Registration Rights Agreement
dated as of
May 25, 2004
by and between
Avitar, Inc.
and
GCA Strategic Investment Fund Limited
TABLE OF CONTENTS
1. Introduction.........................................................1
i. Securities Purchase Agreement...............................1
ii. Definition of Securities....................................1
iii. National Market Representation..............................1
2. Registration under Securities Act, etc...............................1
2.1 Mandatory Registration......................................1
i. Registration of Registrable Securities.............1
ii. Registration Statement Form........................2
iii. Expenses...........................................2
iv. Effective Registration Statement...................2
v. Plan of Distribution...............................2
2.2 Incidental Registration.....................................2
i. Right to Include Registrable Securities............2
ii. Priority in Incidental Registrations...............3
2.3 Registration Procedures.....................................3
2.4 Underwritten Offerings......................................7
i. Incidental Underwritten Offerings..................7
ii. Holdback Agreements................................7
iii. Participation in Underwritten Offerings............7
2.5 Preparation; Reasonable Investigation.......................8
2.6 Registration Default Fee....................................8
2.7 Indemnification.............................................8
i. Indemnification by the Company.....................8
ii. Indemnification by the Sellers.....................9
iii. Notices of Claims, etc.............................9
iv. Other Indemnification.............................10
v. Indemnification Payments..........................10
vi. Contribution......................................10
3. Definitions.........................................................11
4. Rule 144............................................................13
5. Amendments and Waivers..............................................13
6. Nominees for Beneficial Owners......................................14
7. Notices.............................................................14
8. Assignment..........................................................14
9. Descriptive Headings................................................14
10. GOVERNING LAW.......................................................15
11. Counterparts........................................................15
12. Entire Agreement....................................................15
13. Severability........................................................15
Registration Rights Agreement
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May 14, 2004,
among Avitar, Inc., a Delaware corporation (the "Company"), and GCA Strategic
Investment Fund Limited (the "Fund").
1. Introduction.
i. Securities Purchase Agreement. The Company and the Fund have today
executed that certain Securities Purchase Agreement (the "Securities Purchase
Agreement"), pursuant to which the Fund has agreed, among other things, to
purchase 1,000 shares of its Series A Preferred Stock, 4% Cumulative Dividend
(the "Preferred Stock"). In addition, the Company has issued to the Fund Common
Stock Purchase Warrants exercisable for up to an aggregate of 100,000 shares of
the Company's common stock, $0.01 par value per share (the "Common Stock") (the
"Warrant Shares"). The number of Warrant Shares is subject to adjustment upon
the occurrence of stock splits, recapitalization and similar events occurring
after the date hereof.
ii. Definition of Securities. The Common Stock issued upon conversion of
the Preferred Stock and the Warrant Shares are collectively herein referred to
as the "Securities."
iii. National Market Representation. The Company represents and warrants
that the Company's Common Stock is currently eligible for trading on the
American Stock Exchange ("Amex") under the symbol "AVR." Certain capitalized
terms used in this Agreement are defined in Section 3 hereof; references to
sections shall be to sections of this Agreement.
2. Registration under Securities Act, etc.
2.1 Mandatory Registration.
i. Registration of Registrable Securities. The Company will file with the
Commission, within 30 days following the date hereof, a Registration Statement
on Form S-3 (the "Registration Statement") to register the resale of the Common
Shares issuable upon the exercise of the Warrants. The Company will use its best
efforts to cause the Registration Statement to become effective within (i) 90
days of the Date hereof, (ii) ten (10) days following the receipt of a "No
Review" or similar letter from the Commission or (iii) the first day following
the day the Commission determines the Registration Statement eligible to be
declared effective (the "Required Effectiveness Date"). Nothing contained herein
shall be deemed to limit the number of Registrable Securities to be registered
by the Company hereunder. As a result, should the Registration Statement not
relate to the maximum number of Registrable Securities acquired by (or
potentially acquirable by) the holders thereof upon conversion of the Preferred
Stock, or exercise of the Common Stock Purchase Warrants described in Section 1
above, the Company shall be required to promptly file a separate registration
statement (utilizing Rule 462 promulgated under the Exchange Act, where
applicable) relating to such Registrable Securities which then remain
unregistered. The provisions of this Agreement shall relate to any such separate
registration statement as if it were an amendment to the Registration Statement.
ii. Registration Statement Form. Registrations under this Section 2.1 shall
be on Form S-3 or such other appropriate registration form of the Commission as
shall permit the disposition of such Registrable Securities in accordance with
the intended method or methods of disposition specified by the Fund; provided,
however, such intended method of deposition shall not include an underwritten
offering of the Registrable Securities.
iii. Expenses. The Company will pay all Registration Expenses in connection
with any registration required by this Section 2.1.
iv. Effective Registration Statement. A registration requested pursuant to
this Section 2.1 shall not be deemed to have been effected (i) unless a
registration statement with respect thereto has become effective, provided that
a registration which does not become effective after the Company filed a
registration statement with respect thereto solely by reason of the refusal to
proceed of any holder of Registrable Securities (other than a refusal to proceed
based upon the advice of counsel in the form of a letter signed by such counsel
and provided to the Company relating to a disclosure matter unrelated to such
holder) shall be deemed to have been effected by the Company unless the holders
of the Registrable Securities shall have elected to pay all Registration
Expenses in connection with such registration, (ii) if, after it has become
effective, such registration becomes subject to any stop order, injunction or
other order or extraordinary requirement of the Commission or other governmental
agency or court for any reason or (iii) if, after it has become effective, such
registration ceases to be effective for more than an aggregate of ninety (90)
days.
v. Plan of Distribution. The Company hereby agrees that the Registration
Statement shall include a plan of distribution section reasonably acceptable to
the Fund; provided, however, such plan of distribution section shall be modified
by the Company so as to not provide for the disposition of the Registrable
Securities on the basis of an underwritten offering.
2.2 Incidental Registration.
i. Right to Include Registrable Securities. If any time after the date
hereof but before the third anniversary of the date hereof, the Company proposes
to register any of its securities under the Securities Act (other than by a
registration in connection with an acquisition in a manner which would not
permit registration of Registrable Securities for sale to the public, on Form
S-8, or any successor form thereto, on Form S-4, or any successor form thereto
and other than pursuant to Section 2.1), on an underwritten basis (either
best-efforts or firm-commitment), then, the Company will at such time give
prompt written notice to all Holders of its intention to do so and of such
Holders' rights under this Section 2.2. Upon the written request of any such
Holder made within twenty (20) days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
such Holder an and the intended method of disposition thereof), the Company
will, subject to the terms of this Agreement, effect the registration under the
Securities Act of the Registrable Securities, to the extent requisite to permit
the disposition (in accordance with the intended methods thereof as aforesaid)
of such Registrable Securities so to be registered, by inclusion of such
Registrable Securities in the registration statement which covers the securities
which the Company proposes to register, provided that if, at any time after
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason either not to register
or to delay registration of such securities, the Company may, at its election,
give written notice of such determination to each Holder and, thereupon, (i) in
the case of a determination not to register, shall be relieved of this
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under Section 2.1, and (ii) in the
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this Section
2.2 shall relieve the Company of its obligation to effect any registration upon
request under Section 2.1, nor shall any such registration hereunder be deemed
to have been effected pursuant to Section 2.1. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this Section 2.2. The right provided the
Holders of the Registrable Securities pursuant to this Section shall be
exercisable at their sole discretion and will in no way limit any of the
Company's obligations to pay the Securities according to their terms.
ii. Priority in Incidental Registrations. If the managing underwriter of
the underwritten offering contemplated by this Section 2.2 shall inform the
Company and holders of the Registrable Securities requesting such registration
by letter of its belief that the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering, then
the Company will include in such registration, to the extent of the number which
the Company is so advised can be sold in such offering, (i) first securities
proposed by the Company to be sold for its own account, and (iii) second
Registrable Securities and securities of other selling security holders
requested to be included in such registration pro rata on the basis of the
number of shares of such securities so proposed to be sold and so requested to
be included; provided, however, the holders of Registrable Securities shall have
priority to all shares sought to be included by officers and directors of the
Company as well as holders of ten percent (10%) or more of the Company's Common
Stock.
2.3 Registration Procedures. If and whenever the Company is required to
effect the registration of any Registrable Securities under the Securities Act
as provided in Section 2.1 and, as applicable, 2.2, the Company shall, as
expeditiously as possible:
i. prepare and file with the Commission the Registration Statement to
effect such registration (including such audited financial statements as may be
required by the Securities Act or the rules and regulations promulgated
thereunder) and thereafter use its best efforts to cause such registration
statement to be declared effective by the Commission, as soon as practicable,
but in any event no later than the Required Effectiveness Date (with respect to
a registration pursuant to Section 2.1); provided, however, that before filing
such registration statement or any amendments thereto, the Company will furnish
to the counsel selected by the holders of Registrable Securities which are to be
included in such registration, copies of all such documents proposed to be
filed;
ii. with respect to any Registration Statement pursuant to Section 2.1,
prepare and file with the Commission such 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 to comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement, until the earlier
to occur of six (6) years after the date of this Agreement(subject to the right
of the Company to suspend the effectiveness thereof for not more than 10
consecutive days or an aggregate of 30 days in such six (6) years period) or
such time as all of the securities which are the subject of such registration
statement cease to be Registrable Securities (such period, in each case, the
"Registration Maintenance Period");
iii. furnish to each seller of Registrable Securities covered by such
registration statement such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus contained in
such registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act, and
such other documents, as such seller and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by such seller;
iv. use its reasonable efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement under
such other securities laws or blue sky laws as any seller thereof shall
reasonably request, to keep such registrations or qualifications in effect for
so long as such registration statement remains in effect, and take any other
action which may be reasonably necessary to enable such seller to consummate the
disposition in such jurisdictions of the securities owned by such seller, except
that the Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this subdivision (iv) be obligated to be so
qualified or to consent to general service of process in any such jurisdiction;
v. use its best efforts to cause all Registrable Securities covered by such
registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof to consummate the disposition of such Registrable Securities;
vi. furnish to each seller of Registrable Securities a signed counterpart,
addressed to such seller, and the underwriters, if any, of:
(A) an opinion of counsel for the Company, dated the effective date of
such registration statement (or, if such registration includes an
underwritten public offering, an opinion dated the date of the closing
under the underwriting agreement),reasonably satisfactory in form and
substance to such seller) including that the prospectus and any prospectus
supplement forming a part of the Registration Statement does not contain an
untrue statement of a material fact or omits a material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
(B) a "comfort" letter (or, in the case of any Person which does not
satisfy the conditions for receipt of a "comfort" letter specified in
Statement on Auditing Standards No. 72, an "agreed upon procedures"
letter), dated the effective date of such registration statement (and, if
such registration includes an underwritten public offering, a letter of
like kind dated the date of the closing under the underwriting agreement),
signed by the independent public accountants who have certified the
Company's financial statement included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities (with, in the case of an
"agreed upon procedures" letter, such modifications or deletions as may be
required under Statement on Auditing Standards No. 35) and, in the case of
the accountants' letter, such other financial matters, and, in the case of
the legal opinion, such other legal matters, as such seller (or the
underwriters, if any) may reasonably request;
vii. notify the Sellers' Representative and its counsel promptly and
confirm such advice in writing promptly after the Company has knowledge thereof:
(A) when the Registration Statement, the prospectus or any prospectus
supplement related thereto or post-effective amendment to the Registration
Statement has been filed, and, with respect to the Registration Statement
or any post-effective amendment thereto, when the same has become
effective;
(B) of any request by the Commission for amendments or supplements to
the Registration Statement or the prospectus or for additional information;
(C) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings by any Person for that purpose; and
(D) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any Registrable Securities for sale
under the securities or blue sky laws of any jurisdiction or the initiation
or threat of any proceeding for such purpose;
viii. notify each seller of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material facts required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of any such seller promptly
prepare and furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an 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 in the light of the circumstances then existing;
ix. use its best efforts to obtain the withdrawal of any order suspending
the effectiveness of the Registration Statement at the earliest possible moment;
x. otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with the first
full calendar month after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
xi. enter into such agreements and take such other actions as the Sellers'
Representative shall reasonably request in writing (at the expense of the
requesting or benefiting sellers) in order to expedite or facilitate the
disposition of such Registrable Securities; and
xii. use its best efforts to list all Registrable Securities covered by
such registration statement on any securities exchange on which any of the
Registrable Securities are then listed.
The Company may require each seller of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing.
The Company will not file any registration statement pursuant to Section
2.1, or amendment thereto or any prospectus or any supplement thereto (including
such documents incorporated by reference and proposed to be filed after the
initial filing of the Registration Statement) to which the Sellers'
Representative shall reasonably object, provided that the Company may file such
documents in a form required by law or upon the advice of its counsel.
The Company represents and warrants to each holder of Registrable
Securities that it has obtained all necessary waivers, consents and
authorizations necessary to execute this Agreement and consummate the
transactions contemplated hereby other than such waivers, consents and/or
authorizations specifically contemplated by the Securities Purchase Agreement.
The Fund agrees that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in subdivision (viii) of this
Section 2.3, the Fund will forthwith discontinue the Fund's disposition of
Registrable Securities pursuant to the Registration Statement relating to such
Registrable Securities until the Fund's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (viii) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in the
Fund's possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice.
2.4 Underwritten Offerings.
i. Incidental Underwritten Offerings. If the Company at any time proposes
to register any of its securities under the Securities Act as contemplated by
Section 2.2 and such securities are to be distributed by or through one or more
underwriters, the Company will, if requested by any holder of Registrable
Securities as provided in Section 2.2 and subject to the provisions of Section
2.2(i), use its reasonable efforts to arrange for such underwriters to include
all the Registrable Securities to be offered and sold by such holder among the
securities to be distributed by such underwriters.
ii. Holdback Agreements. Subject to such other reasonable requirements as
may be imposed by the underwriter as a condition of inclusion of a Fund's
Registrable Securities in the registration statement, each Fund agrees by
acquisition of Registrable Securities, if so required by the managing
underwriter, not to sell, make any short sale of, loan, grant any option for the
purchase of, effect any public sale or distribution of or otherwise dispose of,
except as part of such underwritten registration, any equity securities of the
Company, during such reasonable period of time requested by the underwriter;
provided however, such period shall not exceed the 120 day period commencing 30
days prior to the commencement of such underwritten offering and ending 90 days
following the completion of such underwritten offering.
iii. Participation in Underwritten Offerings. No holder of Registrable
Securities may participate in any underwritten offering under Section 2.2 unless
such holder of Registrable Securities (i) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements approved,
subject to the terms and conditions hereof, by the holders of a majority of
Registrable Securities to be included in such underwritten offering and (ii)
completes and executes all questionnaires, indemnities, underwriting agreements
and other documents (other than powers of attorney) required under the terms of
such underwriting arrangements. Notwithstanding the foregoing, no underwriting
agreement (or other agreement in connection with such offering) shall require
any holder of Registrable Securities to make an representations or warranties to
or agreements with the Company or the underwriters other than representations
and warranties contained in a writing furnished by such holder expressly for use
in the related registration statement or representations, warranties or
agreements regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation required
by law.
2.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, and their respective
counsel and accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the reasonable opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
2.6 Registration Default Fee. If the Registration Statement contemplated in
Section 2.1 is (x) not declared effective by the Required Effectiveness Date or
(y) such effectiveness is not maintained for the Registration Maintenance
Period, then the Company shall pay to the Fund the applicable Default Fee
specified in Section 10.4 of the Securities Purchase Agreement.
2.7 Indemnification.
i. Indemnification by the Company. In the event of any registration of any
securities of the Company under the Securities Act, the Company will, and hereby
does agree to indemnify and hold harmless the holder of any Registrable
Securities covered by such registration statement, its directors and officers,
each other Person who participates as an underwriter in the offering or sale of
such securities and each other Person, if any, who controls such holder or any
such underwriter within the meaning of the Securities Act against any losses,
claims, damages or liabilities, joint or several, to which such holder or any
such director or officer or underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
reimburse such holder and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding, provided that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability, (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
holder or underwriter stating that it is for use in the preparation thereof and,
provided further that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or to any other Person, if any, who controls such underwriter within the meaning
of the Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, within the time required by the
Securities Act to the Person asserting the existence of an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final prospectus or an
amendment or supplement thereto. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such holder or
any such director, officer, underwriter or controlling person and shall survive
the transfer of such securities by such holder.
ii. Indemnification by the Sellers. The Company may require, as a condition
to including any Registrable Securities in any registration statement filed
pursuant to this Agreement, the Company shall have received an undertaking
satisfactory to it from the prospective seller of such Registrable Securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (i) of this Section 2.7) the Company, each director of the
Company, each officer of the Company and each other Person, if any, who controls
the Company within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such seller specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Any such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such seller.
iii. Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 2.7, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 2.7, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability, or a covenant not to ▇▇▇, in respect to such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
iv. Other Indemnification. Indemnification similar to that specified in the
preceding subdivisions of this Section 2.7 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities (but
only if and to the extent required pursuant to the terms of 2.7(ii)) with
respect to any required registration or other qualification of securities under
any Federal or state law or regulation of any governmental authority, other than
the Securities Act.
v. Indemnification Payments. The indemnification required by this Section
2.7 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
vi. Contribution. If the indemnification provided for in the preceding
subdivision of this Section 2.7 is unavailable to an indemnified party in
respect of any expense, loss, claim, damage or liability referred to therein,
then each 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 expense, loss, claim, damage or liability (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand and the holder or underwriter, as the case may be, on the other
from the distribution of the Registrable Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and of the holder or underwriter, as the case may be, on the other in
connection with the statements or omissions which resulted in such expense,
loss, damage or liability, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the holder or underwriter, as the case may be, on the other in connection
with the distribution of the Registrable Securities shall be deemed to be in the
same proportion as the total net proceeds received by the Company from the
initial sale of the Registrable Securities by the Company to the purchasers bear
to the gain, if any, realized by all selling holders participating in such
offering or the underwriting discounts and commissions received by the
underwriter, as the case may be. The relative fault of the Company on the one
hand and of the holder or underwriter, as the case may be, on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the holder or by the underwriter and
the parties' relative intent, knowledge, access to information supplied by the
Company, by the holder or by the underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, provided that the foregoing contribution agreement shall
not inure to the benefit of any indemnified party if indemnification would be
unavailable to such indemnified party by reason of the provisions contained in
the first sentence of subdivision (i) of this Section 2.7, and in no event shall
the obligation of any indemnifying party to contribute under this subdivision
(vi) exceed the amount that such indemnifying party would have been obligated to
pay by way of indemnification if the indemnification provided for under
subdivisions (ii) of this Section 2.7 had been available under the
circumstances.
The Company and the holders of Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this subdivision (vi) were
determined by pro rata allocation (even if the holders and any underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth in the preceding sentence and subdivision (iii) of this
Section 2.7, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (vi), no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
allege untrue statement or omission. 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.
3. Definitions. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
"Agreement": As defined in Section 1.
"Amex": As defined in Section 1.
"Commission": The Securities and Exchange Commission or any other Federal
agency at the time administering the Securities Act.
"Common Stock": As defined in Section 1.
"Company": As defined in the introductory paragraph of this Agreement.
"Exchange Act": The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder.
"Person": A corporation, association, partnership, organization, business,
individual, governmental or political subdivision thereof or a governmental
agency.
"Preferred Stock": As defined in Section 1, such term to include any
securities issued in substitution of or in addition to such Preferred Stock.
"Registrable Securities": The Securities and any securities issued or
issuable with respect to such Securities by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. Once issued such securities
shall cease to be Registrable Securities when (a) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (b) they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision) under the Securities
Act, (c) they shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been delivered by
the Company and subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law then in
force, (d) they shall have ceased to be outstanding, (e) on the expiration of
the applicable Registration Maintenance Period or (f) any and all legends
restricting transfer thereof have been removed in accordance with the provisions
of Rule 144(k) (or any successor provision) under the Securities Act.
"Registration Expenses": All expenses incident to the Company's performance
of or compliance with this Agreement, including, without limitation, all
registration, filing and NASD fees, all stock exchange and Amex listing fees,
all fees and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and delivery expenses,
the fees and disbursements of counsel for the Company and of its independent
public accountants, including the expenses of any special audits or "cold
comfort" letters required by or incident to such performance and compliance,
premiums and other costs of policies of insurance of the Company against
liabilities arising out of the public offering of the Registrable Securities
being registered and any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any, provided that, in any case where
Registration Expenses are not to be borne by the Company, such expenses shall
not include salaries of Company personnel or general overhead expenses of the
Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event.
"Registration Maintenance Period": As defined in Section 2.3.
"Required Effectiveness Date": As defined in Section 2.1.
"Securities Act": The Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder.
"Securities Purchase Agreement": As defined in Section 1.
"Sellers' Representative": Global Capital Advisors, Ltd. or such Person
designated by Global Capital Advisors, Ltd.
"Warrant Shares": As defined in Section 1.
4. Rule 144. The Company shall timely file the reports required to be filed
by it under the Securities Act and the Exchange Act (including but not limited
to the reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c) of Rule 144 adopted by the Commission under the Securities Act)
and the rules and regulations adopted by the Commission thereunder (or, if the
Company is not required to file such reports, will, upon the request of any
holder of Registrable Securities, make publicly available other information) and
will take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any holder of Registrable Securities, the Company will deliver to such holder
a written statement as to whether it has complied with the requirements of this
Section 4.
5. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of the sum of the 51% or more of the shares of (i) Registrable
Securities issued at such time, plus (ii) Registrable Securities issuable upon
exercise or conversion of the Securities then constituting derivative securities
(if such Securities were not fully exchanged or converted in full as of the date
such consent if sought). Each holder of any Registrable Securities at the time
or thereafter outstanding shall be bound by any consent authorized by this
Section 5, whether or not such Registrable Securities shall have been marked to
indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number of percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
7. Notices. Except as otherwise provided in this Agreement, all notices,
requests and other communications to any Person provided for hereunder shall be
in writing and shall be given to such Person (a) in the case of a party hereto
other than the Company, addressed to such party in the manner set forth in the
Securities Purchase Agreement or at such other address as such party shall have
furnished to the Company in writing, or (b) in the case of any other holder of
Registrable Securities, at the address that such holder shall have furnished to
the Company in writing, or, until any such other holder so furnishes to the
Company an address, then to and at the address of the last holder of such
Registrable Securities who has furnished an address to the Company, or (c) in
the case of the Company, at the address set forth on the signature page hereto,
to the attention of its President, or at such other address, or to the attention
of such other officer, as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding. Each such notice, request or
other communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (ii) if given by any other means (including, without
limitation, by fax or air courier), when delivered at the address specified
above, provided that any such notice, request or communication shall not be
effective until received.
8. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto. In addition, and whether or
not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties hereto other than the Company
shall also be for the benefit of and enforceable by any subsequent holder of any
Registrable Securities. Each of the Holders of the Registrable Securities
agrees, by accepting any portion of the Registrable Securities after the date
hereof, to the provisions of this Agreement including, without limitation,
appointment of the Sellers' Representative to act on behalf of such Holder
pursuant to the terms hereof which such actions shall be made in the good faith
discretion of the Sellers' Representative and be binding on all persons for all
purposes.
9. Descriptive Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for reference only and shall not
limit or otherwise affect the meaning hereof.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF DELAWARE WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS.
11. Counterparts. This Agreement may be executed by facsimile and may be
signed simultaneously in any number of counterparts, each of which shall be
deemed an original, but all such counterparts shall together constitute one and
the same instrument.
12. Entire Agreement. Subject to Article X of the Securities Purchase
Agreement, this Agreement embodies the entire agreement and understanding
between the Company and each other party hereto relating to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
13. Severability. If any provision of this Agreement, or the application of
such provisions to any Person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
AVITAR, INC.
By:
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Name:
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Title:
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Address: ▇▇ ▇▇▇ ▇▇▇▇
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Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
GCA Strategic Investment Fund Limited
By:
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Director
Address: Mechanics ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇
Telephone:(▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇