REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as
of October __, 1999, by and among, a corporation duly incorporated and
existing under the laws of the State of Nevada (the "Company") and the
subscriber as named on the signature page hereto (hereinafter referred to as
"Subscriber").
RECITALS:
WHEREAS, pursuant to the Company's offering ("Offering") of up to
Thirty-Five Million Dollars ($35,000,000), excluding any funds paid upon
exercise of the Warrants, of Common Stock of the Company pursuant to that
certain Investment Agreement of even date herewith (the "Investment
Agreement") between the Company and the Subscriber, the Company has agreed to
sell and the Subscriber has agreed to purchase, from time to time as provided
in the Investment Agreement, shares of the Company's Common Stock for a
maximum aggregate offering amount of Thirty-Five Million Dollars
($35,000,000);
WHEREAS, pursuant to the terms of the Investment Agreement, the Company
has agreed to issue to the Subscriber, from time to time, Commitment Warrants
and Purchase Warrants, each as defined in the Investment Agreement, to
purchase a number of shares of Common Stock, exercisable for five (5) years
from their respective dates of issuance (collectively, the "Subscriber
Warrants" or the "Warrants"); and
WHEREAS, pursuant to the terms of the Investment Agreement, the Company
has agreed to provide the Subscriber with certain registration rights with
respect to the Common Stock to be issued in the Offering and the Common Stock
issuable upon exercise of the Subscriber Warrants as set forth in this
Registration Rights Agreement.
TERMS:
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement (including the
Recitals above), the following terms shall have the following meanings (such
meanings to be equally applicable to both singular and plural forms of the
terms defined):
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"Additional Registration Statement" shall have the meaning set
forth in Section 3(b).
"Amended Registration Statement" shall have the meaning set forth
in Section 3(b).
"Business Day" shall have the meaning set forth in the Investment
Agreement.
"Closing Bid Price" shall have the meaning set forth in the
Investment Agreement.
"Common Stock" shall mean the common stock, par value $0.01, of
the Company.
"Due Date" shall mean the date that is one hundred twenty (120)
days after the date of this Agreement.
"Effective Date" shall have the meaning set forth in Section 2.4.
"Filing Date" shall mean the date that is forty-five (45) days
after the date of this Agreement.
"Holder" shall mean Subscriber, and any other person or entity
owning or having the right to acquire Registrable Securities or any permitted
assignee thereof;
"Piggyback Registration" and "Piggyback Registration Statement"
shall have the meaning set forth in Section 4.
"Put" shall have the meaning as set forth in the Investment
Agreement.
"Register," "Registered," and "Registration" shall mean and refer
to a registration effected by preparing and filing a registration statement
or similar document in compliance with the Securities Act of 1933, as amended
(the "Act"), and pursuant to Rule 415 under the Act or any successor rule,
and the declaration or ordering of effectiveness of such registration
statement or document.
"Registrable Securities" shall have the meaning set forth in
Section 2.1.
"Registration Statement" shall have the meaning set forth in
Section 2.2.
"Rule 144" shall mean Rule 144, as amended, promulgated under the
Act.
"Subscriber" shall have the meaning set forth in the preamble to
this Agreement.
"Subscriber Warrants" shall have the meaning set forth in the
above Recitals.
"Investment Agreement" shall have the meaning set forth in the
Recitals hereto.
"Supplemental Registration Statement" shall have the meaning set
forth in Section 3(b).
"Warrants" shall have the meaning set forth in the above
Recitals.
"Warrant Shares" shall mean shares of Common Stock issuable upon
exercise of any Warrant.
2. Required Registration.
2.1 Registrable Securities. "Registrable Securities" shall
mean those shares of the Common Stock of the Company together with any
capital stock issued in replacement of, in exchange for or otherwise in
respect of such Common Stock, that are: (i) issuable or issued to the
Subscriber pursuant to the Investment Agreement or in this Agreement, and
(ii) issuable or issued upon exercise of the Subscriber Warrants; provided,
however, that notwithstanding the above, the following shall not be
considered Registrable Securities:
(a) any Common Stock which would otherwise be deemed to be
Registrable Securities, if and to the extent that those shares of Common
Stock may be resold in a public transaction without volume limitations or
other material restrictions without registration under the Act, including
without limitation, pursuant to Rule 144 under the Act; and
(b) any shares of Common Stock which have been sold in a
private transaction in which the transferor's rights under this Agreement are
not assigned.
2.2 Filing of Initial Registration Statement. The Company
shall, by the Filing Date, file a registration statement ("Registration
Statement") on Form SB-2 (or other suitable form, at the Company's
discretion, but subject to the reasonable approval of Subscriber), covering
the resale of a number of shares of Common Stock as Registrable Securities
equal to at least Six Million Five Hundred Thousand (6,500,000) shares of
Common Stock and shall cover, to the extent allowed by applicable law, such
indeterminate number of additional shares of Common Stock that may be issued
or become issuable as Registrable Securities by the Company pursuant to Rule
416 of the Act.
2.3 [Intentionally Left Blank].
2.4 Registration Effective Date. The Company shall use its
best efforts to have the Registration Statement declared effective by the SEC
(the date of such effectiveness is referred to herein as the "Effective
Date") by the Due Date.
2.5 [Intentionally Left Blank].
2.6 [Intentionally Left Blank].
2.7 Shelf Registration. The Registration Statement shall be
prepared as a "shelf" registration statement under Rule 415, and shall be
maintained effective until all Registrable Securities are resold pursuant to
such Registration Statement.
2.8 Supplemental Registration Statement. Anytime the
Registration Statement does not cover a sufficient number of shares of Common
Stock to cover all outstanding Registrable Securities, the Company shall
promptly prepare and file with the SEC such Supplemental Registration
Statement and the prospectus used in connection with such registration
statement as may be necessary to comply with the provisions of the Act with
respect to the disposition of all such Registrable Securities and shall use
its best efforts to cause such Supplemental Registration Statement to be
declared effective as soon as possible.
3. Obligations of the Company. Whenever required under this
Agreement to effect the registration of any Registrable Securities, the
Company shall, as expeditiously and 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 to remain effective until all Registrable Securities are resold
pursuant to such Registration Statement.
(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 ("Amended Registration
Statement") or prepare and file any additional registration statement
("Additional Registration Statement," together with the Amended Registration
Statement, "Supplemental Registration Statements") as may be necessary to
comply with the provisions of the Act with respect to the disposition of all
securities covered by such Supplemental Registration Statements or such prior
registration statement and to cover the resale of all Registrable Securities.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities 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 such other securities or Blue
Sky laws of the jurisdictions in which the Holders are located, of such other
jurisdictions as shall be reasonably requested by the Holders of the
Registrable Securities covered by such Registration Statement and of all
other jurisdictions where legally required, 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
states or jurisdictions.
(e) [Intentionally Omitted].
(f) As promptly as practicable after becoming aware of such
event, notify each Holder of Registrable Securities 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, use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver a number
of copies of such supplement or amendment to each Holder as such Holder may
reasonably request.
(g) Provide Holders with notice of the date that a Registration
Statement or any Supplemental Registration Statement registering the resale
of the Registrable Securities is declared effective by the SEC, and the date
or dates when the Registration Statement is no longer effective.
(h) Provide Holders and their representatives the opportunity
and a reasonable amount of time, based upon reasonable notice delivered by
the Company, to conduct a reasonable due diligence inquiry of Company's
pertinent financial and other records and make available its officers and
directors for questions regarding such information as it relates to
information contained in the Registration Statement.
(i) Provide Holders and their representatives the opportunity to
review the Registration Statement and all amendments or supplements thereto
prior to their filing with the SEC by giving the Holder at least ten (10)
business days advance written prior to such filing.
(j) Provide each Holder with prompt notice of the issuance by
the SEC or any state securities commission or agency of any stop order
suspending the effectiveness of the Registration Statement or the initiation
of any proceeding for such purpose. The Company shall use its best efforts
to prevent the issuance of any stop order and, if any is issued, to obtain
the removal thereof at the earliest possible date.
(k) Use its best efforts to list the Registrable Securities
covered by the Registration Statement with all securities exchanges or
markets on which the Common Stock is then listed and prepare and file any
required filing with the NASD, American Stock Exchange, NYSE and any other
exchange or market on which the Common Stock is listed.
4. Piggyback Registration. If anytime prior to the date that the
Registration Statement is declared effective or during any Ineffective Period
(as defined in the Investment Agreement) the Company proposes to register
(including for this purpose a registration effected by the Company for
shareholders other than the Holders) any of its Common Stock under the Act in
connection with the public offering of such securities solely for cash (other
than a registration relating solely for the sale of securities to
participants in a Company stock plan or a registration on Form S-4
promulgated under the Act or any successor or similar form registering stock
issuable upon a reclassification, upon a business combination involving an
exchange of securities or upon an exchange offer for securities of the issuer
or another entity), the Company shall, at such time, promptly give each
Holder written notice of such registration (a "Piggyback Registration
Statement"). Upon the written request of each Holder given by fax within ten
(10) days after mailing of such notice by the Company, the Company shall
cause to be included in such registration statement under the Act all of the
Registrable Securities that each such Holder has requested to be registered
("Piggyback Registration") to the extent such inclusion does not violate the
registration rights of any other security holder of the company granted prior
to the date hereof; provided, however, that nothing herein shall prevent the
Company from withdrawing or abandoning such registration statement prior to
its effectiveness.
5. [Intentionally Left Blank].
6. Dispute as to Registrable Securities. In the event the Company
believes that shares sought to be registered under Section 2 or Section 4 by
Holders do not constitute "Registrable Securities" by virtue of Section 2.1
of this Agreement, and the status of those shares as Registrable Securities
is disputed, the Company shall provide, at its expense, an Opinion of
Counsel, reasonably acceptable to the Holders of the Securities at issue (and
satisfactory to the Company's transfer agent to permit the sale and
transfer), that those securities may be sold immediately, without volume
limitation or other material restrictions, without registration under the
Act, by virtue of Rule 144 or similar provisions.
7. Furnish Information. At the Company's request, each Holder shall
furnish to the Company such information regarding Holder, the Registrable
Securities held by it, and the intended method of disposition of such
securities to the extent required to effect the registration of its
Registrable Securities or to determine that registration is not required
pursuant to Rule 144 or other applicable provision of the Act. The Company
shall include all information provided by such Holder pursuant hereto in the
Registration Statement, substantially in the form supplied, except to the
extent such information is not permitted by law.
8. Expenses. All expenses, other than commissions and fees and
expenses of counsel to the selling Holders, incurred in connection with
registrations, filings or qualifications pursuant hereto, including (without
limitation) all registration, filing and qualification fees, printers' and
accounting fees, fees and disbursements of counsel for the Company, shall be
borne by the Company.
9. 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 each Holder, the officers, directors, partners, legal
counsel, and accountants of each Holder, any underwriter (as defined in the
Act, or as deemed by the Securities Exchange Commission, or as indicated in a
registration statement) for such Holder and each person, if any, who controls
such Holder or underwriter within the meaning of Section 15 of the Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following
statements or omissions: (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, or (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, and the Company will reimburse
each such Holder, officer or director, 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
subsection 9(a) 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 out of
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, officer, director, underwriter or
controlling person; provided however, that the above shall not relieve the
Company from any other liabilities which it might otherwise have.
(b) Promptly after receipt by an indemnified party under this
Section 9 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 9,
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 party so desires, jointly with any other
indemnifying party similarly noticed, to assume, the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the
reasonably incurred fees and expenses of one such counsel 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 conflicting interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if materially prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 9, but the omission so
to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 9.
(c) In the event that the indemnity provided in paragraph (a)
of this Section 9 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and each Holder agree to
contribute to the aggregate claims, losses, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the Company
and one or more of the Holders may be subject in such proportion as is
appropriate to reflect the relative fault of the Company and the Holders in
connection with the statements or omissions which resulted in such Losses.
Relative fault shall be determined by reference to whether any alleged untrue
statement or omission relates to information provided by the Company or by
the Holders. The Company and the Holders agree that it would not be just and
equitable if contribution were determined by pro rata allocation or any other
method of allocation that does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), 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 9, each person who controls
a Holder of Registrable Securities within the meaning of either the
Securities Act or the Exchange Act and each director, officer, partner,
employee and agent of a Holder shall have the same rights to contribution as
such holder, and each person who controls the Company within the meaning of
either the Act or the Exchange Act and each director and officer of the
Company shall have the same rights to contribution as the Company, subject in
each case to the applicable terms and conditions of this paragraph (c).
(d) The obligations of the Company and Holders under this
Section 9 shall survive the resale, if any, of the Common Stock, the
completion of any offering of Registrable Securities in a Registration
Statement under this Agreement, and otherwise.
10. Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under
the 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, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144; and
(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 Act
and the 1934 Act.
11. Amendment of Registration Rights. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the written
consent of each Holder affected thereby. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each Holder, each future
Holder, and the Company.
12. Notices. All notices required or permitted under this Agreement
shall be made in writing signed by the party making the same, shall specify
the section under this Agreement pursuant to which it is given, and shall be
addressed if to (i) the Company at: LMKI Inc., Attn: William Kettle, CEO,
1720 East Garry Avenue, Suite 201, Santa Ana, CA 92705, Telephone, (949) 475-
4500, Facsimile, (949) 475-4511 (or at such other location as directed by the
Company in writing) and (ii) the Holders at their respective last address as
the party as shown on the records of the Company. Any notice, except as
otherwise provided in this Agreement, shall be made by fax and shall be
deemed given at the time of transmission of the fax.
13. Termination. This Agreement shall terminate on the date all
Registrable Securities cease to exist (as that term is defined in Section 2.1
hereof); but without prejudice to (i) the parties' rights and obligations
arising from breaches of this Agreement occurring prior to such termination
(ii) other indemnification obligations under this Agreement.
14. Assignment. No assignment, transfer or delegation, whether by
operation of law or otherwise, of any rights or obligations under this
Agreement by the Company or any Holder, respectively, shall be made without
the prior written consent of the majority in interest of the Holders or the
Company, respectively; provided that the rights of a Holder may be
transferred to a subsequent holder of the Holder's Registrable Securities
(provided such transferee shall provide to the Company, together with or
prior to such transferee's request to have such Registrable Securities
included in a Registration, a writing executed by such transferee agreeing to
be bound as a Holder by the terms of this Agreement), and the Company hereby
agrees to file an amended registration statement including such transferee or
a selling security holder thereunder; and provided further that the Company
may transfer its rights and obligations under this Agreement to a purchaser
of all or a substantial portion of its business if the obligations of the
Company under this Agreement are assumed in connection with such transfer,
either by merger or other operation of law (which may include without
limitation a transaction whereby the Registrable Securities are converted
into securities of the successor in interest) or by specific assumption
executed by the transferee.
15. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Nevada applicable to agreements
made in and wholly to be performed in that jurisdiction, except for matters
arising under the Act or the Securities Exchange Act of 1934, which matters
shall be construed and interpreted in accordance with such laws.
16. Execution in Counterparts Permitted. This Agreement may be
executed in any number of counterparts, each of which shall be enforceable
against the parties actually executing such counterparts, and all of which
together shall constitute one (1) instrument.
17. Specific Performance. The Holder shall be entitled to the remedy
of specific performance in the event of the Company's breach of this
Agreement, the parties agreeing that a remedy at law would be inadequate.
18. Indemnity. Each party shall indemnify each other party against
any and all claims, damages (including reasonable attorney's fees), and
expenses arising out of the first party's breach of any of the terms of this
Agreement.
19. Entire Agreement; Written Amendments Required. This Agreement,
including the Exhibits attached hereto, the Investment Agreement, the Common
Stock certificates, and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof, and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or
therein. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
this ___ day of October, 1999.
LMKI Inc.
By:
________________________________
William Kettle, CEO
Address: Attn: William Kettle, CEO
1720 East Garry Avenue, Suite #201
Santa Ana, CA 92705
Telephone (949) 475-4500
Facsimile (949) 475-4511
SUBSCRIBER:
SWARTZ PRIVATE EQUITY, LLC.
By:
________________________________
Eric S. Swartz, Manager
Address: 1080 Holcomb Bridge Road
Bldg. 200, Suite 285
Roswell, GA 30076
Telephone: (770) 640-8130
Facsimile: (770) 640-7150