Registration Rights Agreement
Between
Electronic Control Security, Inc.
And
Hyundai Syscomm Corp.
December 22, 2006
Registration Rights Agreement (this "Agreement") is entered into as of the
22nd day of December, 2006, by and between Electronic Control Security, Inc., a
New Jersey corporation (the "Company"), and Hyundai Syscomm Corp., a California
corporation ("HYUNDAI").
R E C I T A L S
WHEREAS, HYUNDAI and the Company have entered into a Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated as of the date hereof,
pursuant to which, among other things: (i) HYUNDAI has agreed, on the terms and
conditions set forth therein, to purchase four million eight hundred thousand
(4,800,000) shares (the "Purchased Shares") of ECSI Common Stock ("Common
Stock") for an aggregate purchase price (the "Purchase Price") of One Million
Two Hundred Thousand Dollars ($1,200,000); and (ii) ECSI has issued and
delivered HYUNDAI a warrant dated the date hereof (the "Warrant") that will
enable HYUNDAI to achieve and maintain a fifty percent (50%) ownership interest
in the outstanding Common Stock of the Company provided that HYUNDAI provides a
sufficient level of business to ECSI under the Sub-Contract referred to below;
and
WHEREAS, HYUNDAI, the Company and ▇▇▇▇▇▇▇▇▇▇ Law, as Escrow Agent (the
"Escrow Agent"), have entered into an Escrow Agreement (the "Escrow Agreement"),
dated as of the date hereof, pursuant to which, among other things, the Company
has agreed to deliver the Purchased Shares and HYUNDAI has agreed to wire
transfer the Purchase Price to the Escrow Agent; and
WHEREAS, ECSI and HYUNDAI have entered into a Sub-Contract Agreement (the
"Sub-Contract"), dated as of the date hereof, pursuant to which, among other
things, HYUNDAI has agreed to award ECSI at lease Twenty Five Million Dollars
($25,000,000) of purchase orders for: (i) video surveillance systems to be
specified and integrated according to the specifications provided pursuant to
the Sub-Contract; (ii) security worthy assets in Asia; and/or (iii) such other
items as may be mutually agreeable to HYUNDAI and ECSI, and ECSI has agreed to
share a portion of the gross profits it makes from the Sub-Contract by vesting
the exercisability of the Warrant; and
WHEREAS, the Purchased Shares are, and shares of Common Stock issuable
upon exercise of the Warrant (the "Warrant Shares"), when and if issued, will be
"restricted securities," as such term is defined in Rule 144 promulgated by the
Securities and Exchange Commission (the "Commission") under the Securities Act
and bear a restrictive legend (the "Legend"); and
WHEREAS, is order to register the resale of the Purchased Shares and any
Warrant Shares that may be issued (collectively, the "Shares") under the
Securities Act, the Company is willing to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed as follows:
1. Definitions. The following terms used herein have the following meanings:
"Agreement" means this Agreement, as amended, restated, supplemented, or
otherwise modified from time to time.
"Certificates" is defined in the 1st Recital to this Agreement.
"Commission" means the Commission, as defined in the 4th Recital to this
Agreement, or any other federal agency then administering the Securities Act or
the Exchange Act.
"Common Stock" is defined in the 1st Recital of this Agreement.
"Company" is defined in the preamble to this Agreement.
"Company Indemnified Party" is defined in Section 4.2.
"Demanding Holder" is defined in Section 2.1.1.
"Demand Registration" is defined in Section 2.1.1.
"Derivative Securities' is defined in the 2nd Recital to this Agreement.
"Escrow Agent" is defined in the 2nd Recital to this Agreement.
"Escrow Agreement" is defined in the 2nd Recital to this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder, all as the
same shall be in effect at the time.
"HYUNDAI" is defined in the preamble to this Agreement.
"Indemnified Party" is defined in Section 4.3.
"Indemnifying Party" is defined in Section 4.3.
"Investor Indemnified Party" is defined in Section 4.1.
"Legend" is defined in the 4th Recital of this Agreement.
"Maximum Number of Shares" is defined in Section 2.1.4.
"Notices" is defined in Section 6.3.
"Piggy-Back Registration" is defined in Section 2.2.1.
"Purchased Shares" is defined in the 1st Recital to this Agreement.
"Purchase Price" is defined in the 1st Recital to this Agreement.
"Register," registered" and "registration" mean a registration effected by
preparing and filing a registration statement or similar document in compliance
with the requirements of the Securities Act, and the applicable rules and
regulations promulgated thereunder, and such registration statement becoming
effective.
"Registrable Shares" means the Shares. As to any particular Registrable
Shares, such Shares shall cease to be Registrable Shares when: (a) a
Registration Statement with respect to the sale of such Shares shall have become
effective under the Securities Act and such securities shall have been sold,
transferred or disposed of in accordance with such Registration Statement; (b)
such Shares shall have been otherwise transferred, new certificates for them not
bearing the Legend shall have been delivered by the Company and subsequent
public distribution of them shall not require registration under the Securities
Act; (c) such Shares shall have ceased to be outstanding; or (d) such Shares are
saleable under clause (k) of Rule 144 promulgated under the Securities Act or
any successor to such rule ("Rule 144") or are otherwise saleable under Rule 144
without regard to volume restrictions.
"Registration Statement" means a registration statement filed by the
Company with the Commission in compliance with the Securities Act for a public
offering and sale of Common Stock (other than a registration statement on Form
S-4 or Form S-8, or their successors, or any registration statement covering
only securities proposed to be issued in exchange for securities or assets of
another entity).
"Restricted Securities" is defined in the 4th Recital of this Agreement.
"Securities Act" means Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder, all as the same shall
be in effect at the time.
"Shares" is defined in the 5th Recital of this Agreement.
"Stock Purchase Agreement" is defined in the 1st Recital to this
Agreement.
"Sub-Contract" is defined in the 3rd Recital to this Agreement.
"Underwriter" means a securities dealer who purchases any Registrable
Shares as principal in an underwritten offering and not as part of such dealer's
market-making activities.
"Waivers" is defined in the 2nd Recital to this Agreement.
"Warrant" is defined in the 1st Recital to this Agreement.
"Warrant Shares" is defined in the 4th Recital to this Agreement.
2. Registration Rights.
2.1 Demand Registration.
2.1.1. Request for Registration. At any time after the date of this
Agreement, HYUNDAI may make a written demand for registration under the
Securities Act of all or part of its Registrable Shares (a "Demand
Registration"). Any demand for a Demand Registration shall specify the number of
Registrable Shares proposed to be sold and the intended method(s) of
distribution thereof. Upon any such request, HYUNDAI shall be entitled to have
its Registrable Shares included in the Demand Registration, subject to Section
2.1.4 and the provisos set forth in Section 3.1.1. The Company shall not be
obligated to effect more than three (3) Demand Registrations under this Section
2.1.1 in respect of Registrable Shares.
2.1.2. Effective Registration. A registration will not count as the
Demand Registration until the Registration Statement filed with the Commission
with respect to such Demand Registration has been declared effective by the
Commission and the Company has complied with all of its obligations under this
Agreement with respect thereto; provided, however, that if, after such
Registration Statement has been declared effective, the offering of Registrable
Shares pursuant to a Demand Registration is interfered with by any stop order or
injunction of the Commission or any other governmental agency or court, the
Registration Statement with respect to such Demand Registration will be deemed
not to have been declared effective, unless and until, (i) such stop order or
injunction is removed, rescinded or otherwise terminated, and (ii) HYUNDAI
elects to continue the offering.
2.1.3. Underwritten Offering. If HYUNDAI so elects and so advises
the Company as part of its written demand for a Demand Registration, the
offering of such Registrable Shares pursuant to such Demand Registration shall
be in the form of an underwritten offering. In such event, the right of HYUNDAI
to include its Registrable Shares in such registration shall be conditioned upon
HYUNDAI's participation in such underwriting and the inclusion of HYUNDAI's
Registrable Shares in the underwriting to the extent provided herein. HYUNDAI
shall enter into an underwriting agreement in customary form with the
Underwriter or Underwriters selected for such underwriting by HYUNDAI.
2.1.4. Reduction of Offering. If the managing Underwriter or
Underwriters for a Demand Registration that is to be an underwritten offering
advises the Company and HYUNDAI in writing that the dollar amount or number of
Registrable Shares which HYUNDAI desires to sell, taken together with all other
shares of Common Stock or other securities which the Company desires to sell and
the shares of Common Stock, if any, as to which registration has been requested
pursuant to written contractual piggy-back registration rights held by other
stockholders of the Company who desire to sell, exceeds the maximum dollar
amount or maximum number of shares that can be sold in such offering without
adversely affecting the proposed offering price, the timing, the distribution
method, or the probability of success of such offering (such maximum dollar
amount or maximum number of shares, as applicable, the "Maximum Number of
Shares"), then the Company shall include in such registration: (i) first, the
Registrable Shares as to which Demand Registration has been requested by HYUNDAI
that can be sold without exceeding the Maximum Number of Shares; (ii) second, to
the extent that the Maximum Number of Shares has not been reached under the
foregoing clause (i), the shares of Common Stock or other securities that the
Company desires to sell that can be sold without exceeding the Maximum Number of
Shares; (iii) third, to the extent that the Maximum Number of Shares has not
been reached under the foregoing clauses (i) and (ii), the shares of Common
Stock for the account of other persons that the Company is obligated to register
pursuant to written contractual arrangements with such persons and that can be
sold without exceeding the Maximum Number of Shares; and (iv) fourth, to the
extent that the Maximum Number of Shares have not been reached under the
foregoing clauses (i), (ii), and (iii), the shares of Common Stock that other
stockholders desire to sell that can be sold without exceeding the Maximum
Number of Shares.
2.1.5. Withdrawal. If HYUNDAI disapproves of the terms of any
underwriting or is not entitled to include all of its Registrable Shares in any
offering, HYUNDAI may elect to withdraw from such offering by giving written
notice to the Company and the Underwriter or Underwriters of its request to
withdraw prior to the effectiveness of the Registration Statement filed with the
Commission with respect to such Demand Registration. If HYUNDAI withdraws from a
proposed offering relating to a Demand Registration before the Registration
Statement is filed with the Commission, then such registration shall not count
as a Demand Registration provided for in Section 2.1.1.
2.2 Piggy-Back Registration.
2.2.1. Piggy-Back Rights. If at any time on or after the date of
hereof the Company proposes to file a Registration Statement under the
Securities Act with respect to an offering of equity securities, or securities
or other obligations exercisable or exchangeable for, or convertible into,
equity securities, by the Company for its own account or for stockholders of the
Company for their account (or by the Company and by stockholders of the Company
other than pursuant to Section 2.1), other than a Registration Statement (i)
filed in connection with any employee stock option or other benefit plan or (ii)
for an exchange offer or offering of securities solely to the Company's existing
stockholders, then the Company shall (x) give written notice of such proposed
filing to HYUNDAI as soon as practicable but in no event less than ten (10) days
before the anticipated filing date, which notice shall describe the amount and
type of securities to be included in such offering, the intended method(s) of
distribution, and the name of the proposed managing Underwriter or Underwriters,
if any, of the offering, and (y) offer to HYUNDAI in such notice the opportunity
to register the sale of such number of Registrable Shares as HYUNDAI may request
in writing within five (5) days following receipt of such notice (a "Piggy-Back
Registration"). The Company shall cause such Registrable Shares to be included
in such registration and shall use commercially reasonable efforts to cause the
managing Underwriter or Underwriters of a proposed underwritten offering to
permit the Registrable Shares requested to be included in a Piggy-Back
Registration to be included on the same terms and conditions as any similar
securities of the Company and to permit the sale or other disposition of such
Registrable Shares in accordance with the intended method(s) of distribution
thereof. HYUNDAI shall enter into an underwriting agreement in customary form
with the Underwriter or Underwriters, if any, selected for such Piggy-Back
Registration.
2.2.2. Reduction of Offering. If the managing Underwriter or
Underwriters for a Piggy-Back Registration that is to be an underwritten
offering advises the Company and HYUNDAI in writing that the dollar amount or
number of shares of Common Stock which the Company desires to sell, taken
together with shares of Common Stock, if any, as to which registration has been
demanded pursuant to written contractual arrangements with persons other than
HYUNDAI, and the shares of Common Stock, if any, as to which registration has
been requested pursuant to the written contractual piggy-back registration
rights of other stockholders of the Company, exceeds the Maximum Number of
Shares, then the Company shall include in any such registration: (i) if the
registration is undertaken for the Company's account: (A) first, the shares of
Common Stock or other securities that the Company desires to sell that can be
sold without exceeding the Maximum Number of Shares; (B) second, to the extent
that the Maximum Number of Shares has not been reached under the foregoing
clause (A), the shares of Common Stock, if any, including the Registrable
Shares, as to which registration has been requested pursuant to written
contractual piggy-back registration rights of security holders (pro rata in
accordance with the number of shares of Common Stock which each such person has
actually requested to be included in such registration, regardless of the number
of shares of Common Stock with respect to which such persons have the right to
request such inclusion) that can be sold without exceeding the Maximum Number of
Shares; and (ii) if the registration is a "demand" registration undertaken at
the demand of persons other than HYUNDAI pursuant to written contractual
arrangements with such persons, (A) first, the shares of Common Stock for the
account of the demanding persons that can be sold without exceeding the Maximum
Number of Shares; (B) second, to the extent that the Maximum Number of Shares
has not been reached under the foregoing clause (A), the shares of Common Stock
or other securities that the Company desires to sell that can be sold without
exceeding the Maximum Number of Shares; and (C) third, to the extent that the
Maximum Number of Shares has not been reached under the foregoing clauses (A)
and (B), the Registrable Shares as to which registration has been requested
under this Section 2.2; and (D) fourth, to the extent that the Maximum Number of
Shares has not been reached under the foregoing clauses (A), (B) and (C), the
shares of Common Stock, if any, as to which registration has been requested
pursuant to written contractual piggy-back registration rights which other
stockholders desire to sell that can be sold without exceeding the Maximum
Number of Shares.
2.2.3. Withdrawal. HYUNDAI may elect to withdraw its request for
inclusion of Registrable Shares in any Piggy-Back Registration by giving written
notice to the Company of such request to withdraw prior to the effectiveness of
the Registration Statement. The Company may also elect to withdraw a
registration statement at any time prior to the effectiveness of the
Registration Statement. Notwithstanding any such withdrawal, the Company shall
pay all expenses incurred by HYUNDAI in connection with such Piggy-Back
Registration as provided in Section 3.3.
3. Registration Procedures.
3.1 Filings; Information. Whenever the Company is required to effect the
registration of any Registrable Shares pursuant to Section 2, the Company shall
use commercially reasonable efforts to effect the registration and sale of such
Registrable Shares in accordance with the intended method(s) of distribution
thereof as expeditiously as practicable, and in connection with any such
request:
3.1.1. Filing Registration Statement. The Company shall, as
expeditiously as possible and in any event within ninety (90) days after receipt
of a request for a Demand Registration pursuant to Section 2.1, prepare and file
with the Commission a Registration Statement on any form for which the Company
then qualifies or which counsel for the Company shall deem appropriate and which
form shall be available for the sale of all Registrable Shares to be registered
thereunder in accordance with the intended method(s) of distribution thereof,
and shall use commercially reasonable efforts to cause such Registration
Statement to become and remain effective for the period required by Section
3.1.3; provided, however, that the Company shall have the right to defer any
Demand Registration for up to forty-five (45) days, and any Piggy-Back
Registration for such period as may be applicable to deferment of any demand
registration to which such Piggy-Back Registration relates, in each case if the
Company shall furnish to the holders a certificate signed by the Chief Executive
Officer of the Company stating that, in the good faith judgment of the Board of
Directors of the Company, it would be materially detrimental to the Company and
its stockholders for such Registration Statement to be effected at such time;
provided further, however, that the Company shall not have the right to exercise
the right set forth in the immediately preceding proviso more than once in any
365-day period in respect of a Demand Registration hereunder.
3.1.2. Copies. The Company shall, prior to filing a Registration
Statement or prospectus, or any amendment or supplement thereto, which includes
any Registrable Shares, furnish without charge to HYUNDAI and HYUNDAI's legal
counsel, copies of such Registration Statement as proposed to be filed, each
amendment and supplement to such Registration Statement (in each case including
all exhibits thereto and documents incorporated by reference therein), the
prospectus included in such Registration Statement (including each preliminary
prospectus), and such other documents as HYUNDAI or its legal counsel may
request in order to facilitate the disposition of HYUNDAI's Registrable Shares.
3.1.3. Amendments and Supplements. The Company shall prepare and
file with the Commission such amendments, including post-effective amendments,
and supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective and in compliance with the provisions of the Securities Act until all
Registrable Shares and other securities covered by such Registration Statement
have been disposed of in accordance with the intended method(s) of distribution
set forth in such Registration Statement (which period shall not exceed the sum
of one hundred eighty (180) days plus any period during which any such
disposition is interfered with by any stop order or injunction of the Commission
or any governmental agency or court) or such securities have been withdrawn.
3.1.4. Notification. After the filing of a Registration Statement,
if any Registrable Shares are included in such Registration Statement of such
filing, the Company shall promptly, and in no event more than two (2) business
days after such filing, notify HYUNDAI and shall further notify HYUNDAI promptly
and confirm such advice in writing in all events within two (2) business days of
the occurrence of any of the following: (i) when such Registration Statement
becomes effective; (ii) when any post-effective amendment to such Registration
Statement becomes effective; (iii) the issuance or threatened issuance by the
Commission of any stop order (and the Company shall take all actions required to
prevent the entry of such stop order or to remove it if entered); and (iv) any
request by the Commission for any amendment or supplement to such Registration
Statement or any prospectus relating thereto or for additional information or of
the occurrence of an event requiring the preparation of a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of the securities covered by such Registration Statement, such prospectus will
not contain an 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
not misleading, and promptly make available to HYUNDAI any such supplement or
amendment; except that before filing with the Commission a Registration
Statement or prospectus or any amendment or supplement thereto, including
documents incorporated by reference, the Company shall furnish to HYUNDAI and to
its legal counsel copies of all such documents proposed to be filed sufficiently
in advance of filing to provide HYUNDAI and its legal counsel with a reasonable
opportunity to review such documents and comment thereon, and the Company shall
not file any Registration Statement or prospectus or amendment or supplement
thereto, including documents incorporated by reference, to which HYUNDAI or its
legal counsel shall object.
3.1.5. State Securities Laws Compliance. The Company shall use
commercially reasonable efforts to (i) register or qualify the Registrable
Shares covered by the Registration Statement under such securities or "blue sky"
laws of such jurisdictions in the United States as HYUNDAI (in light of its
intended plan of distribution) may request and (ii) take such action necessary
to cause such Registrable Shares covered by the Registration Statement to be
registered with or approved by such other governmental authorities as may be
necessary by virtue of the business and operations of the Company and do any and
all other acts and things that may be necessary or advisable to enable HYUNDAI
to consummate the disposition of its Registrable Shares in such jurisdictions;
provided, however, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph or subject itself to taxation in any such
jurisdiction.
3.1.6. Agreements for Disposition. The Company shall enter into
customary agreements (including, if applicable, an underwriting agreement in
customary form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of the Registrable Shares. The
representations, warranties and covenants of the Company in any underwriting
agreement which are made to or for the benefit of any Underwriters, to the
extent applicable, shall also be made to and for the benefit of HYUNDAI. HYUNDAI
shall not be required to make any representations or warranties in the
underwriting agreement except, if applicable, with respect to HYUNDAI's title to
the Registrable Shares and with respect to written information relating to
HYUNDAI that HYUNDAI has furnished in writing expressly for inclusion in such
Registration Statement.
3.1.7. Cooperation. The principal executive officer of the Company,
the principal financial officer of the Company, the principal accounting officer
of the Company and all other officers and members of the management of the
Company shall cooperate fully in any offering of Registrable Shares hereunder,
which cooperation shall include, without limitation, the preparation of the
Registration Statement with respect to such offering and all other offering
materials and related documents, and participation in meetings with
Underwriters, attorneys, accountants and potential investors.
3.1.8. Records. The Company shall make available for inspection by
HYUNDAI, any Underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other professional
retained by HYUNDAI or any Underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, as shall be
necessary to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all information
requested by any of them in connection with such Registration Statement.
3.1.9. Opinions and Comfort Letters. The Company shall furnish to
HYUNDAI a signed counterpart, addressed to HYUNDAI, of (i) any opinion of
counsel to the Company delivered to any Underwriter and (ii) any comfort letter
from the Company's independent public accountants delivered to any Underwriter.
In the event no legal opinion is delivered to any Underwriter, the Company shall
furnish to HYUNDAI, at any time that HYUNDAI elects to use a prospectus, an
opinion of counsel to the Company to the effect that the Registration Statement
containing such prospectus has been declared effective and that no stop order is
in effect.
3.1.10. Earnings Statement. The Company shall comply with all
applicable rules and regulations of the Commission and the Securities Act, and
make available to its stockholders, as soon as practicable, an earnings
statement covering a period of twelve (12) months, beginning within three (3)
months after the effective date of the Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder.
3.1.11. Listing. The Company shall use commercially reasonable
efforts to cause all Registrable Shares included in any registration to be
listed on Nasdaq or otherwise designated for trading in the same manner as
similar securities issued by the Company are then listed or designated.
3.2 Obligation to Suspend Distribution. Upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
3.1.4(iv), HYUNDAI shall immediately discontinue disposition of such Registrable
Shares pursuant to the Registration Statement covering such Registrable Shares
until HYUNDAI receives the supplemented or amended prospectus contemplated by
Section 3.1.4(iv) and, if so directed by the Company, HYUNDAI will deliver to
the Company all copies, other than permanent file copies then in HYUNDAI's
possession, of the most recent prospectus covering such Registrable Shares at
the time of receipt of such notice.
3.3 Registration Expenses. The Company shall bear all costs and expenses
incurred in connection with each Demand Registration pursuant to Section 2.1 and
any Piggy-Back Registration pursuant to Section 2.2, and all expenses incurred
in performing or complying with its other obligations under this Agreement,
whether or not the Registration Statement becomes effective, including, without
limitation: (i) all registration and filing fees; (ii) fees and expenses of
compliance with securities or "blue sky" laws (including fees and disbursements
of counsel in connection with blue sky qualifications of the Registrable
Shares); (iii) printing expenses; (iv) the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees); (v) the fees and expenses incurred in connection with the listing of
the Registrable Shares as required by Section 3.1.11; (vi) fees and
disbursements of counsel for the Company and fees and expenses for independent
certified public accountants retained by the Company (including the expenses or
costs associated with the delivery of any opinions or comfort letters requested
pursuant to Section 3.1.9); (vii) the fees and expenses of any special experts
retained by the Company in connection with such registration and (viii) the fees
and expenses of one legal counsel selected by HYUNDAI. The Company shall have no
obligation to pay any underwriting discounts or selling commissions attributable
to the Registrable Shares being sold by HYUNDAI, which underwriting discounts or
selling commissions shall be borne by HYUNDAI. Additionally, in an underwritten
offering, all selling stockholders and the Company shall bear the expenses of
the underwriter pro rata in proportion to the respective amount of shares each
is selling in such offering.
3.4 Information. HYUNDAI shall provide such information as may reasonably
be requested by the Company, or the managing Underwriter, if any, in connection
with the preparation of any Registration Statement, including amendments and
supplements thereto, in order to effect the registration of any Registrable
Shares under the Securities Act pursuant to Section 2 and in connection with the
Company's obligation to comply with federal and applicable state securities
laws.
4. Indemnification and Contribution.
4.1 Indemnification by the Company. The Company agrees to indemnify and
hold harmless HYUNDAI and its successors and assigns, and each person, if any,
who controls any successor or assign of HYUNDAI (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) (each, an "Investor
Indemnified Party"), from and against any expenses, losses, judgments, claims,
damages or liabilities, whether joint or several, arising out of or based upon
any untrue statement (or allegedly untrue statement) of a material fact
contained in any Registration Statement under which the sale of any Registrable
Shares was registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained in the Registration Statement,
or any amendment or supplement to such Registration Statement, or arising out of
or based upon any omission (or alleged omission) to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any rule or
regulation promulgated thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration; and the Company shall promptly reimburse the Investor Indemnified
Party for any legal and any other expenses reasonably incurred by such Investor
Indemnified Party in connection with investigating and defending any such
expense, loss, judgment, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
expense, loss, claim, damage or liability arises out of or is based upon any
untrue statement or allegedly untrue statement or omission or alleged omission
made in such Registration Statement, preliminary prospectus, final prospectus,
or summary prospectus, or any such amendment or supplement, in reliance upon and
in conformity with information furnished to the Company, in writing, by such
Indemnified Party expressly for use therein. The Company also shall indemnify
any Underwriter of the Registrable Shares, their officers, affiliates,
directors, partners, members and agents and each person who controls such
Underwriter on substantially the same basis as that of the indemnification
provided above in this Section 4.1.
4.2 Indemnification by HYUNDAI. HYUNDAI will, in the event that any
registration is being effected under the Securities Act pursuant to this
Agreement of any Registrable Shares held by HYUNDAI, indemnify and hold harmless
the Company, each of its directors and officers and each underwriter (if any),
and each other person, if any, who controls such selling holder or such
underwriter within the meaning of the Securities Act (each, a "Company
Indemnified Party"), against any losses, claims, judgments, damages or
liabilities, whether joint or several, insofar as such losses, claims,
judgments, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or allegedly untrue statement of a
material fact contained in any Registration Statement under which the sale of
such Registrable Shares was registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or the alleged omission to state a
material fact required to be stated therein or necessary to make the statement
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information furnished in writing to the Company by
HYUNDAI expressly for use therein, and shall reimburse the Company, its
directors and officers, and each such controlling person for any legal or other
expenses reasonably incurred by any of them in connection with investigation or
defending any such loss, claim, damage, liability or action. HYUNDAI's
indemnification obligations hereunder shall be limited to the amount of any net
proceeds actually received by HYUNDAI.
4.3 Conduct of Indemnification Proceedings. Promptly after receipt by any
person of any notice of any loss, claim, damage or liability or any action in
respect of which indemnity may be sought pursuant to Section 4.1 or 4.2, such
person (the "Indemnified Party") shall, if a claim in respect thereof is to be
made against any other person for indemnification hereunder, notify such other
person (the "Indemnifying Party") in writing of the loss, claim, judgment,
damage, liability or action; provided, however, that the failure by the
Indemnified Party to notify the Indemnifying Party shall not relieve the
Indemnifying Party from any liability which the Indemnifying Party may have to
such Indemnified Party hereunder, except and solely to the extent the
Indemnifying Party is actually prejudiced by such failure. If the Indemnified
Party is seeking indemnification with respect to any claim or action brought
against the Indemnified Party, then the Indemnifying Party shall be entitled to
participate in such claim or action, and, to the extent that it wishes, jointly
with all other Indemnifying Parties, to assume control of the defense thereof
with counsel satisfactory to the Indemnified Party. After notice from the
Indemnifying Party to the Indemnified Party of its election to assume control of
the defense of such claim or action, the Indemnifying Party shall not be liable
to the Indemnified Party for any legal or other expenses subsequently incurred
by the Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that in any action in
which both the Indemnified Party and the Indemnifying Party are named as
defendants, the Indemnified Party shall have the right to employ separate
counsel (but no more than one such separate counsel) to represent the
Indemnified Party and its controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the
Indemnified Party against the Indemnifying Party, with the fees and expenses of
such counsel to be paid by such Indemnifying Party if, based upon the written
opinion of counsel of such Indemnified Party, representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, consent to entry of judgment or effect any
settlement of any claim or pending or threatened proceeding in respect of which
the Indemnified Party is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Party, unless such judgment or
settlement includes an unconditional release of such Indemnified Party from all
liability arising out of such claim or proceeding.
4.4 Contribution.
4.4.1. If the indemnification provided for in the foregoing Sections
4.1, 4.2 and 4.3 is unavailable to any Indemnified Party in respect of any loss,
claim, damage, liability or action referred to herein, then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such loss, claim, damage, liability or action in such proportion as is
appropriate to reflect the relative fault of the Indemnified Parties and the
Indemnifying Parties in connection with the actions or omissions which resulted
in such loss, claim, damage, liability or action, as well as any other relevant
equitable considerations. The relative fault of any Indemnified Party and any
Indemnifying Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such Indemnified Party or such Indemnifying Party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
4.4.2. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 4.4 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding Section
4.4.1. The amount paid or payable by an Indemnified Party as a result of any
loss, claim, damage, liability or action referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.4, HYUNDAI shall not be
required to contribute any amount in excess of the dollar amount of the net
proceeds (after payment of any underwriting fees, discounts, commissions or
taxes) actually received by HYUNDAI from the sale of Registrable Shares which
gave rise to such contribution obligation. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
5. Rule 144. The Company covenants that it shall file any reports required to be
filed by it under the Securities Act and the Exchange Act and shall take such
further action as HYUNDAI may reasonably request, all to the extent required
from time to time to enable HYUNDAI to sell Registrable Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 under the Securities Act, as such Rule may be amended from
time to time, or any similar Rule or regulation hereafter adopted by the
Commission.
6. Miscellaneous.
6.1. Other Registration Rights. Attached hereto as Schedule 6.1 is a
listing of all other registration rights that ECSI is subject to, which list
shall set forth the identify of each person holding such rights, the type and
quantity of such registration rights and the number of shares of Common Stock
covered by such registration rights. ECSI shall furnish copies of each agreement
setting forth such registration rights upon Hyundai's written request therefor.
6.2 Assignment; No Third Party Beneficiaries. This Agreement and the
rights, duties and obligations of the Company hereunder may not be assigned or
delegated by the Company in whole or in part. This Agreement and the rights,
duties and obligations of HYUNDAI may be freely assigned or delegated by HYUNDAI
in conjunction with and to the extent of any transfer of Registrable Shares
HYUNDAI. This Agreement and the provisions hereof shall be binding upon and
shall inure to the benefit of each of the parties and their respective
successors and the permitted assigns of holder of Registrable Shares or of any
assignee of HYUNDAI. This Agreement is not intended to confer any rights or
benefits on any persons that are not party hereto other than HYUNDAI and except
as expressly set forth in Section 4 and this Section 6.2.
6.3. Notices. All notices, demands, requests, consents, approvals or other
communications (collectively, "Notices") required or permitted to be given
hereunder or which are given with respect to this Agreement shall be in writing
and shall be personally served, delivered by reputable air courier service with
charges prepaid, or transmitted by hand delivery, telegram, telex, facsimile or
E-mail, addressed as set forth below, or to such other address as such party
shall have specified most recently by written notice. Notice shall be deemed
given on the date of service or transmission if personally served or transmitted
by telegram, telex, facsimile or E-Mail; provided, that if such service or
transmission is not on a business day or is after normal business hours, then
such notice shall be deemed given on the next business day. Notice otherwise
sent as provided herein shall be deemed given on the next business day following
timely delivery of such notice to a reputable air courier service with an order
for next-day delivery.
If to the Company: With a copy to:
Electronic Control Security, Inc. Aboudi & ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇ ▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ Kfar Saba Ind. Zone 44641
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Israel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: ▇▇▇-▇-▇▇▇-▇▇▇▇
E-Mail:▇_▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ Facsimile: 972-9-764-4834
E-Mail: ▇▇▇▇▇@▇-▇▇▇▇.▇▇▇
If to HYUNDAI: With a copy to:
Hyundai Syscomm Corp. ▇▇▇▇▇▇▇▇▇▇ Law
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ Suite 7B
Attention: ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (415)358--4551 Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
E-Mail: ▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
6.4. Severability. This Agreement shall be deemed severable, and the
invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible that is valid and enforceable.
6.5. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
6.6. Electronic Counterparts Acceptable. An electron-ically transmitted
copy of a manually signed counterpart of this Agreement or any Notice shall for
all purposes be equivalent to the manually signed counterpart so electronically
transmitted.
6.7. Entire Agreement. This Agreement (including all agreements entered
into pursuant hereto and all certificates and instruments delivered pursuant
hereto and thereto) constitute the entire agreement of the parties with respect
to the subject matter hereof and supersede all prior and contemporaneous
agreements, representations, understandings, negotiations and discussions
between the parties, whether oral or written.
6.8. Modifications and Amendments. No amendment, modification or
termination of this Agreement shall be binding upon any party unless executed in
writing by such party.
6.9. Titles and Headings. Titles and headings of sections of this
Agreement are for convenience only and shall not affect the construction of any
provision of this Agreement.
6.10. Waivers and Extensions. Any party to this Agreement may waive any
right, breach or default which such party has the right to waive, provided that
such waiver will not be effective against the waiving party unless it is in
writing, is signed by such party, and specifically refers to this Agreement.
Waivers may be made in advance or after the right waived has arisen or the
breach or default waived has occurred. Any waiver may be conditional. No waiver
of any breach of any agreement or provision herein contained shall be deemed a
waiver of any preceding or succeeding breach thereof nor of any other agreement
or provision herein contained. No waiver or extension of time for performance of
any obligations or acts shall be deemed a waiver or extension of the time for
performance of any other obligations or acts.
6.11 Remedies Cumulative. In the event that the Company fails to observe
or perform any covenant or agreement to be observed or performed under this
Agreement, the Investor or any other holder of Registrable Shares may proceed to
protect and enforce its rights by suit in equity or action at law, whether for
specific performance of any term contained in this Agreement or for an
injunction against the breach of any such term or in aid of the exercise of any
power granted in this Agreement or to enforce any other legal or equitable
right, or to take any one or more of such actions, without being required to
post a bond. None of the rights, powers or remedies conferred under this
Agreement shall be mutually exclusive, and each such right, power or remedy
shall be cumulative and in addition to any other right, power or remedy, whether
conferred by this Agreement or now or hereafter available at law, in equity, by
statute or otherwise.
6.12 Governing Law. This Agreement shall be governed by, interpreted
under, and construed in accordance with the internal laws of the State of
California applicable to agreements made and to be performed within the State of
California, without giving effect to any choice-of-law provisions thereof that
would compel the application of the substantive laws of any other jurisdiction.
6.13 Waiver of Trial by Jury. Each party hereby irrevocably and
unconditionally waives the right to a trial by jury in any action, suit,
counterclaim or other proceeding (whether based on contract, tort or otherwise)
arising out of, connected with or relating to this Agreement, the transactions
contemplated hereby, or the actions of the Investor in the negotiation,
administration, performance or enforcement hereof.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be executed and delivered by their duly authorized representatives
as of the date first written above.
Electronic Control Security, Inc. Hyundai Syscomm Corp.
By: /s/▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/▇▇▇▇▇▇ ▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇
Title: Chief Executive Officer Title: Chairman of the Board