Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), is made as of
July 27, 1998, by and among Valence Technology, Inc., a Delaware corporation
(the "COMPANY"), with headquarters located at 000 Xxxxxxxxx Xxx, Xxxxxxxxx, XX
00000 and the undersigned (the "INITIAL PURCHASER").
RECITALS
A. In connection with the Securities Purchase Agreement dated of even
date herewith by and between the Company and the Initial Purchaser (the
"SECURITIES PURCHASE AGREEMENT"), the Company has agreed, upon the terms and
subject to the conditions contained therein, to issue and sell to the Initial
Purchaser (i) shares of Series A Convertible Participating Preferred Stock of
the Company (the "PREFERRED STOCK") that is convertible into shares (the
"CONVERSION SHARES") of the Company's common stock, par value $.001 per share
(the "COMMON STOCK") and (ii) a Warrant (a "WARRANT" and, when take together
with all of the warrants issuable under the Securities Purchase Agreement, the
"WARRANTS") entitling the holder thereof to purchase the number of shares of
Common Stock set forth in the Securities Purchase Agreement (the "WARRANT
SHARES"), upon the terms and subject to the limitations and conditions set forth
in the Certificate of Designations, Preferences and Rights with respect to such
Preferred Stock (the "CERTIFICATE OF DESIGNATION"), in the form attached as
Exhibit A to the Securities Purchase Agreement.
B. To induce the Initial Purchaser to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"SECURITIES ACT"), and applicable state securities laws.
AGREEMENTS
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company, and the Initial
Purchaser hereby agrees as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "PURCHASERS" means the Initial Purchaser and any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Article IX hereof.
(b) "REGISTER," "REGISTERED," and "REGISTRATION" refer
to a registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("RULE 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(c) "REGISTRABLE SECURITIES" means the Conversion Shares
(including any Conversion Shares issuable with respect to conversion default
payments under the Certificate of Designation) issued or issuable with respect
to the Preferred Stock and the Warrant Shares issued or issuable with respect to
the Warrants (without regard to any limitations on conversion or exercise) and
any shares of capital stock issued or issuable, from time to time (with any
adjustments), on or in exchange for or otherwise with respect to the Common
Stock or any other Registrable Securities.
(d) "REGISTRATION STATEMENT" means a registration
statement of the Company under the Securities Act.
1.2 CAPITALIZED TERMS. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings set forth in the
Securities Purchase Agreement.
ARTICLE II
REGISTRATION
2.1 MANDATORY REGISTRATION. The Company shall prepare, and, on or
prior to twenty (20) days after the date of the Closing (the "FILING DATE"),
file with the SEC a Registration Statement on Form S-3 (or, if Form S-3 is
not then available, on such form of Registration Statement as is then
available to effect a registration of all of the Registrable Securities,
subject to the consent of the Initial Purchasers (as determined pursuant to
Section 11.10 hereof)) covering the resale of 5,000,000 shares of Common
Stock (which Registration Statement shall be amended or supplemented as soon
as practicable following the Shareholder Approval (as defined in the
Securities Purchase Agreement) to add at least an additional 2,000,000 shares
of Common Stock, such that the resale of at least 7,000,000 shares of Common
Stock is covered by the Registration Statement), which Registration
Statement, to the extent allowable under the Securities Act and the Rules
promulgated thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the
Preferred Stock and the exercise of the Warrants (i) to prevent dilution
resulting from stock splits, stock dividends or similar transactions or (ii)
by reason of changes in the Conversion Price of the Preferred Stock or the
Exercise Price of the Warrants in accordance with the terms thereof, as the
case may be. The Registrable Securities included in the Registration
Statement shall be allocated among the Purchasers as set forth in Section
11.11 hereof. The Registration Statement (and each amendment or supplement
thereto, and each request for acceleration of effectiveness thereof) shall be
provided to (and subject to the approval of (which approval shall not be
unreasonably withheld or denied)) the Initial Purchasers and their counsel
prior to its filing or other submission.
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2.2 UNDERWRITTEN OFFERING. If any offering pursuant to a Registration
Statement pursuant to Section 2.1 hereof involves an underwritten offering, the
Purchasers who hold a majority in interest of the Registrable Securities subject
to such underwritten offering, with the consent of the Initial Purchasers, shall
have the right to select a total of one legal counsel to represent the
Purchasers and an investment banker or bankers and manager or managers to
administer the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company.
2.3 PAYMENTS BY THE COMPANY. The Company shall cause the registration
statement to become effective as soon as practicable, but in no event later than
the ninetieth (90th) day following the date of the Closing (or, if the SEC
comments on the Registration Statement, the one hundred twentieth (120th) day
following the date of the Closing) (the "REGISTRATION DEADLINE"). If (i) the
registration statement(s) covering the Registrable Securities required to be
filed by the Company pursuant to Section 2.1 hereof is not declared effective by
the SEC on or before the Registration Deadline, or (ii) after the registration
statement has been declared effective by the SEC, sales of all the Registrable
Securities (including any Registrable Securities required to be registered
pursuant to Section 3.2 hereof) cannot be made pursuant to the registration
statement (by reason of a stop order or the Company's failure to update the
registration statement or any other reason outside the control of the
Purchasers), then the Company will make payments to the Purchasers in such
amounts and at such times as shall be determined pursuant to this Section 2.3 as
partial relief for the damages to the Purchasers by reason of any such delay in
or reduction of their ability to sell the Registrable Securities (which remedy
shall not be exclusive of any other remedies available at law or in equity). In
such event, the Company shall pay to each Purchaser (i) an amount equal to (A)
.01 times (B) the aggregate purchase price of the Preferred Stock held by such
Purchaser (including, without limitation, shares of Preferred Stock that have
been converted into Conversion Shares) prorated per day for the first thirty
(30) days following the Registration Deadline (the "GRACE PERIOD") prior to the
date the Registration Statement filed pursuant to Section 2.1 is declared
effective by the SEC (the "EFFECTIVE DATE"), and (ii) an amount equal to (x) (A)
.03 times (B) the aggregate purchase price of the Preferred Stock held by such
Purchaser (including, without limitation, shares of Preferred Stock that have
been converted into Conversion Shares) times (y) the sum of: (A) the number of
months (prorated per day for partial months) following the Grace Period prior to
the Effective Date plus (B) the number of months (prorated per day for partial
months) following the Grace Period but prior to the termination of the
Registration Period that sales cannot be made pursuant to the Registration
Statement after the Effective Date. Such amounts shall be paid in cash or, at
each Purchaser's option, may be convertible into Common Stock at the "CONVERSION
PRICE" (as defined in the Certificate of Designation), subject, however, to the
limitations set forth in Section IV6(ii) of the Certificate of Designation of
Section 8(f) of the Warrant. Any shares of Common Stock issued upon conversion
of such amounts shall be Registrable Securities. If the Purchaser desires to
convert or exercise the amounts due hereunder into Registrable Securities it
shall so notify the Company in writing within two (2) days prior to the date on
which such amounts are first payable in cash and such amounts shall be so
convertible (pursuant to the terms of the Certificate of Designation), beginning
on the last day upon which the cash amount would otherwise be due in accordance
with the following sentence. Payments of cash pursuant hereto shall be made
within five (5) days after the end of each period that
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gives rise to such obligation, provided that, if any such period extends for
more than thirty (30) days, payments shall be made for each such thirty (30)
day period within five (5) days after the end of such thirty (30) day period.
2.4 PIGGY-BACK REGISTRATIONS. If at any time prior to the expiration
of the Registration Period (as hereinafter defined) the Company shall file with
the SEC 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 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 Purchaser who
has a right to have Registrable Securities covered by a Registration Statement
pursuant to this Agreement written notice of such determination and, if within
fifteen (15) days after the date of such notice, such Purchaser shall so request
in writing, the Company shall include in such Registration Statement all or any
part of the Registrable Securities such Purchaser requests to be registered,
except that if, in connection with any underwritten public offering for the
account of the Company the managing underwriter(s) thereof shall impose a
limitation on the number of shares of Common Stock which may be included in the
Registration Statement because, in such underwriter(s)' judgment, marketing or
other factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Purchaser has requested inclusion hereunder as the
underwriter shall permit. Any exclusion of Registrable Securities shall be made
pro rata among the Purchasers seeking to include Registrable Securities, in
proportion to the number of Registrable Securities sought to be included by such
Purchasers; provided, however, that the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not entitled to inclusion of such
securities in such Registration Statement or are not entitled to pro rata
inclusion with the Registrable Securities; and provided, further, however, that,
after giving effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement. No
right to registration of Registrable Securities under this Section 2.4 shall be
construed to limit any registration required under Section 2.1 or 3.2 hereof.
If an offering in connection with which a Purchaser is entitled to registration
under this Section 2.4 is an underwritten offering, then each Purchaser 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.
2.5 ELIGIBILITY FOR FORM S-3. The Company represents and warrants
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Initial Purchasers and any other Purchaser of the Registrable
Securities and the Company shall file all reports required to be filed by the
Company with the SEC in a timely manner so as to maintain such eligibility for
the use of Form S-3.
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ARTICLE III
OBLIGATIONS OF THE COMPANY
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
3.1 The Company shall prepare promptly and file with the SEC the
Registration Statement required by Section 2.1, and cause such Registration
Statement relating to Registrable Securities to become effective as soon as
practicable after such filing, and keep the Registration Statement effective
pursuant to Rule 415 at all times until such date as is the earlier of (i) the
date on which all of the Registrable Securities have been sold (and no further
Registrable Securities may be issued in the future) and (ii) the date on which
all of the Registrable Securities (in the reasonable opinion of counsel to the
Initial Purchasers) may be immediately sold to the public without registration
and without restriction as to the number of Registrable Securities to be sold,
whether pursuant to Rule 144 or otherwise (the "REGISTRATION PERIOD"). The
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein and all documents incorporated by reference
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 not misleading.
3.2 The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until the termination of the Registration Period or, if earlier, such time as
all of such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
the Registration Statement. In the event the number of shares available under a
Registration Statement filed pursuant to this Agreement is, for any three (3)
consecutive trading days (the last of such three (3) trading days being the
"REGISTRATION TRIGGER DATE"), insufficient to cover one hundred seventy-five
percent (175%) of the Registrable Securities issued or issuable upon conversion
of the Preferred Stock held by any Purchaser, the Company shall amend, if
permissible, the Registration Statement, or file a new Registration Statement
(on the short form available therefor, if applicable), or both, so as to cover
two hundred percent (200%) of the Registrable Securities issued or issuable to
such Purchaser, in each case, as soon as practicable, but in any event within
five (5) days in the case of an amendment and ten (10) days in the case of a
Registration Statement after the Registration Trigger Date (based on the market
price of the Common Stock and other relevant factors on which the Company
reasonably elects to rely). The Company shall cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof.
3.3 The Company shall furnish to each Purchaser whose Registrable
Securities are included in the Registration Statement and its legal counsel (a)
promptly after the same is prepared
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and publicly distributed, filed with the SEC, or received by the Company, one
copy of the Registration Statement and any amendment thereto, each
preliminary prospectus and prospectus and each amendment or supplement
thereto, and, in the case of the Registration Statement referred to in
Section 2.1, each letter written by or on behalf of the Company to the SEC or
the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other
than any portion, if any, thereof which contains information for which the
Company has sought confidential treatment), and (b) such number of copies of
a prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Purchaser may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned (or to be owned) by such Purchaser.
3.4 The Company shall use commercially reasonable efforts to (a)
register and qualify the Registrable Securities covered by the Registration
Statement under securities laws of such jurisdictions in the United States as
each Purchaser who holds (or has the right to hold) Registrable Securities being
offered reasonably requests, (b) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (c) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (d) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (i) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3.4, (ii) subject itself to general taxation in any such
jurisdiction, (iii) file a general consent to service of process in any such
jurisdiction, (iv) provide any undertakings that cause the Company material
expense or burden, or (v) make any change in its charter or by-laws, which in
each case the board of directors of the Company determines to be contrary to the
best interests of the Company and its stockholders.
3.5 In the event the Purchasers who hold a majority in interest of the
Registrable Securities being offered in an offering pursuant to a Registration
Statement or any amendment or supplement thereto under Section 2.1 or 3.2 hereof
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.
3.6 As soon as practicable after becoming aware of such event, the
Company shall notify (by telephone and also by facsimile and reputable overnight
courier) each Purchaser of the happening of any event, of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and use its best efforts promptly
(but in any event within five (5) days) to prepare a supplement or amendment to
the Registration Statement to correct such untrue statement
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or omission, and deliver such number of copies of such supplement or
amendment to each Purchaser as such Purchaser may reasonably request.
3.7 The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest practicable time and to notify (by telephone and also by facsimile and
reputable overnight carrier) each Purchaser who holds Registrable Securities
being sold (or, in the event of an underwritten offering, the managing
underwriters) of the issuance of such order and the resolution thereof.
Notwithstanding anything to the contrary, the Company shall cause the Transfer
Agent to deliver unlegended shares of Common Stock to a transferee of Purchaser
in accordance with the terms of the Certificate of Designation in connection
with any sale of Registrable Securities with respect to which such Purchaser has
entered into a contract for sale prior to receipt of notice of such suspension
and for which such Purchaser has not yet settled.
3.8 The Company shall permit a single firm of counsel designated by
the Initial Purchasers to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time prior to their filing with
the SEC, and not file any document in a form to which such counsel reasonably
objects.
3.9 The Company shall make generally available to its security holders
as soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
3.10 The Company shall make available for inspection by (i) any
Purchaser, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
retained by the Purchasers, and (iv) one firm of attorneys retained by all such
underwriters (collectively, the "INSPECTORS") all pertinent financial and other
records, and pertinent corporate documents and properties of the Company
(collectively, the "RECORDS"), as shall be reasonably deemed necessary by each
Inspector to enable each Inspector to exercise its due diligence responsibility,
if any, 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 confidence and
shall not make any disclosure (except to a Purchaser) 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 in writing, unless (a) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in any Registration Statement, (b) the release of such Records is
ordered pursuant to a subpoena or other order from a court or government body of
competent jurisdiction, or is otherwise required by applicable law or legal
process 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 (to the knowledge of the relevant Purchaser). The Company shall not
be required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have
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entered into confidentiality agreements (in form and reasonable substance
satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3.10. Each Purchaser 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. Nothing herein shall
be deemed to limit a Purchaser's ability to sell Registrable Securities in a
manner which is consistent with applicable laws and regulations.
3.11 The Company shall hold in confidence and not make any disclosure
of information concerning a Purchaser provided to the Company unless (a)
disclosure of such information is necessary to comply with federal or state
securities laws, (b) the disclosure of such information is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (c) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or is otherwise
required by applicable law or legal process, (d) such information has been made
generally available to the public other than by disclosure in violation of this
or any other agreement (to the knowledge of the Company), or (e) such Purchaser
consents to the form and content of any such disclosure. The Company agrees
that it shall, upon learning that disclosure of such information concerning a
Purchaser is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Purchaser prior
to making such disclosure, and allow the Purchaser, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
3.12 The Company shall cause the listing and the continuation of
listing of all the Registrable Securities covered by the Registration Statement
on the Nasdaq National Market System, the Nasdaq SmallCap Market, the New York
Stock Exchange or the American Stock Exchange, and cause the Registrable
Securities to be quoted or listed on each additional national securities
exchange or quotation system upon which the Common Stock is then listed or
quoted.
3.13 The Company shall provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
3.14 The Company shall cooperate with the Purchasers who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Purchasers may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Purchasers may request, and, within one (1)
business day after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Purchasers whose Registrable
Securities are included in such Registration Statement) an opinion of such
counsel in the form attached hereto as EXHIBIT 1.
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3.15 At the request of any Purchaser, the Company shall promptly
prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the prospectus used
in connection with the Registration Statement as may be necessary in order to
change the plan of distribution set forth in such Registration Statement.
3.16 The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including, without limitation, the Securities Act and the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated by the
Commission).
3.17 The Company shall take all such other actions as any Purchaser or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities.
3.18 From and after the date of this Agreement, the Company shall not,
and shall not agree to, allow the holders of any securities of the Company to
include any of their securities in any Registration Statement or any amendment
or supplement thereto under Section 2.1 or 3.2 hereof without the consent of the
holders of a majority of the Registrable Securities.
ARTICLE IV
OBLIGATIONS OF THE PURCHASERS
In connection with the registration of the Registrable Securities, the
Purchasers shall have the following obligations:
4.1 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 Purchaser that such Purchaser shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least ten (10)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Purchaser of the information the
Company requires from each such Purchaser.
4.2 Each Purchaser, by such Purchaser'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
Statements hereunder, unless such Purchaser has notified the Company in writing
of such Purchaser's election to exclude all of such Purchaser's Registrable
Securities from the Registration Statement.
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4.3 Each Purchaser whose Registrable Securities are included in a
Registration Statement understands that the Securities Act may require delivery
of a prospectus relating thereto in connection with any sale thereof pursuant to
such Registration Statement, and each such Purchaser shall use its reasonable
efforts to comply with the applicable prospectus delivery requirements of the
Securities Act in connection with any such sale.
4.4 [Intentionally Deleted].
4.5 Each Purchaser agrees that, upon receipt of written notice from
the Company of the happening of any event of the kind described in Section 3.6,
such Purchaser will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Purchaser's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3.6 and, if so directed by the
Company, such Purchaser shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Purchaser's possession (other than a limited number of
permanent file copies), of the prospectus covering such Registrable Securities
current at the time of receipt of such notice. Notwithstanding anything to the
contrary, the Company shall cause its transfer agent to deliver unlegended
shares of Common Stock to a transferee of a Purchaser in accordance with the
terms of the Warrants or the Preferred Stock in connection with any sale of
Registrable Securities with respect to which such Purchaser has entered into a
contract for sale prior to receipt of such notice and for which such Purchaser
has not yet settled.
4.6 Without limiting a Purchaser's rights under Section 2.1 or 3.2
hereof, no Purchaser may participate in any underwritten distribution hereunder
unless such Purchaser (a) agrees to sell such Purchaser's Registrable Securities
on the basis provided in any underwriting arrangements in usual and customary
form entered into by the Company, (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements, and (c)
agrees to pay its pro rata share of all underwriting discounts and commissions
and any expenses in excess of those payable by the Company pursuant to
Article V.
ARTICLE V
EXPENSES OF REGISTRATION
All expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Articles
II and III, including, without limitation, all registration, listing and
qualification fees, printers and accounting fees, the fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
counsel selected by the Purchasers pursuant to Section 2.2, hereof shall be
borne by the Company.
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ARTICLE VI
INDEMNIFICATION
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
6.1 To the extent permitted by law, the Company will indemnify, hold
harmless and defend (a) each Purchaser who holds such Registrable Securities,
(b) each underwriter of Registrable Securities and (c) the directors, officers,
partners, members, employees, agents and persons who control any Purchaser
within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), if any, (each,
an "INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "CLAIMS") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange 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 (the matters in the foregoing clauses (i)
through (iii) being, collectively, "VIOLATIONS"). Subject to the restrictions
set forth in Section 6.3 with respect to the number of legal counsel, the
Company shall reimburse the Purchasers, each such underwriter and controlling
person, and each such other Indemnified Person, promptly as such expenses are
incurred and are due and payable, for any reasonable 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 6.1: (x) shall
not apply to an Indemnified Person with respect 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 such Indemnified Person
expressly for use in the Registration Statement or any such amendment thereof or
supplement thereto; (y) 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; and (z) with respect
to any preliminary prospectus, shall not inure to the benefit of any Indemnified
Person 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, if such corrected prospectus was timely made
available by the Company pursuant to Section 3.3 hereof, 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,
11
notwithstanding such advice, used it. 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 Purchasers pursuant to Article IX.
6.2 In connection with any Registration Statement in which a
Purchaser is participating, each such Purchaser agrees to indemnify, hold
harmless and defend, to the same extent and in the same manner set forth in
Section 6.1, the Company, each of its directors, each of its officers who
signs the Registration Statement, its employees, agents and persons, if any,
who control the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, and any other stockholder selling
securities pursuant to the Registration Statement, together with its
directors, officers and members, and any person who controls such stockholder
or underwriter within the meaning of the Securities Act or the Exchange Act
(such an "INDEMNIFIED PARTY"), against any Claim to which any of them may
become subject, under the Securities Act, the Exchange Act or otherwise,
insofar as such Claim arises out of or is 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 Purchaser expressly for use in connection with such
Registration Statement; and subject to Section 6.3 such Purchaser will
reimburse any legal or other expenses (promptly as such expenses are incurred
and are due and payable) reasonably incurred by them in connection with
investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6.2 shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the
prior written consent of such Purchaser, which consent shall not be
unreasonably withheld; provided, further, however, that a Purchaser shall be
liable under this Agreement (including this Section 6.2 and Article VII) for
only that amount as does not exceed the net proceeds actually received by
such Purchaser 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 Purchasers pursuant to Article IX. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6.2 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, and the Indemnified Party failed to utilize such corrected
prospectus.
6.3 Promptly after receipt by an Indemnified Person or Indemnified
Party under this Article VI of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Article VI, 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 such indemnifying party shall diligently pursue such defense and
that such indemnifying party shall not be entitled to assume such defense and an
Indemnified Person or Indemnified Party shall have
12
the right to retain its own counsel with the fees and expenses to be paid by
the indemnifying party, if the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential conflicts of interest between such
Indemnified Person or Indemnified Party and any other party represented by
such counsel in such proceeding or the actual or potential defendants in, or
targets of, any such action include both the Indemnified Person or the
Indemnified Party and any such Indemnified Person or Indemnified Party
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are different from or in
addition to those available to such indemnifying party. The indemnifying
party shall pay for only one separate legal counsel for the Indemnified
Persons or the Indemnified Parties, as applicable, and such legal counsel
shall be selected by Purchasers holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to which the
Claim relates (with the approval of the Initial Purchasers if they hold
Registrable Securities included in such Registration Statement), if the
Purchasers are entitled to indemnification hereunder, or by the Company, if
the Company is entitled to indemnification hereunder, as applicable. 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 Article VI, except to the extent that the indemnifying party
is actually prejudiced in its ability to defend such action. The
indemnification required by this Article VI shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due
and payable.
ARTICLE VII
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 Article VI to the fullest extent permitted by law; provided,
however, that (i) no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person of Registrable Securities who was not guilty of
such fraudulent misrepresentation, and (ii) contribution (together with any
indemnification or other obligations under this Agreement) 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.
ARTICLE VIII
REPORTS UNDER THE EXCHANGE ACT
With a view to making available to the Purchasers the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation
of the SEC that may at any time permit the Purchasers to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
13
8.1 File with the SEC in a timely manner and make and keep available
all reports and other documents required of the Company under the Securities Act
and the Exchange 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 4.3 of the Securities Purchase Agreement) and the filing and
availability of such reports and other documents is required for the applicable
provisions of Rule 144; and
8.2 Furnish to each Purchaser so long as such Purchaser holds
Preferred Stock, Warrants or Registrable Securities, promptly upon request, (i)
a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Purchasers to sell such securities
pursuant to Rule 144 without registration.
ARTICLE IX
ASSIGNMENT OF REGISTRATION RIGHTS
The rights of the Purchasers hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assigned by each Purchaser to any transferee of all or any portion
of the Preferred Stock or the Registrable Securities if: (a) the Purchaser
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (b) the Company is, within ten (10) business days after
such transfer or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee, and (ii) the securities with respect to
which such registration rights are being transferred or assigned, (c) following
such transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act or applicable
state securities laws, (d) 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 for the benefit of the Company to be bound by all of
the provisions contained herein, and (e) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement.
ARTICLE X
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 written consent of the Company, the
Initial Purchaser (but not an Initial Purchaser who no longer owns any Preferred
Stock or Registrable Securities and who is not affected by such amendment or
waiver) and Purchasers who hold a majority interest of the Registrable
Securities. Any amendment or waiver effected in accordance with this Article X
shall be binding upon each Purchaser and the Company. Notwithstanding the
foregoing, no amendment or waiver shall retroactively affect any Purchaser
without its comment or prospectively adversely affect any Purchaser who no
longer owns
14
any Preferred Stock, Warrants or Registrable Securities without its consent.
Neither Article VI nor Article VII hereof may be amended or waived in a
manner adverse to a Purchaser without its consent.
ARTICLE XI
MISCELLANEOUS
11.1 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.
11.2 Any notices herein required or permitted to be given shall be in
writing and may be personally served or delivered by courier or by confirmed
telecopy, and shall be deemed delivered at the time and date of receipt (which
shall include telephone line facsimile transmission). The addresses for such
communications shall be:
If to the Company:
Valence Technology, Inc.
000 Xxxxxxxxx Xxx
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx Godward LLP
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Telecopy: (000) 000-0000
If to CC Investments, LDC:
CC Investments, LDC
Corporate Centre, West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
15
with a copy to:
Castle Creek Partners, LLC
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxx
and with a copy to:
Altheimer & Xxxx
00 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
and if to any other Purchaser, at such address as such Purchaser, shall have
provided in writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 11.2.
11.3 Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
11.4 This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware applicable to contracts made and to be
performed in the State of Delaware. The Company irrevocably consents to the
jurisdiction of the federal courts located in the State of Delaware and the
state courts of the State of Delaware located in the County of New Castle in the
State of Delaware in any suit or proceeding based on or arising under this
Agreement and irrevocably agrees that all claims in respect of such suit or
proceeding may be determined in such courts. The Company irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The parties hereto further agree that service of process upon the parties hereto
mailed by first class mail shall be deemed in every respect effective service of
process upon each such party in any such suit or proceeding. Nothing herein
shall affect either party's right to serve process in any other manner permitted
by law. The parties hereto agree that a final non-appealable judgment in any
such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
11.5 This Agreement, the Preferred Stock, Warrants and the Securities
Purchase Agreement (including all schedules and exhibits thereto and all
certificates and opinions required thereby) 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
16
set forth or referred to herein and therein. This Agreement, the Preferred
Stock, the Warrants and the Securities Purchase Agreement supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
11.6 Subject to the requirements of Article IX hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto. Notwithstanding anything to the contrary contained
herein, including, without limitation, Article IX, the rights of a Holder
hereunder shall be assignable to and exercisable by a bona fide pledgee of the
Registrable Securities in connection with a Holder's margin or brokerage
accounts.
11.7 The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
11.8 This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto, by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
11.9 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.
11.10 All consents and other determinations to be made by the Purchasers
pursuant to this Agreement shall be made by the Purchasers holding a majority of
the Registrable Securities (determined as if all Preferred Stock then
outstanding had been converted into Registrable Securities) held by all
Purchasers.
11.11 The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable Securities
included thereon shall be allocated pro rata among the Purchasers based on the
number of Registrable Securities held by each Purchaser at the time of such
establishment or increase, as the case may be. In the event a Purchaser shall
sell or otherwise transfer any of such holder's Registrable Securities, each
transferee shall be allocated a pro rata portion of the number of Registrable
Securities included on a Registration Statement for such transferor. Any shares
of Common Stock included on a Registration Statement and which remain allocated
to any person or entity which does not hold any Registrable Securities shall be
allocated to the remaining Purchasers, pro rata based on the number of shares of
Registrable Securities then held by such Purchasers. Without implication that
the contrary would otherwise be true, for purposes of this paragraph, all
Preferred Stock then outstanding shall be assumed converted into Registrable
Securities.
17
11.12 If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement.
* * *
18
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
VALENCE TECHNOLOGY, INC.
By: /s/ Xxx X. Xxxxxx
-----------------------------
Name:
Title: President, Chairman and
Chief Executive Officer
Initial Purchaser:
CC INVESTMENTS, LDC
By:/s/ Xxxx Xxxxxxxxx
-----------------------------
Name:
Title: Director
19
EXHIBIT 1
TO REGISTRATION
RIGHTS AGREEMENT
[Date]
[Name and address
of transfer agent]
RE: VALENCE TECHNOLOGY, INC.
Ladies and Gentlemen:
We are counsel to Valence Technology, Inc., a Delaware corporation (the
"COMPANY"), and we understand that [Name of Purchaser] (the "HOLDER") has
purchased from the Company Series A Convertible Participating Preferred Stock of
the Company (the "PREFERRED STOCK"), convertible into shares of the Company's
common stock, par value $.001 per share (the "COMMON STOCK"). The Preferred
Stock was purchased by the Holder pursuant to a Securities Purchase Agreement,
dated as of July , 1998, by and among the Company and the signatories thereto
(the "AGREEMENT"). Pursuant to a Registration Rights Agreement, dated as of
July , 1998, by and among the Company and the signatories thereto (the
"REGISTRATION RIGHTS AGREEMENT"), the Company agreed with the Holder, among
other things, to register the Registrable Securities (as that term is defined in
the Registration Rights Agreement) under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), upon the terms provided in the Registration Rights
Agreement. In connection with the Company's obligations under the Registration
Rights Agreement, on _____ __, 1998, the Company filed a Registration Statement
on Form S-_____ (File No. 333- __________) (the "REGISTRATION STATEMENT") with
the Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities, which names the Holder as a selling stockholder thereunder.
[Other customary introductory and scope of examination language to be
inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
[Other appropriate customary language to be included.]
Very truly yours,
cc: [Name of Purchaser]
20