REGISTRATION RIGHTS AGREEMENT
▇▇▇▇▇▇▇▇.▇▇▇, INC.
FEBRUARY 22, 2000
TABLE OF CONTENTS
PAGE
1. DEFINITIONS..........................................................1
2. REGISTRATION; RESTRICTIONS ON TRANSFER...............................3
2.1 Restrictions on Transfer....................................3
2.2 Demand Registration.........................................4
2.3 General Provisions Applicable to Demand Registration........5
2.4 Delay, Postponement and Suspension of Sale..................6
2.5 No Piggyback Registrations..................................7
2.6 Registration Expenses.......................................7
2.7 Obligations of the Company..................................8
2.8 Termination of Registration Rights.........................10
2.9 Delay of Registration......................................10
2.10 Indemnification............................................10
2.11 "Market Stand-Off" Agreement...............................13
2.12 Rule 144 Reporting.........................................14
3. CONFIDENTIALITY.....................................................14
4. GENERAL.............................................................15
4.1 Governing Law..............................................15
4.2 Survival...................................................15
4.3 Successors and Assigns.....................................15
4.4 Severability...............................................15
4.5 Amendment and Waiver.......................................16
4.6 Delays or Omissions........................................16
4.7 Notices....................................................16
4.8 Attorneys' Fees............................................16
4.9 Headings...................................................17
4.10 Entire Agreement...........................................17
4.11 Counterparts...............................................17
4.12 Third-Party Beneficiaries..................................17
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
as of the 22nd day of February, 2000, by and among ▇▇▇▇▇▇▇▇.▇▇▇, inc., a
Delaware corporation (the "Company"), and each Holder (as defined in
Section 1 below).
WHEREAS, pursuant to the Agreement and Plan of Merger, dated January
13, 2000 (the "Merger Agreement"), by and among the Company, CB Acquisition
Corp., SP Acquisition Corp., Chips & Bits, Inc., a Vermont corporation,
("CB") Strategy Plus, Inc., a Vermont corporation, ("SP," and together with
CB, the "Targets") pertaining to the acquisition by the Company of all of
the outstanding capital stock of the Targets, the Company has agreed to
provide certain registration rights to the Holders as set forth herein; and
WHEREAS, the foregoing parties desire to set forth their agreement as
to the registration rights of the Holders;
NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
the mutual covenants and agreements hereinafter set forth, and other good
and valuable consideration the receipt and sufficiency of which hereby are
acknowledged, agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following respective meanings:
"AUDITED FINANCIAL STATEMENTS" shall mean balance sheets, statements
of operations, statements of stockholders' equity and statements of cash
flows, including any pro forma financial statements, with respect to the
Targets (and any notes related to the foregoing) necessary in the Company's
judgment in order to meet the requirements of Regulation S-X of the
Securities Act or other federal laws applicable to the Company in
connection with the Registration Statement contemplated by Section 2.2 of
this Agreement, covering any time period required by such securities laws,
prepared in accordance with United States Generally Accepted Accounting
Principles consistently applied and, if required, audited by a nationally
recognized independent accounting firm selected by the Company, which firm
has executed an unqualified opinion related to, and has consented to the
inclusion of, such financial statements in such Registration Statement. The
Company shall bear the cost of preparation of the Audited Financial
Statements; provided, that in the event such costs exceed $85,000, the
Holders shall be liable for such excess, in proportion to their pro rata
ownership of Registrable Securities.
"CB" shall have the meaning set forth in the recitals hereto.
"COMMON STOCK" shall mean the common stock, par value $.001 per share,
of the Company.
"COMPETITOR" shall mean any Person directly or indirectly engaged in
the retail sale of video and/or computer games over the Internet and/or by
catalogue, and/or the writing, distribution and/or publication of computer
or video game news, reviews, previews and tips, whether in print or online.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in Section
3.
"DELAY PERIOD" shall have the meaning set forth in Section 2.4.
"EFFECTIVE DATE" shall have the meaning set forth in Section 2.2.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
References to a particular section of the Securities Exchange Act of 1934,
as amended, shall include a reference to the comparable section, if any, of
any such similar federal statute.
"FAMILY MEMBER" shall mean a Holder's spouse, natural and adoptive
children, siblings, parents and grandparents; provided that none of the
foregoing is a Competitor of the Company.
"HOLDER" means any Person listed on Exhibit A hereto who owns of
record Registrable Securities and who has executed a counterpart signature
page to this Agreement, or any assignee of record of Registrable Securities
held by such Person in accordance with Section 4.3 hereof.
"MERGER AGREEMENT" shall have the meaning set forth in the recitals
hereto.
"PERSON" shall mean any individual, corporation, limited liability
company, partnership, trust or association, or any other entity or
organization, including any government entity.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance
with the Securities Act, and the declaration or ordering of effectiveness
of such registration statement or document by the Commission.
"REGISTRABLE SECURITIES" means (i) shares of Common Stock issued to
the Holders pursuant to the Merger Agreement; and (ii) any Common Stock
issued as a dividend or other distribution with respect to, or in exchange
for or in replacement of, such above-described securities. As to any
particular Registrable Securities, 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, (b) they may be sold by the Holder thereof pursuant to Rule
144 or any successor rule under the Securities Act, (c) they shall have
been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer under the Securities Act shall have been
delivered by the Company and subsequent public distribution of them shall
not require registration of them under the Securities Act, or (d) they
shall have ceased to be outstanding.
"REGISTRATION STATEMENT" means a registration statement of the
Company, filed with the Commission on an appropriate form, including any
registration statement filed pursuant to the provisions of this Agreement,
including the prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
"SEC" or "COMMISSION" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933, as amended, shall include
a reference to the comparable section, if any, of any such similar federal
statute.
"SP" shall have the meaning set forth in the recitals hereto.
"TARGETS" shall have the meaning set forth in the recitals hereto.
"TRANSFER" shall have the meaning set forth in Section 2.1.
2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER. (a) Each Holder agrees not to make any
sale, offer for sale, pledge or other disposition (collectively, a
"Transfer") of all or any portion of Registrable Securities unless and
until:
(i) Subject to the terms of any notice delivered pursuant to
Section 2.3(g), there is then in effect a Registration Statement under the
Securities Act covering such proposed Transfer and such Transfer is made in
accordance with such Registration Statement; or
(ii) (A) The transferee has agreed in a letter addressed to
the Company to be bound by this Agreement, (B) such Holder shall have
notified the Company, in advance of the proposed Transfer, of the name and
address of the proposed transferee and shall have furnished the Company
with a detailed statement of the circumstances surrounding such proposed
Transfer, (C) the transferee is not a Competitor of the Company, and (D) if
requested by the Company, such Holder shall have furnished the Company with
an opinion of counsel, reasonably satisfactory to the Company, that such
Transfer will not require registration of such shares under the Securities
Act.
(iii) Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such Registration Statement or opinion of counsel shall be
necessary for a Transfer by a Holder to such Holder's Family Members or
trusts for the benefit of an individual Holder or such Holder's Family
Members, provided, however, that such Holder shall have notified the
Company in advance of the proposed Transfer, the name and address of the
proposed transferee, and such transferee agrees in a letter addressed to
the Company to be bound by all of the provisions of this Agreement to the
same extent as if such transferee were an original Holder hereunder.
(iv) In the case of any Transfer, the transferee shall
deliver evidence reasonably satisfactory to the Company that such Holder is
an "accredited investor" within the meaning of that term as defined in Rule
501 promulgated under the Securities Act.
(b) Each certificate representing Registrable Securities shall be
stamped or otherwise imprinted with the following legends:
(I) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED."
(II) ANY LEGEND REQUIRED BY APPLICABLE STATE SECURITIES
LAWS.
(c) The Company shall promptly reissue certificates without the
legend specified in Section 2.1(b)(i) at the request of any Holder who has
obtained an opinion of counsel (which counsel may be counsel to the
Company, but the Company shall not be required to have its counsel deliver
such opinion) or other evidence in each case reasonably acceptable to the
Company to the effect that the Registrable Securities proposed to be
disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on a certificate representing Registrable
Securities pursuant to applicable state securities laws and the
stop-transfer instructions with respect to such Registrable Securities
shall be removed upon receipt by the Company of an order of the appropriate
blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION. (a) Subject to clause (b) below, upon receipt
of written notice from the Holders of a majority in interest of Registrable
Securities, the Company agrees to use its commercially reasonable best
efforts to file with the SEC as soon as commercially practicable following
April 20, 2000, a Registration Statement on Form S-1, Form S-3 (if the
Company is then eligible), or such other similar form as may be permitted
under the Securities Act, covering the number of Registrable Securities
equal to the quotient obtained by dividing $5,000,000 by the average
closing price of the Company's Common Stock as reported on the Nasdaq
National Market on the five trading days immediately prior to such filing;
provided that in the event Audited Financial Statements are necessary for
such filing, such Audited Financial Statements shall have been delivered to
the Company prior to the time that any filing pursuant to this Section 2.2
shall be effected. The Company may at any time amend the Registration
Statement to amend the form on which such Registration Statement has been
filed, so long as permitted by applicable federal law. The Company shall
use its commercially reasonable best efforts to cause the Registration
Statement to be declared effective pursuant to the Securities Act as
promptly as practicable following the filing thereof (the "Effective
Date").
(b) Notwithstanding any provision to the contrary contained in
this Agreement, the Company shall have the right to include all Holders'
shares required to be registered pursuant to Section 2.2(a) hereof, in a
Registration Statement filed for the benefit of any stockholder of the
Company or for the Company's own account, which inclusion shall terminate
the Company's obligations to effect the Registration contemplated by
Section 2.2(a).
2.3 GENERAL PROVISIONS APPLICABLE TO DEMAND REGISTRATION. (a) No
Holder may include any of its Registrable Securities in a Registration
Statement pursuant to this Agreement unless and until such Holder furnishes
to the Company in writing, as soon as practicable after the date hereof but
in no event later than fifteen (15) business days prior to an Effective
Date, the information specified in Item 507 or 508 of Regulation S-K
promulgated under the Securities Act, as applicable, and any additional
information required by the Securities Act for use in connection with such
Registration Statement or prospectus or preliminary prospectus included
therein. Each selling Holder agrees to promptly furnish such information
and any additional information required to be disclosed in order to make
the information previously furnished to the Company by such Holder not
materially misleading.
(b) The Company shall not be required to effect a registration as
set forth in Section 2.2 in any particular jurisdiction in which the
Company would be required to qualify to do business as a foreign
corporation or to pay taxes wherein it would not but for the requirements
of this Agreement be obligated to be so qualified or to consent to general
service of process or pay taxes in any such state or jurisdiction effecting
such registration, qualification or compliance.
(c) The Company shall not have any further obligation under
Section 2.2 if a Registration Statement has been declared effective with
respect to the obligation specified under such Section.
(d) Each Holder shall, upon five (5) business days' notice to the
Company (or such shorter period acceptable to the Company), have the right
to withdraw from a Registration Statement, provided that such withdrawal
occurs prior to the Effective Date of such Registration Statement. In the
event that a Holder withdraws from a Registration Statement, the Company's
obligation pursuant to Section 2.2 shall be deemed to have been satisfied
with respect to such Holder.
(e) In the event of any sale or disposition of Registrable
Securities pursuant to a Registration Statement referred to in Section 2.2,
each Holder that has sold or disposed of Registrable Securities thereunder
will promptly notify the Company in writing of the amount of Registrable
Securities sold or disposed of by such Holder.
(f) The Company may elect to include in any Registration
Statement made pursuant to Section 2.2(a), shares of Common Stock of the
Company for its own account and any other shares of Common Stock which are
requested to be included in such Registration Statement pursuant to the
exercise of piggyback registration rights granted by the Company; provided
that the inclusion of such additional shares shall not cause any reduction
in the number of Registrable Securities in such registration.
(g) The Company shall only be required to, maintain the
effectiveness of any Registration Statement for one business day and after
such time, the Company may, in its sole discretion, upon written notice to
the Holders, (i) cause such Registration Statement to cease being effective
and/or (ii) require that such Holders immediately, or upon any date
specified in such notice (provided that such date is not the first
effective date of such Registration Statement), cease any Transfer of the
Restricted Securities, other than pursuant to Section 2.1(ii). Such notice
may be delivered prior to the effectiveness of the Registration Statement.
2.4 DELAY, POSTPONEMENT AND SUSPENSION OF SALE. Notwithstanding the
provisions of Section 2.2 hereof, the Company shall have the right on one
or more occasions to delay the filing or effectiveness of a Registration
Statement, or, if a Registration Statement has become effective, suspend
the distribution or disposition of the Holders' Registrable Securities
pursuant to such Registration Statement, for the period (the "Delay
Period") specified below in the event that either (i) the Company files a
Registration Statement covering shares of Common Stock or any other
security of the Company to be issued by the Company or for resale, or (ii)
the Company determines in its reasonable judgment that (a) the filing or
declaration of effectiveness of a Registration Statement at such time would
require the Company to disclose in such Registration Statement a proposed
or consummated financing, reorganization or recapitalization, or pending or
consummated negotiations relating to a merger, consolidation, acquisition
or similar transaction or other business transaction, venture or other
material business arrangement or other material event, disclosure of which
could otherwise adversely affect the Company; or (b) pro forma and/or
historical financial statements meeting the requirements of the Securities
Act as a result of any transaction described in clause (ii)(a) above are
not available at such time. In the case of clause (i) above, the Delay
Period shall begin on the second (2nd) business day following the date of a
written notice given by the Company to the Holders of the filing of a
Registration Statement in connection with such offering, and shall end on
the closing date of such offering, subject to any lock-up period described
in Section 2.11. In the case of clause (ii) above, the Delay Period shall
begin on the date of the first Holder's receipt of a written notice (as
determined pursuant to Section 4.7 hereof) given by the Company to the
Holders and shall end no later than ninety (90) days thereafter; provided
that the Company shall not exercise this right more than one time in any
six (6) month period. Any notice by the Company pursuant to this Section
2.4 shall be given in the manner set forth in Section 4.7. If the filing or
effectiveness of the Registration Statement is delayed or the right of
Holders to distribute or dispose of Registrable Securities pursuant to the
Registration Statement is suspended by the Company as set forth in this
Section 2.4, the Company shall use its commercially reasonable best efforts
to file and cause to be declared effective, or reinstate the Holders'
ability to distribute or dispose of Registrable Securities pursuant to, the
Registration Statement as soon as practicable following the expiration of
any Delay Period (in the case of clause (i) above, subject to any lock-up
period described in Section 2.11); provided that necessary financial
statements are available for filing. The Company shall not be deemed to be
in breach of its obligations pursuant to Section 2.2 or otherwise pursuant
to this Agreement due to the commencement or continuation of any Delay
Period as set forth in this Section 2.4.
2.5 NO PIGGYBACK REGISTRATIONS. No Holder shall have the right to
include any Registrable Securities in any Registration Statement filed or
proposed to be filed by the Company, other than in a Registration Statement
contemplated by Section 2.2(a).
2.6 REGISTRATION EXPENSES. (a) All expenses incident to the Company's
performance of or compliance with this Agreement shall be borne by the
Company, regardless of whether a Registration Statement becomes effective,
including without limitation:
(i) all registration and filing fees and expenses;
(ii) fees and expenses relating to compliance with federal
securities and state "blue sky" securities laws;
(iii) expenses of printing (including printing certificates
for the Registrable Securities and prospectuses), messenger and delivery
services and telephone charges;
(iv) fees and disbursements of counsel for the Company and
fees and disbursements of up to $5,000 for one counsel for all of the
Holders of the Registrable Securities selling such securities pursuant to
any one Registration Statement;
(v) all application and filing fees in connection with
listing the Registrable Securities on a national securities exchange or
automated quotation system pursuant to the requirements hereof;
(vi) all fees and disbursements of independent certified
public accountants of the Company (including the expenses of any special
audit required by or incident to such performance); and
(vii) such other reasonable and customary expenses as may be
at such time (A) associated with registered offerings and (B) customarily
borne by the issuer, which reasonable and customary expenses shall not be
deemed to include any underwriter or agent discounts, commissions or
applicable transfer taxes attributable to the sale of Registrable
Securities.
The Company shall, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers
and employees performing legal or accounting duties), the expense of any
annual audit, and the fees and expenses of any Person, including special
experts, retained by the Company. Notwithstanding the provisions of this
Section 2.6, each Holder shall pay registration expenses if and to the
extent required by applicable law.
2.7 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities pursuant to this Agreement, the
Company shall, as expeditiously as reasonably possible:
(a) Subject to the right to institute any Delay Period and the
other terms and provisions set forth in Section 2.4, upon the occurrence of
any event that would cause a Registration Statement or any prospectus
contained therein (i) to contain a material misstatement or omission or
(ii) not to be effective and usable for resale of Registrable Securities
(other than pursuant to Section 2.4), the Company shall promptly file an
appropriate amendment to such Registration Statement, (A) in the case of
clause (i), correcting any such misstatement or omission, and (B) in the
case of clauses (i) and (ii), using its commercially reasonable efforts to
cause such amendment to be declared effective and such Registration
Statement and the related prospectus to become usable for their intended
purpose(s) as soon as commercially practicable thereafter;
(b) Prepare and file with the SEC such amendments and
post-effective amendments to a Registration Statement as may be necessary
to declare such Registration Statement effective; cause any prospectus
included as a part of a Registration Statement to be supplemented by any
required prospectus supplement, and as so supplemented, to be filed
pursuant to Rule 424, and to comply fully with Rules 424 and 430A of the
Securities Act, as applicable, in a timely manner; and otherwise comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by a Registration Statement during the applicable
period in accordance with the intended method or methods of distribution by
the sellers thereof as set forth in such Registration Statement or
supplement to the prospectus;
(c) Furnish to counsel for the selling Holders named in any
Registration Statement or prospectus, before filing with the SEC, copies of
any Registration Statement or any prospectus included therein or any
amendments or supplements to any such Registration Statement or prospectus,
which documents will be subject to the review and comment of counsel for
such Holders for a period of time as is reasonably appropriate under the
circumstances, determined in the sole discretion of the Company (it being
acknowledged that such period shall be at least three (3) business days in
the case of an initial draft of the Registration Statement and such shorter
time as may be appropriate in the case of any supplements or amendments
thereto), and the Company agrees to reasonably consider such comments in
preparing the filing of any such Registration Statement or prospectus or
any amendment or supplement to any such Registration Statement or
prospectus (including all such documents incorporated by reference);
(d) Furnish (without charge) to counsel for the selling Holders,
one copy of the Registration Statement, each amendment and supplement
thereto (in each case including all exhibits) and furnish to the Holders
such number of copies of the prospectus included in such Registration
Statement, including each preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them;
(e) Use reasonable commercial efforts to register or qualify the
Registrable Securities covered by a Registration Statement under such
securities or blue sky laws of such States of the United States of America
where any exemption is not available as shall be reasonably requested by
the Holders, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify generally to do business as
a foreign corporation, to pay taxes in any jurisdiction where it would not
but for the requirements of this Agreement be obligated to be so qualified,
to consent to general service of process or to pay taxes in any such state
or jurisdiction;
(f) Promptly notify counsel for the Holders selling Registrable
Securities covered by a Registration Statement: (i) when the Registration
Statement, any pre-effective amendment, 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, when the same has become effective; (ii) of
any request by the SEC or state securities authority for amendments or
supplements to the Registration Statement or the prospectus related thereto
or for additional information; (iii) of the issuance by the SEC of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for such purpose; (iv) 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 of any proceeding
for such purpose; and (v) at any time when a prospectus relating to the
Registration Statement is required to be delivered under the Securities
Act, upon discovering 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 a material fact required to be stated therein or necessary to make
the statements therein not misleading, in the light of the circumstances
under which they were made, and in the case of this clause (v), the Company
will, subject to the other terms of this Agreement, promptly prepare and
furnish to the Holders participating in the offering of the Registrable
Securities, 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 under which they
were made;
(g) Comply with all applicable rules and regulations of the SEC,
and make generally available to the Holders, as soon as reasonably
practicable after the effective date of a Registration Statement (and in
any event within sixteen (16) months thereafter), an earnings statement
(which need not be audited) covering the period of at least twelve (12)
consecutive months beginning with the first day of the Company's first
calendar quarter 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;
(h) Cause all Registrable Securities covered by a Registration
Statement to be listed on the Nasdaq National Market or other principal
securities exchange on which similar securities issued by the Company are
then listed, if the listing of such Registrable Securities is then
permitted under the rules of such exchange;
(i) Provide and cause to be maintained a transfer agent and
registrar for all such Registrable Securities covered by a Registration
Statement not later than the effective date of such Registration Statement;
and
(j) Cooperate with the selling Holders of Registrable Securities
to facilitate the timely preparation and delivery of certificates not
bearing any restrictive legends representing the Registrable Securities to
be sold, and cause such Registrable Securities to be issued in such
denominations and registered in such names in accordance with the
instructions of the selling Holders of Registrable Securities.
Each Holder agrees that if a Registration Statement shall have been
declared effective, upon the giving of any notice from the Company of the
happening of any event of the kind described in Section 2.7(f)(v), or the
giving of notice by the Company of the invocation of any Delay Period
pursuant to Section 2.4, such Holder will discontinue such Holder's
disposition of Registrable Securities pursuant to such Registration
Statement covering such Registrable Securities until (A) in the case of
Section 2.7(f)(v), such Holder's receipt of the copies of the supplemented
or amended prospectus contemplated by such Section and, if so directed by
the Company, such Holder will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such
Holder's possession, of the prospectus covering such Registrable Securities
that was being utilized at the time of receipt of such notice, and (B) in
the case of any Delay Period pursuant to Section 2.4, the expiration of
such period or as otherwise provided in Section 2.4.
2.8 TERMINATION OF REGISTRATION RIGHTS. All registration rights
granted to a Holder pursuant to Section 2.2 shall terminate and be of no
further force and effect upon the earlier of: (i) such time as the
securities of the Company held by a Holder cease to be Registrable
Securities, as defined herein, and (ii) such time as the Registration
Statement described in Section 2.2(a) has been declared effective.
2.9 DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any registration as
the result of any controversy that might arise with respect to this
Agreement.
2.10 INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement pursuant to Section 2.2:
(a) Indemnification by the Company. To the extent permitted by
law, the Company will indemnify and hold harmless each Holder, the
partners, officers and directors of each Holder, if any, who control such
Holder within the meaning of the Securities Act or the Exchange Act,
against any and all losses, claims, damages, liabilities or expenses
whatsoever as incurred (including but not limited to reasonable attorneys'
fees and any and all reasonable expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation), joint or several, to which they may
become subject under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof), arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement or final prospectus contained
therein or any amendments or supplements thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the Company shall not be
liable in any case to the extent that any loss, claim, damage, liability or
expense (or action or proceeding in respect thereof) arises out of or is
based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in
conformity with written information furnished expressly for use in
connection with such registration by such Holder, partner, officer,
director, or controlling person of such Holder, and provided, further, that
the Company shall not be liable to any Person who participates in the
offering or sale of Registrable Securities or any other Person, if any, who
controls such Person, in any such case if any such loss, claim, damage,
liability or expense (or action or proceeding in respect thereof) arises
out of such Person's or such Person's underwriter or agent's failure to
send or give a copy of the final prospectus or amendment or supplement
thereto, as the same may be then supplemented or amended, to the Person
asserting 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.
(b) Indemnification by the Holders. To the extent permitted by
law, each Holder will, if Registrable Securities held by such Holder are
included in such Registration Statement, indemnify and hold harmless the
Company, each of its directors, its officers, and each Person, if any, who
controls the Company within the meaning of the Securities Act, and any
other Holder selling securities under such Registration Statement or any of
such other Holder's partners, directors or officers, if any, who control
such Holder, against any losses, claims, damages, liabilities or expenses
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation), severally, to
which the Company or any such director, officer, controlling Person, or
other such Holder, partner, director, or officer, if any, or controlling
such other Holder may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages,
liabilities or expenses (or actions or proceedings in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement for
registration of the Registrable Securities, or final prospectus contained
therein or any amendments or supplements thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent (and only to the extent)
that such losses, claims, damages, liabilities or expenses (or actions or
proceedings in respect thereof) arise out of or are based upon any such
untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by such Holder expressly for use in
connection with such registration.
(c) 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
2.10, 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, however, 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 2.10, except to the extent that the indemnifying party is
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, and it notifies an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein, and, to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof.
Notwithstanding the foregoing, the indemnified party shall have the right
to employ its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (i)
the employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such action, (ii) the
indemnifying party shall not have employed counsel to have charge of the
defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party shall have
reasonably concluded that there may be defenses available to it which are
different from or additional to those available to the indemnifying party
(in which case the indemnifying party shall not have the right to direct
the defense of such action on behalf of the indemnified party), in any of
which events such fees and expenses shall be borne by the indemnifying
party. In no event shall the indemnifying party be liable for fees and
expenses of more than one counsel (in addition to any local counsel)
separate from its own counsel for all indemnified parties in connection
with any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances,
and which counsel shall be approved by the indemnifying party, whose
approval shall not be unreasonably withheld. No indemnifying party shall be
liable for any settlement of any action or proceeding effected without its
written consent, which consent shall not be unreasonably withheld. No
indemnifying party shall, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement 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 in
respect of such claim or litigation.
(d) Contribution. If the indemnification provided for in this
Section 2.10 is held by a court of competent jurisdiction to be
unenforceable by an indemnified party with respect to any losses, claims,
damages, liabilities or expenses (including but not limited to attorneys'
fees and any and all expenses whatsoever incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or
any claim whatsoever, and any and all amounts paid in settlement of any
claim or litigation), joint or several, of the nature contemplated by such
indemnification provision, the indemnifying party, in lieu of indemnifying
such indemnified party thereunder, shall to the extent permitted by
applicable law contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or expense (or
action or proceeding in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses (or actions or proceedings in respect thereof), as
well as any other relevant equitable considerations. The relative fault of
the indemnifying party and of the indemnified party shall be determined by
a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or
by the indemnified party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such 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. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim
effected without such Person's consent, which consent shall not be
unreasonably withheld.
(e) Survival of Indemnification. The obligations of the Company
and the Holders under this Section 2.10 shall survive completion of any
offering of Registrable Securities in a Registration Statement pursuant to
Section 2.2.
2.11 "MARKET STAND-OFF" AGREEMENT. In the case of any underwritten
public offering by the Company of shares of Common Stock or securities
convertible into or exercisable for Common Stock, whether for its own
account or for the account of any stockholder of the Company, each Holder
agrees that, during a period of seven (7) days prior to and ninety (90)
days following the effective date of a Registration Statement filed in
connection with such offering, such Holder will not, without the prior
written consent of the Company, directly or indirectly, offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant for the
sale of, or otherwise dispose of or transfer any shares of Common Stock or
any securities convertible into or exchangeable or exercisable for Common
Stock, whether now owned or hereafter acquired by such Holder or with
respect to which such Holder has or hereafter acquires the power of
disposition, or enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly,
the economic consequence of ownership of the Common Stock, whether any such
swap or transaction is to be settled by delivery of Common Stock or other
securities, in cash or otherwise; provided that all the Company's officers
and directors shall have entered into similar arrangements with the
Company. The Company shall give notice of such restriction in the manner
set forth in Section 4.7, provided that such notice may include the
Company's best estimates of the "market stand-off" period and such may
change due to the timing of such offering and market conditions and the
Company may reasonably deliver additional notices for new "market
stand-off" periods as it deems appropriate under the circumstances. Upon
the request of the underwriters for any underwritten public offering of
Common Stock of the Company referred to above, each Holder hereby agrees to
deliver a "lock-up" or "market stand-off" agreement signed by such Holder
which is equivalent in substance to the agreement set forth in this Section
2.11 addressed to such underwriter. Any such underwriter shall expressly be
deemed to be a third party beneficiary of this Section 2.11.
The obligations described in this Section 2.11 shall not apply to a
registration relating solely to employee benefit plans or similar forms
that may be promulgated in the future, or a registration relating solely to
a Rule 145 transaction (including the registration for resale of securities
issued in a Rule 145 transaction) on Form S-4 under the Securities Act or
similar forms that may be promulgated in the future, unless in any such
case such registration is in connection with an underwritten public
offering. The Company may impose stop-transfer instructions with respect to
the shares of Common Stock (or other securities) subject to the foregoing
restriction until the end of such restrictive period.
2.12 RULE 144 REPORTING. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its commercially reasonable best
efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act; and
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act.
3. CONFIDENTIALITY.
(a) Each Holder agrees not to disclose to any third party or use
Confidential Information (as hereinafter defined) of the Company for its
own use or for any purpose except to evaluate its current equity investment
in the Company. Each Holder shall undertake to treat such Confidential
Information in a manner consistent with the treatment of its own
information of similar proprietary nature and agrees that it shall protect
the confidentiality of Confidential Information. Each transferee of any
Holder who receives Confidential Information shall agree to be bound by
such provisions and the Company is not required to deliver any Confidential
Information to any person who does not agree to be so bound.
(b) "Confidential Information" means any notices given by the
Company pursuant to the terms of this Agreement and any other information
disclosed by the Company either directly or indirectly in a writing stamped
"Confidential" or "Proprietary" or, if disclosed orally, which is promptly
confirmed in writing to be Confidential Information. Confidential
Information does not include information, technical data or know-how which
(i) is generally known or publicly available not as a result of any action
or inaction of a Holder; (ii) is disclosed to a Holder on a
non-confidential basis by a third party having a legal right to disclose
such information; or (iii) is approved for release by written authorization
of the Company. The provisions of this Section shall not apply to the
extent that a Holder is required to disclose Confidential Information
pursuant to any law, statute, rule or regulation or any legal process or
order of any court, provided that the Holder shall notify the Company of
any such required disclosure as promptly as possible and shall cooperate
with the Company in order to limit the scope of any order or service of
legal process requiring disclosure of such Confidential Information.
4. GENERAL.
4.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York without giving effect to conflicts
of laws principles. Each of the parties to this Agreement hereby
irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of New York and the courts of the
United States of America located in the Southern District of the State of
New York for any action, claim or proceeding arising out of or relating to
this Agreement (and agrees not to commence any action, claim or proceeding
relating hereto except in such courts), and further agrees that service of
any process, summons, notice or document by U.S. registered mail to its
respective address shall be effective service of process for any action,
claim or proceeding brought against it in any such court. Each of the
parties to this Agreement hereby irrevocably and unconditionally waives any
objection to the laying of venue of any action, claim or proceeding arising
out of this Agreement in the courts of the State of New York or the courts
of the United States of America located in the State of New York and hereby
further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, claim or proceeding brought
in any such court has been brought in an inconvenient forum. Each of the
parties hereto hereby irrevocably and unconditionally waives any right it
may have to trial by jury in connection with any action, claim or
proceeding arising out of or relating to this Agreement.
4.2 SURVIVAL. The provisions of Section 2.10 and Section 3 hereof
shall survive any termination of this Agreement
4.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
Person who shall be a Holder from time to time in accordance with the terms
of this Agreement.
4.4 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
4.5 AMENDMENT AND WAIVER. (a) Except as otherwise expressly provided
herein, this Agreement may be amended or modified and the observance of any
provision hereof may be waived (either generally or in a particular
instance and either retroactively or prospectively) upon the written
consent of the Company and the Holders of at least a majority in interest
of the Registrable Securities. Any amendment or waiver effected in
accordance with this Section 4.5 shall be binding upon each Holder and the
Company.
(b) Except as otherwise expressly provided herein, the
obligations of the Company and the rights of the Holders under this
Agreement may be waived only with the written consent of at least a
majority in interest of the Registrable Securities.
(c) This Agreement may be amended only with the written consent
of the Company to include any additional party as a "Holder."
4.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any Holder or the Company,
upon any breach, default or noncompliance of the Company or any Holder, as
the case may be, under this Agreement shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of any similar
breach, default or noncompliance thereafter occurring. It is further agreed
that any waiver, permit, consent or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under this
Agreement or any waiver on such Holder's part of any provisions or
conditions of this Agreement must be in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either
under this Agreement, by law or otherwise afforded to Holders, shall be
cumulative and not alternative.
4.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery
to the party to be notified, (ii) when sent by confirmed facsimile if sent
during normal business hours of the sender; if not, then on the next
business day, (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one (1)
day after deposit with a recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be
sent to the party to be notified at the address as set forth on Exhibit A
hereto or at such other address as such party may designate in writing to
the other party in accordance with this Section 4.7 by ten (10) days'
advance written notice to the other parties hereto. All communications made
to the Company shall be sent to ▇▇▇▇▇▇▇▇.▇▇▇, inc., ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇.▇., ▇▇▇▇▇, Attn. ▇▇▇▇▇▇▇ Mass, Esq.
4.8 ATTORNEYS' FEES. In the event that any dispute among the parties
to this Agreement should result in litigation, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable
fees and expenses of attorneys and accountants, which shall include,
without limitation, all fees, costs and expenses of appeals.
4.9 HEADINGS. The titles of the sections and subsections of this
Agreement are for convenience of reference only and are not to be
considered in construing the intent of this Agreement.
4.10 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof and supersedes all previous negotiations, agreements and
arrangements made between the parties with respect to such subject matter.
4.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
4.12 THIRD-PARTY BENEFICIARIES. This Agreement shall inure to the
benefit of and be binding upon the Company and each of the other
signatories hereto and their respective successors and assigns. The
underwriter for an underwritten public offering of the Company, as
described in Section 2.11, shall be expressly deemed to be a third-party
beneficiary of the provisions of such Section. Other than as expressly set
forth in this paragraph, no other party will be considered a third-party
beneficiary of any rights or benefits created under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date set forth in the first paragraph hereof.
COMPANY: HOLDER:
▇▇▇▇▇▇▇▇.▇▇▇, inc.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President & C.O.O.
/s/ Yale Brozen
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Yale Brozen
/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT A
SCHEDULE OF HOLDERS
Name Address Telephone
---- ------- ---------
Yale Brozen ▇.▇. ▇▇▇ ▇▇▇ ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇ ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇