Exhibit 10.4
ELECSYS CORPORATION
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement"), is made as of
January 30, 2002, by and among Elecsys Corporation, a Kansas corporation (the
"Company"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(collectively, the "Investors").
WHEREAS, pursuant to the promissory note executed by DCI, Inc. in favor
of the Investors dated January 31, 2002 (the "Promissory Note"), the Investors
have acquired conversion rights pursuant to which they may convert the
outstanding balance of the Promissory Note into shares of common stock of the
Company (the "Converted Shares"); and
WHEREAS, the Investors wish to obtain and the Company wishes to grant
registration rights for the Converted Shares.
NOW THEREFORE, in consideration of the agreements set forth herein, the
Company and the Investors agree as follows:
Section 1. Definitions. The following terms shall have the following
meanings:
(a) "Commission" means the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
(b) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(c) "Holder" means any Investor holding outstanding Registrable
Securities.
(d) "Register," "registered" and "registration" refers to a
registration effected by preparing and filing a registration statement
in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement, and compliance
with applicable state securities laws of such states in which Holders
notify the Company of their intention to offer Registrable Securities.
(e) "Registrable Securities" means all of the following to the
extent the same have not been sold to the public (i) Converted Shares;
(ii) stock issued in respect of the stock referred to in (i) as a
result of a stock split, stock dividend, recapitalization or
combination. Notwithstanding the foregoing, Registrable Securities
shall not include otherwise Registrable Securities sold in a
transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(l) thereof so that
all transfer restrictions, and restrictive legends with respect
thereto, if any, are removed upon the consummation of such sale.
(f) "Securities Act" means the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(g) "Rule 144" means Rule 144 under the Securities Act or any
successor or similar rule as may be enacted by the Commission from
time to time, but shall not include Rule 144A.
(h) "Rule 144A" means Rule 144A under the Securities Act or any
successor or similar rule as may be enacted by the Commission from
time to time, but shall not include Rule 144.
Section 2. Piggyback Registration.
(a) If at any time or from time to time, the Company shall
determine to register any of its securities, for its own account or
the account of any of its shareholders, other than a registration
relating solely to securities (or securities underlying such
securities) issued to an employee or employees in connection with
services provided to the Company, a registration relating solely to a
Securities Act Rule 145 transaction, a registration relating solely to
the sale of debt or convertible debt instruments, or a registration on
any form (other than Form ▇▇-▇, ▇▇-▇, ▇-▇, ▇-▇ or S-3, or their
successor forms) which does not include substantially the same
information as would be required to be included in a registration
statement covering the sale of Registrable Securities, the Company
will:
i. give to each Holder written notice thereof as soon as
practicable prior to filing the registration statement; and
ii. include in such registration and in any underwriting
involved therein, all the Registrable Securities specified in a
written request or requests, made within 15 days after receipt of
such written notice from the Company, by any Holder or Holders,
except as set forth in subsection (b) below.
(b) If the registration is for a registered public offering
involving an underwriting, the Company shall so advise the Holders as
a part of the written notice given pursuant to subsection 2(a)(i). In
such event, the right of any Holder to registration pursuant to this
Section 2 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 2, if the managing
underwriter advises the Company in writing that marketing factors
require a limitation of the number of shares to be underwritten, the
managing underwriter may limit the number of Registrable Securities to
be included in the registration and underwriting (provided that no
shares held by officers and directors of the Company, other than
Registrable Securities that may be owned by officers and directors,
are included in the registration and underwriting). The Company shall
so advise all Holders, and the number of shares of Registrable
Securities and other securities that may be included in the
registration and underwriting shall be allocated among all Holders, in
proportion, as nearly as practicable, to the respective amounts of
Registrable Securities offered for sale by such Holders at the time of
filing the registration statement. If any Holder disapproves of the
terms of any such underwriting, he may elect to withdraw therefrom by
written notice to the Company and the managing underwriter. If, by the
withdrawal of such Registrable Securities, a greater number of
Registrable Securities held by other Holders may be included in such
registration (up to the limit imposed by the underwriters), the
Company shall offer to all Holders who have included Registrable
Securities in the registration the right to include additional
Registrable Securities. Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from such
registration.
Section 3. Registration Procedures. (a) In the case of each registration
effected by the Company pursuant to this Agreement, the Company will keep each
Holder participating therein advised in writing as to the initiation of each
registration and as to the completion thereof. The Company will use reasonable
efforts to:
i. keep such registration pursuant to Sections 2 continuously
effective for such reasonable period as necessary to permit the Holder
or Holders to complete the distribution described in the registration
statement relating thereto, but in no event for periods of more than
90 days;
ii. prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions
of the Securities Act, and to keep such registration statement
effective for the applicable period of time specified in Section
3(a)(i) above;
iii. furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request;
iv. obtain the withdrawal of any order suspending the
effectiveness of a registration statement, or the lifting of any
suspension of the qualification of any of the Registrable Securities
for sale in any jurisdiction;
v. register or qualify such Registrable Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions as
any Holder or underwriter reasonably requires, and keep such
registration or qualification effective for the applicable period
specified in Section 3(a)(i) above;
vi. cause all Registrable Securities covered by such
registrations to be listed on each securities exchange, including
NASDAQ, on which similar securities issued by the Company are then
listed;
vii. cause its accountants to issue to the underwriter, if any,
or the Holders, if there is no underwriter, comfort letters and
updated versions thereof, in customary form and covering matters of
the type customarily covered in such letters with respect to
underwritten offerings;
viii. enter into such customary agreements (including
underwriting agreements in customary form) and take all such other
actions as the holders of a majority of the Registrable Securities
being sold or the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities
(including, without limitation, effecting a stock split or a
combination of shares);
ix. if the offering is underwritten, comply with the request of
any Holder of Registrable Securities to furnish on the date that
Registrable Securities are delivered to the underwriters for sale
pursuant to such registration: (i) an opinion dated such date of
counsel representing the Company for the purposes of such
registration, addressed to the underwriters and to such Holder,
stating that such registration statement has become effective under
the Securities Act and that (A) to the best knowledge of such counsel,
no stop order suspending the effectiveness thereof has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act, and (B) the registration
statement, the related prospectus and each amendment or supplement
thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not
express any opinion as to financial statements or other financial data
contained therein), and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to
the underwriters and to such seller, stating that they are independent
public accountants within the meaning of the Securities Act and that,
in the opinion of such accountants, the financial statements of the
Company included in the registration statement or the prospectus, or
any amendment or supplement thereof, comply as to form in all material
respects with the applicable accounting requirements of the Securities
Act;
x. notify each Holder, at any time a prospectus covered by such
registration statement is required to be delivered under the
Securities Act, of the happening of any event of which it has
knowledge 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 a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing; and
xi. take such other actions as shall be requested by any
underwriter or Holder that is reasonably necessary to obtain
effectiveness of the registration statement.
(b) Notwithstanding anything in the Agreement to the contrary, if,
after a registration statement becomes effective, the Company advises the
holders of registered shares that the Company considers it appropriate for
the registration statement to be amended, the holders of such shares shall
suspend any further sales of their registered shares until the Company
advises them that the registration statement has been amended. The 90-day
time period referred to in 3(a)(i) above during which the registration
statement must be kept current after its effective date shall be extended
for an additional
number of business days equal to the number of business days during which
the rights to sell shares was suspended pursuant to the preceding sentence,
but in no event will the company be required to update the registration
statement after the first anniversary of the date hereof.
(c) So long as the Company is publicly traded on a nationally
recognized exchange, the Company agrees to make and keep public information
available, as those terms are understood and defined in Rule 144 and Rule
144A.
Section 4. Indemnification.
(a) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Section 3, the Company will
indemnify and hold harmless each Holder of such Registrable Securities
thereunder, each underwriter of such Registrable Securities thereunder and
each other person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such Holder, underwriter or
controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such Registrable Securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of
any rule or regulation promulgated under the Securities Act or any state
securities law applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, and will
reimburse each such Holder, each of its officers, directors and partners,
and each person controlling such Holder, each such underwriter and each
person who controls any such underwriter, for any reasonable legal and any
other expenses incurred in connection with investigating, defending or
settling any such claim, loss, damage, liability or action, provided that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage or liability arises out of or is based on any untrue
statement or omission based upon information furnished to the Company by
any Holder or underwriter in writing specifically for use therein.
(b) Each Holder will, if Registrable Securities held by or issuable to
such Holder are included in the securities as to which such registration is
being effected, indemnify and hold harmless the Company, each of its
directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who
controls the Company and each underwriter within the meaning of the
Securities Act, and each other Holder, each of its officers, directors and
partners and each person controlling such Holder, against all claims,
losses, expenses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged statement) of a
material fact contained in any such registration statement, prospectus,
offering circular or other document, or any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary
to make the
statements therein not misleading, and will reimburse the Company, such
Holders, such directors, officers, partners, persons or underwriters for
any reasonable legal or any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent
that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in conformity with
information furnished to the Company by such Holder in writing specifically
for use therein.
(c) Each party entitled to indemnification under this Section 4 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claims as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval
shall not be unreasonably withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations hereunder,
unless such failure resulted in actual detriment to the Indemnifying Party.
No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a full and unconditional release from all liability in
respect of such claim or litigation.
(d) Notwithstanding the foregoing, to the extent that the provisions
on indemnification contained in the underwriting agreements entered into
among the Holders, the Company and the underwriters in connection with an
underwritten public offering are in conflict with the foregoing provisions,
the provisions in the underwriting agreement shall be controlling as to the
Registrable Securities included in the public offering;
(e) If the indemnification provided for in this Section 4 is held by a
court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute the amount paid or payable
by such indemnified party as a result of such loss, liability, claim,
damage or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other hand in connection with the statements or
omissions which resulted in such loss, liability, claim, damage or expense
as well as any other relevant equitable considerations. The relevant fault
of the indemnifying party and the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(f) Survival of Indemnity. The indemnification provided by this
Section 4 shall be a continuing right to indemnification and shall survive
the registration and sale of any securities by any Person entitled to
indemnification hereunder and the expiration or termination of this
Agreement.
Section 5. Lockup Agreement. In consideration for the Company agreeing to
its obligations under this Agreement, each Holder agrees in connection with any
registration of the Company's securities (whether or not such Holder is
participating in such registration) upon the request of the Company and the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any common stock of the Company (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time from the effective
date of such registration as the Company and the underwriters may specify, but
in no event beyond six (6) months.
Section 6. Obligations of the Holders. If any of the Registrable Securities
are included in any registration pursuant to this Agreement, each Holder shall
take such actions and furnish the Company with such information regarding and
relating to the distribution of the Registrable Securities as the Company may
from time to time reasonably request and as shall be required in connection with
any registration, qualification or compliance referred to in this Agreement,
including, without limitation, the following: (i) enter into an appropriate
underwriting agreement containing terms and provisions then customary in
agreements of that nature and cause each underwriter of the Registrable
Securities to be sold that is selected by the Holder to agree in writing with
the Company to provisions with respect to indemnification and contribution that
are substantially the same as set forth in Section 4 hereof; (ii) enter into
such custody agreements, powers of attorney, and related documents at such time
and on such terms and conditions as may then be customarily required in
connection with such offering; and (iii) distribute the Registrable Securities
only in accordance with and in the manner of the distribution contemplated by
the applicable registration statement and prospectus. In addition, the Holders
shall notify the Company of any request by the Commission or any state
securities commission or agency for additional information or for such
registration statement or prospectus to be amended or supplemented.
Section 7. Expenses of Registration. The Holders shall bear all of their
legal, accounting and underwriting expenses and commissions incurred in
connection with a registration pursuant to this Agreement including any
registration fees related to the Registrable Securities incurred in connection
with any such registration or exchange listing; such expenses shall not include
the Company's legal or investment banking fees, salaries of the Company
personnel or general overhead expenses of the Company, auditing, or any other
expenses for the preparation of financial statements or other data normally
prepared by the Company in the ordinary course of its business or which the
Company would have incurred in any event. The Company shall not, under any
circumstances, be required in connection with a registration hereunder, to (i)
conduct any road shows or similar sales efforts for the Holders, or (ii) pay any
expenses of the Holders for any road shows or similar sales efforts.
Section 8. Certificate Legends.
(a) Future Events. The Company will notify the Holder participating in
a registration of the occurrence of any of the following events, and when
so notified, each Holder will immediately discontinue any disposition of
the Registrable Securities until notified by the Company that the event is
no longer applicable:
i. the issuance by the Commission or any state securities
commission or agency of any stop order suspending the effectiveness of
the registration statement or the initiation of any proceedings for
that purpose (in which case the Company will make reasonable effort to
obtain the withdrawal of any such order or the cessation of any such
proceedings); or
ii. the existence of any fact which makes untrue any material
statement made in the registration statement or prospectus or any
document incorporated therein by reference or which requires the
making of any changes in the registration statement or prospectus or
any document incorporated therein by reference in order to make the
statements therein not misleading (in which case the Company will make
reasonable effort to amend the applicable document to correct the
deficiency).
Section 9. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall promptly furnish to the Company
such information regarding such Holder or Holders and the distribution proposed
by such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration referred to herein.
Section 10. Termination of Rights. All rights of any particular
Holder under this Agreement shall terminate at 5:00 P.M. Central time on January
31, 2004.
Section 11. Representations and Warranties of the Company. The Company
represents and warrants to the Holders as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other
agency of government, the Articles of Incorporation or Bylaws of the
Company or any provision of any indenture, agreement or other instrument to
which it or any of its properties or assets is bound, conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument or result
in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance and
moratorium laws and other laws of general application affecting enforcement
of creditors' rights generally and (ii) the availability of
equitable remedies as such remedies may be limited by equitable principles
of general applicability (regardless of whether enforcement is sought in a
proceeding in equity or at law).
Section 12. Miscellaneous.
(a) Amendments. This Agreement may be amended only by a writing signed
by the Company and the Holders of more than 51% of the Registrable
Securities, as constituted from time to time. The Holders hereby consent to
future amendments to this Agreement that permit future investors to be made
parties hereto and to become Holders of Registrable Securities; provided,
however, that no such future amendment may materially impair the rights of
the Holders hereunder without obtaining the requisite consent of the
Holders, as set forth above. For purposes of this Section, Registrable
Securities held by the Company or beneficially owned by any officer or
employee of the Company shall be disregarded and deemed not to be
outstanding.
(b) Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute a single instrument.
(c) Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and may be sent by facsimile
transmission (with written confirmation of successful transmission), by
registered or certified mail, postage prepaid, or delivered by hand or by
messenger, addressed (a) if to a Holder, at such Holder's address set forth
on the books of the Company, or at such other address as such Holder shall
have furnished to the Company in writing pursuant to this Section, or (b)
if to the Company, to the Company's then current executive office address,
or at such other address as the Company shall have furnished to the Holders
pursuant to this Section. Each such notice or other communication shall for
all purposes of this Agreement be treated as effective or having been given
when delivered if delivered personally, or, if sent by registered or
certified mail or facsimile transmission, upon its receipt.
(d) Severability. If any provision of this Agreement shall be held to
be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any
manner affect or render illegal, invalid or unenforceable any other
provision of this Agreement, and this Agreement shall be carried out as if
any such illegal, invalid or unenforceable provision were not contained
herein.
(e) Specific Performance. The parties hereto acknowledge that they
will be irreparably damaged in the event that this Agreement is not
specifically enforced. Upon any breach threatened, breach of the terms,
covenants or conditions of this Agreement by any party hereto, the other
party shall, in addition to all other remedies, be entitled to a temporary
permanent injunction, without showing any actual damage or posting any
bond, or a decree for specific performance, in accordance with the
provisions hereof.
(f) Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Kansas without regard to principles of
conflict of law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
ELECSYS CORPORATION
By:
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Name:
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Title:
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