EXHIBIT 10.8
------------
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of June 30, 1998, among JFAX
Communications, Inc., a Delaware corporation (the "Company") and the investors
whose names appear under the heading "Investors" on the signature page hereof.
1. Background. The Company is a party to (i) a securities purchase
----------
agreement, dated the date hereof (as amended from time to time, the "Note
Purchase Agreement"), entered into with the investors named therein, pursuant to
which the Company agreed to issue to such investors $10,000,000 aggregate
principal amount of 10% Senior Subordinated Notes due 2004 and shares of Common
Stock and (ii) a securities purchase agreement, dated on or about the date
hereof (the "Preferred Stock Purchase Agreement"), entered into with the
investors named therein, pursuant to which the Company agreed to issue to such
investors shares of Preferred Stock and warrants to purchase Common Stock.
In connection with each of the Note Purchase Agreement and the
Preferred Stock Purchase Agreement, the Company entered into this Registration
Rights Agreement, to which the respective investors who received securities
thereunder are parties.
2. Registration under Securities Act, etc.
---------------------------------------
2.1. Registration of Registrable Securities on Request. (a)
-------------------------------------------------
Request. At any time following the sixth month anniversary of the Company's
-------
Initial Public Offering, (i) the holder or holders (collectively, the "Notes
Holders") of more than 50% (by number of shares) of the Notes Registrable
Securities shall twice have the right to request in writing that the Company
effect an underwritten registration under the Securities Act of all or part of
such holders' Registrable Securities (such requesting Notes Holders being
referred to hereinafter as the "Initiating Notes Holders") and (ii) the holder
or holders (collectively, the "Preferred Holders") of more than 50% (by number
of shares) of the Preferred Registrable Securities shall twice have the right to
request in writing that the Company effect an underwritten registration under
the Securities Act, of all or part of such holders' Registrable Securities (such
requesting Preferred Holders being referred to hereinafter as the "Initiating
Preferred Holders"), provided that, in the case of (i) or (ii) above, the
--------
aggregate Fair Market Value of the Registrable Securities to be so registered is
at least $1,000,000. It is hereby acknowledged that there may be both
Initiating Notes Holders and Initiating Preferred Holders in respect of any
particular registration in the event that each group elects to exercise one of
its requests referenced in this Section 2.1(a). The Company will promptly give
written notice of such requested registration to all other holders of
Registrable Securities, which holders shall be entitled to include their
Registrable Securities in such registration subject to Sections 2.1(b) and
2.1(g). Thereupon the Company will use its reasonable best efforts to effect
the registrations under the Securities Act of:
(A) the Registrable Securities which the Company has been so
requested to register by such Initiating Notes Holders or Initiating
Preferred Holders, as the case may be; and
(B) subject to Sections 2.1(b) and 2.1(g), all other Registrable
Securities which the Company has been requested to register by the
holders thereof by written request given to the Company within 30 days
after the giving of such written notice by the Company (which request
shall specify the intended method of disposition of such Registrable
Securities) all to the extent requisite to permit the disposition of
the Registrable Securities so to be registered.
(b) Registration of Other Securities. Whenever the Company shall
--------------------------------
effect a registration pursuant to this Section 2.1, no securities other than
Registrable Securities shall be included among the securities covered by such
registration unless the managing underwriter of such offering shall have advised
in writing that the inclusion of such other securities would not in the
underwriter's reasonable judgment adversely affect the marketing or the selling
price of the Registrable Securities to be covered by such registration. The
Company will not grant to any Person at any time on or after the date hereof any
right to be included among the securities registered pursuant to this Section
2.1 that is inconsistent with this Section 2.1(b) or Section 2.1(g).
(c) Registration Statement Form. Registrations under this Section
---------------------------
2.1 shall be on such appropriate registration form or prospectus of the
Commission (i) as shall be selected by the Company and as shall be reasonably
acceptable to the Initiating Notes Holders or Initiating Preferred Holders, as
the case may be, holding more than 50% (by number of shares) of the Registrable
Securities so to be registered and (ii) as shall permit the disposition of such
Registrable Securities in accordance with the intended method or methods of
disposition specified in their request for such registration. The Company
agrees to include in any such registration statement all information which
holders of Registrable Securities being registered shall reasonably request.
(d) Expenses. The Company will pay all Registration Expenses in
--------
connection with the registration requests made pursuant to this Section 2.1.
2
(e) Effective Registration Statement. A registration requested
--------------------------------
pursuant to this Section 2.1 shall not be deemed to have been effected and shall
not count as a requested registration pursuant to Section 2.1 (a) hereof (i)
unless a registration statement with respect thereto has become effective, (ii)
if after it has become effective, such registration is interfered with by any
stop order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not the fault of an Initiating Notes
Holder or Initiating Preferred Holder, as the case may be, and the Note
Registrable Securities or Preferred Registrable Securities, as the case may be,
covered thereby have not been sold, or (iii) if the conditions to closing
specified in the selling agreement or underwriting agreement entered into in
connection with such registration are not satisfied or waived by the parties
thereto other than an Initiating Notes Holder or Initiating Preferred Holder, as
the case may be.
(f) Underwriters. Any registration effected pursuant to this Section
------------
2.1 shall at the election of the Initiating Notes Holders or Initiating
Preferred Holders, as the case may be, be an underwritten public offering on a
firm commitment basis or a reasonable best efforts basis. The managing
underwriter or underwriters thereof shall be selected by the Company, and such
underwriter as well as the price, terms and provisions of the offering shall be
subject to the approval of the Company and the Initiating Notes Holders or
Initiating Preferred Holders, as the case may be.
(g) Apportionment in Registrations Requested. If, in connection with
----------------------------------------
a registration requested pursuant to this Section 2.1, the managing underwriter
shall advise the Company in writing (with a copy to each Initiating Notes Holder
or Initiating Preferred Holder, as the case may be) that, in its opinion, the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering within a price range acceptable to the
Initiating Notes Holders or Initiating Preferred Holders, as the case may be,
the number of securities that are otherwise entitled to be included in such
registration shall be allocated in the following manner: (i) all securities
other than Registrable Securities of the Notes Holders or the Preferred Holders,
as the case may be, shall be reduced on a pro rata basis (based on the number of
securities requested to be included in such registration) and (ii) if, after the
exclusion of all such securities (if necessary), further reductions are still
required, Registrable Securities of the Notes Holders or the Preferred Holders,
as the case may be, shall be reduced on a pro rata basis (based on the number of
securities requested to be included in such registration). If the pro ration as
aforesaid results in the exclusion of in excess of 15% of the Registrable
Securities of the Notes Holders or the Preferred Holders, as the case may be,
originally sought to be registered, the request shall not be counted for
purposes of
3
determining the number of registrations pursuant to Section 2.1 hereof.
2.2. Registrations on Form S-3. Following an Initial Public
-------------------------
Offering, the Company shall use its reasonable best efforts to qualify for
registration on Form S-3 promulgated under the Securities Act or any successor
form thereto ("Form S-3") for secondary sales. Anything contained in Section
2.1 to the contrary notwithstanding, at such time as the Company shall have
qualified for the use of Form S-3, (i) any holder or holders of Notes
Registrable Securities shall twice have the right to request in writing
registrations on Form S-3 of Registrable Securities and (ii) any holder or
holders of Preferred Registrable Securities shall twice have the right to
request in writing registrations on Form S-3 of Registrable Securities, provided
--------
that, in the case of (i) or (ii) above, the aggregate Fair Market Value of the
Registrable Securities to be so registered is at least $2,500,000, which request
or requests shall (A) specify the number of Registrable Securities intended to
be sold or disposed of and the holders thereof and (B) state the intended method
of disposition of such Registrable Securities. A requested registration on Form
S-3 in compliance with this Section 2.2 shall not count as a registration
statement initiated pursuant to Section 2.1 but shall otherwise be treated as a
registration initiated pursuant to, and shall, except as otherwise expressly
provided in this Section 2.2, be subject to Section 2.1.
2.3. "Piggyback" Registrations. (a) Right to Include Registrable
------------------------- ----------------------------
Securities. If the Company at any time proposes to register any of its
----------
securities under the Securities Act (other than by a registration on Form S-4 or
Form S-8 and other than in cases where Section 2.1 or 2.2 is applicable) whether
or not for sale for its own account, it will each such time give prompt written
notice to all holders of Registrable Securities of its intention to do so and of
such holders' rights under this Section 2.3. Upon the written request of any
such holder made within 10 days after the date of any such notice given in
accordance with Section 7 hereof, the Company will use its reasonable best
efforts to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the holders
thereof, to the extent requisite to permit the disposition of the Registrable
Securities so to be registered, provided that if, at any time after giving
--------
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to each holder of Registrable Securities
and, thereupon, (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay the Registration
Expenses in
4
connection therewith), without prejudice, however, to the rights of any holder
or holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under Section 2.1 or Section 2.2, and
(ii) in the case of a determination to delay registering, shall be permitted to
delay registering any Registrable Securities for the same period as the delay in
registering such other securities. No registration effected under this Section
2.3 shall relieve the Company of its obligation to effect any registration upon
request under Section 2.1 or Section 2.2. The Company will pay all Registration
Expenses in connection with each registration of Registrable Securities
requested pursuant to this Section 2.3.
(b) Apportionment in "Piggyback" Registrations. If (i) a
------------------------------------------
registration pursuant to this Section 2.3 involves an underwritten offering of
the securities being registered, whether or not for sale for the account of the
Company, to be distributed (on a firm commitment basis) by or through one or
more underwriters of recognized national or regional standing under underwriting
terms appropriate for such a transaction, and (ii) the managing underwriter of
such underwritten offering shall inform in writing the Company and the holders
of the Registrable Securities requesting registration that marketing
considerations require a limitation on the number of securities that can be
included in such registration, then the Company may include all securities
proposed by the Company to be sold for its own account or the maximum amount
that the underwriter considers saleable and such limitation on any remaining
securities that may, in the opinion of the underwriter, be sold will be imposed
(x) first, pro rata among holders of securities that have no applicable
registration rights, (y) second, pro rata among holders of securities, including
Registrable Securities, other than the holders, if any, exercising demand
registration rights with respect thereto, in each case on the basis of the
respective percentages of securities sought to be registered held by such
holders. To the extent that any Registrable Securities or other securities are
excluded from the registration pursuant to this Section 2.3(b), no shares of
Common Stock issued to management of the Company pursuant to a stock option (or
any other type of benefit plan) ("Option Shares") shall be included in such
registration.
2.4. Registration Procedures. If and whenever the Company is
-----------------------
required to use its reasonable best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Sections 2.1, 2.2
and 2.3, the Company will as expeditiously as possible:
(i) prepare and (as soon thereafter as practicable or in any
event no later than 45 days after the end of the period within which
requests for registration may be given to the Company) file with the
Commission the requisite registration statement to effect such
registration and thereafter use its
5
reasonable best efforts to cause such registration statement to become
effective, provided that the Company may discontinue any registration
--------
of its securities which are not Registrable Securities (and, under the
circumstances specified in Section 2.3(a), its securities which are
Registrable Securities) at any time prior to the effective date of the
registration statement relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement until such time as all of such
securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in
such registration statement;
(iii) furnish to each seller of Registrable Securities covered
by such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto, such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 or
Rule 430A under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as such
seller may reasonably request;
(iv) use its reasonable best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of
such jurisdictions as each seller thereof shall reasonably request, to
keep such registration or qualification in effect for so long as such
registration statement remains in effect, and take any other action
which may be reasonably necessary to enable such seller to consummate
the disposition in such jurisdictions of the securities owned by such
seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of
this subdivision (iv) be obligated to be so qualified or to consent to
general service of process in any such jurisdiction or subject itself
to be required to pay any franchise or income taxes in any such
jurisdiction;
6
(v) use its reasonable best efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as
may be necessary to enable the seller or sellers thereof to consummate
the disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller, except as provided in (y) below
(and the underwriters, if any), of
(x) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the
date of the closing under the underwriting agreement), reasonably
satisfactory in form and substance to counsel for all such
sellers or, if such registration includes an underwritten public
offering, to such underwriter, and
(y) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, dated the date of the closing under
the underwriting agreement), signed by the independent public
accountants who have certified the Company's financial statements
included in such registration statement, addressed to each
seller, to the extent the same can be reasonably obtained, and
addressed to the underwriters, if any, covering substantially the
same matters with respect to such registration statement (and the
prospectus included therein) and, in the case of the accountants'
letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in accountants'
letters delivered to the underwriters in underwritten public
offerings of securities and such other financial matters as such
seller or such holder (or the underwriters, if any) may
reasonably request;
(vii) notify each seller of Registrable Securities covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or
7
necessary to make the statements therein not misleading in the light
of the circumstances under which they were made, and at the request of
any such seller or holder promptly prepare to furnish to such seller
or holder 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;
(viii) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably practicable,
an earnings statement covering the period of at least twelve months,
but not more than eighteen months, beginning after the effective date
of such registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act, and, in the
case of a registration requested pursuant to Section 2.1 or 2.2
hereof, will furnish to each such seller at least two business days
prior to the filing thereof a copy of any amendment or supplement to
such registration statement or prospectus and shall not file any
thereof to which any such seller shall have reasonably objected on the
grounds that such amendment or supplement does not comply in all
material respects with the requirements of the Securities Act or of
the rules or regulations thereunder;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of
such registration statement; and
(x) use its reasonable best efforts to list all Registrable
Securities covered by such registration statement on any securities
exchange on which any of the Registrable Securities is then listed.
Notwithstanding the foregoing, the Company may defer its obligations
under Section 2.1 and Section 2.2 to file a registration statement, but not its
obligations to initiate the process of preparing the applicable registration
statement, for a period of no more than 90 days in any 365-day period, if the
Company's Board of Directors determines in good faith based upon a written
opinion of counsel that filing such a registration statement would require a
public disclosure by the Company, which disclosure would interfere with a
material transaction then under
8
consideration by the Company, provided that once such information has been
--------
publicly disclosed, the Company shall promptly proceed to fulfill its
obligations under Section 2.1 or Section 2.2, as the case may be.
The Company may require each proposed seller of Registrable Securities
as to which any registration is being effected to promptly furnish the Company,
as a condition precedent to including such holder's Registrable Securities in
any registration, such information regarding such seller and the distribution of
such securities as the Company may from time to time reasonably request in
writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in subdivision (vii) of this
Section 2.4, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 2.4 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
2.5. Underwritten Offerings. (a) Requested Underwritten Offerings.
---------------------- --------------------------------
If requested by the underwriters for any offering by the Initiating Notes
Holders or the Initiating Preferred Holders, as the case may be, in connection
with a registration requested under Section 2.1, the Company will enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be satisfactory in substance and form to the Company, to the Initiating Notes
Holders or the Initiating Preferred Holders, as the case may be, and to the
underwriters and to contain such representations and warranties by the Company
and such other terms as are generally prevailing in agreements of this type,
including, without limitation, indemnities to the effect and to the extent
provided in Section 2.7. The Initiating Notes Holders or the Initiating
Preferred Holders, as the case may be, will cooperate with the Company in the
negotiation of the underwriting agreement and will give consideration to the
reasonable requests of the Company regarding the form thereof, provided that
--------
nothing herein contained shall diminish the foregoing obligations of the
Company. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such
9
underwriters under such underwriting agreement be conditions precedent to the
obligations of such holders of Registrable Securities. Any such holder of
Registrable Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements typical in an offering of that type,
including those regarding such holder, such holder's Registrable Securities, and
such holder's intended method of distribution, any other information supplied by
such holder to the Company for use in the Registration Statement and any other
representation required by law.
(b) Incidental Underwritten Offerings. If the Company at any time
---------------------------------
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.3 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any holder
of Registrable Securities as provided in Section 2.3 and subject to the
provisions of Sections 2.3(a), 2.3(b) and 2.4, arrange for such underwriters to
include all the Registrable Securities to be offered and sold by such holder
among the securities to be distributed by such underwriters. The holders of
Registrable Securities to be distributed by such underwriters shall be parties
to the underwriting agreement between the Company and such underwriters and may,
at their option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit of such holders
of Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Any
such holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties, or agreements typical in an
offering of this type, including those regarding such holder, such holder's
Registrable Securities and such holder's intended method of distribution, any
other information supplied by such holder to the Company for use in the
Registration Statement and any other representation required by law.
(c) Lock-up Agreements. In connection with any underwritten offering
------------------
of Common Stock, the holders of Registrable Securities will agree not to effect
any public sale or distribution of Registrable Securities, except for
Registrable Securities included in such registration statement, for such periods
of time before and after the effective date of such registration statement as
shall be mutually agreed between the managing underwriter and such holders.
2.6. Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement,
10
the Company will give the holders of Registrable Securities registered under
such registration statement, the underwriters, if any, and their respective
counsel (such holders' counsel to be appointed by the holders of more than 50%
(by number of shares) of Registrable Securities so to be registered, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each of them such access
to its books and records and such opportunities to discuss the business of the
Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of such
holders' and such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
2.7. Indemnification. (a) Indemnification by the Company. In the
--------------- ------------------------------
event of any registration of any securities of the Company under the Securities
Act or any other Federal or state law, the Company will, and hereby does,
indemnify and hold harmless the seller of any Registrable Securities covered by
such registration statement, its directors and officers, each other Person who
participates as an underwriter in the offering or sale of such securities and
such other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such seller or any such director or
officer or underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
reimburse such seller and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company will not be
-------- -------
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
said preliminary or final prospectus or said amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by such
seller or such underwriter, specifically for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any
11
such director, officer, underwriter or controlling person and shall survive the
transfer of such securities by such seller.
(b) Indemnification by the Investors. The holders of Registrable
--------------------------------
Securities will, and hereby do, severally and not jointly, indemnify and hold
harmless (in the same manner and to the same extent as set forth in subdivision
(a) of this Section 2.7) the Company, each director of the Company, each officer
of the Company and each other Person, if any, who controls the Company within
the meaning of the Securities Act with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such holder for
use in the preparation of such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of the Company or any such director, officer or controlling Person
and shall survive the transfer of such securities by such Purchaser with respect
to information furnished by such Purchaser prior to such transfer.
(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 2.7, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
--------
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 2.7, except to the extent that
the indemnifying party is prejudiced by such failure to give notice. In case
any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified party and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or
12
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
------------------------
Section 2.7 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
2.8. Adjustments Affecting Registrable Securities. The Company will
--------------------------------------------
not effect or permit to occur any combination or subdivision of shares which
would adversely affect the ability of the holders of Registrable Securities to
include such Registrable Securities in any registration of its securities
contemplated by this Section 2 or the marketability of such Registrable
Securities under any such registration.
3. Definitions. As used herein, unless the context otherwise
-----------
requires, the following terms have the following respective meanings:
Commission: The Securities and Exchange Commission or any other Federal
----------
agency at the time administering the Securities Act.
Common Stock: All shares now or hereafter authorized and designated as
------------
Common Stock of the Company and capital stock of any other class with which
such shares may hereafter have been exchanged or reclassified.
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Fair Market Value: As defined in the Note Purchase Agreement.
-----------------
Initial Public Offering: As defined in the Note Purchase Agreement.
-----------------------
Person: A corporation, an association, a partnership, a limited liability
------
company, a business, an individual or a governmental authority.
Preferred Stock: The Company's Series A Usable Redeemable Preferred Stock,
---------------
par value $.01 per share.
Registrable Securities: The shares of Common Stock (i) issued or issuable
----------------------
pursuant to the Note Purchase Agreement and any additional shares of Common
Stock received in respect of such shares by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise (collectively,
"Note Registrable Securities") or (ii) issued or issuable upon exercise of
13
warrants issued pursuant to the Preferred Stock Purchase Agreement and any
additional shares of Common Stock received in respect of such shares by way
of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise (collectively, "Preferred Registrable 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 and such securities shall have been disposed of in
accordance with such registration statement, (b) they shall have been
distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act or (c) they shall have ceased to be outstanding.
Registration Expenses: All expenses incident to the Company's performance
---------------------
of or compliance with Section 2, including, without limitation, all
registration, filing and National Association of Securities Dealers, Inc.
fees, all fees and expenses of complying with securities or blue sky laws,
all word processing, duplicating and printing expenses, messenger and
delivery expenses, the reasonable fees and disbursements of counsel for the
Company and of its independent public accountants, including the expenses
of any special audits or "cold comfort" letters required by or incident to
such performance and compliance, the reasonable fees and disbursements of a
single counsel retained by the holder or holders of more than 50% (by
number of shares) of the Registrable Securities being registered, premiums
and other costs of policies of insurance, if any, obtained by the Company
against liabilities arising out of the public offering of the Registrable
Securities being registered and any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities, including reasonable
fees of underwriters counsel incurred in the qualification of the
Securities under blue sky laws, but excluding all agency fees and
commissions, underwriting discounts and commissions and transfer taxes, if
any.
Securities Act: The Securities Act of 1933, as amended.
--------------
4. Rule 144. Following an Initial Public Offering, the Company will
--------
file the reports required to be filed by it, and in the manner required to be
filed by it, under the Securities Act and the Exchange Act (or, if the Company
is not required to file such reports, will, upon the request of any holder of
Registrable Securities, make publicly available other information) and will take
such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the Securities
14
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission ("Rule 144").
Upon the request of any holder of Registrable Securities, the Company will
deliver to such holder a written statement as to whether it has complied with
such requirements.
5. Amendments and Waivers. This Agreement may be amended and the
----------------------
Company may take any action herein prohibited or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of 66-2/3% or more (by number of shares) of Registrable Securities.
Each holder of any Registrable Securities at the time or thereafter outstanding
shall be bound by any consent authorized by this Section 5, whether or not such
Registrable Securities shall have been marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
------------------------------
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may upon the giving of written notice to the Company,
at its election, be treated as the holder of such Registrable Securities for
purposes of any request or other action by any holder or holders of Registrable
Securities pursuant to this Agreement or any determination of any number or
percentage of shares of Registrable Securities held by any holder or holders of
Registrable Securities contemplated by this Agreement. The Company may require
assurances reasonably satisfactory to it of such owner's beneficial ownership of
such Registrable Securities.
7. Notices. All communications provided for hereunder shall be sent
-------
by first-class mail or overnight courier and (a) if addressed to a party other
than the Company, addressed to such party in the manner set forth in the Note
Purchase Agreement or the Preferred Stock Purchase Agreement, as the case may
be, or at such other address as such party shall have furnished to the Company
in writing, or (b) if addressed to any other holder of Registrable Securities,
at the address that such holder shall have furnished to the Company in writing,
or, until any such other holder so furnishes to the Company an address, then to
and at the address of the last holder of such Registrable Securities who has
furnished an address to the Company, or (c) if addressed to the Company, at JFAX
Communications, Inc., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, to the attention of General Counsel, or at such other address, or to the
attention of such other officer, as the Company shall have furnished to each
holder of Registrable Securities at the time outstanding.
8. Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns. Whether or not any express assignment shall
have been made, the
15
provisions of this Agreement which are for the benefit of the parties hereto
other than the Company shall also be for the benefit of and enforceable by any
subsequent holder of at least 100,000 Registrable Securities (with respect to
Registrable Securities), subject to the provisions respecting the minimum
numbers or percentages of shares of Registrable Securities required in order to
be entitled to certain rights, or take certain actions, contained herein;
provided, however, that the transfer of Registrable Securities to the
-------- -------
transferor's equity holder, partner or officer will not be subject to any such
minimum shareholding.
9. Descriptive Headings. The descriptive headings of the several
--------------------
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
11. Counterparts. This Agreement may be executed simultaneously in
------------
any number of counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute one and the same instrument.
16
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
JFAX COMMUNICATIONS, INC.
By: /s/ Hemi ▇▇▇▇▇▇
----------------------------
Name: Hemi ▇▇▇▇▇▇
Title: Chief Financial Officer
17
THE INVESTORS:
DELAWARE STATE EMPLOYEES'
RETIREMENT FUND
By: Pecks Management Partners Ltd.
Its Investment Advisor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Director
DECLARATION OF TRUST FOR DEFINED BENEFIT PLAN OF ICI
AMERICAN HOLDINGS INC.
By: Pecks Management Partners Ltd.
Its Investment Advisor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Director
DECLARATION OF TRUST FOR DEFINED BENEFIT PLAN OF
ZENECA HOLDINGS INC.
By: Pecks Management Partners Ltd.
Its Investment Advisor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Director
THE ▇.▇. ▇▇▇▇▇▇▇▇▇ FAMILY FOUNDATION
By: Pecks Management Partners Ltd.
Its Investment Advisor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Director
18
DLJ FUND INVESTMENT PARTNERS II, L.P.
By: DLJ LBO PLANS MANAGEMENT CORPORATION
Its General Partner
By: /s/ ▇▇▇ ▇▇▇▇▇
-------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Vice President
DLJ CAPITAL CORPORATION
By: /s/ ▇▇▇ ▇▇▇▇▇
-------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Vice President
GMT PARTNERS, LLC
c/o Blue Capital Management
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
Managing Member
ORCHARD/JFAX INVESTORS, L.L.C.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Manager
19
DLJ PRIVATE EQUITY EMPLOYEES FUND, L.P.
By: DLJ LBO PLANS MANAGEMENT CORPORATION
Its General Partner
By: /s/ ▇▇▇ ▇▇▇▇▇
-------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Vice President
20