REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of August
31, 2004, by and among VSUS Technologies Incorporated, a Delaware corporation
(the "Company"), and the investors named on SCHEDULE A hereto (together with
their affiliates and any assignee or transferee of all of its respective rights
hereunder, individually a "Buyer" and collectively the "Buyers").
WHEREAS:
A. In connection with the Series A Unit Purchase Agreement by and among
the parties hereto of even date herewith (the "Purchase Agreement"), the Company
has agreed, upon the terms and subject to the conditions contained therein, to
issue and sell to the Buyers: (i) up to 350 shares of the Series A Convertible
Preferred Stock of the Company, (together with any securities issued in
replacement thereof or as a dividend thereon or otherwise with respect thereto
in accordance with the terms thereof, the "Series A Preferred Stock"),
convertible into shares of common stock, $.001 par value per share, of the
Company (the "Common Stock"), upon the terms and subject to the limitations and
conditions set forth in the Certificate of Designation of Series and
Determination of Rights and Preferences of Series A Convertible Preferred Stock
of VSUS Technologies Incorporated, dated July 30, 2004 (the "Certificate of
Designation"); and (ii) warrants to purchase up to 5,250,000 shares of Common
Stock, consisting of up to 1,750,000 Class A Warrants, up to 1,750,000 Class B
Warrants and 1,750,000 Class C Warrants (collectively the "Warrants");
B. To induce the Buyer to execute and deliver the Purchase Agreement,
the Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations thereunder, or
any similar successor statute (collectively, the "1933 Act"), and applicable
state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyer hereby agree as follows:
1. DEFINITIONS.
A. As used in this Agreement, the following terms shall have the
following meanings:
(I) "Buyers" means each Buyer and all other buyers that
execute agreements substantially identical to the Purchase Agreement on or
before August 31, 2004, including any transferees or assignees of Buyers who
agree to become bound by the provisions of this Agreement in accordance with
Section 9 hereof.
(II) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the
1933 Act and pursuant to Rule 415 under the 1933 Act or any successor rule
providing for offering securities on a continuous basis ("Rule 415"), and the
declaration or ordering of effectiveness of such Registration Statement by the
United States Securities and Exchange Commission (the "SEC").
(III) "Registrable Securities" means one hundred and thirty
percent (130%) of the shares of Common Stock issued or issuable upon conversion
of the Series A Preferred Stock (including, without limitation, such additional
shares of Common Stock, if any, as are issuable as a result of the events
described in the Certificate of Designation (including but not limited to
Section 4(e) of the Certificate of Designation) and Section 2(b) of this
Agreement, such shares of Common Stock being referred to herein as the
"Conversion Shares"), and the shares of Common Stock issued or issuable upon
exercise or otherwise pursuant to the Warrants (the "Warrant Shares"), and any
shares of Common Stock issued or issuable as a dividend on or in exchange for or
otherwise with respect to any of the foregoing.
(IV) "Registration Statement" means a registration statement
of the Company under the 1933 Act.
(V) "Resale Registration Statement" means a Registration
Statement covering the resale of all, or any portion of, the Registrable
Securities.
B. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement or Certificate of Designation.
2. REGISTRATION.
A. MANDATORY REGISTRATION. The Company shall prepare, and, on or
prior to the forty-fifth (45th) day following the date hereof (the "Filing
Date"), file with the SEC a Resale Registration Statement on Form SB-2 (or, if
Form SB-2 is not then available, on such form of Registration Statement as is
then available to effect a registration of the Registrable Securities, subject
to the consent of the Buyers, which consent will not be unreasonably withheld),
which such Resale Registration Statement, to the extent allowable under the 1933
Act and the rules and regulations promulgated thereunder (including Rule 416),
shall state that such Resale Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of or otherwise pursuant to the Series A Preferred Stock and
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 Series A Preferred Stock in accordance with the terms
thereof or the exercise price of the Warrants in accordance with the terms
thereof.
B. PAYMENTS BY THE COMPANY. The Company shall use its best efforts
to obtain effectiveness of the Resale Registration Statement as soon as
practicable. If (i) the Resale Registration Statement is not filed by the Filing
Date, (ii) the Company fails to respond promptly to any comments from the SEC,
or (iii) the Company fails to use its best efforts to have the SEC
2
declare the Resale Registration Statement effective within ninety (90) days
after filing the Resale Registration Statement with the SEC, then the Company
will make payments to the Buyers in such amounts and at such times as shall be
determined pursuant to this Section 2(b) as partial relief for the damages to
the Buyers by reason of any such delay in their ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other remedies available
at law or in equity). The Company shall pay to each holder of the Series A
Preferred Stock or Registrable Securities an amount equal to three percent (3%)
per month of $1,750,000, assuming sale of $1,750,000 of the Company's Series A
Preferred Stock (and, in the case of holders of Registrable Securities, the
Original Series A Issue Price of the Series A Preferred Stock from which such
Registrable Securities were converted) ("Outstanding Principal Amount")
multiplied by the number of months (prorated for partial months) after the
Filing Date or the end of the aforementioned ninety (90) day period and prior to
the date the Resale Registration Statement is declared effective by the SEC,
provided, however, that there shall be excluded from such period any delays
which are solely attributable to changes required by the Buyers in the Resale
Registration Statement with respect to information relating to the Buyers,
including, without limitation, changes to the plan of distribution, or to the
failure of the Buyers to conduct their review of the Registration Statement
pursuant to Section 3(g) below in a reasonably prompt manner. Any payments due
pursuant to this Section 2(b) may be paid by the Company in cash or shares of
the Company's Common Stock at the option of the Buyers. If the Buyers elect to
receive payment in shares of Common Stock, such shares shall be issued at the
Conversion Price (as that term is defined in the Certificate of Designation).
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
A. The Company shall prepare promptly, and file with the SEC not
later than the Filing Date, a Resale Registration Statement with respect to the
number of Registrable Securities provided in Section 2(a), and thereafter use
its best efforts to cause such Resale Registration Statement relating to
Registrable Securities to become effective within ninety (90) days after filing
the Resale Registration Statement with the SEC, and keep the Resale Registration
Statement effective pursuant to Rule 415 until August 31, 2006 (the
"Registration Period"), which Resale Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein not
misleading.
B. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Resale Registration
Statement and the prospectus used in connection with the Resale Registration
Statement as may be necessary to keep the Resale Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by the Resale Registration
Statement until such time as all of such Registrable Securities have been
disposed of in accordance with the
3
intended methods of disposition by the Buyers as set forth in the Resale
Registration Statement. In the event the number of shares available under the
Resale Registration Statement filed pursuant to this Agreement is insufficient
to cover all of the Registrable Securities, the Company shall amend the Resale
Registration Statement, or file a new Registration Statement (on the short form
available therefore, if applicable), or both, so as to cover all of the
Registrable Securities, in each case, as soon as practicable, but in any event
within twenty (20) business days after the necessity therefor arises (based on
the market price of the Common Stock and other relevant factors on which the
Company reasonably elects to rely). The Company shall use its best efforts to
cause any amendment to the Resale Registration Statement to become effective as
soon as practicable following the filing thereof, but in any event within sixty
(60) days after the date on which the Company reasonably first determines (or
reasonably should have determined) the need therefor. The Company shall use its
best efforts to cause any new Registration Statement to become effective as soon
as practicable following the filing thereof, but in any event within one hundred
and twenty (120) days after the date on which the Company reasonably first
determines (or reasonably should have determined) the need therefor. The
provisions of Section 2(b) above shall be applicable with respect to such
obligation.
C. The Company shall furnish to legal counsel for the Buyers (i)
promptly (but in no event more than two (2) business days) after the same is
prepared and publicly distributed, filed with the SEC, or received by the
Company, one copy of each Registration Statement and any amendment thereto, each
preliminary prospectus and prospectus and each amendment or supplement thereto,
and, in the case of the Resale Registration Statement referred to in Section
2(a), 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 Resale Registration Statement (other than any
portion of any thereof which contains information for which the Company has
sought confidential treatment), and (ii) such number of copies of a prospectus,
including a preliminary prospectus, and all amendments and supplements thereto
and such other documents as such Buyers may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Buyers.
The Company will immediately notify each Buyer by facsimile of the effectiveness
of each Registration Statement or any post-effective amendment. The Company will
promptly respond (but in no event more than ten (10) business days) to any and
all comments received from the SEC (which comments shall promptly be made
available to the Buyers upon request), with a view towards causing each
Registration Statement or any amendment thereto to be declared effective by the
SEC as soon as practicable, shall promptly file an acceleration request as soon
as practicable (but in no event more than three (3) business days) following the
resolution or clearance of all SEC comments or, if applicable, following
notification by the SEC that any such Registration Statement or any amendment
thereto will not be subject to review and shall promptly file with the SEC a
final prospectus as soon as practicable (but in no event more than two (2)
business days) following receipt by the Company from the SEC of an order
declaring the Registration Statement effective. In the event of a breach by the
Company of the provisions of this Section 3(c), the Company will be required to
make payments pursuant to Section 2(b) hereof.
D. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by any Registration Statement under
such other securities or "blue
4
sky" laws of such jurisdictions in the United States as the Buyers who hold a
majority in interest of the Registrable Securities being offered reasonably
request, (ii) 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, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) 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 (a) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (b) subject itself to general taxation in any such jurisdiction,
(c) file a general consent to service of process in any such jurisdiction, (d)
provide any undertakings that cause the Company undue expense or burden, or (e)
make any change in its charter or bylaws, 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.
E. As promptly as practicable after becoming aware of such event,
the Company shall notify each Buyer of the happening of any event, of which the
Company has knowledge, as a result of which the prospectus included in any
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 to prepare a supplement or amendment to any Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Buyer as such Buyer may
reasonably request; provided that, for not more than thirty (30) consecutive
trading days (or a total of not more than forty-five (45) trading days in any
twelve (12) month period), the Company may delay the disclosure of material
non-public information concerning the Company (as well as prospectus or
Registration Statement updating) the disclosure of which at the time is not, in
the good faith opinion of the Company, in the best interests of the Company (an
"Allowed Delay"); provided, further, that the Company shall promptly (i) notify
the Buyers in writing of the existence of (but in no event, without the prior
written consent of the Buyers, shall the Company disclose to such Buyers any of
the facts or circumstances regarding) material non-public information giving
rise to an Allowed Delay and (ii) advise the Buyers in writing to cease all
sales under such Registration Statement until the end of the Allowed Delay. Upon
expiration of the Allowed Delay, the Company shall again be bound by the first
sentence of this Section 3(e) with respect to the information giving rise
thereto.
F. The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of any Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest possible moment and to notify each Buyers 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.
G. The Company shall permit a single firm or counsel designated by
the Buyers to review such Resale Registration Statement and all amendments and
supplements thereto (as well as all requests for acceleration or effectiveness
thereof) a reasonable period of time prior to their filing with the SEC, and not
file any document in a form to which such counsel
5
reasonably objects and will not request acceleration of such Resale Registration
Statement without prior notice to such counsel. The sections of such Resale
Registration Statement covering information with respect to the Buyers, the
Buyer's beneficial ownership of securities of the Company or the Buyers intended
method of disposition of Registrable Securities shall conform to the information
provided to the Company by each of the Buyers.
H. At the request of the Buyer, the Company shall make available
for inspection by (i) any Buyers, and (ii) Buyers legal counsel, (collectively,
the "Inspectors") all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the "Records"),
as shall be reasonably deemed necessary by each Inspector to enable each
Inspector to exercise its due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information which any Inspector
may reasonably request for purposes of such due diligence; provided, however,
that each Inspector shall hold in confidence and shall not make any disclosure
(except to a Buyer) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
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 (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.
I. The Company shall hold in confidence and not make any disclosure
of information concerning any Buyers provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning a Buyer
is sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to such Buyer prior to making such
disclosure, and allow the Buyer, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, such information.
J. The Company shall (i) cause all the Registrable Securities
covered by any Registration Statement to be listed on each national securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) to the extent the securities
of the same class or series are not then listed on a national securities
exchange, secure the designation and quotation, of all the Registrable
Securities covered by any Registration Statement on the OTC BB and, without
limiting the generality of the foregoing, to arrange for at least two market
makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities.
6
K. 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 any Registration Statement.
L. The Company shall cooperate with the Buyers who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be offered pursuant to any
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, or the Buyers may reasonably request and
registered in such names as the Buyers may request, and, within three (3)
business days after any Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Buyers whose Registrable
Securities are included in such Registration Statement) an instruction in the
form attached hereto as EXHIBIT A and an opinion of such counsel.
M. At the request of the holders of a majority-in-interest of the
Registrable Securities, the Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and any 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.
N. 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 under Section
2(a) hereof or any amendment or supplement thereto under Section 3(b) hereof
without the consent of the holders of a majority-in-interest of the Registrable
Securities.
O. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Buyers of Registrable Securities
pursuant to a Registration Statement.
4. OBLIGATIONS OF THE BUYERS.
In connection with the registration of the Registrable Securities, the
Buyers shall have the following obligations:
A. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Buyer that such Buyer shall furnish
to the Company, in writing, 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 seven (7)
business days prior to the
7
first anticipated filing date of a Registration Statement, the Company shall
notify each Buyer of the information the Company requires from each such Buyer.
B. Each Buyer, by such Buyer'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 a Registration
Statement hereunder, unless such Buyer has notified the Company in writing of
such Buyer's election to exclude all of such Buyer's Registrable Securities from
the Registration Statements.
C. In the event Buyer holding a majority-in-interest of the
Registrable Securities being registered determine to engage the services of an
underwriter, each Buyer agrees to enter into and perform such Buyer's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Buyer has notified the
Company in writing of such Buyer's election to exclude all of such Buyer's
Registrable Securities from such Registration Statement.
D. Each Buyer agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), such Buyers will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Buyer's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, such Buyer 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 Buyer's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and 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 Buyers pursuant to Sections 2(b)
and 3(g) hereof (unless Company retains ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, a New York limited
liability partnership, as counsel), shall be borne by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
A. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Buyer who holds such Registrable Securities, (ii)
the directors,
8
officers, partners, employees, agents and each person who controls any Buyer
within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as
amended (the "1934 Act"), if any, (iii) any underwriter (as defined in the ▇▇▇▇
▇▇▇) for the Buyers, and (iv) the directors, officers, partners, employees and
each person who controls any such underwriter within the meaning of the 1933 Act
or the 1934 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 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities (the matters in the foregoing clauses (i)
through (iii) being, collectively, "Violations"). Subject to the restrictions
set forth in Section 6(c) with respect to the number of legal counsel, the
Company shall reimburse the 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(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of such Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (ii) 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 (iii) 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, such corrected prospectus was timely made
available by the Company pursuant to Section 3(c) 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,
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 Buyers pursuant to Section 9.
B. In connection with any Registration Statement in which a Buyer
is participating, each such Buyer agrees severally and not jointly to indemnify,
hold harmless and defend, to the same extent and in the same manner set forth in
Section 6(a), the Company, each
9
of its directors, each of its officers who signs the Registration Statement,
each person, if any, who controls the Company within the meaning of the 1933 Act
or the 1934 Act, any underwriter and any other stockholder selling securities
pursuant to the Registration Statement or any of its directors or officers or
any person who controls such stockholder or underwriter within the meaning of
the 1933 Act or the 1934 Act (collectively and together with an Indemnified
Person, an "Indemnified Party"), against any Claim to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim arises out of or is based upon any Violation by such Buyer, 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
Buyer expressly for use in connection with such Registration Statement; and
subject to Section 6(c) such Buyer 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(b)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Buyer, which consent shall
not be unreasonably withheld; provided, further, however, that the Buyer shall
be liable under this Agreement (including this Section 6(b) and Section 7) for
only that amount as does not exceed the net proceeds to such Buyer 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 Buyer pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
C. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The 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 Buyers holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates (with the approval of a
majority-in-interest of the Buyers), if the Buyers are entitled to
indemnification hereunder, or the Company, if the
10
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 Section 6,
except to the extent that the indemnifying party is actually prejudiced in its
ability to defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) 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.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Buyers the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Buyers to sell securities of the Company to
the public without registration ("Rule 144"), the Company agrees to:
A. make and keep public information available, as those terms are
understood and defined in Rule 144;
B. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and
C. furnish to each Buyers so long as such Buyers owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 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 Buyers to
sell such securities pursuant to Rule 144 without registration.
11
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by
the Buyers to any transferee of all or any portion of Registrable Securities if:
(i) the Buyers agree in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an "accredited investor" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company, the
Buyers (to the extent such Buyers still own Registrable Securities) and Buyers
who hold a majority interest of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Buyer and the Company.
11. MISCELLANEOUS.
A. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
B. NOTICES. Any notice or other communications required or
permitted hereunder shall be deemed to be sufficient if contained in a written
instrument delivered in person or duly sent by first class certified mail,
postage prepaid, by reputable overnight courier or such other address as may
hereafter be designated in writing by the addressee to the other parties:
if to the Company, to:
VSUS Technologies Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇▇▇▇
12
with a copy to:
▇▇▇▇▇ & Schloss LLP
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
if to the Buyers, to each of the Buyers at the address listed on SCHEDULE A.
with a copy to:
▇▇▇▇▇ & Schloss LLP
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or, in any case, at such other address or addresses as shall have
been furnished in writing by such party to the other parties hereto. All such
notices, requests, consents and other communications shall be deemed to have
been received (i) in the case of personal delivery, on the date of such
delivery, (ii) in the case of mailing, on the fifth business day following the
date of such mailing and (iii) in the case of overnight courier, on the second
next business day.
C. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
D. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK
WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED
INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE
OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE 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. BOTH PARTIES 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
13
MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER THIS
AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING ATTORNEYS'
FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.
E. In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any
provision hereof which may prove invalid or unenforceable under any law shall
not affect the validity or enforceability of any other provision hereof.
F. This Agreement, the Purchase Agreement (including all schedules
and exhibits thereto), the Certificate of Designation, the Warrants and all
other documents relating to this transaction (collectively, the "Transaction
Documents") constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. The Transaction Documents supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
G. Subject to the requirements of Section 9 hereof, this Agreement
shall be binding upon and inure to the benefit of the parties and their
successors and assigns.
H. The headings in this Agreement are for convenience of reference
only and shall not form part of, or affect the interpretation of, this
Agreement.
I. 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 and shall become effective when counterparts have been signed
by each party and delivered to the other party. 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.
J. 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.
K. Except as otherwise provided herein, all consents and other
determinations to be made by the Buyers pursuant to this Agreement shall be made
by Buyers holding a majority of the Registrable Securities, determined as if all
of the Series A Preferred Stock then outstanding have been converted into
Registrable Securities.
L. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to each Buyer by vitiating the intent and
purpose of the
14
transactions contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for breach of its obligations under this Agreement will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of any of the provisions under this Agreement, that each Buyer shall be
entitled, in addition to all other available remedies in law or in equity, and
in addition to the penalties assessable herein, to an injunction or injunctions
restraining, preventing or curing any breach of this Agreement and to enforce
specifically the terms and provisions hereof, without the necessity of showing
economic loss and without any bond or other security being required.
M. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party
[THE REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY]
15
COUNTERPART SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT, DATED AUGUST 31,
2004
IN WITNESS WHEREOF, the Company and the undersigned Buyers have caused
this Agreement to be duly executed as of the date first above written.
VSUS TECHNOLOGIES INCORPORATED
By:
-------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: Chief Executive Officer
By:
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President
BUYER:
-----------------------------------
16