EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of this 12th day
of February, 1999 (this "Agreement"), between DynamicWeb
Enterprises, Inc., a New Jersey Corporation, with principal
offices located at Fairfield Commons, 271 Route ▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇
▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and the
undersigned (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of
the Securities Purchase Agreement dated as of February 12, 1999,
between the Initial Investor and the Company (the "Securities
Purchase Agreement"), the Company has agreed to issue and sell to
the Initial Investor (i) 1,500 shares of Series B 6% Convertible
Preferred Stock, $.001 par value (the "Preferred Stock") which,
upon the terms and subject to the conditions thereof, are
convertible into shares of the common stock, $.0001 par value, of
the Company (the "Common Stock") and (ii) warrants ("Warrants") to
purchase 135,000 shares of Common Stock in two tranches, the First
Tranche and the Second Tranche; and
; and
WHEREAS, to induce the Initial Investor to execute and
deliver the Securities Purchase Agreement, the Company has agreed
to provide with respect to the Common Stock issued or issuable in
lieu of cash dividend payments on the Preferred Stock, upon
conversion of the Preferred Stock and exercise of the Warrants
certain registration rights under the Securities Act;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms
shall have the meanings:
(i) "Affiliate" of any specified Person means any
other Person who directly, or indirectly through one or more
intermediaries, is in control of, is controlled by, or is
under common control with, such specified Person. For
purposes of this definition, control of a Person means the
power, directly or indirectly, to direct or cause the
direction of the management and policies of such Person
whether by contract, securities, ownership or otherwise; and
the terms "controlling" and "controlled" have the
respective meanings correlative to the foregoing.
(ii) "Commission" means the Securities and Exchange
Commission.
(iii) "Current Market Price" on any date of
determination means the closing price of a Common Share on
such day as reported on the National Association of
Securities Dealers, Inc. Over the Counter Bulletin Board
System (the "NASD/BBS"), or, if such security is not listed
or admitted to trading on the NASD/BBS, on the principal
national security exchange or quotation system on which such
security is quoted or listed or admitted to trading, or, if
not quoted or listed or admitted to trading on any national
securities exchange or quotation system, the closing price of
such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting
service, or if not so available, in such manner as furnished
by any Nasdaq member firm of the NASD selected from time to
time by the Board of Directors of the Company for that
purpose, or a price determined in good faith by the Board of
Directors of the Company as being equal to the fair market
value thereof, as the case may be.
(iv) "Exchange Act" means the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the
Commission thereunder, or any similar successor statute.
(v) "Investors" means the Initial Investor and any
transferee or assignee of Registrable Securities who agrees
to become bound by all of the terms and provisions of this
Agreement in accordance with Section 8 hereof.
(vi) "Person" means any individual, partnership,
corporation, limited liability company, joint stock company,
association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
(vii) "Prospectus" means the prospectus
(including, without limitation, any preliminary prospectus
and any final prospectus filed pursuant to Rule 424(b) under
the Securities Act, including any prospectus that discloses
information previously omitted from a prospectus filed as
part of an effective registration statement in reliance on
Rule 430A under the Securities Act) included in the
Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered
by the Registration Statement and by all other amendments and
supplements to such prospectus, including all material
incorporated by reference in such prospectus and all
documents filed after the date of such prospectus by the
Company under the Exchange Act and incorporated by
reference therein.
(viii) "Registrable Securities" means the Common
Stock issued or issuable (i) in lieu of cash dividend
payments on the Preferred Stock, (ii) upon conversion of the
Preferred Stock or (iii) upon exercise of the Warrants;
provided, however, a share of Common Stock shall cease to be
a Registrable Security for purposes of this Agreement when it
no longer is a Restricted Security.
(ix) "Registration Statement" means a registration
statement of the Company filed on an appropriate form under
the Securities Act providing for the registration of, and the
sale on a continuous or delayed basis by the holders of, all
of the Registrable Securities pursuant to Rule 415 under the
Securities Act, including the Prospectus contained therein
and forming a part thereof, any amendments to such
registration statement and supplements to such Prospectus,
and all exhibits and other material incorporated by reference
in such registration statement and Prospectus.
(x) "Restricted Security" means any share of
Common Stock issued or issuable in lieu of cash dividend
payments on the Preferred Stock, upon conversion of the
Preferred Stock or exercise of the Warrants except any such
share that (i) has been registered pursuant to an effective
registration statement under the Securities Act and sold in a
manner contemplated by the Prospectus included in the
Registration Statement, (ii) has been transferred in
compliance with the resale provisions of Rule 144 under the
Securities Act (or any successor provision thereto) or is
transferable pursuant to paragraph (k) of Rule 144 under the
Securities Act (or any successor provision thereto), or (iii)
otherwise has been transferred and a new share of Common
Stock not subject to transfer restrictions under the
Securities Act has been delivered by or on behalf of the
Company.
(xi) "Securities Act" means the Securities Act of
1933, as amended, and the rules and regulations of the
Commission thereunder, or any similar successor statute.
(b) All capitalized terms used and not defined herein
have the respective meaning assigned to them in the Securities
Purchase Agreement.
2. Registration.
(a) Filing and Effectiveness of Registration Statement.
The Company shall prepare and file with the Commission not later
than the 45th day after the Initial Funding Date, a Registration
Statement relating to the offer and sale of the Registrable
Securities and shall use its best efforts to cause the Commission
to declare such Registration Statement effective under
the Securities Act as promptly as practicable but not later than
120 days after the Initial Funding Date (as defined in the
Securities Purchase Agreement), assuming for purposes hereof a
Conversion Price under the Preferred Stock of $2.00 per share.
The Company shall not include any other securities in the
Registration Statement relating to the offer and sale of the
Registrable Securities. The Company shall notify the Initial
Investor by written notice that such Registration Statement has
been declared effective by the Commission within 24 hours of such
declaration by the Commission.
(b) Registration Default. If the Registration
Statement covering the Registrable Securities required to be filed
by the Company pursuant to Section 2(a) hereof is not (i) filed
with the Commission by the 45th day after the Initial Funding Date
or (ii) declared effective by the Commission within 120 days after
the Initial Funding Date (either of which, without duplication, an
"Initial Date"), then the Company shall make the payments to the
Initial Investor as provided in the next sentence as liquidated
damages and not as a penalty. The amount to be paid by the
Company to the Initial Investor shall be determined as of each
Computation Date, and such amount shall be equal to 2% (the
"Liquidated Damage Rate") of the Purchase Price per share of
Preferred Stock (as defined in the Securities Purchase Agreement)
from the Initial Date to the first Computation Date and for each
Computation Date thereafter, calculated on a pro rata basis to the
date on which the Registration Statement is filed with (in the
event of an Initial Date pursuant to (c)(i) above) or declared
effective by (in the event of an Initial Date pursuant to (c)(ii)
above) the Commission (the "Periodic Amount"); provided, however,
that in no event shall the liquidated damages be less than $30,000
and; further provided, that if the Registration Statement covering
the Registrable Securities required to be filed by the Company
pursuant to Section 2(a) hereof is not declared effective by the
Commission within 150 days after the Initial Funding Date, then
the Liquidated Damage Rate shall be increase to 3% and; further
provided, however, that the Liquidated Damage Rate shall increase
by 1% for each 30 day period after the 180th day after the Initial
Funding Date that the Registration Statement covering the
Registrable Securities required to be filed by the Company
pursuant to Section 2(a) hereof is not declared effective by the
Commission. The full Periodic Amount shall be paid by the Company
to the Initial Investor by wire transfer of immediately available
funds within three days after each Computation Date.
As used in this Section 2(b), "Computation Date" means
the date which is 30 days after the Initial Date and, if the
Registration Statement required to be filed by the Company
pursuant to Section 2(a) has not theretofore been declared
effective by the Commission, each date which is 30 days after the
previous Computation Date until such Registration Statement is so
declared effective.
Notwithstanding the above, the Company and Initial
Investor recognize that recent changes in the rules and
regulations for filing a Registration Statement have made it
difficult to determine the time within which the Commission will
declare a Registration Statement effective. The parties believe
that, under normal circumstances, 120 days from the Initial
Funding Date is a reasonable time within which to cause a
Registration Statement to become effective and to impose
liquidated damages against the Company if it fails to meet such a
reasonable requirement. Notwithstanding the foregoing, the
Company will not be liable for liquidated damages if the
Registration Statement is not declared effective by the Commission
within 120 days from the Initial Funding Date; provided, that,
(i) the Company has filed a Registration Statement
within 45 days of the date of the Initial Funding
Date;
(ii) the Company has made a good faith effort to comply
with all Commission rules and regulations with
respect to the filing, including without
limitation, all "plain english" rules;
(iii) the Company has responded to any and all comments
received from the Commission with respect to the
filing of the Registration Statement or any
Amendment thereto within a reasonable time and in
no event longer than 10 days from the date of
receipt of the comments;
(iv) the Company has otherwise acted in good faith in
its attempt to cause the Registration Statement to
be declared effective in a timely manner; and
(v) the Registration Statement is declared effective
by the Commission within 150 days of the Initial
Funding Date.
Provided further, however, that if the Registration Statement is
not declared effective by the Commission within such 150 day
period, the Company shall be liable for liquidated damages from
the 120th day after the Initial Funding Date pursuant to the first
paragraph of this Section 2(b).
Notwithstanding the above, if the Registration Statement
covering the Registrable Securities required to be filed by the
Company pursuant to Section 2(a) hereof is not filed with the
Commission by the 45th day after the Initial Funding Date or if
the Registration Statement covering the Additional Registrable
Securities (as defined in Section 2(d) hereof) required to be
filed by the Company pursuant to Section 2(d) hereof is not filed
with the Commission within 45 days after the Current Market Price
declines to $4.00 or less to the extent required by the Securities
Act (because the additional shares were not covered by the
Registration Statements filed pursuant to Sections 2(a)),
the Company shall be in default of this Registration Rights
Agreement.
(c) Eligibility for Use of Form S-2. The Company
agrees that at such time as it meets all the requirements for the
use of Securities Act Registration Statement on Form S-2 it shall
file all reports and information required to be filed by it with
the Commission in a timely manner and take all such other action
so as to maintain such eligibility for the use of such form.
(d) Additional Registration Statement. In the event
the Current Market Price declines to $4.00 or less (the "Decline
Date"), the Company shall, to the extent required by the
Securities Act (because the additional shares were not covered by
the Registration Statement filed pursuant to Section 2(a)), as
reasonably determined by the Initial Investor, file an additional
Registration Statement with the Commission for such additional
number of Registrable Securities as would be issuable upon
conversion of the Preferred Stock (the "Additional Registrable
Securities"), in addition to those previously registered, assuming
a Conversion Price of $.50 per share. The Company shall, to the
extent required by the Securities Act (because the additional
shares were not covered by the Registration Statement filed
pursuant to Section 2(a)), as reasonably determined by the Initial
Investor, prepare and file with the Commission not later than the
30th day after the Decline Date, a registration statement relating
to the offer and sale of such Additional Registrable Securities
(the "Additional Registration Statement") and shall use its best
efforts to cause the Commission to declare such Additional
Registration Statement effective under the Securities Act as
promptly as practicable but not later than 60 days thereafter.
The Company shall not include any other securities in the
Registration Statement relating to the offer and sale of such
Additional Registrable Securities.
If the Additional Registration Statement is not
(i) filed with the Commission by the 30th day after the Decline
Date or (ii) declared effective by the Commission within 120 days
after the Decline Date (either of which, without duplication, an
"Additional Registration Date"), then the Company shall make
payments to the Initial Investor at the Liquidated Damage Rate
from the Additional Registration Date to the first Additional
Computation Date and for each Computation Date thereafter,
calculated on a pro rata basis to the date on which the Additional
Registration Statement is filed with or declared effective by the
Commission (the "Additional Periodic Amount"); provided, however,
that in no event shall the liquidated damages be less than $30,000
and; further provided, that if the Additional Registration
Statement is not declared effective by the Commission within 120
days after the Additional Registration Date set forth in clause
(ii) above, then the Liquidated Damage Rate shall be increased to
3% and; further provided, however, that the Liquidated Damage Rate
shall increase by 1% for each 30 day period after the 150th day
after the Additional Registration Date set forth in
clause (ii) above that the Additional Registration Statement is
not declared effective by the Commission. The full Additional
Periodic Amount shall be paid by the Company to the Initial
Investor by wire transfer of immediately available funds within
three days after each Additional Computation Date.
As used in this Section 2(d), "Additional Computation
Date" means the date which is 30 days after the Additional
Registration Date and, if the Additional Registration Statement
required to be filed by the Company pursuant to this Section 2(d)
has not theretofore been declared effective by the Commission,
each date which is 30 days after the previous Additional
Computation Date until such Additional Registration Statement is
so declared effective.
(e) (i) If the Company proposes to register any of its
warrants, Common Stock or any other shares of common stock of the
Company under the Securities Act (other than a registration (A) on
Form S-8 or S-4 or any successor or similar forms, (B) relating to
Common Shares or any other shares of common stock of the Company
issuable upon exercise of employee share options or in connection
with any employee benefit or similar plan of the Company or (C) in
connection with a direct or indirect acquisition by the Company of
another Person or any transaction with respect to which Rule 145
(or any successor provision) under the Securities Act applies),
whether or not for sale for its own account, it will each such
time, give prompt written notice at least 20 days prior to the
anticipated filing date of the registration statement relating to
such registration to the Initial Investor, which notice shall set
forth such Initial Investor' rights under this Section 3(e) and
shall offer the Initial Investor the opportunity to include in
such registration statement such number of Registrable Shares as
the Initial Investor may request. Upon the written request of an
Initial Investor made within ten (10) days after the receipt of
notice from the Company (which request shall specify the number of
Registrable Shares intended to be disposed of by such Initial
Investor), the Company will use its best efforts to effect the
registration under the Securities Laws of all Registrable Shares
that the Company has been so requested to register by the Initial
Investor, to the extent requisite to permit the disposition of the
Registrable Shares so to be registered; provided, however, that
(A) if such registration involves a Public Offering, the Initial
Investor must sell their Registrable Shares to the underwriters
selected as provided in Section 3(b) hereof on the same terms and
conditions as apply to the Company and (B) if, at any time after
giving written notice of its intention to register any Registrable
Shares pursuant to this Section 3 and prior to the effective date
of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to
register such Registrable Shares, the Company shall give written
notice to the Initial Investor and, thereupon, shall be relieved
of its obligation to register any Registrable Shares in connection
with such registration. The Company's obligations under this
Section 2(c) shall terminate on the date that the
registration statement to be filed in accordance with Section 2(a)
is declared effective by the Commission.
(ii) If a registration pursuant to this Section 2(e)
involves a Public Offering and the managing underwriter thereof
advises the Company that, in its view, the number of shares of
Common Stock, warrants or other shares of Common Stock that the
Company and the Initial Investor intend to include in such
registration exceeds the largest number of shares of Common Stock
or warrants (including any other shares of Common Stock or
warrants of the Company) that can be sold without having an
adverse effect on such Public Offering (the "Maximum Offering
Size"), the Company will include in such registration, only that
number of shares of Common Stock or warrants, as applicable, such
that the number of Registrable Shares registered does not exceed
the Maximum Offering Size, with the difference between the number
of shares in the Maximum Offering Size and the number of shares to
be issued by the Company to be allocated (after including all
shares to be issued and sold by the Company) among the Company and
the Initial Investor pro rata on the basis of the relative number
of Registrable Shares offered for sale under such registration by
each of the Company and the Initial Investor.
If as a result of the proration provisions of this
Section 2(e)(ii), any Initial Investor is not entitled to include
all such Registrable Shares in such registration, such Initial
Investor may elect to withdraw its request to include any
Registrable Shares in such registration. With respect to
registrations pursuant to this Section 2(e), the number of
securities required to satisfy any underwriters' over-allotment
option shall be allocated pro rata among the Company and the
Initial Investor on the basis of the relative number of securities
otherwise to be included by each of them in the registration with
respect to which such over-allotment option relates.
3. Obligations of the Company. In connection with the
registration of the Registrable Securities, the Company shall:
(a) Promptly (i) prepare and file with the Commission
such amendments (including post-effective amendments) to the
Registration Statement and supplements to the Prospectus as may be
necessary to keep the Registration Statement continuously
effective and in compliance with the provisions of the Securities
Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Investors for resales of the
Registrable Securities for a period of two years from the date on
which the Registration Statement is first declared effective by
the Commission (the "Effective Time") or such shorter period that
will terminate when all the Registrable Securities covered by the
Registration Statement have been sold pursuant thereto in
accordance with the plan of distribution provided in the
Prospectus, transferred pursuant to Rule 144 under the Securities
Act or otherwise transferred in a manner that results in the
delivery of new securities not subject to transfer
restrictions under the Securities Act (the "Registration Period")
and (ii) take all lawful action such that each of (A) the
Registration Statement and any amendment thereto does not, when it
becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, not misleading and (B)
the Prospectus forming part of the Registration Statement, and any
amendment or supplement thereto, does not at any time during the
Registration Period include 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 light of the
circumstances under which they were made, not misleading.
Notwithstanding the foregoing provisions of this Section 3(a), the
Company may, during the Registration Period, suspend the use of
the Prospectus for a period not to exceed 60 days (whether or not
consecutive) in any 12-month period if the Board of Directors of
the Company determines in good faith that because of valid
business reasons, including pending mergers or other business
combination transactions, the planned acquisition or divestiture
of assets, pending material corporate developments and similar
events, it is in the best interests of the Company to suspend such
use, and prior to or contemporaneously with suspending such use
the Company provides the Investors with written notice of such
suspension, which notice need not specify the nature of the event
giving rise to such suspension. At the end of any such suspension
period, the Company shall provide the Investors with written
notice of the termination of such suspension.
(b) During the Registration Period, comply with the
provisions of the Securities Act with respect to the Registrable
Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition
by the Investors as set forth in the Prospectus forming part of
the Registration Statement;
(c) (i) Prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and the
distribution or delivery of any Prospectus (including any
supplements thereto), provide draft copies thereof to the
Investors and reflect in such documents all such comments as the
Investors (and their counsel) reasonably may propose and (ii)
furnish to each Investor whose Registrable Securities are included
in the Registration Statement and its legal counsel identified to
the Company, (A) promptly after the same is prepared and publicly
distributed, filed with the Commission, or received by the
Company, one copy of the Registration Statement, each Prospectus,
and each amendment or supplement thereto, and (B) such number of
copies of the Prospectus and all amendments and supplements
thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable
Securities owned by such Investor;
(d) (i) Register or qualify the Registrable Securities
covered by the Registration Statement under such securities or
"blue sky" laws of such jurisdictions as the Investors who hold a
majority-in-interest of the Registrable Securities being offered
reasonably request, (ii) prepare and file in such jurisdictions
such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times
during the Registration Period, (iii) take all such other lawful
actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably
necessary or advisable to qualify the Registrable Securities for
sale in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a condition
thereto to (A) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section
3(d), (B) subject itself to general taxation in any such
jurisdiction or (C) file a general consent to service of process
in any such jurisdiction;
(e) As promptly as practicable after becoming aware of
such event, notify each Investor of the occurrence of any event,
as a result of which the Prospectus included in the 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, in
light of the circumstances under which they were made, not
misleading, and promptly prepare an amendment to the Registration
Statement and supplement to the Prospectus to correct such untrue
statement or omission, and deliver a number of copies of such
supplement and amendment to each Investor as such Investor may
reasonably request;
(f) As promptly as practicable after becoming aware of
such event, notify each Investor who holds Registrable Securities
being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance by the Commission of any
stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all
lawful action to effect the withdrawal, recession or removal of
such stop order or other suspension;
(g) (i) Cause all the Registrable Securities covered
by the Registration Statement to be listed on the principal
national securities exchange, and included in an inter-dealer
quotation system of a registered national securities association,
on or in which securities of the same class or series issued by
the Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may
be a single entity, for the Registrable Securities not later than
the effective date of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and enable such
certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors
reasonably may request and registered in such names as the
Investor may request; and, within three business days after a
Registration Statement which includes Registrable Securities is
declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent
for the Registrable Securities (with copies to the Investors whose
Registrable Securities are included in such Registration
Statement) an appropriate instruction and, to the extent
necessary, an opinion of such counsel;
(j) Take all such other lawful actions reasonably
necessary to expedite and facilitate the disposition by the
Investors of their Registrable Securities in accordance with the
intended methods therefor provided in the Prospectus which are
customary under the circumstances;
(k) Make generally available to its security holders as
soon as practicable, but in any event not later than 18 months
after (i) the effective date (as defined in Rule 158(c) under the
Securities Act) of the Registration Statement, and (ii) the
effective date of each post-effective amendment to the
Registration Statement, as the case may be, an earnings statement
of the Company and its subsidiaries complying with Section 11(a)
of the Securities Act and the rules and regulations of the
Commission thereunder (including, at the option of the Company,
Rule 158);
(l) In the event of an underwritten offering, promptly
include or incorporate in a Prospectus supplement or post-
effective amendment to the Registration Statement such information
as the managers reasonably agree should be included therein and to
which the Company does not reasonably object and make all required
filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be
included or incorporated in such Prospectus supplement or post-
effective amendment;
(m) (i) Make reasonably available for inspection by
Investors, any underwriter participating in any disposition
pursuant to the Registration Statement, and any attorney,
accountant or other agent retained by such Investors or any such
underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and
employees to supply all information reasonably requested by such
Investors or any such underwriter, attorney, accountant or agent
in connection with the Registration Statement, in each case, as is
customary for similar due diligence examinations; provided,
however, that all records, information and documents
that are designated in writing by the Company, in good faith, as
confidential, proprietary or containing any material non-public
information shall be kept confidential by such Investors and any
such underwriter, attorney, accountant or agent (pursuant to an
appropriate confidentiality agreement in the case of any such
holder or agent), unless such disclosure is made pursuant to
judicial process in a court proceeding (after first giving the
Company an opportunity promptly to seek a protective order or
otherwise limit the scope of the information sought to be
disclosed) or is required by law, or such records, information or
documents become available to the public generally or through a
third party not in violation of an accompanying obligation of
confidentiality; and provided further that, if the foregoing
inspection and information gathering would otherwise disrupt the
Company's conduct of its business, such inspection and information
gathering shall, to the maximum extent possible, be coordinated on
behalf of the Investors and the other parties entitled thereto by
one firm of counsel designed by and on behalf of the majority in
interest of Investors and other parties;
(n) In connection with any underwritten offering, make
such representations and warranties to the Investors participating
in such underwritten offering and to the managers, in form,
substance and scope as are customarily made by the Company to
underwriters in secondary underwritten offerings;
(o) In connection with any underwritten offering,
obtain opinions of counsel to the Company (which counsel and
opinions (in form, scope and substance) shall be reasonably
satisfactory to the managers) addressed to the underwriters,
covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed
that the matters to be covered by such opinions shall include,
without limitation, as of the date of the opinion and as of the
Effective Time of the Registration Statement or most recent post-
effective amendment thereto, as the case may be, the absence from
the Registration Statement and the Prospectus, including any
documents incorporated by reference therein, of an untrue
statement of a material fact or the omission of a material fact
required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, subject
to customary limitations);
(p) In connection with any underwritten offering,
obtain "cold comfort" letters and updates thereof from the
independent public accountants of the Company (and, if necessary,
from the independent public accountants of any subsidiary of the
Company or of any business acquired by the Company, in each case
for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed
to each underwriter participating in such underwritten offering
(if such underwriter has provided such letter, representations or
documentation, if any, required for such cold comfort
letter to be so addressed), in customary form and covering matters
of the type customarily covered in "cold comfort" letters in
connection with secondary underwritten offerings;
(q) In connection with any underwritten offering,
deliver such documents and certificates as may be reasonably
required by the managers, if any; and
(r) In the event that any broker-dealer registered
under the Exchange Act shall be an "Affiliate" (as defined in Rule
2729(b)(1) of the rules and regulations of the National
Association of Securities Dealers, Inc. (the "NASD Rules") (or any
successor provision thereto)) of the Company or has a "conflict of
interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any
successor provision thereto)) and such broker-dealer shall
underwrite, participate as a member of an underwriting syndicate
or selling group or assist in the distribution of any Registrable
Securities covered by the Registration Statement, whether as a
holder of such Registrable Securities or as an underwriter, a
placement or sales agent or a broker or dealer in respect thereof,
or otherwise, the Company shall assist such broker-dealer in
complying with the requirements of the NASD Rules, including,
without limitation, by (A) engaging a "qualified independent
underwriter" (as defined in Rule 2720(b)(15) of the NASD Rules (or
any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such
Registrable Securities, to exercise usual standards of due
diligence in respect thereof and to recommend the public offering
price of such Registrable Securities, (B) indemnifying such
qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof, and
(C) providing such information to such broker-dealer as may be
required in order for such broker-dealer to comply with the
requirements of the NASD Rules.
4. Obligations of the Investors. In connection with
the registration of the Registrable Securities, the Investors
shall have the following obligations:
(a) It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant
to this Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of
the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such
registration as the Company may reasonably request. As least
seven days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of
the information the Company requires from each such Investor (the
"Requested Information") if such Investor elects to have any of
its Registrable Securities included in the Registration
Statement. If at least two business days prior to the anticipated
filing date the Company has not received the Requested Information
from an Investor (a "Non-Responsive Investor"), then the Company
may file the Registration Statement without including Registrable
Securities of such Non-Responsive Investor and have no further
obligations to the Non-Responsive Investor;
(b) Each Investor by its acceptance of the Registrable
Securities agrees to cooperate with the Company in connection with
the preparation and filing of the Registration Statement
hereunder, unless such Investor has notified the Company in
writing of its election to exclude all of its Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any
notice from the Company of the occurrence of any event of the kind
described in Section 3(e) or 3(f), it shall immediately
discontinue its disposition of Registrable Securities pursuant to
the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(e) and, if so
directed by the Company, such Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to
the Company a certificate of destruction) all copies in such
Investor's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice.
5. Expenses of Registration. All expenses, other than
underwriting discounts and commissions, incurred in connection
with registrations, filings or qualifications pursuant to Section
3, but including, without limitation, all registration, listing,
and qualifications fees, printing and engraving fees, accounting
fees, and the fees and disbursements of counsel for the Company,
and the reasonable fees of one firm of counsel to the holders of a
majority in interest of the Registrable Securities shall be borne
by the Company.
6. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each
Investor and each underwriter, if any, which facilitates the
disposition of Registrable Securities, and each of their
respective officers and directors and each person who controls
such Investor or underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act (each such
person being sometimes hereinafter referred to as an "Indemnified
Person") from and against any losses, claims, damages or
liabilities, joint or several, to which such Indemnified 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 an untrue
statement or alleged untrue statement of a material fact contained
in any Registration Statement or an 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 arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any
Prospectus or an omission or alleged omission to state therein 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; and the Company hereby
agrees to reimburse such Indemnified Person for all reasonable
legal and other expenses incurred by them in connection with
investigating or defending any such action or claim as and when
such expenses are incurred; provided, however, that the Company
shall not be liable to any such Indemnified Person in any such
case to the extent that any such loss, claim, damage or liability
arises out of or is based upon (i) an untrue statement or alleged
untrue statement made in, or an omission or alleged omission from,
such Registration Statement or Prospectus in reliance upon and in
conformity with written information furnished to the Company by
such Indemnified Person expressly for use therein or (ii) in the
case of the occurrence of an event of the type specified in
Section 3(e), the use by the Indemnified Person of an outdated or
defective Prospectus after the Company has provided to such
Indemnified Person an updated Prospectus correcting the untrue
statement or alleged untrue statement or omission or alleged
omission giving rise to such loss, claim, damage or liability.
(b) Indemnification by the Investors and Underwriters.
Each Investor agrees, as a consequence of the inclusion of any of
its Registrable Securities in a Registration Statement, and each
underwriter, if any, which facilitates the disposition of
Registrable Securities shall agree, as a consequence of
facilitating such disposition of Registrable Securities, severally
and not jointly, to (i) indemnify and hold harmless the Company,
its directors (including any person who, with his or her consent,
is named in the Registration Statement as a director nominee of
the Company), its officers who sign any Registration Statement and
each person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities
to which the Company or such other persons 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 an untrue statement or alleged
untrue statement of a material fact contained in such Registration
Statement or Prospectus or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein (in light of the circumstances under which they were made,
in the case of the Prospectus), not misleading, in each case to
the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information
furnished to the Company by such holder or underwriter expressly
for use therein, and (ii) reimburse the Company for any legal or
other expenses incurred by the Company in connection
with investigating or defending any such action or claim as such
expenses are incurred.
(c) Notice of Claims, etc. Promptly after receipt by a
party seeking indemnification pursuant to this Section 6 (an
"Indemnified Party") of written notice of any investigation,
claim, proceeding or other action in respect of which
indemnification is being sought (each, a "Claim"), the Indemnified
Party promptly shall notify the party against whom indemnification
pursuant to this Section 6 is being sought (the "Indemnifying
Party") of the commencement thereof; but the omission to so notify
the Indemnifying Party shall not relieve it from any liability
that it otherwise may have to the Indemnified Party, except to the
extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such
failure. In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the
Indemnifying Party shall be entitled to assume the defense
thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have
the right to employ separate legal counsel and to participate in
the defense of such Claim, and the Indemnifying Party shall bear
the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if):
(x) the Indemnifying Party shall have agreed to pay such fees,
costs and expenses, (y) the Indemnified Party and the Indemnifying
Party shall reasonably have concluded that representation of the
Indemnified Party by the Indemnifying Party by the same legal
counsel would not be appropriate due to actual or, as reasonably
determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available
to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party, or (z) the Indemnifying
Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period
of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances
other than as described in clauses (x), (y) or (z) above, the
fees, costs and expenses of such legal counsel shall be borne
exclusively by the Indemnified Party. Except as provided above,
the Indemnifying Party shall not, in connection with any Claim in
the same jurisdiction, be liable for the fees and expenses of more
than one firm of counsel for the Indemnified Party (together with
appropriate local counsel). The Indemnifying Party shall not,
without the prior written consent of the Indemnifying Party (which
consent shall not unreasonably be withheld), settle or compromise
any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnifying Party from
all liabilities with respect to such Claim or judgment.
(d) Contribution. If the indemnification provided for
in this Section 6 is unavailable to or insufficient to hold
harmless an Indemnified Person under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities
(or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable
by such Indemnified Party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and the Indemnified Party in connection with
the statements or omissions which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as
any other relevant equitable considerations. The relative fault
of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information
supplied by such Indemnified Party or by such Indemnified Party,
and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if the Investors or any underwriters
were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to in this Section 6(d). The amount paid
or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof)
referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or
claim. 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. The obligations of the
Investors and any underwriters in this Section 6(d) to contribute
shall be several in proportion to the percentage of Registrable
Securities registered or underwritten, as the case may be, by them
and not joint.
(e) Notwithstanding any other provision of this Section
6, in no event shall any (i) Investor be required to undertake
liability to any person under this Section 6 for any amounts in
excess of the dollar amount of the proceeds to be received by such
Investor from the sale of such Investor's Registrable Securities
(after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities
Act and (ii) underwriter be required to undertake liability to any
Person hereunder for any amounts in excess of the aggregate
discount, commission or other compensation payable to such
underwriter with respect to the Registrable Securities
underwritten by it and distributed pursuant to the Registration
Statement.
(f) The obligations of the Company under this Section 6
shall be in addition to any liability which the Company may
otherwise have to any Indemnified Person and the obligations of
any Indemnified Person under this Section 6 shall be in addition
to any liability which such Indemnified Person may otherwise have
to the Company. The remedies provided in this Section 6 are not
exclusive and shall not limit any rights or remedies which may
otherwise be available to an indemnified party at law or in
equity.
7. Rule 144. With a view to making available to the
Investors the benefits of Rule 144 under the Securities Act or any
other similar rule or regulation of the Commission that may at any
time permit the Investors to sell securities of the Company to the
public without registration ("Rule 144"), the Company agrees to
use its best efforts to:
(a) comply with the provisions of paragraph (c)(1) of
Rule 144; and
(b) file with the Commission in a timely manner all
reports and other documents required to be filed by the Company
pursuant to Section 13 or 15(d) under the Exchange Act; and, if at
any time it is not required to file such reports but in the past
had been required to or did file such reports, it will, upon the
request of any Holder, make available other information as
required by, and so long as necessary to permit sales of, its
Registrable Securities pursuant to Rule 144.
8. Assignment. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall
be automatically assigned by the Investors to any permitted
transferee of all or any portion of such securities (or all or any
portion of any Preferred Stock or Warrant of the Company which is
convertible into such securities) of Registrable Securities only
if: (a) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such
assignment, (b) the Company is, within a reasonable time after
such transfer or assignment, furnished with written notice of (i)
the name and address of such transferee or assignee and (ii) the
securities with respect to which such registration rights are
being transferred or assigned, (c) immediately following such
transfer or assignment, the securities so transferred or assigned
to the transferee or assignee constitute Restricted Securities,
and (d) at or before the time the Company received the written
notice contemplated by clause (b) of this sentence the transferee
or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein.
9. Amendment and Waiver. 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 Investors who hold a majority-in-
interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 9 shall be binding upon
each Investor and the Company.
10. Miscellaneous.
(a) A person or entity shall be deemed to be a holder
of Registrable Securities whenever such person or entity owns of
record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more
persons or entities with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such
Registrable Securities.
(b) If, after the date hereof and prior to the
Commission declaring the Registration Statement to be filed
pursuant to Section 2(a) effective under the Securities Act, the
Company grants to any Person any registration rights with respect
to any Company securities which are more favorable to such other
Person than those provided in this Agreement, then the Company
forthwith shall grant (by means of an amendment to this Agreement
or otherwise) identical registration rights to all Investors
hereunder.
(c) Except as may be otherwise provided herein, any
notice or other communication or delivery required or permitted
hereunder shall be in writing and shall be delivered personally or
sent by certified mail, postage prepaid, or by a nationally
recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or,
if mailed, three (3) days after the date of deposit in the United
States mails, as follows:
(1) if to the Company, to:
DynamicWeb Enterprises, Inc.
Fairfield Commons
271 Route ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇.
Chief Executive Officer
(2) if to the Initial Investor, to:
THE SHAAR FUND LTD.
c/▇ ▇▇▇▇▇▇▇▇ CAPITAL MANAGEMENT, LLC
▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(3) if to any other Investor, at such address as such
Investor shall have provided in writing to the
Company.
The Company, the Initial Investor or any Investor may change the
foregoing address by notice given pursuant to this Section 10(c).
(d) Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in
exercising such right or remedy, shall not operate as a waiver
thereof.
(e) This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York. Each of the
parties consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state
courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any
objection including any objection based on forum non conveniens,
to the bringing of any such proceeding in such jurisdictions.
(f) The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided by law. If
any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provision,
covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their best efforts
to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(g) The Company shall not enter into any agreement with
respect to its securities that is inconsistent with the rights
granted to the holders of Registrable Securities in this Agreement
or otherwise conflicts with the provisions hereof. The Company is
not currently a party to any agreement granting any registration
rights with respect to any of its securities to any person which
conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any
Registration Statement filed pursuant hereto, except for such
rights and conflicts as have been irrevocably waived. Without
limiting the generality of the foregoing, without the written
consent of the Holders of a majority in interest of the
Registrable Securities, the Company shall not grant to any person
the right to request it to register any of its securities under
the Securities Act unless the rights so granted are subject in all
respect to the prior rights of the holders of
Registrable Securities set forth herein, and are not otherwise in
conflict or inconsistent with the provisions of this Agreement.
The restrictions on the Company's rights to grant registration
rights under this paragraph shall terminate on the date the
Registration Statement to be filed pursuant to Section 2(a) is
declared effective by the Commission.
(h) This Agreement, the Securities Purchase Agreement,
the Escrow Instructions, dated as of the date hereof (the "Escrow
Instructions"), between the Company, the Initial Investor and
Weil, Gotshal & ▇▇▇▇▇▇ LLP, the Certificate of Amendment to the
Certificate of Incorporation, dated as of the date hereof (the
"Certificate of Designations"), between the Company and the
Initial Holder and the Warrants constitute the entire agreement
among the parties hereto with respect to the subject matter
hereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein.
This Agreement, the Securities Purchase Agreement, the Escrow
Instructions, the Certificate of Designations and the Warrants
supersede all prior agreements and undertakings among the parties
hereto with respect to the subject matter hereof.
(i) Subject to the requirements of Section 8 hereof,
this Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto.
(j) All pronouns and any variations thereof refer to
the masculine, feminine or neuter, singular or plural, as the
context may require.
(k) The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the
meaning thereof.
(l) The Company acknowledges that any failure by the
Company to perform its obligations under Section 3, or any delay
in such performance could result in direct damages to the
Investors and the Company agrees that, in addition to any other
liability the Company may have by reason of any such failure or
delay, the Company shall be liable for all direct damages caused
by such failure or delay.
(m) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement. A facsimile
transmission of this signed Agreement shall be legal and binding
on all parties hereto.
PAGE 21
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed and delivered as of the date first
above written.
DYNAMICWEB ENTERPRISES, INC.
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇.
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇.
Title:Chief Executive Officer
THE SHAAR FUND LTD.
By:____________________________
Name:
Title: