EXHIBIT 4.2
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of December 1, 2004, by and among Insignia Systems, Inc., a Minnesota
corporation (the "Company"), and the purchasers signatory hereto (each such
purchaser, a "Purchaser" and collectively, the "Purchasers").
This Agreement is made pursuant to the Securities Purchase Agreement, dated
as of the date hereof among the Company and the Purchasers (the "Purchase
Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:
"Advice" shall have the meaning set forth in Section 6(d).
"Effectiveness Date" means, with respect to the Registration Statement
required to be filed hereunder, the earlier of (a) the 90th calendar day
following the date of the Purchase Agreement and (b) the fifth Trading Day
following the date on which the Company is notified by the Commission that
the Registration Statement will not be reviewed or is no longer subject to
further review and comments.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Event" shall have the meaning set forth in Section 2(b).
"Event Date" shall have the meaning set forth in Section 2(b).
"Filing Date" means, with respect to the Registration Statement
required to be filed hereunder, the 30th calendar day following the date of
the Purchase Agreement.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Plan of Distribution" shall have the meaning set forth in Section
2(a).
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"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by the Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"Registrable Securities" means all of the Shares together with any
shares of Common Stock issued or issuable upon any stock split, dividend or
other distribution, recapitalization or similar event with respect to the
foregoing.
"Registration Statement" means the registration statements required to
be filed hereunder, including (in each case) the Prospectus, amendments and
supplements to the registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference in the
registration statement.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
"Selling Shareholder Questionnaire" shall have the meaning set forth
in Section 3(a).
2. Registration.
(a) On or prior to the Filing Date, the Company shall prepare and file
with the Commission the Registration Statement covering the resale of all
of the Registrable Securities for an offering to be made on a continuous
basis pursuant to Rule 415. The Registration Statement required hereunder
shall be on Form S-3 (except if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3, in which case
the Registration shall be on another appropriate form in accordance
herewith). The Registration Statement required hereunder shall contain
(except if otherwise directed by the Holders) substantially the "Plan of
Distribution" attached hereto as Annex A. Subject to the terms of this
Agreement, the Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
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possible after the filing thereof, but in any event not later than the
Effectiveness Date, and shall use its best efforts to keep the Registration
Statement continuously effective under the Securities Act until the date
when all Registrable Securities covered by the Registration Statement have
been sold or may be sold without volume restrictions pursuant to Rule
144(k) as determined by the counsel to the Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the Company's
transfer agent and the affected Holders (the "Effectiveness Period").
(b) If: (i) a Registration Statement is not filed on or prior to the
Filing Date (if the Company files a Registration Statement without
affording the Holder the opportunity to review and comment on the same as
required by Section 3(a), the Company shall not be deemed to have satisfied
this clause (i)), or (ii) the Company fails to file with the Commission a
request for acceleration in accordance with Rule 461 promulgated under the
Securities Act, within five Trading Days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission
that a Registration Statement will not be "reviewed," or is not subject to
further review, or (iii) prior to the date when such Registration Statement
is first declared effective by the Commission, the Company fails to file a
pre-effective amendment and otherwise respond in writing to comments made
by the Commission in respect of such Registration Statement within 10
calendar days after the receipt of comments by or notice from the
Commission that such amendment is required in order for a Registration
Statement to be declared effective, or (iv) a Registration Statement filed
or required to be filed hereunder is not declared effective by the
Commission on or before the Effectiveness Date, or (v) after a Registration
Statement is first declared effective by the Commission, it ceases for any
reason to remain continuously effective as to all Registrable Securities
for which it is required to be effective, or the Holders are not permitted
to utilize the Prospectus therein to resell such Registrable Securities,
for in any such case 10 consecutive calendar days but no more than an
aggregate of 15 calendar days during any 12 month period (which need not be
consecutive Trading Days)(any such failure or breach being referred to as
an "Event," and for purposes of clause (i) or (iv) the date on which such
Event occurs, or for purposes of clause (ii) the date on which such five
Trading Day period is exceeded, or for purposes of clause (iii) the date
which such 10 calendar day period is exceeded, or for purposes of clause
(v) the date on which such 10 or 15 calendar day period, as applicable, is
exceeded being referred to as "Event Date"), then in addition to any other
rights the Holders may have hereunder or under applicable law, on each such
Event Date and, on each monthly anniversary of each such Event Date (if the
applicable Event shall not have been cured by such date) until the
applicable Event is cured, the Company shall pay to each Holder an amount
in cash, as partial liquidated damages and not as a penalty, equal to 1% of
the aggregate purchase price paid by such Holder pursuant to the Purchase
Agreement for any Registrable Securities then held by such Holder. If the
Company fails to pay any partial liquidated damages pursuant to this
Section in full within seven days after the date payable, the Company will
pay interest thereon at a rate of 18% per annum (or such lesser maximum
amount that is permitted to be paid by applicable law) to the Holder,
accruing daily from the date such partial liquidated damages are due until
such amounts, plus all such interest thereon, are paid in full. The partial
liquidated damages pursuant to the terms hereof shall apply on a daily
pro-rata basis for any portion of a month prior to the cure of an Event.
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3. Registration Procedures
In connection with the Company's registration obligations hereunder, the
Company shall:
(a) Not less than five Trading Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or
supplement thereto, the Company shall, (i) furnish to the Holders copies of
all such documents proposed to be filed (including documents incorporated
or deemed incorporated by reference to the extent requested by such Person)
which documents will be subject to the review of such Holders, and (ii)
cause its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall
not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities shall reasonably object in good faith, provided that
the Company is notified of such objection in writing no later than 5
Trading Days after the Holders have been so furnished copies of such
documents. Each Holder agrees to furnish to the Company a completed
Questionnaire in the form attached to this Agreement as Annex B (a "Selling
Shareholder Questionnaire") not less than two Trading Days prior to the
Filing Date or by the end of the fourth Trading Day following the date on
which such Holder receives draft materials in accordance with this Section.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file
with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or supplemented
by any required Prospectus supplement, and as so supplemented or amended to
be filed pursuant to Rule 424; (iii) respond as promptly as reasonably
possible to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and, as promptly as
reasonably possible, upon request, provide the Holders true and complete
copies of all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration
Statement during the applicable period in accordance with the intended
methods of disposition by the Holders thereof set forth in the Registration
Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold as
promptly as reasonably possible and (if requested by any such Person)
confirm such notice in writing promptly 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) when the Commission
notifies the Company whether there will be a "review" of the Registration
Statement and whenever the Commission comments in writing on the
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Registration Statement (the Company shall upon request provide true and
complete copies thereof and all written responses thereto to each of the
Holders); and (C) 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 during the period of effectiveness of the Registration Statement
for amendments or supplements to the Registration Statement or Prospectus
or for additional information; (iii) of the issuance by the Commission or
any other federal or state governmental authority 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) 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 (v) of the occurrence of any event or passage of time that
makes the financial statements included in the Registration Statement
ineligible for inclusion therein or 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.
(d) Use commercially reasonable efforts to avoid the issuance of, or,
if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of the Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable
moment.
(e) Furnish to each Holder, without charge, at least one conformed
copy of the Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed to
be incorporated therein by reference to the extent requested by such
Person, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
(f) Promptly deliver to each Holder, without charge, as many copies of
the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request in
connection with resales by the Holder of Registrable Securities. Subject to
the terms of this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement
thereto, except after the giving on any notice pursuant to Section 3(c).
(g) Prior to any resale of Registrable Securities by a Holder, use its
commercially reasonable efforts to register or qualify or cooperate with
the selling
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Holders in connection with the registration or qualification (or exemption
from the Registration or qualification) of such Registrable Securities for
the resale by the Holder under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in
writing, to keep the Registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and to do any and all other acts
or things reasonably necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, that the Company shall not be required to --------
qualify generally to do business in any jurisdiction where it is not then
so qualified, subject the Company to any material tax in any such
jurisdiction where it is not then so subject or file a general consent to
service of process in any such jurisdiction.
(h) If requested by the Holders, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to the
Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to
enable such Registrable Securities to be in such denominations and
registered in such names as any such Holders may request.
(i) Upon the occurrence of any event contemplated by Section 3(c)(v),
as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration
Statement nor such Prospectus will contain an 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 under which they were made, not misleading. If the Company
notifies the Holders in accordance with clauses (ii) through (v) of Section
3(c) above to suspend the use of any Prospectus until the requisite changes
to such Prospectus have been made, then the Holders shall suspend use of
such Prospectus. The Company will use its best efforts to ensure that the
use of the Prospectus may be resumed as promptly as is practicable. The
Company shall be entitled to exercise its right under this Section 3(i) to
suspend the availability of a Registration Statement and Prospectus,
subject to the payment of partial liquidated damages pursuant to Section
2(b), for a period not to exceed 60 days (which need not be consecutive
days) in any 12 month period.
(j) Comply with all applicable rules and regulations of the
Commission.
(k) The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Holder and, if required by the Commission, the
person thereof that has voting and dispositive control over the Shares.
During any periods that the Company is unable to meet its obligations
hereunder with respect to the registration of the Registrable Securities
solely because any Holder fails to furnish such information within three
Trading Days of the Company's request, any liquidated damages that are
accruing at such time as to such Holder only shall be tolled and any Event
that may otherwise occur solely
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because of such delay shall be suspended as to such Holder only, until such
information is delivered to the Company.
4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be
borne by the Company whether or not any Registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses referred to
in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and
expenses (A) with respect to filings required to be made with the Trading
Market on which the Common Stock is then listed for trading, (B) in
compliance with applicable state securities or Blue Sky laws) and (C) with
respect to any filing that may be required to be made by any broker through
which a Holder intends to make sales of Registrable Securities with NASD
Regulation, Inc. pursuant to the NASD Rule 2710, so long as the broker is
receiving no more than a customary brokerage commission in connection with
such sale, (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is reasonably requested by the
holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company, (v) Securities Act
liability insurance, if the Company so desires such insurance, and (vi)
fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and
expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder. In no event
shall the Company be responsible for any broker or similar commissions or,
except to the extent provided for in the Transaction Documents, any legal
fees or other costs of the Holders.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, the officers, directors, agents and employees of
each of them, each Person who controls any such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of
each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable
attorneys' fees) and expenses (collectively, "Losses"), as incurred,
arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they
were made) not misleading, except to the extent, but only to the
extent, that (i) such untrue statements or omissions are based solely
upon information regarding such Holder furnished in writing
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to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly
for use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto (it being
understood that the Holder has approved Annex A hereto for this
purpose) or (ii) in the case of an occurrence of an event of the type
specified in Section 3(c)(ii)-(v), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such
Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in
Section 6(d). The Company shall notify the Holders promptly of the
institution, threat or assertion of any Proceeding of which the
Company is aware in connection with the transactions contemplated by
this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act), and the directors, officers, agents or employees
of such controlling Persons, to the fullest extent permitted by
applicable law, from and against all Losses, as incurred, to the
extent arising out of or based solely upon: (x) such Holder's failure
to comply with the prospectus delivery requirements of the Securities
Act or (y) any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, any Prospectus, or any form
of prospectus, or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading (i) to the
extent, but only to the extent, that such untrue statement or omission
is contained in any information so furnished in writing by such Holder
to the Company specifically for inclusion in the Registration
Statement or such Prospectus or (ii) to the extent that (1) such
untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such
Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the
Registration Statement (it being understood that the Holder has
approved Annex A hereto for this purpose), such Prospectus or such
form of Prospectus or in any amendment or supplement thereto or (2) in
the case of an occurrence of an event of the type specified in Section
3(c)(ii)-(v), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that
the Prospectus is outdated or defective and prior to the receipt by
such Holder of the Advice contemplated in Section 6(d). In no event
shall the liability of any selling Holder hereunder be greater in
amount than the dollar amount of the net proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "Indemnified Party"), such Indemnified Party shall
promptly notify the Person from whom indemnity is sought (the
"Indemnifying Party") in writing, and the Indemnifying Party shall
have
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the right to assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and
only) to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal
or further review) that such failure shall have prejudiced the
Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless: (1) the
Indemnifying Party has agreed in writing to pay such fees and expenses;
(2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded
parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall reasonably believe that a
material conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party
in writing that it elects to employ separate counsel at the expense of
the Indemnifying Party, the Indemnifying Party shall not have the right
to assume the defense thereof and the reasonable fees and expenses of
one separate counsel shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any settlement
of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party,
effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on
claims that are the subject matter of such Proceeding.
Subject to the terms of this Agreement, all reasonable fees
and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with
this Section) shall be paid to the Indemnified Party, as incurred,
within ten Trading Days of written notice thereof to the Indemnifying
Party; provided, that the Indemnified Party shall promptly reimburse
the Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is not
entitled to indemnification hereunder, determined based upon the
relative faults of the parties.
(d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of
public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses,
in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of
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such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission of a material fact, has been taken or
made by, or relates to information supplied by, such Indemnifying
Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include, subject to
the limitations set forth in this Agreement, any reasonable attorneys'
or other reasonable fees or expenses incurred by such party in
connection with any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification
provided for in this Section was available to such party in accordance
with its terms.
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 or by any other method of allocation that does not
take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of
this Section 5(d), no Holder shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the proceeds
actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages
that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission,
except in the case of fraud by such Holder.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties
may have to the Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder
or the Company, as the case may be, in addition to being entitled to
exercise all rights granted by law and under this Agreement, including
recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Company and each Holder agree that
monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions
of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall
waive the defense that a remedy at law would be adequate.
(b) No Piggyback on Registrations. Except as set forth on
Schedule 6(b) attached hereto, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant
hereto) may include securities of the Company in a Registration
Statement other than the Registrable Securities. No Person has any
right to cause the Company to effect the registration under the
Securities Act of any securities of the Company. The Company shall not
file any other registration statement until after the Effective Date.
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(c) Compliance. Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act
as applicable to it in connection with sales of Registrable Securities
pursuant to the Registration Statement.
(d) Discontinued Disposition. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a
notice from the Company of the occurrence of any event of the kind
described in Section 3(c), such Holder will forthwith discontinue
disposition of such Registrable Securities under the Registration
Statement until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement or until
it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and, in either case, has
received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement. The Company will use its best
efforts to ensure that the use of the Prospectus may be resumed as
promptly as it practicable. The Company agrees and acknowledges that
any periods during which the Holder is required to discontinue the
disposition of the Registrable Securities hereunder shall be subject
to the provisions of Section 2(b).
(e) Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement
covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account
of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection
with the stock option or other employee benefit plans, then the
Company shall send to each Holder a written notice of such
determination and, if within fifteen days after the date of such
notice, any such Holder shall so request in writing, the Company shall
include in such registration statement all or any part of such
Registrable Securities such Holder requests to be registered, subject
to customary underwriter cutbacks applicable to all holders of
registration rights.
(f) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the same shall be in
writing and signed by the Company and each Holder of the then
outstanding Registrable Securities.
(g) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be
made in accordance with the provisions of the Purchase Agreement.
(h) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder.
Each Holder may assign their respective rights hereunder in the manner
and to the Persons as permitted under the Purchase Agreement.
11
(i) Execution and Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed shall be
deemed to be an original and, all of which taken together shall
constitute one and the same Agreement. In the event that any signature
is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as
if such facsimile signature were the original thereof.
(j) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be
determined with the provisions of the Purchase Agreement.
(k) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning
hereof.
(n) Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with
the obligations of any other Holder hereunder, and no Holder shall be
responsible in any way for the performance of the obligations of any
other Holder hereunder. Nothing contained herein or in any other
agreement or document delivered at any closing, and no action taken by
any Holder pursuant hereto or thereto, shall be deemed to constitute
the Holders as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Holders are in
any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be
entitled to protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall not
be necessary for any other Holder to be joined as an additional party
in any proceeding for such purpose.
*************************
12
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
INSIGNIA SYSTEMS, INC.
By: /s/ Xxxxx Drill
--------------------------------------
Name: Xxxxx Drill
Title: President and CEO
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
[PURCHASER'S SIGNATURE PAGE TO ISIG RRA]
Name of Investing Entity: Bear Xxxxxxx Securities Corp. Inc., FBO J. Xxxxxx
Xxxxxxx Xxxx XXX
G. Xxxxx Xxxxxxx or Jasmine Xxxxxx Xxxxxxx
TTEES The Xxxxxxx Family Trust dtd 1-11-2000
High Tide, LLC
JMG Capital Partners, LP
JMG Triton Offshore Fund, Ltd.
Bristol Investment Fund, Ltd
Potomac Capital Partners, LP
Pleiades Investment Partners-R, L.P.
Potomac Capital International Ltd.
Xxxxxxx Holdings, LLC
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: _________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
[SIGNATURE PAGES CONTINUE]
14
ANNEX A
Plan of Distribution
The Selling Stockholders (the "Selling Stockholders") of the common stock
("Common Stock") of Insignia Systems, Inc., a Minnesota corporation (the
"Company") and any of their pledgees, assignees and successors-in-interest may,
from time to time, sell any or all of their shares of Common Stock on any stock
exchange, market or trading facility on which the shares are traded or in
private transactions. These sales may be at fixed or negotiated prices. The
Selling Stockholders may use any one or more of the following methods when
selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o settlement of short sales entered into after the date of this
prospectus;
o broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale;
o through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
or
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. Each Selling Stockholder does not expect these commissions and
discounts relating to its sales of shares to exceed what is customary in the
types of transactions involved.
15
In connection with the sale of our common stock or interests therein, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Stockholder has informed the
Company that it does not have any agreement or understanding, directly or
indirectly, with any person to distribute the Common Stock.
The Company is required to pay certain fees and expenses incurred by the
Company incident to the registration of the shares. The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act. In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than under this prospectus. Each Selling
Stockholder has advised us that they have not entered into any agreements,
understandings or arrangements with any underwriter or broker-dealer regarding
the sale of the resale shares. There is no underwriter or coordinating broker
acting in connection with the proposed sale of the resale shares by the Selling
Stockholders.
We agreed to keep this prospectus effective until the earlier of (i) the
date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule
144(k) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale shares may not simultaneously engage
in market making activities with respect to our common stock for a period of two
business days prior to the commencement
16
of the distribution. In addition, the Selling Stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases and
sales of shares of our common stock by the Selling Stockholders or any other
person. We will make copies of this prospectus available to the Selling
Stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale.
17
ANNEX B
IINSIGNIA SYSTEMS, INC.
SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE
The undersigned beneficial owner of common stock, par value $0.01 per share
(the "Common Stock"), of Insignia Systems, Inc., a Minnesota corporation (the
"Company"), (the "Registrable Securities") understands that the Company has
filed or intends to file with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (the "Registration
Statement") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "Securities Act"), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement, dated as of
December 1, 2004 (the "Registration Rights Agreement"), among the Company and
the Purchasers named therein. A copy of the Registration Rights Agreement is
available from the Company upon request at the address set forth below. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.
Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.
NOTICE
The undersigned beneficial owner (the "Selling Securityholder") of
Registrable Securities hereby elects to include the Registrable Securities owned
by it and listed below in Item 3 (unless otherwise specified under such Item 3)
in the Registration Statement.
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The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
QUESTIONNAIRE
1. NAME.
(a) Full Legal Name of Selling Securityholder
--------------------------------------------------------------
(b) Full Legal Name of Registered Holder (if not the same as (a)
above) through which Registrable Securities Listed in Item 3
below are held:
--------------------------------------------------------------
(c) Full Legal Name of Natural Control Person (which means a
natural person who directly you indirectly alone or with
others has power to vote or dispose of the securities covered
by the questionnaire):
--------------------------------------------------------------
2. ADDRESS FOR NOTICES TO SELLING SECURITYHOLDER:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Telephone:
----------------------------------------------------------------------
Fax:
----------------------------------------------------------------------------
Contact Person:
-----------------------------------------------------------------
3. BENEFICIAL OWNERSHIP OF REGISTRABLE SECURITIES:
(a) Type and Number of Registrable Securities beneficially owned:
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
19
4. BROKER-DEALER STATUS:
(a) Are you a broker-dealer?
Yes No
Note: If yes, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
(b) Are you an affiliate of a broker-dealer?
Yes No
(c) If you are an affiliate of a broker-dealer, do you certify that
you bought the Registrable Securities in the ordinary course of
business, and at the time of the purchase of the Registrable
Securities to be resold, you had no agreements or understandings,
directly or indirectly, with any person to distribute the
Registrable Securities?
Yes No
Note: If no, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
5. BENEFICIAL OWNERSHIP OF OTHER SECURITIES OF THE COMPANY OWNED BY THE SELLING
SECURITYHOLDER.
EXCEPT AS SET FORTH BELOW IN THIS ITEM 5, THE UNDERSIGNED IS NOT THE
BENEFICIAL OR REGISTERED OWNER OF ANY SECURITIES OF THE COMPANY OTHER
THAN THE REGISTRABLE SECURITIES LISTED ABOVE IN ITEM 3.
(a) Type and Amount of Other Securities beneficially owned by the
Selling Securityholder:
------------------------------------------------------------------
------------------------------------------------------------------
20
6. RELATIONSHIPS WITH THE COMPANY:
EXCEPT AS SET FORTH BELOW, NEITHER THE UNDERSIGNED NOR ANY OF ITS
AFFILIATES, OFFICERS, DIRECTORS OR PRINCIPAL EQUITY HOLDERS (OWNERS OF
5% OF MORE OF THE EQUITY SECURITIES OF THE UNDERSIGNED) HAS HELD ANY
POSITION OR OFFICE OR HAS HAD ANY OTHER MATERIAL RELATIONSHIP WITH THE
COMPANY (OR ITS PREDECESSORS OR AFFILIATES) DURING THE PAST THREE
YEARS.
State any exceptions here:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
The undersigned agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein that may occur
subsequent to the date hereof at any time while the Registration Statement
remains effective.
By signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items 1 through 6 and the
inclusion of such information in the Registration Statement and the related
prospectus. The undersigned understands that such information will be relied
upon by the Company in connection with the preparation or amendment of the
Registration Statement and the related prospectus.
IN WITNESS WHEREOF the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.
Dated: Beneficial Owner:
---------------------------- --------------------------
By:
----------------------------------------
Name:
Title:
PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:
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