(Registration Rights Agreement)
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May 26,
2000, by and among Saf T Lok Incorporated, a Florida corporation, with
headquarters at 0000 Xxxxxxxxxx Xxxxxxx, Xxxx Xxxx Xxxxx Xxxxxxx, 00000 (the
"Company"), and the undersigned buyers (the "Buyers" ).
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyer's, the Company's
6% Subordinated Convertible Debenture (the "Debentures"), which will be
convertible into shares of the Company's common stock, $0.01 par value per share
(the "Common Stock") (as converted, the "Conversion Shares") in accordance with
the terms of the Debentures; and
B. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "Investor" means the Buyer and any transferee or assignee
thereof to whom the Buyer assigns its rights under this Agreement and
who agrees to become bound by the provisions of this Agreement in
accordance with Section 9.
b. "Person" means a corporation, a limited liability company,
an association, a partnership, an organization, a business, an
individual, a governmental or political subdivision thereof or a
governmental agency.
c. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415
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under the 1933 Act or any successor rule providing for offering
securities on a continuous basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the
United States Securities and Exchange Commission (the "SEC").
d. "Registrable Securities" means the Conversion Shares issued
or issuable upon conversion of the Debentures and any shares of capital
stock issued or issuable with respect to the Conversion Shares or the
Debentures as a result of any stock split, stock dividend,
recapitalization, exchange, or similar event.
e. "Registration Statement" means a registration statement of
the Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set for the in the Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare and, on
or prior to a date which is no more than ninety (90) days from the date
that the Company has sold a total of $875,000 in principal amount of
Debentures (the "Filing Deadline"), file with the SEC a Registration
Statement or Registration Statements (as is necessary) on Form S-3 (or,
if such form is unavailable for such a registration, on such other form
as is available for such a registration, subject to the consent of each
Buyer and the provisions of Section 2.e., which consent will not be
unreasonably withheld), covering the resale of all of the Registrable
Securities, which Registration Statement(s) shall state that, in
accordance with Rule 416 promulgated under the 1933 Act, such
Registration Statement(s) also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon
conversion of the Debentures (i) to prevent dilution resulting from
stock splits, stock dividends or similar transactions and (ii) by
reason of changes in the Conversion Price or Conversion Rate of the
Debentures in accordance with the terms thereof. Such Registration
Statement shall initially register for resale at least 1,023,750 shares
of Common Stock for the Investors and others, subject to adjustment as
provided in Section 3.b., and 1,023,750 such registered shares of
Common Stock shall be allocated among the Investors pro rata based on
the total number of Registrable Securities issued or issuable as of
each date that a Registration Statement, as amended, relating to the
resale of the Registrable Securities is declared effective by the SEC.
The Company shall use its best efforts to have the Registration
Statement declared effective by the SEC within ninety (90) days after
the Filing Deadline (the "Registration Deadline"). The Company shall
permit the registration statement to become effective within ten (10)
business days after receipt of a "no review" notice from the SEC. In
the event that the Registration Statement is not filed by the Company
with the SEC by the Filing Deadline, then the Company shall be required
to deliver to the Investors within 10 calendar days of the end of each
month in which the Company has not so filed a cash penalty of 2% of the
principal amount of Debentures per month (pro-rated for partial
months).
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b. Underwritten Offering. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) involves an
underwritten offering, the Buyers shall have the right to select one
legal counsel and one investment banker or manager at the cost of the
Company to administer their interest in the offering, which investment
banker or manager shall be reasonably satisfactory to the Company.
c. Piggy-Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) and at a
time when there is currently no effective registration statement
covering the Regsitrable Securities, the Company proposes to file with
the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its
securities (other than on Form S-4 or Form S-8 or their then
equivalents relating to securities to be issued solely in connection
with any acquisition of any entity or business or equity securities
issuable in connection with stock option or other employee benefit
plans) the Company shall promptly send to each Investor who is entitled
to registration rights under this Section 2(c) written notice of the
Company's intention to file a Registration Statement and of such
Investor's rights under this Section 2(c) and, if within ten (10) days
after receipt of such notice, such Investor shall so request in
writing, the Company shall include in such Registration Statement all
or any part of the Registrable Securities such Investor requests to be
registered, subject to the priorities set forth in Section 2(d) below.
No right to registration of Registrable Securities under this Section
2(c) shall be construed to limit any registration required under
Section 2(a). The obligations of the Company under this Section 2(c)
may be waived by Investors holding a majority of the Registrable
Securities. If an offering in connection with which an Investor is
entitled to registration under this Section 2(c) is an underwritten
offering, then each Investor whose Registrable Securities are included
in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten
offering using the same underwriter or underwriters and, subject to the
provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
d. Priority in Piggy-Back Registration Rights in connection
with Registrations or Company Account. If the registration referred to
in Section 2(c) is to be an underwritten public offering for the
account of the Company and the managing underwriter(s) advise the
Company in writing, that in their reasonable good faith opinion,
marketing or other factors dictate that a limitation on the number of
shares of Common Stock which may be included in the Registration
Statement is necessary to facilitate and not adversely affect the
proposed offering, then the Company shall include in such registration:
(1) first, all securities the Company proposes to sell for its own
account, (2) second, up to the full number of securities proposed to be
registered for the account of the holders of securities entitled to
inclusion of their securities in the Registration Statement by reason
of demand registration rights, and (3) third, the securities requested
to be registered by the Investors and other holders of securities
entitled to participate in the registration, drawn from them pro rata
based on the number each has requested to be included in such
registration.
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3. RELATED OBLIGATIONS.
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Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2(c) or at such time as the Company is obligated
to file a Registration Statement with the SEC pursuant to Section 2(a), the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
a. The Company shall keep the Registration Statement(s)
effective pursuant to Rule 415 at all times until the earlier of (i)
the date as of which the Investors may sell all of the Registrable
Securities without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act (or successor thereto) or (ii) the date on which (A)
the Investors shall have sold all the Registrable Securities and (B)
none of the Debentures is outstanding (the "Registration Period"),
which Registration Statement(s) (including any amendments or
supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement(s) and the prospectus(es) used in connection
with the Registration Statement(s), which prospectus(es) are to be
filed pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep the Registration Statement(s) effective at all times
during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration
Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the
Registration Statement(s). In the event the number of shares available
under a Registration Statement filed pursuant to this Agreement is
insufficient in the reasonable opinion of a majority of the Buyers to
cover all of the Registrable Securities, the Company shall promptly
amend the Registration Statement, or file a new Registration Statement
(on the short form available therefor, if applicable), or both, so as
to cover all of the Registrable Securities, in each case, as soon as
practicable, but in any event within thirty (30) days after the
necessity therefor arises (based on the market price of the Common
Stock and other relevant factors on which the Company reasonably elects
to rely). The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon
as practicable following the filing thereof. For purposes of the
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foregoing provision, the number of shares available under a
Registration Statement shall be deemed "insufficient to cover all of
the Registrable Securities" if at any time the number of Registrable
Securities issued or issuable upon conversion of the Debentures is
greater than the quotient determined by dividing (i) the number of
shares of Common Stock available for resale under such Registration
Statement by (ii) 1.0; provided that in the case of the initial
registration of the Registrable Securities pursuant to Section 2(a),
the Company shall be required to register at least 1,023,750 shares of
Common Stock for the benefit of the Investors. For purposes of the
calculation set forth in the foregoing sentence, any restrictions on
the convertibility of the Debentures shall be disregarded and such
calculation shall assume that the Debentures are then convertible into
shares of Common Stock at the then prevailing Conversion Rate together
with accrued interest which shall be payable in shares of Common Stock
(as defined in the Debentures).
c. Upon request, the Company shall furnish to each Investor
whose Registrable Securities are included in the Registration
Statement(s) and its legal counsel without charge (i) promptly after
the same is prepared and filed with the SEC at least one copy of the
Registration Statement and any amendment thereto, including financial
statements and schedules, all documents incorporated therein by
reference and all exhibits, the prospectus(es) included in such
Registration Statement(s) (including each preliminary prospectus) and,
with regards to the Registration Statement, any correspondence by or on
behalf of the Company to the SEC or the staff of the SEC and any
correspondence from the SEC or the staff of the SEC to the Company or
its representatives, (ii) upon the effectiveness of any Registration
Statement, three (3) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or
such other number of copies as such Investor may reasonably request)
and (iii) such other documents, including any preliminary prospectus,
as such Investor may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Investor.
d. [INTENTIONALLY LEFT BLANK]
e. In the event Investors who hold a majority of the
Registrable Securities being offered in the offering select
underwriters for the offering, the Company shall enter into and perform
its obligations under an underwriting agreement, in usual and customary
form, including, without limitation, customary indemnification and
contribution obligations, with the underwriters of such offering.
f. [INTENTIONALLY LEFT BLANK]
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any
of the Registrable Securities for sale in any jurisdiction
(acknowledging that, to date, no such registrations have been made)
and, if such an order or suspension is issued, to obtain the withdrawal
of such order or suspension at the earliest possible moment and to
notify each Investor who holds Registrable Securities being sold (and,
in the event of an underwritten offering, the managing underwriters) of
the issuance of such order and the resolution thereof or its receipt of
actual notice of the initiation or threat of any proceeding for such
purpose.
h. The Company shall permit each Investor a single firm of
counsel or such other counsel as thereafter designated as selling
stockholders' counsel by the Investors who hold a majority of the
Registrable Securities being sold at the Investor's expense, to review
and comment upon the Registration Statement(s) and all amendments and
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supplements thereto at least four (4) days prior to their filing with
the SEC, provided that the name, address and telephone number of such
counsel shall have previously been provided, in writing, to the
Company, specifically designating such counsel for purposes of this
Section 3h.
i. At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall use their best
efforts to furnish, on the date that Registrable Securities are
delivered to an underwriter, if any, for sale in connection with the
Registration Statement (i) if required by an underwriter, a letter,
dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, and (ii)
an opinion, dated as of such date, of counsel representing the Company
for purposes of such Registration Statement, in form, scope and
substance as is customarily given in an underwritten public offering,
addressed to the underwriters and the Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) one underwriter participating in any disposition
pursuant to a Registration Statement, (iii) one firm of attorneys and
one firm of accountants or other agents retained by the Investors, and
(iv) one firm of attorneys retained by such underwriter (collectively,
the "Inspectors") all pertinent financial and other records, and
pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed necessary
by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors
and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence provided,
however, that each Inspector shall hold in strict confidence and shall
not make any disclosure (except to an Investor) or use of any Record or
other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is mutually
determined to be necessary to avoid or correct a misstatement or
omission in any Registration Statement or is otherwise required under
the 1933 Act, (b) the release of such Records is ordered pursuant to a
final, non-appealable subpoena or order from a court or government body
of competent jurisdiction, or (c) the information in such Records has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Company and allow the Company, at its
expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, the Records deemed confidential.
k. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the
Company unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii) the disclosure of
such information is necessary to avoid or correct a misstatement or
omission in any Registration Statement, (iii) the release of such
information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
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jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this
or any other agreement. The Company agrees that it shall, upon learning
that disclosure of such information concerning an Investor is sought in
or by a court or governmental body of competent jurisdiction or through
other means, give prompt written notice to such Investor and allow such
Investor, at the Investor's expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, such
information.
l. The Company shall use its best efforts either to (i) cause
all the Registrable Securities covered by a Registration Statement to
be listed on each national securities exchange on which securities of
the same class or series issued by the Company are then listed, if any,
if the listing of such Registrable Securities is then permitted under
the rules of such exchange, (ii) if, despite the Company's best efforts
to satisfy the preceding clause (i), the Company is unsuccessful in
satisfying the preceding clause (i), if at any time during the
Registration Period the Company is able to satisfy the relevant listing
criteria, to secure the inclusion for quotation on the Nasdaq SmallCap
Market for such Registrable Securities or, (ii) if, despite the
Company's best efforts to satisfy the preceding clause (ii), the
Company is unsuccessful in satisfying the preceding clause (ii), to
secure the inclusion for quotation on the over-the-counter market for
such Registrable Securities, and, without limiting the generality of
the foregoing, in the case of clause (ii) or (iii), to arrange for at
least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such
Registrable Securities. The Company shall pay all fees and expenses in
connection with satisfying its obligation under this Section 3(l).
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any
managing underwriter, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration
Statement and enable such certificates to be in such denominations or
amounts, as the case may be, as the managing underwriter, if any, or,
if there is no managing underwriter, a majority of the Investors may
reasonably request and registered in such names as the managing
underwriter, if any, or the Investors may request. Not later than the
date on which any Registration Statement registering the resale of
Registrable Securities is declared effective, the Company shall deliver
to its transfer agent instructions, accompanied by any reasonably
required opinion of counsel, that permit resales of the Registrable
Securities, without legend, in a timely fashion that complies with then
mandated securities settlement procedures for regular way market
transactions.
n. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of
Registrable Securities pursuant to a Registration Statement.
o. The Company shall use the services of a transfer agent and
registrar for all such Registrable Securities not later than the
effective date of such Registration Statement.
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p. Subject to the reasonable approval of counsel to the
Company, if requested by the managing underwriter or a majority of the
Investors, the Company shall immediately incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriter and the majority of Investors agree should be included
therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to
the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and with
respect to any other terms of the underwritten (or best efforts
underwritten) offering of the Registrable Securities to be sold in such
offering; make all required filings of such prospectus supplement or
post-effective amendment as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment;
and supplement or make amendments to any Registration Statement if
requested by a shareholder or any underwriter of such Registrable
Securities.
q. The Company shall use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement
to be registered with or approved by such other governmental agencies
or authorities as may be necessary to consummate the disposition of
such Registrable Securities.
r. The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with
any registration hereunder.
4. OBLIGATIONS OF THE INVESTORS.
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a. At least fourteen (14) days prior to the first anticipated
filing date of the Registration Statement, or any amendments thereto,
the Company shall notify each Investor in writing of the information
the Company requires from each such Investor if such Investor elects to
have any of such Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to
this Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the Company
such information regarding itself, the Registrable Securities held by
it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably
request. An investor's failure to respond to the Company's request for
information prior to the specified filing date of the Registration
Statement shall toll the Company's obligations under Section 2 as to
that Investor.
b. Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as
reasonably requested by the Company in connection with the preparation
and filing of the Registration Statement(s) hereunder, unless such
Investor has notified the Company in writing of such Investor's
election to exclude all of such Investor's Registrable Securities from
the Registration Statement.
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c. In the event Investors holding a majority of the
Registrable Securities being registered determine to engage the
services of an underwriter, each Investor agrees to enter into and
perform such Investor's obligations under an underwriting agreement, in
usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing
underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition
of the Registrable Securities, unless such Investor notifies the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement(s).
d. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in
Section 3(g) or the first sentence of 3(f), such Investor will
immediately discontinue disposition of Registrable Securities pursuant
to the Registration Statement(s) covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(g) or the first sentence
of 3(f) and, if so directed by the Company, such Investor shall deliver
to the Company (at the expense of the Company) or destroy all copies in
such Investor's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such
Investor's Registrable Securities on the basis provided in any
underwriting arrangements approved by the Investors entitled hereunder
to approve such arrangements, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of
such underwriting arrangements, and (iii) agrees to pay its pro rata
share of all underwriting discounts and commissions.
f. Investor has been advised as to provisions of Regulation M
and agrees that Investors disposition of the Registrable Securities
will be made in a manner so as not to violate Regulation M.
5. EXPENSES OF REGISTRATION.
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All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company, shall be paid by the Company.
The fees and disbursements of counsel for the Investors and the Inspectors shall
be borne by each Investor.
6. INDEMNIFICATION
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
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a. To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Investor who
holds such Registrable Securities, the directors, officers, partners,
employees, agents and each Person, if any, who controls any Investor
within the meaning of the 1933 Act or the Securities Exchange Act of
1934, as amended (the "1934 Act"), and any underwriter (as defined in
the 0000 Xxx) for the Investors, and the directors and officers of, and
each Person, if any, who controls, any such underwriter within the
meaning of the 1933 Act or the 1934 Act (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities, judgments,
fines, penalties, charges, costs, attorneys' fees, amounts paid in
settlement or expenses, joint or several, (collectively, "Claims")
incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or
other regulatory agency, body or the SEC, whether pending or
threatened, whether or not an indemnified party is or may be a party
thereto ("Indemnified Damages"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other "blue sky"
laws of any jurisdiction in which Registrable Securities are offered
("Blue Sky Filing"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the
statements therein were made, not misleading, (ii) any untrue statement
or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to
state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements
therein were made, not misleading, or (iii) any violation or alleged
violation of the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations").
Subject to the restrictions set forth in Section 6(d) with respect to
the number of legal counsel, the Company shall reimburse the Investors
and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or
other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained
in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified
Person or underwriter for such Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or any
such amendment thereof or supplement thereto, if such prospectus was
timely made available by the Company pursuant to Section 3(c); (ii)
with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such
Claim purchased the Registrable Securities that are the subject thereof
(or to the benefit of any person controlling such person) if the untrue
statement or mission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the
Company pursuant to Section 3(c), and the Indemnified Person was
promptly advised in writing not to use the incorrect prospectus prior
to the use giving rise to a violation and such Indemnified Person,
notwithstanding such advice, used it; (iii) shall not be available to
the extent such Claim is based on a failure of the Investor to deliver
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or to cause to be delivered the prospectus made available by the
Company and (iv) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent
of the Company, which consent shall not be unreasonably withheld. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and
not jointly indemnify, hold harmless and defend, to the same extent and
in the same manner as is set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration
Statement, each Person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act (collectively and together with
an Indemnified Person, an "Indemnified Party"), against any Claim or
Indemnified Damages to which any of them may become subject, under the
1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or are based upon any Violation, in
each case to the extent, and only to the extent, that such Violation
occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and, subject to Section
6(d), such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 6(b) and Section 7 shall not apply
to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; provided, further, however,
that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the
proceeds to such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the
transfer of the Registrable Securities by the Investors pursuant to
Section 9. Notwithstanding anything to the contrary contained herein,
the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of
any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely
basis in the prospectus, as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same
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extent as provided above, with respect to information such persons so
furnished in writing expressly for inclusion in the Registration
Statement.
d. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of
any action or proceeding (including any governmental action or
proceeding) involving a Claim such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense
thereof with counsel mutually satisfactory to the indemnifying party
and the Indemnified Person or the Indemnified Party, as the case may
be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and
expenses to be paid by the indemnifying party, if, in the reasonable
opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified
Party and the indemnifying party would be inappropriate due to actual
or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in
such proceeding. The Company shall pay reasonable fees for only one
separate legal counsel for the Investors, and such legal counsel shall
be selected by the Investors holding a majority in interest of the
Registrable Securities included in the Registration Statement to which
the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying
party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person
which relates to such action or claim. The indemnifying party shall
keep the Indemnified Party or Indemnified Person fully apprised at all
times as to the status of the defense or any settlement negotiations
with respect thereto. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its
written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No
indemnifying party shall, without the consent of the Indemnified Party
or Indemnified Person, consent to entry of any judgment or enter into
any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such Indemnified Party or Indemnified Person of a release from all
liability in respect to such claim or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall
be subrogated to all rights of the Indemnified Party or Indemnified
Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The
failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified
Person or Indemnified Party under this Section 6, except to the extent
that the indemnifying party is prejudiced in its ability to defend such
action.
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e. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.
f. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified
Party or Indemnified Person against the indemnifying party or others,
and (ii) any liabilities the indemnifying party may be subject to
pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act
so long as the Company remains subject to such requirements (it being
understood that nothing herein shall limit the Company's obligations
under Section 4(c) of the Securities Purchase Agreement) and the filing
of such reports and other documents is required for the applicable
provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon written request, (i) a written
statement by the Company that it has complied with the reporting
requirements of Rule 144(c )(1), (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be
reasonably requested to permit the investors to sell such securities
pursuant to Rule 144 without registration.
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9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights to have the Company register Registrable Securities pursuant
to this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable Securities if the Company
consents (except for such transfer to an affiliate or successor, which shall not
require any such consent) and: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned; (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein; (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement; (vi) such transferee shall be an "accredited
investor" as that term is defined in Rule 501 of Regulation D promulgated under
the 1933 Act; and (vii) in the event the assignment occurs subsequent to the
date of effectiveness of the Registration Statement required to be filed
pursuant to Section 2(a), the transferee agrees to pay all reasonable expenses
of amending or supplementing such Registration Statement to reflect such
assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold two-thirds of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
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11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or entities
with respect to the same Registrable Securities, the Company shall act
upon the basis of instructions, notice or election received from the
registered owner of such Registrable Securities.
b. Any notices consents, waivers or other communications
required or permitted to be given under the terms of this Agreement
must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile, provided a copy is mailed by U.S. certified mail, return
receipt requested; (iii) three (3) days after being sent by U.S.
certified mail, return receipt requested, or (d) one (1) day after
deposit with a nationally recognized overnight delivery service, in
each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company: 0000 Xxxxxxxxxx Xxxxxxx
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's counsel as set forth on the Schedule of
Buyers. Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of
the remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other
jurisdiction.
e. This Agreement and the Securities Purchase Agreement
constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or
referred to herein and therein. This Agreement and the Securities
Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and
thereof.
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f. Subject to the requirements of Section 9, this Agreement
shall inure to the benefit and of and be binding upon the permitted
successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning
hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement. This Agreement, once
executed by a party, may be delivered to the other party hereto by
facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
------- ------
SAF T LOK INCORPORATED ___________________________________
By: _____________________________ By: _______________________________
Name: ___________________________ Name: _____________________________
Its: ____________________________ Its: ______________________________
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