furnish to the
Company such information regarding the distribution of such
Registrable Securities as the Company may from time to time
reasonably request in writing.
Holder agrees by acquisition of such Registrable Securities
that, upon receipt of any notice from the Company described in this
paragraph 2(c), Holder will forthwith discontinue disposition of
Registrable Securities until Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 2(c)(vii)
hereof, or until it is advised in writing by the Company (which
notice the Company shall give as promptly as possible), that the use
of the Prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by
reference in the Prospectus, and if so directed by the Company,
Holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in Holder's possession,
of the Prospectus covering such Registrable Securities current at the
time of receipt of such notice.
3. COOPERATION BY THE HOLDER.
(a) The Holder will furnish to the Company in writing such
information about the Holder as the Company may reasonably require from
the Holder in connection with the preparation of the registration
statement (and the prospectus included therein).
(b) The Holder will not (until further notice) effect sales of
Shares after receipt of telegraphic or written notice from the Company to
suspend sales to permit the Company to correct or update a registration
statement or prospectus; the Company agrees to use commercially reasonable
efforts to promptly prepare and file any such correction or update. At
the end of the period during which the Company has decided or is obliged
to keep a registration statement current and effective (and any extensions
thereof), the Holder shall discontinue sales of Shares pursuant to the
registration statement upon receipt of notice from the Company of its
intention to remove from registration the Shares covered by the
registration statement which remain unsold, and the Holder shall notify
the Company of the number of Shares registered which remain unsold
immediately upon receipt of the notice from the Company, however, the
Company shall not unreasonably or arbitrarily cease to keep a registration
current to the apparent detriment of Holder.
(c) The Holder agrees to provide the Company with written
representations of fact about the Holder reasonably necessary to permit
the Company and its counsel to conclude that all sales of Shares made in
connection with the registration were made in compliance with all
applicable securities laws, including, without limitation, the prospectus
delivery requirements of Section 5 of the Securities Act and any
applicable restrictions of Rules 10b-6 and 10b-7 of the Securities
Exchange Act of 1934, as amended.
If any Registration is underwritten, Holder shall (i) agree to sell its
Shares on the basis provided in any underwriting arrangement approved by the
Company and (ii) completes and executes all questionnaires, powers of attorney,
indemnities, indemnity agreements, and other documents requested thereunder;
provided that Holder shall only be required to make representations and
warrants regarding Holder and its intended method of distribution.
4. EXPENSES OF REGISTRATION.
All expenses incurred in effecting any registration pursuant to this
Agreement including, without limitation, all registration and filing fees,
expenses of compliance with blue sky laws, fees and disbursements of
counsel for the Company and expenses of any audits incidental to or
required by any such registration, shall be borne by the Company, except
that all underwriting discounts and commissions attributable to Shares
being sold by the Holder shall be borne by the Holder. Without limiting
the generality of the foregoing, the Company shall pay but not be limited
to, all of the following registration expenses: (a) the Company's internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), (b) to the
extent not already incurred, the fees and expenses incurred in connection
with the listing on an exchange, the Nasdaq Stock Market, or inter-dealer
quotation system of the Shares, (c) all registration and filing fees,
(d) fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements of counsel in connection with blue sky
qualifications of the Shares), (e) printing expenses and engraving
expenses, (f) fees and disbursements of counsel to the Company and
customary fees and expenses for independent certified public accountants
retained by the Company, and (g) the fees and expenses of any special
experts retained by the Company.
5. NOTICES.
Any and all notices, designations, consents, offers, acceptances or
other communications provided for herein (each a "Notice") shall be given
in writing by overnight courier, telegram or telecopy which shall be
addressed, or sent, to the Company as follows (or such other address as
the Company or the Holder may specify to the Company and all other parties
by Notice):
INSYNQ, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: President
Telecopy: (000) 000-0000
and to the Holder at :
International Fluid Dynamics, Inc.
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
All Notices shall be deemed effective and received (a) if given by
telecopy, when the telecopy is transmitted to the telecopy number specified
above and receipt thereof is confirmed; (b) given by overnight courier, on the
business day immediately following the date on which the Notice is delivered to
a reputable overnight courier service and signed for by Holder or his
representative, or (c) if given by telegram, when the Notice is delivered at
the address specified above and signed for by Holder or his representative.
6. AMENDMENT.
The terms of this Agreement may not be amended, modified or otherwise
revised except by the written consent of the Company and the Holder.
7. COUNTERPARTS; FACSIMILE EXECUTION.
This Agreement may be executed in two or more counterparts and each
counterpart shall be deemed to be an original and which counterparts
together shall constitute one and the same agreement of the parties
hereto. Each party to this Agreement agrees that it will be bound by its
own telecopy signature and that it accepts the telecopy signature of each
other party to this Agreement.
8. CHOICE OF LAW.
THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
DELAWARE WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF AND
WILL, TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR PERFORMANCE
IN XXXXXX COUNTY, WASHINGTON.
9. ENTIRE AGREEMENT.
This Agreement contains the entire understanding of the parties
hereto respecting the subject matter hereof and supersedes all prior
agreements, discussions and understandings with respect thereto.
10. CUMULATIVE RIGHTS.
The rights of the parties under this Agreement are cumulative and in
addition to all similar and other rights of the parties under other
agreements.
11. SEVERABILITY AND REFORMATION.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law, and if the rights or
obligations of the parties under this Agreement would not be materially
and adversely affected thereby, such provision shall be fully separable,
and this Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part thereof, the
remaining provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance therefrom, and in lieu of such illegal,
invalid or unenforceable provision, there shall be added automatically as
a part of this Agreement, a legal, valid and enforceable provision as
similar in terms to such illegal, invalid or unenforceable provision as
may be possible, and the parties hereto request the court or any
arbitrator to whom disputes relating to this Agreement are submitted to
reform the otherwise illegal, invalid or unenforceable provision in
accordance with this Section 11.
12. ARBITRATION.
IN THE EVENT OF A DISPUTE HEREUNDER WHICH CANNOT BE RESOLVED BY THE
PARTIES AMONG THEMSELVES, SUCH DISPUTE SHALL BE SETTLED BY ARBITRATION IN
ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION AND JUDGMENT ON THE AWARD RENDERED BY THE
ARBITRATION PANEL (WHICH SHALL BE A ONE PERSON PANEL) MAY BE ENTERED IN
ANY COURT OR TRIBUNAL OF COMPETENT JURISDICTION. THE COMPANY AND THE
HOLDER AGREE THAT ALL ARBITRATIONS OCCURRING UNDER THIS SECTION 12 SHALL
BE HELD IN THE CITY OF TACOMA, WASHINGTON.
13. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company will indemnify
Holder against any and all claims, losses, damages, and liabilities (or
actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of any material fact contained in
any prospectus, offering circular or other document incident to any
registration, qualification or compliance (or in any related registration
statement, notification or the like) or any omission (or alleged omission)
to state therein any material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation
by the Company of any rule or regulation promulgated under the Securities
Act applicable to, and relating to any action or inaction required of, the
Company in connection with any such registration, qualification or
compliance, and the Company will reimburse Holder for any legal and any
other expenses reasonably incurred by them in connection with
investigating or defending any such claim, loss, damage, liability or
action; provided, however, that the Company will not be liable in any such
case to the extent that any such claim, loss, damage or liability arises
out of or is based on any untrue statement or omission based upon written
information furnished to the Company by Holder for use in such prospectus,
offering circular or other document.
(b) INDEMNIFICATION BY HOLDER. Holder will indemnify the Company
and its officers and directors and each entity or individual who controls
the Company (within the meaning of the Securities Act) and their
respective successors in title and assigns against any and all claims,
losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of
any material fact contained in any prospectus, offering circular or other
document incident to any registration, qualification or compliance (or in
any related registration statement, notification or the like) or any
omission (or alleged omission) to state therein any material fact required
to be stated therein or necessary to make the statement therein not
misleading, and Holder will reimburse the Company and its officers,
directors, and controlling entities or individuals for any legal and any
other expenses reasonably by them incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action; provided, however, that this paragraph (b) shall apply only if
(and only to the extent that) such statement or omission was made in
reliance upon written information furnished to the Company in an
instrument duly executed by Holder or any of its officers, directors, or
controlling entities or individuals and stated to be specifically for use
in such prospectus, offering circular or other document (or related
registration statement, notification or the like) or any amendment or
supplement thereto.
(c) INDEMNIFICATION PROCEEDINGS. Each party entitled to
indemnification pursuant to this Section 13 (the "Indemnified Party")
shall give notice to the party required to provide indemnification
pursuant to this Section 13 (the "Indemnifying Party") promptly after such
Indemnified Party acquires actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party (at its
expense) to assume the defense of any claim or any litigation resulting
therefrom; provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be acceptable to
the Indemnified Party, and the Indemnified Party may participate in such
defense at such party's expense; and provided, further, that the failure
by any Indemnified Party to give notice as provided in this paragraph (c)
shall not relieve the Indemnifying Party of its obligations under
Section 13 except to the extent that the failure results in a failure of
actual notice to the Indemnifying Party and such Indemnifying Party is
damaged solely as a result of the failure to give notice. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with
the consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
The reimbursement required by this Section 13 shall be made by periodic
payments during the course of the investigation or defense, as and when
bills are received or expenses incurred.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
INSYNQ, INC.
a Delaware corporation
By: ___________________________________
Xxxx X. Xxxxx
Chief Executive Officer
INTERNATIONAL FLUID DYNAMICS, INC.
By: ___________________________________
Name: Xxxxxxxx X. Xxxxxx, Xx.
Title: President
