EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of December
________, 1999, by and among Saf T Lok Incorporated, a Florida corporation, with
headquarters at 0000 Xxxxxxxxxx Xxxxxxx, Xxxx Xxxx Xxxxx Xxxxxxx, 00000 (the
"Company"), and the undersigned buyers (the "Buyers").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties of even date herewith (the "Securities Purchase Agreement"), the Company
has agreed, upon the terms and subject to the conditions of the Securities
Purchase Agreement, to issue and sell to the Buyer's, the Company's 6%
Subordinated Convertible Debenture (the "Debentures"), which will be convertible
into shares of the Company's common stock, $0.01 par value per share (the
"Common Stock") (as converted, the "Conversion Shares") in accordance with the
terms of the Debentures; and
B. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyers hereby
agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "Investor" means the Buyer and any transferee or assignee thereof
to whom the Buyer assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with
Section 9.
b. "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
c. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under
the 1933 Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").
d. "Registrable Securities" means the Conversion Shares issued or
issuable upon conversion of the Debentures and any shares of capital stock
issued or issuable with
respect to the Conversion Shares or the Debentures as a result of any
stock split, stock dividend, recapitalization, exchange, or similar event.
e. "Registration Statement" means a registration statement of the
Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set for the in the Securities Purchase Agreement.
2. REGISTRATION.
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a. Mandatory Registration. The Company shall prepare and, on or
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prior to a date which is no more than ninety (90) days from the date that
the Company has sold a total of $950,000 in principal amount of Debentures
(the "Filing Deadline"), file with the SEC a Registration Statement or
Registration Statements (as is necessary) on Form S-3 (or, if such form is
unavailable for such a registration, on such other form as is available for
such a registration, subject to the consent of each Buyer and the
provisions of Section 2.e., which consent will not be unreasonably
withheld), covering the resale of all of the Registrable Securities, which
Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement(s) also covers
such indeterminate number of additional shares of Common Stock as may
become issuable upon conversion of the Debentures (i) to prevent dilution
resulting from stock splits, stock dividends or similar transactions and
(ii) by reason of changes in the Conversion Price or Conversion Rate of the
Debentures in accordance with the terms thereof. Such Registration
Statement shall initially register for resale at least 1,615,003 shares of
Common Stock for the Investors and others, subject to adjustment as
provided in Section 3.b., and 1,520,003 such registered shares of Common
Stock shall be allocated among the Investors pro rata based on the total
number of Registrable Securities issued or issuable as of each date that a
Registration Statement, as amended, relating to the resale of the
Registrable Securities is declared effective by the SEC. The Company has
also agreed to include an additional 637,505 shares of Common Stock for the
benefit of other investors in connection with the sale of $375,000 of
convertible debentures through Alexander, Wescott & Co., Inc. The Company
shall use its best efforts to have the Registration Statement declared
effective by the SEC within ninety (90) days after the Filing Deadline (the
"Registration Deadline"). The Company shall permit the registration
statement to become effective within ten (10) business days after receipt
of a "no review" notice from the SEC. In the event that the Registration
Statement is not filed by the Company with the SEC by the Filing Deadline,
then the Company shall be required to deliver to the Investors within 10
calendar days of the end of each month in which the Company has not so
filed a cash penalty of 2% of the principal amount of Debentures per month
(pro-rated for partial months). If the Registration Statement is not
declared effective by the SEC by the Registration Deadline, then the
Company shall be required to deliver to the Investors within 10 calendar
days of the end of each month in which such Registration Statement has not
been declared effective a cash penalty of 2% of the principal amount of the
Debentures per month (pro-rated for partial months).
b. Underwritten Offering. If any offering pursuant to a Registration
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Statement pursuant to Section 2(a) involves an underwritten offering, the
Buyers shall have the right
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to select one legal counsel and one investment banker or manager at the
cost of the Company to administer their interest in the offering, which
investment banker or manager shall be reasonably satisfactory to the
Company.
c. Piggy-Back Registrations. If at any time prior to the expiration
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of the Registration Period (as hereinafter defined) and at a time when
there is currently no effective registration statement covering the
Registrable Securities, the Company proposes to file with the SEC a
Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its securities (other than
on Form S-4 or Form S-8 or their then equivalents relating to securities to
be issued solely in connection with any acquisition of any entity or
business or equity securities issuable in connection with stock option or
other employee benefit plans) the Company shall promptly send to each
Investor who is entitled to registration rights under this Section 2(c)
written notice of the Company's intention to file a Registration Statement
and of such Investor's rights under this Section 2(c) and, if within ten
(10) days after receipt of such notice, such Investor shall so request in
writing, the Company shall include in such Registration Statement all or
any part of the Registrable Securities such Investor requests to be
registered, subject to the priorities set forth in Section 2(d) below. No
right to registration of Registrable Securities under this Section 2(c)
shall be construed to limit any registration required under Section 2(a).
The obligations of the Company under this Section 2(c) may be waived by
Investors holding a majority of the Registrable Securities. If an offering
in connection with which an Investor is entitled to registration under this
Section 2(c) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall,
unless otherwise agreed by the Company, offer and sell such Registrable
Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same
terms and conditions as other shares of Common Stock included in such
underwritten offering.
d. Priority in Piggy-Back Registration Rights in connection with
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Registrations or Company Account. If the registration referred to in
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Section 2(c) is to be an underwritten public offering for the account of
the Company and the managing underwriter(s) advise the Company in writing,
that in their reasonable good faith opinion, marketing or other factors
dictate that a limitation on the number of shares of Common Stock which may
be included in the Registration Statement is necessary to facilitate and
not adversely affect the proposed offering, then the Company shall include
in such registration: (1) first, all securities the Company proposes to
sell for its own account, (2) second, up to the full number of securities
proposed to be registered for the account of the holders of securities
entitled to inclusion of their securities in the Registration Statement by
reason of demand registration rights, and (3) third, the securities
requested to be registered by the Investors and other holders of securities
entitled to participate in the registration, drawn from them pro rata based
on the number each has requested to be included in such registration.
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3. RELATED OBLIGATIONS.
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Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2(c) or at such time as the Company is obligated
to file a Registration Statement with the SEC pursuant to Section 2(a), the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
a. The Company shall keep the Registration Statement(s) effective
pursuant to Rule 415 at all times until the earlier of (i) the date as of
which the Investors may sell all of the Registrable Securities without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto) or (ii) the date on which (A) the Investors shall have
sold all the Registrable Securities and (B) none of the Debentures is
outstanding (the "Registration Period"), which Registration Statement(s)
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances in which they
were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement(s) and the prospectus(es) used in connection with the
Registration Statement(s), which prospectus(es) are to be filed pursuant to
Rule 424 promulgated under the 1933 Act, as may be necessary to keep the
Registration Statement(s) effective at all times during the Registration
Period, and, during such period, comply with the provisions of the 1933 Act
with respect to the disposition of all Registrable Securities of the
Company covered by the Registration Statement(s) until such time as all of
such Registrable Securities shall have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statement(s). In the event the number of shares
available under a Registration Statement filed pursuant to this Agreement
is insufficient in the reasonable opinion of a majority of the Buyers to
cover all of the Registrable Securities, the Company shall promptly amend
the Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover all
of the Registrable Securities, in each case, as soon as practicable, but in
any event within thirty (30) days after the necessity therefor arises
(based on the market price of the Common Stock and other relevant factors
on which the Company reasonably elects to rely). The Company shall use its
best efforts to cause such amendment and/or new Registration Statement to
become effective as soon as practicable following the filing thereof. For
purposes of the foregoing provision, the number of shares available under a
Registration Statement shall be deemed "insufficient to cover all of the
Registrable Securities" if at any time the number of Registrable Securities
issued or issuable upon conversion of the Debentures is greater than the
quotient determined by dividing (i) the number of shares of Common Stock
available for resale under such Registration Statement by (ii) 1.0;
provided that in the case of the initial registration of the Registrable
Securities pursuant to Section 2(a), the Company shall be required to
register at least 1,520,003 shares of Common Stock for the benefit of the
Investors. For purposes of the calculation set forth in the foregoing
sentence, any restrictions on the convertibility of the Debentures shall be
disregarded and such calculation shall assume that the Debentures are then
convertible into shares of Common Stock at the then
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prevailing Conversion Rate together with accrued interest which shall be
payable in shares of Common Stock (as defined in the Debentures).
c. Upon request, the Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement(s) and
its legal counsel without charge (i) promptly after the same is prepared
and filed with the SEC at least one copy of the Registration Statement and
any amendment thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits, the
prospectus(es) included in such Registration Statement(s) (including each
preliminary prospectus) and, with regards to the Registration Statement,
any correspondence by or on behalf of the Company to the SEC or the staff
of the SEC and any correspondence from the SEC or the staff of the SEC to
the Company or its representatives, (ii) upon the effectiveness of any
Registration Statement, three (3) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such
other number of copies as such Investor may reasonably request) and (iii)
such other documents, including any preliminary prospectus, as such
Investor may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such Investor.
d. [INTENTIONALLY LEFT BLANK]
e. In the event Investors who hold a majority of the Registrable
Securities being offered in the offering select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with
the underwriters of such offering.
f. [INTENTIONALLY LEFT BLANK]
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration
Statement, or the suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction (acknowledging that, to date, no
such registrations have been made) and, if such an order or suspension is
issued, to obtain the withdrawal of such order or suspension at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (and, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution
thereof or its receipt of actual notice of the initiation or threat of any
proceeding for such purpose.
h. The Company shall permit each Investor a single firm of counsel or
such other counsel as thereafter designated as selling stockholders'
counsel by the Investors who hold a majority of the Registrable Securities
being sold at the Investor's expense, to review and comment upon the
Registration Statement(s) and all amendments and supplements thereto at
least four (4) days prior to their filing with the SEC, provided that the
name, address and telephone number of such counsel shall have previously
been provided, in writing, to the Company, specifically designating such
counsel for purposes of this Section 3h.
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i. At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall use their best efforts
to furnish, on the date that Registrable Securities are delivered to an
underwriter, if any, for sale in connection with the Registration Statement
(i) if required by an underwriter, a letter, dated such date, from the
Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the
underwriters, and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) one underwriter participating in any disposition pursuant to
a Registration Statement, (iii) one firm of attorneys and one firm of
accountants or other agents retained by the Investors, and (iv) one firm of
attorneys retained by such underwriter (collectively, the "Inspectors") all
pertinent financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the "Records"), as shall be
reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due diligence
provided, however, that each Inspector shall hold in strict confidence and
shall not make any disclosure (except to an Investor) or use of any Record
or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified,
unless (a) the disclosure of such Records is mutually determined to be
necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of
this or any other agreement. Each Investor agrees that it shall, upon
learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
k. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement,
(iii) the release of such information is ordered pursuant to a subpoena or
other final, non-appealable order from a court or governmental body of
competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or
any other agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through other
means, give prompt written notice to such Investor and allow such Investor,
at the Investor's expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
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l. The Company shall use its best efforts either to (i) cause all the
Registrable Securities covered by a Registration Statement to be listed on
each national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such
exchange, (ii) if, despite the Company's best efforts to satisfy the
preceding clause (i), the Company is unsuccessful in satisfying the
preceding clause (i), if at any time during the Registration Period the
Company is able to satisfy the relevant listing criteria, to secure the
inclusion for quotation on the Nasdaq SmallCap Market for such Registrable
Securities or, (ii) if, despite the Company's best efforts to satisfy the
preceding clause (ii), the Company is unsuccessful in satisfying the
preceding clause (ii), to secure the inclusion for quotation on the over-
the-counter market for such Registrable Securities, and, without limiting
the generality of the foregoing, in the case of clause (ii) or (iii), to
arrange for at least two market makers to register with the National
Association of Securities Dealers, Inc. ("NASD") as such with respect to
such Registrable Securities. The Company shall pay all fees and expenses
in connection with satisfying its obligation under this Section 3(l).
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any
managing underwriter, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement
and enable such certificates to be in such denominations or amounts, as the
case may be, as the managing underwriter, if any, or, if there is no
managing underwriter, a majority of the Investors may reasonably request
and registered in such names as the managing underwriter, if any, or the
Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit
resales of the Registrable Securities, without legend, in a timely fashion
that complies with then mandated securities settlement procedures for
regular way market transactions.
n. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
o. The Company shall use the services of a transfer agent and
registrar for all such Registrable Securities not later than the effective
date of such Registration Statement.
p. Subject to the reasonable approval of counsel to the Company, if
requested by the managing underwriter or a majority of the Investors, the
Company shall immediately incorporate in a prospectus supplement or post-
effective amendment such information as the managing underwriter and the
majority of Investors agree should be included therein relating to the sale
and distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being sold
to such underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the underwritten (or
best efforts underwritten) offering of the Registrable Securities to be
sold in such offering; make all required filings of such prospectus
supplement or post-effective amendment as soon as notified of the matters
to
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be incorporated in such prospectus supplement or post-effective amendment;
and supplement or make amendments to any Registration Statement if
requested by a shareholder or any underwriter of such Registrable
Securities.
q. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of such
Registrable Securities.
r. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.
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4. OBLIGATIONS OF THE INVESTORS.
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a. At least fourteen (14) days prior to the first anticipated filing
date of the Registration Statement, or any amendments thereto, the Company
shall notify each Investor in writing of the information the Company
requires from each such Investor if such Investor elects to have any of
such Investor's Registrable Securities included in the Registration
Statement. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Investor that such
Investor shall furnish to the Company such information regarding itself,
the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and
shall execute such documents in connection with such registration as the
Company may reasonably request. An investor's failure to respond to the
Company's request for information prior to the specified filing date of the
Registration Statement shall toll the Company's obligations under Section 2
as to that Investor.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement.
c. In the event Investors holding a majority of the Registrable
Securities being registered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such
other actions as are reasonably required in order to expedite or facilitate
the disposition of the Registrable Securities, unless such Investor
notifies the Company in writing of such Investor's election to exclude all
of such Investor's Registrable Securities from the Registration
Statement(s).
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Registration
Statement(s) covering such Registrable Securities until such Investor's
receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(g) or the first sentence of 3(f) and, if so
directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy all copies in such Investor's
possession, of the prospectus covering such Registrable Securities current
at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting
arrangements approved by the Investors entitled hereunder to approve such
arrangements, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents
reasonably required
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under the terms of such underwriting arrangements, and (iii) agrees to pay
its pro rata share of all underwriting discounts and commissions.
f. Investor has been advised as to provisions of Regulation M and
agrees that Investors disposition of the Registrable Securities will be
made in a manner so as not to violate Regulation M.
5. EXPENSES OF REGISTRATION.
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All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company, shall be paid by the Company. The fees and
disbursements of counsel for the Investors and the Inspectors shall be borne by
each Investor.
6. INDEMNIFICATION
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In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor who holds
such Registrable Securities, the directors, officers, partners, employees,
agents and each Person, if any, who controls any Investor within the
meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and any underwriter (as defined in the 0000 Xxx) for the
Investors, and the directors and officers of, and each Person, if any, who
controls, any such underwriter within the meaning of the 1933 Act or the
1934 Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs,
attorneys' fees, amounts paid in settlement or expenses, joint or several,
(collectively, "Claims") incurred in investigating, preparing or defending
any action, claim, suit, inquiry, proceeding, investigation or appeal taken
from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto
("Indemnified Damages"), to which any of them may become subject insofar as
such Claims (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon: (i) any untrue statement
or alleged untrue statement of a material fact in a Registration Statement
or any post-effective amendment thereto or in any filing made in connection
with the qualification of the offering under the securities or other "blue
sky" laws of any jurisdiction in which Registrable Securities are offered
("Blue Sky Filing"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the
statements therein were made, not misleading, (ii) any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein
any material fact necessary to make the statements made therein, in light
of the circumstances under which the
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statements therein were made, not misleading, or (iii) any violation or
alleged violation of the Company of the 1933 Act, the 1934 Act, any other
law, including, without limitation, any state securities law, or any rule
or regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations").
Subject to the restrictions set forth in Section 6(d) with respect to the
number of legal counsel, the Company shall reimburse the Investors and each
such underwriter or controlling person, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any
such Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not
apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to
the Company by any Indemnified Person or underwriter for such Indemnified
Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to
Section 3(c); (ii) with respect to any preliminary prospectus, shall not
inure to the benefit of any such person from whom the person asserting any
such Claim purchased the Registrable Securities that are the subject
thereof (or to the benefit of any person controlling such person) if the
untrue statement or mission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(c), and the Indemnified Person was promptly advised
in writing not to use the incorrect prospectus prior to the use giving rise
to a violation and such Indemnified Person, notwithstanding such advice,
used it; (iii) shall not be available to the extent such Claim is based on
a failure of the Investor to deliver or to cause to be delivered the
prospectus made available by the Company (i) and (iv) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not
be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers who signs the Registration Statement, each Person, if
any, who controls the Company within the meaning of the 1933 Act or the
1934 Act (collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim or Indemnified Damages to which any
of them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim or Indemnified Damages arise out of or are based upon
any Violation, in each case to the extent, and only to the extent, that
such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and, subject to Section 6(d),
such Investor will reimburse any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) and Section 7 shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior
11
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable
under this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such Registration Statement.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same
extent as provided above, with respect to information such persons so
furnished in writing expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a
Claim such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as
the case may be; provided, however, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel with the
fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified
Party and the indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate
legal counsel for the Investors, and such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable
Securities included in the Registration Statement to which the Claim
relates. The Indemnified Party or Indemnified Person shall cooperate fully
with the indemnifying party in connection with any negotiation or defense
of any such action or claim by the indemnifying party and shall furnish to
the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or
claim. The indemnifying party shall keep the Indemnified Party or
Indemnified Person fully apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim
or proceeding effected without its written consent, provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition
its consent. No indemnifying party shall, without the consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment
or enter into any settlement or other
12
compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such claim
or litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified
Party or Indemnified Person with respect to all third parties, firms or
corporations relating to the matter for which indemnification has been
made. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person
or Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.
e. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified
Damages are incurred.
f. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that: (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the investors to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements (it being
understood that nothing herein shall limit the Company's obligations under
Section 4(c) of the Securities Purchase Agreement) and the filing of such
reports and other documents is required for the applicable provisions of
Rule 144; and
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c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon written request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule
144(c)(1), (ii) a copy of the most recent annual or quarterly report of
the Company and such other reports and documents so filed by the Company,
and (iii) such other information as may be reasonably requested to permit
the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable Securities if the Company
consents (except for such transfer to an affiliate or successor, which shall not
require any such consent) and: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned; (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein; (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement; (vi) such transferee shall be an "accredited
investor" as that term is defined in Rule 501 of Regulation D promulgated under
the 1933 Act; and (vii) in the event the assignment occurs subsequent to the
date of effectiveness of the Registration Statement required to be filed
pursuant to Section 2(a), the transferee agrees to pay all reasonable expenses
of amending or supplementing such Registration Statement to reflect such
assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and Investors
who hold two-thirds of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
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b. Any notices consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile, provided a copy is
mailed by U.S. certified mail, return receipt requested; (iii) three (3)
days after being sent by U.S. certified mail, return receipt requested, or
(d) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive
the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company: 0000 Xxxxxxxxxx Xxxxxxx
Xxxx Xxxx Xxxxx
Xxxxxxx, 00000
Facsimile: (000) 000-0000
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's counsel as set forth on the Schedule of
Buyers. Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Delaware without regard to the principles of
conflict of laws. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this
Agreement in that jurisdiction or the validity or enforceability of any
provision of this Agreement in any other jurisdiction.
e. This Agreement and the Securities Purchase Agreement constitute
the entire agreement among the parties hereto with respect to the subject
matter hereof and thereof. There are no restrictions, promises, warranties
or undertakings, other than those set forth or referred to herein and
therein. This Agreement and the Securities Purchase Agreement supersede
all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit and of and be binding upon the permitted successors
and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement. This Agreement, once executed
by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party
so delivering this Agreement.
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i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the
other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
------- ------
SAF T LOK INCORPORATED ___________________________________
By: _____________________________ By: __________________________________
Name: ___________________________ Name: ________________________________
Its: ____________________________ Its: _________________________________
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SCHEDULE OF BUYERS
Buyer Address
Buyer Name and Facsimile Number
---------- --------------------
18
