EXHIBIT 10.6.1
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this
"Agreement"), dated as of June 3, 2002, is made and entered into among
Borough Corp., a Delaware corporation (the "Company"), and Prima
Capital Growth Fund LLC, a New York limited liability corporation
("Investor").
WHEREAS, the Company and the Investor have entered into that
certain Private Equity Line of Credit Agreement, dated as of the date
hereof (the "Investment Agreement"), pursuant to which the Company will
issue, from time to time, to the Investor up to $30,000,000 worth of
Common Stock and 1,098,000 Warrants;
WHEREAS, pursuant to the terms of, and in partial consideration
for, the Investor's agreement to enter into the Investment Agreement, the
Company has agreed to provide the Investor with certain registration rights
with respect to the Registrable Securities (as defined in the Investment
Agreement);
NOW, THEREFORE, in consideration of the premises, the
representations, warranties, covenants and agreements contained herein
and in the Investment Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
intending to be legally bound hereby, the parties hereto agree as follows
(capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Investment Agreement):
ARTICLE I
REGISTRATION RIGHTS
Section 1.1 FORM OF REGISTRATION STATEMENTS.
(a) Filing of Registration Statement. Subject to the terms and
conditions of this Agreement, the Company shall file with the SEC, within
ninety (90) days following the Subscription Date, a registration statement
on Form S-1 or SB-2 under the Securities Act (the "Registration
Statement") for the registration of the resale by the Investor of Registrable
Securities.
(b) Effectiveness of the Registration Statement. The Company
shall use its reasonable best efforts to have the Registration Statement
declared effective by the SEC by no later than one hundred and twenty
(120) days after the filing of the Registration Statement to insure that the
Registration Statement remains in effect throughout the term of this
Agreement as set forth in Section 4.2, subject to the terms and conditions
of this Agreement.
(c) Failure to Obtain Effectiveness of Registration Statements.
In the event the Company fails for any reason to obtain the effectiveness of
a Registration Statement within the time period set forth in Section 1.1(b),
the Company shall pay to the Investor, within three (3) Trading Days of the
date by which such Registration Statement was required to have been
declared effective, $50,000.00 in immediately available funds into an
account designated by the Investor. Such payments shall be made by wire
transfer of immediately available funds.
(d) Failure to Maintain Effectiveness of Registration
Statements. Subsequent to the initial effectiveness of a Registration
Statement, in the event the Company fails to maintain the effectiveness of a
Registration Statement (or the underlying prospectus) throughout the
period set forth in Section 4.2, and the Investor holds any Registrable
Securities at any time during the period of such ineffectiveness (an
"Ineffective Period"), the Company shall pay to the Investor, in
immediately available funds into accounts designated by the Investor, an
amount equal to one percent (1%) of the aggregate purchase price of such
Registrable Securities which are issued and payable to the Investor and
aggregate Purchase Price (as defined in the Warrant) of the Warrant Shares
(payable proportionately to the Investor of all of the Registrable Securities
then held by the Investor for each seven-calendar-day period (or portion
thereof) of an Ineffective Period. Such payments shall be made on the first
Trading Day after the earliest to occur of (i) the expiration of the
Commitment Period, (ii) the expiration of an Ineffective Period, (iii) the
expiration of the first twenty-eight calendar days of an Ineffective Period
and (iv) the expiration of each additional twenty-eight calendar-day periods
during an Ineffective Period.
(e) The parties hereto acknowledge and agree that the sums
payable under Sections 1(c) or 1(d) above shall constitute liquidated
damages and not penalties. The parties further acknowledge that (i) the
amount of loss or damages likely to be incurred is incapable or is difficult
to precisely estimate, (ii) the amounts specified in such Sections bear a
reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred in connection with any failure by the
Company to obtain or maintain the effectiveness of a Registration
Statement, (iii) one of the reasons for the parties reaching an agreement as
to such amounts was the uncertainty and cost of litigation regarding the
question of actual damages, and (iv) the parties are sophisticated business
parties and have been represented by sophisticated and able legal and
financial counsel and negotiated this Agreement at arm's length.
ARTICLE II
REGISTRATION PROCEDURES
Section 2.1 FILINGS; INFORMATION. The Company will
facilitate the registration of such Registrable Securities in accordance with
the Investor's intended methods of disposition thereof. Without limiting the
foregoing, the Company in each such case will do the following as
expeditiously as possible, but in no event later than the deadline, if any,
prescribed therefor in this Agreement:
(a) The Company shall prepare and file with the SEC a
registration statement on Form S-1 or Form SB-2 (if use of such forms are
then available to the Company pursuant to the rules of the SEC and, if not,
on such other form promulgated by the SEC for which the Company then
qualifies and which counsel for the Company shall deem appropriate and
which form shall be available for the sale of the Registrable Securities to be
registered thereunder in accordance with the provisions of this Agreement
and in accordance with the intended method of distribution of such
Registrable Securities); use reasonable best efforts to cause such filed
Registration Statement to become and remain effective (pursuant to Rule
415 under the Securities Act, if applicable, or otherwise); prepare and file
with the SEC such amendments and supplements to such Registration
Statement and the prospectus used in connection therewith as may be
necessary to keep such Registration Statement effective during the term of
this Agreement; prepare and file, within one day after each Closing Date,
any prospectus supplement required under the Securities Act; and comply
with the provisions of the Securities Act with respect to the disposition of
all Registrable Securities covered by such Registration Statement during
such period in accordance with the intended methods of disposition by the
Investor set forth in such Registration Statement.
(b) The Company shall file all necessary amendments to the
Registration Statement in order to effectuate the purpose of this
Agreement.
(c) If so requested by the managing underwriters, if any, or the
holders of a majority in aggregate amount of the Registrable Securities
being registered, the Company shall (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as
the managing underwriters, if any, and such holders agree should be
included therein, and (ii) make all required filings of such prospectus
supplement or post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in
such prospectus supplement or post-effective amendment; provided,
however, that the Company shall not be required to take any action
pursuant to this Section 2.1(c)(ii) that would, in the opinion of counsel for
the Company, violate applicable law.
(d) In connection with the filing of a Registration Statement,
the Company shall enter into such agreements and take all such other
reasonable actions in connection therewith (including those reasonably
requested by the managing underwriters, if any, or the holders of a majority
in aggregate principal amount of the Registrable Securities being sold) in
order to expedite or facilitate the disposition of such Registrable Securities,
and in such connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten
registration, (i) make such representations and warranties to the holders of
such Registrable Securities and the underwriters, if any, with respect to the
business of the Company (including with respect to businesses or assets
acquired or to be acquired by the Company), and the Registration
Statement, prospectus and documents, if any, incorporated or deemed to
be incorporated by reference therein, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings, and confirm the same if and when requested; (ii) if an
underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the selling
holders of such Registrable Securities and the underwriters, if any, than
those set forth herein (or such other provisions and procedures acceptable
to the holders of a majority in aggregate principal amount of Registrable
Securities covered by such Registration Statement and the managing
underwriters, if any); and (iii) deliver such documents and certificates as
may be reasonably requested by the holders of a majority in aggregate
principal amount of the Registrable Securities being sold, their counsel and
the managing underwriters, if any, to evidence the continued validity of
their representations and warranties made pursuant to clause (i) above and
to evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.
(e) Five Trading Days prior to filing a Registration Statement
or prospectus, or any amendment or supplement thereto (excluding
amendments deemed to result from the filing of documents incorporated by
reference therein), the Company shall deliver to the seller of Registrable
Securities and counsel representing the seller of Registrable Securities, in
accordance with the notice provisions of Section 4.8, copies of such
Registration Statement as proposed to be filed, together with exhibits
thereto, which documents will be subject to review by such parties, and
thereafter deliver to the seller of Registrable Securities and its counsel, in
accordance with the notice provisions of Section 4.8, such number of
copies of such Registration Statement, each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus included
in such Registration Statement (including each preliminary prospectus) and
such other documents or information as the Investor or counsel may
reasonably request in order to facilitate the disposition of the Registrable
Securities.
(f) After the filing of the Registration Statement, the Company
shall promptly notify the Investor of any stop order issued or threatened by
the SEC in connection therewith and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered.
(g) The Company shall use its reasonable best efforts to (i)
register or qualify such Registrable Securities under such other securities or
blue sky laws of such jurisdictions in the United States as the Investor may
reasonably (in light of its intended plan of distribution) request, and (ii)
cause such Registrable Securities to be registered with or approved by such
other governmental agencies or authorities in the United States as may be
necessary by virtue of the business and operations of the Company and do
any and all other acts and things that may be reasonably necessary or
advisable to enable the Investor to consummate the disposition of the
Registrable Securities; provided that the Company will not be required to
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (g), subject itself to
taxation in any such jurisdiction, or consent or subject itself to general
service of process in any such jurisdiction.
(h) The Company shall immediately notify the Investor upon the
occurrence of any of the following events in respect of a Registration
Statement or related prospectus in respect of an offering of Registrable
Securities: (i) receipt of any request for additional information by the SEC
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 related prospectus; (ii) the issuance by the
SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation
of any proceedings for that purpose; (iii) receipt 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; (iv) the
happening of any event that makes any statement made in the Registration
Statement or related prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement,
related prospectus or documents so that, in the case of the Registration
Statement, 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 not misleading, and that in the case of the
related prospectus, 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 the light of the circumstances
under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the
Registration Statement would be appropriate; and the Company will
promptly make available to the Investor any such supplement or
amendment to the related prospectus.
(i) The Company shall enter into customary agreements and
take such other actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities (whereupon the
Investor may, at its option, require that any or all of the representations,
warranties and covenants of the Company also be made to and for the
benefit of the Investor).
(j) The Company shall make available to the Investor (and will
deliver to Investor's counsel), subject to restrictions imposed by the United
States federal government or any agency or instrumentality thereof, copies
of all correspondence between the SEC and the Company, its counsel or
auditors and will also make available for inspection by the Investor and any
attorney, accountant or other professional retained by the Investor
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the Company's officers and
employees to supply all information reasonably requested by any Inspectors
in connection with such Registration Statement. Records that the
Company determines, in good faith, to be confidential and which it notifies
the Inspectors are confidential shall not be disclosed by the Inspectors
unless (i) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such Registration Statement or (ii) the
disclosure or release of such Records is requested or required pursuant to
oral questions, interrogatories, requests for information or documents or a
subpoena or other order from a court of competent jurisdiction or other
process; provided that prior to any disclosure or release pursuant to clause
(ii), the Inspectors shall provide the Company with prompt notice of any
such request or requirement so that the Company may seek an appropriate
protective order or waive such Inspectors' obligation not to disclose such
Records; and, provided further, that if failing the entry of a protective order
or the waiver by the Company permitting the disclosure or release of such
Records, the Inspectors, upon advice of counsel, are compelled to disclose
such Records, the Inspectors may disclose that portion of the Records
which counsel has advised the Inspectors that the Inspectors are compelled
to disclose. The Investor agrees that information obtained by it solely as a
result of such inspections (not including any information obtained from a
third party who, insofar as is known to the Investor after reasonable
inquiry, is not prohibited from providing such information by a contractual,
legal or fiduciary obligation to the Company) shall be deemed confidential
and shall not be used by it as the basis for any market transactions in the
securities of the Company or its Affiliates unless and until such information
is made generally available to the public. The Investor further agrees that it
will, upon learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the
Company, at its expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential.
(k) The Company shall deliver, in accordance with the notice
provisions of Section 4.8, to the Investor a signed counterpart, addressed
to the Investor, of (1) an opinion or opinions of counsel to the Company, in
such form reasonably acceptable to the Investor, and (2) to the extent
required by law or reasonably necessary to effect a sale of Registrable
Securities in accordance with prevailing business practices at the time of
any sale of Registrable Securities pursuant to a Registration Statement, a
comfort letter or comfort letters from the Company's independent public
accountants, each in customary form and covering such matters of the type
customarily covered by opinions or comfort letters, as the case may be, as
the Investor therefore reasonably requests.
(l) The Company shall otherwise comply with all applicable
rules and regulations of the SEC, including, without limitation, compliance
with applicable reporting requirements under the Exchange Act.
(m) The Company shall appoint a transfer agent and registrar for
all such Registrable Securities covered by such Registration Statement not
later than the effective date of such Registration Statement.
(n) The Company may require the Investor to promptly furnish
in writing to the Company such information as may be legally required in
connection with such registration including, without limitation, all such
information as may be requested by the SEC or the National Association of
Securities Dealers. The Investor agrees to provide such information
requested in connection with such registration within ten (10) business days
after receiving such written request and the Company shall not be
responsible for any delays in obtaining or maintaining the effectiveness of
the Registration Statement directly caused by the Investor's failure to
timely provide such information.
Section 2.2 REGISTRATION EXPENSES. In connection with
each Registration Statement, the Company shall pay all registration
expenses incurred in connection with the registration thereunder (the
"Registration Expenses"), including, without limitation: (i) all registration,
filing, securities exchange listing and fees required by the National
Association of Securities Dealers, (ii) all registration, filing, qualification
and other fees and expenses of compliance with securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with
blue sky qualifications of the Registrable Securities), (iii) all word
processing, duplicating, printing, messenger and delivery expenses, (iv) the
Company's internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting
duties), (v) the fees and expenses incurred in connection with the listing of
the Registrable Securities, (vi) reasonable fees and disbursements of
counsel for the Company and customary fees and expenses for independent
certified public accountants retained by the Company (including the
expenses of any special audits or comfort letters or costs associated with
the delivery by independent certified public accountants of such special
audit(s) or comfort letter(s) requested pursuant to Section 2.1(l) hereof),
(vii) the fees and expenses of any special experts retained by the Company
in connection with such registration, (viii) premiums and other costs of
policies of insurance against liabilities arising out of any public offering of
the Registrable Securities being registered, and (ix) any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities, but excluding underwriting fees, discounts, transfer taxes or
commissions, if any, attributable to the sale of Registrable Securities, which
shall be payable by each seller of Registrable Securities pro rata on the
basis of the number of Registrable Securities of each such seller that are
included in a registration under this Agreement.
ARTICLE III
INDEMNIFICATION AND CONTRIBUTION
Section 3.1 INDEMNIFICATION BY THE COMPANY. The
Company agrees to indemnify and hold harmless each seller of Registrable
Securities, its partners, Affiliates, officers, directors, employees and duly
authorized agents, and each Person or entity, if any, who controls the seller
of Registrable Securities within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, together with the partners,
Affiliates, officers, directors, employees and duly authorized agents of such
controlling Person or entity (collectively, the "Controlling Persons"), from
and against any loss, claim, damage, liability, costs and expenses (including,
without limitation, reasonable attorneys' fees and disbursements and costs
and expenses of investigating and defending any such claim) (collectively,
"Damages"), joint or several, and any action or proceeding in respect
thereof to which the seller of Registrable Securities, its partners, Affiliates,
officers, directors, employees and duly authorized agents, and any such
Controlling Person may become subject under the Securities Act or
otherwise as incurred and, insofar as such Damages (or actions or
proceedings in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement or prospectus relating to the Registrable Securities
or any preliminary prospectus, or arises out of, or are based upon, any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are based upon information furnished in writing
to the Company by the seller of Registrable Securities expressly for use
therein, and shall reimburse the seller of Registrable Securities, its partners,
Affiliates, officers, directors, employees and duly authorized agents, and
each such Controlling Person for any legal and other expenses reasonably
incurred by the seller of Registrable Securities, its partners, Affiliates,
officers, directors, employees and duly authorized agents, or any such
Controlling Person, as incurred, in investigating or defending or preparing
to defend against any such Damages or actions or proceedings; provided,
however, that the Company shall not be liable to the seller of Registrable
Securities to the extent that any such Damages arise out of or are based
upon an untrue statement or omission made in any preliminary prospectus
if (A) the seller of Registrable Securities failed to send or deliver a copy of
the final prospectus delivered by the Company to the seller of Registrable
Securities with or prior to the delivery of written confirmation of the sale
by the seller of Registrable Securities to the Person asserting the claim from
which such Damages arise, and (B) the final prospectus would have
corrected such untrue statement or alleged untrue statement or such
omission or alleged omission, or (C) such untrue statement or omission
made in any prospectus was furnished to the Company by a seller of
Registrable Securities or described such seller of Registrable Securities in a
manner consistent with representations made by any Investor in the
Investment Agreement.
Section 3.2 INDEMNIFICATION BY SELLER OF
REGISTRABLE SECURITIES. Each Seller of Registrable Securities
agrees to indemnify and hold harmless the Company and each person, if
any, who controls the Company, or entity, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, and each officer of the Company who signs the
Registration Statement, the Company's directors, together with the
partners, Affiliates, officers, directors, employees and duly authorized
agents of such controlling Person or entity (collectively, the "Controlling
Persons"), from and against any loss, claim, damage, liability, costs and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements and costs and expenses of investigating and defending any
such claim) (collectively, "Damages"), joint or several, and any action or
proceeding in respect thereof to which the Company and Controlling
Person may become subject under the Securities Act or otherwise as
incurred and, insofar as such Damages (or actions or proceedings in respect
thereof) arise out of, or are based upon, any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
or prospectus relating to the Registrable Securities or any preliminary
prospectus, or arises out of, or are based upon, any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, only insofar as the
same are based upon information furnished in writing to the Company by
the seller of Registrable Securities expressly for use therein, and shall
reimburse the Company and each such Controlling Person for any legal and
other expenses reasonably incurred by the Company, or any such
Controlling Person, in investigating or defending or preparing to defend
against any such Damages or actions or proceedings; provided, however,
that the seller of Registrable Securities shall be limited to the proportion of
any such loss, claim, damage, liability or expense which is equal to the
proportion that the public offering price of the Registrable Securities sold
by the seller under such Registration Statement bears to the total public
offering price of all securities offered thereunder, but not in any event to
exceed the net proceeds received by the seller of Registrable Securities
from the sale of Registrable Securities covered by such registration
statement.
Section 3.3 CONDUCT OF INDEMNIFICATION
PROCEEDINGS. Promptly after receipt by any person or entity in respect
of which indemnity may be sought pursuant to Section 3.1 or 3.2 (an
"Indemnified Party") of notice of any claim or the commencement of any
action, the Indemnified Party shall, if a claim in respect thereof is to be
made against the person or entity against whom such indemnity may be
sought (the "Indemnifying Party"), notify the Indemnifying Party in writing
of the claim or the commencement of such action; in the event an
Indemnified Party shall fail to give such notice as provided in this Section
3.3 and the Indemnifying Party to whom notice was not given was unaware
of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, the indemnification
provided for in Section 3.1 and 3.2 shall be reduced to the extent of any
actual prejudice resulting from such failure to so notify the Indemnifying
Party; provided, that the failure to notify the Indemnifying Party shall not
relieve it from any liability that it may have to an Indemnified Party
otherwise than under Section 3.1 or 3.2. If any such claim or action shall be
brought against an Indemnified Party, and it shall notify the Indemnifying
Party thereof, the Indemnifying Party shall be entitled to participate therein,
and, to the extent that it wishes, jointly with any other similarly notified
Indemnifying Party, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. After notice from the Indemnifying
Party to the Indemnified Party of its election to assume the defense of such
claim or action, the Indemnifying Party shall not be liable to the
Indemnified Party for any legal or other expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation; provided that the Indemnified Party shall
have the right to employ separate counsel to represent the Indemnified
Party and its controlling persons who may be subject to liability arising out
of any claim in respect of which indemnity may be sought by the
Indemnified Party against the Indemnifying Party, but the fees and expenses
of such counsel shall be for the account of such Indemnified Party unless (i)
the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) in the reasonable judgment of
the Company and such Indemnified Party, representation of both parties by
the same counsel would be inappropriate due to actual or potential
conflicts of interest between them, it being understood, however, that the
Indemnifying Party shall not, in connection with any one such claim or
action or separate but substantially similar or related claims or actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys together with appropriate local counsel) at any
time for all Indemnified Parties, or for fees and expenses that are not
reasonable. No Indemnifying Party shall, without the prior written consent
of the Indemnified Party, effect any settlement of any claim or pending or
threatened proceeding in respect of which the Indemnified Party is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release
of such Indemnified Party from all liability arising out of such claim or
proceeding. Whether or not the defense of any claim or action is assumed
by the Indemnifying Party, such Indemnifying Party will not be subject to
any liability for any settlement made without its consent, which consent will
not be unreasonably withheld.
Section 3.4 OTHER INDEMNIFICATION. Indemnification
similar to that specified in the preceding paragraphs of this Article 3 (with
appropriate modifications) shall be given by the Company and each seller
of Registrable Securities with respect to any required registration or other
qualification of securities under any federal or state law or regulation of
any governmental authority other than the Securities Act. The provisions
of this Article III shall be in addition to any other rights to indemnification,
contribution or other remedies which an Indemnified Party may have
pursuant to law, equity, contract or otherwise.
Section 3.5 CONTRIBUTION. If the indemnification provided
for in this Article III is unavailable to the Indemnified Parties in respect of
any Damages referred to herein, then the 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 Damages between the
Company on the one hand and the Investor on the other, in such proportion
as is appropriate to reflect the relative fault of the Company and of the
Investor in connection with such statements or omissions, as well as other
equitable considerations. The relative fault of the Company on the one
hand and of the Investor on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by such party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Investor agree
that it would not be just and equitable if contribution pursuant to this
Section 3.5 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. The amount paid or
payable by an Indemnified Party as a result of the Damages referred to in
the immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably
incurred by such Indemnified Party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 3.5, the Investor shall in no event be required to contribute any
amount in excess of the amount by which the total price at which the
Registrable Securities of the seller of Registrable Securities were sold to
the public (less underwriting discounts and commissions) exceeds the
amount of any damages which the Investor has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
ARTICLE IV
MISCELLANEOUS
Section 4.1 NO OUTSTANDING REGISTRATION RIGHTS.
The Company represents and warrants to the seller of Registrable
Securities that there is not in effect on the date hereof any agreement by the
Company pursuant to which any holders of securities of the Company have
a right to cause the Company to register or qualify such securities under
the Securities Act or any securities or blue sky laws of any jurisdiction that
would conflict or be inconsistent with any provision of this Agreement or
the Investment Agreement. The Company further represents and warrants
that upon issuance, the Registrable Securities will not have been issued or
sold in violation of any preemptive or other similar rights of holders of any
securities of the Company or any other person.
Section 4.2 TERM. The registration rights provided to the
holders of Registrable Securities hereunder shall terminate at such time as
all Put Shares and Warrant Shares (i) have been disposed of pursuant to the
Registration Statement, (ii) have been sold under circumstances under
which all of the applicable conditions of Rule 144 (or any similar provision
then in force) under the Securities Act ("Rule 144") are met, (iii) have been
otherwise transferred to holders who may trade such shares without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend, or (iv) may be sold without any time, volume or manner
limitations pursuant to Rule 144(k) (or any similar provision then in effect)
under the Securities Act in the opinion of counsel to the Company, which
counsel shall be reasonably acceptable to the holder of Registrable
Securities; provided, however, that such registration rights shall not
terminate sooner than two years following the end of the Commitment
Period. Notwithstanding the foregoing, paragraph (d) of Section 1.1,
Article III, Section 4.8 and Section 4.9 shall survive the termination of this
Agreement.
Section 4.3 RULE 144. The Company covenants that it will file
all reports required to be filed by it under the Securities Act and the
Exchange Act and that it will take such further action as holders of
Registrable Securities may reasonably request, all to the extent required
from time to time to enable the seller of Registrable Securities to sell
Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144, as such Rule
may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC. If at any time the Company is not required
to file such reports, it will, upon the request of any holder of Registrable
Securities, make publicly available other information so long as necessary
to permit sales pursuant to Rule 144. Upon the request of the seller of
Registrable Securities, the Company will deliver to the seller of Registrable
Securities a written statement as to whether it has complied with such
requirements.
Section 4.4 CERTIFICATE. The Company will, at its expense,
forthwith upon the request of any holder of Registrable Securities, deliver
to such holder a certificate, signed by the Company's principal financial
officer, stating (a) the Company's name, address and telephone number
(including area code), (b) the Company's Internal Revenue Service
identification number, (c) the Company's Commission file number, (d) the
number of shares of each class of Stock outstanding as shown by the most
recent report or statement published by the Company, and (e) whether the
Company has filed the reports required to be filed under the Exchange Act
for a period of at least ninety (90) days prior to the date of such certificate
and in addition has filed the most recent annual report required to be filed
thereunder.
Section 4.5 AMENDMENT AND MODIFICATION. Any
provision of this Agreement may be waived, provided that such waiver is
set forth in a writing executed by the parties to this Agreement. 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
Company has obtained the written consent of the holders of a majority of
the then outstanding Registrable Securities. Notwithstanding the
foregoing, the waiver of any provision hereof with respect to a matter that
relates exclusively to the rights of holders of Registrable Securities whose
securities are being sold pursuant to a Registration Statement and does not
directly or indirectly affect the rights of other holders of Registrable
Securities may be given by holders of at least a majority of the Registrable
Securities being sold by such holders; provided that the provisions of this
sentence may not be amended, modified or supplemented except in
accordance with the provisions of the immediately preceding sentence. No
course of dealing between or among any Person having any interest in this
Agreement will be deemed effective to modify, amend or discharge any
part of this Agreement or any rights or obligations of any person under or
by reason of this Agreement.
Section 4.6 SUCCESSORS AND ASSIGNS; ENTIRE
AGREEMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto. The Investor
and Company may not assign their rights under this Agreement. This
Agreement, together with the Investment Agreement set forth the entire
agreement and understanding between the parties as to the subject matter
hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
Section 4.7 SEPARABILITY. In the event that any provision
of this Agreement or the application of any provision hereof is declared to
be illegal, invalid or otherwise unenforceable by a court of competent
jurisdiction, the remainder of this Agreement shall not be affected except to
the extent necessary to delete such illegal, invalid or unenforceable
provision unless that provision held invalid shall substantially impair the
benefits of the remaining portions of this Agreement.
Section 4.8 NOTICES. All notices, demands, requests,
consents, approvals, and other communications required or permitted
hereunder shall be in writing and shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram or facsimile,
addressed as set forth below or to such other address as such party shall
have specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at
the address or number designated below (if delivered on a business day
during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or
upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to Borough Corporation:
Borough Corporation
0000 X. Xxxxxx XX
Xxxxxxxxxx, X.X. 00000
If to the Investor:
Prima Capital Growth Fund LLC
000X 0xx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Telecopier: 000-000-0000
Either party hereto may from time to time change its address or facsimile
number for notices under this Section by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other
party hereto.
Section 4.9 GOVERNING LAW. This Agreement shall be
subject to the same choice of law, venue and jurisdiction as the Investment
Agreement and construed under the laws of the State of Florida, without
giving effect to provisions regarding conflicts of law or choice of law.
Section 4.10 HEADINGS. The headings in this Agreement are
for convenience of reference only and shall not constitute a part of this
Agreement, nor shall they affect their meaning, construction or effect.
Section 4.11 COUNTERPARTS. This Agreement may be
executed in multiple counterparts, each of which shall be deemed to be an
original instrument and all of which together shall constitute one and the
same instrument.
Section 4.12 FURTHER ASSURANCES. Each party shall
cooperate and take such action as may be reasonably requested by another
party in order to carry out the provisions and purposes of this Agreement
and the transactions contemplated hereby.
Section 4.13 REMEDIES. In the event of a breach or a
threatened breach by any party to this Agreement of its obligations under
this Agreement, any party injured or to be injured by such breach will be
entitled to specific performance of its rights under this Agreement or to
injunctive relief, in addition to being entitled to exercise all rights
provided in this Agreement and granted by law. The parties agree that the
provisions of this Agreement shall be specifically enforceable, it being
agreed by the parties that the remedy at law, including monetary damages,
for breach of any such provision will be inadequate compensation for any
loss and that any defense or objection in any action for specific
performance or injunctive relief that a remedy at law would be adequate is
waived.
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth above.
BOROUGH CORP.
"Company"
By: _______________
Xxxxx X. Xxxxxxx, Xx., President
PRIMA CAPITAL GROWTH FUND LLC
"Investor"
By:
Xxxx X. Xxxxxx,
Managing Member
