REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of April 7, 2006, by and between Auxilio, Inc., a Nevada
corporation (the "Company"), and Laurus Master Fund, Ltd. (the "Purchaser").
This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof, by and between the Purchaser and the Company (as
amended, modified or supplemented from time to time, the "Securities Purchase
Agreement"), and pursuant to the Note and the Warrants referred to therein.
The Company and the Purchaser hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Securities Purchase Agreement shall have the meanings
given such terms in the Securities Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Commission" means the Securities and Exchange Commission.
"Common Stock" means shares of the Company's common stock, par value
$0.001 per share.
"Effectiveness Date" means (i) with respect to the initial
Registration Statement required to be filed hereunder, a date no later than one
hundred eighty (180) days following the date hereof; (ii) with respect to each
post-effective amendment to the Registration Statement required to be filed
hereunder, a date no later than thirty (30) days following the applicable Filing
Date; and (iii) with respect to each additional Registration Statement required
to be filed hereunder, a date no later than thirty (30) days following the
applicable Filing Date.
"Effectiveness Period" has the meaning set forth in Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any successor statute.
"Filing Date" means, with respect to (i) the Registration Statement
required to be filed hereunder in respect of the shares of Common Stock issuable
upon conversion of the Note, a date no later than sixty (60) days following the
date hereof, (ii) the shares of Common Stock issuable upon exercise of any
Warrant, the date which is sixty (60) days after the date of the issuance of
such Warrant, and (iii) the shares of Common Stock issuable to the Holder as a
result of adjustments to the Fixed Conversion Price or Exercise Price, as the
case may be, made pursuant to the Note or the Warrant or otherwise, thirty (30)
days after the occurrence such event or the date of the adjustment of the Fixed
Conversion Price or Exercise Price, as the case may be. With respect to any
post-effective amendment that is required to be made due to the Company's filing
of certain reports and filings under Section 13 or 15(d) of the Exchange Act,
the "Filing Date" shall be five (5) days following the earlier of (a) date of
filing of such report or filing, or (b) the date such report or filing is
required to be made (giving effect to any extensions permitted under the
Exchange Act or the Securities Act)
"Holder" or "Holders" means the Purchaser or any of its affiliates
or transferees to the extent any of them hold Registrable Securities, other than
those purchasing Registrable Securities in a market transaction.
"Indemnified Party" has the meaning set forth in Section 5(c).
"Indemnifying Party" has the meaning set forth in Section 5(c).
"Note" has the meaning set forth in the Securities Purchase
Agreement.
"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 the 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
upon the conversion of the Note and issuable upon exercise of the Warrants.
"Registration Statement" means each registration statement required
to be filed hereunder, including the Prospectus therein, amendments and
supplements to such registration statement 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
statement.
"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.
"Securities Act" means the Securities Act of 1933, as amended, and
any successor statute.
"Securities Purchase Agreement" has the meaning given to such term
in the Preamble hereto.
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"Trading Market" means any of the NASD Over The Counter Bulletin
Board, the NASDAQ Capital Market, the NASDAQ National Markets System, the
American Stock Exchange or the New York Stock Exchange.
"Warrants" means the Common Stock purchase warrants issued in
connection with the Securities Purchase Agreement, whether on the date hereof or
thereafter.
2. Registration.
(a) On or prior to the Filing Date, the Company shall prepare and
file with the Commission a Registration Statement covering the Registrable
Securities for a selling stockholder resale offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement shall be
on Form SB-2 (except if the Company is not then eligible to register for
resale the Registrable Securities on Form SB-2, in which case such
registration shall be on another appropriate form in accordance herewith).
The Company shall cause each Registration Statement to become effective
and remain effective as provided herein. The Company shall use its best
efforts to cause each Registration Statement to be declared effective
under the Securities Act as promptly as possible after the filing thereof,
but in any event no later than the Effectiveness Date. The Company shall
use its reasonable commercial efforts to keep each Registration Statement
continuously effective under the Securities Act until the date which is
the earlier date of when (i) all Registrable Securities have been sold or
(ii) all Registrable Securities covered by such Registration Statement may
be sold immediately without registration under the Securities Act and
without volume restrictions pursuant to Rule 144(k), as determined by the
counsel to the Company pursuant to a written opinion letter to such
effect, addressed and acceptable to the Company's transfer agent and the
affected Holders (the "Effectiveness Period").
(b) Each Purchaser acknowledges that as of the date of this
Agreement the Company is not eligible to use Form S-3 and must, therefore,
use Form SB-2. As such, the Company will be required to regularly update
its Form SB-2 upon the filing of certain reports or filings required by
Section 13(a) or 15(d) of the Exchange Act. Each Purchaser further
acknowledges that upon the filings of any post-effective amendment the
Registration Statement required to be filed hereunder may not be deemed
effective until such time as the post-effective amendment has been
declared effective by the Commission. During such time the Purchaser will
be unable to use the prospectus contained therein for the purpose of
reselling its Registrable Securities. In the event that the Company must
file a post-effective amendment to the Registration Statement, the Company
shall use its best efforts to cause the post-effective amendment to be
declared effective under the Securities Act within a reasonable amount of
time after the Filing Date.
(c) Within three business days of the applicable Effectiveness Date,
the Company shall cause its counsel to issue a blanket opinion in the form
attached hereto as Exhibit A, to the transfer agent stating that the
shares are subject to an effective registration statement and can be
reissued free of restrictive legend upon notice of a sale by the Purchaser
and confirmation by the Purchaser that it has complied with the prospectus
delivery requirements, provided that the Company has not advised the
transfer agent orally or in writing that the opinion has been withdrawn.
Copies of the blanket opinion required by this Section 2(b) shall be
delivered to the Purchaser within the time frame set forth above.
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3. Registration Procedures. If and whenever the Company is required by the
provisions hereof to effect the registration of any Registrable Securities under
the Securities Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a Registration Statement
with respect to such Registrable Securities, respond as promptly as
possible to any comments received from the Commission, and use its best
efforts to cause the Registration Statement to become and remain effective
for the Effectiveness Period with respect thereto, and promptly provide to
the Purchaser copies of all filings and Commission letters of comment
relating thereto;
(b) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the Prospectus used in
connection therewith as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all Registrable
Securities covered by such Registration Statement and to keep such
Registration Statement effective until the expiration of the Effectiveness
Period applicable to such Registration Statement;
(c) furnish to the Purchaser such number of copies of the
Registration Statement and the Prospectus included therein (including each
preliminary Prospectus) as the Purchaser reasonably may request to
facilitate the public sale or disposition of the Registrable Securities
covered by the Registration Statement;
(d) use its best efforts to register or qualify the Purchaser's
Registrable Securities covered by such Registration Statement under the
securities or "blue sky" laws of such jurisdictions within the United
States as the Purchaser may reasonably request, provided, however, that
the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service
of process in any such jurisdiction;
(e) list the Registrable Securities covered by such Registration
Statement with any securities exchange on which the Common Stock of the
Company is then listed;
(f) immediately notify the Purchaser at any time when a Prospectus
relating thereto is required to be delivered under the Securities Act, of
the happening of any event of which the Company has knowledge as a result
of which the Prospectus contained in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing; and
(g) make available for inspection by the Purchaser and any attorney,
accountant or other agent retained by the Purchaser, all publicly
available, non-confidential financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the attorney,
accountant or agent of the Purchaser.
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4. Registration Expenses. All expenses relating to the Company's
compliance with Sections 2 and 3 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses
(including reasonable counsel fees) incurred in connection with complying with
state securities or "blue sky" laws, fees of the NASD, transfer taxes, fees of
transfer agents and registrars, fees of, and disbursements incurred by, one
counsel for the Holders (in an amount not to exceed $20,000 per registration
unless otherwise agreed), are called "Registration Expenses". All selling
commissions applicable to the sale of Registrable Securities, including any fees
and disbursements of any special counsel to the Holders beyond those included in
Registration Expenses, are called "Selling Expenses." The Company shall only be
responsible for all Registration Expenses.
5. Indemnification.
(a) In the event of a registration of any Registrable Securities
under the Securities Act pursuant to this Agreement, the Company will
indemnify and hold harmless the Purchaser, and its officers, directors and
each other person, if any, who controls the Purchaser within the meaning
of the Securities Act, against any losses, claims, damages or liabilities,
joint or several ("Losses"), to which the Purchaser, or such persons may
become subject under the Securities Act or otherwise, insofar as such
Losses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement under which such Registrable
Securities were registered under the Securities Act pursuant to this
Agreement, any preliminary Prospectus or final Prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Purchaser, and each such
person for any reasonable legal or other expenses incurred by them in
connection with investigating or defending any such Losses; provided,
however, that the Company will not be liable in any such case if and to
the extent that any such Losses arise out of or are based upon an untrue
statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by or on behalf of the
Purchaser or any such person in writing specifically for use in any such
document. Each Purchaser acknowledges that upon the filings of any
post-effective amendment the Registration Statement required to be filed
hereunder may not be deemed effective until such time as the
post-effective amendment has been declared effective by the Commission.
During such time the Purchaser will be unable to use the prospectus
contained therein for the purpose of reselling its Registrable Securities.
The Company shall not be liable for any sales made by any Purchaser during
the period of time commencing on the filing of the post-effective
amendment and ending on the date in which the SEC declares the
post-effective amendment to be effective under the Securities Act.
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(b) In the event of a registration of the Registrable Securities
under the Securities Act pursuant to this Agreement, the Purchaser will
indemnify and hold harmless the Company, and its officers, directors and
each other person, if any, who controls the Company within the meaning of
the Securities Act, against all Losses, to which the Company or such
persons may become subject under the Securities Act or otherwise, insofar
as such Losses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
which was furnished in writing by the Purchaser to the Company expressly
for use in (and such information is contained in) the Registration
Statement under which such Registrable Securities were registered under
the Securities Act pursuant to this Agreement, any preliminary Prospectus
or final Prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will
reimburse the Company and each such person for any reasonable legal or
other expenses incurred by them in connection with investigating or
defending any such Losses, provided, however, that the Purchaser will be
liable in any such case if and only to the extent that any such Losses
arise out of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished in writing to the Company by or on behalf of the
Purchaser specifically for use in any such document. Notwithstanding the
provisions of this paragraph, the Purchaser shall not be required to
indemnify any person or entity in excess of the amount of the aggregate
net proceeds received by the Purchaser in respect of Registrable
Securities in connection with any such registration under the Securities
Act.
(c) Promptly after receipt by a party entitled to claim
indemnification hereunder (an "Indemnified Party") of notice of the
commencement of any action, such Indemnified Party shall, if a claim for
indemnification in respect thereof is to be made against a party hereto
obligated to indemnify such Indemnified Party (an "Indemnifying Party"),
notify the Indemnifying Party in writing thereof, but the omission so to
notify the Indemnifying Party shall not relieve it from any liability
which it may have to such Indemnified Party other than under this Section
5(c) and shall only relieve it from any liability which it may have to
such Indemnified Party under this Section 5(c) if and to the extent the
Indemnifying Party is prejudiced by such omission. In case any such action
shall be brought against any Indemnified Party and it shall notify the
Indemnifying Party of the commencement thereof, the Indemnifying Party
shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel satisfactory to such
Indemnified Party, and, after notice from the Indemnifying Party to such
Indemnified Party of its election so to assume and undertake the defense
thereof, the Indemnifying Party shall not be liable to such Indemnified
Party under this Section 5(c) for any legal expenses subsequently incurred
by such Indemnified Party in connection with the defense thereof; if the
Indemnified Party retains its own counsel, then the Indemnified Party
shall pay all fees, costs and expenses of such counsel, provided, however,
that, if the defendants in any such action include both the Indemnified
Party and the Indemnifying Party and the Indemnified Party shall have
reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the
Indemnifying Party or if the interests of the Indemnified Party reasonably
may be deemed to conflict with the interests of the Indemnifying Party,
the Indemnified Party shall have the right to select one separate counsel
and to assume such legal defenses and otherwise to participate in the
defense of such action, with the reasonable expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the Indemnifying Party as incurred.
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(d) In order to provide for just and equitable contribution in the
event of joint liability under the Securities Act in any case in which
either (i) the Purchaser, or any officer, director or controlling person
of the Purchaser, makes a claim for indemnification pursuant to this
Section 5 but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact
that this Section 5 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of the
Purchaser or such officer, director or controlling person of the Purchaser
in circumstances for which indemnification is provided under this Section
5; then, and in each such case, the Company and the Purchaser will
contribute to the aggregate Losses to which they may be subject (after
contribution from others) in such proportion so that the Purchaser is
responsible only for the portion represented by the percentage that the
public offering price of its securities offered by the Registration
Statement bears to the public offering price of all securities offered by
such Registration Statement, provided, however, that, in any such case,
(A) the Purchaser will not be required to contribute any amount in excess
of the public offering price of all such securities offered by it pursuant
to such Registration Statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 10(f) of the
Act) will be entitled to contribution from any person or entity who was
not guilty of such fraudulent misrepresentation
6. Representations and Warranties.
(a) The Common Stock is registered pursuant to Section 12(b) or
12(g) of the Exchange Act and, except with respect to certain matters
which the Company has disclosed to the Purchaser on Schedule 4.21 to the
Securities Purchase Agreement, the Company has timely filed all proxy
statements, reports, schedules, forms, statements and other documents
required to be filed by it under the Exchange Act. The Company has filed
(i) its Annual Report on Form 10-KSB for its fiscal year ended December
31, 2004 and (ii) its Quarterly Report on Form 10-QSB for the fiscal
quarters ended March 30, 2005, June 30, 2005 and September 30, 2005
(collectively, the "SEC Reports"). Each SEC Report was, at the time of its
filing, in substantial compliance with the requirements of its respective
form and none of the SEC Reports, nor the financial statements (and the
notes thereto) included in the SEC Reports, as of their respective filing
dates, contained any untrue statement of a material fact or omitted 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. The financial statements of the Company
included in the SEC Reports comply as to form in all material respects
with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations
with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied
on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or
(ii) in the case of unaudited interim statements, to the extent they may
not include footnotes or may be condensed) and fairly present in all
material respects the financial condition, the results of operations and
the cash flows of the Company and its subsidiaries, on a consolidated
basis, as of, and for, the periods presented in each such SEC Report.
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(b) The Common Stock is quoted for trading on the NASDAQ Over The
Counter Bulletin Board and satisfies all requirements for the continuation
of such quotation, and the Company shall do all things necessary for the
continuation of such quotation. The Company has not received any notice
that its Common Stock will no longer be quoted on the NASDAQ Over The
Counter Bulletin Board (except for prior notices which have been fully
remedied) or that the Common Stock does not meet all requirements for the
continuation of such listing.
(c) Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf, has directly or indirectly made any offers
or sales of any security or solicited any offers to buy any security under
circumstances that would cause the offering of the Securities pursuant to
the Securities Purchase Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the
Company from selling the Common Stock pursuant to Rule 506 under the
Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or subsidiaries
take any action or steps that would cause the offering of the Securities
to be integrated with other offerings.
(d) The Warrants, the Note and the shares of Common Stock which the
Purchaser may acquire pursuant to the Warrants and the Note are all
restricted securities under the Securities Act as of the date of this
Agreement. The Company will not issue any stop transfer order or other
order impeding the sale and delivery of any of the Registrable Securities
at such time as such Registrable Securities are registered for public sale
or an exemption from registration is available, except as required by
federal or state securities laws.
(e) The Company understands the nature of the Registrable Securities
issuable upon the conversion of the Note and the exercise of the Warrant
and recognizes that the issuance of such Registrable Securities may have a
potential dilutive effect. The Company specifically acknowledges that its
obligation to issue the Registrable Securities is binding upon the Company
and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company.
(f) Except for agreements made in the ordinary course of business,
there is no agreement that has not been filed with the Commission as an
exhibit to a registration statement or to a form required to be filed by
the Company under the Exchange Act, the breach of which could reasonably
be expected to have a material and adverse effect on the Company and its
subsidiaries, or would prohibit or otherwise interfere with the ability of
the Company to enter into and perform any of its obligations under this
Agreement in any material respect.
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(g) The Company will at all times have authorized and reserved a
sufficient number of shares of Common Stock for the full conversion of the
Note and exercise of the Warrants.
7. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their respective 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.
(b) No Piggyback on Registrations. Except as and to the extent
specified in Schedule 7(b) hereto, 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 any Registration Statement other
than the Registrable Securities, and the Company shall not after the date
hereof enter into any agreement providing any such right for inclusion of
shares in the Registration Statement to any of its security holders.
Except as and to the extent specified in Schedule 7(b) hereto, the Company
has not previously entered into any agreement granting any registration
rights with respect to any of its securities to any person or entity that
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 a Discontinuation Event (as defined below),
such Holder will forthwith discontinue disposition of such Registrable
Securities under the applicable 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. For
purposes of this Agreement, a "Discontinuation Event" shall mean (i) 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); (ii) any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to such Registration
Statement or Prospectus or for additional information; (iii) the issuance
by the Commission of any stop order suspending the effectiveness of such
Registration Statement covering any or all of the Registrable Securities
or the initiation of any Proceedings for that purpose; (iv) the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening
of any Proceeding for such purpose; and/or (v) the occurrence of any event
or passage of time that makes the financial statements included in such
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 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.
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(e) Piggy-Back Registrations. If at any time after the date hereof
there is not an effective Registration Statement covering all of the
Registrable Securities required to be covered hereunder 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 (15) 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 to the
extent the Company may do so without violating registration rights of
others which exist as of the date of this Agreement, subject to customary
underwriter cutbacks applicable to all holders of registration rights and
subject to obtaining any required consent of any selling stockholder(s) to
such inclusion under such registration statement.
(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 the then outstanding 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 a majority of the Registrable Securities to which such waiver or
consent relates; provided, however, 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 notice or request hereunder may be given to the
Company or the Purchaser at the respective addresses set forth below or as
may hereafter be specified in a notice designated as a change of address
under this Section 6(g). Any notice or request hereunder shall be given by
registered or certified mail, return receipt requested, hand delivery,
overnight mail, Federal Express or other national overnight next day
carrier (collectively, "Courier") or telecopy (confirmed by mail). Notices
and requests shall be, in the case of those by hand delivery, deemed to
have been given when delivered to any party to whom it is addressed, in
the case of those by mail or overnight mail, deemed to have been given
three (3) business days after the date when deposited in the mail or with
the overnight mail carrier, in the case of a Courier, the next business
day following timely delivery of the package with the Courier, and, in the
case of a telecopy, when confirmed. The address for such notices and
communications shall be as follows:
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If to the Company: Auxilio, Inc.
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Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
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▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to a Purchaser: To the address set forth under such
Purchaser 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
accordance with this Section 7(g) 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 and entities
as permitted under the Note and the Securities Purchase Agreement, but
only if (a) the Company is, within a reasonable time after such transfer
or assignment, furnished with written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being transferred or assigned, (b) after such
transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and
applicable state securities laws, (c) at or before the time the Company
received the written notice contemplated by clause (a) of this sentence,
the transferee or assignee agrees in writing with the Company to be bound
by all of the provisions contained herein, and (d) the transferee or
assignee is an "accredited investor" as that term is defined in Rule 501
of Regulation D.
11
(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, Jurisdiction and Waiver of Jury Trial. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
The Company hereby consents and agrees that the state or federal courts
located in the County of New York, State of New York shall have exclusion
jurisdiction to hear and determine any Proceeding between the Company, on
the one hand, and the Purchaser, on the other hand, pertaining to this
Agreement or to any matter arising out of or related to this Agreement;
provided, that the Purchaser and the Company acknowledge that any appeals
from those courts may have to be heard by a court located outside of the
County of New York, State of New York, and further provided, that nothing
in this Agreement shall be deemed or operate to preclude the Purchaser
from bringing a Proceeding in any other jurisdiction to collect the
obligations, to realize on the Collateral or any other security for the
obligations, or to enforce a judgment or other court order in favor of the
Purchaser. The Company expressly submits and consents in advance to such
jurisdiction in any Proceeding commenced in any such court, and the
Company hereby waives any objection which it may have based upon lack of
personal jurisdiction, improper venue or forum non conveniens. The Company
hereby waives personal service of the summons, complaint and other process
issued in any such Proceeding and agrees that service of such summons,
complaint and other process may be made by registered or certified mail
addressed to the Company at the address set forth in Section 7(g) and that
service so made shall be deemed completed upon the earlier of the
Company's actual receipt thereof or three (3) days after deposit in the
U.S. mails, proper postage prepaid. The parties hereto desire that their
disputes be resolved by a judge applying such applicable laws. Therefore,
to achieve the best combination of the benefits of the judicial system and
of arbitration, the parties hereto waive all rights to trial by jury in
any Proceeding brought to resolve any dispute, whether arising in
contract, tort, or otherwise between the Purchaser and/or the Company
arising out of, connected with, related or incidental to the relationship
established between then in connection with this Agreement. If either
party hereto shall commence a Proceeding to enforce any provisions of this
Agreement, the Securities Purchase Agreement or any other Related
Agreement, then the prevailing party in such Proceeding shall be
reimbursed by the other party for its reasonable attorneys' 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.
12
(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.
[Balance of page intentionally left blank;
signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
AUXILIO, INC. LAURUS MASTER FUND, LTD.
By: By:
------------------------------ ------------------------------
Name: Name:
------------------------------ ------------------------------
Title: Title:
------------------------------ ------------------------------
Address for Notices: Address for Notices:
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇ Attention: ▇▇▇▇▇ Grin
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
14
EXHIBIT A
LEGAL OPINION
Schedule A
Shares
Selling Stockholder Being Offered
------------------- -------------
SCHEDULE 7(b)
-------------
(a)
(1) In March 2006, the Company borrowed $250,000 from Cambria
Investment Fund L.P. under the Revolving Loan Agreement. This borrowing
earned Cambria the right to receive warrants to purchase 75,000 shares of
the Company's common stock at the market price, as 17,500 shares vest for
every multiple of $50,000 borrowed under the Revolving Loan Agreement with
the Company. Total warrants issued to Cambria under this note is 162,500.
(2) On December 28, 2004, Auxilio entered into a Revolving Loan and
Security Agreement with ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇. ▇▇. ▇▇▇▇▇▇▇▇▇▇ is a
director of the Company. Under the agreement, the Company can borrow up to
$500,000. As of March 31, 2005, the Company had borrowed $500,000 under
the Revolving Loan. During the three months ended March 31, 2005, the
Company issued 50,000 warrants at $2.50 per share to ▇▇. ▇▇▇▇▇▇▇▇▇▇. All
amounts owed on The Revolving Loan and Security Agreement have been repaid
and the debt facility expired on December 10, 2005.
(3) On December 10, 2004 the Company issued a warrant agreement to
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Financial Officer, to purchase 330,000 shares of
the Company's common stock at an exercise price of $1.95 per share, which
was equal to the fair market value of the Company's common stock on the
date of issuance.
(4) During 2004 the Board of Directors approved and issued warrant
agreements to purchase 715,000 shares of the Company's common stock to
three officers at an exercise price of $0.30 per share, which is equal to
the price the Company sold shares in a private placement. The warrants
granted are restricted from vesting for a minimum of one year, while
certain shares only vest pursuant to certain earning targets being
achieved, and accordingly, the intrinsic value measurement will be made
when the earnings targets are met. A total of 640,000 shares subject to
the warrants have vested and 75,000 have been cancelled.
(5) The Company granted a warrant agreement to purchase 5,000 shares
at $0.30 per share in April 2004 to a "finder" whom introduced the Company
to Workstream.
(10) The Company granted a warrant agreement to purchase 8,333
shares at $12.00 per share in May 2000 to ▇▇▇▇▇ ▇▇▇▇▇▇▇ whom performed
services for the Company.
The warrants set forth above state that: "If (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than
the Holder) any of its stock under the Securities Act of 1934 in
connection with the public offering of such securities solely for cash
(other than a registration on Form S?4, Form S?8 or any successors thereto
or a registration in which the only stock being registered is Common Stock
issuable upon conversion of debt securities which are also being
registered), the Company shall, at such time, promptly give the Holder
written notice of such registration. Upon the written request of the
Holder given within fifteen (15) days after mailing of such notice by the
Company, the Company shall, subject to the provisions of Section 5(a),
below, cause to be registered under the Securities Act all of the Warrant
Shares."
(b) The warrants and shares of common stock issued in the Company's July 2005
Private Placement have registration rights. The registration rights granted to
these securities are as follows: "If at any time or from time to time, the
Company shall determine to register any of its securities, either for its own
account or the account of a security holder or holders (other than a
registration relating solely to employee stock option or purchase plans or
relating solely to an SEC Rule 145 transaction or to debt securities), the
Company will (i) promptly give to each Purchaser written notice thereof; and
(ii) subject to Section 4(a) below, include in such registration (and any
related qualification under state securities laws or other compliance), and in
any underwriting involved therein, all the Shares specified in a written request
or requests, received within twenty (20) days after such written notice from the
Company, by any Purchaser or Purchasers. (a) If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Purchasers as a part of the
written notice given pursuant to Section 4. In such event the right of any
Purchaser to registration pursuant to Section 4 shall be conditioned upon the
inclusion of such Purchaser's Shares in the underwriting. All Purchasers
proposing to distribute their securities shall (together with the Company and
other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this Section 4, if the underwriter determines that marketing
factors require a limitation of the number of Shares to be included in the
registration, such limitation shall be done on a pro rata basis based on the
total number of Shares held by the Purchasers and based on the total number of
securities entitled to registration held by other persons or organizations
selling securities pursuant to registration rights granted them by the Company.
The Company shall advise all Purchasers of Shares which would otherwise be
registered and underwritten pursuant hereto of any such limitations, and the
number of Shares that may be included in the registration. If any Purchaser
disapproves of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the underwriter. Any securities
excluded or withdrawn from such underwriting shall not be transferred prior to
90 days after the effective date of the registration statement for such
underwriting, or such shorter period as the underwriter may require."
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