REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated
as of March 17, 1999, by and among Covol Technologies, Inc.,
a Delaware corporation (the "Company"), OZ Master Fund, Ltd.
(the "Purchaser"), Leeds Group Inc. ("Leeds") and Havenwood
Capital Markets, LLC ("Havenwood").
RECITALS:
(a) The Purchaser and the Company have
entered into a Securities Purchase Agreement, dated as of
the date hereof (the "Purchase Agreement") (each
capitalized term used herein and not otherwise defined shall have
the meaning ascribed to such term in the Purchase Agreement),
pursuant to which the Purchaser is simultaneously with the
execution hereof purchasing from the Company (i) 60,000 shares
of Series D Cumulative Convertible Preferred Stock, $.001 par
value per share (the "Preferred Stock"), (ii) Convertible
Secured Notes (the "Notes") due March 17, 2004, in an
initial aggregate principal amount of $20,000,000, and (iii) the
Warrants (other than the Series E Warrants), initially
exercisable for 971,430 shares of Common Stock in the
aggregate.
(b) As of the date hereof, the Preferred
Stock, the Notes and the Warrants (other than the Series E
Warrants) purchased by the Purchaser pursuant to the Purchase
Agreement entitles the holder thereof to receive, upon the
conversion or exercise thereof, 5,426,484 shares of Common
Stock, which number of shares are subject to adjustment as set
forth in the provisions of the Certificate of Designations, the
Notes and the Warrants, as the case may be.
(c) On the Closing Date, the Company will
also issue the Series E Warrants, initially exercisable for
312,196 shares of Common Stock in the aggregate, to Leeds and
Havenwood.
(d) The Company desires to grant the
Purchaser, Leeds and Havenwood certain registration rights with
respect to the Common Stock.
NOW, THEREFORE, in consideration of the
mutual covenants herein contained, the parties hereto agree as
follows:
1. Demand Registrations.
(a) Requests for Registration. Subject to
paragraph 1(b) below, (i) the holders of at least 50% of the
Preferred Registrable Securities may request, at any time
following the Closing Date, registration under the Securities
Act of 1933, as amended (the "Securities Act"), of all or part
of their Registrable Securities on Form S-1 or any similar
long-form registration ("Long-Form Registrations"), and each
holder of Preferred Registrable Securities may request
registration under the Securities Act of all or
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part of their Registrable Securities on Form S-2 or S-3
or any similar short-form registration ("Short-Form
Registrations") if available, (ii) the holders of at least 50%
of the Note Registrable Securities may request, at any time
from and after the date on which the Notes shall have become
convertible, a Long-Form Registration of all or part of their
Note Registrable Securities, and each holder of Note Registrable
Securities may request a Short-Form Registration of all or part
of their Note Registrable Securities if available, and (iii) the
holders of at least 50% of the Warrant Registrable Securities
(other than the holders of Series E Warrants who shall have
no Demand Registration rights hereunder) may request, at any
time following the Closing Date, a Long-Form Registration of
all or part of their Warrant Registrable Securities, and each
holder of Warrant Registrable Securities (other than the
holders of Series E Warrants who shall have no Demand
Registration rights hereunder) may request a Short-Form
Registration of all or part of their Warrant Registrable
Securities if available. Each request for a Demand
Registration shall specify the approximate number of
Registrable Securities requested to be registered and the
anticipated per share price range for such offering. Holders of
all Registrable Securities may join in any Demand Registration
initiated by any holder of Registrable Securities regardless
of class of securities. Notwithstanding anything herein to
the contrary, the right of a holder of Preferred Registrable
Securities, Warrant Registrable Securities or Note Registrable
Securities to join in a Demand Registration initiated by the
holder of a different class of Registrable Securities shall not
count as a Demand Registration for any holders of Registrable
Securities other than the holders of the class of Registrable
Securities held by the holders initiating the Demand
Registration. Within ten days after receipt of any such request,
the Company will give written notice of such requested
registration to all other holders of Registrable Securities and
will include in such registration all Registrable Securities
with respect to which the Company has received written requests
for inclusion therein within fifteen (15) days after the
receipt of the Company's notice. All registrations requested
pursuant to this paragraph 1(a) are referred to herein as
"Demand Registrations".
(b) Long-Form Registrations. Subject to
paragraph 1(a), the holders of Registrable Securities will be
entitled, at any time following the Closing Date, to request
Long-Form Registrations; provided, that (i) the holders of
Preferred Registrable Securities may not initiate more than
four (4) Long-Form Registrations (each a "Demand Long-Form
Registration") with respect to their Preferred Registrable
Securities, such number to be reduced by the number of
previously consummated Demand Long-Form Registrations
initiated by such holders of Preferred Registrable Securities
with respect to such securities, (ii) the holders of Note
Registrable Securities may not initiate more than four (4)
Demand Long-Form Registrations with respect to their Note
Registrable Securities and (iii) the holders of Warrant
Registrable Securities (other than the holders of Series E
Warrants who shall have no Demand Registration rights
hereunder) may not initiate more than two (2) Demand Long-Form
Registration with respect to their Warrant Registrable
Securities. A registration will not count as one of the
permitted Demand Long-Form Registrations until it has become
effective, and no Demand Long-Form Registration will count
as one of the permitted Demand Long-Form Registrations unless
the holders of Registrable Securities are able to register
and sell at least 90% of the Registrable Securities requested
to be included in such registration.
(c) Short-Form Registrations. In addition to
the Long-Form Registrations provided pursuant to paragraph
1(b), the holders of Registrable Securities will be entitled to
request Short Form Registrations; provided, that (i) the holders
of Preferred Registrable Securities may only initiate up to four
(4) Short-Form Registrations (each a "Demand Short-Form
Registration") with respect to their Preferred
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Registrable Securities in any fiscal year of the Company, which
number shall be reduced by the number of previously consummated
Demand Short-Form Registrations by such holders of Preferred
Registrable Securities with respect to such securities in
such fiscal year, (ii) the holders of the Note Registrable
Securities may only initiate four (4) Demand Short-Form
Registrations with respect to their Note Registrable
Securities in any fiscal year and (iii) the holders of the
Warrant Registrable Securities (other than the holders of Series
E Warrants who shall have no Demand Registration rights
hereunder) may only initiate two (2) Demand Short-Form
Registration with respect to their Warrant Registrable
Securities in any fiscal year. Demand Registrations will
be Short-Form Registrations whenever the Company is permitted to
use any applicable short form. The Company will use its
best efforts to make Short-Form Registrations on Form S-3
available for the sale of Registrable Securities. The holders of
Registrable Securities agree that they will not request a
Long-Form Registration when the Company is eligible to use a
Short-Form Registration; provided, that the Company agrees to
include in the prospectus included in any Short-Form
Registration Statement, such material describing the Company
and intended to facilitate the sale of securities being so
registered as is reasonably requested for inclusion therein by
any of the shareholders selling securities pursuant to such
registration statement, whether or not the form used for such
registration statement requires the inclusion of such
information. The Company will not be obligated to effect any
Demand Short-Form Registration unless the anticipated
aggregate offering price, net of underwriting discounts and
commissions, of the Common Stock to be included in such Demand
Short-Form Registration exceeds one million dollars ($1,000,000).
(d) Priority on Demand Registrations. The
Company will not include in any Demand Registration any
securities which are not Registrable Securities without the
prior written consent of the holders of at least 662/3% of the
Registrable Securities included in such registration. If a
Demand Registra tion is an underwritten offering and the
managing underwriters advise the Company in writing that in
their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be
included in such offering exceeds the number of Registrable
Securities and other securities, if any, which can be sold
therein without adversely affecting the marketability of the
offering, the Company will include in such registration prior
to the inclusion of any securities which are not Registrable
Securities the number of Registrable Securities requested to
be included which in the opinion of such underwriters can
be sold without adversely affecting the marketability of the
offering, pro rata among the respective holders thereof on the
basis of the number of Registrable Securities owned by
each holder participating in such offering.
(e) Restrictions on Long-Form
Registrations and Demand Registrations. The Company will not
be obligated to effect any Demand Long-Form Registration during
the period starting with the date thirty (30) days prior to the
Company's good faith estimate of the date of filing of, and
ending on a date ninety (90) days after the effective date of, a
Company-initiated registration; provided, that the Company is
actively employing in good faith all reasonable efforts to
cause such registration statement to become and remain effective.
The Company will not be obligated to effect any Demand Long-Form
Registration within six (6) months after the effective date of
a previous Long-Form Registration with respect to Registrable
Securities. The Company may postpone for up to ninety (90)
days the filing or the effectiveness of a registration statement
for a Demand Registration if the Company determines in good faith
and the holders of a majority of the Registrable Securities to
be covered thereby agree that such Demand Registration would
reasonably be expected to have an adverse effect on any proposal
or plan by the
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Company or any of its subsidiaries to engage in any material
acquisition of assets (other than in the ordinary course of
business) or any material merger, consolidation, tender offer
or similar transaction; provided, that in such event, the
holders of Registrable Securities initially requesting such
Demand Registration will be entitled to withdraw such
request and such Demand Registration will not count as
one of the permitted Demand Registrations hereunder and the
Company will pay all Registration Expenses in connection with
such registration. The Company will not be obligated to
effect any Demand Long-Form Registration unless either (i) the
number of Registrable Securities requested to be included in
such offering equals at least 50% of the number of Registrable
Securities held by the holders of Registrable Securities
initiating such request or (ii) in the case of Demand Long-Form
Registrations initiated by the holders of Note Registrable
Securities, the anticipated aggregate offering price, net of
underwriting discounts and commissions, of the Common Stock to
be included in such Demand Long-Form Registration exceeds five
million dollars ($5,000,000).
(f) Other Registration Rights. (i) within
ninety (90) days from the Closing Date, the Company shall
prepare and file with the Securities and Exchange Commission a
registration statement (which shall not count as one of the
permitted Demand Registrations granted under this Agreement) with
respect to all of the eligible Registrable Securities and
cause such registration statement to become effective, and
prepare and file with the Securities and Exchange 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
comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration
statement in accordance with the intended methods of disposition
by the sellers thereof set forth in such registration statement
and (ii) except as provided in this Agreement or as previously
granted by the Company under any registration rights agreement
listed on Schedule 4.30 of the Purchase Agreement, the Company
shall not grant to any Persons the right to request the Company
to register any equity securities of the Company, or any
securities convertible or exchangeable into or exercisable for
such securities, without the prior written consent of the
holders of at least 66.67% of the Registrable Securities;
provided, that the Company may grant rights to employees of the
Company and its Subsidiaries to participate in Piggyback
Registrations so long as such rights are subordinate to the
rights of the holders of Registrable Securities with respect
to such Piggyback Registrations as provided in paragraphs 2(c)
and 2(d) below.
(g) Selection of Underwriters. If any Demand
Registration is an underwritten offering, the selection of
investment banker(s) and manager(s) for the offering shall be
made by the holders of a majority of the Registrable Securities
included in such Demand Registration, subject to approval by
the Company which approval will not be unreasonably withheld.
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the
Company proposes to register any of its securities under the
Securities Act (other than pursuant to (i) a registration in
connection with shares issued by the Company in connection with
the acquisition of any company or companies or (ii) a
registration solely of shares that have been issued pursuant
to the Company's employee benefit plans) and the registration
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form to be used may be used for the registration of Registrable
Securities (a "Piggyback Registration"), the Company will give
prompt written notice to all holders of Registrable Securities
of its intention to effect such a registration and will include
in such registration all Registrable Securities with respect to
which the Company has received written requests for inclusion
therein within fifteen (15) days after the receipt of the
Company's notice.
(b) Piggyback Expenses. The Registration
Expenses of the holders of Registrable Securities will be paid
by the Company in all Piggyback Registrations.
(c) Priority on Primary Registrations.
If a Piggyback Registration is an underwritten primary
registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in
such registration exceeds the number which can be sold in
such offering without adversely affecting the marketability
of the offering, the Company will include in such registration
(i) first, the securities the Company proposes to sell,
(ii) second, the Registrable Securities requested to be
included in such registration, pro rata among the holders of
such Registrable Securities on the basis of the number of
Registrable Securities owned by each holder of Registrable
Securities participating in such offering, and (iii) third,
other securities requested to be included in such registration;
provided, that if the holders of Registrable Securities would be
precluded from having priority in any such Piggyback Registration
over the holders of other securities requested to be included in
such registration pursuant to any registration rights
agreement listed on Schedule 4.30 of the Purchase
Agreement, then the holders of Registrable Securities
requested to be included in any such registration shall be
entitled to participate in such piggyback registration pro
rata with such holders of other securities requested to be
included in such registration.
(d) Priority on Secondary Registrations.
If a Piggyback Registration is an underwritten secondary
registration on behalf of holders of the Company's securities,
and the managing underwriters advise the Company in writing that
in their opinion the number of securities requested to be
included in such registration exceeds the number which can
be sold in such offering without adversely affecting the
marketability of the offering, the Company will include in such
registration (i) first, the Registrable Securities requested to
be included in such registration, pro rata among the holders of
such Registrable Securities on the basis of the number of
Registrable Securities owned by each holder of Registrable
Securities participating in such offering, and (ii) second other
securities requested to be included in such registration;
provided, that if the holders of Registrable Securities would be
precluded from having priority in any such Piggyback
Registration over the holders of other securities requested
to be included in such registration pursuant to any
registration rights agreement listed on Schedule 4.30 of the
Purchase Agreement, then the holders of Registrable
Securities requested to be included in any such
registration shall be entitled to participate in such piggyback
registration pro rata with such holders of other securities
(other than the shares included because of Demand
Registration Rights) requested to be included in such
registration; provided, further, however, the rights of
the holders of Registrable Securities pursuant to this
paragraph 2(d) shall be subject to the rights of PacifiCorp.
Financial Services, Inc. pursuant to paragraph 2.2(b) of the
Registration Rights Agreement between the Company and PacifiCorp
Financial Services, Inc., dated March 20, 1997.
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(e) Selection of Underwriters. If any
Piggyback Registration is an underwritten offering, the
selection by the Company of investment banker(s) and
manager(s) for the offering must be approved by the holders of a
majority of the Registrable Securities included in such Piggyback
Registration; provided, that such right may not be exercised if
it is deemed to conflict with paragraph 2.4(a) of the
Registration Rights Agreement between the Company and
PacifiCorp. Financial Services, Inc., dated March 20, 1997. Such
approval cannot be unreasonably withheld.
3. Holdback Agreements.
(a) Each holder of Registrable Securities
agrees not to effect any public sale or distribution (including
sales pursuant to Rule 144) of equity securities of the Company,
or any securities convertible into or exchangeable or exercisable
for such securities, during the seven days prior to and the
one hundred and eighty (180)-day period beginning on the
effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration in which Registrable
Securities are included (except as part of such underwritten
registration), unless the underwriters managing the registered
public offering otherwise agree.
(b) The Company agrees (i) not to effect any
public sale or distribution of its equity securities, or any
securities convertible into or exchangeable or exercisable for
such securities, during the seven days prior to and during the
one hundred and eighty (180)-day period beginning on the
effective date of any underwritten Demand Registration or
any underwritten Piggyback Registration (except as part of
such underwritten registration or pursuant to registrations
on Form S-8 or any successor form), unless the underwriters
managing the registered public offering otherwise agree, and
(ii) to cause each holder of at least 5% (on a fully-diluted
basis) of its Common Stock, or any securities convertible into
or exchangeable or exercisable for Common Stock, purchased
from the Company at any time after the date of this Agreement
(other than in a registered public offering) to agree not to
effect any public sale or distribution (including sales
pursuant to Rule 144) of any such securities during such
period (except as part of such underwritten registration,
if otherwise permitted), unless the underwriters managing the
registered public offering otherwise agree.
4. Registration Procedures. Whenever
the holders of Registrable Securities have requested that
any Registrable Securities be registered pursuant to this
Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities
in accordance with the intended method of disposition
thereof including the registration of common stock that may
be obtained upon conversion of the Securities held by a
holder of Registrable Securities requesting registration as to
which the Company has received reasonable assurances that only
Registrable Securities will be distributed to the public, and
pursuant thereto the Company will as expeditiously as possible:
(a) prepare and file (in the case of a
Demand Long-Form Registration or a Demand Short Form
Registration not more than sixty (60) days and thirty (30) days,
respectively, after request therefor) with the Securities and
Exchange Commission a registration statement with respect
to such Registrable Securities and use its best efforts to
cause such registration statement to become effective
(provided that as far in advance as practicable before filing a
registration statement or prospectus or any
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amendments or supplements thereto, the Company will furnish
to the counsel selected by the holders of a majority of the
Registrable Securities covered by such registration statement
copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel);
(b) prepare and file with the Securities
and Exchange 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 for a period of not less than one hundred
and eighty (180) days (subject to paragraph (a) above)
and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by
such registration statement during such period in
accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable
Securities such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each
preliminary prospectus) and such other documents as such seller
may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such seller;
(d) use its best efforts to register or
qualify such Registrable Securities under such other
securities or blue sky laws of such jurisdictions as any seller
reasonably requests and do any and all other acts and things
which may be reasonably necessary or advisable to enable such
seller to consummate the disposition in such jurisdictions
of the Registrable Securities owned by such seller (provided
that the Company will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise
be required to qualify but for this subparagraph, (ii) subject
itself to taxation in any such jurisdiction or (iii) consent
to general service of process in any such jurisdiction);
(e) notify each seller of such Registrable
Securities, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus
included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make
the statements therein not misleading, and, at the request of
any such seller, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus
will not contain an untrue statement of a material fact or omit
to state any fact necessary to make the statements therein not
misleading;
(f) cause all such Registrable Securities to be
listed on each securities exchange on which similar securities
issued by the Company are then listed and, if not so listed,
to be listed on the National Association of Securities Dealers
automated quotation system;
(g) provide a transfer agent and
registrar for all such Registrable Securities not later than
the effective date of such registration statement;
(h) enter into such customary
agreements (including underwriting agreements in customary
form) and take all such other actions as the holders of a
majority of the Registrable Securities
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being sold or the underwriters, if any, reasonably request in
order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, effecting
a stock split or a combination of shares);
(i) make available for inspection by any seller
of Registrable Securities, any underwriter participating in any
disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by any such seller
or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause
the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent
in connection with such registration statement;
(j) permit any holder of Registrable
Securities which holder, in its sole and exclusive judgment,
might be deemed to be an underwriter or a controlling Person of
the Company, to participate in the preparation of such
registration or comparable statement and to require the
insertion therein of material, furnished to the Company in
writing, which in the reasonable judgment of such holder and its
counsel should be included;
(k) in the event of the issuance of any stop
order suspending the effectiveness of a registration
statement, or of any order suspending or preventing the use of
any related prospectus or suspending the qualification of any
common stock included in such registration statement for
sale in any jurisdiction, the Company will promptly notify
the holders of Registrable Securities and will use its
reasonable best efforts promptly to obtain the withdrawal of
such order;
(l) obtain a cold comfort letter from
the Company's independent public accountants in customary
form and covering such matters of the type customarily covered
by cold comfort letters as the holders of a majority of the
Registrable Securities being sold reasonably request; and
(m) in connection with an underwritten public
offering, (i) cooperate with the selling holders of Registrable
Securities, the underwriters participating in the offering
and their counsel in any due diligence investigation
reasonably requested by the selling holders or the underwriters
in connection therewith and (ii) participate, to the extent
reasonably requested by the managing underwriter for the
offering or the selling holder, in efforts to sell the
Registrable Securities under the offering (including,
without limitation, participating in "roadshow" meetings with
prospective investors) that would be customary for
underwritten primary offerings of a comparable amount of
equity securities by the Company.
5. Registration Expenses.
(a) All expenses incident to the Company's
performance of or compliance with this Agreement, including
without limitation all registration and filing fees, fees and
expenses of compliance with securities or blue sky laws,
printing expenses, messenger and delivery expenses, and
fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons
retained by the Company (all such expenses
8
being herein called "Registration Expenses"), will be borne as
provided in this Agreement, except that the Company will, in any
event, pay 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 or quarterly review, the expense
of any liability insurance and the expenses and fees for
listing the securities to be registered on each securities
exchange on which similar securities issued by the Company are
then listed or on the National Association of Securities Dealers
automated quotation system. The Company shall not be required
to pay an underwriting discount with respect to any shares
being sold by any party other than the Company in connection
with an underwritten public offering of any of the Company's
securities pursuant to this Agreement.
(b) In connection with each Demand
Registration requested by the holders of Registrable
Securities hereunder, the Company shall pay all Registration
Expenses.
(c) The Company will reimburse the holders
of Registrable Securities for the reasonable fees and expenses
(including the fees and expenses of counsel chosen by the
holders of a majority of the Registrable Securities) incurred
by such holders in enforcing any of their rights under this
Agreement.
6. Indemnification.
(a) Indemnification of Selling Stockholders
by the Company. The Company agrees to indemnify and hold
harmless each holder of Registrable Securities (each a "Selling
Stockholder") and each Person, if any, who controls any Selling
Stockholder within the meaning of Section 15 of the Securities
Act or Section 20 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as follows:
(i) against any and all loss, liability,
claim, damage and expense whatsoever, as incurred, arising out
of any untrue statement or alleged untrue statement of a material
fact contained in the registration statement (or any amendment
thereto), or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make
the statements therein not misleading or arising out of any
untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or the prospectus (or
any amendment or supplement thereto), or the omission or alleged
omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability,
claim, damage and expense whatsoever, as incurred, to the
extent of the aggregate amount paid in settlement of any
litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission;
provided, that subject to Section 6(c) below any such settlement
is effected with the prior written consent of the Company; and
9
(iii) against any and all expense
whatsoever, as incurred (including the fees and
disbursements of counsel chosen by such Selling
Stockholder), reasonably incurred in investigating, preparing
or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement
or omission, to the extent that any such expense is not paid
under (i) or (ii) above; provided, that this indemnity
agreement shall not apply to any loss, liability, claim,
damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with written information
furnished to the Company by such Selling Stockholder expressly
for use in the registration statement (or any amendment
thereto), or any preliminary prospectus or the prospectus (or
any amendment or supplement thereto).
(b) Indemnification of Company by the Selling
Stockholders. Each Selling Stockholder, severally and not
jointly, agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the registration
statement and each Person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, against any and all loss,
liability, claim, damage and expense described in the indemnity
contained in Section 6(a) above, as incurred, but only with
respect to untrue or alleged untrue statements or
omissions made in the registration statement (or any amendment
thereto), or any preliminary prospectus or any prospectus (or any
amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by
or on behalf of such Selling Stockholder with respect to such
Selling Stockholder expressly for use in the registration
statement (or any amendment or supplement thereto); provided,
that such Selling Stockholder's aggregate liability under this
Section 6 shall be limited to an amount equal to the net proceeds
(after deducting the underwriting discount, but before
deducting expenses) received by such Selling Stockholder from the
sale of Registrable Securities pursuant to a registration
statement filed pursuant to this Agreement.
(c) Actions against Parties; Notification.
Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any
action commenced against it in respect of which indemnity
may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially
prejudiced as a result thereof and in any event shall not
relieve it from any liability which it may have otherwise
than on account of this indemnity agreement. In the case of
parties indemnified pursuant to Section 6(a), counsel to the
indemnified parties shall be selected by the Selling
Stockholders (by majority vote based on the number of
Registrable Securities included in a registration hereunder)
and, in the case of parties indemnified pursuant to Section
6(b), counsel to the indemnified parties shall be selected by
the Company. An indemnifying party may participate at its own
expense in the defense of any such action; provided, that
counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties
be liable for fees and expenses of more than one counsel (in
addition to any local counsel) separate from their 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. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect
to any litigation, or any investigation or proceeding by any
governmental agency or body,
10
commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be
sought under this Section 6 (whether or not the indemnified
parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional
release of each indemnified party from all liability arising
out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any
indemnified party.
(d) Settlement without Consent if Failure to
Reimburse. If at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, such indemnifying
party agrees that it shall be liable for any settlement of
the nature contemplated by Section 6(a)(ii) effected without its
written consent if (i) such settlement is entered into more than
forty-five (45) days after receipt by such indemnifying party
of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least
thirty (30) days prior to such settlement being entered
into and (iii) such indemnifying party shall not have
reimbursed such indemnified party in accordance with such
request prior to the date of such settlement.
(e) Contribution. (i) If a claim for
indemnification under Section 6(a) or 6(b) is unavailable to an
indemnified party because of a failure or refusal of a
governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or
otherwise), 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 losses, in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and the indemnified
party in connection with the actions, statements or omissions
that resulted in such losses as well as any other relevant
equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference
to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material
fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of
any losses shall be deemed to include, subject to the
limitations set forth in this Section, any reasonable attorneys'
or other reasonable fees or expenses incurred by such party in
connection with any proceeding to the extent such party
would have been indemnified for such fees or expenses
if the indemnification provided for in this Section was
available to such party in accordance with its terms.
(ii) The parties hereto agree that it would
not be just and equitable if contribution pursuant to this
Section 6(e) were determined by pro rata allocation or by any
other method of allocation that does not take into account the
equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this
Section 6(e), a holder shall not be required to contribute, in
the aggregate, any amount in excess of the amount by which the
proceeds actually received by such holder from the sale of the
Registrable Securities subject to the proceeding exceeds the
amount of any damages that the holder has otherwise been
required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the
11
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.
(iii) The indemnity and contribution
agreements contained in this Section are in addition to any
liability that the indemnifying parties may have to the
indemnified parties.
7. Participation in Underwritten Registrations.
No Person may participate in any registration hereunder which
is underwritten unless such Person (a) agrees to sell such
Person's securities on the basis provided in any underwriting
arrangements approved by the Person or Persons entitled
hereunder to approve such arrangements and (b) completes and
executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the
terms of such underwriting arrangements.
8. Definitions.
"Business Day" means any day other than a
Saturday, a Sunday or a day on which banks in New York City are
authorized or obligated by law or executive order to close.
"Closing Date" means March 17, 1999.
"Common Stock" means, collectively, the
Company's Common Stock, $.001 par value per share.
"Note Registrable Securities" means (i) any
Common Stock issued or issuable upon the conversion of any
Note (whether held by the Purchaser or any successor or
assignee of the Purchaser) and (ii) any Common Stock issued or
issuable with respect to the securities referred to in clause
(i) by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization.
"Notes" means the Company's Convertible
Secured Notes due March 10, 2004 in the initial aggregate
principal amount of $20,000,000.
"Person" means any individual, partnership,
joint venture, corporation, trust, unincorporated organization or
other entity.
"Preferred Registrable Securities" means (i)
any Common Stock issued or issuable upon the conversion of any
Preferred Stock (whether held by the Purchaser or any successor
or assignee of the Purchaser) and (ii) any Common Stock issued or
issuable with respect to the securities referred to in clause
(i) by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization.
"Preferred Stock" means the Series D
Cumulative Convertible Preferred Stock, $.001 par value per
share, of the Company.
12
"Registrable Securities" means the
Preferred Registrable Securities, the Note Registrable
Securities and the Warrant Registrable Securities. As to any
particular Registrable Securities, such securities will cease
to be Registrable Securities when they have been distributed to
the public pursuant to an offering registered under the
Securities Act or sold to the public through a broker, dealer
or market maker in compliance with Rule 144 under the
Securities Act (or any similar rule then in force). For
purposes of this Agreement, a Person will be deemed to be a
holder of Registrable Securities whenever such Person has the
right to acquire directly or indirectly such Registrable
Securities (upon conversion or exercise in connection with
a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right),
whether or not such acquisition has actually been effected.
For purposes of calculating the percentage of Registrable
Securities for voting purposes, the Preferred Stock, the Notes
and the Warrants shall be deemed to have been converted at
the then applicable conversion price.
"Registration Expenses" has the meaning set
forth in Section 5(a) hereof.
"Securities" means the Preferred Stock,
the Notes and the Warrants.
"Warrants" means, collectively (i) the
Series A Warrants of the Company initially exercisable for
200,000 shares of Common Stock (the "Series A Warrants"),
(ii) the Series B Warrants of the Company initially
exercisable for 200,000 shares of Common Stock (the "Series B
Warrants") (iii) the Series C Warrants of the Company initially
exercisable for 228,572 shares of Common Stock (the "Series C
Warrants"), (iv) the Series D Warrants of the Company
initially exercisable for 342,858 shares of Common Stock (the
"Series D Warrants"), in each case issued by the Company to the
Purchaser on the Closing Date pursuant to the Purchase
Agreement, and (v) the Series E Warrants of the Company
initially exercisable for 312,196 shares of Common Stock (the
"Series E Warrants") issued by the Company on the Closing Date.
"Warrant Registrable Securities" means (i)
any Common Stock issued or issuable upon the exercise of the
Warrants and (ii) any Common Stock issued or issuable with
respect to the securities referred to in clause (i) by way of a
stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation
or other reorganization.
"Warrant Shares" means shares of Common
Stock obtained or obtainable upon exercise of the Warrants;
provided, that if there is a change such that the securities
issuable upon exercise of the Warrants are issued by an entity
other than the Company or there is a change in the class of
securities so issuable, then the term "Warrant Shares" shall
mean shares of the security issuable upon exercise of the
Warrants if such security is issuable in shares, or shall mean
the equivalent units in which such security is issuable if
such security is not issuable in shares.
13
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company
has not entered and will not hereafter enter into any agreement
with respect to its securities which is inconsistent with or
violates or diminishes in any way, or grants anyone superior
rights than, the rights granted to the holders of Registrable
Securities in this Agreement. The parties to this Agreement
hereby confirm the rights of the holders of negotiable
securities under the Registration Rights Agreements, dated as
of December 20, 1996 and January 8, 1998, by and between the
Company and AJG Financial Services, Inc. ("AJG"). The
Company hereby represents and warrants that it has granted AJG
comparable rights to those given to the holders of Registrable
Securities hereunder and that the Company has received AJG's
consent with respect to the rights granted to the holders of
Registrable Securities hereunder.
(b) Adjustments Affecting Registrable
Securities. The Company will not take any action, or permit
any change to occur, with respect to its securities which
would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in
a registration undertaken pursuant to this Agreement or which
would adversely affect the marketability of such
Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a
combination of shares).
(c) Remedies. Any Person having rights under
any provision of this Agreement will be entitled to enforce such
rights specifically to recover damages caused by reason of any
breach of any provision of this Agreement and to exercise all
other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that any
party may in its sole discretion apply to any court of law or
equity of competent jurisdiction (without posting any bond or
other security) for specific performance and for other
injunctive relief in order to enforce or prevent violation
of the provisions of this Agreement.
(d) Amendments and Waivers. Except as
otherwise provided herein, the provisions of this Agreement may
be amended or waived only upon the prior written consent of the
Company and holders of at least 66.67% of the Registrable
Securities.
(e) Successors and Assigns. All covenants
and agreements in this Agreement by or on behalf of any of the
parties hereto will bind and inure to the benefit of the
permitted respective successors and assigns of the parties hereto
whether so expressed or not.
(f) Notices. Except as otherwise expressly
provided herein, any and all notices, designations, consents,
offers, acceptances or other communications provided for
herein shall be given in writing and shall be mailed by first
class registered or certified mail, postage prepaid, sent
by a nationally recognized overnight courier service or
transmitted via telecopier as follows:
14
If to the Company:
Covol Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to (which shall not
constitute notice to the Company):
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
Ten ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
If to the Purchaser:
OZ Master Fund, Ltd.
c/o Och-Ziff Management, L.L.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇
with a copy to (which shall not
constitute notice to the Purchaser):
▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
If to holders of Series E Warrants:
c/o Leeds Group Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
c/o Havenwood Capital Markets, LLC
▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
15
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
with a copy to (which shall not
constitute notice to any holder):
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Notice shall be deemed given, for all purposes, when
deposited in the United States mail as registered or
certified mail, in which event the fifth day following the
date of postmark on the receipt of such registered or certified
mail shall conclusively be deemed the date of giving of such
notice, on the first Business Day following collection by
the courier service or when acknowledged by the receiving
telecopier.
(g) Interpretation of Agreement; Severability.
The provisions of this Agreement shall be applied and
interpreted in a manner consistent with each other so as to
carry out the purposes and intent of the parties hereto, but if
for any reason any provision hereof is determined to be
unenforceable or invalid, such provision or such part thereof
as may be unenforceable or invalid shall be deemed severed from
the Agreement and the remaining provisions carried out with the
same force and effect as if the severed provision or part
thereof had not been a part of this Agreement.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
SUBSTANTIVE LAWS (AND NOT THE CONFLICTS OF LAW) OF THE STATE
OF NEW YORK.
(i) Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be
deemed to be an original, but all of which taken together shall
constitute one and the same Agreement.
(j) Entire Agreement. This Agreement
constitutes the entire agreement of the parties with respect
to the subject matter hereof, and supersedes all previous
agreements.
* * * * *
16
IN WITNESS WHEREOF, the parties hereto have
duly executed and delivered this Agreement as of the date first
written above.
COVOL TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CFO
OZ MASTER FUND, LTD.
By: /s/ ▇▇▇▇▇▇ ▇. Och
--------------------------------
Name: ▇▇▇▇▇▇ ▇. Och
Title: Managing Member
LEEDS GROUP INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
HAVENWOOD CAPITAL MARKETS, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President