REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Registration Rights Agreement"),
entered into as of February 6, 1998, between the Subscribers named in that
Convertible Securities Subscription Agreement of even date herewith
(collectively, the "Purchasers"), and XXXX SYSTEMS, INC., a California
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, pursuant to a Convertible Securities Subscription Agreement,
dated as of February 6, 1998 (the "Agreement"), by and between the Company
and the Purchasers, the Company has agreed to sell and the Purchasers have
agreed to purchase up to an aggregate of U.S.$10,000,000 of the Company's
Convertible Subordinated Debentures due February 6, 2003 (the "Debentures")
convertible into shares of the Company's Common Stock, no par value (the
"Shares") in two closings subject to the terms and conditions of the
Agreement;
WHEREAS, pursuant to the terms of, and in partial consideration for,
Purchasers' purchase of the Debentures, the Company has agreed to provide the
Purchasers with certain registration rights with respect to the Shares
issuable upon conversion of the Debentures as set forth in this Registration
Rights Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the
Agreement and this Registration Rights Agreement, the Company and the
Purchasers agree as follows:
1. CERTAIN DEFINITIONS. Terms capitalized herein and not otherwise
defined shall have the meanings ascribed to them in the Agreement. As used
in this Agreement, the following terms shall have the following respective
meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean any Shares or other securities
issued or issuable to Purchaser or any Holder upon the conversion or exchange
of or pursuant to the payment of interest under any Debentures or Shares and
any shares of capital stock issued or issuable with respect to the Shares as
a result of any stock split, stock dividend, recapitalization, exchange,
combination, merger, consolidation, distribution or similar event.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement by the Commission.
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"Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with Purchasers' exercise of their registration rights
under this Agreement, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses, reasonable fees and disbursements of
counsel to all Holders for a "due diligence" examination of the Company and
review of the Registration Statements and related documents, and the expense of
any special audits incident to or required by any such registration (but
excluding the compensation of regular employees of the Company, which shall be
paid in any event by the Company). With respect to the "due diligence"
examination of the Company, the Registration Expenses shall include only fees
and disbursements for one (1) designated counsel for all the Holders of
Debentures (subject to a maximum amount of $20,000).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for Holder not included within "Registration
Expenses".
"Holder" shall include any Purchaser and any transferee or assignee of
Debentures, Shares or Registrable Securities which have not been sold to the
public to whom the registration rights conferred by this Agreement have been
transferred in compliance with Section 10 of this Agreement.
"Registration Statement," "Initial Registration Statement" and "Second
Closing Registration Statement" shall have the meaning set forth in Section
2(a) herein.
"Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Securities Act" shall mean the Securities Act of 1933, as amended.
2. REGISTRATION REQUIREMENTS. The Company shall use its diligent best
efforts to effect the registration of the Registrable Securities contemplated
by the Agreement (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification
under applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities Act) as
would permit or facilitate the sale or distribution of all the Registrable
Securities by the Holders in the manner (including manner of sale) and in all
states reasonably requested by the Holders for purposes of maximizing the
proceeds realizable by the Holders from such sale or distribution. Such best
efforts by the Company shall include without limitation the following:
(a) The Company shall, as soon as practicable after the date hereof
but in no event later than thirty (30) days after the date hereof, file (i) a
registration statement with the Commission pursuant to Rule 415 under the
Securities Act on Form S-3 under the Securities Act (or in the event that the
Company in ineligible to use such form, such other form as the Company is
eligible to use under the Securities Act) ("Registration Statement") covering
the resale of all of the Registrable Securities underlying the Debentures
issued and sold to the Purchasers on the First Closing Date (the "Initial
Registration Statement"); (ii) such blue sky filings as shall have been
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requested by the Holder; and (iii) any required filings with the National
Association of Securities Dealers, Inc. or exchange or market where the
Shares are traded. The Company shall, as soon as practicable after the
Second Closing Date, but in no event later than thirty (30) days after the
Second Closing Date, file (i) a Registration Statement covering the resale of
all of the Registrable Securities underlying the Debentures issued in the
Second Closing Date (the "Second Closing Registration Statement"); (ii) such
blue sky filings as shall have been requested by the Holder; and (iii) any
required filings with the National Association of Securities Dealers, Inc. or
exchange or market where the Shares are traded. No securities other than
the Registrable Securities shall be included in any Registration Statement.
The Company shall use its best efforts to have such Registration Statements
and other filings declared effective as promptly as practicable, and until
such Registration Statements are declared effective the Company undertakes to
file no other registration statements covering any securities other than the
Registrable Securities (except registration statements on Form S-8 and
registration statements relating to Other Registration Rights).
(b) (i) If the Company fails to file the Initial Registration
Statement and the Second Closing Registration Statement complying with
the requirements of this Registration Rights Agreement within thirty
(30) days from the First Closing Date and Second Closing Date,
respectively, or if such Registration Statement has not become effective
within one hundred twenty (120) days from such Closing Date, the Holder
shall have, in addition to and without limiting any other rights it may
have at law, in equity or under the Debentures, the Agreement or this
Registration Rights Agreement (including the right to specific
performance), the right to receive, as liquidated damages, the payments
as provided in subparagraph (ii) of this section.
(ii) If after one hundred twenty (120) days from the First
Closing Date the Initial Registration Statement has not been declared
effective by the Commission, or if after one hundred twenty (120) days
from the Second Closing Date the Second Closing Date Registration
Statement has not been declared effective by the Commission, then the
Company shall pay to the Purchaser an amount equal to 2% of the
Outstanding Principal Amount (as defined in the Debenture) of the
related Debentures, in cash, for each 30-day period after such 120-day
period that such Registration Statement is not effective. In addition
to the foregoing, if after 210 days from the First Closing Date the
Initial Registration Statement has not been declared effective by the
Commission, or if after 210 days from the Second Closing Date the Second
Closing Registration Statement has not been declared effective by the
Commission, then upon demand of such Holder, the Company shall redeem
all the Debentures acquired by the Holder on the First Closing Date or
the Second Closing Date, as applicable, which are held by such Holder at
a redemption price equal to 120% of the Outstanding Principal Amount of
such Debentures plus accrued interest thereon, together with all other
payments due under this paragraph and under the Debenture and the
Agreement.
(c) If the Holder intends to distribute the Registrable Securities
covered by its request by means of an underwriting, the Holder shall so
advise the Company. The Holder
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will have the right to select the investment bankers for such underwriting
subject to such investment bankers being reasonably satisfactory to the
Company.
(d) The Company shall enter into such customary agreements
(including a customary underwriting agreement with the underwriter or
underwriters, if any) and take all such other reasonable actions in
connection therewith 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 Registrable
Securities are to be sold in an underwritten offering:
(i) make such representations and warranties to the Holder
and the underwriter or underwriters, if any, in form, substance and
scope as are customarily made by issuers to underwriters in secondary
underwritten offerings;
(ii) cause to be delivered to the sellers of Registrable
Securities and the underwriter or underwriters, if any, opinions of
counsel to the Company, dated the effective date (or in the case of an
underwritten offering, dated the date of delivery of any Registrable
Securities sold pursuant thereto) of each Registration Statement (which
counsel, and opinions (in form, scope and substance), shall be
reasonably satisfactory to the managing underwriter or underwriters, if
any, and the appointed representative or counsel of the Holder),
addressed to the Holder and each underwriter, if any, covering the
matters customarily covered in opinions requested in secondary
underwritten offerings and, in the case of an underwritten offering,
such other matters as may be reasonably requested by the Holder;
(iii) cause to be delivered, immediately prior to the
effectiveness of each Registration Statement (and, in the case of an
underwritten offering, at the time of delivery of any Registrable
Securities sold pursuant thereto), a "comfort" letter from the Company's
independent certified public accountants addressed to the Holder and
each underwriter, if any, stating that such accountants are independent
public accountants within the meaning of the Securities Act and the
applicable published rules and regulations thereunder, and otherwise in
customary form and covering such financial and accounting matters as are
customarily covered by letters of the independent certified public
accountants delivered in connection with secondary underwritten public
offerings;
(iv) if an underwriting agreement is entered into, the same
shall set forth in full the indemnification and contribution provisions
and procedures of sections 6 and 7 with respect to all parties to be
indemnified pursuant to such sections; and
(v) the Company shall deliver such documents and certificates
as may be reasonably requested by the Holder or the managing underwriter
or underwriters, if any, to evidence compliance with clause (i) above
and with any customary conditions contained in the underwriting
agreement, if any, or other agreement entered into by the Company;
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the foregoing in this paragraph 2(d) shall be done at each closing under such
underwriting or similar agreement or as and to the extent required
thereunder; provided, however, the foregoing in paragraph 2(d) shall not be
required on more than two (2) occasions.
(e) The Company shall make available for inspection by a
representative or representatives of the Holder, any underwriter
participating in any disposition pursuant to a Registration Statement, and
any attorney or accountant retained by such Holder or underwriter, all
pertinent financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with such
Registration Statement. The Holder will agree to keep all non-public
information supplied to it confidential until such information is included in
a Registration Statement.
3. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance with
registration pursuant to this Agreement shall be borne by the Company, and
all Selling Expenses shall be borne by the Holder.
4. REGISTRATION ON FORM S-3. The Company shall use its best efforts
to qualify for registration on Form S-3 or any comparable or successor form
or forms, or in the event that the Company is ineligible to use such form,
such form as the Company is eligible to use under the Securities Act. The
foregoing is not intended to require the Company to pay dividends in order to
use Form S-3.
5. REGISTRATION PROCEDURES. In the case of each registration effected
by the Company pursuant to this Agreement, the Company will keep the Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for the period ending
thirty-six (36) months after the initial date of effectiveness of such
Registration Statement, as extended pursuant to Section 5A hereof, or until
the Holder has completed the distribution of the Shares issuable upon
conversion of the Debentures, whichever first occurs.
(b) Furnish such number of prospectuses, and amendments and
supplements thereto, and other documents incident thereto as the Holder from
time to time may reasonably request.
(c) Prepare and file with the Commission such amendments and
post-effective amendments to a Registration Statement as may be necessary to
keep such Registration Statement effective for the applicable period; cause
the related Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of the Securities Act
applicable to it with respect to the disposition of all Registrable
Securities covered by such Registration Statement during the applicable
period in accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement or supplement to such
Prospectus;
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(d) Notify each Holder of Registrable Securities included in a
Registration Statement, their counsel and the managing underwriters, if any,
promptly, and confirm such notice (a "Notice") in writing, (1) when a
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (2) of any request by the
Commission for amendments or supplements to a Registration Statement or
related Prospectus or for additional information, (3) of the issuance by the
Commission of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purposes, (4) if at
any time the representations and warranties of the Company contained in
agreements contemplated by Section 2 (d) cease to be true and correct, (5) of
the receipt by the Company of any notification with respect to the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, (6) of the happening of any event as a result of which the
Prospectus included in a Registration Statement (as then in effect) contains
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein (in
the case of the Prospectus or any preliminary Prospectus, in light of the
circumstances under which they were made) not misleading and (7) of the
Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate or that there exist circumstances
not yet disclosed to the public which make further sales under such
Registration Statement inadvisable pending such disclosure and post-effective
amendment;
(e) Upon the occurrence of any event contemplated by Section
5(d)(2)-(7) and immediately upon the expiration of any Blocking Period (as
defined in Section 5A), prepare, if the occurrence of such event or period
requires such preparation, a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(f) Make every reasonable effort to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement
and, if such an order or suspension is issued, to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement, or the
lifting of any suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction, at the earliest possible moment;
(g) Insure that all Registrable Securities subject to the
Registration Statement shall at all times be registered or qualified for
offer and sale under the securities or blue sky laws of such jurisdictions as
any Holder or underwriter reasonably requests in writing; use its best
efforts to keep each such registration or qualification effective, including
through new filings or amendments or renewals, during the period such
Registration Statement is required to be kept effective and do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the applicable
Registration Statement; PROVIDED, HOWEVER, that the Company will not be
required to qualify to do business or take any
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action that would subject it to taxation or general service of process in any
jurisdiction where it is not then so qualified or subject;
(h) Use its best efforts to cause the Registrable Securities
covered by a Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriter or underwriters, if any, to
consummate the disposition of such Registrable Securities in accordance with
the chosen method or methods of distribution;
(i) Cause all Registrable Securities included in such Registration
Statement to be listed, by the date of first sale of Registrable Securities
pursuant to such Registration Statement, on the principal securities exchange
or automated interdealer system on which the same type of securities of the
Company are then listed or traded;
(j) Make generally available to its security holders as soon as
practicable, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Section 11(a) of the Securities Act and Rule 158 promulgated
thereunder) covering a twelve month period beginning not later than the first
day of the Company's fiscal quarter next following the effective date of the
Registration Statement.
5A. SUSPENSIONS OF EFFECTIVENESS. The Company may suspend dispositions
under a Registration Statement and notify the Holder that it may not sell the
Registrable Securities pursuant to any Registration Statement or Prospectus
(a "Blocking Notice") if the Company's management determines in its
reasonable good faith judgment that the Company's obligation to ensure that
such Registration Statement and Prospectus are current and complete would
require the Company to take actions that might reasonably be expected to have
a materially adverse detrimental effect on the Company and its stockholders;
PROVIDED that such suspension pursuant to a Blocking Notice or the Notice
described below or as a result of the circumstances described in 5(d)(2)-(7)
may not exceed sixty (60) days (whether or not consecutive) in any twelve
(12) month period. The Holder agrees by acquisition of the Registrable
Securities that, upon receipt of a Blocking Notice or "Notice" from the
Company of the existence of any fact of the kind described in the following
sentence, such Holder shall not dispose of, sell or offer for sale the
Registrable Securities pursuant to the Registration Statement until such
Holder receives (i) copies of the supplemented or amended Prospectus, or
until counsel for the Company shall have determined that such disclosure is
not required due to subsequent events, (ii) notice in writing (the "Advice")
from the Company that the use of the Prospectus may be resumed and (iii)
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus. Pursuant to the immediately preceding sentence,
the Company may provide such Notice to the Holder upon the determination by
the Company of the existence of any fact or the happening or any event that
makes any statement of a material fact made in the Registration Statement,
the Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue in any material respect, or that
requires the making of any additions to or changes in the Registration
Statement or the Prospectus, in order to make the statements therein not
misleading in any material respect. If so directed by the Company in
connection with any such Notice, each Holder will
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deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities that was current immediately prior to
the time of receipt of such notice. In the event the Company shall give any
such Blocking Notice or Notice, the time regarding the effectiveness of such
Registration Statement set forth in Section 5(a) and the maturity date of the
Debenture shall be extended by one and one-half (1-1/2) times the number of
days during the period from and including the date of the giving of such
Blocking Notice or Notice to and including the date when the Holder shall
have received the copies of the supplemented or amended Prospectus, the
Advice and any additional or supplemental filings that are incorporated by
reference in the Prospectus. Delivery of a Blocking Notice or Notice and the
related suspension of any Registration Statement shall not constitute a
default under this Agreement and shall not create any obligation to pay
liquidated damages under Section 2 hereof. However, if the Holder's ability
to sell under the Registration Statement is suspended for more than the 60
day period described above (an "Excess Blocking Period"), then the rate of
interest on all of the Debentures shall, to the maximum extent permitted by
law, be permanently increased by two percent (2%) (I.E., from 6% to 8%)
commencing on the first day of the thirty (30) day period (or part thereof)
following the beginning of an Excess Blocking Period; if the Excess Blocking
Period continues beyond 90 days, then the rate of interest on all of the
Debentures shall, to the maximum extent permitted by law, be permanently
increased an additional two percent (2%) commencing on the 91st day; if the
Excess Blocking Period continues beyond 120 days, then the rate of interest
on all of the Debentures shall, to the maximum extent permitted by law, be
permanently increased an additional two percent (2%) commencing on the 121st
day; and if the Excess Blocking Period continues beyond 150 days, then the
rate of interest on all of the Debentures shall, to the maximum extent
permitted by law, be permanently increased an additional one (1%) percent on
the first day of each consecutive thirty (30) day period (or part thereof)
thereafter until the Excess Blocking Period terminates. In addition, if the
Excess Blocking Period continues for more than an aggregate of 120 days in
any 360-day period, then at Holder's option, the Company shall redeem
Holder's Debentures at a redemption price equal to 120% of the Outstanding
Principal Amount of the Debentures plus accrued interest thereon to the date
of redemption, together with all payments due under this paragraph and under
the Debenture and the Agreement.
6. INDEMNIFICATION.
(a) COMPANY INDEMNITY. The Company will indemnify the Holder, each
of its officers, directors and partners, and each person controlling Holder,
within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each
underwriter, if any, and each person who controls, within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder,
any underwriter, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in a Registration
Statement, any post-effective amendment thereto or any prospectus, offering
circular or other document (including any related notification or the like)
incident to any such registration, qualification or compliance, or based on
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, or any
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violation or alleged violation by the Company of the Securities Act or any
state securities law or in either case, any rule or regulation thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or
compliance, and will reimburse the Holder, each of its officers, directors
and partners, and each person controlling such Holder, each such underwriter
and each person who controls any such underwriter, for any legal and any
other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, provided that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission (or alleged untrue statement or omission) that
is made in reliance upon and in conformity with written information furnished
to the Company by Holder or the underwriter and stated to be specifically for
use therein. In addition to any other information furnished in writing to
the Company by the Holder, the information in the Registration Statement
concerning the Holder under the captions "Selling Shareholders" (or any
similarly captioned section containing the information required pursuant to
Item 507 of Regulation S-K promulgated pursuant to the Securities Act) and
"Plan of Distribution" (or any similarly captioned section containing
information required pursuant to Item 508 of Regulation S-K) shall be deemed
information furnished in writing to the Company by the Holder to the extent
it conforms to information actually supplied in writing by the Holder. The
indemnity agreement contained in this Section 6(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if
such settlement is effected without the consent of the Company (which consent
will not be unreasonably withheld).
(b) HOLDER INDEMNITY. The Holder will, if Registrable Securities
held by it are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors, officers, partners, and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person
who controls the Company or such underwriter within the meaning of Section 15
of the Securities Act and the rules and regulations thereunder, each other
Holder (if any), and each of their officers, directors and partners, and each
person controlling such other Holder against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statement therein
not misleading, and will reimburse the Company and such other Holders and
their directors, officers and partners, underwriters or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information
furnished to the Company by Holder and stated to be specifically for use
therein, and provided that no Holder shall be liable under this indemnity for
an amount in excess of the proceeds received by the Holder from the sale of
the Registrable Securities pursuant to such registration statement. In
addition to any other information furnished in writing to the Company by the
Holder, the information in the Registration Statement concerning the Holder
under the captions "Selling Shareholders" (or any similarly captioned section
containing the information
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required pursuant to Item 507 of Regulation S-K promulgated pursuant to the
Securities Act) and "Plan of Distribution" (or any similarly captioned
section containing information required pursuant to Item 508 of Regulation
S-K) shall be deemed information furnished in writing to the Company by the
Holder to the extent it conforms to information actually supplied in writing
by the Holder. The indemnity agreement contained in this Section 6(b) shall
not apply to amounts paid in settlement of any such claims, losses, damages
or liabilities if such settlement is effected without the consent of Holder
(which consent shall not be unreasonably withheld).
(c) PROCEDURE. Each party entitled to indemnification under this
Article (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim in any litigation resulting therefrom, provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
any litigation resulting therefrom, shall be approved by the Indemnified
Party (whose approval shall not be unreasonably withheld), and the
Indemnified Party may participate in such defense at such party's expense,
and provided further that the failure of any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying Party of its
obligations under this Article except to the extent that the Indemnifying
Party is materially and adversely affected by such failure to provide notice.
The indemnifying party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys (in addition to any local
counsel) at any time for such indemnified party, provided, however, that if
separate firm(s) of attorneys are required due to a conflict of interest,
then the indemnifying party shall be liable for the reasonable fees and
expenses of each such separate firm. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party
shall furnish such information regarding itself or the claim in question as
an Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with the defense of such claim and
litigation resulting therefrom.
7. CONTRIBUTION. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of
the exceptions provided therein), then each such Indemnifying Party, in lieu
of indemnifying such Indemnified Party, shall contribute to the amount paid
or payable by such Indemnified Party as a result of such losses, claims,
damages or liabilities (i) as between the Company and the Holder on the one
hand and the underwriters on the other, in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Holder on
the one hand or underwriters, as the case may be, on the other from the
offering of the Registrable Securities, or if such allocation is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of the Company on
the one hand and of the Holder or underwriters, as the case may be, on the
other in connection
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with the statements or omissions which resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable
considerations and (ii) as between the Company on the one hand and the Holder
on the other, in such proportion as is appropriate to reflect the relative
fault of the Company and of the Holder in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Holder or the underwriters, as the case may be, on the other shall be deemed
to be in the same proportion as the proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses)
received by the Company from the initial sale of the Registrable Securities
by the Company to the Holder pursuant to this Registration Rights Agreement
bear to the proceeds received by the Holder from the sale of Registrable
Securities pursuant to the registration statement or the total underwriting
discounts and commissions received by the underwriters as set forth in the
table on the cover page of the prospectus, as the case may be. The relative
fault of the Company on the one hand and of the Holder or underwriters, as
the case may be, on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company, by the Holder or by the underwriters.
In no event shall the obligation of any Indemnifying Party to contribute
under this Section 7 exceed the amount that such Indemnifying Party would
have been obligated to pay by way of indemnification if the indemnification
provided for under Section 6(a) or 6(b) hereof had been available under the
circumstances.
The Company and the Holder agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by PRO RATA
allocation (even if the Holder or the underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraphs. The amount paid or payable by an Indemnified Party as
a result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraphs 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, no
Holder or underwriter shall be required to contribute any amount in excess of
the amount by which (i) in the case of the Holder, the total price at which
the shares of Common Stock offered by such Holder and distributed to the
public, or offered to the public, exceed the amount paid by such Holder for
the underlying debentures converted into such shares of Common Stock, (ii) in
the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that the Holder
or underwriter 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.
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8. SURVIVAL. The indemnity and contribution agreements contained in
Sections 6 and 7 and the representations and warranties of the Company
referred to in Section 2(e)(i) shall remain operative and in full force and
effect regardless of (i) any termination of the Agreement or any underwriting
agreement, (ii) any investigation made by or on behalf of any Indemnified
Party or by or on behalf of the Company and (iii) the consummation of the
sale or successive resales of the Registrable Securities.
9. INFORMATION BY HOLDER. The Holder shall promptly furnish to the
Company such information regarding such Holder and the distribution proposed
by such Holder as the Company may reasonably request in writing and as shall
be reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement. All information provided to the
Company by Holder shall be accurate and complete in all material respects and
Holder shall promptly notify the Company if any such information becomes
incorrect or incomplete. If the Holder does not timely provide all such
reasonably requested information, the Holder shall not be entitled to the
liquidated damages contemplated by paragraph 2(b)(ii) to the extent that such
delay in the Registration Statement becoming effective is caused by such
failure to timely provide information unless such Holder shall be able to
demonstrate to the Company's satisfaction that such failure to timely provide
did not proportionately contribute to the event giving rise to the indemnity
obligation.
10. TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights granted
to Purchasers by the Company under this Registration Rights Agreement to
cause the Company to register Registrable Securities, may be furnished or
assigned to a transferee or assignee of any of not less than $100,000 in
Outstanding Principal Amount of Debentures, provided that the Company is
given written notice by Holder at the time of or within a reasonable time
after said transfer or assignment, stating the name and address of said
transferee or assignee and identifying the securities with respect to which
such registration rights are being transferred or assigned, and provided
further that the transferee or assignee of such rights is not deemed by the
board of directors of the Company, in its reasonable judgment, to be a
competitor of the Company; and provided further that the transferee or
assignee of such rights agrees to be bound by this Registration Rights
Agreement.
11. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Registration Rights Agreement contains
the entire understanding and agreement of the parties, and may not be
modified or terminated except by a written agreement signed by both parties.
(b) NOTICES. Any notice or other communication given or permitted
under this Agreement shall be in writing and shall be deemed to have been
duly given if personally delivered or sent by facsimile or next-day or
two-day courier service (a) if to Purchaser, at its address set forth on the
signature page hereto, (b) if to the Company, at its address set forth on the
signature page hereto, and (c) if to a Holder other than Purchaser, at the
address thereof furnished by like notice to the Company, or (d) to any such
addresses at such other address or addresses as shall be so furnished to the
other parties by like notice.
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(c) GENDER OF TERMS. All terms used herein shall be deemed to
include the feminine and the neuter, and the singular and the plural, as the
context requires.
(d) GOVERNING LAW; CONSENT OF JURISDICTION; WAIVER OF JURY TRIAL.
This Registration Rights Agreement and the validity and performance of the
terms hereof shall be governed by and construed in accordance with the laws
of the State of New York without regard to principles of conflicts of law or
choice of law, except to the extent that the law of California regulates the
Company's issuance of securities. The parties hereto hereby agree that all
actions or proceedings arising directly or indirectly from or in connection
with this Registration Rights Agreement shall be litigated only in the
Supreme Court of the State of New York or the United States District Court
for the Southern District of New York located in New York County, New York.
To the extent permitted by applicable law, the parties hereto consent to the
jurisdiction and venue of the foregoing courts and consent that any process
or notice of motion or other application to either of said courts or a judge
thereof may be served inside or outside the State of New York or the Southern
District of New York by registered mail, return receipt requested, directed
to the such party at its address set forth in this Registration Rights
Agreement (and service so made shall be deemed complete five (5) days after
the same has been posted as aforesaid) or by personal service or in such
other manner as may be permissible under the rules of said courts. The
parties hereto hereby waive any right to a jury trial in connection with any
litigation pursuant to this Registration Rights Agreement.
(e) TITLES. The titles used in this Registration Rights Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Registration Rights Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed as of the date first above
written.
PURCHASER: COMPANY:
___________________________________ XXXX SYSTEMS, INC.,
Address____________________________ a California Corporation
___________________________________ Address______________________________
___________________________________ _____________________________________
_____________________________________
By:________________________________ By:__________________________________
Printed Name: Title:
Title:
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With Copies of Notices to: With Copies of Notices to:
___________________________________ _________________________________
___________________________________ _________________________________
___________________________________ _________________________________
___________________________________ _________________________________
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