Exhibit 10.5
REGISTRATION RIGHTS AGREEMENT
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REGISTRATION RIGHTS AGREEMENT ("Agreement") made as of the 9th day of
April, 1999, by and between World Callnet, Inc., a Delaware corporation (the
"Company") and Eagle Equity I, L.P. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (each a "Purchaser"
and, collectively, the "Purchasers").
WITNESSETH
WHEREAS, the Company and the Purchasers have, simultaneously herewith,
entered into the Securities Purchase Agreement pursuant to which the Purchasers
are purchasing up to $500,000 principal amount of the Company's Unsecured Notes
and warrants to purchase up to 1,000,000 shares of the Company's common stock,
par value $.001 per share; and
WHEREAS, the Company has agreed to grant Purchasers certain "demand"
and "piggyback" registration rights with respect to the shares of the Company's
Common Stock (as defined below) issuable upon exercise of the Warrants (as
defined below).
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other valuable consideration the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
"Securities Act" (as defined herein).
"Common Stock" shall mean the Common Stock, $.001 par value per share,
of the Company, as constituted as of the date of this Agreement.
"Exchange Act" shall mean the United States Securities Exchange Act of
1934, as amended or any similar federal statue, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Measuring Date" shall be the date which is six months after the date
of this Agreement.
"Notes" shall mean the Company's 10% Unsecured Note issued pursuant to
the Securities Purchase Agreement.
"Requesting Purchaser" shall mean any Purchaser, or permitted assignee,
for whom Warrant Shares are being registered pursuant to Section 2 or 3
hereunder.
"Securities Purchase Agreement" shall mean the Securities Agreement
dated as of the date hereof between the Company and the Purchaser, a copy of
which is annexed hereto.
"Securities Act" shall mean the United States Securities Act of 1933,
as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
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"Warrants" shall mean the warrants to purchase up to 1,000,000 shares
of the Company's Common Stock issuable pursuant to the Securities Purchase
Agreement.
"Warrants Exercise Period" shall have the meaning ascribed thereto in
the Warrants.
"Warrants Shares" shall means the shares of Stock of the Company
issuable upon exercise of the Warrants and, to the extent issued, the Additional
Warrants.
2. Demand Registration.
(a) As soon as practicable following the Measuring Date and during the
Warrant Exercise Period, upon the Written request of Purchasers holding and/or
having the right to acquire 50% or more of the Warrant Shares, the Company
agrees, on one occasion, to use its best reasonable efforts to register the
Warrant Shares under the Securities Act and applicable state securities laws.
(b) Purchasers shall have an additional demand registration right in
the event that the Company exercises its "mandatory exercise rights" pursuant to
Section 8 of the Warrants.
(c) If, after a written request has been made pursuant to this
Agreement to register the Warrant Shares under the Securities Act and applicable
state securities laws, the Company fails to file the required registration
statement or if a registration statement is filed, but fails to become
effective, the Company agrees to extend the expiration period for the exercise
period for the Warrants until thirty (30) days following the registration of the
Warrant Shares or until the termination of the Company's obligations hereunder.
The extension of such expiration period shall not affect or diminish Purchaser's
other remedies at law or equity, if any, with respect to such failure to file
the registration statement or failure to have the registration statement
declared effective.
3. "Piggy-Back Registration"
(a) If within the Warrant Exercise Period, the Company at any time
proposes to file a registration statement to register any of its securities
under the Securities Act (except for a registration filed in connection with an
employee benefit plan, a transaction relating to a merger or business
combination, a transaction relating to an exchange offer, a transaction relating
with an acquisition of assets or securities, or a transaction otherwise
described in Rule 145 of the Securities Act), whether or not for sale for its
own account, it will each such time give written notice to the Purchaser of its
intention to do so. Upon the written request of a Purchaser (the "Requesting
Purchaser"), which request shall specify the number and manner of disposition of
the Warrant Shares intended to be disposed of by the Requesting Purchaser and
which request shall be given to the Company as promptly as practicable and in
any event within ten (10) days after the receipt of any such notice, the Company
will use reasonable efforts to effect the registration under the Securities Act
of all the Warrant Shares which the Company has been so requested to register by
the Requesting Purchaser (a "Piggy-Back Registration"). No registration effected
under this Section 3 shall relieve the Company of its obligation to effect any
registration upon request under Section 2 of this Agreement.
(b) If the managing underwriter of any underwritten offering shall
deliver a written statement to the Requesting Purchaser that in such
underwriter's opinion the total amount of Warrant Shares requested to be
included in such registration would have a material adverse effect on such
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offering, then the Company will include in such registration, to the extent of
the number which the Company is so advised can be sold in (or during the time
of) such offering, first, all securities proposed by the Company to be sold for
its own account and for the account of other persons and entities other than the
Company who are exercising their demand registration rights, and second, the
Warrant Shares requested to be included in such registration by the Requesting
Purchaser pursuant to this Agreement; provided, that if securities are being
offered for the account of other persons or entities who are not exercising
demand registration rights, such reduction in the number of Warrant Shares being
registered shall not represent a greater fraction of similar reductions imposed
on such other person or entities over the amount of securities they intended to
offer. Any Warrant Shares not registered pursuant to the provisions that this
Section 3(b) shall be subject to the provisions of Section 2(a) of this
Agreement.
(c) The Company shall not be obligated to include any Warrant Shares in
any registration statement filed for the benefit of any person or entity other
than the Company or the Purchasers wherein rights granted by the Company prior
to the date hereof prohibit such inclusion.
4. Registration Procedures. If and whenever the Company is required by
the provisions of this Agreement to use its reasonable best efforts to effect
the registration of any Warrant Shares under the Securities Act, the Company
will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement with
respect to such securities (on such applicable form as the Company may in its
sole discretion elect to use) and use its reasonable best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby, determined as hereinafter provided.
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in subsection (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all the Warrant Shares
covered by such registration statement in accordance with the Requesting
Purchaser's intended method of disposition set forth in such registration
statement for such period;
(c) furnish to the Requesting Purchaser such number of copies of the
registration statement and the prospectus included therein, including each
preliminary prospectus, as the Requesting Purchaser reasonably may request in
order to facilitate the public sale or other disposition of the Warrant Shares
covered by such registration statement;
(d) use its reasonable best efforts to register or qualify the Warrant
Shares covered by such registration statement under the securities or "blue sky"
laws of such jurisdictions as the Requesting Purchaser reasonably request and
keep such registration or qualification in effect for so long as such
registration statement remains in effect; and take any other action which may be
reasonably necessary or advisable to enable the Requesting Purchaser to
consummate the disposition in such jurisdictions of the Warrant Shares to be
sold by such Requesting Purchaser; provided, however, that the Company shall not
for any such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;
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(e) immediately notify the Requesting Purchaser at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event of which the Company has knowledge as a
result of which the prospectus contained 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 statement
therein not misleading in light of the circumstances then existing; and at the
request of the Requesting Purchaser promptly prepare and furnish to him a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Warrant Shares, such prospectus shall not include an untrue
statement of a material fact or omit to states a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(f) otherwise comply with all, applicable rules and regulations of the
Commission, and, if required, make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen months, beginning with the first full
calendar month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder, and promptly furnish to the
Requesting Purchaser a copy of any amendment or supplement to such registration
statement or prospectus;
(g) keep the Requesting Purchaser advised in writing as to the
initiation and progress of any registration statement covering the Warrant
Shares referred to in Section 2 or 3 hereunder;
(h) use its reasonable best efforts to include or list, as the case may
be, the Warrant Shares being registered on the automated quotation system of the
National Association of Securities Dealers, Inc. or the principal securities
exchange on which Common Stock of the Company is then quoted or listed;
(i) afford to the Requesting Purchaser an opportunity to make such
examination and inquiry into the financial position, business and affairs of the
Company and its subsidiaries as the Requesting Purchaser and his counsel as to
accuracy and completeness of the registration statement;
(j) deliver promptly to the Requesting Purchaser copies of all corres-
pondence between the Commission and the Company relating to the registration
statement; and
(k) use reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement (which in no event
shall require the Company to commence any judicial proceeding.)
For purposes of Sections 3(a) and 3(b) hereof, the period of
distribution of Warrant Shares shall be deemed to extend until the earlier of
the sale of all Warrant Shares covered by the Registration Statement or six
months after the effective date thereof.
In connection with registration hereunder, the Requesting Purchaser
shall furnish to the Company in writing such information with respect to himself
and the proposed distribution by him as shall be reasonably necessary in order
to assure compliance with federal and applicable state securities laws.
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5. Expenses. All expenses incurred by the Company in complying with
Sections 2, 3 and 4 hereof, including without limitation, all printing expenses,
fees and disbursement of counsel for the Company and independent public
accountants for the Company, fees and expenses, including counsel fees, incurred
in connection with complying with Sections 4(a) and (b) above, and all state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, fees and
disbursements of any special counsel to the Requesting Purchasers, and costs of
insurance are called "Registration Expenses." All selling commissions, and only
to the extent payment by the Company is specifically prohibited by applicable
federal or state law, and filing fees under the Securities Act or "blue sky"
laws applicable to the Warrant Shares, are called "Selling Expenses."
Notwithstanding the foregoing, the Company shall not be obligated to pay more
than $10,000 of the fees and disbursements of counsel to the Requesting
Purchasers in connection with the registration of the Warrant Shares. The
Company will pay all Registration Expenses in connection with each registration
statement hereunder. All Selling Expenses in connection with a registration
statement hereunder shall be borne by the Requesting Purchaser.
6. Underwritten Offerings. If the Company proposes to register any of
its securities under the Securities Act as contemplated by Section 3 and such
securities are to be distributed by or through one or more underwriters, the
Company will, if requested by the Requesting Purchaser, subject to the provision
of Section 3(b) hereof, use their reasonable efforts to arrange for such
underwriters to include all the Warrant Shares to be offered and sold by such
Requesting Purchaser among the securities of the Company to be distributed by
such underwriters. In such event, the Requesting Purchaser shall be a party to
the underwriting agreement between the Company and such underwriters and may, at
his option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of the Requesting
Purchaser and that any or all of the conditions precedent to the obligations of
such underwriters under such underwriting agreement be condition precedent to
the obligations of the Requesting Purchaser. The Requesting Purchaser shall not
be required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding the Requesting Purchaser, his Warrant Shares and his intended method
of distribution or any representations required by applicable law.
7. Rule 144 Reporting. With a view to making available to the
Purchasers the benefits of certain rules and regulations of the Commission which
may permit the sale of the Warrant Shares without registration, the Company
agrees to:
(a) make and keep public information available, as those terms
are used and defined in Commission Rule 144;
(b) use its reasonable best efforts to file with the
Commission in a timely manner all reports and other documents required by the
Company under the Exchange Act.
8. Indemnification and Contribution.
(a) In the event of a registration of any Warrant Shares under
the Securities Act pursuant to this Agreement, the Company will indemnify and
hold harmless the Requesting
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Purchaser, and each other person, if any, who controls such Requesting Purchaser
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Requesting Purchaser or such
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities, or actions in respect
thereof, arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such Warrant Shares was registered under the Securities Act pursuant to
this Agreement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Requesting Purchaser and each such controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case if and
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by the
Requesting Purchaser, or any such controlling person in writing specifically for
use in such registration statement or prospectus.
(b) In the event of a registration of any of the Warrant Shares under
the Securities Act pursuant to this Agreement, the Requesting Purchaser will
indemnify and hold harmless the Company, each person, if any, who control the
Company within the meaning of the Securities Act, each officer of the Company
who signs the registration statement and each director of the Company, against
all losses, claims, damages, or liabilities, joint or several, to which the
Company or such officer, director, or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities, or actions in respect thereof, arise out of or are based upon
any untrue statement or allege untrue statement of any material fact contained
in the registration statement under which such Warrant Shares were registered
under the Securities Act pursuant to this Agreement, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof ,
or arise out of or are based upon the omission or allege omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, and controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action, provided, however, that the
Requesting Purchaser will be liable hereunder in any such case if any only to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon an in conformity with information
pertaining to the Requesting Purchaser specifically for use in such registration
statement or prospectus; and provided further, however, that the liability of
the Requesting Purchaser shall be limited to the proportion of any such loss,
claim, damage, liability or expense which is equal to the proportion that the
public offering price of the shares sold by the Requesting Purchaser under such
registration statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the proceeds received
by the Requesting Purchaser from the sale of the Warrant Shares covered by such
registration statement.
(c) Promptly after receipt by a party indemnified hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but
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the omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to such indemnified party other than under this
Section 8 and shall only receive it from any liability which it may have to such
indemnified party under this Section 8 if an to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel reasonably satisfactory to such indemnified party and, after notice
from the indemnifying party to such indemnified party of its election so to
assume and undertake the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Section 8 for any legal expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected; provided, however, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified parties shall have the right to select one separate
counsel and to assume such legal defenses and otherwise to participate in the
defense of such action, with the expenses and fees of such separate counsel and
other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) If the indemnification provided for in this Section 8 shall for any
reason be held by a court to be unavailable to an indemnified party under
subparagraph (a) or (b) hereof in respect of any loss, claim, damage or
liability, or any action in respect thereof, then in lieu of the amount paid or
payable under subparagraph (a) or (b) hereof, shall contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating the same), (i) in such
proportion as is appropriate to reflect the relative fault of the Company and
the Requesting Purchaser which resulted in such equitable considerations or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as shall be appropriate to reflect the relative benefits
received by the Company and the Requesting Purchaser from the offering of the
securities covered by such registration statement; provided, however, that in
any such case, (x) the Requesting Purchaser will not be required to contribute
any amount in excess of the public offering price of all such Warrant Shares
offered by such Requesting Purchaser pursuant to such registration statement;
and (y) no person or entity guilty of fraudulent misrepresentation, within the
meaning of Section 11(f) of the Securities Act, will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
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9. Miscellaneous.
(a) The rights granted to the Purchaser hereunder may not be
assigned to any other person except in connection with an assignment of the
Warrants held by the Purchaser.
(b) All notices, requests, demands and other communications
which are required to be or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when (a) delivered in
person, (b) the day following dispatch by an overnight courier service (such as
Federal Express or UPS, etc.) or (c) five (5) days after dispatch by certified
or registered first class mail, postage prepaid, return receipt requested, to
the party to whom the same is so given or made:
if to the Company or to a Purchaser, at the address of such
party set forth in the Securities Purchase Agreement, dated of
even date herewith.
(c) All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal law, and not
the law of conflicts, of the State of Texas.
(d) This Agreement may not be amended or modified or otherwise
altered except pursuant to an instrument, in writing, signed by each of the
parties.
(e) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) The provisions of Sections 2 and 3 hereof to the contrary
notwithstanding, the Company's obligation to file a registration statement, or
cause such registration statement to become and remain effective, shall (i) not
apply if all of the Warrant Shares proposed to be sold by a Requesting Purchaser
can be sold pursuant to Rule 144 and (ii) shall be suspended for a period not to
exceed 90 days in any 12-month period if there exists at the time material
non-public information relating to the Company which, in the reasonable opinion
of counsel to the Company, should not be disclosed.
(g) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
(h) Each and every controversy or claim arising out of or
relating to this Agreement and/or any document executed or delivered in
connection herewith shall be settled by arbitration in accordance with the
commercial rules of the American Arbitration Association, in Dallas, Texas and
judgment upon the award rendered in such arbitration shall be final and binding
upon the parties and may be entered in any court having jurisdiction thereof.
Notice of the demand for arbitration shall be filed in writing with the other
party to this Agreement, which such demand
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shall set forth the claims to be submitted to arbitration. Notwithstanding the
foregoing, this Agreement to arbitrate shall not bar any party from seeking
injunctive relief or other temporary relief in any court of competent
jurisdiction. This Agreement to arbitrate may be specifically enforced by a
court of competent jurisdiction under the applicable law of the State of Texas
pertaining to arbitrations. The rules of the American Arbitration Association
concerning commercial disputes shall be applicable to any such arbitration
proceeding except as they may be modified by the terms of this Agreement. The
arbitrators shall have the authority and jurisdiction to enter any preliminary
award that would aid and assist the conduct of the arbitration or preserve the
parties' rights with respect to the arbitration as the arbitrators shall deem
appropriate in their discretion. The award of the arbitrators shall be in
writing and it shall specify in detail the issues submitted to arbitration and
the award of the arbitrators with respect to each of the issues so submitted.
The prevailing party as determined by the arbitrators shall be entitled to
recover from the losing party reasonable expenses, attorneys' fees and costs
incurred in connection therewith and in the enforcement or collection of any
judgment or award rendered therein. The prevailing party means the party
determined by the arbitrators to have most nearly prevailed, even if such party
does not prevail in all matters, or is not the party in whose favor an award is
rendered. Included within the cost recoverable pursuant to the terms of this
Section shall be included service of process costs, filing fees, arbitration
fees, arbitrators' fees, court and reporter costs, investigative costs, and
expert witness fees. The award pursuant to such arbitration will be final,
binding and conclusive. Upon final determination of the award, the party
determined obligated to pay will pay to the party determined entitled thereto,
within thirty (30) days of such final determination, the full amount, in cash,
of such award (which shall include such fees and costs as awarded by the
arbitrators). Counsel to the parties in connection with the negotiation of and
consummation of the transactions under this Agreement shall be entitled to
represent their respective party in any and all proceedings under this Section
or in any other proceeding (collectively, "Proceedings"). The parties hereto
waive the right and agree they shall not seek to disqualify any such counsel in
such proceedings for any reason, including but not limited to the fact that such
counsel or any member thereof may be a witness in any such Proceedings or
possess or have learned of information of a confidential or financial nature of
the party whose interests are adverse to the party represented by such counsel
in any such Proceedings.
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IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer, and each Purchaser has duly executed
this Agreement, as of the date first written above.
WORLD CALLNET, INC.
By:
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EAGLE EQUITY I, L.P.
By: Eagle Equity, Inc.
General Partner
By:
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Chairman/CEO
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