SENTO CORPORATION REGISTRATION RIGHTS AGREEMENT

SENTO CORPORATION

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of December 21, 2006 by and among Sento Corporation, a Utah corporation (“the Company”), each of the purchasers of the Company’s Series B Convertible Participating Preferred Stock set forth on Exhibit A hereto (referred to as the “Investors”, or individually as an “Investor”).

RECITALS

 

WHEREAS, the Company proposes to sell and issue to the Investors 3,000 shares of its Series B Convertible Participating Preferred Stock (“Series B Preferred”) pursuant to a Series B Convertible Participating Preferred Stock Purchase Agreement (the “Series B Purchase Agreement”).

NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants and conditions set forth in this Registration Rights Agreement and the Series B Purchase Agreement the parties mutually agree as follows:

•      Registration. The terms “register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act (as defined herein), and the declaration or ordering of effectiveness of such registration statement.

•      Registrable Securities. The term “Registrable Securities” means: (1) all the shares of Common Stock of the Company issued or issuable upon the conversion of any shares of Series B Preferred, or upon the exercise of any Warrants, (2) any shares of Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, all such shares of Common Stock described in clause (1) of this subsection (b), and (3) any other shares of Common Stock held by the Investors (excluding any shares acquired in ordinary trading transactions in the public securities markets); excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which rights under this Section 1 are not assigned in accordance with this Agreement or any Registrable Securities sold to the public or sold pursuant to Rule 144 promulgated under the Securities Act.

•      Registrable Securities Then Outstanding. The number of shares of “Registrable Securities then outstanding” will mean the number of shares of Common Stock which are Registrable Securities and (1) are then issued and outstanding or (2) are then issuable pursuant to the exercise or conversion of then outstanding and then exercisable options, warrants or other convertible or exchangeable securities.

•      Holder. For purposes of this Agreement, the term “Holder” means any person owning of record Registrable Securities or any assignee of record of such Registrable Securities to whom rights under this Section 1 have been duly assigned in accordance with this Agreement; provided, however, that the Company will in no event be obligated to register shares of Series B Preferred that have not been converted into shares of Common Stock, and provided further that Holders of Registrable

 

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Securities will not be required to convert their shares of Series B Preferred into Common Stock in order to exercise the registration rights granted hereunder, until immediately before the closing of the offering to which the registration relates.

•      Form S-3. The term “Form S-3” means such form under the Securities Act as is in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.

•      SEC. The term “SEC” or “Commission” means the U.S. Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

•      Securities Act. The term “Securities Act” means the Securities Act of 1933, as amended, or any similar federal statute and rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

•      Request by Holders. At any time two years after the date of this Agreement, or in the case of an underwritten offering, at any time one year after the date of this Agreement, upon receipt by the Company of a written request from the Holders of at least fifty (50%) percent of the Registrable Securities then outstanding that the Company file a registration statement under the Securities Act covering the registration of an amount of Registrable Securities with respect to at least 50% of the outstanding Registrable Securities, then the Company will, within ten (10) business days of the receipt of such written request, give written notice of such request (“Request Notice”) to all Holders, and use its best efforts to effect, as soon as practicable, the registration under the Securities Act of all Registrable Securities which the Holders request to be registered and included in such registration by written notice given by such Holders to the Company within twenty (20) days after receipt of the Request Notice, subject only to the limitations of this Section 1.2; provided, however, that the Company shall not be required to comply with a Request Notice of Registrable Securities having a value of less than $750,000.

•      Underwriting. If the Holders initiating the registration request under this Section 1.2 (“Initiating Holders”) intend to distribute the Registrable Securities covered by their request by means of an underwriting, then they will so advise the Company as a part of their request made pursuant to this Section 1.2 and the Company will include such information in the written notice referred to in subsection 1.2(a). In such event, the right of any Holder to include his Registrable Securities in such registration will be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting will enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting by the Company, subject to the approval of a majority of the Holders which shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, with respect to the underwriting agreement or any other documents reasonably required under such agreement, (i) no Holder shall be required to make any representation or warranty with respect to or on behalf of the Company or any other shareholder of the Company and (ii) the liability of any Holder shall be limited as provided in Section 1.7(b) hereof. Notwithstanding any other provision of this Section 1.2, if the managing underwriter advises the Company in writing that in its opinion the number of securities requested to be included in the registration creates a substantial risk that the price per share of Common Stock will be reduced, then the

 

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Company will so advise all Holders of Registrable Securities which would otherwise be registered and underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting will be reduced as required by the underwriter(s) and allocated among the Holders of Registrable Securities on a pro rata basis according to the number of Registrable Securities then outstanding held by each Holder requesting registration (including the Initiating Holders); provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration will not be reduced unless all securities other than Registrable Securities are first entirely excluded from the underwriting and registration. Any Registrable Securities excluded and withdrawn from such underwriting will be withdrawn from the registration.

If any Holder of Registrable Securities disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice, on or before the fifth (5^th) day prior to the effectiveness of the registration statement, to the Company, the managing underwriter and the other Holders.

•      Maximum Number of Demand Registrations. The Company is obligated to effect only two (2) demand registrations pursuant to this Section 1.2; provided, that a demand registration pursuant to this Section 1.2 will not count for the purposes of this Section 1.2(c) unless at least eighty percent (80%) of all Registrable Securities requested to be registered in such demand registration are, in fact, registered and sold in such registration.

•      Deferral. Notwithstanding the foregoing, the Company is not obligated to effect a registration pursuant to this Section 1.2 during the 90-day period commencing on the effective date of the Company’s registration statement in connection with a firm commitment underwritten public offering. In addition, if the Company shall furnish to the Initiating Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to the Company or its shareholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, then the Company shall have the right to defer such filing for a period of not more than ninety (90) days from the date of receipt of the request of the Initiating Holders; provided, however, that the Company shall not exercise such right more than once in any twelve (12) month period.

•      Expenses. All expenses incurred in connection with a registration pursuant to this Section 1.2, including without limitation all registration and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company, and reasonable fees and expenses of one (1) special counsel for the Holders selected by the holders of a majority of the Registrable Securities included in the offering (but excluding underwriters’ discounts and commissions), will be borne by the Company. Each Holder participating in a registration pursuant to this Section 1.2 will bear such Holder’s proportionate share (based on the total number of shares sold in such registration other than for the account of the Company) of all discounts, commissions or other amounts payable to underwriters or brokers in connection with such offering and the fees and disbursements of any counsel for the participating Holders other than the special counsel for the Holders set forth in the previous sentence.

•      Notice of Registration. The Company will notify all Holders of Registrable Securities in writing at least thirty (30) days prior to filing any registration statement under the Securities Act for purposes of effecting a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements relating to (i) any registration under Section 1.2 or Section 1.4 of this Agreement,

 

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(ii) a registration relating solely to employee benefit plans, and (iii) a registration solely relating to a Commission Rule 145 transaction), and will afford each such Holder an opportunity to include in such registration statement all or any part of the Registrable Securities then held by such Holder (a “Piggyback Registration”). Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by such Holder will, within twenty (20) days after receipt of the above-described notice from the Company, so notify the Company in writing, and in such notice will inform the Company of the number of Registrable Securities such Holder wishes to include in such registration statement. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, such Holder will nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

•      Priority on Primary Registrations. Subject to Section 1.3(d), if a Piggyback Registration is an underwritten primary registration on behalf of the Company and the managing underwriter advises the Company in writing that in its opinion the number of securities requested to be included in the registration creates a substantial risk that the price per share of Common Stock will be reduced, then the managing underwriter may exclude shares (including Registrable Securities) from the registration and the underwriting, and the number of shares that may be included in such registration and underwriting shall include, first, the securities that the Company proposes to sell, second, the Registrable Securities requested to be included in such registration, pro rata among the Holders of such Registrable Securities on the basis of the number of shares which are owned by such Holders, and third, other securities requested to be included in such registration; provided, however, in any registration subject to this Section 1.3(b), the right of the managing underwriter to exclude shares (including Registrable Securities) from the registration and underwriting as described above will be restricted so that the number of Registrable Securities included in any such registration is not reduced below twenty-five percent (25%) of the shares included in the registration.

•      Priority on Secondary Registrations. Subject to Section 1.3(d), if a Piggyback Registration is an underwritten secondary registration on behalf of Holders of the Company’s securities and the managing underwriter advises the Company in writing that in its opinion the number of securities requested to be included in the registration creates a substantial risk that the price per share of Common Stock will be reduced, then the managing underwriter may exclude shares (including Registrable Securities) from the registration and the underwriting, and the number of shares that may be included in such registration and underwriting shall include, first, the securities requested to be included therein by the Holders requesting such registration and the Registrable Securities requested to be included in such registration, pro rata among the Holders of such securities on the basis of the number of shares of Common Stock or Registrable Securities which are owned by such Holders, and second, other securities requested to be included in such registration; provided, however, the right of the managing underwriter to exclude shares (including Registrable Securities) from the registration and underwriting as described above will be restricted so that the number of Registrable Securities included in any such registration is not reduced below twenty-five percent (25%) of the shares included in the registration.

•      Underwriting. If a registration statement under which the Company gives notice under this Section 1.3 is for an underwritten offering, then the Company will so advise the Holders of Registrable Securities. In such event, the right of any such Holder’s Registrable Securities to be included in a registration pursuant to this Section 1.3 will be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting will enter into an underwriting agreement in customary form with the lead underwriter or

 

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underwriter(s) selected for such underwriting by the Company and approved by a majority of the Holders proposing to distribute their securities through such underwriting. Notwithstanding the foregoing, with respect to the underwriting agreement or any other documents reasonably required under such agreement, (i) no Holder shall be required to make any representation or warranty with respect to or on behalf of the Company or any other stockholder of the Company and (ii) the liability of any holder shall be limited as provided in Section 1.7(b) hereof. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least five (5) days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting will be excluded and withdrawn from the registration. For any Holder which is a partnership or corporation, the partners, retired partners and shareholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons will be deemed to be a single “Holder”, and any pro rata reduction with respect to such “Holder” will be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such “Holder”, as defined in this sentence.

•      Expenses. All expenses incurred in connection with a registration pursuant to this Section 1.3 (excluding underwriters’ and brokers’ discounts and commissions), including, without limitation all federal and “blue sky” registration and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company and the reasonable expenses of one (1) counsel for the selling Holders will be borne by the Company.

•      Form S-3 Registration. In case the Company will receive a written request from any Holder of the Registrable Securities then outstanding that the Company effect a registration of securities, with an anticipated aggregate offering price of at least $1,000,000, on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, then the Company will:

•      Notice. Promptly give written notice of the proposed registration and the Holder’s or Holders’ request therefor, and any related qualification or compliance, to all other Holders of Registrable Securities; and

•      Registration. As soon as practicable and in any event not later than sixty (60) days after the Company’s receipt of the Holder’s request therefor, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder’s or Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within twenty (20) days after receipt of such written notice from the Company; provided, however, that the Company will not be obligated to effect any such registration, qualification or compliance pursuant to this Section 1.4:

(i)           if Form S-3 is not available for such offering by the Holders; or

•      Expenses. The Company will pay all expenses incurred in connection with any registration requested pursuant to this Section 1.4, including without limitation any filing, registration and qualification, printers’ or accounting fees or the reasonable fees and disbursements for one (1) counsel to the Holders.

 

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•      Not Demand Registration. Form S-3 registrations will not be deemed to be demand registrations for purposes of Section 1.2 above.

•      Obligations of the Company. Whenever required to effect the registration of any Registrable Securities under this Agreement, the Company will, as expeditiously as reasonably possible:

•      Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to be declared effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective until the earlier of two (2) years or until all of the Registrable Securities covered thereby shall have been sold by the Holders.

•      Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.

•      Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act and the rules and regulations of the Commission promulgated thereunder, and such other documents as such Holders may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Holders that are included in such registration.

•      Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as will be reasonably requested by the Holders, provided that the Company will 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.

•      In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering.

•      Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act due to the occurrence of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.

•      Furnish, at the request of any Holder requesting registration of Registrable Securities, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) a “comfort” letter dated as of such date, from the independent certified public auditors of the Company, in form and substance as is customarily given by independent certified public auditors to

 

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underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities.

•      Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed.

•      Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

•      Make available for inspection by any Holder of Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement, and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement, provided, however, to the extent that such information is confidential, that such individual agrees to enter into an appropriate and reasonable agreement regarding the confidentiality of such information.

•      Advise each Holder of such Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such registration statement or the initiation or threatening of any proceeding for such purpose and promptly use all reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued.

•      Make senior executives of the Company reasonably available to assist the underwriters with respect to, and accompany the underwriters on the so-called “road show”, in connection with the marketing efforts for, and the distribution and sale of Registrable Shares pursuant to a registration statement.

•      Furnish Information. It will be a condition precedent to the obligations of the Company to take any action pursuant to Sections 1.2, 1.3 or 1.4 that the selling Holders will furnish to the Company such information regarding themselves, the Registrable Securities held by them, and the intended method of disposition of such securities as will be reasonably required to timely effect the registration of their Registrable Securities.

•      Indemnification. In the event any Registrable Securities are included in a registration statement under Sections 1.2, 1.3 or 1.4:

•      By the Company. To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the equity holders, officers, directors, employees, agents and advisors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (the “1934 Act”), against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”):

 

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(i)           any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto;

(ii)          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)         any violation or alleged violation by the Company of the Securities Act, the 1934 Act, any federal or state securities law or any rule or regulation promulgated under the Securities Act, the 1934 Act or any federal or state securities law in connection with the offering covered by such registration statement; and the Company will reimburse each such Holder, partner, officer or director, underwriter or controlling person for any legal or other expenses reasonably incurred by them, as incurred, in connection with investigating or defending any such loss, claim, damage, liability or action; provided however, that the indemnity agreement contained in this subsection 1.7(a) will 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 will not be unreasonably withheld), nor will the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises directly out of or is based directly upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, officer, director, underwriter or controlling person of such Holder.

•      By Selling Holders. To the extent permitted by law, each selling Holder, severally and not jointly, will 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, any underwriter and any other Holder selling securities under such registration statement and any of such other Holder’s equity holders, directors, officers, employees, agents and any person who controls such Holder within the meaning of the Securities Act or the 1934 Act, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, underwriter or other such Holder, partner or director, officer or controlling person of such other Holder may become subject under the Securities Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, partner, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection 1.7(b) will 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 Holder, which consent will not be unreasonably withheld; and provided further, that the total amounts payable in indemnity by a Holder under this Section 1.7(b) in respect of any Violation will not exceed the net proceeds received by such Holder in the registered offering out of which such Violation arises.

•      Notice. Promptly after receipt by an indemnified party under this Section 1.7 of notice of the commencement of any action (including any governmental action), such indemnified

 

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party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.7, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party will have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party will have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential conflict of interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, unless materially prejudicial to its ability to defend such action, will not relieve such indemnifying party of any liability to the indemnified party under this Section 1.7.

•      Defect Eliminated in Final Prospectus. The foregoing indemnity agreements of the Company and Holders are subject to the condition that, insofar as they relate to any Violation made in a preliminary prospectus but eliminated or remedied in the amended prospectus on file with the SEC at the time the registration statement in question becomes effective or the amended prospectus filed with the SEC pursuant to SEC Rule 424(b) (the “Final Prospectus”), such indemnity agreement will not inure to the benefit of any person if a copy of the Final Prospectus was furnished to the indemnified party and was furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act.

•      Contribution. If the indemnification provided for in this Section 1.7 from the indemnifying party is unavailable to or unenforceable by the indemnified party in respect to any costs, fines, penalties, losses, claims, damages, liabilities or expenses 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 costs, fines, penalties, losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the costs, fines, penalties, losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in this Section 1.7, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. Notwithstanding the foregoing, the total amounts contributed by a Holder under this Section 1.7(e) will not exceed the net proceeds received by such Holder in the registered offering out of which such Violation arises.

(i)           the Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 1.7(e) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the immediately preceding paragraph. No person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.

 

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(ii)          If indemnification is available under this Section 1.7, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 1.7 without regard to the relative fault of the indemnifying party or indemnified party or any other equitable consideration provided for in this Section 1.7(e).

•      Survival. The obligations of the Company and Holders under this Section 1.7 will survive the completion of any offering of Registrable Securities in a registration statement, and otherwise. The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Party or any officer, director or controlling person of such Indemnified Party and will survive the transfer of securities.

•      Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Registrable Securities to the public without registration, when a public market exists for the Common Stock of the Company, the Company agrees to:

•      Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times;

•      Subject to the provisions in Section 1.4, take such action as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities;

•      Use its best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the 1934 Act; and

•      So long as a Holder owns any Registrable Securities, to furnish to the Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 and of the Securities Act and the 1934 Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration.

•      No Inconsistent Agreements. The Company has not entered, and will not hereafter enter, into any agreement with respect to its securities which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement. To the extent that the Company, on or after the date hereof, grants any such superior or more favorable rights or terms relating to the subject matter of this Agreement to any person than those provided to the Holders of Registrable Shares as set forth herein, any such superior or more favorable rights or terms shall also be deemed to have been granted simultaneously to the Holders of Registrable Securities.

•      Adjustments Affecting Registrable Securities. The Company will not take any action, or permit any change to occur, with respect to its Articles of Incorporation or Bylaws which would reasonably be expected to adversely affect the ability of the Holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement or which would reasonably be expected to adversely affect the marketability of such Registrable Securities in any such registration.

•      Other Registration Rights. The Company will not hereafter, without the consent of the Holders of a majority of the Registrable Securities then outstanding, grant to any person (or persons) or entity (or entities) the right to request the Company to register any equity securities of the Company, or

 

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any securities convertible or exchangeable into or exercisable for such securities, or to participate in any registration, which right conflicts or interferes with any of the rights granted hereunder or to the extent such participation rights provide for the inclusion of securities on a parity with or prior to the inclusion of Registrable Securities. The Company will not include in any registration pursuant to Section 1.2 any securities which are not Registrable Securities (for the purposes of Section 1.2) unless and until all Registrable Securities requested to be registered have first been so included.

•      Assignment. Each Investor’s rights hereunder, and the rights of any of such Investor’s permitted assigns, may only be assigned to a party who acquires in aggregate at least 50 shares of Series B Preferred or Warrants to purchase 16,250 shares of Common Stock, or such lesser amount if it represents such Investor’s entire holdings; provided, however that no party may be assigned any of the foregoing rights unless the Company is given written notice by the assigning party at the time of such assignment stating the name and address of the assignee and identifying the securities of the Company as to which the rights in question are being assigned; and provided further that any such assignee will receive such assigned rights subject to all the terms and conditions of this Agreement, including without limitation, the provisions of this Section 2. Notwithstanding the foregoing, an Investor may assign its rights hereunder to a Permitted Transferee without restriction as to minimum shareholdings. “Permitted Transferee” means (a) in the case of an Investor that is a partnership, (1) any constituent partner of such partnership and (2) any affiliated partnership, limited liability company or other entity managed by the same management company or general partner or any affiliate of such management company or general partner, and, (b) in the case of an Investor that is a limited liability company, (1) any member of such limited liability company and (2) any affiliated limited liability company, partnership or other entity managed by the same management company or member or any affiliate of such management company or member, (c) any affiliate (as that term is defined in Rule 405 promulgated by the Commission under the Securities Act) of the applicable person, (d) in the case of an Investor that is a corporation, any officer, director or principal shareholder thereof, (e) in the case of an Investor that is an individual, the spouse, children, grandchildren or spouse of such children or grandchildren of such person or to pension or benefit plans or trusts for the benefit of such person or such person’s spouse, children, grandchildren or spouse of such children or grandchildren and (f) in the case of an Investor that is a trust, any beneficiary of such trust. Notwithstanding the foregoing, any transfer in accordance with this Section 2.1, including any transfer to a Permitted Transferee, will require a written agreement by such transferee to be bound by the terms of this Agreement.

•      Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Investors (and/or any of their permitted successors or assigns) holding a majority of the outstanding shares of Series B Preferred and a majority of the outstanding Warrants (including for each purpose any Conversion Shares or Warrant Shares). Any amendment or waiver effected in accordance with this Section 2.2 will be binding upon the Investor, each Holder, each permitted successor or assignee of the Investor or such Holder and the Company.

•      Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified; (ii) when sent by

 

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confirmed telex, facsimile or electronic mail if sent during normal business hours of the recipient, if not, then on the next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company and each Investor at the address as set forth on the signature page hereof or at such other address as the Company or an Investor may designate by ten (10) days advance written notice to the other parties hereto.

•      Entire Agreement. This Agreement and the Exhibits hereto, along with the Series B Purchase Agreement and the Investment Documents (as defined in the Series B Purchase Agreement) and each of the Exhibits thereto, constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein (provided that nothing in this Section shall deprive any party of the benefit of any representations, warranties, covenants or agreements to which they currently may be entitled under any provisions of the Series B Purchase Agreement).

•      Governing Law; Waiver of Jury Trial. This Agreement will be governed by and construed exclusively in accordance with the substantive laws of the State of New York as applied to agreements among New York residents entered into and to be performed entirely within New York, excluding that body of law relating to conflict of laws and choice of law. THE INVESTORS AND THE COMPANY HEREBY EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT, POWER, OR REMEDY UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE INVESTMENT DOCUMENTS OR UNDER OR IN CONNECTION WITH ANY AMENDMENT, INSTRUMENT, DOCUMENT, OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY INVESTMENT DOCUMENT, AND AGREE THAT ANY SUCH ACTION SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THE TERMS AND PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.

•      Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, then such provision(s) will be excluded from this Agreement and the balance of this Agreement will be interpreted as if such provision(s) were so excluded and will be enforceable in accordance with its terms.

•      Third Parties. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties hereto and their successors and assigns, any rights or remedies under or by reason of this Agreement, other than any persons who are indemnified parties pursuant to Section 1.7(a) or 1.7(b).

•      Successors and Assigns. Subject to the provisions of Section 2.1, the provisions of this Agreement will inure to the benefit of, and will be binding upon, the successors and permitted assigns of the parties hereto.

 

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•      Captions. The captions to sections of this Agreement have been inserted for identification and reference purposes only and will not be used to construe or interpret this Agreement.

•      Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

•      Aggregation of Stock. All shares held or acquired by affiliated entities or persons will be aggregated together for the purpose of determining the availability of any rights under this Agreement.

•      Trustee Exculpation. The execution of this Agreement by a trustee on behalf of a trust shall not create any liability of, or require performance of any covenant or agreement by the trustee individually, such liability being limited to the assets of the trust on behalf of which this Agreement is being executed by a trustee.

IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION RIGHTS AGREEMENT as of the date set forth below to be effective as of the date set forth in the first paragraph hereof.

 

 

By:    

 

IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION RIGHTS AGREEMENT as of the date set forth below to be effective as of the date set forth in the first paragraph hereof.

 

 

By:    

 

IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION RIGHTS AGREEMENT as of the date set forth below to be effective as of the date set forth in the first paragraph hereof.

 

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By:    

 

 

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IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION RIGHTS AGREEMENT as of the date set forth below to be effective as of the date set forth in the first paragraph hereof.

 

 

By:    

By:    

 

IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION RIGHTS AGREEMENT as of the date set forth below to be effective as of the date set forth in the first paragraph hereof.

 

 

By:    

 

IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION RIGHTS AGREEMENT as of the date set forth below to be effective as of the date set forth in the first paragraph hereof.

 

 

By:    

 

 

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IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION RIGHTS AGREEMENT as of the date set forth below to be effective as of the date set forth in the first paragraph hereof.

 

 

By:    

 

IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION RIGHTS AGREEMENT as of the date set forth below to be effective as of the date set forth in the first paragraph hereof.

 

 

By:   

 

IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION RIGHTS AGREEMENT as of the date set forth below to be effective as of the date set forth in the first paragraph hereof.

 

 

 

 

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IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION RIGHTS AGREEMENT as of the date set forth below to be effective as of the date set forth in the first paragraph hereof.

 

 

By: 

 

IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION RIGHTS AGREEMENT as of the date set forth below to be effective as of the date set forth in the first paragraph hereof.

 

 

By: 

 

IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION RIGHTS AGREEMENT as of the date set forth below to be effective as of the date set forth in the first paragraph hereof.

 

 

By:    

 

By:    

 

REGISTRATION RIGHTS AGREEMENT

 

EXHIBIT A

 

 

 

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