Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of November __, 2000
(this "Agreement"), is made by and between MICROWARE SYSTEMS CORPORATION, an
Iowa corporation (the "Company"), and the entity named on the signature page
hereto (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of November __, 2000, between the
Initial Investor and the Company (the "Securities Purchase Agreement";
capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Securities Purchase Agreement), the Company has agreed to issue
and sell to the Initial Investor a 8% Convertible Debenture, in the principal
amount of $2,000,000 (the "Debenture") which term, as used herein shall have the
meaning ascribed to it in the Securities Purchase Agreement); and
WHEREAS, the Company has agreed to issue the Warrants to the Initial
Investor in connection with the issuance of the Debenture; and
WHEREAS, the balance due pursuant to the Debenture, including, without
limitation, principal and interest, is convertible into shares of Common Stock
(the "Conversion Shares") upon the terms and subject to the conditions set forth
therein; and
WHEREAS, the Warrants to be issued to the Initial Investor may be
exercised for the purchase of shares of Common Stock (the "Warrant Shares") upon
the terms and conditions of the Warrants; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Conversion Shares and the Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
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(a) "Investor" means the Initial Investor and any permitted
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(b) "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.
(c) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(d) "Registrable Securities" means the Conversion Shares and the
Warrant Shares.
(e) "Registration Statement" means a registration statement of the
Company under the Securities Act.
2. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company shall prepare and file with
the SEC, as soon as possible after the Closing Date, but no later than thirty
(30) days following the Closing Date, a Registration Statement on Form S-3, or
other available form, registering for resale by the Investor all of the
Registrable Securities, but in no event less than two hundred percent (200%) of
the aggregate number of shares into (i) which the Debentures would be
convertible at the time of filing of the Registration Statement (assuming for
such purposes that the entire principal and interest balance of all Debentures
had been eligible to be converted, and had been converted, into Conversion
Shares in accordance with their terms, whether or not such eligibility or
conversion had in fact occurred as of such date), and (ii) which would be issued
upon exercise of all of the Warrants at the time of filing of the Registration
Statement (assuming for such purposes that all such Warrants had been eligible
to be exercised and had been exercised in accordance with their terms, whether
or not such eligibility or exercise had in fact occurred as
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of such date). The Registration Statement shall also state that, in accordance
with Rule 416 and 457 under the Securities Act, it also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Debentures and the exercise of the Warrants (and the
Existing Warrants) to prevent dilution resulting from stock splits, or stock
dividends. The Company will use its best efforts to cause the Registration
Statement to be declared effective no later than one hundred twenty (120) days
after the Closing Date. If at any time the number of shares of Common Stock into
which the Debentures may be converted and which would be issued upon exercise of
the Warrants equals more than seventy five percent (75%) of the aggregate number
of shares of Common Stock then registered, the Company shall, within ten (10)
business days after receipt of a written notice from any Investor, either (i)
further amend the Registration Statement filed by the Company pursuant to the
preceding sentence, if such Registration Statement has not been declared
effective by the SEC at that time, to register 200% of the aggregate of all
shares of Common Stock into which the Debentures may then or in the future be
converted and which would be issued currently or in the future upon exercise of
the Warrants, or (ii) if such Registration Statement has been declared effective
by the SEC at that time, file with the SEC an additional Registration Statement
on Form S-3, or other available forum as may be appropriate, to register (A)
200% of the aggregate shares of Common Stock into which the Debentures may then
or in the future be converted and which would be issued currently or in the
future upon exercise of the unexercised Warrants, less (B) the aggregate number
of shares of Common Stock already registered which have not been issued upon
conversions of the Debentures or the exercise of Warrants. THE REGISTRATION
STATEMENT SHALL NOT INCLUDE ANY SHARES OTHER THAN THE REGISTRABLE SECURITIES,
AND CERTAIN OTHER SHARES THAT THE COMPANY IS OBLIGATED TO REGISTER AS SET FORTH
IN SCHEDULE 5(b), WITHOUT THE CONSENT OF THE INVESTOR.
(b) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the Registrable
Securities is not filed with the SEC on or before thirty (30) days after the
Closing Date (the "Required Filing Date"), then the Company shall pay Investor a
late filing penalty (collectively "Late Filing Penalties"), (i) on the first day
after the Required Filing Date, an amount equal to two percent (2%) of the
original purchase price paid pursuant to the Securities Purchase Agreement (the
"Purchase Price") for the Debentures, and (ii) on each subsequent monthly
anniversary of the Required Filing Date, if the Registration Statement has not
been filed in proper form on or before such date, an amount equal to two percent
(2%) of the Purchase Price for the Debenture.
(ii) If the Registration Statement covering the Registrable Securities
is not effective within the earlier of (a) seven (7) business days after notice
by the SEC that it may be declared effective (including the issuance by the SEC
of a "no review letter"), or (b) one hundred twenty (120) days following the
Closing Date (the "Required Effective Date"), then the Company shall pay
Investor a late effective date penalty (collectively "Late Effective Date
Penalties")(sometimes Late Filing Penalties and Late Effective Penalties are
collectively referred to as "Late Penalties"), (i) on the first day after the
Required Effective Date, an amount equal to
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two percent (2%) of the Purchase Price for the Debentures and (ii) on each
subsequent monthly anniversary of the Required Effective Date, if the
Registration Statement has not been declared effective on or before such date,
an amount equal to two percent (2%) of the Purchase Price for the Debenture.
(iii) By way of illustration and not in limitation of the
foregoing, assuming a Closing Date of February 3, 2000 (X) if the Registration
Statement is timely filed but is not declared effective until July 15, 2000
(assuming for the purpose of this example that the SEC has not previously
provided notice that it may be declared effective), the aggregate Late Effective
Date Penalty will equal 4% percent of the Purchase Price (2% on June 2, the
120th day after the Closing Date, plus 2% on July 2) or (Y) if the Registration
Statement is filed on April 9 and is not declared effective until June 15, 2000
(assuming for the purpose of this example that the SEC has not previously
provided notice that it may be declared effective), the aggregate Late Filing
Penalty will equal 4% of the Purchase Price (2% on March 4, the 30th day after
the Closing Date, plus 2% on April 3) and the aggregate Late Effective Date
Penalty will equal 2% percent of the Purchase Price (2% on June 2, the 120th day
after the Closing Date). Notwithstanding anything to the contrary herein, the
penalty shall only apply to the portion of the Purchase Price paid by the
Investor on the Closing Date (and not the Second Closing Date, as defined in the
Securities Purchase Agreement).
(iv) In addition to and not in lieu of the payment of penalties
hereunder, if the Registration Statement is not filed within sixty (60) days
after the Closing Date, or the Registration Statement is not declared effective
within one hundred eighty (180) days after the Closing Date, Investor may, at
its option, require the Company, to redeem the Debentures in full (within three
(3) days after its delivery of a redemption notice to the Company), in cash,
which redemption amount shall be calculated as set forth in Section 6 of the
Debenture.
(v) Late Penalties will be payable to the Investor by the
Company in cash or other immediately available funds on the date such Late
Penalty is incurred.
(vi) The parties acknowledge that the damages which may be
incurred by the Investor if the Registration Statement is not filed by the
Required Filing Date or if the Registration Statement has not been declared
effective by the Required Registration Date may be difficult to ascertain. The
parties agree that the Late Penalties represent a reasonable estimate on the
part of the parties, as of the date of this Agreement, of the amount of such
damages. The payment of the Late Penalties to the Investor shall not limit the
Investor's other rights and remedies hereunder or under any other document
entered into in connection herewith.
(vii) Notwithstanding the foregoing, the amounts payable by the
Company pursuant to this provision shall not be payable to the extent any delay
in the effectiveness of the Registration Statement occurs because of an act of,
or a failure to act or to
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act timely by the Investor or its counsel if the Company timely forwards to
counsel any required documents or in the event all of the Registrable Securities
may be sold pursuant to Rule 144 or another available exemption under the Act.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration
of the Registrable Securities, the Company shall do each of the following.
(a) Prepare promptly, and file with the SEC by the Required Filing
Date, the Registration Statement with respect to not less than the number of
Registrable Securities provided in Section 2(a) above, and thereafter use its
reasonable best efforts to cause each Registration Statement relating to
Registrable Securities to become effective by the Required Effective Date and
keep the Registration Statement effective at all times until the earliest (the
"Registration Period") of (i) the date that is two (2) years after the Closing
Date, (ii) the date when the Investor may sell all Registrable Securities under
Rule 144 or (iii) the date the Investor no longer own any of the Registrable
Securities, which Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall 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 light of the
circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) The Company shall permit counsel designated by the Investor to
review the Registration Statement and all amendments and supplements thereto a
reasonable period of time (but not less than three (3) business days or more
than five (5) business days) prior to their filing with the SEC, and not file
any document in a form to which such counsel reasonably objects.
(d) Notify the Investor, its counsel and managing underwriters, if
any, immediately (and, in the case of (i)(A) below, not less than five (5) days
prior to such filing) and (if requested by any such Person) confirm such notice
in writing no later than one (1) Business Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) whenever the Commission
notifies the Company whether there will be a "review" of such Registration
Statement; (C) whenever the Company receives (or representatives of the Company
receive on its behalf) any oral or written comments from the Commission in
respect of a Registration Statement (copies or, in the case of oral comments,
summaries of such comments shall be promptly furnished by the
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Company to the Investor); and (D) with respect to the Registration Statement or
any post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations or warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event that to the
best knowledge of the Company makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall furnish the Investor with
copies of all intended written responses to the comments contemplated in clause
(C) of this Section 3(d) not later than one (1) Business Day in advance of the
filing of such responses with the Commission so that the Investor shall have the
opportunity to comment thereon.
(e) Furnish to Investor and its legal counsel identified to the
Company, (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one (1) copy of the Registration
Statement, each preliminary prospectus and prospectus, and each amendment or
supplement thereto, and (ii) such number of copies of a prospectus, and all
amendments and supplements thereto and such other documents, as Investor may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by Investor;
(f) As promptly as practicable after becoming aware of such event,
notify Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the 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, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to Investor as it may reasonably request;
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(g) As promptly as practicable after becoming aware of such event,
notify Investor (or, in the event of an underwritten offering, the managing
underwriters) of the issuance by the SEC of a Notice of Effectiveness or any
notice of effectiveness or any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time to
time after the date of effectiveness of the Registration Statement, the Company
notifies the Investor in writing of the existence of a Potential Material Event,
the Investor shall not offer or sell any Registrable Securities, or engage in
any other transaction involving or relating to the Registrable Securities, from
the time of the giving of notice with respect to a Potential Material Event
until Investor receives written notice from the Company that such Potential
Material Event either has been disclosed to the public or no longer constitutes
a Potential Material Event; PROVIDED, HOWEVER, that the Company may not so
suspend the right to such holders of Registrable Securities for more than two
twenty (20) day periods in the aggregate during any 12-month period ("Suspension
Period") with at least a ten (10) business day interval between such periods,
during the periods the Registration Statement is required to be in effect;
(i) Use its reasonable efforts to secure or maintain, as applicable,
NASD-NMS authorization and quotation for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. ("NASD") as such with respect to such Registrable Securities;
(j) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(k) Cooperate with the Investor who hold Registrable Securities (or,
subject to receipt by the Company of appropriate notice and documentation, as
may be required by the Securities Purchase Agreement, the Debentures, the
Warrants or this Agreement, securities convertible into Registrable Securities)
being offered to facilitate the timely preparation and delivery of certificates
for the Registrable Securities to be offered pursuant to the Registration
Statement and enable such certificates for the Registrable Securities to be in
such denominations or amounts as the case may be, as the Investor may reasonably
request, and, within five (5) business days after a Registration Statement which
includes Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel selected by the Company to deliver,
to the transfer agent for the Registrable Securities (with copies to the
Investor whose Registrable Securities or securities convertible into Registrable
Securities are included in such Registration Statement) an appropriate
instruction and opinion of such counsel; provided, however, that nothing in this
subparagraph (j) shall be deemed to waive any of the provisions regarding the
conditions or method of conversion of The Debentures or exercise of Warrants
into Registrable Securities; and
(l) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
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4. OBLIGATIONS OF THE INVESTOR. In connection with the registration
of the Registrable Securities, Investor shall have the following obligations:
(a) As a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor, Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held by
it, and the intended method of disposition of the Registrable Securities held by
it, as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least five (5) days prior
to the first anticipated filing date of the Registration Statement, the Company
shall notify Investor of the information the Company requires from Investor (the
"Requested Information") if Investor elects to have any of its Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
(b) To cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless Investor has notified the Company in writing of its
election to exclude all of its Registrable Securities from the Registration
Statement; and
(c) Upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 3(e) or 3(f), above, Investor shall
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until Investor's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3(e) or 3(f) and, if so directed by the Company, Investor shall deliver
to the Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in Investor's possession, of
the prospectus covering such Registrable Securities current at the time of
receipt of such notice.
5. EXPENSES OF REGISTRATION. (a) All reasonable expenses (other than
underwriting discounts and commissions of Investor) incurred in connection with
registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing, and qualifications fees, printers
and accounting fees, the fees and disbursements of counsel for the Company, and
a reasonable fee for Investor's legal counsel not exceeding $5,000, shall be
borne by the Company.
(b) Except as and to the extent specifically set forth in Schedule
5(b) attached hereto, neither the Company nor any of its subsidiaries has, as of
the date hereof, nor shall the Company nor any of its subsidiaries, on or after
the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Investor
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herein or otherwise conflicts with the provisions hereof. Except as and to the
extent specifically set forth in Schedule 5(b) attached hereto, neither the
Company nor any of its subsidiaries has previously entered into any agreement
granting any registration rights with respect to any of its securities to any
person or entity. Without limiting the generality of the foregoing, without the
written consent of the Investor, the Company shall not grant to any person the
right to request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subject in all respects to the
prior rights in full of the Investor set forth herein, and are not otherwise in
conflict or inconsistent with the provisions of this Agreement.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless Investor, its directors, officers, managers, representatives,
agents and "controlling persons" within the meaning of the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (each, an
"Indemnified Person" or "Indemnified Party"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations in the
Registration Statement, or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or 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, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to clause (b) of this Section 6, the Company shall reimburse the Investor,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by it in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a) shall not (I) apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (II) be available to the extent such Claim is based on a failure of the
Investor to deliver or cause to be delivered the prospectus made available by
the Company; or
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(III) apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Investor will indemnify the Company and its
officers, directors and agents against any claims arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company, by or on behalf of Investor, expressly for
use in connection with the preparation of the Registration Statement, subject to
such limitations and conditions as are applicable to the Indemnification
provided by the Company pursuant to this Section 6. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investor pursuant to Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be. In case any such action is brought against any Indemnified Person
or Indemnified Party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein stated
and after notice from the indemnifying party to such Indemnified Person or
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Person or Indemnified
Party under this Section 6 for any reasonable legal or other reasonable
out-of-pocket expenses subsequently incurred by such Indemnified Person or
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation, unless the indemnifying party shall not pursue the
action of its final conclusion. The Indemnified Person or Indemnified Party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and reasonable out-of-pocket
expenses of such counsel shall not be at the expense of the indemnifying party
if the indemnifying party has assumed the defense of the action with counsel
reasonably satisfactory to the Indemnified Person or Indemnified Party. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced in its
ability to defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum
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contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; PROVIDED, HOWEVER, that
(a) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation; and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to
the Investor the benefits of Rule 144 promulgated under the Securities Act or
any other similar rule or regulation of the SEC that may at any time permit the
Investor to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) use its best efforts to file with the SEC 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 Investor so long as Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investor to sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by an Investor to any transferee of the Registrable
Securities (or all or any portion of any Debentures of the Company which is
convertible into such securities) permitted or allowable by the terms of the
Securities Purchase Agreement only if: (a) Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, and (d) at or before the time the Company received the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with or in favor of the Company to be bound by all of the provisions
contained herein, a copy of which shall be provided to the Company. The copies
referred to in clauses (a) and (d) of
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the immediately preceding sentence may be redacted to delete certain financial
and other details of the transaction between the Investor and its transferee if
the same is included in the document to be provided to the Company. In the event
of any delay in filing or effectiveness of the Registration Statement as a
result of such assignment, the Company shall not be liable for any damages
arising from such delay, or the payments set forth in Section 2(c) hereof.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of each such
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investor. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Any notice or communication required or permitted by this
Agreement shall be given in writing addressed as follows:
If to Company: Microware Systems Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
ATTN: CFO
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇, ▇▇▇.
▇'▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇.
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Investor:
c/o Navigator Management
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
All notices shall be served personally by telecopy, by telex, by overnight
express mail service or other overnight courier, or by first class registered or
certified mail, postage prepaid, return receipt requested. If served personally,
or by telecopy, notice shall be deemed delivered upon receipt (provided that if
served by telecopy, sender has written confirmation of delivery); if served by
overnight express mail or overnight courier, notice shall be deemed delivered
forty-eight (48) hours after deposit; and if served by first class mail, notice
shall be deemed delivered seventy-two (72) hours after mailing. Any party may
give written notification to the other parties of any change of address for the
sending of notices, pursuant to any method provided for herein.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Any litigation based thereon, or arising out of, under, or in
connection with, this agreement or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Company or Purchaser
shall be brought and maintained exclusively in the state or Federal courts of
the State of California, sitting in the City of Los Angeles. The Company hereby
expressly and irrevocably submits to the jurisdiction of the state and federal
Courts of the State of California for the purpose of any such litigation as set
forth above and irrevocably agrees to be bound by any final judgment rendered
thereby in connection with such litigation. The Company further irrevocably
consents to the service of process by registered mail, postage prepaid, or by
personal service within or without the State of California. The Company hereby
expressly and irrevocably waives, to the fullest extent permitted by law, any
objection which it may have or hereafter may have to the laying of venue of any
such litigation brought in any such court referred to above and any claim that
any such litigation has been brought in any inconvenient forum. To the extent
that the Company has or hereafter may acquire any immunity from jurisdiction of
any court or from any legal process (whether through service or notice,
attachment prior to judgment, attachment in aid of execution or otherwise) with
respect to itself or its property, the Company hereby irrevocably waives such
immunity in respect of its obligations under this Agreement and the related
agreements entered into in connection herewith.
(e) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of
13
the remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
(j) The Company acknowledges that any failure by the Company to
perform its obligations under Section 3(a) hereof, or any delay in such
performance could result in loss to the Investors, and the Company agrees that,
in addition to any other liability the Company may have by reason of such
failure or delay, the Company shall be liable for all direct damages caused by
any such failure or delay, unless the same is the result of force majeure.
Neither party shall be liable for consequential damages.
(k) This Agreement, the Securities Purchase Agreement and the other
documents referenced therein constitute the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement thereof.
(l) Any default by an individual Investor hereunder or any related
agreement, including, without limitation, the Securities Purchase Agreement,
shall not be deemed a default by any other Investor and shall not excuse the
Company's performance hereunder or thereunder with respect to the non-defaulting
Investors.
(m) In the event of any action for breach of or to enforce or declare
rights under any provision of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees and costs, to be paid by the losing
party.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
MICROWARE SYSTEMS CORPORATION, an Iowa corporation
By:
------------------------------------
Name:
Title:
ELDER COURT, LLC, a Cayman Islands limited
liability company
By:
------------------------------------
Manager
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