Exhibit 10.3
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of September 28,
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2001, is made and entered into by and between Dauphin Technology, Inc., an
Illinois corporation (the "Company"), and Crescent International Ltd., an entity
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organized and existing under the laws of Bermuda (the "Investor").
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WHEREAS, the Company and the Investor have entered into that certain Securities
Purchase Agreement, dated as of September 28, 2001, as amended by Amendment to
Securities Purchase Agreement, dated as of September 28, 2001 (the "Securities
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Purchase Agreement"), pursuant to which the Company will issue, from time to
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time, to the Investor and the Investor shall purchase up to $10,000,000 worth of
securities of the Company including (i) common stock, par value $0.001 per
share, of the Company (the "Common Stock"), (ii) a convertible note in the
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principal amount of $2,500,000 (the "Initial Convertible Note"), and (iii)
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Subsequent Convertible Notes (as defined in the Securities Purchase Agreement).
WHEREAS, pursuant to the terms of and in partial consideration for the Investor
entering into the Securities Purchase Agreement, the Company is required to
issue to the Investor (i) an initial incentive warrant, exercisable from time to
time within five years following the date of issuance (the "Initial Incentive
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Warrant") for the purchase of a number of shares of Common Stock at a price to
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be determined as described in such Initial Incentive Warrant, and (ii) under
certain circumstances, a subsequent incentive warrant, exercisable from time to
time within five years following the date of issuance (the "Subsequent Incentive
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Warrant and, together with the Initial Incentive Warrant, the Incentive
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Warrants") for the purchase of a number of shares of Common Stock at a price to
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be determined as described in such Subsequent Incentive Warrant;
WHEREAS, pursuant to the terms of and in partial consideration for the Investor
entering into the Securities Purchase Agreement, the Company may be required to
issue protective warrants to the Investor, each of which may become exercisable
from time to time as described in such warrants and in the Securities Purchase
Agreement (collectively, the "Protective Warrants" and together with the
Incentive Warrants and any new or replacement warrants issued in accordance with
the terms of the Protective Warrants and the Incentive Warrants, the "Warrants")
for the purchase of a number of shares of Common Stock at a price to be
determined as described in each such Protective Warrant;
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Investor's agreement to enter into the Securities Purchase Agreement, the
Company has agreed to provide the Investor with certain registration rights as
described herein;
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein, in the Warrants, in the
Convertible Notes and in the Securities Purchase Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, intending to be legally bound hereby, the parties hereto agree as
follows (capitalized terms used herein and not defined herein shall have the
respective meanings ascribed to them in the Securities Purchase Agreement):
ARTICLE I
REGISTRATION RIGHTS
Section 1.1 REGISTRATION STATEMENTS.
(a) Filing of Registration Statements. The Company shall register for
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resale all Commitment Shares issued or issuable to the Investor
pursuant to the Securities Purchase Agreement and the Convertible
Notes and all Warrant Shares issued or issuable upon full exercise of
the Warrants. Subject to the terms and conditions of this Agreement,
the Company shall effect such registration in the manner provided
below:
(i) First Registration Statement. On or before the end of the 20
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calendar day period immediately following the Subscription Date,
the Company shall file with the SEC a registration statement (the
"First Registration Statement") on Form S-3 if such form is then
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available to the Company and, if not, on such form promulgated by
the SEC for which the Company qualifies, that counsel for the
Company shall deem appropriate and which form shall be available
for the sale of all Note Conversion Shares into which the Initial
Convertible Note may be converted and the Incentive Warrant
Shares relating to the Initial Incentive Warrant in accordance
with the intended method of distribution of such securities. The
aggregate number of shares of Common Stock to be registered under
the First Registration Statement shall be 4,000,000;
(ii) Subsequent Registration Statements.
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(1)If the Company elects to exercise its right with
respect to any Subsequent Sale for which the Sale Shares
(or, in the case of a Subsequent Note Sale, the
applicable Note Conversion Shares), on the applicable
Closing Date, have not been previously registered and
are not covered by an effective Registration Statement
filed with the SEC which is not a Failed Registration
Statement (as hereinafter defined) (an "Unregistered
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Sale"), then on or before the end of a 20 calendar day
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period immediately following each Closing Date relating
to each such Subsequent Sale, the Company shall file
with the SEC a registration statement (each a
"Subsequent Registration Statement," and together with
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the First Registration Statement and any other
registration statement covering Registrable Securities
or otherwise required to be filed by the Company with
the SEC as provided in this Agreement, the "Registration
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Statements" or each, a "Registration Statement") on Form
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S-3 if such form is then available to the Company and,
if not, on such form promulgated by the SEC for which
the Company qualifies, that counsel for the Company
shall
deem appropriate and which form shall be available for
the sale of the Sale Shares purchased by the Investor or
the Note Conversion Shares into which the applicable
Subsequent Convertible Note may be converted and any
Commitment Shares and Warrant Shares that have not been
previously registered, in accordance with the intended
method of distribution of such securities. The aggregate
number of shares to be registered under each Subsequent
Registration Statement shall be equal to (w) with
respect to a Subsequent Share Sale, the number of Sale
Shares purchased by the Investor on the applicable
Closing Date or, with respect to a Subsequent Note Sale,
the number of Note Conversion Shares into which the
applicable Subsequent Convertible Note may be converted
assuming a conversion price of $0.75, plus (x) a number
of Protective Warrant Shares equal to the number of Sale
Shares purchased by the Investor on the applicable
Closing Date plus (y) with respect to any prior
Convertible Notes and any previous Subsequent Share
Sales, any Commitment Shares not previously registered
plus (z) any Warrant Shares not previously registered;
(2)Prior to any Subsequent Sale which is not an
Unregistered Sale, the Company shall file with the SEC a
Registration Statement on Form S-3 if such form is then
available to the Company and, if not, on such form
promulgated by the SEC for which the Company qualifies,
that counsel for the Company shall deem appropriate and
which form shall be available for the sale of the Sale
Shares to be purchased by the Investor or the Note
Conversion Shares into which the applicable Subsequent
Convertible Note may be converted assuming a conversion
price of $0.75 and any Warrant Shares and Commitment
Shares which have not previously been registered, in
accordance with the intended method of distribution of
such securities. The aggregate number of shares to be
registered under such Registration Statement shall be
determined by the Company.
(b) Effectiveness of the Registration Statements. The following
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conditions for effectiveness shall apply to the Registration Statements required
to be filed by the Company with the SEC pursuant to paragraph (a) above, without
limiting the Company's obligation to file such Registration Statements. The
Company shall use its best efforts: (i) to have the First Registration Statement
declared effective by the SEC in no event later than 90 calendar days after the
Closing Date relating to the Initial Convertible Note, and (ii) to have each
Subsequent Registration Statement declared effective by the SEC in no event
later than 60 calendar days
after the Closing Date relating to each Unregistered Sale, and in any
event prior to any further Subsequent Sales. The Company shall ensure
that each Registration Statement and any amendments thereto remain in
effect until the later of (1) one day following the date of expiration
of the Incentive Warrant Exercise Period for the Initial Incentive
Warrant (as such term is defined in the Initial Incentive Warrant) or,
if the Subsequent Incentive Warrant has been issued, one day following
the date of expiration of the Incentive Warrant Exercise Period for
the Subsequent Incentive Warrant (as such term is defined in the
Subsequent Incentive Warrant), if such Incentive Warrant has not been
exercised in full and if such Registration Statement covers the
Warrant Shares issuable under such Incentive Warrant, and (2) the date
the Registrable Securities covered by such Registration Statement and
issued or issuable to the Investor pursuant to the Securities Purchase
Agreement, the Convertible Notes and the Warrants may be sold by the
Investor without registration and without any time, volume or manner
limitations pursuant to Rule 144(k) (or any similar provision then in
effect) under the Securities Act or have otherwise been sold; provided
that such period shall be extended one day for ------ each day after
the applicable Effective Date that any Registration Statement covering
Registrable Securities is not effective during the period such
Registration Statement is required to be effective pursuant to this
Agreement.
(c) Failure to Obtain or Maintain Effectiveness of Registration
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Statements.
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(i) In the event the Company fails for any reason to obtain the
effectiveness of any Registration Statement within the time
periods set forth in Section 1.1(b) (a "Tardy Registration
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Statement") or in the event that the Company fails for any reason
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to maintain the effectiveness of any Registration Statement (or
the underlying prospectus) covering Registrable Securities for
the time period set forth in Section 1.1(b) (an "Ineffective
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Registration Statement" together with a Tardy Registration
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Statement, a "Failed Registration Statement") or upon the
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occurrence of any event of the kind described in Section
2.1(g)(iv) hereof (unless the Registrable Securities covered by
such Registration Statement shall have become freely tradable
pursuant to Rule 144(k) of the Securities Act or have been
otherwise sold), then, in either event an amount equal to two
percent (2.0%) of the aggregate Purchase Price of all of the
Registrable Securities covered by any such Failed Registration
Statement then held by the Investor for each calendar month and
for each portion of a calendar month, pro rata, (the "Failed
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Registration Statement Fee") during any period of such
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ineffectiveness or, in the case of the occurrence of an event of
the kind described in Section 2.1(g)(iv) hereof, until the
Investor shall have received copies of the supplemental or
amended prospectus contemplated by Section 2.1(g)(iv) hereof (an
"Ineffective Period"), shall become due and payable to Investor.
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(ii) If Failed Registration Statement Fees accrue with respect to
any Ineffective Registration Statement, payment of such Failed
Registration
Statement Fees shall be made on the first Trading Day after
the earlier to occur of (1) the expiration of the applicable
Ineffective Period and (2) the last day of each calendar month
during an Ineffective Period.
(d) Restricted Period. While in possession of material non-public
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information received from the Company (a "Restricted Period"), the
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Investor shall not dispose of any Registrable Securities until such
information is disclosed to the public; provided that, if such
Restricted Period exceeds 120 days, the liquidated damages described
in Section 1.1(c) hereof shall be increased to three percent (3.0%)
until such Restricted Period shall have elapsed.
(e) Failure to Register Sufficient Number of Shares. If the number of
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Note Conversion Shares and Warrant Shares included in the First
Registration Statement or each Subsequent Registration Statement is
insufficient to permit the conversion in full of the applicable
Convertible Note or the exercise in full of the applicable Warrant
(such deficit in the number of shares is referred to herein as the
"Deficit Shares"), then (i) the Company shall immediately amend such
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Registration Statement (or file a new Registration Statement) to cover
the Deficit Shares (such amended or new Registration Statement is
referred to herein as a "Deficit Shares Registration Statement") and
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(ii) the Company shall pay to the Investor in immediately available
funds into an account designated by the Investor an amount equal to
2.0% of the product of (x) the number of Deficit Shares multiplied by
(y) the Bid Price of the Common Stock on the applicable Effective
Date, for each calendar month and for each portion of a calendar
month, pro rata, during the period from the Effective Date of the
applicable Registration Statement to the Effective Date of the
applicable Deficit Shares Registration Statement.
(f) Liquidated Damages. The Company and the Investor hereby
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acknowledge and agree that the sums payable under subsections 1.1(c),
1.1(d) and 1.1(e) hereof shall constitute liquidated damages and not
penalties. The parties further acknowledge that (i) the amount of loss
or damages likely to be incurred is incapable or is difficult to
estimate precisely, (ii) the amounts specified in such subsections
bear a reasonable proportion and are not plainly or grossly
disproportionate to the probable loss likely to be incurred in
connection with any failure by the Company to obtain or maintain the
effectiveness of a Registration Statement, (iii) one of the reasons
for the Company and the Investor reaching an agreement as to such
amounts was the uncertainty and cost of litigation regarding the
question of actual damages, and (iv) the Company and the Investor are
sophisticated business parties and have been represented by
sophisticated and able legal and financial counsel and negotiated this
Agreement at arm's length.
(g) Piggyback Registrations. If the Company shall determine to
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register for sale with the SEC any of its Common Stock or securities
convertible into, or exchangeable or exercisable for, shares of its
Common Stock other than for resale by the Investor (a "Piggyback
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Registration"), the Company shall give the Investor written notice
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thereof (a "Notice of Piggyback Registration") 30 calendar days
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prior to the filing of a registration statement relating to such
Piggyback Registration, which notice shall include a description of
(i) the intended method of distribution of such Common Stock and
such other securities, (ii) the number of shares of Common Stock and
such other securities the Company intends to register, and (iii)
such other Persons who will or have a right to participate in the
Piggyback Registration. Upon the written request of the Investor
made within 20 days after receipt of a Notice of Piggyback
Registration (which request shall specify the Registrable Securities
intended to be disposed of by the Investor and the intended method
of distribution thereof), the Company shall include in the
registration statement relating to such Piggyback Registration all
Registrable Securities that the Company has been so requested to
register by the Investor. If the Piggyback Registration for which
the Company gives a Notice of Piggyback Registration is a registered
public offering involving an underwriting, and the underwriters
selected by the Company advise the Company in writing that marketing
factors require a limitation on the number of shares of Common Stock
or other securities to be underwritten, the Company shall reduce the
number of shares of Common Stock or other securities included in
such registration (1) first, by reducing the number of shares of
Common Stock or other securities to be registered for resale by all
Persons other than the Investor, allocated among such Persons in
accordance with the priorities then existing among the Company and
such Persons and (2) second, by reducing on a pro rata basis the
number of shares of Registrable Securities requested to be included
by the Investor. Any other shares of Common Stock, Registrable
Securities, or other securities of the Company so excluded shall be
withdrawn from and shall not be included in such Piggyback
Registration.
ARTICLE II
REGISTRATION PROCEDURES
Section 2.1 FILINGS; INFORMATION. The Company will effect the registration of
the Registrable Securities in accordance with the intended methods of
disposition thereof as furnished to the Company by any proposed seller of such
Registrable Securities prior to the filing of a Registration Statement therefor.
Without limiting the foregoing, the Company in each such case will do the
following as expeditiously as possible, but in no event later than the deadline,
if any, prescribed therefor in this Agreement:
a. The Company shall (i) prepare and file with the SEC the
Registration Statement(s) covering the shares as described in
subsection 1.1(a) above; (ii) use its best efforts to cause such
filed Registration Statement(s) to become and remain effective
(pursuant to Rule 415 under the Securities Act or otherwise) for
the period prescribed by Section 1.1(b); (iii) prepare and file
with the SEC such amendments and supplements to each Registration
Statement and the prospectus used in connection therewith as may
be necessary to keep each Registration Statement effective for
the time period prescribed by Section 1.1(b); and (iv) comply
with the provisions of the Securities Act with respect to the
disposition of all securities covered by each Registration
Statement
during such period in accordance with the intended methods of
disposition by the Investor set forth in each Registration
Statement.
b. The Company shall file all necessary amendments to each
Registration Statement in order to effectuate the purpose of this
Agreement, the Securities Purchase Agreement, the Convertible
Notes and the Warrants.
c. Five Trading Days prior to filing each Registration Statement or
prospectus, or any amendment or supplement thereto (excluding
amendments deemed to result from the filing of documents
incorporated by reference therein), the Company shall deliver to
the Investor and one firm of counsel representing the Investor,
in accordance with the notice provisions of Section 4.8, copies
of such Registration Statement as proposed to be filed, together
with exhibits thereto, which documents will be subject to review
and comment by the Investor and such counsel, and thereafter
deliver to the Investor and such counsel, in accordance with the
notice provisions of Section 4.8, such number of copies of such
Registration Statement, each amendment and supplement thereto (in
each case including all exhibits thereto), the prospectus
included in such Registration Statement (including each
preliminary prospectus) and such other documents or information
as the Investor or counsel may reasonably request in order to
facilitate the disposition of the Registrable Securities.
d. The Company shall deliver, in accordance with the notice
provisions of Section 4.8, to each broker as directed by the
Investor such number of conformed copies of such Registration
Statement and of each amendment and supplement thereto (in each
case including all exhibits and documents incorporated by
reference), such number of copies of the prospectus contained in
such Registration Statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 promulgated under the Securities Act
relating to the Registrable Securities, and such other documents,
as may be reasonably requested to facilitate the disposition of
the Registrable Securities.
e. After the filing of each Registration Statement, the Company
shall promptly notify the Investor of any stop order issued or
threatened by the SEC in connection therewith and take all
commercially reasonable actions required to prevent the entry of
such stop order or to remove it if entered.
f. The Company shall use its best efforts to (i) register or qualify
the Registrable Securities under such other securities or blue
sky laws of such jurisdictions in the United States as the
Investor may reasonably (in light of its intended plan of
distribution) request, and (ii) cause the Registrable Securities
to be registered with or approved by such other governmental
agencies or authorities in the United States as may be necessary
by virtue of the business and operations of the Company and do
any and all other acts and things that may be reasonably
necessary or advisable to enable the Investor to consummate the
disposition of the Registrable Securities; provided, however,
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that the Company will not be required to qualify generally to do
business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph (f), subject itself to
taxation in any such jurisdiction, or consent or subject itself
to general service of process in any such jurisdiction.
g. The Company shall immediately notify the Investor upon the
occurrence of any of the following events in respect of a
Registration Statement or related prospectus in respect of an
offering of Registrable Securities: (i) receipt of any request
for additional information by the SEC or any other federal or
state governmental authority during the period of effectiveness
of the Registration Statement or amendments or supplements to the
Registration Statement or related prospectus; (ii) the issuance
by the SEC or any other federal or state governmental authority
of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose;
(iii) receipt 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;
(iv) the happening of any event that makes any statement made in
such Registration Statement or related prospectus or any document
incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or
documents so that, in the case of a Registration Statement, it
will 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 that
in the case of the related prospectus, it will 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; (v) the declaration by the SEC of
the effectiveness of a Registration Statement; and (vi) the
Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate, and
the Company promptly shall make available to the Investor any
such supplement or amendment to the related prospectus.
h. The Company shall enter into customary agreements and take such
other actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities
(whereupon the Investor, at its option, may require that any or
all of the representations, warranties and covenants of the
Company also be made to and for the benefit of the Investor).
i. The Company shall make available to the Investor (and will
deliver to Investor's counsel), subject to restrictions imposed
by the United States government or any agency or instrumentality
thereof, copies of all correspondence between the SEC and the
Company, concerning any Registration Statement, and also will
make available for inspection by the Investor and any attorney,
accountant or other professional retained by the Investor
(collectively, the "Inspectors"), all financial and other
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records,
pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to
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enable them to exercise their due diligence responsibility, and
cause the Company's officers and employees to supply all
information reasonably requested by any Inspectors in connection
with any Registration Statement. Records that the Company
determines, in good faith, to be confidential and that it
notifies the Inspectors are confidential shall not be disclosed
by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any
Registration Statement or (ii) the disclosure or release of such
Records is requested or required pursuant to oral questions,
interrogatories, requests for information or documents or a
subpoena or other order from a court of competent jurisdiction or
other process; provided, however, that prior to any disclosure or
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release pursuant to clause (ii), the Inspectors shall provide the
Company with prompt notice of any such request or requirement so
that the Company may seek an appropriate protective order or
waive such Inspectors' obligation not to disclose such Records;
and, provided, further, that if failing the entry of a protective
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order or the waiver by the Company permitting the disclosure or
release of such Records, the Inspectors, upon advice of counsel,
are compelled to disclose such Records, the Inspectors may
disclose that portion of the Records that counsel has advised the
Inspectors that the Inspectors are compelled to disclose. The
Investor agrees that information obtained by it solely as a
result of such inspections (not including any information
obtained from a third party who, insofar as is known to the
Investor after reasonable inquiry, is not prohibited from
providing such information by a contractual, legal or fiduciary
obligation to the Company) shall be deemed confidential and, if
material non-public information, the Investor shall not while in
possession of such information engage in market transactions in
the securities of the Company or its Affiliates unless and until
such information is made generally available to the public. The
Investor further agrees that upon learning that disclosure of
such Records is sought in a court of competent jurisdiction, it
will give notice to the Company and allow the Company, at its
expense, to undertake appropriate action to prevent disclosure of
the Records deemed confidential.
j. To the extent required by law or reasonably necessary to effect a
sale of Registrable Securities in accordance with prevailing
business practices at the time of any sale of Registrable
Securities pursuant to a Registration Statement, the Company
shall deliver to the Investor a signed counterpart, addressed to
the Investor, of (1) an opinion or opinions of counsel to the
Company and (2) a comfort letter or comfort letters from the
Company's independent public accountants, each in customary form
and covering such matters of the type customarily covered by
opinions of comfort letters, as the case may be, as the Investor
therefor reasonably requests.
k. The Company otherwise shall comply with all applicable rules and
regulations of the SEC, including, without limitation, compliance
with applicable reporting requirements under the Exchange Act.
l. The Company may require the Investor to furnish promptly in
writing to the Company such information as may be legally
required in connection with any registration including, without
limitation, all such information as may be requested by the SEC
or the National Association of Securities Dealers, Inc. (the
"NASD"). The Investor agrees to provide such information
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requested in connection with any registration within ten Trading
Days after receiving such written request and the Company shall
not be responsible for any delays in obtaining or maintaining the
effectiveness of a Registration Statement caused by the
Investor's failure to timely provide such information. Each
seller of Registrable Securities shall notify the Company as
promptly as practicable of any inaccuracy or change in
information previously furnished by such seller to the Company or
of the occurrence of any event, in either case as a result of
which any prospectus relating to the Registrable Securities
contains or would contain an untrue statement of a material fact
regarding such seller or its intended method of disposition of
such Registrable Securities or omits to state any material fact
regarding such seller or such seller's intended method of
disposition of such Registrable Securities 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 promptly furnish to the Company any additional information
required to correct and update any previously furnished
information or required so that such prospectus shall not
contain, with respect to such seller or the disposition of such
Registrable Securities, 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, in the light of the
circumstances under which they were made, not misleading.
Section 2.2. REGISTRATION EXPENSES.
a. In connection with each Registration Statement, the Company shall
pay all registration expenses incurred in connection with the
registration thereunder (the "Registration Expenses"), including,
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without limitation: (i) all registration, filing, securities
exchange listing and fees required by the NASD, (ii) all
registration, filing, qualification and other fees and expenses
of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with
blue sky qualifications of the Registrable Securities required
hereby), (iii) all of the Company's word processing, duplicating,
printing, messenger and delivery expenses, (iv) the Company's
internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or
accounting duties), (v) the fees and expenses incurred by the
Company in connection with the listing of the Registrable
Securities, (vi) subject to paragraph (b) below, reasonable fees
and disbursements of counsel for the Company and the Investor and
customary fees and expenses for independent certified public
accountants retained by the Company (including the expenses of
any special audits or comfort letters or costs associated with
the delivery by independent certified public accountants of such
special audit(s) or comfort letter(s) requested pursuant to
Section 2.1(j) hereof), (vii) the fees and expenses of any
special experts retained by the Company in connection with such
registration, (viii) premiums and other costs of policies of
insurance purchased at the discretion of the Company against
liabilities arising out of any public offering of the Registrable
Securities being registered, and (ix) any fees and disbursements
of underwriters customarily paid by issuers or sellers of
securities, but excluding underwriting fees, discounts, transfer
taxes or commissions, if any, attributable to the sale of
Registrable Securities, which shall be payable by each holder of
Registrable Securities pro rata on the basis of the number of
Registrable Securities of each such holder that are included in a
registration under this Agreement.
b. The Company shall pay all reasonable fees and expenses of counsel
for the Investor incurred in connection with the review, and
assistance in preparation, of each Registration Statement up to
$10,000 per Registration Statement, unless a greater amount is
required due to the nature of the review performed by Investor's
counsel or the extent of assistance provided by Investor's
counsel (an estimate of such greater fees and expenses of such
firm of counsel to the Investor shall be provided to the Company
prior to the undertaking of such counsel's additional review or
assistance).
ARTICLE III
INDEMNIFICATION AND CONTRIBUTION
Section 3.1. INDEMNIFICATION
a. The Company agrees to indemnify and hold harmless the Investor,
its partners, Affiliates, officers, directors, employees and duly
authorized agents, and each Person or entity, if any, who
controls the Investor within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, together with
the partners, Affiliates, officers, directors, employees and duly
authorized agents of such controlling Person or entity
(collectively, the "Investor Controlling Persons"), from and
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against any and all losses, claims, damages, liabilities, costs
and expenses (including, without limitation, any and all
reasonable attorneys' fees and disbursements and costs and
expenses of investigating and defending any such claim and any
and all amounts paid in settlement of, any action, suit or
proceeding between any of the indemnified parties and any
indemnifying parties or between any indemnified party and any
third party, or otherwise, or any claim asserted) (collectively,
"Damages"), joint or several, and any action or proceeding in
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respect thereof to which the Investor, its partners, Affiliates,
officers, directors, employees and duly authorized agents, and
any Investor Controlling Person, becomes subject to under the
Securities Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, as and
when incurred, insofar as such Damages (or actions or proceedings
in respect thereof) (i) arise out of, or are based upon, any
untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, or in any preliminary
prospectus, final prospectus, summary prospectus, documents filed
under the Exchange Act and deemed to be incorporated by reference
into any Registration Statement, application or other document
executed by or on behalf of the Company or based on written
information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Registrable Securities under
the securities or blue sky laws thereof or filed with the SEC,
amendment or supplement relating to the Registrable Securities or
(ii) arise out of, or are based upon, any omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, and shall reimburse the Investor, its partners,
Affiliates, officers, directors, employees and duly authorized
agents, and each such Investor Controlling Person, for any legal
and other expenses reasonably incurred by the Investor, its
partners, Affiliates, officers, directors, employees and duly
authorized agents, or any such Investor Controlling Person, as
incurred, in investigating or defending or preparing to defend
against any such Damages or actions or proceedings; provided,
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however, that the Company shall not be liable to the extent that
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any such Damages arise out of the Investor's failure to send or
give a copy of the final prospectus or supplement at or prior to
the written confirmation of the sale of Registrable Securities to
the persons asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such
person if such statement or omission was corrected in such final
prospectus or supplement, and provided that the Investor had been
--------
obligated under applicable law to deliver such final prospectus or
supplement to such person; provided, further, that the Company shall
-------- -------
not be liable to the extent that any such Damages arise out of or
are based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such Registration Statement, or
any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by the
Investor or any other person who participates as a seller or as an
underwriter in the offering or sale of such securities, in either
case, in any questionnaire or other request by the Company, or
otherwise specifically stating that it is for use in the preparation
thereof, and provided that such written information furnished to the
--------
Company by the Investor, or any other person who participates as a
seller or as an underwriter in the offering or sale of such
securities, is not materially altered by the Company.
b. The Investor agrees to indemnify and hold harmless the Company, its
Affiliates, officers, directors, employees, and duly authorized
agents from and against any and all Damages, joint or several, and
any action in respect thereof to which the Company, its Affiliates,
officers, directors, employees, and duly authorized agents becomes
subject to under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or
otherwise, as and when incurred, insofar as such Damages (or actions
or proceedings in respect thereof) arise out of, or are based upon,
any untrue statement or alleged untrue statement or omission or
alleged omission made in a Registration Statement, or any
preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by the Investor in any
questionnaire or other request by the Company, or otherwise
specifically stating that it is for use in the preparation thereof;
provided, however, that such written information furnished to the
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Company by the Investor is not materially altered by the Company.
Notwithstanding the foregoing, the Investor shall in no event be
required to indemnify the Company for any amount in excess of the
amount by which the total price at which the Registrable Securities
of the Investor were sold to the public (less underwriting discounts
and commissions) exceeds the amount actually paid by the Investor
under the Securities Purchase Agreement for such Registrable
Securities sold to the public.
c. All claims for indemnification shall be asserted and resolved as set
forth in Section 9.2 of the Securities Purchase Agreement.
Section 3.2. ARBITRATION. Any controversy, claim or dispute arising out of
or in connection with this Agreement, including any question regarding its
existence, validity,
interpretation, breach, or termination, shall be referred to and finally
resolved in accordance with Section 9.3 of the Securities Purchase Agreement.
Section 3.3. OTHER INDEMNIFICATION. Indemnification similar to that
specified in the preceding paragraphs of this Article III (with appropriate
modifications) shall be given by the Company with respect to any required
registration or other qualification of securities under any federal or state law
or regulation of any governmental authority other than the Securities Act. The
provisions of this Article III shall be in addition to any other rights to
indemnification, contribution or other remedies which an Indemnified Party may
have pursuant to law, equity, contract or otherwise.
Section 3.4. CONTRIBUTION. If the indemnification and reimbursement
obligations provided for in any section of this Article III is unavailable or
insufficient to hold harmless the Indemnified Parties in respect of any Damages
referred to herein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Damages as between the Company on the one
hand and the Investor or seller on the other, in such proportion as is
appropriate to reflect the relative fault of the Company and of the Investor or
seller in connection with such statements or omissions, as well as other
equitable considerations. The relative fault of the Company on the one hand and
of the Investor or seller on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Investor agree that it would not be just and equitable if
contribution pursuant to this Section 3.4 were determined by pro rata allocation
or by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Party as a result of the Damages referred to
in the immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 3.4, the
Investor or seller shall in no event be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities of the Investor or seller were sold to the public (less underwriting
discounts and commissions) and less the amount actually paid by the Investor
under the Securities Purchase Agreement for such Registrable Securities sold to
the public exceeds the amount of any damages which the Investor or seller has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
ARTICLE IV
MISCELLANEOUS
Section 4.1. OUTSTANDING REGISTRATION RIGHTS. Except as set forth on
Schedule 4.1, the Company represents and warrants to the Investor that there is
not in effect on the date hereof any agreement by the Company pursuant to which
any holders of securities of the Company have a right to cause the Company to
register or qualify such securities under the Securities Act or any securities
or blue sky laws of any jurisdiction. The Company hereby covenants and agrees
that until 270 calendar days after the Registration Statement has been declared
effective by the SEC it will not, without the prior written consent of the
Investor, enter into or amend any agreement by the Company pursuant to which any
holders of securities of the Company have a right to cause the Company to
register or qualify securities under the Securities Act or any securities or
blue sky laws of any jurisdiction; provided, however, that the foregoing shall
not apply to a Third Party Sale (as such term is defined in the Securities
Purchase Agreement) for which the Investor has elected not to exercise its right
of first refusal pursuant to Section 6.12 of the Securities Purchase Agreement.
Section 4.2. TERM. The registration rights provided to the holders of
Registrable Securities hereunder shall terminate at such time as all Registrable
Securities have been issued and have ceased to be Registrable Securities.
Notwithstanding the foregoing, paragraphs (c) and (d) of Section 1.1, Article
III, Section 4.8, and Section 4.9 shall survive the termination of this
Agreement.
Section 4.3. RULE 144. If the Company is required to file reports under
the Exchange Act, the Company will file in a timely manner, information,
documents and reports in compliance with the Securities Act and the Exchange Act
and will, at its expense, promptly take such further action as holders of
Registrable Securities reasonably may request to enable such holders of
Registrable Securities to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule
144 under the Securities Act ("Rule 144"), as such Rule may be amended from time
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to time, or (b) any similar rule or regulation hereafter adopted by the SEC. If
at any time the Company is not required to file such reports, it will, at its
expense, forthwith upon the written request of any holder of Registrable
Securities who intends to make a sale under Rule 144, make available adequate
current public information with respect to the Company within the meaning of
paragraph (c)(2) of Rule 144 or such other information as necessary to permit
sales pursuant to Rule 144. Upon the request of the Investor, the Company will
deliver to the Investor a written statement, signed by the Company's principal
financial officer, as to whether it has complied with such requirements. This
Section 4.3 shall terminate at the same time as the registration rights as
provided in Section 4.2.
Section 4.4. CERTIFICATE. The Company will, at its expense, forthwith
upon the request of any holder of Registrable Securities, deliver to such holder
a certificate, signed by the Company's principal financial officer, stating (a)
the Company's name, address and telephone number (including area code), (b) the
Company's Internal Revenue Service identification number, (c) the Company's SEC
file number, (d) the number of shares of each class of stock outstanding as
shown by the most recent report or statement published by the Company, and (e)
whether the Company has filed the reports required to be filed under the
Exchange Act for a
period of at least ninety (90) days prior to the date of such certificate and in
addition has filed the most recent annual report required to be filed
thereunder.
Section 4.5. AMENDMENT AND MODIFICATION. Any provision of this
Agreement may be waived, provided that such waiver is set forth in a writing
executed by both parties to this Agreement. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
holders of a majority of the then outstanding Registrable Securities.
Notwithstanding the foregoing, the waiver of any provision hereof with respect
to a matter that relates exclusively to the rights of holders of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and 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; provided that the provisions
of this sentence may not be amended, modified or supplemented except in
accordance with the provisions of the immediately preceding sentence. No course
of dealing between or among any Person having any interest in this Agreement
will be deemed effective to modify, amend or discharge any part of this
Agreement or any rights or obligations of any person under or by reason of this
Agreement.
Section 4.6. SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. The Investor
may assign its rights under this Agreement to any subsequent holder the
Registrable Securities, provided that the Company shall have the right to
require any holder of Registrable Securities to execute a counterpart of this
Agreement and agree to be bound by the provisions of this Agreement as a
condition to such holder's claim to any rights hereunder. This Agreement,
together with the Securities Purchase Agreement, the Convertible Note, the
Warrants and the exhibits and schedules to such agreements together set forth
the entire agreement and understanding between the parties as to the subject
matter hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
Section 4.7. SEVERABILITY. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall not be affected except to the extent necessary
to delete such illegal, invalid or unenforceable provision unless that provision
held invalid shall substantially impair the benefits of the remaining portions
of this Agreement.
Section 4.8. NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and shall be (i) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (ii) delivered by reputable air courier
service with charges prepaid, or (iii) transmitted by hand delivery, telegram or
facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the third business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
Dauphin Technology, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Investor:
Crescent International Ltd.
c/o GreenLight (Switzerland) SA
▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇/Maxi Brezzi
Telephone: ▇▇▇ ▇▇ ▇▇▇ ▇▇ ▇▇
Facsimile: ▇▇▇ ▇▇ ▇▇▇ ▇▇ ▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Either party hereto may from time to time change its address or
facsimile number for notices under this Section 4.8 by giving at least 10 days'
prior written notice of such changed address or facsimile number to the other
party hereto.
Section 4.9. GOVERNING LAW. This Agreement shall be construed under the
laws of the State of New York.
Section 4.10 HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this Agreement,
nor shall they affect their meaning, construction or effect.
Section 4.11. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute one and the same instrument.
Section 4.12. FURTHER ASSURANCES. Each party shall cooperate and take
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
Section 4.13. ABSENCE OF PRESUMPTION. This Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted.
Section 4.14. REMEDIES. In the event of a breach or a threatened breach
by any party to this Agreement of its obligations under this Agreement, any
party injured or to be injured by such breach will be entitled to specific
performance of its rights under this Agreement or to injunctive relief, in
addition to being entitled to exercise all rights provided in this Agreement and
granted by law. The parties agree that the provisions of this Agreement shall be
specifically enforceable, it being agreed by the parties that the remedy at law,
including monetary damages, for breach of any such provision may be inadequate
compensation for any loss.
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
CRESCENT INTERNATIONAL LTD.
By:
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Name:
Title:
DAUPHIN TECHNOLOGY, INC.
By:
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Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President