Form 8-K
Exhibit 10.2
Buyers United, Inc., File No. 0-26917
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of March 10, 2004, by and among Buyers United, Inc., a Delaware
corporation (the "Company"), and the investors signatory hereto (each a
"Investor" and collectively, the "Investors").
This Agreement is made pursuant to the Securities Purchase Agreement, dated
as of the date hereof among the Company, the Selling Stockholder party thereto
and the Investors (the "Purchase Agreement").
The Company and the Investors hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the respective meanings set forth in this Section 1:
"Effective Date" means the date that the Registration Statement filed
pursuant to Section 2(a) or 2(b) is first declared effective by the
Commission.
"Effectiveness Date" means: (a) with respect to the Registration
Statement required to be filed under Section 2(a) to cover the resale by
the Holders of the Registrable Securities, the earlier of: (a)(i) the 90th
day following the Closing Date (or, if such day is not a Business Day, the
next Business Day); provided, that, if the Commission reviews and has
written comments to the filed Registration Statement that would require the
filing of a pre-effective amendment thereto with the Commission, then the
Effectiveness Date under this clause (a)(i) shall be the 105th day
following the Closing Date (or, if such day is not a Business Day, the next
Business Day), and (ii) the third Trading Day following the date on which
the Company is notified by the Commission that the initial Registration
Statement will not be reviewed or is no longer subject to further review
and comments, and (b) with respect to any additional Registration
Statements that may be required pursuant to Section 2(b), the earlier of:
(i) the 90th day following the date on which the Company first knows, or
reasonably should have known, that such additional Registration Statement
is required under such Section (or, if such day is not a Business Day, the
next Business Day); provided, that, if the Commission reviews and has
written comments to such filed Registration Statement that would require
the filing of a pre-effective amendment thereto with the Commission, then
the Effectiveness Date under this clause (b)(i) shall be the 105th day
following the date that the Company first knows, or reasonably should have
known, that such additional Registration Statement is required under such
Section (or, if such day is not a Business Day, the next Business Day) and
(ii) the third Trading Day following the date on which the Company is
notified by the Commission that such additional Registration Statement will
not be reviewed or is no longer subject to further review and comments.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means (a) with respect to the initial Registration
Statement required to be filed under Section 2(a) to cover the resale by
the Holders of the Registrable Securities, the 30th day following the
Closing Date, and (b) with respect to any additional Registration
Statements that may be required pursuant to Section 2(b), the 30th day
following the date on which the Company first knows, or reasonably should
have known, that such additional Registration Statement is required under
such Section; provided, that if either of the foregoing dates is not a
Business Day, the Filing Date is the next Business Day.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments
and supplements to the Prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
"Registrable Securities" means the shares of Common Stock issued and
sold to the Investors pursuant to Section 2.1 of the Purchase Agreement,
and any shares of Common Stock issuable upon the exercise of warrants
issued to any placement agent as compensation in connection with the
financing subject of the Purchase Agreement.
"Registration Statement" means the initial registration statement
required to be filed in accordance with Section 2(a) and any additional
registration statement(s) required to be filed under Section 2(b),
including (in each case) the Prospectus, amendments and supplements to such
registration statements or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statements.
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"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
2. Registration.
(a) On or prior to the Filing Date, the Company shall prepare and file
with the Commission a Registration Statement covering the resale of all
Registrable Securities not already covered by an existing and effective
Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall contain (except if
otherwise required pursuant to written comments received from the
Commission upon a review of such Registration Statement) the "Plan of
Distribution" attached hereto as Annex A. The Company shall cause the
Registration Statement to be declared effective under the Securities Act as
soon as possible but, in any event, no later than the Effectiveness Date,
and shall use its best efforts to keep the Registration Statement
continuously effective under the Securities Act until the date which is the
earlier of (i) at such time as all of the Registrable Securities have been
publicly sold by the Holders, or (ii) at such time as all of the
Registrable Securities may be sold pursuant to Rule 144(k) as determined by
the Company and evidenced by a written opinion of its counsel to that
effect delivered to each of the Holders who then hold Registrable
Securities that have not been publicly sold, which opinion shall not be
unreasonably withheld or delayed (the "Effectiveness Period"). Promptly
following any date on which the Company becomes eligible to use a
registration statement on Form S-3 to register the Registrable Securities
for resale, but in no event more than ten days after such date, the Company
shall file a registration statement on Form S-3 covering the Registrable
Securities (or a post-effective amendment on Form S-3 to the then effective
Registration Statement) and shall cause such Shelf Registration Statement
to be declared effective as soon as possible thereafter, but in any event
prior to the Effectiveness Date therefor.
(b) If for any reason the Commission does not permit all of the Shares
to be included in the Registration Statement filed pursuant to Section
2(a), or for any other reason any Registrable Securities are not permitted
by the Commission to be included in a Registration Statement filed under
this Agreement, then the Company shall prepare and file as soon as possible
after the date on which the Commission shall indicate as being the first
date or time that such filing may be made, but in any event by the 30th day
following such date (or if such day is not a Business Day, the next
Business Day), an additional Registration Statement covering the resale of
all Registrable Securities not already covered by an existing and effective
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Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415. Each such Registration Statement shall contain
(except if otherwise required pursuant to written comments received from
the Commission upon a review of such Registration Statement) the "Plan of
Distribution" attached hereto as Annex A. The Company shall cause each such
Registration Statement to be declared effective under the Securities Act as
soon as possible but, in any event, no later than its Effectiveness Date,
and shall use its best efforts to keep such Registration Statement
continuously effective under the Securities Act during the entire
Effectiveness Period.
(c) If: (i) a Registration Statement is not filed on or prior to its
Filing Date (if the Company files a Registration Statement without
affording the Holders the opportunity to review and comment on the same as
required by Section 3(a) hereof, the Company shall not be deemed to have
satisfied this clause (i)), or (ii) a Registration Statement is not
declared effective by the Commission on or prior to its required
Effectiveness Date, or (iii) after its Effective Date, without regard for
the reason thereunder or efforts therefore, such Registration Statement
ceases for any reason to be effective and available to the Holders as to
all Registrable Securities to which it is required to cover at any time
prior to the expiration of its Effectiveness Period for more than an
aggregate of 20 Trading Days (which need not be consecutive) (any such
failure or breach being referred to as an "Event," and for purposes of
clauses (i) or (ii) the date on which such Event occurs, or for purposes of
clause (iii) the date which such 20 Trading Day-period is exceeded, being
referred to as "Event Date"), then, in addition to any other rights
available to the Holders under the Transaction Documents or under
applicable law: (x) on each such Event Date the Company shall pay to each
Holder an amount in cash, as fees and not as a penalty, equal to 1% of the
aggregate Investment Amount of such Holder pursuant to the Purchase
Agreement; and (y) on each monthly anniversary of each such Event Date
thereof (if the applicable Event shall not have been cured by such date)
until the applicable Event is cured, the Company shall pay to each Holder
an amount in cash, as fees and not as a penalty, equal to 2% of the
aggregate Investment Amount paid by such Holder pursuant to the Purchase
Agreement; provided, that the fees payable under this section shall be
capped for any Investor at 15% of such Investor's Investment Amount (which
cap shall not affect such Investor's right to seek other available
remedies). If the Company fails to pay any fees pursuant to this Section in
full within ten days after the date payable, the Company will pay interest
thereon at a rate of 12% per annum (or such lesser maximum amount that is
permitted to be paid by applicable law) to the Holder, accruing daily from
the date such fees are due until such amounts, plus all such interest
thereon, are paid in full. The fees pursuant to the terms hereof shall
apply on a pro rata basis for any portion of a month prior to the cure of
an Event.
3. Registration Procedures
In connection with the Company's registration obligations hereunder, the
Company and, as applicable, Holders shall do the following:
(a) Not less than five Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or
supplement thereto, the Company shall furnish to the Holders copies of the
"Selling Stockholders" section of such document, the "Plan of Distribution"
and any risk factor contained in such document that addresses specifically
this transaction or the Selling Stockholders, as proposed to be filed which
documents will be subject to the review of such Holders. Any corrections
provided by a Holder by the end of the third Trading Day following receipt
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of such draft documents may be included in the filing without further
notice or approval of the Holder. The Company shall not file a Registration
Statement or any such Prospectus or any amendments or supplements thereto
that contains any disclosure regarding the Holders that varies from the
disclosure set forth in the Selling Holder Questionnaire (as corrected by
the Holders), without the prior approval of the affected Holder. Each
Holder agrees to furnish to the Company a completed Questionnaire in the
form attached to this Agreement as Annex B (a "Selling Holder
Questionnaire") not less than two Trading Days prior to the Filing Date or
by the end of the fourth Trading Day following the date on which such
Holder receives draft materials in accordance with this Section. The
Company shall not be required to include the Registrable Securities of a
Holder in a Registration Statement and shall not be required to pay any
liquidated or other damages under Section 2(c) hereof to such Holder who
fails to furnish to the Company a fully completed Selling Holder
Questionnaire at least two Trading Days prior to the Filing Date.
(b) (i) The Company shall prepare and file with the Commission such
amendments, including post-effective amendments, to each Registration
Statement and the Prospectus used in connection therewith as may be
necessary to keep such Registration Statement continuously effective as to
the applicable Registrable Securities for its Effectiveness Period and
prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all of
the Registrable Securities; (ii) cause the related Prospectus to be amended
or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
promptly as reasonably possible to any comments received from the
Commission with respect to each Registration Statement or any amendment
thereto and, as promptly as reasonably possible provide the Holders true
and complete copies of all correspondence from and to the Commission
relating to such Registration Statement that would not result in the
disclosure to the Holders of material and non-public information concerning
the Company; and (iv) comply in all material respects with the provisions
of the Securities Act and the Exchange Act with respect to the Registration
Statements and the disposition of all Registrable Securities covered by
each Registration Statement.
(c) The Company shall notify the Holders as promptly as reasonably
possible (and, in the case of (i)(A) below, not less than three Trading
Days prior to such filing) and (if requested by any such Person) confirm
such notice in writing no later than one Trading Day following the day
(i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to a Registration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement and whenever the Commission comments in writing on
such Registration Statement (the Company shall provide true and complete
copies thereof and all written responses thereto to each of the Holders
that pertain to the Holders as a Selling Stockholder or to the Plan of
Distribution, but not information which the Company believes would
constitute material and non-public information); and (C) with respect to
each Registration Statement or any post-effective amendment, when the same
has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to a
Registration Statement or Prospectus or for additional information; (iii)
of the issuance by the Commission of any stop order suspending the
effectiveness of a Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) of the receipt by the Company of any notification with
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respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that
makes the financial statements included in a Registration Statement
ineligible for inclusion therein or any statement made in such 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 such Registration Statement, Prospectus or other
documents so that, in the case of such 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.
(d) The Company will use its best efforts to avoid the issuance of,
or, if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of a Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable
moment.
(e) The Company will furnish to each Holder, without charge, at least
one conformed copy of each Registration Statement and each amendment
thereto and all exhibits to the extent requested by such Person (including
those previously furnished) promptly after the filing of such documents
with the Commission.
(f) The Company will promptly deliver to each Holder, without charge,
as many copies of each Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement
thereto.
(g) Prior to any public offering of Registrable Securities, the
Company will register or qualify and cooperate with the selling Holders in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and
sale under the securities or Blue Sky laws that are required for the
Holders to offer and sell the Registrable Securities and are requested by
the Holders in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and to do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by
the Registration Statements; provided, however, that in no event will the
Company be required to satisfy its obligation under this paragraph to
qualify to do business generally in any jurisdiction where it is not so
qualified.
(h) The Company will cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to the Registration
Statements, which certificates shall be free, to the extent permitted by
the Purchase Agreement, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such
names as any such Holders may request.
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(i) The Company shall, upon the occurrence of any event contemplated
by Section 3(c)(ii)-(v), as promptly as reasonably possible, prepare a
supplement or amendment, including a post-effective amendment, to the
affected Registration Statements or a supplement to the related Prospectus
or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document and cause Registration
Statement to become effective so that, as thereafter delivered, no
Registration Statement nor any Prospectus will contain an 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 under which they were made, not misleading.
4. Registration Expenses. All fees and expenses incident to the performance
of or compliance with this Agreement by the Company shall be borne by the
Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with any Trading Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
5. Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder,
the officers, directors, agents, investment advisors, partners, members and
employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of each
such controlling Person, to the fullest extent permitted by applicable law,
from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable costs of preparation and
reasonable attorneys' fees) and expenses (collectively, "Losses"), as
incurred, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to
any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the
extent, but only to the extent, that (1) such untrue statements or
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omissions are based solely upon information regarding such Holder furnished
in writing to the Company by such Holder expressly for use therein, or to
the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was expressly
approved by such Holder for use in the Registration Statement (it being
understood that the Holder has approved Annex A hereto for this purpose) or
(2) in the case of an occurrence of an event of the type specified in
Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder
of an Advice or an amended or supplemented Prospectus, but only if and to
the extent that following the receipt of the Advice or the amended or
supplemented Prospectus the misstatement or omission giving rise to such
Loss would have been corrected. The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which
the Company is aware in connection with the transactions contemplated by
this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and
against all Losses, as incurred, arising solely out of or based solely
upon: (x) such Holder's failure to comply with the prospectus delivery
requirements of the Securities Act or (y) any untrue statement of a
material fact contained in any Registration Statement, any Prospectus, or
any form of prospectus, or in any amendment or supplement thereto, or
arising solely out of or based solely upon any omission of a material fact
required to be stated therein or necessary to make the statements therein
not misleading to the extent, but only to the extent that, (1) such untrue
statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or
such Holder's proposed method of distribution of Registrable Securities and
was expressly approved by such Holder for use in the Registration Statement
(it being understood that the Holder has approved Annex A hereto for this
purpose), such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (2) in the case of an occurrence of an event of the
type specified in Section 3(c)(ii)-(v), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder
in writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of an Advice or an amended or supplemented
Prospectus, but only if and to the extent that following the receipt of the
Advice or the amended or supplemented Prospectus the misstatement or
omission giving rise to such Loss would have been corrected. In no event
shall the liability of any selling Holder hereunder be greater in amount
than the dollar amount of the net proceeds received by such Holder upon the
sale of Registrable Securities under the Prospectus.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing,
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such
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notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent
that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
in writing to pay such fees and expenses; (2) the Indemnifying Party shall
have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to
represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the
defense thereof and such counsel shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect
any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on
claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating
or preparing to defend such Proceeding in a manner not inconsistent with
this Section) shall be paid to the Indemnified Party, as incurred, within
ten Trading Days of written notice thereof to the Indemnifying Party
(regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material
fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
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party as a result of any Losses shall be deemed to include, subject to the
limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such
fees or expenses if the indemnification provided for in this Section was
available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the proceeds actually received by such Holder
from the sale of Registrable Securities under the Prospectus exceeds the
amount of any damages that such Holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to
the Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a Holder,
of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would
not provide adequate compensation for any losses incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in respect
of such breach, it shall waive the defense that a remedy at law would be
adequate.
(b) No Piggyback on Registrations. Except as and to the extent
specified in Schedule 3.1(v)(1) and (4) to the Purchase Agreement, neither
the Company nor any of its security holders (other than the Holders in such
capacity pursuant hereto) may include securities of the Company in a
Registration Statement other than the Registrable Securities, and the
Company shall not after the date hereof enter into any agreement providing
any such right to any of its security holders. Except as and to the extent
specified in Schedule 3.1(v) to the Purchase Agreement, the Company has not
previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person which have not been fully
satisfied.
(c) Compliance. Each Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities
pursuant to the Registration Statement.
(d) Discontinued Disposition. Each Holder agrees by its acquisition of
such Registrable Securities that, upon receipt of a notice from the Company
of the occurrence of any event of the kind described in Section 3(c), such
Holder will forthwith discontinue disposition of such Registrable
10
Securities under the Registration Statement until such Holder's receipt of
the copies of the supplemented Prospectus and/or amended Registration
Statement or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement. The Company may provide appropriate
stop orders to enforce the provisions of this paragraph.
(e) Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file
with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of
its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to
equity 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, then the Company shall send
to each Holder written notice of such determination and, if within fifteen
days after receipt of such notice, any such Holder shall so request in
writing, the Company shall include in such registration statement all or
any part of such Registrable Securities such holder requests to be
registered, subject to customary underwriter cutbacks applicable to all
holders of registration rights.
(f) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the same shall be in writing and signed by
the Company and the Holders of no less than two-thirds of the then
outstanding or issuable Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of certain
Holders and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of at least two-thirds of the Registrable
Securities to which such waiver or consent relates, provided, that the
provisions of this sentence may not be amended, modified, or supplemented
except in accordance with the provisions of the immediately preceding
sentence.
(g) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section prior to 6:30 p.m.
(New York City time) on a Trading Day, (ii) the Trading Day after the date
of transmission, if such notice or communication is delivered via facsimile
at the facsimile telephone number specified in this Agreement later than
6:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New
York City time) on such date, (iii) the Trading Day following the date of
mailing, if sent by nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as follows:
11
If to the Company: BUYERS UNITED, INC.
00000 Xxxxxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Chief Financial Officer
Facsimile: (000) 000-0000
With a copy to: Cohne, Xxxxxxxxx & Xxxxx, P.C.
000 Xxxx Xxxxx Xxxxx, 0xx Xxxxx
Xxxx Xxxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxx, Esq.
If to a Investor: To the address set forth under such
Investor's name on the signature pages hereto.
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears in the stock
transfer books of the Company
or such other address as may be designated in writing hereafter, in the
same manner, by such Person.
(h) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written
consent of each Holder. Each Holder may assign their respective rights
hereunder in the manner and to the Persons as permitted under the Purchase
Agreement.
(i) Execution and Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to
be an original and, all of which taken together shall constitute one and
the same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.
(j) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be
governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflicts of
law thereof. Each party agrees that all Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated
by this Agreement (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the
state and federal courts sitting in the City of New York, Borough of
Manhattan (the "New York Courts"). Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is
12
not personally subject to the jurisdiction of any New York Court, or that
such Proceeding has been commenced in an improper or inconvenient forum.
Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such Proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in
any manner permitted by law. Each party hereto hereby irrevocably waives,
to the fullest extent permitted by applicable law, any and all right to
trial by jury in any Proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of this Agreement, then the
prevailing party in such Proceeding shall be reimbursed by the other party
for its attorney's fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.
(k) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(n) Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor hereunder is several and not joint with the
obligations of any other Investor hereunder, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor hereunder. The decision of each Investor to purchase Securities
pursuant to the Transaction Documents has been made independently of any
other Investor. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Investor
pursuant hereto or thereto, shall be deemed to constitute the Investors as
a partnership, an association, a joint venture or any other kind of entity,
or create a presumption that the Investors are in any way acting in concert
with respect to such obligations or the transactions contemplated by this
Agreement. Each Investor acknowledges that no other Investor has acted as
agent for such Investor in connection with making its investment hereunder
and that no Investor will be acting as agent of such Investor in connection
with monitoring its investment in the Securities or enforcing its rights
under the Transaction Documents. Each Investor shall be entitled to protect
and enforce its rights, including without limitation the rights arising out
of this Agreement, and it shall not be necessary for any other Investor to
be joined as an additional party in any Proceeding for such purpose.
13
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
BUYERS UNITED, INC.
By:_________________________________
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF INVESTOR TO FOLLOW]
14
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
NAME OF INVESTOR
____________________________________________
By: ________________________________________
Name:
Title:
ADDRESS FOR NOTICE
c/o: _______________________________________
Street: ____________________________________
City/State/Zip: ____________________________
Attention: _________________________________
Tel: _______________________________________
Fax: _______________________________________
Email: _____________________________________
15
Annex A
Plan of Distribution
The Selling Stockholders and any of their pledgees, donees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the broker-dealer
solicits Investors;
o block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o to cover short sales made after the date that this Registration Statement
is declared effective by the Commission;
o broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders may from time to time pledge or grant a security
interest in some or all of the Shares owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell shares of Common Stock from time to time under this prospectus,
or under an amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933 amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus.
i
Upon the Company being notified in writing by a Selling Stockholder that
any material arrangement has been entered into with a broker-dealer for the sale
of Common Stock through a block trade, special offering, exchange distribution
or secondary distribution or a purchase by a broker or dealer, a supplement to
this prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such Selling Stockholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii)
the price at which such the shares of Common Stock were sold, (iv)the
commissions paid or discounts or concessions allowed to such broker-dealer(s),
where applicable, (v) that such broker-dealer(s) did not conduct any
investigation to verify the information set out or incorporated by reference in
this prospectus, and (vi) other facts material to the transaction. In addition,
upon the Company being notified in writing by a Selling Stockholder that a donee
or pledge intends to sell more than 500 shares of Common Stock, a supplement to
this prospectus will be filed if then required in accordance with applicable
securities law.
The Selling Stockholders also may transfer the shares of Common Stock in
other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this
prospectus.
The Selling Stockholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Discounts, concessions, commissions and
similar selling expenses, if any, that can be attributed to the sale of
Securities will be paid by the Selling Stockholder and/or the purchasers. Each
Selling Stockholder has represented and warranted to the Company that it does
not have any agreement or understanding, directly or indirectly, with any person
to distribute the Common Stock.
The Company has advised each Selling Stockholder that it may not use shares
registered on this Registration Statement to cover short sales of Common Stock
made prior to the date on which this Registration Statement shall have been
declared effective by the Commission. If a Selling Stockholder uses this
prospectus for any sale of the Common Stock, it will be subject to the
prospectus delivery requirements of the Securities Act. The Selling Stockholders
will be responsible to comply with the applicable provisions of the Securities
Act and Exchange Act, and the rules and regulations thereunder promulgated,
including, without limitation, Regulation M, as applicable to such Selling
Stockholders in connection with resales of their respective shares under this
Registration Statement.
The Company is required to pay all fees and expenses incident to the
registration of the shares, but the Company will not receive any proceeds from
the sale of the Common Stock. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act. If the Selling Stockholders use this
prospectus for any sale of the Common Stock, they will be subject to the
prospectus delivery requirements of the Securities Act.
ii
Annex B
BUYERS UNITED, INC.
Selling Securityholder Notice and Questionnaire
The undersigned beneficial owner of common stock, $.0001 par value per share
(the "Common Stock"), of Buyers United, Inc. (the "Company"), (the "Registrable
Securities") understands that the Company has filed or intends to file with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form S-1 (the "Registration Statement") for the registration and resale under
Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), of
the Registrable Securities, in accordance with the terms of the Registration
Rights Agreement, dated as of March ___, 2004 (the "Registration Rights
Agreement"), among the Company and the Investors named therein. A copy of the
Registration Rights Agreement is available from the Company upon request at the
address set forth below. All capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Registration Rights Agreement.
Certain legal consequences arise from being named as a selling securityholder in
the Registration Statement and the related prospectus. Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Registration Statement and the related
prospectus.
NOTICE
The undersigned beneficial owner (the "Selling Securityholder") of Registrable
Securities hereby elects to include the Registrable Securities owned by it and
listed below in Item 3 (unless otherwise specified under such Item 3) in the
Registration Statement.
iii
The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
QUESTIONNAIRE
1. Name.
(a) Full Legal Name of Selling Securityholder
______________________________________________________________________
(b) Full Legal Name of Registered Holder (if not the same as (a) above)
through which Registrable Securities Listed in Item 3 below are held:
______________________________________________________________________
(c) Full Legal Name of Natural Control Person (which means a natural
person who directly you indirectly alone or with others has power to
vote or dispose of the securities covered by the questionnaire):
______________________________________________________________________
2. Address for Notices to Selling Securityholder:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Telephone: ____________________________________________________________________
Fax: __________________________________________________________________________
Contact Person: _______________________________________________________________
3. Beneficial Ownership of Registrable Securities:
(a) Type and Principal Amount of Registrable Securities beneficially
owned:
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
4. Broker-Dealer Status:
(a) Are you a broker-dealer?
iv
Yes [ ] No [ ]
Note:If yes, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
(b) Are you an affiliate of a broker-dealer?
Yes [ ] No [ ]
(c) If you are an affiliate of a broker-dealer, do you certify that you
bought the Registrable Securities in the ordinary course of business,
and at the time of the purchase of the Registrable Securities to be
resold, you had no agreements or understandings, directly or
indirectly, with any person to distribute the Registrable Securities?
Yes [ ] No [ ]
Note:If no, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
5. Beneficial Ownership of Other Securities of the Company Owned by the Selling
Securityholder.
Except as set forth below in this Item 5, the undersigned is not the
beneficial or registered owner of any securities of the Company other than
the Registrable Securities listed above in Item 3.
(a) Type and Amount of Other Securities beneficially owned by the Selling
Securityholder:
______________________________________________________________________
______________________________________________________________________
v
6. Relationships with the Company:
Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (owners of
5% of more of the equity securities of the undersigned) has held any
position or office or has had any other material relationship with the
Company (or its predecessors or affiliates) during the past three
years.
State any exceptions here:
______________________________________________________________________
______________________________________________________________________
The undersigned agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein that may occur subsequent to the date
hereof at any time while the Registration Statement remains effective.
By signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 6 and the inclusion of such
information in the Registration Statement and the related prospectus. The
undersigned understands that such information will be relied upon by the Company
in connection with the preparation or amendment of the Registration Statement
and the related prospectus.
IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.
Dated: ___________________________ Beneficial Owner: __________________________
By: ________________________________________
Name:
Title:
PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:
Cohne, Xxxxxxxxx & Xxxxx, P.C.
000 Xxxx Xxxxx Xxxxx, 0xx Xxxxx
Xxxx Xxxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxxx, Esq.
vi
