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EXHIBIT 10.13
ANNEX IV
TO
REGISTRATION RIGHTS AGREEMENT SECURITIES PURCHASE
AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 29, 1999
(this "Agreement"), is made by and between ESAT, INC., a Nevada corporation,
with headquarters located at 00000 Xxxxxx Xxxxxxxxx, Xxxx. X, Xxxxxxxx Xxxxxx,
Xxxxxxxxxx 00000 (the "Company"), and each entity named on a signature page
hereto (each, an "Initial Investor") (each agreement with an Initial Investor
being deemed a separate and independent agreement between the Company and such
Initial Investor, except that each Initial Investor acknowledges and consents to
the rights granted to each other Initial Investor under such agreement).
WITNESSETH:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of December 29,1999, between the Initial
Investor and the Company (the "Securities Purchase Agreement"; terms not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement), the Company has agreed to issue and sell to the
Initial Investor, Series C 6% Convertible Preferred Stock of the Company, in an
aggregate liquidation amount not exceeding $5,000,000 (the "Preferred Stock");
and
WHEREAS, the Company has agreed to issue the Warrants to the
Initial Investor in connection with the issuance of the Preferred Stock; and
WHEREAS, the Preferred Stock is convertible into shares of Common
Stock (the "Conversion Shares"; which term, for purposes of this Agreement,
shall include shares of Common Stock of the Company issuable in lieu of accrued
interest on conversion as contemplated by the Certificate of Designations) upon
the terms and subject to the conditions contained in the Certificate of
Designations, and the Warrants may be exercised for the purchase of shares of
Common Stock (the "Warrant Shares") upon the terms and conditions of the
Warrants; and
WHEREAS, to induce the Initial Investor to execute and deliver
the Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Conversion Shares and the Warrant Shares;
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NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
(a) "Investor" means the Initial Investor and any permitted
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof and who holds Preferred Stock,
Warrants or Registrable Securities.
(b) "Potential Material Event" means any of the following: (i)
the possession by the Company of material information not ripe for disclosure in
a registration statement, which shall be evidenced by determinations in good
faith by the Board of Directors of the Company that disclosure of such
information in the registration statement would be detrimental to the business
and affairs of the Company; or (ii) any material engagement or activity by the
Company which would, in the good faith determination of the Board of Directors
of the Company, be adversely affected by disclosure in a registration statement
at such time, which determination shall be accompanied by a good faith
determination by the Board of Directors of the Company that the registration
statement would be materially misleading absent the inclusion of such
information.
(c) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities 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 by the United States Securities and Exchange
Commission (the "SEC").
(d) "Registrable Securities" means the Conversion Shares and the
Warrant Shares applicable to the Preferred Stock and Warrants issued on the
Initial Closing Date or the relevant Additional Closing Date, as the case may
be, and the Other Registrable Securities as defined herein.
(e) "Registration Statement" means a registration statement of
the Company under the Securities Act.
2. REGISTRATION.
(a) MANDATORY REGISTRATION.
(i) The Company shall prepare and file with the SEC, as soon as
possible after the Initial Closing Date no later than a date (the "Required
Filing Date") which is thirty
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(30) days following the Initial Closing Date, either a Registration Statement on
Form SB-2 or an amendment to an existing Registration Statement, in either event
registering for resale by the Investor a sufficient number of shares of Common
Stock for the Initial Investors to sell the Registrable Securities (or such
lesser number as may be required by the SEC, but in no event less than two
hundred percent (200%) of the aggregate number of shares (A) into which the
relevant Preferred Stock and all interest thereon through their respective
Maturity Dates would be convertible at the time of filing of such Registration
Statement (assuming for such purposes that all such Preferred Stock had been
eligible to be converted, and had been converted, into Conversion Shares in
accordance with their terms, whether or not such accrual of interest,
eligibility or conversion had in fact occurred as of such date) and (B) which
would be issued upon exercise of all of the relevant Warrants at the time of
filing of the Registration Statement (assuming for such purposes that such
Warrants had been eligible to be exercised and had been exercised in accordance
with their terms, whether or not such eligibility or exercise had in fact
occurred as of such date). The Registration Statement (W) shall include only the
Registrable Securities and (X) shall also state that, in accordance with Rule
416 and 457 under the Securities Act, it also covers such indeterminate number
of additional shares of Common Stock as may become issuable upon conversion of
the Preferred Stock and the exercise of the Warrants to prevent dilution
resulting from stock splits or stock dividends. The Company will use its
reasonable best efforts to cause such Registration Statement to be declared
effective on a date (a "Required Effective Date") which is no later than is the
earlier of (Y) five (5) days after notice by the SEC that it may be declared
effective or (Z) ninety (90) days after the Initial Closing Date or thirty (30)
days after the relevant Additional Closing Date, as the case may be.
(ii) If at any time (an "Increased Registered Shares Date"), the
number of shares of Common Stock represented by the Registrable Shares, issued
or to be issued as contemplated by the Transaction Agreements, exceeds the
aggregate number of shares of Common Stock then registered, the Company shall,
within ten (10) business days after receipt of a written notice from any
Investor, either (X) amend the relevant Registration Statement filed by the
Company pursuant to the preceding provisions of this Section 2, if such
Registration Statement has not been declared effective by the SEC at that time,
to register two hundred percent (200%) of such Registrable Shares, computed as
contemplated by the immediately preceding subparagraph (i), or (Y) if such
Registration Statement has been declared effective by the SEC at that time, file
with the SEC an additional Registration Statement on Form SB-2 or other
appropriate registration statement form (an "Additional Registration Statement")
to register two hundred percent (200%) of the shares of Common Stock represented
by the Registrable Shares, computed as contemplated by the immediately preceding
subparagraph (i), that exceed the aggregate number of shares of Common Stock
already registered. The Company will use its reasonable best efforts to cause
such Registration Statement to be declared effective on a date (a "Required
Effective Date") which is no later than (Q) with respect to a Registration
Statement under clause (X) of this subparagraph (ii), the Required Effective
Date contemplated by the immediately preceding subparagraph (i) and (R) with
respect to an Additional Registration Statement, the earlier of (I) five (5)
days after notice by the SEC that it may be declared effective or (II) thirty
(30) days after the Increased Registered Shares Date.
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(b) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the Registrable
Securities is not filed in proper form with the SEC by the Required Filing Date,
the Company will make payment to the Initial Investor in such amounts and at
such times as shall be determined pursuant to this Section 2(b).
(ii) If the Registration Statement covering the
Registrable Securities is not effective by thirty (30) days after the relevant
Required Effective Date or if the Investor is restricted from making sales of
Registrable Securities covered by a previously effective Registration Statement
at any time (the date such restriction commences, a "Restricted Sale Date")
after the Effective Date other than during a Suspension Period (as defined
below), then the Company will make payments to the Initial Investor in such
amounts and at such times as shall be determined pursuant to this Section 2(b).
(iii) The amount (the "Periodic Amount") to be paid by the
Company to the Initial Investor shall be determined as of each Computation Date
(as defined below) and such amount shall be equal to the Periodic Amount
Percentage (as defined below) of the Purchase Price for all Preferred Stock for
the period from the date following the relevant Required Filing Date, Required
Effective Date or Restricted Sale Date, as the case may be, to the first
relevant Computation Date, and thereafter to each subsequent Computation Date.
The "Periodic Amount Percentage" means (A) two percent (2%) of the Purchase
Price for all the Preferred Stock previously purchased for the period from the
date following the relevant Required Filing Date, Required Effective Date or
Restricted Sale Date, as the case may be, to the first relevant Computation Date
(prorated on a daily basis if such period is less than thirty [30] days), and
(B) two percent (2%) of the Purchase Price of all Preferred Stock to each
Computation Date thereafter (prorated on a daily basis if such period is less
than thirty [30] days). Anything in the preceding provisions of this paragraph
(iii) to the contrary notwithstanding, after the Effective Date the Purchase
Price shall be deemed to refer to the sum of (X) the principal amount of all
Preferred Stock previously purchased but not yet converted and (Y) the Held
Shares Value (as defined below). The "Held Shares Value" means, for shares
acquired by the Investor upon a conversion within the thirty (30) days preceding
the Restricted Sale Date, but not yet sold by the Investor, the principal amount
of the Preferred Stock converted into such Conversion Shares; provided, however,
that if the Investor effected more than one conversion during such thirty (30)
day period and sold less than all of such shares, the sold shares shall be
deemed to be derived first from the conversions in the sequence of such
conversions (that is, for example, until the number of shares from the first of
such conversions have been sold, all shares shall be deemed to be from the first
conversion; thereafter, from the second conversion until all such shares are
sold). By way of illustration and not in limitation of the foregoing, if the
Registration Statement for the Registrable Securities relating to the Preferred
Stock and Warrants issued on the Initial Closing Date is timely filed but is not
declared effective until one hundred sixty-five (165) days after the Initial
Closing Date, the Periodic Amount will aggregate four percent (4%) of the
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Purchase Price of the Initial Preferred Stock (2% for days 120-150, plus 2% for
days 151-165), provided, however, that no Periodic Amount shall be due if the
Registration Statement is effective within thirty (30) days from the Required
Effective Date.
(iv) Each Periodic Amount will be payable by the Company
in cash or other immediately available funds to the Investor monthly, without
requiring demand therefor by the Investor.
(v) The parties acknowledge that the damages which may be
incurred by the Investor if the Registration Statement is not filed by the
Required Filing Date or if the Registration Statement has not been declared
effective by a Required Effective Date, including if the right to sell
Registrable Securities under a previously effective Registration Statement is
suspended, may be difficult to ascertain. The parties agree that the Periodic
Amounts represent a reasonable estimate on the part of the parties, as of the
date of this Agreement, of the amount of such damages.
(vi) Notwithstanding the foregoing, the amounts payable by
the Company pursuant to this provision shall not be payable to the extent any
delay in the effectiveness of the Registration Statement occurs because of an
act of, or a failure to act or to act timely by the Initial Investor or its
counsel, or in the event all of the Registrable Securities may be sold pursuant
to Rule 144 or another available exemption under the Act.
(vii) "Computation Date" means (A) the date which is the
earlier of (1) thirty (30) days after the Required Filing Date, any relevant
Required Effective Date or a Restricted Sale Date, as the case may be, or (2)
the date after the Required Filing Date, such Required Effective Date or
Restricted Sale Date on which the Registration Statement is filed (with respect
to payments due as contemplated by Section 2(b)(i) hereof) or is declared
effective or has its restrictions removed (with respect to payments due as
contemplated by Section 2(b)(ii) hereof), as the case may be, and (B) each date
which is the earlier of (1) thirty (30) days after the previous Computation Date
or (2) the date after the previous Computation Date on which the Registration
Statement is filed (with respect to payments due as contemplated by Section
2(b)(i) hereof) or is declared effective or has its restrictions removed (with
respect to payments due as contemplated by Section 2(b)(ii) hereof), as the case
may be.
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall do each of the
following.
(a) Prepare promptly, and file with the SEC by the Required
Filing Date a Registration Statement with respect to not less than the number of
Registrable Securities provided in Section 2(a) above, and thereafter use its
reasonable best efforts to cause such Registration Statement relating to
Registrable Securities to become effective by the Required Effective Date and
keep the Registration Statement effective at all times during the period (the
"Registration Period") continuing until the earliest of (i) the date that is two
(2) years after the
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last day of the calendar month following the month in which the closing of the
last tranche of Preferred Stock occurs, (ii) the date when the Investors may
sell all Registrable Securities under Rule 144 or (iii) the date the Investors
no longer own any of the Registrable Securities, which Registration Statement
(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) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities 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;
(c) The Company shall permit a single firm of counsel designated
by the Initial Investors to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time (but not less than three (3)
business days) prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects.
(d) Notify each Investor, such Investor's legal counsel
identified to the Company (which, until further notice, shall be deemed to be
Xxxxxxx & Xxxxxx, ATTN: Xxxxxx Xxxxxxx, Esq.; each, an "Investor's Counsel"),
and any managing underwriters immediately (and, in the case of (i)(A) below, not
less than five (5) days prior to such filing) and (if requested by any such
Person) confirm such notice in writing no later than one (1) business day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) whenever the SEC notifies the Company whether there will be a "review" of
such Registration Statement; (C) whenever the Company receives (or a
representative of the Company receives on its behalf) any oral or written
comments from the SEC respect of a Registration Statement (copies or, in the
case of oral comments, summaries of such comments shall be promptly furnished by
the Company to the Investors); and (D) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or any other Federal or state governmental
authority for amendments or supplements to the Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement
covering any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) if at any time any of the representations or
warranties of the Company contained in any agreement (including any underwriting
agreement) contemplated hereby ceases to be true and correct in all material
respects; (v) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation
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or threatening of any Proceeding for such purpose; and (vi) of the occurrence of
any event that to the best knowledge of the Company makes any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall furnish the Investors with
copies of all intended written responses to the comments contemplated in clause
(C) of this Section 3(d) not later than one (1) business day in advance of the
filing of such responses with the SEC so that the Investors shall have the
opportunity to comment thereon.
(e) Furnish to each Investor and such Investor's Counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(f) As promptly as practicable after becoming aware thereof,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits 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 use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(g) As promptly as practicable after becoming aware thereof,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of a Notice of Effectiveness or any notice of effectiveness or any stop
order or other suspension of the effectiveness of the Registration Statement at
the earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time to
time after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Investor receives written notice from the Company that
such Potential Material Event either has
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been disclosed to the public or no longer constitutes a Potential Material
Event; provided, however, that the Company may not so suspend the right to such
holders of Registrable Securities for more than two twenty (20) day periods in
the aggregate during any 12-month period ("Suspension Period") with at least a
ten (10) business day interval between such periods, during the periods the
Registration Statement is required to be in effect;
(i) Use its reasonable efforts to secure and maintain the
designation of all the Registrable Securities covered by the Registration
Statement on the "OTC Bulletin Board Market" of the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") within the meaning of
Rule 11Aa2-1 of the SEC under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the quotation of the Registrable Securities on The
NASDAQ Bulletin Board Market; and, without limiting the generality of the
foregoing, 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;
(j) Provide a transfer agent , which may be a single entity, for
the Registrable Securities not later than the effective date of the Registration
Statement;
(k) Cooperate with the Investors to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates for
the Registrable Securities to be in such denominations or amounts as the case
may be, as the Investors may reasonably request, and, within three (3) business
days after a Registration Statement which includes Registrable Securities is
ordered effective by the SEC, the Company shall deliver, and shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an appropriate
instruction and opinion of such counsel; and
(l) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) 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. At
least ten (10) days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects
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to have any of such Investor's Registrable Securities included in the
Registration Statement. If at least two (2) business days prior to the filing
date the Company has not received the Requested Information from an Investor (a
"Non-Responsive Investor"), then the Company may file the Registration Statement
without including Registrable Securities of such Non-Responsive Investor;
(b) Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement 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; and
(c) 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(e)
or 3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. EXPENSES OF REGISTRATION. (a) All reasonable expenses (other
than underwriting discounts and commissions of the Investor) incurred in
connection with registrations, filings or qualifications pursuant to Section 3,
but including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company and a fee for a single counsel for the Investors (as a group and not
individually) not exceeding $3,500 for the Registration Statement covering the
Registrable Securities applicable to the Preferred Stock and Warrants issued on
the Closing Date shall be borne by the Company.
(b) The Buyer acknowledges that the Company either intends to
issue shares or has already issued shares as of the date of this agreement
pursuant to (i) its advisory agreement with Xxxxxxx & Associates; (ii) its
warrant agreements with Corporate Financial Enterprises, Inc. ("CFE") and
Vantage Capital, Inc. ("VCI") and the defined term should be "Registrable
CFE/VCI Shares"; (iii) the issuance of Series A 12% Preferred Stock to VCI and
Series B 12% Preferred Stock to CFE and an affiliated entity known as American
Equities, LLC (the "Other Registrable Shares"),each of which has certain
registration rights..
(c) Except as otherwise provided for in this Section 5, neither
the Company nor any of its subsidiaries has, as of the date hereof, nor shall
the Company nor any of its subsidiaries, on or after the date of this Agreement,
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the Investors in this Agreement or
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otherwise conflicts with the provisions hereof. Except as otherwise provided for
in this Section 5, neither the Company nor any of its subsidiaries has
previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person. Except as otherwise provided for
in this Section 5, and without limiting the generality of the foregoing, without
the written consent of the Investors holding a majority of the Registrable
Securities, the Company shall not grant to any person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Investors set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement and the other Transaction
Agreements.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person" or
"Indemnified Party"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact 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 Securities Act, the Exchange Act, any state securities law or any
rule or regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). Subject to clause (b) of this Section 6, the
Company shall reimburse the Investors, 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) shall not (I) 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 or on behalf of any
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (II) be available to the extent such Claim is based on a
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failure of the Investor to deliver or cause to be delivered the prospectus made
available by the Company; or (III) 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. Each Investor will
indemnify the Company and its officers, directors and agents (each, an
"Indemnified Person" or "Indemnified Party") against any claims 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 or on behalf of such
Investor, expressly for use in connection with the preparation of the
Registration Statement, subject to such limitations and conditions as are
applicable to the Indemnification provided by the Company to this Section 6.
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) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), 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. In case any such action is brought against any Indemnified Person
or Indemnified Party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein stated
and after notice from the indemnifying party to such Indemnified Person or
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Person or Indemnified
Party under this Section 6 for any legal or other reasonable out-of-pocket
expenses subsequently incurred by such Indemnified Person or Indemnified Party
in connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action of its
final conclusion. The Indemnified Person or Indemnified Party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and reasonable out-of-pocket expenses of such
counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the Indemnified Person or Indemnified Party. 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. 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 such expense, loss, damage or liability is incurred
and is due and payable.
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7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) 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; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to
the Investors the benefits of Rule 144 promulgated under the Securities 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 Securities Act and the Exchange Act;
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
Securities Act and the Exchange 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.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities (or all or any portion of any unconverted Preferred Stock or
unexercised Warrant) only if: (a) 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, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, and (d) at or before the time the Company received the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained
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herein. In the event of any delay in filing or effectiveness of the Registration
Statement as a result of such assignment, the Company shall not be liable for
any damages arising from such delay, or the payments set forth in Section 2(c)
hereof arising from such delay.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision 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 an eighty (80%) percent interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. RULE 144 REQUIREMENTS. The Company shall make publicly
available and available to the Holder of Registrable Securities, pursuant to
Rule 144 of the Commission under the Securities Act, such information as shall
be necessary to enable the Holders of Registrable Securities to make sales of
Registrable Securities pursuant to that Rule. The Company will furnish to any
Holder of Registrable Securities, upon request made by such Holder at any time,
a written statement signed by the Company, addressed to such Holder, describing
briefly the action the Company has taken or proposes to take to comply with the
current public information requirements of Rule 144. The Company will, at the
request of any Holder of Registrable Securities, upon receipt from such Holder
of a certificate certifying (i) that such Holder has held such Registrable
Securities for a period of not less than one (1) year, (ii) that such Holder has
not been an affiliate (as defined in Rule 144) of the Company for more than the
ninety (90) preceding days, and (iii) as to such other matters as may be
appropriate in accordance with such Rule, remove from the stock certificates
representing such Registrable Securities that portion of any restrictive legend
which relates to the registration provisions of the Securities Act, provided,
however, counsel to Holder may provide such instructions and opinion to the
transfer agent regarding the removal of the restrictive legend.
12. 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) Notices required or permitted to be given hereunder shall be
given in the manner contemplated by the Agreement, (i) if to the Company or to
the Initial Investor, to their respective address contemplated by the Agreement,
and (iii) if to any other Investor, at such address as such Investor shall have
provided in writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 11(b).
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(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or 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 California for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of Los
Angeles or the state courts of the State of California sitting in the City of
Los Angeles in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non coveniens, to the bringing of any such
proceeding in such jurisdictions. To the extent determined by such court, the
Company shall reimburse the Buyer for any reasonable legal fees and
disbursements incurred by the Buyer in enforcement of or protection of any of
its rights under this Agreement.
(e) 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 or the
validity or enforceability of this Agreement in any other jurisdiction.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one or more 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 telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
(j) The Company acknowledges that any failure by the Company to
perform its obligations under Section 3(a) hereof, or any delay in such
performance could result in loss to the Investors, and the Company agrees that,
in addition to any other liability the Company may have by reason of such
failure or delay, the Company shall be liable for all direct damages caused by
any such failure or delay, unless the same is the result of force majeure.
Neither party shall be liable for consequential damages.
(k) This Agreement constitutes the entire agreement among the
parties hereto
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with respect to the subject matter hereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein.
This Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof. This Agreement may be
amended only by an instrument in writing signed by the party to be charged with
enforcement thereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
COMPANY:
ESAT, INC.
By: /s/________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer & Secretary
WENTWORTH LLC
By: /s/________________________________
Name: Navigator Management Ltd.
Title: Director
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