EXHIBIT C
TO SECURITIES
PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
August 31, 1998, by and between SOFTNET SYSTEMS, INC., a New York corporation
(the "Company"), and the undersigned investors (together with their affiliates
and any assignee or transferee of all of their rights hereunder, the "Initial
Investors").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and
among the parties hereto of even date herewith (the "Securities Purchase
Agreement"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell, in the aggregate, to the
Initial Investors (i) 7,500 shares of its Series E Convertible Preferred Stock
and (ii) 7,500 shares of its Series D Convertible Preferred Stock (collectively,
the "Preferred Stock") that are convertible into shares (the "Conversion
Shares") of the Company's common stock, par value $.01 per share (the "Common
Stock"), upon the terms and subject to the limitations and conditions set forth
in Article Third, Sections 3 and 4 of the Company's Amended and Restated
Certificate of Incorporation with respect to such Preferred Stock (the
"Certificate of Designation") and (ii) warrants (the "Warrants") to acquire up
to One Hundred Eighty Seven Thousand Five Hundred (187,500) shares of Common
Stock (the "Warrant Shares"), upon the terms and subject to the limitations and
conditions set forth in the Warrants dated of even date herewith; and
B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"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
Initial Investors hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have
the following meanings:
(i) "Investors" means the Initial Investors and any transferee or assignee who
agrees 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 the Conversion Shares and the Warrant
Shares (including any Conversion Shares issuable with respect to Conversion
Default Payments under the Certificate of Designation or in redemption of any
Preferred Stock and any Warrant Shares issuable with respect to Exercise Default
Payments under the Warrants) issued or issuable with respect to the Warrants and
the Preferred Stock and any shares of capital stock issued or issuable, from
time to time (with any adjustments), as a distribution on or in exchange for or
otherwise with respect to any of the foregoing. As to any particular securities,
such Securities shall cease to be Registrable Securities when they have been
sold pursuant to an effective registration statement or in compliance with Rule
144 or are eligible to be sold pursuant to Rule 144(k) under the 1933 Act (or
any similar rule then in force). (iv) "Registration Statement" means a
registration statement of the Company under the ▇▇▇▇ ▇▇▇. b. Capitalized terms
used herein and not otherwise defined herein shall have the respective meanings
set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on
or prior to the date which is twenty (20) business days after the date of the
Closing under the Securities Purchase Agreement (the "Closing Date"), file with
the SEC a Registration Statement on Form S-3 and pursuant to Rule 415 (or, if
Form S-3 is not then available, on Form S-1 (at the time provided for in Section
2(e)), to effect a registration of all of the Registrable Securities covering
the resale of the Registrable Securities underlying the Preferred Stock and
Warrants issued or issuable pursuant to the Securities Purchase Agreement, which
Registration Statement, to the extent allowable under the 1933 Act and the Rules
promulgated thereunder (including Rule 416), shall state that such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Preferred Stock and exercise
of the Warrants (i) to prevent dilution resulting from stock splits, stock
dividends or similar transactions or (ii) by reason of changes in the Conversion
Price of the Preferred Stock in accordance with the terms of the Certificate of
Designation or the Exercise Price of the Warrants in accordance with the terms
thereof. The number of shares of Common Stock initially included in such
Registration Statement shall be no less than 4,187,500 Shares.
b. Underwritten Offering. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering, with the consent of the
Initial Investors, shall have the right to select one legal counsel and an
investment banker or bankers and manager or managers to administer the offering,
which investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company.
c. Payments by the Company. The Company shall use best efforts
to (A) obtain effectiveness of the Registration Statement as soon as
practicable, (B) exclusive of Allowed Delays, maintain the effectiveness of such
Registration Statement and the ability of the Investors to sell Registrable
Securities pursuant thereto, and (C) maintain the listing of the Common Stock
for quotation on the Nasdaq, NYSE or AMEX and trading thereon after the
Registration Statement has been declared effective If (i) the Registration
Statement(s) covering the Registrable Securities required to be filed by the
Company pursuant to Section 2(a) hereof is not declared effective by the SEC
within ninety (90) days after the Closing Date or (ii), after the Registration
Statement has been declared effective by the SEC, sales cannot be made pursuant
to the Registration Statement, or (iii) the Common Stock is not listed or
included for quotation on any one or more of the Nasdaq National Market
("Nasdaq"), the New York Stock Exchange (the "NYSE") or the American Stock
Exchange (the "AMEX") after being so listed or included for quotation, then the
Company will make payments to the Investors in such amounts and at such times as
shall be determined pursuant to this Section 2(c) as partial relief for the
damages to the Investors by reason of any such delay in or reduction of their
ability to sell the Registrable Securities (which remedy shall not be exclusive
of any other remedies available at law or in equity). The Company shall pay to
each holder of the Preferred Stock or Registrable Securities an amount equal to
the face value of the Preferred Stock ("Purchase Price") multiplied by two
hundredths (.020) (or, solely for the first month of any period of delay in the
initial effectiveness of the Registration Statement after the end of such 90-day
period, one hundredth (.010)) times the sum of: (i) the number of months
(prorated for partial months) after the end of such 90-day period and prior to
the date the 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 Investors in the Registration
Statement with respect to information relating to the Investors, including,
without limitation, changes to the plan of distribution, or to the failure of
the Investors to conduct their review of the Registration Statement pursuant to
Section 3(h) below in a reasonably prompt manner; (ii) exclusive of Allowed
Delays (as defined below), the number of months (prorated for partial months)
that sales cannot be made pursuant to the Registration Statement after the
Registration Statement has been declared effective (including, without
limitation, when sales cannot be made by reason of the Company's failure to
properly supplement or amend the prospectus included therein in accordance with
the terms of this Agreement or when such prospectus otherwise contains a
material misstatement or omission) and (iii) the number of months (prorated for
partial months) that the Common Stock is not listed or included for quotation on
the Nasdaq, NYSE or AMEX or that trading thereon is halted after the
Registration Statement has been declared effective. (For example, if the
Registration Statement becomes effective one (1) month after the end of such
90-day period, the Company would pay $10,000 for each $1,000,000 of Purchase
Price. If thereafter, sales could not be made pursuant to the Registration
Statement for an additional period of one (1) month (exclusive of Allowed
Delays), the Company would pay an additional $20,000 for each $1,000,000 of
Purchase Price. Such amounts shall be paid in cash or, at each Investor's
option, may be convertible into Common Stock at the "Conversion Price" (as
defined in the Certificate of Designation).
Any shares of Common Stock issued upon conversion of the
foregoing amounts shall be Registrable Securities. If any Investor desires to
convert the amounts due hereunder into Registrable Securities, it shall so
notify the Company in writing within two (2) business days of the date on which
such amounts are first payable in cash and such amounts shall be so convertible
(pursuant to the mechanics set forth under Section IV of the Certificate of
Designation), beginning on the last day upon which the cash amount would
otherwise be due in accordance with the following sentence. Payments of cash
pursuant hereto shall be made within five (5) days after the end of each period
that gives rise to such obligation, provided that, if any such period extends
for more than thirty (30) days, interim payments shall be made for each such
thirty (30) day period. The term "Purchase Price" means the purchase price paid
by the Investors for the Preferred Stock.
If at any time during the Registration Period, counsel to the
Company should determine in good faith that the compliance by the Company with
its disclosure obligations in connection with the Registration Statement may
require the disclosure of information which the Board of Directors of the
Company has identified as material and which the Board of Directors has
determined that the Company has a bona fide business purpose for preserving as
confidential, the Company shall promptly, (i) notify the Investors in writing of
the existence of (but in no event, without the prior written consent of an
Investor, shall the Company disclose to such investor any of the facts or
circumstances regarding) material nonpublic information and (ii) advise the
Investors in writing to cease all sales under the Registration Statement until
such information is disclosed to the public or ceases to be material. In such
instance, the Company's obligation to make payments under clause (ii) of the
penultimate sentence in the first paragraph of this Section 2(c) shall be
suspended for a period (an "Allowed Delay") expiring upon the earlier to occur
of (A) the date on which such material information is disclosed to the public or
ceases to be material or the Company is able to so comply with its disclosure
obligations or (B) 15 trading days after the Company first notifies the Investor
of such good faith determination. There shall not be more than two (2) Allowed
Delays in any twelve (12) month period nor more than three (3) Allowed Delays in
any twenty-four (24) month period.
d. Piggy-Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) at which time no
Registration Statement is then effective with respect to the Registrable
Securities, the Company shall file with the SEC a Registration Statement
relating to an offering for its own account or the account of others (unless
inclusion therein would require the consent of such other party, and the Company
is unable, despite exercise of good faith efforts, to obtain such consent) under
the 1933 Act of any of its equity securities (other than on Form S-4 or Form S-8
or their then equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity securities
issuable in connection with stock option, stock purchase or other employee
benefit plans), the Company shall send to each Investor who is entitled to
registration rights under this Section 2(d) written notice of such determination
and, if within fifteen (15) days after the effective date of such notice, such
Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriters) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit; provided,
however, that the Company shall not exclude any Registrable Securities unless
the Company has first excluded all outstanding securities, the holders of which
are not entitled to inclusion of such securities in such Registration Statement;
and provided, further, however , that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities not
subject to a similar cut-back provision. No right to registration of Registrable
Securities under this Section 2(d) shall be construed to limit any registration
required under Section 2(a) hereof. If an offering in connection with which an
Investor is entitled to registration under this Section 2(d) is an underwritten
offering, then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering.
e. Eligibility for Form S-3. The Company represents and
warrants that it meets the registrant eligibility and transaction requirements
for the use of Form S-3 for registration of the sale by the Investors of the
Registrable Securities and the Company shall file all reports required to be
filed by the Company with the SEC in a timely manner so as to maintain such
eligibility for the use of Form S-3. In the event that the Company is advised by
the SEC that it is not eligible to use Form S-3 in connection with the
registration of the Registrable Securities, it shall file a Registration
Statement covering the Registrable Securities on Form S-1 or other available
form as promptly as practicable and not more than 20 business days after such
advice from the SEC, and the Company shall use its best efforts to obtain
eligibility to use Form S-3 as promptly as practicable thereafter and shall
convert, prior to its effectiveness, the Form S-1 Registration Statement to a
Form S-3 Registration Statement as soon as it is permitted to do so thereafter.
f. Rule 416. The Company and the Investors each acknowledge
that, absent guidance from the SEC or other definitive authority to the
contrary, an indeterminate number of Registrable Securities shall be registered
pursuant to Rule 416 under the Securities Act so as to include in such
Registration Statement any and all Registrable Securities which may become
issuable (i) as a result of stock splits, stock dividends or similar
transactions and (ii) by reason of reductions in the Conversion Price of the
Preferred Stock in accordance with the terms thereof, including, but not limited
to, the terms which cause the Conversion Price to decrease to the extent the
closing bid price of the Common Stock decreases (collectively, the "Rule 416
Securities"). In this regard, the Company agrees to take all steps necessary to
ensure that all Registrable Securities are registered pursuant to Rule 416 under
the Securities Act in the Registration Statement and, absent guidance from the
SEC or other definitive authority to the contrary, the Company shall
affirmatively support and not take any action adverse to the position that the
Registration Statements filed hereunder cover all of the Rule 416 Securities. If
the Company determines that the Registration Statements filed hereunder do not
cover all of the Rule 416 Securities, the Company shall immediately provide to
each Investor written notice (a "Rule 416 Notice") setting forth the basis for
the Company's position and the authority therefor. If the Investors provide the
Company with an opinion of counsel that is contrary to the Rule 416 Notice, the
Company shall continue to act in a manner consistent with its obligations under
this Section 2(f).
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 and, on or prior to the date
which is twenty (20) business days after the Closing Date, file with the SEC, a
Registration Statement with respect to the number of Registrable Securities
provided in Section 2(a), and thereafter use its best efforts to cause such
Registration Statement relating to Registrable Securities to become effective as
soon as possible after such filing, and keep the Registration Statement
effective pursuant to Rule 415 at all times until such date as is the earlier of
(i) the date on which all of the Registrable Securities have been sold and (ii)
the date on which the Registrable Securities (in the opinion of counsel to the
Initial Investors) may be immediately sold without restriction (including
without limitation as to volume by each holder thereof) without registration
under the 1933 Act (the "Registration Period"), which 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
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement. In the event that Rule 416
is determined by the SEC not to permit the registration of an indeterminate
number of shares, and the number of shares available under a Registration
Statement filed pursuant to this Agreement is insufficient to cover all of the
Registrable Securities issued or issuable upon conversion of the Preferred Stock
or exercise of the Warrants, the Company shall amend the 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 such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. The provisions of Section 2(c) above shall be applicable with
respect to such obligation, with the ninety (90) days running from the day after
the date on which the Company reasonably first determines (or reasonably should
have determined) the need therefor.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement and, if
requested by such investor, its legal counsel (i) promptly after the same is
prepared and publicly distributed, filed with the SEC, or received by the
Company, one copy of the Registration Statement and any amendment thereto, each
preliminary prospectus and prospectus and each amendment or supplement thereto,
and, in the case of the Registration Statement referred to in Section 2(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 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 Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor. The
Company will immediately notify each Investor by facsimile of the effectiveness
of the Registration Statement or any post-effective amendment. The Company will
promptly respond to any and all comments received from the SEC, with a view
towards causing any Registration Statement or any amendment thereto to be
declared effective by the SEC as soon as practicable and shall promptly file an
acceleration request as soon as practicable following the resolution or
clearance of all SEC comments or, if applicable, following notification by the
SEC that the Registration Statement or any amendment thereto will not be subject
to review.
d. The Company shall use best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as the Investors 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. In the event Investors who hold a two-thirds
majority-in-interest of the Registrable Securities being offered in an offering
registered hereunder select underwriters for the offering, the Company shall
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary indemnification and
contribution obligations, with the underwriters of such offering.
f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and use its best
efforts promptly (but subject to Allowed Delays as set forth in Section 2(c)) to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor 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.
h. The Company shall permit a single firm of counsel and a
single firm of accountants designated by the Initial Investors to review the
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 reasonably objects and will not request acceleration of the
Registration Statement without prior notice to such counsel. The sections of the
Registration Statement covering information with respect to the Investors, the
Investors' beneficial ownership of securities of the Company or the Investors'
intended method of disposition of Registrable Securities shall conform to the
information provided to the Company by the Investors.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in accordance with
the provisions of Rule 158 under the ▇▇▇▇ ▇▇▇) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
j. At the request of any Investor, the Company shall furnish,
on the date that Registrable Securities are delivered to an underwriter, if any,
for sale in connection with the Registration Statement (i) an opinion, dated as
of such date, from counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the underwriters and the Investors
and (ii) a letter, dated such date, from the Company's independent certified
public accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters and the Investors.
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Initial Investors, and (iv) one firm of
attorneys retained by all such underwriters (collectively, the "Inspectors") all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be reasonably
deemed necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, 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 an Investor) 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. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(k). Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and any Investor) shall be deemed
to limit the Investor's ability to sell Registrable Securities in a manner which
is otherwise consistent with applicable laws and regulations.
l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor 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 an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
m. The Company shall (i) cause all the Registrable Securities
covered by the 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) secure the designation and
quotation, of all the Registrable Securities covered by the Registration
Statement on the Nasdaq National Market System or, if not eligible for the
Nasdaq National Market System on the Nasdaq Small Cap and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register with the Nasdaq National Market System as such with respect to such
Registrable Securities.
n. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the managing underwriter or underwriters, if
any, or the Investors may reasonably request and registered in such names as the
managing underwriter or underwriters, if any, or the Investors may request, and,
within three (3) business days after a 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 Investors
whose Registrable Securities are included in such Registration Statement) an
instruction in the form attached hereto as Exhibit 1 and an opinion from such
counsel and a letter from the Company, which letter has been acknowledged by the
Company's transfer agent as sufficient to permit the issuance of unlegended
Conversion Shares and Warrant Shares which are not subject to a stop transfer
notation in the form attached hereto as Exhibit 2.
p. At the request of any Investor, the Company shall prepare
and file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
q. The Company shall comply with all applicable laws related
to a Registration Statement and offering and sale of securities and all
applicable rules and regulations of governmental authorities in connection
therewith (including without limitation the Securities Act and the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated by
the SEC.)
r. 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. Nothing herein shall prohibit the Company from making
concurrent registrations of the Company's securities on separate registration
statements.
s. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable
Securities, the Investors shall each, on a several and not a joint basis, 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 Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five (5)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. In the event Investors holding a two-thirds
majority-in-interest of the Registrable Securities being registered (with the
approval of a majority-in-interest of the Initial Investors) determine to engage
the services of an underwriter, each Investor agrees to enter into and perform
such Investor'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 Investor
has notified the Company in writing of such Investor's election to exclude all
of such Investor's Registrable Securities from the Registration Statement.
d. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(o or 3(g) and, if so directed by
the Company, such Investor 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 Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements in
usual and customary form entered into by the Company, (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, including any lock-up agreement with respect to any
Registrable Securities not being sold in such underwriting as may reasonably be
requested by the managing underwriter, and (iii) agrees to pay its pro rata
share of all underwriting discounts and commissions and any expenses in excess
of those payable by the Company pursuant to Section 5 below.
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 shall be borne by the Company.
In addition, the Company shall pay all of the Investors' reasonable costs
(including legal fees) incurred in connection with the successful enforcement of
the Investors' rights hereunder.
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 Investor who holds such Registrable
Securities, (ii) the directors, officers, partners, employees, agents and each
person who controls any Investor 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 Investors, 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 each 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 the 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 prospectus, shall not inure to the benefit of any
Indemnified Person if the untrue statement or omission of material fact
contained in a preliminary prospectus or final prospectus or any supplement
thereto was corrected on a timely basis in the prospectus, as then amended or
supplemented as required by Section 3(f), 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 or
incomplete 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 Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor 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 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 Investor, 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 Investor
expressly for use in connection with such Registration Statement; and subject to
Section 6(c) such Investor 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 Investor, which consent shall not be
unreasonably withheld; and provided, further, that the Investor's liability
hereunder shall be limited in amount to the net amount of proceeds received by
such seller from the sale of Registrable Securities 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 Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
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 such indemnifying party shall not be
entitled to assume such defense and 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 Investors holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates (with the approval of the Initial
Investors), if the Investors are entitled to indemnification hereunder, or the
Company, if the Company is entitled to indemnification hereunder, as applicable.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this 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(of the 1933 Act) 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 Investors 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 Investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees, for as long as there shall be any Series B Convertible Preferred
Stock, Warrants, Conversion Shares or Warrant Shares held by an Investor, 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 (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor 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 Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically
assignable by the Investors to any transferee of all or a portion of Registrable
Securities if: (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment, (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 and shall have made appropriate representations to that effect to the
Company.
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
Initial Investors (to the extent such Initial Investors still own Registrable
Securities) and Investors who hold a two-thirds majority interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor 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. Any notices required or permitted to be given under the
terms hereof shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular U.S. mail, or upon receipt,
if delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile, in each case addressed to a party. The addresses for
such communications shall be:
If to the Company:
SoftNet Systems, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Initial Investors: To the address set forth
immediately below such Initial Investor's name on the signature pages hereto.
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 New York applicable to agreements made and to be
performed entirely within such State. 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. The parties hereto hereby submit to the exclusive jurisdiction of the
United States Federal Courts located in New York with respect to any dispute
arising under this Agreement or the transactions contemplated hereby.
e. This Agreement, the Securities Purchase Agreement
(including all schedules and exhibits thereto), and the Warrants 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. This
Agreement, the Securities Purchase Agreement and the Warrants supersede all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. 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.
j. Except as otherwise provided herein, all consents and other
determinations to be made by the Investors pursuant to this Agreement shall be
made by Investors holding a two-thirds majority of the Registrable Securities,
determined as if the all of the shares of Preferred Stock and Warrants then
outstanding have been converted into or exercised for Registrable Securities.
k. 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.
IN WITNESS WHEREOF, the Company and the undersigned Initial
Investors have caused this Agreement to be duly executed as of the date first
above written.
SOFTNET SYSTEMS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Treasurer
INITIAL INVESTORS:
RGC INTERNATIONAL INVESTORS, LDC
By: ▇▇▇▇ ▇▇▇▇ Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp.
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Managing Director
RESIDENCE Cayman Islands
ADDRESS:
c/o ▇▇▇▇ ▇▇▇▇ Capital Management, L.P.
▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇