Exhibit 10.5
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of ______,
2004, by and between SECURECARE TECHNOLOGIES, INC., a Nevada corporation (the
"Company"), and the persons named on Schedule A annexed hereto, or its permitted
assigns (each, a "Holder" and collectively, the "Holders").
WHEREAS, this Agreement is being entered into in connection with a
private placement of the Company's securities to certain investors (the
"Investors"), pursuant to the terms described in the Company's Subscription
Agreement, whereby the Company is offering, through Gryphon Financial Securities
Corp. (the "Placement Agent"), up to ten (10) Units (the "Offering"), each Unit
consisting of (i) 90,909 shares of Series B Convertible Preferred Stock
initially convertible into 90,909 shares (the "Conversion Shares") of common
stock, par value $.001 per share (the "Common Stock"), and (ii) a five-year
warrant to purchase 18,182 shares of Common Stock at an exercise price of $1.25
per share (the "Warrant Shares"); and
WHEREAS, the Conversion Shares and the Warrant Shares are entitled to
registration rights as provided herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties and covenants and agreements contained
herein, the Company and the Placement Agent, intending to be legally bound
hereby agree as follows:
I. DEFINITIONS
The following additional definitions shall apply for purposes of this
Agreement:
1.1 The term "Person" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, a government or any department or agency thereof.
1.2 The term "Prospectus" means the Prospectus included in any
Registration Statement (including without limitation, a Prospectus that
discloses information previously omitted from a Prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated under
the 1933 Act), as amended or supplemented by any amendment or Prospectus
supplement, including post-effective amendments, and all materials incorporated
by reference or explicitly deemed to be incorporated by reference in such
Prospectus.
1.3 The terms "Register," "Registered," and "Registration" refer
to a registration effected by preparing and filing one or more Registration
Statements, (as defined below) or similar document in compliance with the
Securities Act of 1933, as amended (the "1933 Act"), and Rule 415 thereunder or
any successor rule providing for the offering for resale of securities on a
continuous or delayed basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement or document by the United States
Securities and Exchange Commission (the "SEC").
1.4 The term "Registrable Securities" means the Conversion Shares
and the Warrant Shares and any shares of capital stock or other securities
issued or issuable with respect to the Agent Warrant Shares, as a result of any
stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, provided, however, that any securities deemed Registrable Securities
in accordance herewith shall cease to be Registrable Securities (i) upon the
sale of such securities pursuant to a Registration Statement, (ii) upon the sale
of such securities pursuant to Rule 144 promulgated under the 1933 Act, or (iii)
on the date on which such securities become available for sale under Rule
144(k).
1.5 The term "Registration Statement" means a registration
statement on Form S-1 or Form S-3 or any similar or successor form then
appropriate for or applicable to the offer and sale of the Registrable
Securities and filed under the 1933 Act.
II. REGISTRATION
2.1 Right to Include Registrable Stock. If the Company proposes to
register any of its securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the offer and sale of non-convertible, non-exchangeable debt
securities or a registration on Form S-4 or Form S-8, or any successor or
similar forms) (a "Piggyback Registration"), whether for the account of the
Company or otherwise, it will promptly, but not later than thirty (30) days
before the anticipated date of filing such Registration Statement, give written
notice to each Holder. Upon the written request of any of the Holders made
within fifteen (15) days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
Holders and the intended method of distribution thereof), the Company will use
its best efforts to effect the registration under the 1933 Act of all
Registrable Securities which the Company has been requested to register by any
of the Holders in accordance with the intended methods of distribution specified
in such request; provided, however, that (a) 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 determines for any reason not to proceed with such
registration, the Company may, at its election, give written notice of such
determination to the Holders and, thereupon, will be relieved of its obligation
to register any Registrable Securities in connection with such registration, and
(b) in case of a determination by the Company to delay registration of its
securities, the Company will be permitted to delay the registration of
Registrable Securities for the same period as the delay in registering such
other securities; provided, however, that the provisions of this Article II will
not be deemed to limit or otherwise restrict the rights of the Holders under
Article III.
2.2 Priority. If the managing underwriter for a registration
involving an underwritten offering advises the Company in writing that, in its
opinion, the number of securities of the Company (including without limitation,
Registrable Securities) requested to be included in such registration by the
holders thereof exceeds the number of securities of the Company (the "Sale
Number") which can be sold in an orderly manner in such offering within a price
range acceptable to the Company, the Company will include (a) first, all
securities of the Company that the Company proposes to register for its own
-2-
account, and (b) second, to the extent that the number of securities of the
Company to be included by the Company is less than the Sale Number, a number of
the Registrable Securities equal to the number derived by multiplying (i) the
difference between the Sale Number and the securities proposed to be sold by the
Company, and (ii) a fraction the numerator of which is the number of Registrable
Securities originally requested to be registered by the Holders, and the
denominator of which shall be the aggregate number of all securities requested
to be registered by all holders of the Company's securities (other than
securities being registered by the Company itself).
2.3 Legal Counsel. Subject to Section 6.1 hereof, the Placement
Agent shall have the right to select one legal counsel to review and oversee any
offering pursuant to this Article II ("Legal Counsel"), which shall be Gusrae,
▇▇▇▇▇▇ & ▇▇▇▇▇, PLLC or such other counsel as thereafter designated by the
Placement Agent. The Company shall reasonably cooperate with Legal Counsel in
performing the Company's obligations under this Agreement.
2.4 Ineligibility of Form S-3. In the event that Form S-3 is not
available for the registration of the resale of Registrable Securities
hereunder, the Company shall (a) register the resale of the Registrable
Securities on another appropriate form, and (b) undertake to register the resale
of the Registrable Securities on Form S-3 as soon as such form is available;
provided, however, that the Company shall maintain the effectiveness of the
Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the SEC.
III. OBLIGATIONS OF THE COMPANY
Whenever required under this Agreement to effect the registration of
any Registrable Securities, the Company will, as expeditiously as possible,
fulfill the following obligations:
3.1 Registration Statement. The Company shall promptly prepare and
file with the SEC a Registration Statement with respect to the Registrable
Securities and use its best efforts to cause such Registration Statement to
become effective. The Company will keep such Registration Statement effective
for up to three (3) years from its effective date, but not in any event after
such securities cease being Registrable Securities (the "Registration Period").
The Registration Statement (including any amendments or supplements thereto and
Prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading. The Company shall submit to the SEC, within
three (3) business days, unless Legal Counsel withholds approval as provided in
Section 3.3, after the Company learns that no review of a particular
Registration Statement will be made by the staff of the SEC or that the staff
has no further comments on the Registration Statement, as the case may be, a
request for acceleration of effectiveness of such Registration Statement to a
time and date not later than 2 business days after the submission of such
request.
3.2 Registration Statement Amendments and Supplements. The Company
shall prepare and file with the SEC such amendments and supplements to such
Registration Statement and the Prospectus used in connection with such
Registration Statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities covered
-3-
by such Registration Statement until such time as all of such Registrable
Securities shall have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof as set forth in such
Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3.2) by reason of the Company filing a
report on Form 10-KSB, Form 10-QSB or Form 8-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the Company shall
have incorporated such report by reference into the Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC on the
same day on which the 1934 Act report is filed which created the requirement for
the Company to amend or supplement the Registration Statement.
3.3 Legal Counsel. The Company shall (a) permit Legal Counsel to
review and comment upon (i) those sections of a Registration Statement relating
to the Investors at least five (5) business days prior to its filing with the
SEC, and (ii) all other sections of a Registration Statement and all amendments
and supplements to all Registration Statements, which are applicable to the
Investors (except for Annual Reports on Form 10-KSB, Quarterly Reports on Form
10-QSB, Current Reports on Form 8-K and any similar or successor report and
registration statements on Form S-8) at least three (3) business days prior to
their filing with the SEC, and (b) not file any document in a form to which
Legal Counsel reasonably objects. The Company shall not submit a request for
acceleration of the effectiveness of a Registration Statement or any amendment
or supplement thereto without the prior approval of Legal Counsel, which consent
shall not be unreasonably withheld. The Company shall furnish to Legal Counsel,
without charge, (a) any correspondence from the SEC or the staff of the SEC to
the Company or its representatives relating to any Registration Statement, (b)
promptly after the same is prepared and filed with the SEC, one copy of any
Registration Statement and any amendment(s) thereto, including financial
statements and schedules and all exhibits and (c) upon the effectiveness of any
Registration Statement, one copy of the Prospectus included in such Registration
Statement and all amendments and supplements thereto. The Company shall
reasonably cooperate with Legal Counsel in performing the Company's obligations
pursuant to this Article III.
3.4 Notification. As promptly as practicable give notice to the
Holders and Legal Counsel (a) when the Registration Statement or any
post-effective amendment has been declared effective, (b) of the issuance by the
SEC or any other federal or state governmental authority of any stop order or
other suspension of the effectiveness of the Registration Statement, or the
suspension of the qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any proceedings for that
purpose, (c) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (d) of the occurrence of (but
not the nature of or details concerning) a Material Event (defined in Section
3.7), and (e) of the determination by the Company that a post-effective
amendment to the Registration Statement will be filed with the SEC, which notice
may, at the discretion of the Company (or as required pursuant to Section 3.7),
state that it constitutes a Deferral Notice, in which event the provisions of
Section 3.7 shall apply.
3.5 Prospectuses. The Company shall deliver to each Holder in
connection with any sale of Registrable Securities pursuant to the Registration
Statement, without charge, as many copies of the Prospectus or Prospectuses
-4-
relating to such Registrable Securities (including each preliminary Prospectus)
and any amendment or supplement thereto as such Holder may reasonably request,
and the Company hereby consents (except during such periods that a Deferral
Notice is outstanding and has not been revoked) to the use of such Prospectus or
each amendment or supplement thereto by each Holder in connection with any
offering and sale of the Registrable Securities covered by such Prospectus or
any amendment or supplement thereto in the manner set forth therein.
3.6 Blue Sky Laws. The Company shall, prior to any public offering
of the Registrable Securities pursuant to the Registration Statement, register
or qualify or cooperate with the Holders in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or "Blue Sky"
laws of such jurisdictions within the United States as any Holder reasonably
requests in writing, and keep each such registration or qualification (or
exemption therefrom) effective during the Registration Period in connection with
such Holder's offer and sale of Registrable Securities pursuant to such
registration or qualification (or exemption therefrom) and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of such Registrable Securities in the manner set forth in the
Registration Statement and the related Prospectus; provided, however, that the
Company will not be required to (a) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not otherwise be
required to qualify but for this Agreement, or (b) take any action that would
subject it to general service of process in suits or to taxation in any such
jurisdiction where it is not then so subject. The Company shall promptly notify
Legal Counsel and each Holder who holds Registrable Securities of the receipt by
the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "Blue Sky" laws of any jurisdiction in the United States
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
3.7 Stop Orders; Material Events. The Company shall use
commercially reasonable efforts to prevent the issuance of any stop order or
other suspension of effectiveness of a Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction. Upon (a) any issuance by the SEC of a stop order or other
suspension of the effectiveness of the Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction despite the Company's commercially reasonable efforts to prevent
such stop order or suspension, or the initiation of proceedings with respect to
the Registration Statement under Section 8(d) or Section 8(e) of the 1933 Act;
(b) the occurrence of any event or the existence of any fact (a "Material
Event") as a result of which the Registration Statement shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any Prospectus shall contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; or (c) the occurrence or existence of any pending
corporate development, public filing with the SEC or other similar event with
respect to the Company that, in the reasonable discretion of the Company, makes
it appropriate to suspend the availability of the Registration Statement and the
related Prospectus, the Company shall (i) in the case of clause (b) above,
subject to the next sentence, as promptly as practicable prepare and file, if
necessary pursuant to applicable law, a post-effective amendment to such
-5-
Registration Statement or a supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document that would
be incorporated by reference into such Registration Statement and Prospectus so
that such Registration Statement does not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and such Prospectus
does not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and, in the case of a post-effective amendment to a Registration
Statement, subject to the next sentence, use its reasonable efforts to cause it
to be declared effective as promptly as is practicable; and (ii) give notice to
the Holders and Legal Counsel that the availability of the Registration
Statement is suspended (a "Deferral Notice") and, upon receipt of any Deferral
Notice, each Holder agrees not to sell any Registrable Securities pursuant to
the Registration Statement until such Holder's receipt of copies of the
supplemented or amended Prospectus provided for in clause (i) above, or until it
is advised in writing by the Company that the Prospectus may be used, and has
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in such Prospectus. The Company will use
commercially reasonable efforts to ensure that the use of the Prospectus may be
resumed (x) in the case of clause (a) above, as promptly as is practicable, (y)
in the case of clause (b) above, as soon as, in the sole judgment of the
Company, public disclosure of such Material Event would not be prejudicial to or
contrary to the interests of the Company or, if necessary to avoid unreasonable
burden or expense, as soon as practicable thereafter, and (z) in the case of
clause (c) above, as soon as, in the discretion of the Company, such suspension
is no longer appropriate (such period, during which the availability of the
Registration Statement and any Prospectus is suspended being a "Deferral
Period"). Notwithstanding the foregoing, no Deferral Period instituted pursuant
to clause (b) or clause (c) above shall last for a period of time in excess of
thirty (30) days from the date of the Material Event or other occurrence or
state of facts on account of which such Deferral Period is instituted, and the
Company shall institute no more than one (1) Deferral Period in the aggregate
pursuant to clause (b) or clause (c) above in any consecutive twelve (12) month
period. The Company shall use commercially reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of a Registration Statement
or the lifting of any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any jurisdiction
in which they have been qualified for sale, in either case as promptly as
practicable.
3.8 Listing or Quotation. The Company shall either (a) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each securities exchange on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (b) secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market or the Nasdaq SmallCap
Market, or, if the Company is unsuccessful in satisfying the preceding clauses
(a) or (b), (c) the Company shall secure the inclusion for quotation on The
American Stock Exchange, Inc. or if it is unable to, the Bulletin Board for such
Registrable Securities and, without limiting the generality of the foregoing, to
arrange for at least two (2) market makers to register with the National
Association of Securities Dealers, Inc. ("NASD") as such with respect to such
Registrable Securities. The Company shall pay all fees and expenses in
connection with satisfying its obligation under this Section 3.8.
-6-
3.9 Access to Information. The Company shall make documents,
files, books, records, officers, directors and employees of the Company
reasonably available to any Holder, Legal Counsel and one firm of accountants or
other agents retained by the Holders and provided the underwriters, if any,
shall have agreed to be bound by the provisions of this Section 3.9, to such
underwriters (collectively, the "Inspectors"), and make such other
accommodations as are reasonably necessary for the Inspectors, if any, to
perform a due diligence review of the Company; provided, however, that all such
information ("Confidential Information") will be kept confidential and not
utilized by the Inspectors except as contemplated herein and except as required
by law or court order. The term "Confidential Information" does not include
information that (a) is already in possession of such other party (other than
that which is subject to another confidentiality agreement), (b) becomes
generally available to the public, or (c) becomes available on a
non-confidential basis from a source other than the Company. Each Holder agrees
that it shall, upon learning that disclosure of such Confidential Information is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the Company, at
its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the information deemed confidential.
3.10 Non-Disclosure. The Company shall hold in confidence and not
make any disclosure of information concerning any Holder provided to the Company
unless (a) disclosure of such information is necessary to comply with federal or
state securities laws, (b) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement, (c)
the release of such information is ordered pursuant to a subpoena or other
final, non-appealable order from a court or governmental body of competent
jurisdiction, (d) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement, or (e) such Holder consents to the form and content of any such
disclosure. The Company agrees that it shall, upon learning that disclosure of
such information concerning any Holder is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Holder and allow such Holder, at the Holder's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
3.11 Certificates. The Company shall cooperate with each of the
Holders who hold Registrable Securities being offered and to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the Holders may reasonably request and
registered in such names as the Holders may request. As provided in the Notes
and Warrants, the failure to deliver certificates to the Holders within required
time periods will result in certain liquidated damage payments to the Holders.
3.12 Transfer Agent and Registrar. The Company shall provide a
transfer agent and registrar of all such Registrable Securities not later than
the effective date of such Registration Statement.
3.13 Amendments and Supplements Requested by Holders. If requested
by any Holder, the Company shall (a) as soon as practicable incorporate in a
Prospectus supplement or post-effective amendment such information as such
-7-
Holder requests to be included therein relating to the sale and distribution of
Registrable Securities, including without limitation, information with respect
to the number of Registrable Securities being offered or sold, the purchase
price being paid therefor and any other terms of the offering of the Registrable
Securities to be sold in such offering, (b) as soon as practicable make all
required filings of such Prospectus supplement or post-effective amendment after
being notified of the matters to be incorporated in such Prospectus supplement
or post-effective amendment, and (c) supplement or make amendments to any
Registration Statement if reasonably requested by any Holder of such Registrable
Securities.
3.14 Additional Registrations and Approvals. The Company shall use
its best efforts to cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to consummate the
disposition of such Registrable Securities.
3.15 Earnings Statements. The Company shall make generally
available to its security holders as soon as practical, but not later than
ninety (90) days after the close of the period covered thereby, an earnings
statement (in form complying with the provisions of Rule 158 under the ▇▇▇▇ ▇▇▇)
covering a twelve (12) month period beginning not later than the first day of
the Company's fiscal quarter next following the effective date of the
Registration Statement, provided that the Company shall be deemed to satisfy its
obligations under this Section 3.15 if it timely makes all required filings
under the 1934 Act and does not change its fiscal year.
3.16 SEC Compliance. The Company shall otherwise comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
3.17 Confirmation of Registration. Within two (2) business days
after a Registration Statement which covers applicable Registrable Securities is
ordered effective by the SEC, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Holders whose Registrable Securities are included
in such Registration Statement and to Legal Counsel) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit A.
3.18 Actions for Public Offering. The Company shall provide such
opinions, certifications, indemnifications, and take such other actions,
including without limitation, entering into such agreements (including
underwriting agreements), as are reasonably required and appropriate, to permit
the Holders to make a public offering of the Registrable Securities requested to
be registered.
3.19 Rule 144 Requirements. The Company covenants that it shall
file the reports required to be filed by it under the 1933 Act and the 1934 Act,
and the rules and regulations adopted by the SEC thereunder, provided, however,
the Company may delay any such filing but only pursuant to Rule 12b-25 under the
1934 Act, and the Company shall take such further action as any Holder of
Registrable Securities may reasonably request (including without limitation,
promptly obtaining any required legal opinions from Company counsel necessary to
-8-
effect the sale of Registrable Securities under Rule 144 and paying the related
fees and expenses of such counsel), all to the extent required from time to time
to enable such Holder to sell Registrable Securities without registration under
the 1933 Act within the limitation of the exemptions provided by (a) Rule 144
under the Act, as such Rule may be amended from time to time, or (b) any similar
rule or regulation hereafter adopted by the SEC. 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.
IV. OBLIGATIONS OF THE HOLDERS
4.1 Furnish Information. The Company's obligation to cause any
Registration Statement to become effective in connection with distribution of
any Registrable Securities pursuant to this Agreement is contingent upon each
Holder, with reasonable promptness, furnishing to the Company such information
regarding itself, the Registrable Securities held by it, and the intended method
of disposition of such securities, as is required pursuant to Regulation S-K
promulgated under the 1933 Act, to effect the registration of the Registrable
Securities. Each Holder agrees, by acquisition of the Registrable Securities,
that it shall not be entitled to sell any of such Registrable Securities
pursuant to the Registration Statement or to receive a Prospectus relating
thereto, unless such Holder has furnished the Company with all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not misleading in a material respect and any other
information regarding such Holder and the distribution of such Registrable
Securities as the Company may from time to time reasonably request. Any sale of
any Registrable Securities by any Holder shall constitute a representation and
warranty by such Holder that the information relating to such Holder and its
plan of distribution is as set forth in the Prospectus delivered by such Holder
in connection with such disposition, that such Prospectus does not as of the
time of such sale contain any untrue statement of a material fact relating to or
provided by such Holder or relating to its plan of distribution and that such
Prospectus does not as of the time of such sale omit to state any material fact
relating to or provided by such Holder or relating to its plan of distribution
necessary to make the statements in such Prospectus, in the light of the
circumstances under which they were made, not misleading.
V. INDEMNIFICATION
In the event of any registration under this Agreement:
5.1 Indemnification by the Company. The Company will indemnify and
hold harmless each Holder and its officers, directors, partners and affiliates
(and their officers, directors and partners), any underwriter (as defined in the
▇▇▇▇ ▇▇▇) for each Holder and each person (and its officers, directors, partners
and affiliates), if any, who controls any Holder or underwriter within the
meaning of the 1933 Act or the 1934 Act (each a "Company Indemnified Person"),
against any losses, claims, damages, expenses or liabilities, joint or several,
or actions in respect thereof ("Losses") to which they may become subject under
the 1933 Act, the 1934 Act, or other federal or state law, insofar as such
Losses arise out of or are based upon any of the following statements, omissions
or violations (collectively a "Violation"): (a) any untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement,
including any preliminary Prospectus or final Prospectus contained therein or
-9-
any amendments or supplements thereto, (b) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, or (c) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any state securities law, or any rule or
regulation promulgated under the 1933 Act, the 1934 Act, or any state securities
law, and the Company will pay to each such Company Indemnified Person, as
incurred, any legal or other expenses reasonably incurred by or on behalf of him
in connection with investigating or defending any such Loss; provided, however,
that the indemnity agreement contained in this Section 5.1 shall not apply to
amounts paid in settlement of any such Loss if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor will the Company be liable in any such case for any such Loss to
the extent that it arises out of or is based upon (a) a Violation which occurs
solely as the result of the written information furnished by any Holder,
underwriter or controlling person seeking indemnification hereunder, as
applicable, expressly for inclusion in the Registration Statement, or (b) with
respect to any underwriter and controlling person of such underwriter (and their
respective officers and directors), a Violation which results from the fact that
there was not sent or given to a person who bought Registrable Securities, at or
prior to the written confirmation of the sale, a copy of the final Prospectus,
as then amended or supplemented, if the Company had previously furnished copies
of such Prospectus hereunder and such Prospectus corrected the misstatement or
omission forming the basis of the Violation.
5.2 Indemnification by Holders. Each Holder will indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the Registration Statement, each person, if any, who controls the Company
within the meaning of the 1933 Act, any underwriter and any controlling person
of any such underwriter or other holder (each a "Holder Indemnified Person"),
against any Losses to which any of the foregoing persons may become subject,
under the 1933 Act, the 1934 Act, or other federal or state law, insofar as such
Losses arise out of or are based upon any Violation, in each case to the extent
(and only to the extent) that such Violation occurs solely as a result of the
written information furnished by each Holder expressly for inclusion in the
applicable Registration Statement, and such Holder will pay, as incurred, any
legal or other expenses reasonably incurred by any Holder Indemnified Person
intended to be indemnified pursuant to this Section 5.2, in connection with
investigating or defending any such Loss; provided, however, that any Holder's
liability pursuant to this Section 5.2 shall be limited to the amount of the net
proceeds received by such Holder from the sale of the Registrable Securities
sold by it, and further provided that the indemnity agreement contained in this
Section 5.2 does not apply to amounts paid in settlement of any such Loss if
such settlement is effected without the consent of such Holder, which consent
shall not be unreasonably withheld.
5.3 Indemnification Procedures. Promptly after receipt by an
indemnified party under this Article V of notice of the commencement of any
action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Article V, deliver to the indemnifying party a written notice of the
commencement of such action and the indemnifying party will have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party (together with all other indemnified parties which may
-10-
be represented without conflict by one counsel) will have the right to retain
one separate counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of the indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between the indemnified party and any other party represented by such
counsel in the same proceeding. If the indemnifying party shall fail to defend
the action, or conducts a defense which is not reasonably adequate in light of
the circumstances, the indemnified party may conduct its own defense and shall
be entitled to reimbursement for the costs of such defense. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the indemnified party under this Agreement, except to the extent
that the indemnifying party is materially prejudiced by such failure. The
omission so to deliver written notice to the indemnifying party does not relieve
it of any liability that it may have to any indemnified party otherwise than
under this Agreement. No indemnifying party under this Agreement will enter into
any settlement or consent to any entry of judgment without the indemnified
party's written consent which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to the indemnified party of a release
from all liability in respect of such claim or litigation.
5.4 Contribution. If the indemnification provided for in this
Article V is held by a court of competent jurisdiction to be unavailable to an
indemnified party or is insufficient to indemnify an indemnified party with
respect to any Loss, then the indemnifying party, in lieu of or in addition to,
as appropriate, indemnifying such indemnified party hereunder, will contribute
to the amount paid or payable by such indemnified party as a result of such Loss
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such Loss as well
as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party will be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission. The obligation of any Holder to make a
contribution pursuant to this Section 5.4 shall be limited to the net proceeds
received by such Holder from the sale of the Registrable Securities sold by it,
less any amounts paid pursuant to Section 5.2. To the extent any indemnification
by an indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Article V to the fullest extent permitted by
law; provided, however, that: (a) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the ▇▇▇▇
▇▇▇) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation, and (b) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities
pursuant to such Registration Statement.
5.5 Survival. The indemnity and contribution provisions contained
in this Article V shall remain operative and in full force and effect regardless
of (a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Holder or any person controlling any Holder, or the Company, or
-11-
the Company's officers or directors or any person controlling the Company, and
(c) the sale of any Registrable Securities by any Holder.
VI. MISCELLANEOUS
6.1 Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance by the Company of its obligations
under this Agreement (including without limitation, all registration and filing
fees, fees with respect to filings required to be made with the NASD, fees and
expenses of compliance with securities or "Blue Sky" laws, printing expenses,
messenger, telephone and distribution expenses associated with the preparation
and distribution of any Registration Statement, all fees and expenses associated
with the listing of any Registrable Securities on any securities exchange or
exchanges, the fees and disbursements of counsel for the Company and its
accountants and any underwriting discounts and/or commissions relating to
primary issuances by the Company of its securities.
6.2 Assignment of Registration Rights. The rights under this
Agreement shall be automatically assignable by any Holder to any transferee of
all or any portion of Registrable Securities if: (a) such Holder agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment; (b) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (i) the name and address of such
transferee or assignee, and (ii) the securities with respect to which such
registration rights are being transferred or assigned; (c) immediately following
such transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the 1933 Act and applicable state
securities laws; and (d) at or before the time the Company receives the written
notice contemplated by clause (b) of this sentence the transferee or assignee
agrees in writing with the Company to be bound by all of the provisions
contained herein.
6.3 "Market Stand-Off" Agreement.
(a) Agreement to be Bound. To the extent requested by the
Company and the managing underwriters, if any, of securities of the Company,
each Holder hereby agrees that it will not, during the period commencing on the
effective date of a Registration Statement of the Company filed under the 1933
Act with respect to a public offering of the Company's securities and ending on
the date specified by the Company and the managing underwriter (such period not
to exceed 180 calendar days), sell, offer, contract to sell, assign, transfer,
convey, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, pledge,
hypothecate or otherwise transfer or dispose of, directly or indirectly, any
Registrable Securities; provided, however, that the Company agrees to use its
commercially reasonable efforts to cause such period not to exceed ninety (90)
calendar days; provided, further, however, that in no event shall the period for
any Holder exceed the period for any other person who is either an officer,
director and/or holder of at least five (5%) percent of the then outstanding
capital stock of the Company. The foregoing provisions of this Section 6.3(a)
shall only be applicable to the Holders if all other persons with registration
rights (whether or not pursuant to this Agreement) and all officers, directors
and holders of more than five (5%) percent of the then outstanding voting
capital stock of the Company enter into identical agreements.
-12-
VII. GENERAL
7.1 Notice. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (a) upon receipt, when
delivered personally, (b) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party), or (c) one (1) business day after deposit
with an overnight courier service, in each case properly addressed to the party
to receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
SecureCare Technologies, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a Copy To:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to a Holder, to its most recent address and facsimile number
provided to the Company five (5) days prior to the effectiveness of any change
thereof, together with a copy to Gryphon Financial Securities Corp., ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
Written confirmation of receipt (a) given by the recipient of such
notice, consent, waiver or other communication, (b) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission, or (c) provided by an overnight courier service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from an
overnight courier service in accordance with clauses (a), (b) or (c) above,
respectively.
7.2 Owner of Registrable Securities. A Person is deemed to be a
holder of Registrable Securities whenever such Person owns or is deemed to be
owner of record of such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more Persons with
respect to the same Registrable Securities, the Company shall act upon the basis
of instructions, notice or election received from the registered owner of such
Registrable Securities.
-13-
7.3 Consents. All consents and other determinations to be made by
the Holders pursuant to this Agreement shall be made, unless otherwise specified
in this Agreement, by Holders holding a majority of the Registrable Securities,
determined as if all the Warrants then outstanding have been exercised for
Registrable Securities without regard for any limitations on exercise of the
Warrants.
7.4 Additional Parties. The parties hereto agree that additional
holders of Warrants or Agent Shares may, with the consent only of the Company,
be added as parties to this Agreement with respect to any or all securities of
the Company held by them, and shall thereupon be deemed for all purposes
"Holders" hereunder; provided, however, that from and after the date of this
Agreement, the Company shall not without the prior written consent of holders of
majority of the outstanding Warrants and Agent Shares enter into any agreement
with any holder or prospective holder of any securities of the Company providing
for the grant to such holder of rights superior to those granted herein. Any
such additional party shall execute a counterpart of this Agreement, and upon
execution by such additional party and by the Company, shall be considered a
Holder for purposes of this Agreement.
7.5 Specific Performance. Each of the parties hereto acknowledges
and agrees that the breach of this Agreement would cause irreparable damage to
the other parties hereto and that the other parties hereto will not have an
adequate remedy at law. Therefore, the obligations of each of the parties hereto
under this Agreement shall be enforceable by a decree of specific performance
issued by any court of competent jurisdiction, and appropriate injunctive relief
may be applied for and granted in connection therewith. Such remedies shall,
however, be cumulative and not exclusive and shall be in addition to any other
remedies which any party may have under this Agreement or otherwise.
7.6 Entire Agreement; Amendment. This Agreement supersedes all
other prior oral or written agreements among the parties, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein. No provision of this Agreement may be amended or waived other than by
an instrument in writing signed by the Company and the Holders of at least a
majority of the Registrable Securities then outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders of Registrable
Securities whose securities are being sold pursuant to the Registration
Statement and that does not directly or indirectly affect the rights of other
Holders of Registrable Securities may be given by Holders of at least a majority
of the Registrable Securities being sold by such Holders pursuant to such
Registration Statement. Each Holder of Registrable Securities outstanding at the
time of any such amendment, modification, supplement, waiver or consent or
thereafter shall be bound by any such amendment, modification, supplement,
waiver or consent effected pursuant to this Section 7.6, whether or not any
notice, writing or marking indicating such amendment, modification, supplement,
waiver or consent appears on the Registrable Securities or is delivered to such
Holder.
7.7 Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
-14-
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
7.8 Termination. This Agreement and the obligations of the parties
hereunder shall terminate as of the end of the Registration Period except for
Article V hereof which shall survive and remain in full force and effect in
accordance with its terms.
7.9 Governing Law; Jurisdiction. This Agreement shall be governed
by and construed solely in accordance with the internal laws of the State of New
York with respect to contracts made and to be fully performed therein, without
regard to the conflicts of laws principles thereof. The parties hereto hereby
expressly and irrevocably agree that any suit or proceeding arising under this
Agreement or the consummation of the transactions contemplated hereby, shall be
brought solely and exclusively in a federal or state court located in the City,
County and State of New York. By its execution hereof, the Company hereby
expressly and irrevocably submits to the in personam jurisdiction of the federal
and state courts located in the City,. County and State of New York and agrees
that any process in any such action may be served upon it personally, or by
certified mail or registered mail upon the Company or such agent, return receipt
requested, with the same full force and effect as if personally served upon the
Company in New York City. The parties hereto each expressly and irrevocably
waive any claim that any such jurisdiction is not a convenient forum for any
such suit or proceeding and any defense or lack of in personam jurisdiction with
respect thereto.
7.10 Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
7.11 Successors and Assigns; No Third Party Beneficiaries. Subject
to Section 6.2, this Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and permitted assigns. Nothing in
this Agreement shall create or be deemed to create any third-party beneficiary
rights in any person not a party to this Agreement except as provided below and
in Section 6.2. Upon any assignment, the references in this Agreement to any
Holder shall also apply to any such assignee unless the context otherwise
requires.
7.12 Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
7.13 No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
7.14 Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
-15-
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
IN WITNESS WHEREOF, the parties hereto have executed or have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first written above.
SECURECARE TECHNOLOGIES, INC.
By: _____________________________________
Name:
Title:
-16-
SCHEDULE A
NAME AND ADDRESS OF HOLDERS
---------------------------
EXHIBIT A
Form of Notice of Effectiveness of Registration Statement
[Transfer Agent]
Attention:
Re: SecureCare Technologies, Inc.
----------------------------
Gentlemen:
We are counsel to SecureCare Technologies, Inc., a Nevada corporation
(the "Company"), and have represented the Company in connection with the
Company's private placement offering, through Gryphon Financial Securities Corp.
(the "Gryphon"), of ____________ (__) units (the "Units"), each Unit consisting
of (i) 90,909 shares of Series B Convertible Preferred Stock (the "Preferred
Shares"), and (ii) a five-year warrant (the "Warrant") to purchase 18,182 shares
of Common Stock, par value $.001 per share (the "Common Stock") at an exercise
price of $1.25 per share (the "Offering"). The specific terms of the Offering
are described in a Subscription Agreement dated ________, 2004. In connection
with the Company's obligations under the Registration Rights Agreement, on
____________________, 200__, the Company filed a Registration Statement on Form
____ (File No. 333-_____________) (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities which names each of the Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [Enter Time
of Effectiveness] on [Enter Date of Effectiveness] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[Issuer's Counsel]
By: _____________________________________
cc: [List Names of Holders]
