Exhibit 4.9
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of December 11, 2000 (this
"Agreement"), is made by and between iExalt, Inc., a Nevada corporation (the
"Company"), and Thomson Kernaghan & Co., Ltd., an Ontario (Canada) corporation
(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 the date hereof (the "Closing Date"), between
the Initial Investor and the Company (the "Securities Purchase Agreement"), the
Company has agreed to issue and sell to the Initial Investor, as agent, a series
of 10% Convertible Debentures, in the aggregate principal amount of $1,200,0000
(the "Debentures"), which are convertible into common stock of the Company, par
value $.001 per share ("Common Stock") ("Debenture Shares"), certain warrants to
purchase Common Stock issued in connection with the Debentures (the "Debenture
Warrants"), shares of Common Stock to be issued pursuant to the exercise of the
Debenture Warrants ("Debenture Warrant Shares"), shares of Common Stock to be
issued pursuant to an Equity Line Financing Agreement ("Equity Line Shares"),
certain warrants to purchase Common Stock to be issued in connection with the
issuance of the Equity Line Shares ("Equity Line Warrants"); and shares of
Common Stock to be issued pursuant to the exercise of the Equity Line Warrants
("Equity Line Warrant Shares").
WHEREAS, capitalized terms not otherwise defined herein shall have the
meanings given to them in the Securities Purchase Agreement; and
WHEREAS, the Debentures are convertible into shares of Common Stock (the
"Debenture Shares") upon the terms and subject to the conditions set forth
therein; and
WHEREAS, the Debenture Warrants may be exercised for the purchase of the
Debenture Warrant Shares upon the terms and conditions of the Debenture Warrants
and the Equity Line Warrants may be exercised for the purchase of the Equity
Line Warrant Shares upon the terms and conditions of the Equity Line Warrants;
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Debenture Shares, the Debenture Warrant
Shares, the Equity Line Shares and the Equity Line Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investor hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
following meanings:
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(a) "Investor" means the Initial Investor and any permitted transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(b) "Potential Material Event" means any of the following: (i) the
possession by the Company of material information that is not required to be
disclosed in a registration statement, which shall be evidenced by
determinations in good faith by the Board of Directors of the Company that
disclosure of such information in the registration statement would be
detrimental to the business and affairs of the Company; or (ii) any material
engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Board of Directors of the
Company that the registration statement would be materially misleading absent
the inclusion of such information.
(c) "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange SEC (the
"SEC").
(d) "Registrable Securities" means at any time (a) the Debenture Shares,
the Debenture Warrant Shares, the Equity Line Shares and the Equity Line Warrant
Shares, whether issued or issuable, including any shares of Common Stock
issuable upon conversion or exercise of Debenture, Debenture Warrants or Equity
Line Warrants that are issuable in the future and (b) any shares of Common Stock
then issuable directly or indirectly upon the conversion or exercise of other
securities which were issued as a dividend or other distribution with respect to
or in replacement of Registrable Shares.
(e) "Registration Statement" means a registration statement of the Company
under the Securities Act and any amendments thereto.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and file with the
SEC, as soon as possible after the Closing Date, but no later than thirty (30)
days following the Closing Date, a Registration Statement on Form S-1, Form S-3
or other available form, registering for resale by the Investor all of the
Registrable Securities, but in no event less than one hundred fifty percent
(150%) of the aggregate number of Registrable Securities at the time of filing
of the Registration Statement (assuming for such purposes that the entire
principal balance of all Debentures had been eligible to be converted, and had
been converted, into Debenture Shares in accordance with their terms, whether or
not such eligibility or conversion had in fact occurred as of such date and that
all Debenture Warrants and Equity Line Warrants had been eligible to be
exercised and had been exercised in accordance with their terms, whether or not
such eligibility
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or exercise had in fact occurred as of such date). The Registration Statement
shall also state that, in accordance with Rule 416 and 457 under the Securities
Act, it also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Debentures and the exercise
of the Debenture Warrants and the Equity Line Warrants to prevent dilution
resulting from stock splits, or stock dividends. The Company will use its best
efforts to cause the Registration Statement to be declared effective no later
than ninety (90) days after the Closing Date.
(b) Amendments. If at any time the number of Registrable Securities
(assuming full conversion or exercise of the Debentures, the Debenture Warrants,
the Equity Line Warrants, and the purchase of $3.0 million of Equity Line
Shares) equals more than seventy five percent (75%) of the aggregate number of
shares of Common Stock then registered, the Company shall, within ten (10)
business days after receipt of a written notice from any Investor, either (i)
further amend the Registration Statement filed by the Company pursuant to the
preceding sentence, if such Registration Statement has not been declared
effective by the SEC at that time, to register 150% of the aggregate of all
Registrable Securities (assuming full conversion or exercise of any issued or
issuable Debentures, the Debenture Warrants, the Equity Line Warrants, and the
purchase of $3.0 million of Equity Line Shares), or (ii) if such Registration
Statement has been declared effective by the SEC at that time, file with the SEC
an additional Registration Statement on Form S-1, Form S-3 or other available
forum as may be appropriate, to register (A) 150% of the aggregate of all
Registrable Securities (assuming full conversion or exercise of any issued or
issuable Debentures, Equity Line Warrants and Debenture Warrants), less (B) the
aggregate number of shares of Common Stock already registered which have not
been issued upon conversions of the Debentures or the exercise of Debenture
Warrants and the Equity Line Warrants. THE REGISTRATION STATEMENT SHALL NOT
INCLUDE ANY SHARES OTHER THAN THE REGISTRABLE SECURITIES, AND CERTAIN OTHER
SHARES THAT THE COMPANY IS OBLIGATED TO REGISTER AS SET FORTH IN SCHEDULE 5(b),
WITHOUT THE CONSENT OF ALL OF THE INVESTORS.
(c) Payments by the Company.
(i) If the Registration Statement covering the Registrable
Securities is not filed with the SEC on or before thirty (30)
days after the Closing Date (the "Required Filing Date"), then
the Company shall pay Investor a late filing penalty
(collectively "Late Filing Fees"), (i) on the first day after
the Required Filing Date, an amount equal to two percent (2%)
of the original purchase price paid pursuant to the Securities
Purchase Agreement (the "Purchase Price") for the Debentures,
and (ii) on each subsequent monthly anniversary of the
Required Filing Date, if the Registration Statement has not
been filed in proper form on or before such date, an amount
equal to three percent (3%) of the Purchase Price for the
Debentures.
(ii) If the Registration Statement covering the Registrable
Securities is not effective within the earlier of (a) five (5)
business days after notice by the SEC that it may be declared
effective (including the issuance by the SEC of a
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"no review letter"), or (b) ninety (90) days following the
Closing Date (the "Required Effective Date"), then the Company
shall pay each applicable Investor a late effective date
penalty (collectively "Late Effective Date Fees")(sometimes
Late Filing Fees and Late Effective Fees are collectively
referred to as "Late Fees"), (i) on the first day after the
Required Effective Date, an amount equal to two percent (2%)
of the aggregate principal amount of all unredeemed Debentures
held by that Investor, and (ii) on each subsequent monthly
anniversary of the Required Effective Date, if the
Registration Statement has not been declared effective on or
before such date, an amount equal to three percent (3%) of the
aggregate principal amount of the unredeemed Debentures held
by that Investor. By way of illustration and not in limitation
of the foregoing, assuming a Closing Date of February 3, 2000
(X) if the Registration Statement is timely filed but is not
declared effective until July 15, 2000 (assuming for the
purpose of this example that the SEC has not previously
provided notice that it may be declared effective and that the
full $500,000 in principal of the Debentures is outstanding),
the aggregate Late Effective Date Penalty will equal 10%
percent of $500,000 (2% on May 3, the 90th day after the
Closing Date, plus 3% each on June 2, and July 2) or (Y) if
the Registration Statement is filed on April 9 and is not
declared effective until June 15, 2000 (assuming for the
purpose of this example that the SEC has not previously
provided notice that it may be declared effective), the
aggregate Late Filing Penalty will equal 5% of $500,000 (2% on
March 4, the 30th day after the Closing Date, plus 3% on April
3) and the aggregate Late Effective Date Penalty will equal 5%
percent of $500,000 (2% on May 3, the 90th day after the
Closing Date, plus 3% on June 2).
(iii) In addition to and not in lieu of the payment of fees
hereunder, if the Registration Statement is not filed within
sixty (60) days after the Closing Date, or the Registration
Statement is not declared effective within one hundred twenty
(120) days after the Closing Date, each Investor may, at its
option, require the Company to redeem the Debentures held by
that Investor in full (within three (3) days after its
delivery of a redemption notice to the Company), in cash,
which redemption amount shall be calculated as set forth in
the Debentures.
(iv) If, subsequent to the declaration by the SEC of its
effectiveness, the availability of the Registration Statement
for use by the Initial Investor is suspended for any period
exceeding ten (10) days, then the Company shall pay to the
Investor an amount equal to two percent (2%) of the aggregate
principal amount of all purchases of Equity Line Shares made
by the Initial Investor for each ten (10) day period (or
portion thereof) thereafter. In the event the Company is able
to cure a suspension contemplated in the preceding sentence,
but the availability of the Registration Statement for the use
by the
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Investor is subsequently suspended, then the Company shall pay
to the Investor an amount equal to two percent (2%) of the
aggregate principal amount of all purchases of Equity Line
Shares made by the Initial Investor since the prior suspension
of effectiveness for each ten (10) day period (or portion
thereof) thereafter.
(v) If, subsequent to the declaration by the SEC of its
effectiveness, the availability of the Registration Statement
for use by the Initial Investor is suspended for any period
exceeding thirty (30) days, then the Initial Investor shall
not have any further obligation to purchase the Equity Line
Shares.
(vi) Late Fees will be payable to the Investor by the Company in
cash or other immediately available funds on the date such
Late Penalty is incurred.
(vii) The parties acknowledge that the damages which may be incurred
by the Investor if the Registration Statement is not filed by
the Required Filing Date or if the Registration Statement has
not been declared effective by the Required Registration Date
may be difficult to ascertain. The parties agree that the Late
Fees represent a reasonable estimate on the part of the
parties, as of the date of this Agreement, of the amount of
such damages. The payment of the Late Fees to the Investor
shall not limit the Investor's other rights and remedies
hereunder or under any other document entered into in
connection herewith.
(viii) Notwithstanding the foregoing, the amounts payable by the
Company pursuant to this provision shall not be payable to the
extent any delay in the effectiveness of the Registration
Statement occurs because of an act of, or a failure to act or
to act timely by the Investor or its counsel if the Company
timely forwards to counsel any required documents or in the
event all of the Registrable Securities may be sold pursuant
to Rule 144 or another available exemption under the Act.
3. Obligations of the Company.
In connection with the registration of the Registrable Securities, the
Company shall do each of the following:
(a) prepare promptly, and file with the SEC by the Required Filing Date,
the Registration Statement with respect to not less than the number of
Registrable Securities provided in Section 2(a) above, and thereafter use its
best efforts to cause each Registration Statement relating to Registrable
Securities to become effective by the Required Effective Date and keep the
Registration Statement effective at all times until the earliest (the
"Registration Period") of (i) the date that is two (2) years after the Closing
Date, (ii) the date when the Investor may sell all Registrable Securities under
Rule 144 of the Securities Act ("Rule 144") or (iii) the date the Investor no
longer owns any of the Registrable Securities, which Registration Statement
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(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any 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 in which they were made, not
misleading;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
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 seller or sellers
thereof as set forth in the Registration Statement;
(c) permit one counsel designated by the Investors to review the
Registration Statement and all amendments and supplements thereto a reasonable
period of time (but not less than three (3) business days) prior to their filing
with the SEC, and not file any document in a form to which such counsel
reasonably objects;
(d) notify the Investors, Investors' legal counsel and managing
underwriters, if any, immediately (and, in the case of (i)(A) below, not less
than five (5) days prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than one (1) business day following the
day (i)(A) when a prospectus or any prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) whenever
the SEC notifies the Company whether there will be a "review" of such
Registration Statement; (C) whenever the Company receives (or representatives of
the Company receive on its behalf) any oral or written comments from the SEC in
respect of a Registration Statement (copies or, in the case of oral comments,
summaries of such comments shall be promptly furnished by the Company to the
Investor); and (D) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any proceedings for that
purpose; (iv) if at any time any of the representations or warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose; and (vi) of the occurrence of any event that, to
the knowledge of the Company, makes any statement made in the Registration
Statement or prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, prospectus or other
documents so that, in the case of the Registration Statement or the prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make
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the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall furnish the Investors with
copies of all intended written responses to the comments contemplated in clause
(C) of this Section 3(d) not later than one (1) Business Day in advance of the
filing of such responses with the SEC so that the Investors shall have the
opportunity to comment thereon;
(e) furnish to the Investors and counsel for the Investors (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, two (1) copies each of the Registration Statement, each
preliminary prospectus and prospectus, and each amendment or supplement thereto,
and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as they may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by that
Investor;
(f) as promptly as practicable after becoming aware of such event, notify
the Investors of the happening of any event of which the Company has knowledge,
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 use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to an Investor as it may reasonably request;
(g) as promptly as practicable after becoming aware of such event, notify
the Investors (or, in the event of an underwritten offering, the managing
underwriters) of the issuance by the SEC of any stop order or other suspension
of the effectiveness of the Registration Statement at the earliest possible
time;
(h) notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Investor in writing of the existence of a Potential Material Event,
an Investor shall not offer or sell any Registrable Securities, or engage in any
other transaction involving or relating to the Registrable Securities, from the
time of the giving of notice with respect to a Potential Material Event until
Investor receives written notice from the Company that such Potential Material
Event either has been disclosed to the public or no longer constitutes a
Potential Material Event; provided, however, that the Company may not so suspend
the right to such holders of Registrable Securities for more than two twenty
(20) day periods in the aggregate during any 12-month period ("Suspension
Period") with at least a ten (10) business day interval between such periods,
during the periods the Registration Statement is required to be in effect;
(i) use its reasonable efforts to secure or maintain, as applicable,
National Association of Securities Dealers Over the Counter Bulletin Board
authorization and quotation for such Registrable Securities or a listing on any
exchange upon which the Common Stock is listed and, without limiting the
generality of the foregoing, to arrange for at least two market
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makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities;
(j) provide 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;
(k) cooperate with the Investor who holds 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 Investor may reasonably
request, and, within five (5) business days after a Registration Statement which
includes Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel selected by the Company to deliver,
to the transfer agent for the Registrable Securities (with copies to the
Investor whose Registrable Securities or securities convertible into Registrable
Securities are included in such Registration Statement) an appropriate
instruction and opinion of such counsel; provided, however, that nothing in this
subparagraph (k) shall be deemed to waive any of the provisions regarding the
conditions or method of conversion of the Debentures or exercise of Debenture
Warrants or the Equity Line Warrants into Registrable Securities; and
(l) take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement.
4. Obligations of the Investor. In connection with the registration of the
Registrable Securities, Investor shall have the following obligations:
(a) as 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, 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. At least ten (10) days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
Investor of the information the Company requires from Investor (the "Requested
Information") if Investor elects to have any of its Registrable Securities
included in the Registration Statement. If at least two (2) business days prior
to the 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;
(b) to cooperate with the Company as reasonably requested by the Company
in connection with the preparation and filing of the Registration Statement
hereunder, unless Investor has notified the Company in writing of its election
to exclude all of its Registrable Securities from the Registration Statement;
and
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(c) upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 3(f) or 3(g), above, Investor shall
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until Investor's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3(f) or 3(g) and, if so directed by the Company, 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 Investor's possession, of
the prospectus covering such Registrable Securities current at the time of
receipt of such notice.
5. Expenses of Registration.
(a) All reasonable expenses (other than underwriting discounts and
commissions of Investor) incurred in connection with registrations, filings or
qualifications pursuant to Section 3, including, without limitation, all
registration, listing, and qualifications fees, printers and accounting fees,
the fees and disbursements of counsel for the Company, and the reasonable fees
and expenses of Investors' legal counsel shall be borne by the Company.
(b) Neither the Company nor any of its subsidiaries has, as of the date
hereof, nor shall the Company nor any of its subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Investor herein or otherwise
conflicts with the provisions hereof. Except as and to the extent specifically
set forth in Schedule 5(b) attached hereto, neither the Company nor any of its
subsidiaries has previously entered into any agreement granting any registration
rights with respect to any of its securities to any person or entity. Without
limiting the generality of the foregoing, without the written consent of the
Investors, the Company shall not grant to any person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Investor set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.
6. Indemnification. In the event 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 Investor, its directors, officers, managers, representatives, agents
and "controlling persons" within the meaning of the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (each, an
"Indemnified Party"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein:
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(i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or any
post-effective amendment thereof or 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,
(ii) any untrue statement or alleged untrue statement of a material
fact contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make
the statements made therein, in light of the circumstances
under which the statements therein were made, not misleading
or
(iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or
any rule or regulation under the Securities Act, the Exchange
Act or any state securities law (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations").
Subject to clause (b) of this Section 6, the Company shall reimburse any
Indemnified Party, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by it in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a) shall not (i) apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Indemnified Party expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (II) be available to the extent such Claim is based on a failure of
the Investor to deliver or cause to be delivered the prospectus made available
by the Company; or (III) apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Investor will indemnify the
Company and its officers, directors and agents against any claims arising out of
or based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company, by or on behalf of Investor,
expressly for use in connection with the preparation of the Registration
Statement, subject to such limitations and conditions as are applicable to the
Indemnification provided by the Company to this Section 6 and further to the
limitation that the aggregate amount of all Investors' indemnification
obligations shall be the proceeds received from the sale of Registrable
Securities under a registration. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Investor pursuant to Section 9.
(b) Promptly after receipt by an Indemnified Party under this Section 6 of
notice of the commencement of any action (including any governmental action),
such Indemnified Party shall, if a Claim in respect thereof is to be made
against any indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
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party so desires, jointly with any other indemnifying party similarly noticed,
to assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying party and the Indemnified Party. In case any such action is
brought against any Indemnified Party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, assume the defense thereof, subject to the provisions
herein stated and after notice from the indemnifying party to such Indemnified
Party of its election so to assume the defense thereof, the indemnifying party
will not be liable to such Indemnified Party under this Section 6 for any
reasonable legal or other reasonable out-of-pocket expenses subsequently
incurred by such Indemnified Party in connection with the defense thereof other
than reasonable costs of investigation, unless the indemnifying party shall not
pursue the action of its final conclusion. The Indemnified Party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and reasonable out-of-pocket expenses of such
counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the Indemnified Party. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(a) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation; and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. Reports Under Exchange Act. With a view to making available to the Investor
the benefits of Rule 144, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(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 Securities Act and
the Exchange Act;
(c) furnish to Investor so long as Investor owns Registrable Securities,
promptly upon request, (i) a written statement by the Company that it has
complied with the reporting
11
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company and (iii) such other information
as may be reasonably requested to permit the Investor to sell such securities
pursuant to Rule 144 without registration; and
(d) at the request of any holder of Registrable Securities, upon receipt
from such holder of a certificate certifying (i) that such holder has held such
Registrable Securities for a period of not less than one(1) year, (ii) that such
holders has not been an affiliate (as defined in Rule 144) of the Company for
more than the ninety (90) preceding days, and (iii) as to such other matters as
may be appropriate in accordance with Rule 144, to deliver an opinion of counsel
and instructions to the Company's transfer agent to remove from the certificate
representing such Registrable Securities that portion of any restrictive legend
that relates to the registration provisions of the Securities Act; provided,
however, that at the Investor's sole discretion, counsel to the Investor may
provide those instructions and opinion to the transfer agent regarding the
removal of the restrictive legend.
9. Assignment of the Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by an Investor to any transferee of the Registrable
Securities (or all or any portion of the Debentures, Equity Line Warrants or
Debenture Warrants) permitted or allowable by the terms of the Securities
Purchase Agreement 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 further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act and applicable state securities laws, 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 or in favor of the Company to be bound by all of the provisions
contained herein, a copy of which shall be provided to the Company.
The copies referred to in clauses (a) and (d) of the immediately preceding
sentence may be redacted to delete certain financial and other details of the
transaction between the Investor and its transferee if the same is included in
the document to be provided to the Company. In the event of any delay in filing
or effectiveness of the Registration Statement as a result of such assignment,
the Company shall not be liable for any damages arising from such delay, or the
payments set forth in Section 2(c) hereof.
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Miscellaneous.
(e) Costs and Expenses. The Company shall be responsible for the
Investors' reasonable out-of-pocket costs and expenses, including fees and
expenses of its legal counsel, in connection with the performance of its
obligations hereunder. The Company agrees to pay the Investor the amounts due
under this clause no later than the Agreement Date.
(f) Notices. Any notice, request, instruction, correspondence or other
document to be given hereunder by either party to the other (herein collectively
called "Notice") shall be in writing and delivered in person or by courier
service requiring acknowledgment of receipt of delivery or mailed by certified
mail, postage prepaid and return receipt requested, or by telecopier, as
follows:
If to the Company:
iExalt, Inc.
Attention: Don W. Sapaugh
12000 Aerospace Avenue, Suite 110
Houston, Texas 77034
Telecopy: 281-9334114
Telephone: 281-464-8400
With a copy (which shall not constitute notice) to:
Seth Farbman, P.C.
Attention: Seth Farbman, Esq.
138-54 Jewel Avenue
Flushing, New York 11367
Telecopy: 718-261-8807
Telephone: 718-261-4327
If to the Investor, to
Thomson Kernaghan & Co., Ltd.
Attention: Michelle McKinnon
365 Bay Street, 10th floor
Toronto, Ontario
M5H 2V2 Canada
Telecopy: 416-860-9663
Telephone: 416-860-6121
With a copy (which shall not constitute notice) to:
Law Offices Of Lance T. Bury
Attention: Lance T. Bury
2035 Crabapple Parc Way
Roswell, GA 30076
Telecopy: 770-518-0916
Telephone: 770-392-3332
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Notice given by personal delivery, courier service or mail shall be effective
upon actual receipt. Notice given by telecopier shall be confirmed by
appropriate answer back and shall be effective upon actual receipt if received
during the recipient's normal business hours, or at the beginning of the
recipient's next business day after receipt if not received during the
recipient's normal business hours. All Notices by telecopier shall be confirmed
promptly after transmission in writing by certified mail or personal delivery.
Any party may change any address to which Notice is to be given to it by giving
Notice as provided above of such change of address.
(c) Governing Law, Jurisdiction and Venue. This Agreement shall be
governed by, and construed in accordance with, the laws of the state of New York
as well as the U.S. securities laws. The parties agree to binding arbitration
before the American Arbitration Association or successor entity if applicable
(or other agreed to arbitration panel). The parties agree that venue shall lie
in New York City for any civil action between the Company and the Investor, or
their respective successors in interest, arising out of or relating to this
Agreement. The Company and the Investor, for themselves and their respective
successors in interest, hereby irrevocably consent to such binding arbitration,
and hereby irrevocably waive any claim of forum non conveniens or right to
change such venue. The parties agree to a three panel board, with each party
picking one arbitrator, and the two selected arbitrators agreeing upon the third
arbitrator.
(d) Entire Agreement; Amendments and Waivers. This Agreement constitutes
the entire agreement between the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof except as set forth specifically
herein or contemplated hereby. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. The failure of a party to exercise any right or remedy shall not be
deemed or constitute a waiver of such right or remedy in the future. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (regardless of whether similar), nor shall
any such waiver constitute a continuing waiver unless otherwise expressly
provided.
(e) Binding Effect and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective permitted
successors and assigns; but neither this Agreement nor any of the rights,
benefits or obligations hereunder shall be assigned, by operation of law or
otherwise, by any party hereto without the prior written consent of the other
party; provided, however, that Investor may assign its rights and obligations
hereunder, in whole or in part, to any Affiliate of the Investor (a "Permitted
Transferee"); provided, however, that any such assignment shall not release the
Investor from its obligations hereunder. The rights and obligations of the
Investor under this Agreement shall inure to the benefit of, and be enforceable
by and against, any such Permitted Transferee. Nothing in this Agreement,
express or implied, is intended to confer upon any person or entity other than
the parties hereto and their respective permitted successors and assigns, any
rights, benefits or obligations hereunder.
(f) Waiver of Immunity. The Company irrevocably waives, to the fullest
extent permitted by law, all immunity (whether on the basis of sovereignty or
otherwise) from jurisdiction, attachment (both before and after judgment) and
execution to which it might otherwise be entitled in any action or proceeding in
any court relating in any way to this
14
Agreement and agrees that it will not raise or claim or cause to be pleaded any
such immunity at or in respect of such action or proceeding.
(g) Headings. The headings of the sections herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
Execution. This Agreement may be executed in multiple counterparts
each of which shall be deemed an original and all of which
shall constitute one instrument. A signed photocopy or
facsimile copy shall be as valid and binding as an original.
(h) Survival; Severability. The representations, warranties, covenants and
agreements of the parties hereto shall survive each Closing hereunder. The
indemnity and contribution agreements contained herein shall survive and remain
operative and in full force and effect regardless of (i) any termination of this
Agreement or of the Commitment Period, (ii) any investigation made by or on
behalf of any indemnified party or by or on behalf of the Company, and (iii) the
consummation of the sale or successive resales of the Common Stock. In the event
that any provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision; provided that
such severability shall be ineffective if it materially changes the economic
benefit of this Agreement to any party.
(i) Effectiveness of the Agreement. This Agreement shall be effective as
of the Effective Date.
IN WITNESS WHEREOF, the parties hereto have caused this Registrations
Rights Agreement to be duly executed by their respective authorized officers as
of the date hereof.
iExalt, Inc. THOMSON KERNAGHAN & CO., LTD.
By: /s/ Donald W. Sapaugh By: /s/Ian McKinnon
----------------------------- ------------------------------------
Name: Donald W. Sapaugh Name: Ian McKinnon
-------------------------- ----------------------------------
Title: Chairman and CEO Title:
-------------------------- ----------------------------------
15
IEXALT, INC.
REGISTRATION RIGHTS AGREEMENT SCHEDULE 5(b)
1. Approximately 1,250,000 shares to Travin
2. Approximately 1,250,000 shares to TCA
3. 200,000 shares of common stock relating to the acquisition of Clean Web, Inc.
4.
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