REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the 9th day of
January, 1998, by and among COVOL TECHNOLOGIES, INC., a Delaware corporation
(the "Company"), and AJG FINANCIAL SERVICES, INC. and its successors, assigns
and transferees (herein referred to collectively as the "Holders" and
individually as a "Holder").
W I T N E S S E T H:
WHEREAS, on the date hereof, Holder is the holder of those certain
Warrants To Purchase Common Stock of the Company, both issued January 9, 1998,
to AJG Financial Services, Inc., one designated Warrant A for 216, 272 Shares of
Common Stock, and the other designated Warrant B for 216, 272 Shares of Common
Stock.
WHEREAS, the Company has agreed to provide the Holders with certain
registration rights as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and subject to and
on the terms and conditions herein set forth, the parties hereto agree as
follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"Company" shall have the meaning set forth in the preamble and shall
also include the Company's successors.
"Company Common Stock" shall mean the shares of common stock, $.001 par
value per share, of the Company.
"Effective Date" shall mean the date of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Holder" or "Holders" shall have the meaning set forth in the preamble.
"Person" shall mean an individual, partnership, corporation, trust, or
unincorporated organization, or a government or agency or political subdivision
thereof.
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"Prospectus" shall mean the prospectus included in a Registration
Statement, and any such prospectus 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 a Registration Statement, and by all other
amendments and supplements to such prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Public Sale" shall mean a public sale or distribution of Registrable
Securities, including a sale pursuant to Rule 144 (or any similar provision then
in effect) under the Securities Act.
"Registrable Securities" shall mean the Shares, excluding (i) Shares
for which a Registration Statement relating to the sale thereof by the Holder
shall have become effective under the Securities Act and which have been
disposed of by the Holder under such Registration Statement, and (ii) Shares
sold or otherwise distributed pursuant to Rule 144 under the Securities Act.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation:
(i) all SEC or National Association of Securities Dealers, Inc. ("NASD")
registration and filing fees, (ii) all fees and expenses incurred in connection
with compliance with state securities or blue sky laws (including reasonable
fees and disbursements of counsel in connection with blue sky qualification of
any of the Registrable Securities and the preparation of a Blue Sky Memorandum)
and compliance with the rules of the NASD, (iii) all expenses of any Persons
engaged by the Company in preparing or assisting in preparing, word processing,
printing and distributing any Registration Statement, any Prospectus,
certificates and other documents relating to the performance of and compliance
with this Agreement, (iv) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Securities on any securities exchange
or exchanges pursuant to Section 3(a)(vii) hereof, and (v) the fees and
disbursements of counsel for the Company and of the independent public
accountants of the Company, including the expenses of any special audits or
"cold comfort" letters, if any, required by or incident to such performance and
compliance. Registration Expenses shall specifically exclude the fees and
disbursements of counsel representing a selling Holder and underwriting
discounts and commissions, and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by a selling Holder, all of which shall be
borne by such Holder in all cases.
"Registration Statement" shall mean a registration statement of the
Company and any other entity required to be a registrant with respect to such
registration statement pursuant to the requirements of the Securities Act which
covers the Registrable Securities requested by Holders to be covered by such
registration statement, and all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all materials
incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
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"Selling Holder" shall mean each Holder who elects to participate in an
underwritten public offering of Company Common Stock.
"Shares" shall mean Company Common Stock that is issued upon exercise
of the Warrants.
"Warrants" shall mean the two Warrants (one designated Warrant A and
the other designated Warrant B), each dated January 9, 1998, issued by the
Company to AJG Financial Services, Inc. evidencing rights to purchase initially
up to an aggregate of 432,544 shares of Common Stock, and all warrants issued
upon transfer, division or combination of, or in substitution or exchange for,
any thereof.
2. Registration Under the Securities Act.
(a) Filing of Registration Statement. As promptly as
practicable after the date hereof, the Company intends, but is not obligated, to
cause to be filed a Registration Statement providing for the issuance of the
Shares to the Holder to the extent allowed by applicable regulations and the
resale by the Holder of Registrable Securities then held by the Holder and
intends to use its best efforts to cause such Registration Statement if filed to
be declared effective by the SEC as soon as reasonably practicable. The Company
agrees to use its best efforts to keep such Registration Statement continuously
effective under the Securities Act for a period expiring on the date two (2)
years from the date of the last issuance of any Shares and further agrees to
supplement or amend the Registration Statement, if and as required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Registration Statement or by the Securities Act or by any other
rules and regulations thereunder for such Registration Statement.
(b) Demand Registration. In the event the Company has not
caused to be filed a Registration Statement as provided in Section 2(a) within
six (6) months from the date hereof, Holder shall have the right, at any time
and from time to time after such six (6) month period, to demand that the
Company cause to be filed a Registration Statement or an amendment to a
Registration Statement providing for the registration under the Securities Act
of the Shares to be issued to Holder to the extent allowed by applicable
regulations and the resale by the Holder of all Registrable Securities, or, in
the event the Company has filed a Registration Statement as provided in Section
2(a) within six (6) months from the date hereof, but such Registration Statement
has not been declared effective by the SEC, Holder shall have the right at any
time and from time to time after September 1, 1998, to demand that the Company
cause to be filed a Registration Statement or an amendment to a Registration
Statement providing for the registration under the Securities Act of the Shares
to be issued to Holder and the resale by the Holder of all Registrable
Securities; provided, however, if at the time of such demand, the Shares have
been issued, such Registration Statement shall only relate to sales by Holder.
The Company agrees to use its best efforts to keep such Registration Statement
continuously effective under the Securities Act for a period expiring on the
date two (2) years from the date of the last issuance of any Shares and further
agrees to supplement or amend the Registration Statement, if and as required by
the rules, regulations or instructions
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applicable to the registration form used by the Company for such Registration
Statement or by the Securities Act or by any other rules and regulations
thereunder for such Registration Statement.
(c) Cut-Back Registration. In the event that the Holder has
requested the inclusion of Registrable Securities in a registration statement
pursuant to Section 3(a) or Section 3(b) and all or a portion of the Registrable
Securities with respect to which the Holder has requested registration are not
registered by virtue of the provisions of said sections, Holder shall thereupon
have the right to require the registration under the Securities Act of such
Registrable Securities pursuant to the provisions of Section 2(b), irrespective
of whether the date upon which Registration is requested is within six months of
the date of this Agreement.
(d) Expenses. The Company shall pay all Registration Expenses
in connection with any Registration Statement filed pursuant to this Section 2.
(e) Inclusion in Registration Statement. The Company may
require each Holder of Registrable Securities to furnish to the Company in
writing such information regarding the proposed offer or sale by such Holder of
such Registrable Securities as the Company may from time to time reasonably
request in writing. Any Holder who does not provide the information reasonably
requested by the Company in connection with the Registration Statement as
promptly as practicable after receipt of such request, but in no event later
than ten (10) days thereafter, shall not be entitled to have its Registrable
Securities included in the Registration Statement.
(f) Underwritten Demand by Holder. If at the demand of Holder,
the Company proposes to file a Registration Statement relating to an
underwritten public offering of any Registerable Securities and the investment
banking firm selected by Holder to act as lead underwriter in connection with
such public offering of securities by Holder advises in writing that, in such
firm's opinion, a registration of other securities of the Company at that time
would materially and adversely affect the offering by Holder, no person
(including the Company) shall have a right to have shares of common stock or
other securities included in such Registration Statement; provided, however,
that if an offering of some but not all of the shares requested to be registered
by Holder would not adversely affect the offering by Holder, the aggregate
number of shares requested to be included in such offering by the Company and
each other person shall be reduced pro rata according to the total number of
securities proposed to be sold by the Company and other Person taken as a whole;
provided, in no event shall the shares requested by Holder to be included in the
Registration Statement be reduced.
(g) Rights to Subsequent Investors. The Company shall not
grant any rights to any other person which shall diminish in any way the rights
granted to the Holders hereunder. The Company may grant subsequent investors
rights of registration (such as those provided in Section 2 hereof); provided,
however, that (i) such rights are limited to shares of Common Stock (including,
in the case of any underwritten offering, shares issuable upon the conversion of
convertible securities or upon the exercise of warrants if such conversion or
exercise is effected by the sellers or the
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underwriters prior to sale to the public in such offering), (ii) such rights are
not inconsistent with the provisions hereof; (iii) the instrument granting such
rights specifically confirms the rights of the Holders of Registrable Shares
hereunder; (iv) the rights of the Holder hereunder shall be the same as the
rights of registration granted to the subsequent investors.
3. Incidental Registration.
(a) If the Company proposes to register any shares of Company
Common Stock ("Other Securities") for public sale by the Company pursuant to an
underwritten offering under the Securities Act it will give prompt written
notice to Holders of its intention to do so, and upon the written request of
Holders delivered to the Company within fifteen (15) Business Days after the
giving of any such notice which request shall specify the number of Registrable
Securities intended to be disposed of by Holders and the Company shall include
such Registrable Securities in such Registration Statement. The Company will not
be required to effect any registration pursuant to this Section 3(a) if the
Company shall have been advised in writing (with a copy to the Selling Holders)
by a nationally recognized independent investment banking firm selected by the
Company to act as lead underwriter in connection with the public offering of
securities by the Company that, in such firm's opinion, a registration at that
time by other holders would materially and adversely affect the Company's own
scheduled offering; provided, however, that if an offering of some but not all
of the shares requested to be registered by Holder and other holders would not
adversely affect the Company's offering, the aggregate number of shares
requested to be included in such offering by each selling holder shall be
reduced pro rata according to the total number of securities proposed to be sold
by the selling holders taken as a whole.
(b) If at the demand of any other Person but the Holder
("Other Person"), the Company proposes to register Other Securities for public
sale pursuant to an underwritten offering under the Securities Act it will give
prompt written notice to Holder of its intention to do so, and upon the written
request of Holders delivered to the Company within fifteen (15) Business Days
after the giving of any such notice which request shall specify the number of
Registrable Securities intended to be disposed of by Holder and the Company
shall include such Registrable Securities in such Registration Statement. If the
Other Person shall have been advised in writing (with a copy to the Selling
Holders) by a nationally recognized independent investment banking firm acting
as lead underwriter in connection with the public offering of securities by the
Other Person that, in such firm's opinion, a registration by the Holders at that
time would materially and adversely affect the offering by the Other Person, the
Registrable Securities of the Holder shall not be included in such Registration,
provided the number of shares requested to be included in such offering by the
Holders and all other Persons shall be reduced pro rata according to the total
number of securities proposed to be sold by the Holder and other selling holders
taken as a whole; provided, however, notwithstanding the foregoing sentence, the
shares requested by the Other Person demanding registration to be included in
the Registration Statement shall not be reduced if required by an agreement
between such Other Person and the Company.
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(c) With respect to any proposed sale or sale by the Holder of
Registrable Securities pursuant to this Section 3 the Company shall pay all
Registration Expenses.
(d) No registration of Registrable Securities effected under
this Section 3 shall relieve the Company of its obligation (if any) to effect
registrations of Registrable Securities pursuant to Section 2.
4. Registration Procedures.
(a) Obligations of the Company. In connection with any
Registration Statement pursuant to Sections 2 or 3 hereof, the Company shall:
(i) cause the Registration Statement to be
available for the sale of the Registrable
Securities by Holders in one or more
transactions, in negotiated transactions,
through the writing of options of the
Registrable Securities, or a combination of
such methods of sale, and to comply as to
form in all material respects with the
requirements of the applicable form and
include all financial statements required by
the SEC to be filed therewith and in the
event the Company is listed on the NASDAQ
National Market System ("NMS") in one or
more transactions on NMS or otherwise in
special offerings, exchange distributions or
secondary distribution pursuant to and in
accordance with the rules of the NMS, in the
over-the-counter market;
(ii) (A) prepare and file with the SEC such
amendments and post- effective amendments to
any Registration Statement as may be
necessary to keep each such Registration
Statement effective for the applicable
period; (B) cause the Prospectus included in
each such Registration Statement to be
supplemented by any required prospectus
supplement, and as so supplemented to be
filed pursuant to Rule 424 or any similar
rule that may be adopted under the
Securities Act; (C) respond promptly to any
comments received from the SEC with respect
to each Registration Statement, or any
amendment, post-effective amendment or
supplement relating thereto; and (D) comply
with the provisions of the Securities Act
with respect to the disposition of all
securities covered by each Registration
Statement;
(iii) furnish to each Holder of Registrable
Securities, without charge, as many copies
of each Prospectus, and any amendment or
supplement thereto and such other documents
as they may reasonably request, in order to
facilitate the public sale or other
disposition of the Registrable Securities;
the Company consents to the use of the
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Prospectus, by each such Holder of
Registrable Securities, in connection with
the offering and sale of the Registrable
Securities covered by the Prospectus;
(iv) notify promptly each Holder of Registrable
Securities and confirm such advice in
writing (A) of the issuance by the SEC or
any state securities authority of any stop
order suspending the effectiveness of a
Registration Statement or the initiation of
any proceedings for that purpose, (B) if the
Company receives any notification with
respect to the suspension of the
qualification of the Registrable Securities
for sale in any jurisdiction or the
initiation of any proceeding for such
purpose, and (C) of the happening of any
event during the period a Registration
Statement is effective as a result of which
such Registration Statement or the related
Prospectus contains any 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,
in light of the circumstances under which
they were made (in the case of the
Prospectus), not misleading;
(v) use its best effort to obtain the withdrawal
of any order suspending the effectiveness of
a Registration Statement at the earliest
possible moment;
(vi) use its best efforts to register or qualify
the Registrable Securities by the time the
applicable Registration Statement is
declared effective by the SEC under all
applicable state securities or "blue sky"
laws of such jurisdictions as any Holder of
Registrable Securities covered by a
Registration Statement shall reasonably
request in writing, keep each such
registration or qualification effective
during the period such Registration
Statement is required to be kept effective
or during the period offers or sales are
being made by a Holder that has delivered a
Registration Notice to the Company,
whichever is shorter, and do any and all
other acts and things which may be
reasonably necessary or advisable to enable
such Holder to consummate the disposition in
each such jurisdiction of such Registrable
Securities owned by such Holder; provided,
however, that the Company shall not be
required to (A) qualify generally to do
business in any jurisdiction or to register
as a broker or dealer in such jurisdiction
where it would not otherwise be required to
qualify but for this Section 4(a)(vi), (B)
subject itself to taxation in any such
jurisdiction, or (C) submit to the general
service of process in any such jurisdiction;
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(vii) upon the occurrence of any event
contemplated by Section 4(a)(iv)(C) hereof,
use its best efforts promptly to prepare and
file a supplement or prepare, file and
obtain effectiveness of a post-effective
amendment to a 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 purchasers of
the Registrable Securities, such Prospectus
will not contain any untrue statement of a
material fact or omit to state a material
fact required to be stated therein or
necessary to make the statements therein, in
the light of the circumstances under which
they were made, not misleading;
(viii) use its best efforts to cause all
Registrable Securities to be listed on any
securities exchange on which similar
securities issued by the Company are then
listed;
(ix) provide a CUSIP number for all Registrable
Securities, not later than the effective
date of the Registration Statement or
amendment thereto relating to such
Registrable Securities;
(x) otherwise use its best efforts to comply
with all applicable rules and regulations of
the SEC and make available to its security
holders, as soon as reasonably practicable,
an earning statement covering at least
twelve (12) months which shall satisfy the
provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder; and
(xi) use its best efforts to cause the
Registrable Securities covered by a
Registration Statement to be registered with
or approved by such other governmental
agencies or authorities as may be necessary
by virtue of the business and operations of
the Company to enable Holders to consummate
the disposition of such Registrable
Securities.
(b) Obligations of Holders. In connection with and as a
condition to the Company's obligations with respect to a Registration Statement
pursuant to Section 2 hereof and this Section 4, each Holder agrees that (i) it
will not offer or sell its Registrable Securities under the Registration
Statement until it has received copies of the supplemental or amended Prospectus
contemplated by Section 4(a)(ii) hereof and receives notice that any
post-effective amendment has become effective; and (ii) upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 4(a)(iv)(C) hereof, such Holder will forthwith discontinue disposition
of Registrable Securities pursuant to a Registration Statement until such Holder
receives copies of the supplemented or amended Prospectus contemplated by
Section 4(a)(vii) hereof and receives notice that any post-effective amendment
has become effective, and, if so directed by the Company, such Holder will
deliver to the Company (at the expense of the Company) all copies in
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its possession, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Registrable Securities current at
the time of receipt of such notice.
(c) Lockup. In the event the Company proposes to effect the
distribution of its securities by the Company through an underwritten public
offering, each Holder who then beneficially owns in excess of 100,000 shares
agrees for a period of time, beginning seven (7) days prior to the effective
date of the underwriting agreement pertaining to such offering and ending thirty
(30) days after such effective date that such Holder will forthwith cease any
sale or other disposition of any of the Registrable Securities or sale or other
disposition of any of its Registrable Securities during such period of time, if
requested in writing by the representatives of the underwriters for any such
underwritten public offering; provided, however, that Holders shall not be
subject to more than one Lockup Period during any twelve (12) month period.
5. Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Holder, each officer and director of such
Holder, and each Person, if any, who controls any Holder within the meaning of
Section 15 of the Securities Act as follows:
(i) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred,
arising out of any untrue statement or
alleged untrue statement of a material fact
contained in any Registration Statement (or
any amendment thereto) pursuant to which
Registrable Securities were registered under
the Securities Act, including all documents
incorporated therein by reference, or the
omission or alleged omission therefrom of a
material fact necessary in order to make the
statements therein, in the light of the
circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim,
damage and expense 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 any such alleged untrue statement or
omission, if such settlement is effected
with the written consent of the Company; and
(iii) against any and all expense whatsoever, as
incurred (including reasonable fees and
disbursements of counsel), reasonably
incurred in investigating, preparing or
defending against any litigation, or
investigation or proceeding by any
governmental agency or body, commenced or
threatened, in each case whether or not a
party, or any claim whatsoever based upon
any such untrue statement or omission,
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or any such alleged untrue statement or
omission, to the extent that any such
expense is not paid under subparagraph (i)
or (ii) above;
provided, however, that the indemnity provided pursuant to this Section 4(a)
does not apply to any Holder with respect to any loss, liability, claim, damage
or expense to the extent arising out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by such Holder expressly for
use in a Registration Statement (or any amendment thereto) or any Prospectus (or
any amendment or supplement thereto).
(b) Indemnification by the Holders. Each Holder severally
agrees to indemnify and hold harmless the Company and the other selling Holders,
and each of their respective directors and officers (including each director and
officer of the Company who signed the Registration Statement), and each Person,
if any, who controls the Company or any other selling Holder within the meaning
of Section 15 of the Securities Act, to the same extent as the indemnity
contained in Section 5(a) hereof (except that any settlement described in
Section 4(a)(ii) shall be effected only with the written consent of such
Holder), but only insofar as such loss, liability, claim, damage or expense
arises out of or is based upon (i) any untrue statement or omission, or alleged
untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such selling Holder expressly for use in such Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or supplement
thereto), or (ii) such Holder's failure to deliver a Prospectus to any purchaser
of Registrable Securities where such a delivery obligation was applicable to
such Holder's sale of Registrable Securities and such Holder had been provided
with sufficient copies of such Prospectus for the relevant deliveries thereof.
In no event shall the liability of any Holder under this Section 4(b) be greater
in amount than the dollar amount of the proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Conduct of Indemnification Proceedings. Each indemnified
party shall give reasonably prompt notice to each indemnifying party of any
action or proceeding commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party (i) shall not
relieve it from any liability which it may have under the indemnity agreement
provided in Section 4(a) or (b) above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the indemnified party
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) shall not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided under Section 4(a) or (b) above. If the indemnifying party
so elects within a reasonable time after receipt of such notice, the
indemnifying party may assume the defense of such action or proceeding at such
indemnifying party's own expense with counsel chosen by the indemnifying party
and approved by the indemnified parties defendant in such action or proceeding,
which approval shall not be unreasonably withheld; provided, however, that, if
such indemnified party or parties reasonably determine that a conflict of
interest exists where it is advisable for such indemnified party
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or parties to be represented by separate counsel or that, upon advice of
counsel, there may be legal defenses available to them which are different from
or in addition to those available to the indemnifying party, then the
indemnifying party shall not be entitled to assume such defense and the
indemnified party or parties shall be entitled to one separate counsel at the
indemnifying party's expense. If an indemnifying party is not entitled to assume
the defense of such action or proceeding as a result of the proviso to the
preceding sentence, such indemnifying party's counsel shall be entitled to
conduct the defense of such indemnified party or parties, it being understood
that both such counsel will cooperate with each other to conduct the defense of
such action or proceeding as efficiently as possible. If an indemnifying party
is not so entitled to assume the defense of such action or does not assume such
defense, after having received the notice referred to in the first sentence of
this paragraph, the indemnifying party or parties will pay the reasonable fees
and expenses of counsel for the indemnified party or parties. In such event,
however, no indemnifying party will be liable for any settlement effected
without the written consent of such indemnifying party. If an indemnifying party
is entitled to assume, and assumes, the defense of such action or proceeding in
accordance with this paragraph, such indemnifying party shall not be liable for
any fees and expenses of counsel for the indemnified parties incurred thereafter
in connection with such action or proceeding. The indemnification obligations
provided pursuant to Sections 4(a) and (b) hereof survive, with respect to a
Holder, the transfer of Registrable Securities by such Holder, and with respect
to a Holder or the Company, shall remain in full force and effect regardless of
any investigation made by or on behalf of any indemnified party.
(d) Contribution.
(i) In order to provide for just and equitable
contribution in circumstances in which the
indemnity agreement provided for in this
Section 4 is for any reason held to be
unenforceable although applicable in
accordance with its terms, the Company and
the selling Holders shall contribute to the
aggregate losses, liabilities, claims,
damages and expenses of the nature
contemplated by such indemnity agreement
incurred by the Company and the selling
Holders, in such proportion as is
appropriate to reflect the relative fault of
and benefits to the Company on the one hand
and the selling Holders on the other (in
such proportions that the selling Holders
are severally, not jointly, responsible for
the balance), in connection with the
statements or omissions which resulted in
such losses, claims, damages, liabilities or
expenses, as well as any other relevant
equitable considerations. The relative
benefits to the indemnifying party and
indemnified parties shall be determined by
reference to, among other things, the total
proceeds received by the indemnified party
and indemnified parties in connection with
the offering to which such losses, claims,
damages, liabilities or expenses relate. The
relative fault of the indemnifying party and
indemnified parties shall be determined by
reference to, among other things, whether
the action in question,
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including any untrue or alleged untrue
statement of a material fact or omission or
alleged omission to state a material fact,
has been made by, or relates to information
supplied by, such indemnifying party or the
indemnified parties, and the parties'
relative intent, knowledge, access to
information and opportunity to correct or
prevent such action.
(ii) The Company and the Holders agree that it
would not be just or equitable if
contribution pursuant to this Section 4(d)
were determined by pro rata allocation or by
any other method of allocation which does
not take account of the equitable
considerations referred to in the
immediately preceding paragraph.
Notwithstanding the provisions of this
Section 4(d), no selling Holder shall be
required to contribute any amount in excess
of the amount by which the total price at
which the Registrable Securities of such
selling Holder were offered to the public
exceeds the amount of any damages which such
selling Holder would otherwise have been
required to pay by reason of such untrue
statement or omission.
(iii) Notwithstanding the foregoing, 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.
For purposes of this Section 4(d), each
Person, if any, who controls a Holder within
the meaning of Section 15 of the Securities
Act and directors and officers of a Holder
shall have the same rights to contribution
as such Holder, and each director of the
Company, each officer of the Company who
signed the Registration Statement and each
Person, if any, who controls the Company
within the meaning of Section 15 of the
Securities Act shall have the same rights to
contribution as the Company.
(iv) The contribution provided for in this
Section 4(d) shall survive, with respect to
a Holder, the transfer of Registrable
Securities by such Holder, and with respect
to a Holder or the Company, shall remain in
full force and effect regardless of any
investigation made by or on behalf of any
indemnified party.
6. Rule 144 Sales.
(a) Reports. The Company covenants that it will file the
reports required to be filed by the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended, and will take such further action
as any Holder of Registrable Securities may reasonably request, all to
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the extent required to enable such Holder to sell Registrable Securities
pursuant to Rule 144 under the Securities Act.
(b) Certificates. In connection with any sale, transfer or
other disposition by any Holder of any Registrable Securities pursuant to Rule
144 under the Securities Act, the Company shall cooperate with such Holder to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act legend, and
enable certificates for such Registrable Securities to be for such number of
shares and registered in such names as the selling Holders may reasonably
request at least two (2) business days prior to any sale of Registrable
Securities.
7. Miscellaneous.
(a) 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 without the written consent of the Company and the Holders of a
majority in amount of the outstanding Registrable Securities; provided, however,
that no amendment, modification or supplement or waiver or consent to the
departure with respect to the provisions of Sections 2, 3, 4, 5, 6 or 7 hereof
shall be effective as against any Holder of Registrable Securities unless
consented to in writing by such Holder of Registrable Securities, as the case
may be. Notice of any amendment, modification or supplement to this Agreement
adopted in accordance with this Section 6(a) shall be provided by the Company to
each Holder of Registrable Securities at least thirty (30) days prior to the
effective date of such amendment, modification or supplement.
(b) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery, (i) if to a Holder, at the most current address given by such Holder
to the Company by means of a notice given in accordance with the provisions of
this Section 6(b), which address initially is, with respect to each Holder, the
address set forth next to such Holder's name on the books and records of the
Company, or (ii) if to the Company, at: Covol Technologies, Inc., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇; Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇; Attn: General
Counsel.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
(5) business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; or
at the time delivered if delivered by an air courier guaranteeing overnight
delivery.
(c) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the Company and the Holders, including without limitation and without the
need for an express assignment, subsequent Holders. If any successor, assignee
or transferee of any Holder shall acquire Registrable Securities, in any
13
manner, whether by operation of law or otherwise, such Registrable Securities,
as the case may be, shall be held subject to all of the terms of this Agreement,
and by taking and holding such Registrable Securities such Person shall be
entitled to receive the benefits hereof and shall be conclusively deemed to have
agreed to be bound by all of the terms and provisions hereof.
(d) Headings. The headings in this Agreement are for the
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(e) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING
EFFECT TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
(f) Specific Performance. The Company and the Holders hereto
acknowledge that there would be no adequate remedy at law if any party fails to
perform any of its obligations hereunder, and accordingly agree that each party,
in addition to any other remedy to which it may be entitled at law or in equity,
shall be entitled to compel specific performance of the obligations of any other
party under this Agreement in accordance with the terms and conditions of this
Agreement in any court of the United States or any State thereof having
jurisdiction.
(g) Entire Agreement. This Agreement is intended by the
Company as a final expression of its agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the Company in respect
of the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings of the Company with respect to such subject
matter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
COVOL TECHNOLOGIES, INC.
By:/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇/
---------------------------
Name:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
AJG FINANCIAL SERVICES, INC.
By: /▇▇▇▇▇ ▇. ▇▇▇▇/
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
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