EXHIBIT 4.8
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into on and as of February 13, 2002 by and between E-Sync Networks,
Inc., a Delaware corporation (the "COMPANY"), and CRC, Inc., a New York
corporation ("CRC").
WHEREAS, simultaneously with the execution of this Agreement, CRC
is providing certain loans to the Company, and it is a condition precedent to
CRC making such loans that the Company issue to CRC a certain Common Stock
Purchase Warrant (the "WARRANT") to purchase shares of Common Stock (as
hereinafter defined) and grant to CRC the registration rights provided for
herein.
NOW, THEREFORE, the Parties hereto agree as follows:
1. DEFINITIONS
In addition to the terms defined elsewhere herein, when used herein the
following terms shall have the meanings indicated:
"COMMISSION" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"COMMON SHARES" shall mean the shares of Common Stock acquired by the Holders
upon exercise of the Warrant (subject to adjustment for stock splits, reverse
stock splits, stock dividends, or other similar transactions involving Common
Stock).
"COMMON STOCK" shall mean the common stock, par value $0.01 per share, of the
Company, and any capital stock of the Company into which such Common Stock
thereafter may be changed.
"COMMON STOCK EQUIVALENTS" shall mean (without duplication with any other Common
Stock or Common Stock Equivalents) rights, warrants, options (other than any
options issued pursuant to the Company's stock option plans), convertible
securities or convertible indebtedness, exchangeable securities or exchangeable
indebtedness, or other rights, exercisable for or convertible or exchangeable
into, directly or indirectly, Common Stock, whether at the time or upon the
occurrence of some future event.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"HOLDER" shall mean CRC, any Person that owns all or any part of the Warrant or
any Person that owns any of the Registrable Shares issuable upon exercise of the
Warrant, including successors and assigns of CRC or such Person.
"MATERIAL ADVERSE EFFECT" shall have the meaning set forth in Section 2(d).
"PERSON" shall mean a natural person, corporation, general partnership, limited
partnership, limited liability company, joint stock company, joint venture,
association, company, trust, bank, trust company, land trust, business trust or
other organization, whether or not a legal entity, or a government or agency or
political subdivision thereof.
"REGISTRABLE SHARES" shall mean at any time (i) any Common Shares and (ii) any
shares of Common Stock issuable upon exercise or conversion by the Holders of
any Common Stock Equivalent; provided, however, that Registrable Shares shall
not include any shares (x) the sale of which has been registered pursuant to the
Securities Act and which shares have been sold pursuant to such registration,
(y) which have been sold to the public pursuant to Rule 144 (or any other
similar provision then in force) promulgated under the Securities Act ("RULE
144"), or (z) which may be sold without registration and without volume
limitations pursuant to Rule 144(k).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
2. DEMAND REGISTRATION
(a) REQUEST FOR REGISTRATION. At any time after the earlier of (i) the one
(1) year anniversary of date hereof or (ii) such time as the closing bid
price for the Common Stock equals at least five (5) times the closing
bid price of the Common Stock on the date hereof, a Holder may make a
written request to the Company (a "DEMAND REQUEST"), for the
registration under the Securities Act of all or part of such Holder's
Registrable Shares (a "DEMAND REGISTRATION") so as to permit a public
offering and sale of such Registrable Shares for up to twelve (12)
consecutive months in accordance with the manner specified in such
notice; provided, however, that the Company shall not be obligated to
register Registrable Securities pursuant to such request: (i) in any
particular jurisdiction in which the Company would be required to
qualify to do business or to execute a general consent to service of
process in effecting such registration when it was not then so qualified
and had not filed such a consent; (ii) if the Company determines upon
advice of counsel to the Company that the filing of such a registration
statement would require the disclosure of material non-public
information about the Company, the disclosure of which could have a
material adverse effect on the business or financial condition of the
Company and provides written notice of such determination to the
requesting Holders, in which event no such registration statement shall
be filed until the earlier of the lapse of ninety (90) days from the
date of delivery of such notice or the Company's determination that such
information is no longer required to be disclosed, is not material or
non-public or its disclosure would not have a material adverse effect on
the business or financial condition of the Company; provided, however,
that (A) the Company shall evaluate all relevant facts and circumstances
no less often than once every thirty (30) days in order to determine
whether such information is no longer required to be disclosed, is not
material or non-public or its disclosure would not have a material
adverse effect on the business or financial condition of the Company and
shall promptly notify the requesting Holders of such determination; and
(B) the Company may not exercise its right under this clause (ii) and
clause (iii) below more than once in any 12-month period and the
aggregate number of days of any such deferral shall not exceed 90; or
(iii) if the Company is in the process of consummating an underwritten
primary registration at the time that a Demand Request
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is made, and the managing underwriters advise the Company in writing
that in their reasonable opinion based upon market conditions such
Demand Registration would have a Material Adverse Effect on the
Company's underwritten primary registration; provided, however, that (A)
a copy of such written opinion shall be promptly provided to each
Requesting Holder; (B) within twenty (20) days after receiving such
written opinion, the Holders of a majority of the Registrable Shares
held by the Requesting Holders and for which registration was previously
requested may withdraw such request by giving notice to the Company and,
if so withdrawn, the Demand Request shall be deemed not to have been
made for all purposes of this Agreement; and (C) a deferral of the
filing of a registration statement pursuant to this clause (iii) shall
be lifted, and the requested registration statement shall be filed
forthwith upon the effectiveness of the Company's underwritten primary
registration. Notwithstanding anything to the contrary contained herein,
no request may be made under this Section 2(a) within 180 days after the
effective date of a registration statement filed by the Company covering
a firm commitment underwritten public offering in which the Holders of
Registrable Securities shall have been entitled to join pursuant to this
Section 2 or Section 3 hereof and in which there shall have been
effectively registered all shares of Registrable Securities as to which
registration shall have been so requested. Such request shall specify
the number of Registrable Shares proposed to be sold and the intended
method of disposition thereof. Upon receipt of such request, the Company
shall promptly (but in any event within ten (10) days after receipt)
give written notice of such registration request to all Holders. Such
Holders shall have the right, by giving written notice to the Company
within ten (10) days after the receipt of notice from the Company, to
elect to have included in such registration all or part of their
Registrable Shares as such Holders may request in such notice of
election. Each such request will also specify the number of Registrable
Shares to be registered and the intended method of disposition thereof.
The Company shall file the Demand Registration within (i) forty-five
(45) days if the Company is eligible to use Form S-3 or any substitute
form adopted by the Commission ("SHORT-FORM REGISTRATION") or (ii) sixty
(60) days if the Company is not eligible to use such Short-Term
Registration, after receiving a Demand Request (the "REQUIRED FILING
DATE") and shall use its best efforts to cause the same to be declared
effective by the Commission as promptly as practicable after such
filing. Notwithstanding the foregoing, in no event shall the Company be
required to effect more than two (2) Demand Registrations pursuant to
this Section 2(a); provided, however, that if a Holder elects to include
all or part of such Holder's Registrable Shares in a Demand
Registration, such registration shall not be counted as one of the
registrations permitted hereunder unless such Holder is permitted to
include in the Demand Registration all of the Registrable Shares that it
desires to sell due to the limitations contained in Section 2(d) hereof.
(b) EFFECTIVE REGISTRATION AND EXPENSES. A registration will not count as a
Demand Registration until it has become effective (unless all Holders
making or joining such request pursuant to Section 2(a) above (the
"REQUESTING HOLDERS") withdraw all their Registrable Shares, in which
case such demand will count as a Demand Registration unless the
Requesting Holders pay all expenses in connection with such withdrawn
registration); provided that if, after it has become effective, an
offering of Registrable Shares pursuant to a registration is interfered
with by any stop order, injunction, or other
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order or requirement of the Commission or other governmental agency or
court, such registration will be deemed not to have been effected.
(c) SELECTION OF UNDERWRITERS. If the Holders of a majority of the
Registrable Shares to be registered in a Demand Registration so elect,
the offering of Registrable Shares pursuant to a Demand Registration
shall be in the form of an underwritten public offering. The Requesting
Holders who hold a majority of the Registrable Shares to be registered
in the Demand Registration shall be entitled to select the investment
banking firm or firms to manage the underwritten offering, subject to
the approval of the Company (not to be unreasonably withheld).
(d) PRIORITY ON DEMAND REGISTRATIONS. No securities to be sold for the
account of any Person (including the Company and including any other
holder of capital stock of the Company) other than Requesting Holders
shall be included in a Demand Registration that is an underwritten
public offering unless (i) the managing underwriter or underwriters
shall advise the Company or the Requesting Holders in writing that the
inclusion of such securities will not materially and adversely affect
the price or success of the offering (a "MATERIAL ADVERSE EFFECT") and
(ii) the Holders of not less than a majority of the Registrable Shares
to be covered by such registration (calculated by using numbers of
shares of Common Stock of the Company represented by such Registrable
Shares on an as-if-converted basis) shall have consented in writing to
the inclusion of such other securities. Furthermore, and subject to the
immediately following sentence, in the event the managing underwriter or
underwriters shall advise the Company or the Requesting Holders that
even after exclusion of all securities of other Persons pursuant to the
immediately preceding sentence, the amount of Registrable Shares
proposed to be included in such Demand Registration by Requesting
Holders is sufficiently large to cause a Material Adverse Effect, the
Registrable Shares of Requesting Holders to be included in such Demand
Registration shall be allocated pro rata among the Requesting Holders on
the basis of the number of Registrable Shares requested to be included
in such Demand Registration by each such Requesting Holder.
3. PIGGYBACK REGISTRATION
(a) RIGHT TO PIGGYBACK. If the Company proposes to file a registration
statement under the Securities Act with respect to an equity security of
the Company for its own account or for the account of any of its
securityholders (other than pursuant to Section 2 and other than a
registration statement on Form S-4 or S-8 (or any substitute forms
adopted by the Commission)), then the Company shall give prompt written
notice to the Holders of its intention to effect such a registration
(which notice shall be given not less than thirty (30) days prior to the
anticipated filing date of such registration statement) and such notice
shall offer the Holders who are holders of Registrable Shares the
opportunity to have any or all of their Registrable Shares included in
such registration statement, subject to the limitations contained in
Section 3(b) hereof. The Holders shall advise the Company in writing
within twenty (20) days after the date of receipt of such notice from
the Company of such Holder's desire to have their Registrable Shares
registered under this Section 3. Subject to Section 3(b) below, the
Company shall include in such registration statement all such
Registrable Shares so requested to be included therein pursuant to the
piggyback
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rights granted under this Section 3(a); provided, however, that the
Company may at any time withdraw or cease proceeding with any such
registration if it shall at the same time withdraw or cease proceeding
with the registration of all other equity securities originally proposed
to be registered without any obligation to the Holders of any
Registrable Securities. The Company (or such other Holders, as the case
may be,) shall be entitled to select the investment banking firm or
firms to manage any underwritten offering contemplated by this Section
3(a).
(b) PRIORITY ON REGISTRATIONS. If any managing underwriter advises the
Company in writing that including all the shares of Common Stock
requested to be included in the registration by all Persons (including
the Company) would have a Material Adverse Effect, subject to the
immediately following sentence, the Company will be obligated to include
in such registration only Common Shares in the following priority: (i)
first, if the registration statement has been proposed to be filed by
the Company for its own account, any Common Stock for sale by the
Company, and (ii) second, (x) if the registration statement has been
proposed to be filed by the Company for its own account, pro rata among
the Holders of the Registrable Shares requesting to be included in the
registration based on the number of Registrable Shares, on an
as-if-converted basis, requested to be included in such registration by
each such Holder, or (y) if the registration statement has been proposed
to be filed at the request and for the account of any of the Company's
securityholders, pro rata among such requesting securityholders and the
Holders of the Registrable Shares requesting to be included in the
registration based on the number of shares of Common Stock, on an
as-if-converted basis, requested to be included in such registration by
each such Holder and each such securityholder, and (iii) third, in the
event that all Common Stock for sale by the Company and all Registrable
Shares requested to be included in such registration statement by the
Holders of Registrable Shares and, if applicable, all Common Stock for
sale by the requesting securityholders have been included in such
registration, any other Common Stock requested to be included pursuant
to any other registration rights that may hereafter be and to the extent
granted by the Company (pro rata on the basis of the total number of
shares of Common Stock that each holder of such shares has requested to
be registered).
4. MISCELLANEOUS REGISTRATION RIGHTS PROVISIONS
(a) HOLDBACK AGREEMENT. If the Company previously shall have received a
request for registration pursuant to Section 2 hereof or any Holder
shall have requested to have such Holder's Registrable Shares registered
pursuant to Section 3 hereof, and if such previous registration shall
not have been withdrawn or abandoned, the Company agrees (A) not to
effect any public sale or distribution of its equity securities, or any
securities convertible into or exchangeable or exercisable for such
securities, during the seven days prior to and during the 180-day period
beginning on the effective date of such previous registration, and (B)
to use its best efforts to cause each officer and director of the
Company or any of its subsidiaries and each other holder of 5% or more
of its equity securities (or any securities convertible into or
exchangeable for such securities), on a fully diluted basis purchased
from the Company at any time (other than in a registered public
offering), to agree not to effect any public sale or distribution
(including sales pursuant to Rule 144) of any such securities during
such period (except as part of such registration, if otherwise
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permitted), unless the Holders of a majority of the Registrable Shares
to be registered in such registration agree. Additionally, each Holder
of Registrable Securities agrees, if so required by the managing
underwriter of the public offering, not to effect any public sale or
distribution of securities of the Company of the same class as the
securities included in such registration statement, during the seven (7)
days prior to the date on which any underwritten registration pursuant
to Section 2 or 3 has become effective and the ninety (90) days (or such
longer period as shall have been agreed to by all of the holders of
securities included in such registration statement other than the
Holders of Registrable Securities) thereafter, except as part of such
underwritten registration or to the extent that such Holder is
prohibited by applicable law from agreeing to withhold Registrable
Securities from sale or is acting in its capacity as a fiduciary or an
investment adviser. The Company agrees not to effect any public sale or
distribution of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during the seven
(7) days prior to and the ninety (90) days after any underwritten
registration pursuant to Section 2 or 3 has become effective, except as
part of such underwritten registration.
(b) REGISTRATION PROCEDURES. Whenever the Holders have requested that any
Registrable Shares be registered pursuant to this Agreement, the Company
will use its best efforts to effect the registration and the sale of
such Registrable Shares in accordance with the intended method of
disposition thereof, and pursuant thereto the Company will as
expeditiously as possible:
(i) prepare and, subject to Section 2(e), file with the Commission a
registration statement on any appropriate form under the
Securities Act, with respect to such Registrable Shares and use
its best efforts to cause such registration statement to become
effective at the earliest possible time (provided that before
filing a registration statement or prospectus or any amendments
or supplements thereto, the Company will furnish to the counsel
selected by the Holders of a majority of the Registrable Shares
covered by such registration statement copies of all such
documents proposed to be filed);
(ii) prepare and file with the Commission and notify each seller of
such Registrable Shares immediately after the filing of such
amendments, post-effective amendments, and supplements to such
registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for a period of not less than 180 days, in the case of
a piggyback registration, or 360 days in the case of a Demand
Registration (or such lesser periods as is necessary for the
underwriters in an underwritten offering to sell unsold
allotments) and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth
in such registration statement;
(iii) furnish to each seller of Registrable Shares and the underwriters
of the securities being registered such number of copies of such
registration statement, each amendment and supplement thereto (in
each case including all exhibits), the
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prospectus included in such registration statement (including
each preliminary and summary prospectus) and any other prospectus
filed under Rule 424 or Rule 430-A under the Securities Act, and
such other documents as such seller or underwriters may
reasonably request in order to facilitate the disposition of the
Registrable Shares owned by such seller or the sale of such
securities by such underwriters;
(iv) use its best efforts to register or qualify such Registrable
Shares under such other securities or blue sky laws of such
jurisdictions as the managing underwriter and each seller
reasonably requests, to keep such registration or qualification
in effect for so long as such registration statement remains in
effect, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to
consummate the disposition of the Registrable Shares owned by
such seller in such jurisdictions (provided, however, that the
Company will not be required to (A) qualify generally to do
business in any jurisdiction where it would not otherwise be
required to qualify but for this subparagraph, (B) consent to
general service of process in any such jurisdiction or (C)
subject itself to any taxation (other than stamp taxes) in any
such jurisdiction);
(v) notify each seller of Registrable Shares promptly after it shall
receive notice thereof, of the time when such registration
statement has become effective;
(vi) notify each seller of Registrable Shares promptly of any request
by the Commission for the amending or supplementing of such
registration statement or prospectus or for additional
information;
(vii) provide a transfer agent and registrar for all Registrable Shares
sold under the registration not later than the effective date of
the registration statement;
(viii) furnish to each Holder participating in the registration a signed
counterpart, addressed to such Holder (a) of an opinion of
counsel as to such matters that are customarily covered in an
opinion of counsel delivered to an underwriter, including that
the registration is valid and effective and such other matters as
such Holder may reasonably request and (b) of a "cold comfort"
letter signed by the independent public accountants who have
issued a report on the Company's financial statements included in
the registration statement, covering substantially the same
matters with respect to such registration statement (and the
prospectus included therein) and, in the case of such
accountant's letter, with respect to events subsequent to the
date of such financial statements, as are customarily delivered
to underwriters in underwritten public offerings of securities
and such other financial matters as such Holder may reasonably
request;
(ix) advise each seller of such Registrable Shares, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance
of any stop order by the Commission suspending the effectiveness
of such registration statement or of any order suspending or
preventing the use of any related prospectus or suspending the
qualification of any common stock included in such registration
statement for sale
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in any jurisdiction or the initiation or threatening of any
proceeding for such purpose and promptly use reasonable best
efforts to prevent the issuance of any stop order or to obtain
its withdrawal if such stop order should be issued;
(x) notify each seller of Registrable Shares covered by such
registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act,
upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they
were made, and at the request of any such seller promptly
prepare, file with the Commission and to furnish such seller a
reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact required
to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they
were made;
(xi) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make
available to its securityholders, as required, as soon as
reasonably practicable, an earnings statement covering the period
of at least twelve months, but not more than eighteen months,
beginning with the first full calendar month after the effective
date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities
Act, and Rule 158 promulgated thereunder and will furnish to each
such seller at least two business days prior to the filing
thereof a copy of any amendment or supplement to such
registration statement or prospectus and shall not file any
thereof to which any such seller shall have reasonably objected
on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Securities
Act or of the rules or regulations thereunder;
(xii) use its reasonable best efforts to list all Registrable Shares
covered by such registration statement on any securities exchange
on which similar securities of the Company are then listed;
(xiii) enter into such customary agreements (including underwriting
agreements in customary form) and take such other customary
actions as the Holders of Registrable Shares or the underwriters,
if any, shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Shares;
(xiv) make available for reasonable inspection by any seller of
Registrable Shares, any underwriter participating in any
disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by any such seller
or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
Company's officers, directors,
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employees and independent accountants to supply all information
reasonably requested by any such sellers, underwriter, attorney,
accountant or agent in connection with such registration
statement;
(xv) deliver promptly to each Holder participating in an offering who
so requests the file correspondence and memoranda described
below, copies of all correspondence between the Commission and
the Company, its counsel or auditors with respect to the
registration statement and permit each Holder to do such
investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the registration
statement as it deems reasonably necessary to comply with
applicable securities laws or the rules and regulations of the
NASD. Such investigation shall include reasonable access to
books, records and properties and opportunities to discuss the
business of the Company with its officers and independent
auditors, all to such reasonable extent and at such reasonable
times and as often as any such Holder shall reasonably request;
and
(xvi) permit any Holder of Registrable Shares, which holder, in its
sole and exclusive judgment, might be deemed to be an underwriter
or a controlling person of the Company, to participate in the
preparation of such registration or comparable statement and to
require the insertion therein of materials, furnished to the
Company in writing, which in the reasonable judgment of such
Holder and its counsel should be included.
If any such registration or comparable statement refers to any Holder by
name or otherwise as the holder of any securities of the Company and if,
in its sole and exclusive judgment, such Holder is or might be deemed to
be a controlling person of the Company, such Holder shall have the right
to require (i) the insertion therein of language, in form and substance
satisfactory to such Holder and presented to the Company in writing, to
the effect that the holding 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
holding does not imply that such Holder will assist in meeting any
future financial requirements of the Company, or (ii) in the event that
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; provided that with respect to
this clause (ii) such Holder shall furnish to the Company an opinion of
counsel to such effect, which opinion and counsel shall be reasonably
satisfactory to the Company.
The Company may require each Holder of Registrable Shares to be included
in such registration statement to promptly furnish in writing to the
Company such information regarding the distribution of the Registrable
Shares as the Company may from time to time reasonably request and any
such other information as may be legally required in connection with
such registration.
(c) SUSPENSION OF DISPOSITIONS. Each Holder agrees by acquisition of any
Registrable Shares that, upon receipt of any notice (a "SUSPENSION
NOTICE") from the Company of the happening of any event of the kind
which, in the opinion of the Company, requires the
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amendment or supplement of any prospectus, such Holder will forthwith
discontinue disposition of Registrable Shares until such Holder's
receipt of the copies of the supplemented or amended prospectus (which
the Company shall prepare and file as promptly as practicable), or until
it is advised in writing (the "ADVICE") by the Company that the use of
the prospectus may be resumed, and such Holder has received copies of
any additional or supplemental filings which are incorporated by
reference in the prospectus, and, if so directed by the Company, such
Holder will deliver to the Company all copies, other than permanent file
copies then in such Holder's possession, of the prospectus covering such
Registrable Shares current at the time of receipt of such notice. In the
event the Company shall give any such notice, the time period regarding
the effectiveness of registration statements set forth in Section
4(b)(ii) hereof shall be extended by the number of days during the
period from and including the date of the giving of the Suspension
Notice to and including the date when each seller of Registrable Shares
covered by such registration statement shall have received the copies of
the supplemented or amended prospectus or the Advice.
(d) REGISTRATION EXPENSES. All expenses incident to the Company's
performance of or compliance with this Agreement including, without
limitation, all registration and filing fees, reasonable fees and
expenses of one legal counsel for all Holders of Registrable Shares to
be included in the registration statement (up to a maximum of $15,000 in
the aggregate if such registration is on a Short-Form Registration), all
fees and expenses associated with filings required to be made with the
NASD (including, if applicable, the fees and expenses of any "qualified
independent underwriter" as such term is defined in Schedule E of the
By-Laws of the NASD, and of its counsel), as may be required by the
rules and regulations of the NASD, fees and expenses of compliance with
securities or "blue sky" laws (including reasonable fees and
disbursements of counsel in connection with "blue sky" qualifications of
the Registrable Shares), all word processing, duplicating and printing
expenses (including expenses of printing certificates for the
Registrable Shares and of printing prospectuses if the printing of
prospectuses is requested by a Holder of Registrable Shares) (provided,
however, that the manner and form of printing the registration statement
and prospectuses shall be at the sole discretion of the Company),
messenger and delivery expenses, fees and expenses of counsel for the
Company and its independent certified public accountants (including the
expenses of any special audit or "cold comfort" letters required by or
incident to such performance), securities acts liability insurance (if
the Company elects to obtain such insurance), the fees and expenses of
any special experts retained by the Company in connection with such
registration, the fees and expenses of underwriters customarily paid by
issuers or sellers of securities (including fees paid to a qualified
independent underwriter but excluding underwriting discounts and
commissions), and the fees and expenses of other persons retained by the
Company (all such expenses being herein called "REGISTRATION EXPENSES")
will be borne by the Company whether or not any registration statement
becomes effective; provided that in no event shall Registration Expenses
include any underwriting discounts, commissions, or any out of pocket
expenses of the Holders (or agents who manage their accounts) other than
as expressly provided above.
(e) REQUIREMENTS TO PARTICIPATE. No Holder may participate in any
registration hereunder unless such Holder (x) agrees to sell such
Holder's Registrable Shares on the basis
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provided in any underwriting arrangements approved by the Company and
(y) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements, and other documents required under
the terms of such underwriting arrangements; provided, however, that no
such Holder shall be required to make any representations or warranties
in connection with any such registration other than representations and
warranties as to (i) such Holder's ownership of such Holder's
Registrable Shares to be sold or transferred free and clear of all
liens, claims, and encumbrances, (ii) such Holder's power and authority
to effect such transfer, and (iii) such matters pertaining to compliance
with securities laws as may be reasonably requested; provided further,
however, that the obligation of such Holder to indemnify pursuant to any
such underwriting arrangements shall be several, not joint and several,
among such Persons selling securities thereunder, and the liability of
each such Holder will be in proportion to and limited to the net amount
received by such Holder from the sale of such Holder's Registrable
Shares pursuant to such registration.
5. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless, to the fullest extent
permitted by law, each seller of Registrable Shares, and each of its
employees, advisors, agents, representatives, partners, officers,
directors and affiliates and each Person who controls such seller
(within the meaning of the Securities Act or the Exchange Act)
(collectively, the "SELLER AFFILIATES") and each other Person who
participated as an underwriter in the offering or sale of such
securities and each of its employees, advisors, agents, representatives,
partners, officers, directors and affiliates and each Person who
controls such underwriters (within the meaning of the Securities Act or
the Exchange Act) (i) against any and all losses, claims, damages,
liabilities and expenses (including, without limitation, reasonable
attorneys' fees except as limited by Section 5(c) below) arising out of
or caused by any untrue or alleged untrue statement of a material fact
contained in any registration statement, preliminary prospectus, final
prospectus, summary prospectus, or any amendment thereof or supplement
thereto if the Company shall have furnished any amendments or
supplements, or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements
therein not misleading, (ii) against any and all losses, claims,
damages, liabilities and expenses whatsoever, as incurred, to the extent
of the aggregate amount paid in settlement of any litigation or
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission or alleged untrue statement or omission,
and (iii) against any and all costs and expenses (including reasonable
fees and disbursements of counsel) as may be reasonably incurred in
investigating, preparing, or defending against any litigation, or
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission or alleged untrue statement or omission, to
the extent that any such expense or cost is not paid under subparagraph
(i) or (ii) above; except insofar as the same are made in reliance upon
and in strict conformity with information furnished in writing to the
Company by such seller or any Seller Affiliate for use therein. The
reimbursements required by this Section 5(a) will be made by periodic
payments during the course of the investigation or defense, as and when
bills are received or expenses incurred.
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(b) In connection with any registration statement in which a seller of
Registrable Shares is participating, each such seller will furnish to
the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration
statement or prospectus and, to the fullest extent permitted by law,
each such seller will indemnify the Company, its directors, agents,
officers and each Person who controls the Company (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) to
the same extent as the foregoing indemnity from the Company to such
seller and its Seller Affiliates, but only to the extent that such
untrue statement or alleged untrue statement or omission or alleged
omission is contained in any information or affidavit so furnished in
writing by such seller or any of its Seller Affiliates for specific
inclusion in such registration statement; provided that the obligation
to indemnify will be several, not joint and several, among such sellers
of securities thereunder, and the liability of each such seller will be
in proportion and limited to the net amount received by such seller from
the sale of such seller's Registrable Securities pursuant to such
registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give such
notice shall not limit the rights of such Person) and (ii) unless in
such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist with respect
to such claim, permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified
party; provided, however, that any person entitled to indemnification
hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of
such counsel shall be at the expense of such person unless (X) the
indemnifying party has agreed to pay such fees or expenses, (Y) the
indemnifying party shall have failed to assume the defense of such claim
and employ counsel reasonably satisfactory to such person or (Z) in the
reasonable judgment of any indemnified party, a conflict of interest may
exist between such indemnified party and any other of such indemnified
parties with respect to such claim. An indemnifying party will not be
obligated to pay the fees and expenses of more than one counsel for all
parties indemnified by such indemnifying party with respect to such
claim. If such defense is assumed by the indemnified party as permitted
hereunder, the indemnifying party will not be subject to any liability
for any settlement made by the indemnified party without its written
consent (which consent shall not be unreasonably withheld). If such
defense is assumed by the indemnifying party pursuant to the provisions
hereof, such indemnifying party shall not settle or otherwise compromise
the applicable claim unless (1) such settlement or compromise contains a
full and unconditional release of the indemnified party from all
liabilities arising out of such proceeding or (2) the indemnified party
otherwise consents in writing.
(d) Each party hereto agrees that, if for any reason the indemnification
provisions contemplated by Section 5(a) or Section 5(b) are unavailable
to or insufficient to hold harmless an indemnified party in respect of
any losses, claims, damages, liabilities or expenses (or actions in
respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, liabilities, or expenses (or actions in
respect thereof) in such
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proportion as is appropriate to reflect the relative fault of the
indemnifying party and the indemnified party as well as any other
relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by such indemnifying party
or indemnified party, and the parties' relative knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined
by pro rata allocation (even if the Holders were treated as one entity
for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section
5(d). The amount paid or payable by an indemnified party as result of
the losses, claims, damages, liabilities or expenses (or actions in
respect thereof) referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such indemnified party
in connection with investigating or, except as provided in Section 5(c),
defending any such action or claim. Notwithstanding the provisions of
this Section 5(d), no Holder shall be required to contribute an amount
greater than the dollar amount of the proceeds received by such Holder
with respect to the sale of any Registrable Shares. 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 Holders'
obligations in this Section 5(d) to contribute shall be several in
proportion to the amount of Registrable Shares registered by them and
not joint.
(e) The indemnification provided for under this Agreement will remain in
full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and will survive the transfer of
securities.
6. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Holders that:
(a) The Company is a corporation duly organized and validly existing and in
good standing under the laws of the State of Delaware, and has corporate
power and corporate authority to own, operate, and lease its properties
and conduct its business as now conducted. The Company is duly qualified
to do business and is in good standing in all jurisdictions in which the
failure to so qualify would have a material adverse effect on the
operations, business, financial conditions, assets, or liabilities of
the Company and its subsidiaries, taken as a whole.
(b) The Company has the corporate power and is duly authorized and empowered
to enter into and perform its obligations under this Agreement. This
Agreement has been duly and validly executed, issued, and delivered and
constitutes the legal, valid, and binding obligation of the Company.
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(c) The execution, delivery, and performance of this Agreement by the
Company shall not, by the lapse of time, the giving of notice or
otherwise, constitute a violation of any applicable statute, law, rule
or regulation of any governmental authority, any applicable provision
contained in the certificate of incorporation or bylaws of the Company
or contained in any agreement, instrument, or document to which the
Company is a party or by which it is bound, or any order, ruling,
judgment or decree of any court, arbitral body or governmental
authority.
7. ARBITRATION AND DISPUTE RESOLUTION
The parties hereto agree that any and all disputes, claims or
controversies arising out of or relating to this Agreement that are not resolved
by their mutual agreement shall be submitted to final and binding arbitration
before JAMS, or its successor, pursuant to the United States Arbitration Act, 9
U.S.C. Sec. 1, et seq. Either party may commence the arbitration process called
for in this Agreement by filing a written demand for arbitration with JAMS, with
a copy to the other party. The arbitration will be conducted in accordance with
the provisions of JAMS' Comprehensive Arbitration Rules and Procedures in effect
at the time of filing of the demand for arbitration. The parties will cooperate
with JAMS and with one another in selecting an arbitrator from JAMS' panel of
neutrals, and in scheduling the arbitration proceedings. The parties covenant
that they will participate in the arbitration in good faith, and that they will
share equally in its costs. The provisions of this paragraph may be enforced by
any court of competent jurisdiction, and the party seeking enforcement shall be
entitled to an award of all costs, fees and expenses, including attorneys fees,
to be paid by the party against whom enforcement is ordered.
8. COMPLIANCE WITH RULE 144
With a view to making available the benefits of certain rules and
regulations of the Commission which may at any time permit the sale of
Registrable Shares to the public without registration, at all times, the Company
agrees to:
(a) Make and keep available adequate current public information, as those
terms are understood and defined in Rule 144 under the Securities Act,
at all times after it has become subject to the reporting requirements
of the Exchange Act;
(b) Use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities
Act and the Exchange Act; and
(c) Furnish to each Holder of Registrable Shares forthwith upon request a
written statement by the Company as to its compliance with the reporting
requirements of such Rule 144 ninety (90) days after any registration
statement covering a public offering of securities of the Company under
the Securities Act shall have become effective, and of the Securities
Act and the Exchange Act, a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed by
the Company as such Holder may reasonably request availing itself of any
rule or regulation of the Commission allowing such Holder to sell any
Registrable Shares without registration.
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9. SUBSEQUENT INVESTORS
The Company shall not grant registration rights or enter into any
registration rights agreement or similar agreement with any Person which are
equal to, superior to or conflict, impair or interfere in any way with the
rights granted hereunder, without the consent of Holders, at the time of
determination, of 70% of the Registrable Shares (based on the number of shares
of Common Stock underlying the Registrable Shares on an as-if converted basis).
10. TERMINATION
The provisions of this Agreement shall terminate upon the date on which
there are no longer any Registrable Shares.
11. NOTICES
All notices and communications to be given or otherwise to be made to
any party to this Agreement shall be deemed to have been duly given or delivered
by any party, (i) when received by such party if delivered by hand, (ii) upon
confirmation when delivered by telecopy, or (iii) within one day after being
sent by recognized overnight delivery service, and in each case addressed as
follows:
If to the Company:
E-Sync Networks, Inc.
c/o Xxxxxxx X. Xxxxx
00 Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Telecopy: (000) 000-0000
If to any other party, as indicated on the signature pages hereto.
Any party by written notice to the other parties pursuant to this
Section 11 may change the address or the Persons to whom notices or copies
thereof shall be directed.
12. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns.
13. MODIFICATION
Except as otherwise provided herein, neither this Agreement nor any
provision hereof can be amended, modified, changed, discharged, waived or
terminated (each, an "AMENDMENT") except by an instrument in writing executed in
good faith by the Company and the Holders, at the time of determination, of 70%
of Registrable Shares (based on the number of shares of Common Stock underlying
the Registrable Shares on an as-if converted basis), in which event such
Amendment shall be binding upon all of the Parties in accordance with its terms.
-15-
14. WAIVER
Any waiver by any party of a breach of any provision of this Agreement
shall not operate as or be construed to be a waiver of any other breach of that
provision or of any breach of any other provision of this Agreement. The failure
of a party to insist upon strict adherence to any term of this Agreement on one
or more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Subject to the provisions of Section 13 hereof, any waiver
must be evidenced by a writing signed by the party against whom the waiver is
sought to be enforced.
15. AVAILABILITY OF EQUITABLE REMEDIES
Each party hereto acknowledges that a breach of the provisions of this
Agreement could not adequately be compensated by money damages. Accordingly, it
is the intention of the parties that any party shall be entitled, in addition to
any other right or remedy available to it, to an injunction restraining such
breach or a threatened breach and/or to specific performance of any such
provision of this Agreement, and in either case no bond or other security shall
be required in connection therewith, and the parties hereby consent to such
injunction and to the ordering of specific performance.
16. ENTIRE AGREEMENT
This Agreement sets forth the entire understanding, and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
17. SEVERABILITY
If any provision of this Agreement shall be determined to be illegal or
unenforceable by any court of law of competent jurisdiction, the Parties intend
that such provision shall be deemed not to form part of this Agreement and, the
remaining provisions shall be severable and enforceable in accordance with their
terms.
18. GOVERNING LAW
This Agreement shall be governed by, interpreted under and construed in
accordance with the internal laws of the State of New York applicable to
contracts executed and to be performed wholly in that state without giving
effect to the choice or conflict of laws principles or provisions thereof. Each
of the parties hereto hereby irrevocably submits to the jurisdiction of any
state or federal court sitting in the City, County and State of New York in
respect of any enforcement proceeding arising out of or relating to this
Agreement, which courts shall have exclusive jurisdiction over and with respect
to any such enforcement proceeding, and irrevocably accepts for itself and in
respect of its property, generally and unconditionally, jurisdiction of the
aforesaid courts. Each of the parties hereto hereby irrevocably waives, to the
fullest extent such party may effectively do so under applicable law, trial by
jury and any objection that such party may now or hereafter have to the laying
of venue of any such enforcement proceeding brought in any such court and any
claim that any such enforcement proceeding brought in any such court has been
brought in an inconvenient forum. Nothing herein shall affect the right of any
party
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hereto to serve process in any manner permitted by law or to commence
enforcement proceedings or otherwise proceed against the other party in any
other jurisdiction.
19. CAPTIONS
The captions herein are inserted for convenience only and shall not
define, limit, extend or describe the scope of this Agreement or affect the
construction hereof.
20. COUNTERPARTS
This Agreement may be executed in two or more counterparts (and via
facsimile), each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been executed and
delivered as of the date first set forth above.
E-SYNC NETWORKS, INC.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President and Chief Operating Officer
CRC, INC.
By: /s/ Xxxxxx Xxxxxxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxxxxxx
Title: President
Address for Notices:
1290 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: President
