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