1
EXHIBIT 10.7
FORM OF REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") which
shall be effective as of October 29, 1996, is made and entered into by and among
Procom Technology, Inc., a California corporation (the "Company"), and each of
the investors/shareholders identified on the signature page hereto (each an
"Investor" and collectively the "Investors").
RECITALS
WHEREAS, the Investor are shareholders of the Company; and
WHEREAS, in order to induce the Investors to enter into
certain lock-up agreements in connection with the Company's proposed initial
public offering, the Company has agreed to provide the registration rights set
forth in this Agreement with respect to the "Registrable Securities" (as such
term is defined in Section 1);
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants and agreements herein contained, the parties, intending to
be legally bound, hereby agree as follows:
1. Definitions. For purposes of this Agreement:
(a) the term "Common Stock" means the Company's
authorized voting common stock and any class of securities issued in
exchange for the Common Stock or into which the Common Stock is
converted;
(b) the term "Holder" means any Investor owning of
record Registrable Securities but shall not include any assignee
thereof;
(c) the term "Registrable Securities" means: (i) the
Common Stock owned by each of the Investors as of the date hereof, and
(ii) any Common Stock of the Company issued as a dividend or other
distribution with respect to, or in exchange for or in replacement of,
such Common Stock;
(d) the term "Registration Expenses" means all
expenses incurred by the Company in complying with Sections 2 and 12
hereof, including, without limitation, all registration and filing
fees, underwriters' expense allowances (but not including
non-accountable
1
2
or other fixed percentage allowances), printing expenses, fees and
disbursements of counsel for the Company and one counsel for the
Investors as a group, blue sky fees and expenses, and the expense of
any special audits incident to or required by any such registration
(but not including the compensation of regular employees of the Company
which shall be paid in any event by the Company);
(e) the terms "register," "registered" and
"registration" refer to a registration effected by preparing and filing
a registration statement or similar document in compliance with the
1933 Act, and the declaration or ordering of the effectiveness of such
registration statement or document by the Securities and Exchange
Commission;
(f) the term "Selling Expenses" means all
underwriting discounts and selling commissions applicable to the sale
of Registrable Securities, and all non-accountable underwriters'
expense allowances that constitute a fixed percentage of the proceeds
of the offering or of the offering price; and
(g) the number of shares of Registrable Securities
"then outstanding" shall be the number of shares of Common Stock
outstanding which are Registrable Securities.
2. Piggy-back Registration Rights. If, at any time the Company
proposes to register (including for this purpose a registration effected by the
Company for shareholders other than the Holders) any of its securities under the
1933 Act in connection with the public offering of such securities solely for
cash the Company shall, each such time, promptly give each Holder written notice
of such registration together with a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under applicable state
securities laws. Upon the written request of any Holder given within 10 days
after written notice from the Company in accordance with Section 15, the Company
shall, subject to the provisions of Section 6 (in the case of an underwritten
offering), cause to be registered under the 1933 Act all of the Registrable
Securities that each such Holder has requested to be registered; provided,
however, in the event and to the extent such a Holder may freely sell his
Registrable Securities without registration under the 1933 Act without regard to
any restrictions set forth in Rule 144 under the 1933 Act and the person
acquiring the securities does not acquire "restricted Securities" within the
meaning of
2
3
Rule 144, the Company may elect not to register such Registrable Securities.
3. Obligations of the Company. Whenever required under this
Agreement to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Securities and Exchange
Commission ("SEC") a registration statement with respect to such
Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to one
year unless all Registrable Securities to be distributed pursuant to
such registration statement have been sold prior to the expiration of
such one-year period;
(b) 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 1933 Act with respect to the
disposition of all securities covered by such registration statement;
(c) Furnish to the Holders such numbers of copies of
a prospectus, including a preliminary prospectus, in conformity with
the requirements of the 1933 Act, and such other documents as they may
reasonably request in order to facilitate the disposition of
Registrable Securities owned by them;
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under the securities
laws of such jurisdictions as the Company believes shall be reasonably
appropriate for the distribution of the securities covered by the
registration statement and such jurisdictions as the Holders
participating in the offering shall reasonably request, provided that
the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general
consent to service of process in any such jurisdiction, and further
provided that (anything in this Agreement to the contrary
notwithstanding with respect to the bearing of expenses) if any
jurisdiction in which the securities shall be qualified shall require
that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders and
provided there is
3
4
no exemption from such requirement by reason of the Company's
obligation to pay such expenses pursuant to the foregoing provisions of
this Section 3, such expenses shall be payable by the selling Holders
pro rata, to the extent required by such jurisdiction; and
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement
with terms generally satisfactory to the managing underwriter of such
offering. Each Holder participating in such underwriting shall also
enter into and perform its obligations under such an agreement.
4. Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Agreement
that the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities. In that connection, each selling Holder shall
be required to represent to the Company that all such information which is given
is both complete and accurate in all material respects.
5. Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to this Agreement shall be borne by the Company except that
Registration Expenses incurred by the Company in complying a request for any
registration made under Section 12 hereof shall be borne by the Holders of the
securities so registered pro rata on the basis of the number of shares so
registered, and in all cases all Selling Expenses shall be borne by the Holders
of the securities so registered pro rata on the basis of the number of shares so
registered.
6. Underwriting Requirements. The right of any Holder to
"piggyback" in an underwritten public offering of the Company's securities
pursuant to Section 2 shall 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 securities through such underwriting shall (together with the
Company and any other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for underwriting by the Company.
Notwithstanding any other provision of Section 2 and this Section 6, if the
underwriter determines that marketing factors require a limita-
4
5
tion of the number of shares to be underwritten the underwriter may exclude some
or all of the Registrable Securities from such registration and underwriting,
provided that the Holders are allowed to participate in the offering in the same
proportion (based on the total number of securities held by such Holders at the
time of filing of the registration statement) as any other shareholder of the
Company existing as of the date of this Agreement participating in the offering.
Any reduction in the number of Registrable Securities included in such
registration shall be borne equally by the Holders as a group pro rata based on
the number of shares held by such Holders at the time of filing of the
registration statement. If any Holder disapproves of the terms of any such
underwriting, it may elect to withdraw therefrom by written notice to the
Company and the underwriter. Any Registrable Securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration.
7. Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Agreement.
8. Indemnification. If any Registrable Securities are
included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers, directors and
partners of each Holder, any underwriter (as defined in the 1933 Act)
for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the 1933 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 or any
of them may become subject under the 1933 Act, the 1934 Act or any
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise from or are based
upon any of the following statements, omissions or violations
(collectively a "Violation") (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 1933
Act, the 1934 Act, any state
5
6
securities law or any rule or regulation promulgated under the 1933
Act, the 1934 Act or any state securities law, each as applicable to
the subject registration statement; and the Company will reimburse each
such Holder, officer, director or partner, underwriter or controlling
person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 8 shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if
such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or
action to the extent that it arises from or is based upon a violation
which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling
Holder 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 1933 Act, any underwriter (within the meaning of the
1933 Act) for the Company, any person who controls such underwriter,
any other Holder selling securities in such registration statement or
any of its directors or officers or any person who controls such Holder
against any losses, claims, damages or liabilities (joint or several)
to which the Company or any such director, officer, controlling person,
or underwriter or other such Holder or director, officer or controlling
person may become subject, under the 1933 Act, the 1934 Act or any
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise from 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 controlling
person, other Holder, officer, director or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 8 shall not apply to amounts paid
in settlement
6
7
of any such loss, claim damage, liability or action if such settlement
is effected without the consent of the Holder which consent shall not
be unreasonably withheld; provided, that in no event shall any
indemnity under this Section 8(b) exceed the gross proceeds from the
offering received by the Holder.
(c) In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for
in this Section 8 is applicable but for any reason is held to be
unavailable from the Company or any Holder, the Company and the Holders
participating in the registration shall contribute to the aggregate
losses, claims, damages and liabilities (including any investigation,
legal and other expenses incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claims
asserted) to which the Company and the participating Holders may be
subject in such proportion so that the participating Holders are
responsible for that portion of the foregoing amount represented by the
ratio of the proceeds received by the participating Holders in the
offering to the total proceeds received from the offering by the
Company and all selling shareholders (other than participating Holders)
and the Company shall be responsible for the portion represented by the
ratio of proceeds received by the Company to the total proceeds
received by the Company and all selling shareholders (other than
participating Holders); provided, however, that 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. For purposes
of this Section 8(c), each person, if any, who controls the Company or
any Holder within the meaning of the Securities Act, each officer of
the Company who shall have signed the registration statement and each
director of the Company shall have the same rights to contribution as
the Company.
(d) No settlement of any action in which the Holders
participating in a registration are defendants shall be effected
without the prior written consent of such Holders unless (i) the
obligations of the Company for indemnification or contribution pursuant
to this Agreement survive and are not extinguished by reason of the
settlement and remain in full force and effect under applicable federal
and state laws, rules, regulations and orders or (ii) all claims and
actions against the participating Holders and each person who controls
a participating holder within the meaning of Section 14 of the
Securities Act or Section 20 of the
7
8
Exchange Act are extinguished by the settlement and the indemnifying
party obtains a full release of all claims and actions against the
participating Holders and each such control person, which release shall
be to the reasonable satisfaction of the participating Holders.
(e) Promptly after receipt by an indemnified party
under this Section 8 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel selected by the indemnifying party or
parties and reasonably acceptable to the indemnified party; provided,
however, that an indemnified party shall 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 differing interests between such indemnified party and any
other party represented by such counsel in such proceeding (and
provided further that all indemnified parties similarly situated shall
be represented jointly by a single counsel). The failure to notify an
indemnifying party within a reasonable time of the commencement of any
such action, to the extent prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 8, but the omission so to notify
the indemnifying party will not relieve it of any liability that it may
have to any indemnified party otherwise than under this Section 8.
(f) The obligations of the Company and the Holders
under this Section 8 shall survive through the completion of any
offering of Registrable Securities in a registration statement made
under the terms of this Agreement and otherwise.
9. Reports Under Securities Exchange Act of 1934. With a view
of making available to the Holders the benefits of Rule 144 promulgated under
the 1933 Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
8
9
(a) use its best efforts to make and keep public
information available, as those terms are understood and defined in
SEC Rule 144, at all times;
(b) use its best efforts to file with the SEC in a
timely manner all reports and other documents required of the Company
under the 1933 Act and the 1934 Act;
(c) furnish to any Holder so long as the Holder owns
any Registrable Securities, forthwith upon request: (i) a written
statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act or that it
qualifies as a Registrant where securities may be resold pursuant to
Form S-3; (ii) a copy of the most recent annual or quarterly report of
the Company and all other reports and documents filed by the Company
with the SEC; and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC
which permits the selling of any such securities without registration;
and
(d) take such action as is necessary to enable the
Holders to use Form S-3 for the sale of their Registrable Securities.
10. Assignment of Registration Rights. The registration rights
provided for hereunder may not be assigned by operation of law or otherwise and
shall not succeed to any future owner of the Registrable Securities.
11. "Market Stand-off" Agreement. Each Holder hereby agrees
that it shall not, to the extent requested by the Company and an underwriter of
Common Stock (or other securities) of the Company, sell or otherwise transfer or
dispose of any Registrable Securities or any interest therein in a market or
other transaction during the 180-day period following the effective date of any
registration statement of the Company filed under the 1933 Act (other than a
registration form relating to: (a) a registration of a stock option, stock
purchase or compensation or incentive plan or of stock issued or issuable
pursuant to any such plan, or a dividend investment plan; (b) a registration of
securities proposed to be issued in exchange for securities or assets of or in
connection with a merger or consolidation with, another corporation; or (c) a
registration of securities proposed to be issued in exchange for other
securities of the Company).
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect
9
10
to the Registrable Securities of each Holder (and the shares or securities of
every other person subject to the foregoing restriction) until the end of such
180-day period.
12. Form S-3 Registration. If the Company shall receive, at
any time after the first anniversary of the Company's initial public offering
and the Company is at that time eligible for use of S-3 with respect to
secondary stock sales by its shareholders, a request or requests from the
Initiating Holders that the Company effect a registration on Form S-3 (or any
similar successor form) and any related qualification or compliance with respect
to all or a part of the Registrable Securities owned by such Holder or Holders,
the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders; and
(b) as soon as practicable, effect such registration
and all such qualifications and compliance 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 15 days
after receipt of such written notice from the Company; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 12:
(i) if the Company is not qualified as a registrant entitled to use
Form S-3 (or the applicable successor form); or (ii) if the Holders,
together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and any other securities at an aggregate price to the public
of less than $2,500,000; or (iii) if the Company has, within the
12-month period preceding the date of such request, already effected
one registrations on Form S-3 (or applicable successor form) for the
Holders pursuant to this Section 12; or (iv) in any particular
jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.
Notwithstanding the foregoing, if the Company shall furnish to
a Holder or Holders requesting S-3 registration, a certificate signed by the
President of the Company stating that in the good faith judgment of the Board
10
11
of Directors it would be detrimental to the Company for a registration statement
to be filed in the near future, then the Company's obligation to use its best
efforts to file a registration statement shall be deferred for a period not to
exceed 180 days; provided, however, that the Company shall not obtain such a
deferral more than once in any 12-month period. Subject to the foregoing, the
Company shall file a registration statement covering the Registrable Securities
and other securities so requested to be registered as soon as practicable after
receipt of the request or requests of the Initiating Holders.
13. Remedies. Except as provided in Section 7 of this
Agreement, each Holder of Registrable Securities, in addition to being entitled
to exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Agreement and
hereby agrees to waive the defense in any action for specific performance that a
remedy of law would be adequate.
14. Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of at least a majority of the then outstanding Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof with respect to a matter which relates exclusively to the
rights of Holders of Registrable Securities whose securities are being sold
pursuant to a registration statement and which does not directly or indirectly
affect the rights of other holders of Registrable Securities may be given by the
holders of a majority of the Registrable Securities being sold; provided,
however, that the provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
15. Notices. All notices, demands and requests required by
this Agreement shall be in writing and shall be deemed to have been given for
all purposes (a) upon personal delivery, (b) one day after being sent, when sent
by professional overnight courier service from and to locations within the
continental United States, (c) five days after posting when sent by registered
or certified mail, or (d) on the date of transmission when sent by telegram,
telegraph, telex or telecopier, addressed to the Company or an Investor at its
address set forth on the signature pages hereof. Any party hereto may from time
to time by notice in writing
11
12
served upon the others as provided herein, designate a different mailing address
or a different person to which such notices or demands are thereafter to be
addressed or delivered.
16. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the Company.
Investors may not assign their rights hereunder without the express written
consent of the Company.
17. Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be deemed to be an original, and when
executed, separately or together, shall constitute a single original instrument,
effective in the same manner as if the parties hereto had executed one and the
same instrument.
18. Captions. Captions are provided herein for convenience
only and they are not to serve as a basis for interpretation or construction of
this Agreement, nor as evidence of the intention of the parties hereto.
19. Cross-References. All cross-references in this Agreement,
unless specifically directed to another agreement or document, refer to
provisions within this Agreement.
20. Governing Law. This Agreement shall be governed by and
construed in accordance with, the laws of the State of Nevada, without reference
to conflicts of laws provisions.
21. Severability. The provisions of this Agreement are
severable. The invalidity, in whole or in part, of any provision of this
Agreement shall not affect the validity or enforceability of any other of its
provisions. If one or more provisions hereof shall be declared invalid or
unenforceable, the remaining provisions shall remain in full force and effect
and shall be construed in the broadest possible manner to effectuate the
purposes hereof. The parties further agree to replace such void or unenforceable
provisions of this Agreement with valid and enforceable provisions which will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provisions.
22. Entire Agreement. This Agreement is intended by the
parties hereto to be the final expression of their agreement and constitutes and
embodies the entire agreement and understanding between the parties hereto with
regard to the subject matter hereof and is a complete and exclusive statement of
the terms and conditions thereof, and shall
12
13
supersede any and all prior oral and written correspondence, conversations,
negotiations, agreements and understandings relating to the same subject matter.
23. Attorneys' Fees. In any action at law or in equity to
enforce any of the provisions or rights under this Agreement, the unsuccessful
party to such litigation, as determined by the court in a final judgement or
decree, shall pay the successful party all costs, expenses and reasonable
attorney's fees, as set by the court and not by a jury, incurred by the
successful party (including, without limitation, costs, expenses and fees on any
appeal).
13
14
IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement with the intent and agreement that the same shall
be effective as of the day and year first above written.
THE COMPANY:
PROCOM TECHNOLOGY, INC.,
a California Corporation
2181 Dupont Drive
Irvine, California 92715
By:_____________________________________
THE INVESTORS:
ALEX RAZM'JOO
c/o Procom Technology, Inc.
2181 Dupont Drive
Irvine, California 92715
By:_____________________________________
FRANK ALAGHBAND
c/o Procom Technology, Inc.
2181 Dupont Drive
Irvine, California 92715
By:_____________________________________
ALEX AYDIN
c/o Procom Technology, Inc.
2181 Dupont Drive
Irvine, California 92715
By:_____________________________________
NICK SHAHRESTANY
c/o Procom Technology, Inc.
2181 Dupont Drive
Irvine, California 92715
By:_____________________________________