NOVINT TECHNOLOGIES, INC. INVESTOR RIGHTS AGREEMENT
Exhibit 10.2
NOVINT TECHNOLOGIES, INC.
INVESTOR RIGHTS AGREEMENT (this “Agreement”) is entered into as of March 5, 2007 by and among
Novint Technologies, Inc., a Delaware corporation (the “Company”) and the investors listed on
Exhibit A hereto (collectively the “Investors”).
WHEREAS, the Company desires to sell to the Investors, and the Investors desire to purchase,
up to a maximum of ten million (10,000,000) Units consisting of shares of Common Stock of the
Company (the “Shares”) and 5-year warrants (the “Warrants”), exercisable to purchase up to a
maximum of ten million (10,000,000) shares of Common Stock of the Company (the “Warrant Shares”),
upon the terms and conditions set forth in that certain Unit Subscription Agreement, dated as of
February 23, 2007, among the Company and the Investors (the “Unit Subscription Agreement”);
WHEREAS, the terms of the Unit Subscription Agreement provide that it shall be a condition
precedent to the closing of the transactions thereunder for the Company and the Investors to
execute and deliver this Agreement; and
WHEREAS, capitalized terms used herein and not otherwise defined are defined in the Unit
Subscription Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the
parties hereto hereby agree as follows:
1. Definitions. The following terms shall have the meanings provided below:
“Additional Shares” shall mean any additional shares of Common Stock which may be issued or
become issuable from time to time upon a distribution with respect to, or in exchange for, or in
replacement of, Shares, a Warrant or Warrant Shares, as a result of anti-dilution provisions of a
Warrant or otherwise.
“Additional Share Notice” shall have the meaning assigned thereto in Section 10 hereof.
“Blue Sky” shall have the meaning assigned thereto in Section 4(c) hereof.
“Board of Directors” shall mean the board of directors of the Company.
“Convertible Securities” means (i) options to purchase or rights to subscribe for Common
Stock, (ii) securities by their terms convertible into or exchangeable for Common Stock or (iii)
options to purchase or rights to subscribe for such convertible or exchangeable securities.
“Correspondence” shall have the meaning assigned thereto in Section 15(d) hereof.
“Difference” shall have the meaning assigned thereto in Section 8(b) hereof.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and all of the
rules and regulations promulgated thereunder.
“Exempt Issuance” means (i) all shares of Common Stock issued or issuable to employees,
directors or consultants pursuant to any equity compensation plan that is in effect on the date of
this Agreement, (ii) all shares of Common Stock issued or issuable to employees or directors
pursuant to any equity compensation plan approved by the stockholders of the Company after the date
of this Agreement, (iii) all shares of Common Stock issued or issuable to employees, directors or
consultants as bona fide compensation for business services rendered, not compensation for
fundraising activities, (iv) all shares of Common Stock issued or issuable to bona fide leasing
companies, strategic partners, or major lenders or other financing or credit transaction which is
not an equity capital raising event for the Company, (v) all shares of Common Stock issued or
issuable as the purchase price in a bona fide acquisition or merger (including reasonable fees paid
in connection therewith) or (vi) all Warrant Shares, Additional Shares and shares issued upon
conversion or exercise of other Convertible Securities outstanding on the date hereof.
“Holder” shall mean each Investor or any transferee of the Warrants or Registrable Shares that
were held by Investors.
“Majority Holders” shall mean, at the relevant time of reference thereto, those Holders
holding more than fifty percent (50%) of the Registrable Shares Owned by all of the Holders.
“Mandatory Registration” shall have the meaning assigned thereto in Section 7 hereof.
“Mandatory Registration Effective Date” shall have the meaning assigned thereto in Section
3(a) hereof.
“Mandatory Registration Termination Date” shall have the meaning assigned thereto in Section
3(c) hereof.
“Mandatory Subsequent Registration Effective Date” shall have the meaning assigned thereto in
Section 3(e) hereof.
“Mandatory Subsequent Registration Filing Date” shall have the meaning assigned thereto in
Section 3(e) hereof.
“Other Securities” shall have the meaning assigned thereto in the Warrant.
“Own” shall mean to own beneficially, as that term is defined in the rules and regulations of
the SEC.
“Proportionate Percentage” shall have the meaning assigned thereto in Section 11 hereof.
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“Purchase Notice” shall have the meaning assigned thereto in Section 11 hereof.
“Registrable Shares” shall mean the Shares, the Warrant Shares and any Additional Shares.
“Registration Statement” shall have the meaning assigned thereto in Section 3(a) hereof.
“Registration Waiver” shall have the meaning assigned thereto in the Unit Subscription
Agreement.
“Rule 144” shall mean Rule 144 promulgated under the Securities Act and any successor or
substitute rule, law or provision.
“SEC” shall mean the Securities and Exchange Commission.
“Securities Act” shall mean the Securities Act of 1933, as amended, and all of the rules and
regulations promulgated thereunder.
“Selling Expenses” shall mean all underwriting discounts, brokerage and selling commissions
applicable to the sale of Registrable Shares, including standard underwriters’ cutbacks.
“Shares” shall have the meaning assigned thereto in the Preamble to this Agreement.
“Subsequent Registration Statements” shall have the meaning assigned thereto in Section 3(e)
hereof.
“Suspension” shall have the meaning assigned thereto in Section 10(b) hereof.
“Underlying Securities” shall mean the Warrant Shares, Additional Shares or Other Securities
issued or issuable upon exercise of Warrants.
“Unit Subscription Agreement” shall have the meaning assigned thereto in the Preamble to this
Agreement.
“Warrants” shall have the meaning assigned thereto in the Preamble to this Agreement.
“Warrant Shares” shall have the meaning assigned thereto in the Preamble to this Agreement.
2. Effectiveness. This Agreement shall become effective upon the Closing.
3. Mandatory Registration.
(a) No later than fifty five (55) days after the Closing, the Company will prepare and file
with the SEC a registration statement on Form SB-2 for the purpose of
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registering (such registration, the “Mandatory Registration”) under the Securities Act all of
the Registrable Shares for resale by, and for the account of, the Investors as selling stockholders
thereunder (the “Registration Statement”). The Registration Statement shall permit the Investors
to offer and sell, on a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
any or all of the Registrable Shares. Such Registration Statement also shall cover, to the extent
allowable under the Securities Act and the rules promulgated thereunder (including Rule 416), such
indeterminate number of additional shares of Common Stock resulting from stock splits, stock
dividends or similar transactions with respect to the Registrable Shares.
(b) The Company agrees to use its best efforts to cause the Registration Statement to become
effective within ninety (90) days after filing (the “Mandatory Registration Effective Date”).
(c) The Company shall be required to keep the Registration Statement (and any subsequent
Registration Statements), as amended, effective until such date that is the earlier of (i) two
years after the Closing, (ii) the date when all of the Registrable Shares registered thereunder
shall have been sold or (iii) such time as all the Registrable Shares held by the Investors can be
sold pursuant to Rule 144(k) and without compliance with the registration requirements of the
Securities Act (such date is referred to herein as the “Mandatory Registration Termination Date”).
Thereafter, the Company shall be entitled to withdraw the Registration Statement and the Investors
shall have no further right to offer or sell any of the Registrable Shares pursuant to the
Registration Statement (or any prospectus relating thereto).
(d) Absent the prior written consent of the Investors then holding a majority of the Shares,
the Company shall not for a period of two years from the Closing Date grant any registration rights
that are senior to the registration rights of the Investors under this Agreement. The Company
represents that no securityholders of the Company other than the Investors and other than as
disclosed in the Unit Subscription Agreement have the right to sell any Common Stock or other
securities of the Company pursuant to the Registration Statement other than rights waived pursuant
to the Registration Waivers.
(e) In the event the amount of Shares and Underlying Shares covered by such Registration
Statement is limited by the SEC, the Company: (i) shall register the maximum number of Registrable
Shares permitted by the SEC, without adding any other shares to the Registration Statement, and
(ii) shall file additional registration statements (the “Subsequent Registration Statements”)
covering the balance of the Registrable Shares as soon as practicable in light of SEC positions,
rules and regulations (each a “Mandatory Subsequent Registration Filing Date”). The Company shall
use its best efforts to cause any and all Subsequent Registration Statements to become effective
within seventy five (75) days after filing (each, a “Mandatory Subsequent Registration Effective
Date”)
4. Obligations of the Company. In connection with the Company’s obligations under
Section 3 hereof to file the Registration Statement with the SEC and to use its reasonable efforts
to cause the Registration Statement to become effective as soon as set forth in Section 3, the
Company shall, as expeditiously as reasonably possible, subject to Section 10 hereof:
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(a) prepare and file with the SEC such amendments and supplements to the Registration
Statement and the prospectus used in connection therewith as may be necessary in order to keep the
Registration Statement effective until the Mandatory Registration Termination Date;
(b) furnish to the selling Holders such reasonable number of copies of the Registration
Statement and a final prospectus, in conformity with the requirements of the Securities Act, and
such other documents (including, without limitation, prospectus amendments and supplements as are
prepared by the Company in accordance with Section 4(a) above) as the selling Holders may
reasonably request, in order to facilitate the public or other disposition of such selling Holders’
Registrable Shares;
(c) use reasonable efforts to register and qualify the Registrable Shares covered by the
Registration Statement under such other securities laws or blue sky (“Blue Sky”) laws of all states
requiring such securities or Blue Sky registration or qualification, provided that the
Company shall not be required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states or jurisdictions;
and
(d) use reasonable efforts to cause all such Registrable Shares registered hereunder to be
listed on each securities exchange (including without limitation The Nasdaq SmallCap Market) on
which securities of the same class issued by the Company are then listed.
5. Furnish Information.
(a) It shall be a condition precedent to the obligations of the Company to take any action
pursuant to this Agreement that the selling Holders shall furnish to the Company such information
regarding them and the securities held by them as the Company shall reasonably request and as shall
be required in order to effect any registration by the Company pursuant to this Agreement.
(b) The Registration Statement will provide for a plan of distribution with respect to the
Registrable Shares substantially as follows, provided such plan of distribution may be modified at
the request of the SEC: The Registrable Shares may be sold from time to time by the Holders, or by
pledgees, donees, transferees or other successors in interest. Such sales may be made on one or
more exchanges or in the over-the-counter market, or otherwise at prices and at terms then
prevailing or at prices related to the then-current market price, or in negotiated transactions.
The Registrable Shares may be sold by one or more of the following: (i) a block trade in which the
broker or dealer so engaged will attempt to sell the shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction; (ii) purchases by a broker or
dealer as principal and resale by such broker or dealer for its account pursuant to the resale
registration statement; (iii) an exchange distribution in accordance with the rules of such
exchange; (iv) one or more underwritten offerings on a firm commitment or best efforts basis; (v)
ordinary brokerage transactions and transactions in which the broker solicits purchasers; and (vi)
transactions between sellers and purchasers without a broker/dealer. In addition, any securities
covered by the Registration Statement that qualify for sale pursuant to Rule 144 may be sold under
Rule 144 rather than pursuant to the Registration Statement. For so
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long as a Holder Owns any Registrable Shares, such Holder shall not maintain a Net Short
Position. For purposes of this Section, a “Net Short Position” by a person means a position
whereby such person has executed one or more sales of Common Stock that is marked as a short sale
and that is executed at a time when such Holder has no equivalent offsetting long position in the
Common Stock. For purposes of determining whether a Holder has an equivalent offsetting long
position in the Common Stock, all Common Stock that is Owned by such Holder shall be deemed to be
held long by such Holder. The Holders may also distribute the Registrable Shares and Warrants to
their partners, members, stockholders or shareholders to the extent such distributions are effected
in full compliance with applicable securities laws and provided that the distributing Holders and
the distributees provide the Company with such documents and other information as reasonably
requested by the Company. In effecting sales, brokers or dealers engaged by the selling Holders
may arrange for other brokers or dealers to participate. Brokers or dealers will receive
commissions or discounts from selling Holders in amounts to be negotiated immediately prior to the
sale.
6. Expenses of Registration. All expenses incurred in connection with the
registration of the Registrable Shares pursuant to this Agreement, including without limitation all
registration and qualification and filing fees, printing expenses, fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one counsel, ▇▇▇▇ & Hessen
LLP as counsel for the selling Holders, shall be borne by the Company. The Company shall not be
responsible for the fees and disbursements of any additional counsel for any of the selling
Holders. All Selling Expenses shall be borne by the Holders of the Registrable Shares so registered
and sold, pro rata on the basis of the number of their Registrable Shares so registered and sold.
7. Delay in Filing or Effectiveness of Registration Statement.
(a) If (i) the initial Registration Statement is not filed by the Company with the SEC on or
prior to fifty five (55) days after the Closing (the “Mandatory Registration Date”), (ii) such
Registration Statement is not effective on the Mandatory Registration Effective Date, (iii) any
Subsequent Registration Statement is not filed by the Mandatory Subsequent Registration Filing
Date, or (iv) any Subsequent Registration Statement is not effective on the Mandatory Subsequent
Registration Effective Date (each such event a “Registration Failure”), then for each day (w)
following the Mandatory Registration Date, (x) following each Mandatory Subsequent Registration
Filing Date, (y) following the Mandatory Registration Effective Date, or (z) following each
Mandatory Subsequent Registration Effective Date, until but excluding the date the Registration
Statement or Subsequent Registration Statement is filed or becomes effective, as applicable, the
Company shall, for each such day, pay the Holder with respect to any such failure, as liquidated
damages and not as a penalty, an amount equal to 0.0333% of the sum of (i) the purchase amount paid
by such Holder (or if such Holder was not an Investor, by the Investor from which the Holder
directly or indirectly acquired the Registrable Shares) for its Registrable Shares pursuant to the
Unit Subscription Agreement (the “Subscription Payment”) and (ii) amount paid for Underlying
Securities held by such Holder (the “Warrant Payment”); and for any such day, such payment shall be
made no later than the first business day of the calendar month next succeeding the month in which
such day occurs; provided however, that liquidated damages arising from a Registration
Failure shall accrue or be payable by the
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Company only to the extent of the number of Registrable Shares affected by such Registration
Failure.
(b) If the Holder shall be prohibited from selling Shares under the Registration Statement as
a result of a Suspension of more than thirty (30) days or Suspensions on more than two (2)
occasions of not more than thirty (30) days each in any 12-month period, then for each day on which
a Suspension is in effect that exceeds the maximum allowed period for a Suspension or Suspensions,
but not including any day on which a Suspension is lifted, the Company shall pay the Holders, as
liquidated damages and not as a penalty, an amount equal to 0.0333% of the purchase price paid by
such Holder (or if such Holder was not an Investor, by the Investor from which the Holder directly
or indirectly acquired the Registrable Shares) for its Registrable Shares pursuant to the Unit
Subscription Agreement for each such day, and such payment shall be made no later than the first
business day of the calendar month next succeeding the month in which such day occurs. For
purposes of this Section 7, a Suspension shall be deemed lifted on the date that notice that the
Suspension has been lifted is delivered to the Holder pursuant to Section 10(b) of this Agreement.
(c) Notwithstanding the foregoing provisions, in no event shall the Company be obligated to
pay such liquidated damages to more than one Holder in respect of the same Registrable Shares for
the same period of time. Any payments made pursuant to this Section 7 shall not constitute the
Holder’s exclusive remedy for such events.
(d) Payments under this Section 7 shall be made to the Holder in cash, provided that the
Company shall have the option, in its sole discretion, to pay the liquidated damages amounts
accruing after the first three months (in each instance in which liquidated damages may occur) with
additional Shares, with the price of each such additional Share to be deemed equal to the average
closing price per share of the Company’s Common Stock as quoted on the OTCBB for each such 30
business day period, or portion thereof. In no event shall payment pursuant to this Section exceed
20% in the aggregate of (i) the Subscription Payment and (ii) the Warrant Payment. These payments
will be prorated on a daily basis during the 30-business day period and will be paid to each Holder
within ten business days following the end of each 30-business day period as to which payment is
due hereunder provided that the respective Holder delivered to the Company at least two business
days prior thereto information with respect to the number of Shares, Warrants and Underlying
Securities not previously sold by such Holder (together with reasonable supporting documentation).
The Holders may make a claim for additional damages as a remedy for the Company’s failure to comply
with the timelines set forth in this Section, but acknowledgement of such right in this Agreement
shall not constitute an admission by the Company that any such damages exist or may exist. Nothing
contained in the preceding sentence shall be read to limit the ability of the Holders to seek
specific performance of this Agreement.
8. Indemnification.
(a) To the extent permitted by law, the Company will indemnify and hold harmless each selling
Holder (including the partners or officers, directors and stockholders of such Holder), and each
person, if any, who controls such selling Holder within the meaning of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which
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they may become subject under the Securities Act, the Exchange Act, and other federal or state
securities laws, or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) (i) arise out of or are based upon any untrue or alleged untrue statement of
any material fact contained in the Registration Statement, in any preliminary prospectus or final
prospectus relating thereto or in any amendments or supplements to the Registration Statement or
any such preliminary prospectus or final prospectus, (ii) arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading or (iii) arise out of any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any other federal or
state securities law or any rule or regulation promulgated under the Securities Act, the Exchange
Act or any other federal or state securities law; and will reimburse such selling Holder, or such
officer, director or controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 8(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent shall not be
unreasonably withheld or delayed), nor shall the Company be liable in any such case for any such
loss, damage, liability or action, to the extent that it arises out of or is based upon an untrue
statement or alleged untrue statement or omission made in connection with the Registration
Statement, any preliminary prospectus or final prospectus relating thereto or any amendments or
supplements to the Registration Statement or any such preliminary prospectus or final prospectus,
in reliance upon and in conformity with written information furnished expressly for use in
connection with the Registration Statement or any such preliminary prospectus or final prospectus
by the selling Holders, any broker/dealer acting on their behalf or controlling person with respect
to them.
(b) To the extent permitted by law, each selling Holder will severally and not jointly
indemnify and hold harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, each person, if any, who controls the Company within the meaning
of the Securities Act, or any selling Holders, and all other selling Holders against any losses,
claims, damages or liabilities to which the Company or any such director, officer, controlling
person or such other selling Holder may become subject to, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of
or are based upon any untrue or alleged untrue statement of any material fact contained in the
Registration Statement or any preliminary prospectus or final prospectus, relating thereto or in
any amendments or supplements to the Registration Statement or any such preliminary prospectus or
final prospectus, or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent and only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the Registration Statement, in
any preliminary prospectus or final prospectus relating thereto or in any amendments or supplements
to the Registration Statement or any such preliminary prospectus or final prospectus, in reliance
upon and in conformity with written information furnished by the selling Holder expressly for use
in connection with the Registration Statement, or any preliminary prospectus or final prospectus;
and such selling Holder will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, or other selling Holder in connection
with investigating or defending any
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such loss, claim, damage, liability or action; provided, however, that the
liability of each selling Holder hereunder (when aggregated with amounts contributed, if any,
pursuant to Section 8(d)) shall be limited to the difference (the “Difference”) between (a) the
amount received by such Holder from the sale of the Registrable Shares pursuant to the Registration
Statement and (b) the amount paid by such Holder to the Company for such Registrable Shares
pursuant to the Unit Subscription Agreement; and provided, further, that the
indemnity agreement contained in this Section 8(b) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected without the
consent of those selling Holder(s) against which the request for indemnity is being made (which
consent shall not be unreasonably withheld or delayed).
(c) Promptly after receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 8, notify the indemnifying party in writing
of the commencement thereof and the indemnifying party shall have the right to participate in and,
to the extent the indemnifying party desires, jointly with any other indemnifying party similarly
noticed, to assume at its expense the defense thereof with counsel mutually satisfactory to the
indemnifying parties with the consent of the indemnified party, which consent will not be
unreasonably withheld, conditioned or delayed. In the event that the indemnifying party assumes
any such defense, the indemnified party may participate in such defense with its own counsel and at
its own expense, provided, however, that the counsel for the indemnifying party
shall act as lead counsel in all matters pertaining to such defense or settlement of such claim and
the indemnifying party shall only pay for such indemnified party’s reasonable legal fees and
expenses for the period prior to the date of its participation in such defense, and
provided further, however, that the indemnified party (together with all
indemnified parties which may be represented without conflict by one counsel) shall have the right
to retain one separate counsel, with the reasonable fees and expenses of such separate counsel to
be paid by the indemnifying party, if the 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 such
proceeding. Notwithstanding the foregoing, the indemnifying party shall not be obligated to pay
the fees of more than one separate counsel. The failure to notify an indemnifying party of the
commencement of any such action will not relieve such indemnifying party of any liability to the
indemnified party under this Section 8 (except to the extent that such failure materially and
adversely affects the indemnifying party’s ability to defend such action), nor shall the omission
so to notify an indemnifying party relieve such indemnifying party of any liability which it may
have to any indemnified party otherwise other than under this Section 8. No indemnifying party
shall, without the consent of the indemnified party, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such indemnified party of a release from all liability in respect to such claim or
litigation and otherwise in form and substance reasonably satisfactory to the indemnified party.
(d) If the indemnification provided in this Section 8 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim,
damage or expense referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable
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by such indemnified party as a result of such loss, liability, claim, damage or expense 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 shall have resulted in such loss, liability, claim, damage or expense, as well as any other
relevant equitable considerations; provided that in no event shall any contribution by an Holder
under this Section 8(d), when aggregated with amounts paid, if any, pursuant to Section 8(b),
exceed the Difference. The relative fault of the indemnifying party and of the indemnified party
shall 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.
(e) The obligations of the Company and Holders under this Section 8 shall survive the
completion of any offering of Registrable Shares in a Registration Statement under Section 3 and
otherwise.
9. Reports Under the Exchange Act. With a view to making available to the Holders the
benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit the
Holders to sell the Registrable Shares to the public without registration, the Company agrees to
use reasonable efforts: (a) to make and keep public information available, as those terms are
understood and defined in Rule 144, (b) to file with the SEC in a timely manner all reports and
other documents required to be filed by an issuer of securities registered under the Securities Act
or the Exchange Act and (c) undertake any additional actions reasonably necessary to maintain the
effectiveness of the Registration Statement or the use of Rule 144.
10. Selling Procedures. Any sale of Registrable Shares pursuant to a registration
statement filed in accordance with Section 3 hereof shall be subject to the following conditions
and procedures:
(a) Updating the Prospectus.
(i) If the Company informs the selling Holder that any registration statement or final
prospectus covering Registrable Shares then on file with the SEC is not current or otherwise does
not comply with the Securities Act, the Company shall use its commercially reasonable efforts to
provide to the selling Holder a current prospectus that complies with the Securities Act as soon as
practicable, but in no event later than five (5) business days after delivery of such notice.
(ii) If the Company requires more than five (5) business days to update the prospectus under
Section 10(a)(i) above, the Company shall have the right to delay the preparation of a current
prospectus that complies with the Securities Act without explanation to such Holder, subject to the
limitations set forth in Section 10(b) below, for a total of not more than two periods of thirty
(30) days each during any twelve-month period.
(b) General. Notwithstanding the foregoing, upon receipt of any notice from the
Company of (i) any request by the SEC or any other federal or state governmental authority during
the period of effectiveness of the Registration Statement for amendments or supplements
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to the Registration Statement or related prospectus or for additional information relating to
the Registration Statement, (ii) the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose, (iii) 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 Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, (iv) the happening of any event which makes any statement made in the
registration statement covering Registrable Shares or related prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any material respect or
which requires the making of any changes in the registration statement or prospectus so that, in
the case of the registration statement, it will not contain 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, and that in the case of the prospectus, it will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading or
(v) that, in the judgment of the Board of Directors, it is advisable to suspend use of the
prospectus for a discrete period of time due to pending corporate developments, public filings with
the SEC or that there exists material nonpublic information about the Company that the Board of
Directors, acting in good faith, determines not to disclose in a registration statement, then the
Company may suspend use of the prospectus (each a “Suspension”), in which case the Company shall
promptly so notify each Holder and each Holder shall not dispose of Registrable Shares covered by
the registration statement or prospectus until copies of a supplemented or amended prospectus are
distributed to the Holders or until the Holders are advised in writing by the Company that the use
of the applicable prospectus may be resumed; provided, however, that,
notwithstanding the foregoing, the Company may suspend use of the prospectus pursuant to Sections
10(a)(ii), 10(b)(iv) and 10(b)(v), and an Holder may be prohibited from selling or otherwise
disposing of the Registrable Shares covered by the registration statement or prospectus, for no
more than two periods of thirty (30) days during any such twelve-month period. The Company
shall use its best efforts to ensure the use of the prospectus may be resumed as soon as
practicable. The Company shall use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement, or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the securities for sale in any
jurisdiction, at the earliest practicable moment. The Company shall, upon the occurrence of any
event contemplated by clause (iv), prepare a supplement or post-effective amendment to the
registration statement or a supplement to the related prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Shares being sold thereunder, such prospectus will not contain an
untrue statement of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading.
11. Preemptive Rights. In the event that at any time after the date hereof until the
date that is two (2) years after the Closing Date, the Company proposes to issue additional shares
of Common Stock or Convertible Securities, other than an Exempt Issuance, pursuant to a private
offering for a cash investment not registered with the SEC, the Company shall send a notice (an
“Additional Share Notice”) to the Holder setting forth the terms of such proposed issuance. The
Holder shall be entitled to purchase a number of shares of Common Stock or
11
Convertible Securities, equal to its pro rata portion of 39% of the total number of shares of
Common Stock or Convertible Securities proposed to be issued in the offering (the “Preemptive
Amount”), where such pro rata amount shall be determined based upon such Holder’s pro rata portion
of the total number of Units sold under the Subscription Agreement. By way of example only, if the
Holder purchased or acquired one half of the total Units sold under the Subscription Agreement,
such Holder would be entitled to purchase one half of the Preemptive Amount. In addition, such
Preemptive Amount is determined based on the sale of 10,000,000 Units, and in the event less than
such number of Units is sold under the Subscription Agreement the Preemptive Amount shall be
reduced proportionately. Such participation by Holder in the offering shall be made on the same
terms set forth in the Additional Share Notice by (a) notice to the Company (the “Purchase Notice”)
within 10 days of the date of the Additional Share Notice and (b) payment of the price for such
shares of Common Stock or Convertible Securities, by wire transfer of immediately available funds
or such other method of payment as the Company may approve, within 10 days after delivery to the
Company of the Purchase Notice.
12. Issuance of Certain Securities. Until all Registrable Shares have been resold
publicly pursuant to a registration statement or under Rule 144, without the prior written consent
of Holders owning a majority of the Shares, during the three year period following the Closing
Date, the Company shall not issue for cash (a) any Convertible Securities or similar securities
that contain a provision that provides for any change or determination of the applicable conversion
price, conversion rate, or exercise price (or a similar provision which might have a similar
effect) based on any determination of the market price or other value of the Company’s securities
or any other market based or contingent standard, such as so-called “toxic” or “death spiral”
convertible securities; provided, however, that this prohibition shall not include Convertible
Securities or similar securities the conversion or exercise price or conversion rate of which is
(i) fixed on the date of issuance, (ii) subject to adjustment as a result of or in connection with
a bona fide business combination or similar transaction or (iii) subject to adjustment based upon
the issuance by the Company of additional securities, including without limitation, standard
anti-dilution adjustment provisions which are not based on calculations of market price or other
variable valuations; and provided, further, that in no event shall this provision be deemed to
prohibit the transactions contemplated in the Unit Subscription Agreement, or (b) any preferred
stock, debt instruments or similar securities or investment instruments provided for (i)
preferences or other payments substantially in excess of the original investment by purchasers
thereof or (ii) dividends, interest or similar payments other than dividends, interest or similar
payments computed on an annual basis and not in excess, directly or indirectly, of the lesser of a
rate equal to (A) twice the interest rate on 10 year US Treasury Notes and (B) 20%.
13. 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 assigns. In addition, and
whether or not any express assignment shall have been made, the provisions of this Agreement which
are for the benefit of the Holders shall also be for the benefit of and enforceable by any
subsequent holder of any Registrable Shares who has executed a copy of this Agreement or otherwise
indicated its agreement to be bound hereby. Without limitation on the Holders’ rights to transfer
Registrable Shares, the Company acknowledges that any Holder may, at any time, transfer any of the
Registrable Shares which it may own, beneficially or of record, to (a) its affiliates or (b) its
partner(s), investor(s), security holder(s) or beneficial holder(s) pursuant to its organization
documents or other agreements, and that, upon the consummation of
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any such transfer, the provisions of this Agreement shall be binding upon and inure to the
benefit of each transferee of such Registrable Shares.
14. Entire Agreement. This Agreement (including the exhibits hereto), the Unit
Subscription Agreement and the Warrants constitute and contain the entire agreement and
understanding of the parties with respect to the subject matter hereof, and such agreements also
supersede any and all prior negotiations, correspondence, agreements or understandings with respect
to the subject matter hereof.
15. Miscellaneous.
(a) Amendments. This Agreement may not be amended, modified or terminated, and no
rights or provisions may be waived, except with the written consent of the Majority Holders and the
Company.
(b) Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York. Each party hereby irrevocably consents and
submits to the jurisdiction of any New York State or United States Federal Court sitting in the
State of New York, County of New York, over any action or proceeding arising out of or relating to
this Agreement and irrevocably consents to the service of any and all process in any such action or
proceeding by registered mail addressed to such party at its address specified herein (or as
otherwise noticed to the other party). Each party further waives any objection to venue in New
York and any objection to an action or proceeding in such state and county on the basis of forum
non conveniens. Each party also waives any right to trial by jury.
(c) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal representatives, successors or
assigns. This Agreement shall also be binding upon and inure to the benefit of any transferee of
any of the Registrable Shares. Notwithstanding anything in this Agreement to the contrary, if at
any time any Holder shall cease to own any Registrable Shares, all of such Holder’s rights under
this Agreement shall immediately terminate.
(d) Notices.
(i) Any notices, reports or other correspondence (hereinafter collectively referred to as
“correspondence”) required or permitted to be given hereunder shall be given in writing and shall
be deemed effectively given upon (a) personal delivery, (b) delivery by fax (with answer back
confirmed), or (c) two business days after mailing by recognized overnight courier (such as Federal
Express), addressed to a party at its address or sent to the fax number provided below or at such
other address or fax number as such party may designate by three days’ advance notice to the other
party.
(ii) All correspondence to the Company shall be addressed as follows:
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Novint Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇, CEO
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇, CEO
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
(iii) All correspondence to any Holder shall be sent to the most recent address furnished by
the Holder to the Company.
(iv) Any Holder may change the address to which correspondence to it is to be addressed by
notification as provided for herein.
(e) Injunctive Relief. The parties acknowledge and agree that in the event of any
breach of this Agreement, remedies at law may be inadequate, and each of the parties hereto shall
be entitled to seek specific performance of the obligations of the other parties hereto and such
appropriate injunctive relief as may be granted by a court of competent jurisdiction.
(f) Attorney’s Fees. If any action at law or in equity is necessary to enforce or
interpret any of the terms of this Agreement, the prevailing party shall be entitled to reasonable
attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such
party may be entitled.
(g) Severability. If any provision of this Agreement is held by a court of competent
jurisdiction to be unenforceable under applicable law, such provision shall be replaced with a
provision that accomplishes, to the extent possible, the original business purpose of such
provision in a valid and enforceable manner, and the balance of the Agreement shall be interpreted
as if such provision were so modified and shall be enforceable in accordance with its terms.
(h) Aggregation of Shares. Registrable Shares held or acquired by affiliated entities
or persons shall be aggregated for the purpose of determining the availability of any rights under
this Agreement.
(i) Counterparts. This Agreement may be executed in a number of counterparts, any of
which together shall for all purposes constitute one Agreement, binding on all the parties hereto
notwithstanding that all such parties have not signed the same counterpart.
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SIGNATURE PAGE TO NOVINT TECHNOLOGIES, INC.
INVESTOR RIGHTS AGREEMENT
INVESTOR RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Investor Rights Agreement as of the
date and year first above written.
| NOVINT TECHNOLOGIES, INC. | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| INVESTORS: | ||||
| (Individuals) | ||||
| Name: | ||||
| (Entities) | ||||
| Entity Name: | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
Exhibit A
SCHEDULE OF INVESTORS