EXHIBIT 10.41
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement"), is made and entered into
as of the 16th day of March, 1999, by and among COMPOSITECH LTD., a Delaware
corporation (the "Company"), and the Persons listed on the Purchaser Signature
Pages hereto (each of whom is individually referred to as a "Purchaser" and all
of whom collectively are referred to as the "Purchasers"). Defined terms used in
this Agreement and not otherwise defined herein shall have the meanings ascribed
to them in the Purchase Agreement.
Background
In connection with the consummation of the transactions contemplated by
that certain Series 1 Bridge Note Purchase and Security Agreement (the "Purchase
Agreement") by and among the Company and the Purchasers of even date herewith,
the Company has agreed, upon the terms and subject to the conditions of the
Purchase Agreement, to issue and sell to the Purchasers from time to time up to
$1,500,000 in original principal amount of the Company's Series 1 Bridge Notes
(the "Series 1 Bridge Notes"), which are convertible into shares of the
Company's common stock, $.01 par value per share (the "Common Stock"), together
with Purchaser Warrants (the "Purchaser Warrants") to Purchaser of Common Stock,
and to issue Repricing Warrants (the "Repricing Warrants") to Purchasers, and to
issue to Agent a Placement Agent Warrant (the "Placement Agent Warrant). The
Common Stock issuable upon conversion of the Series 1 Bridge Notes is
hereinafter referred to as the "Conversion Shares", the Common Stock issuable
upon exercise of the Purchaser Warrants is hereinafter referred to as the
"Purchaser Warrant Shares", the Common Stock issuable upon exercise of the
Repricing Warrants is hereinafter called the "Repricing Warrant Shares", and the
Common Stock issuable upon exercise of the Placement Agent Warrant is
hereinafter called the "Placement Warrant Shares". To induce the Purchasers to
execute and deliver the Purchase Agreement, the Company has agreed to file a
Registration Statement covering the Conversion Shares and the Warrant Shares
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.
Agreement
For and 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 Purchasers hereby agree as
follows:
Section 1. Definitions. As used in this Agreement, the following
capitalized terms are used with the meanings there after ascribed:
(a) "Investor" means any Purchaser and any transferee or assignee
thereof to whom any Purchaser 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.
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(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 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, the
Purchaser Warrant Shares, the Repricing Warrant Shares, the Placement
Warrant Shares, and any shares of capital stock issued or issuable with
respect to the Conversion Shares, the Purchaser Warrant Shares, or the
Repricing Warrant Shares, 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 forth in the Purchase Agreement.
Section 2. Registration.
(a) Mandatory Registration. The Company shall prepare and 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
Purchaser and the provisions of Section 2(e), which consent will not be
unreasonably withheld), covering the resale of all of the Registrable
Securities, within thirty (30) days after the first to occur of (1) the
issuance, sale, and delivery of $1,500,000 in original principal amount of
Bridge Notes, or (2) the date the Company receives written notice from Sovereign
Capital Advisors, LLC of termination of further offers of the Bridge Notes (the
"Filing Deadline"). The 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 (i) upon conversion of the Series 1 Bridge
Notes and exercise of the Purchaser Warrants to prevent dilution resulting from
stock splits, stock dividends, or similar transactions, and (ii) by reason of
the Repricing Warrants in accordance with the terms thereof. Such Registration
Statement shall initially register for resale at least 1,316,025 shares of
Common Stock, comprised of 641,025 shares for Conversion Shares, 300,000 shares
for Purchaser Warrant Shares, 75,000 shares for Placement Warrant Shares, and
300,000 shares of Common Stock to cover the Repricing Warrant Shares, all of
which is subject to adjustment as provided in Section 3(b), and 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 five (5) business days after receipt of a "no review" notice
from the SEC. Such Registration Statement shall be kept current and effective
for a period of twelve (12) months from the Closing Date. If a Registration
Statement with respect to the Common Stock is not effective on the Maturity Date
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(as such term is defined in the Series 1 Bridge Note), the Company agrees to and
shall pay a cash penalty equal to two percent (2%) per month of the outstanding
principal amount of the Series 1 Bridge Notes, payable monthly and pro-rated for
partial months until the Registration Statement is effective.
(b) Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) involves an underwritten offering, the
Purchasers shall have the right to select one legal counsel and an investment
banker or bankers and manager or managers to administer their interest in the
offering, which investment banker or bankers or manager or managers 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) 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 twenty (20) 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, provided however,
if the Company shall effect a registration on Form S-3 for securities or related
derivatives thereto that have been issued, sold, and delivered prior to the date
hereof, the Company shall not obligated to give notice of or include any shares
of Common Stock belonging to any Investor in such registration.
(d) Priority in Piggy-Back Registration Rights in connection with
Registrations for 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: (i)
first, all securities the Company proposes to sell for its own account, (ii)
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 (iii)
third, the securities requested to be registered by the Investors and other
holders of securities entitled to participate
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in the registration, drawn from them pro rata based on the number each has
requested to be included in such registration.
(e) Eligibility for Form S-3. The Company represents, warrants covenants
that it has filed and shall file all reports required to be filed by the Company
with the SEC in a timely manner so as to obtain and maintain such eligibility
for the use of Form S-3. In the event that Form S-3 is not available for sale by
the Investors of the Registrable Securities, then (i) the Company, with the
consent of each Investor pursuant to Section 2(a), shall register the sale of
the Registrable Securities on another appropriate form, such as Form SB-2 and
(ii) the Company shall undertake to register the Registrable Securities on Form
S-3 as soon as such form is available.
Section 3. Related Obligations. 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 promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (on or
prior to the Filing Deadline), for the registration of Registrable
Securities pursuant to Section 2(a) and use its best efforts to cause such
Registration Statement(s) relating to Registrable Securities to become
effective as soon as possible after such filing by the ninetieth (90th) day
following the issuance of Series 1 Bridge Notes for the registration of
Registrable Securities pursuant to Section 2(a) hereof, and keep the
Registration Statement(s) effective pursuant to Rule 415 at all times until
the later 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 Series 1 Bridge Notes 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 to cover all of the Registrable Securities, the Company
shall 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 fifteen (15) days after the necessity
therefor arises (based on the market price of the Common Stock and other
relevant factors on which the
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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 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 Series 1 Bridge Notes together
with the number of Registrable Securities issued or issuable upon exercise
of the Purchaser Warrants and the Repricing Warrants 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) {2.0}. For
purposes of the calculation set forth in the foregoing sentence, any
restrictions on the convertibility of the Series 1 Bridge Notes or exercise
of the Purchaser Warrants and the Repricing Warrants shall be disregarded
and such calculation shall assume that the Series 1 Bridge Notes are then
convertible into shares of Common Stock at the then prevailing Conversion
Rate (as defined in the Series 1 Bridge Notes) and that the Purchaser
Warrants and the Repricing Warrants are exercised at the then current
exercise price.
(c) 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, ten (10) 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) The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement(s)
under such other securities or "blue sky" laws of such jurisdictions in the
United States as any Investor reasonably requests, (ii) prepare and file in
those jurisdictions, such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the Registration
Period, (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary
or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided however, that the Company shall not be required in
connection therewith or as a condition thereto to (A) qualify to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d) hereof, (B) subject itself to general
taxation in any such jurisdiction, or (C) file a general consent to service
of process in any such jurisdiction. The Company shall promptly notify each
Investor who holds Registrable Securities of the receipt by the Company of
any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the
securities or "blue sky" laws of any jurisdiction in the United States or
its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.
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(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) As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor in writing of the happening of any
event, of which the Company has knowledge, as a result of which, the
prospectus included in a Registration Statement, as then in effect,
includes an untrue statement of a material fact or 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 they were
made, not misleading, and promptly prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and
deliver ten (10) copies of such supplement or amendment to each Investor
(or such other number of copies as such Investor may reasonably request).
The Company shall also promptly notify each Investor in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has
been filed, and when a Registration Statement or any post-effective
amendment has become effective (notification of such effectiveness shall be
delivered to each Investor by facsimile on the same day of such
effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus
or related information, and (iii) of the Company's reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.
(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 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 threatened
initiation 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, to review and comment upon the Registration Statement(s) and
all amendments and supplements thereto at least seven (7) days prior to
their filing with the SEC, and not file any document in a form to which
such counsel reasonably objects. The Company shall not submit a request for
acceleration of the effectiveness of a Registration Statement(s) or any
amendment or supplement thereto without the prior approval of such counsel,
which consent shall not be unreasonably withheld.
(i) At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall 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
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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) any 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 all such underwriters (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 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 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.
(1) 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) to secure designation and quotation of all the Registrable
Securities covered by the Registration Statement on the Nasdaq National
Small Cap Market, (iii) if, despite the Company's best efforts to satisfy
the preceding clause (i) or (ii), the Company is unsuccessful in satisfying
the preceding clause (i) or (ii) to secure the inclusion for quotation on
the Nasdaq [National Small Cap] Market for such Registrable Securities or,
(iv) if, despite the Company's best efforts to satisfy the preceding clause
(iii), the Company is unsuccessful in satisfying the preceding clause
(iii), to secure the inclusion for quotation on the over-the-counter market
for such Registrable Securities,
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and, without limiting the generality of the foregoing, in the case of
clause (iii) or (iv), 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(1).
(m) The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any
managing underwriter or underwriters, 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
or underwriters, if any, or, if there is no managing underwriter or
underwriters, the Investors may reasonably request and registered in such
names as the managing underwriter or underwriters, 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 sales of unlegended
securities 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 provide a transfer agent and registrar of all
such Registrable Securities not later than the effective date of such
Registration Statement.
(p) If requested by the managing underwriters or an Investor, the
Company shall immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and
the 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.
Section 4. Obligations of the Investors.
(a) At least seven (7) days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor in writing of
the information the Company
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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.
(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.
(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.
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Section 5. Expenses of Registration. 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 printing fees, accounting fees, and fees and disbursements of
counsel for the Company and fees and disbursements of one counsel for the
Investors, shall be borne by the Company.
Section 6. Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(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 by 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
-10-
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 (iii) shall not be available to the
extent such Claim is based on a failure of the Investor to deliver 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 net 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
extent as provided above, with respect to information such persons so
furnished in writing expressly for inclusion in the Registration Statement.
-11-
(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.
(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.
Section 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
-12-
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.
Section 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
the 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 request, (i) a written statement by the Company
that it has complied with the reporting requirements of Rule 144, the 1933
Act, and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
-13-
Section 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: (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 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.
Section 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.
Section 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 mall, return receipt requested, or (iv) 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:
Compositech Ltd.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx, Executive Vice President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
-14-
with a copy (which shall not constitute notice) to:
Patterson, Belknap, Xxxx & Tyler LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to a Purchaser, to its address and facsimile number on the Schedule of
Purchasers, with copies to such Purchaser's counsel as set forth on the Schedule
of Purchasers. 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 New York 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 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
Purchase Agreement, and the Certificate of Designations supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof
(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.
-15-
[Signatures begin on next page]
-16-
COMPANY SIGNATURE PAGE
TO
REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
COMPOSITECH LTD.
By:
------------------------------------------
Xxxxxx X. Xxxxx, Executive Vice President
[Purchasers Signature on Following Pages]
-17-
PURCHASER SIGNATURE PAGE
TO
REGISTRATION RIGHTS AGREEMENT
PURCHASER:
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
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SovCap Equity Partners, Ltd.
Purchaser Name Cumberland House
Address and #00 Xxxxxxxxxx Xxxxxx
Facsimile Number P.O. Box CB - 13016
Nassau, New Providence
The Bahamas
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Principal Amount of Bridge Notes $500,000
Purchased
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Purchaser's Legal Counsel Xxxxxxx Law Group LLC
Address and 0000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxxxx Xxxxxx Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx XX
Facsimile No.: (000) 000-0000
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