EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of June 28,
2005, is made and entered into by and between Debt Resolve, Inc., a Delaware
corporation, with headquarters located at 707 Westchester Avenue, Lobby Level,
White Plains, New York 10604 (the "COMPANY"), and each of the purchasers set
forth on the Schedule A hereto (the "PURCHASERS").
WHEREAS, in connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Purchasers: (i) 7% senior convertible
promissory notes of the Company in the aggregate principal amount of up to Three
Million Dollars ($3,000,000) (together with any note(s) issued in replacement
thereof or as a dividend thereon or otherwise with respect thereto in accordance
with the terms thereof, the "NOTES"), convertible into shares of common stock,
par value $.001 per share, of the Company (the "COMMON STOCK"), upon the terms
and subject to the limitations and conditions set forth in such Notes and (ii)
warrants to purchase shares of Common Stock (the "WARRANTS");
WHEREAS, the Company is contemplating an initial underwritten public
offering of shares of its Common Stock (the "IPO"); and
WHEREAS, in order to induce the Purchasers 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
"1933 ACT"), and applicable state securities laws.
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 each of the
Purchasers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following capitalized terms shall have the
following meanings. Capitalized terms used but not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
"PURCHASERS" means the Purchasers and any transferee or assignee who agrees
to become bound by the provisions of this Agreement in accordance with Section 9
hereof.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 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 Commission (the "SEC").
"REGISTRABLE SECURITIES" means: (i) the Conversion Shares issued or
issuable upon conversion or otherwise pursuant to the Notes, (ii) the Warrant
Shares issuable, upon exercise or otherwise pursuant to the Warrants, and (iii)
any shares of capital stock issued or issuable as a dividend on or in exchange
for or otherwise with respect to any of the foregoing.
"REGISTRATION STATEMENT" means a registration statement of the Company
under the 1933 Act which the Company may or is obligated to file hereunder.
2. REGISTRATION.
(a) Mandatory Registration. The Company shall, in connection with the
IPO and with the same Registration Statement utilized by the Company for the
IPO, effect a registration of the Registrable Securities covering the resale of
all Registrable Securities underlying the Notes and Warrants issued or otherwise
issuable pursuant to the Securities Purchase Agreement, which Registration
Statement, to the extent allowable under the 1933 Act and the rules and
regulations promulgated thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of or otherwise
pursuant to the Notes and exercise of the Warrants to prevent dilution resulting
from stock splits, stock dividends or similar transactions. The Company
acknowledges that the number of Registrable Securities initially to be included
in the Registration Statement for the IPO shall represent a good faith estimate
of the maximum number of shares issuable upon conversion of the Notes and upon
exercise of the Warrants.
Notwithstanding the foregoing agreement to register all Registrable
Securities in connection with the IPO, if, in connection with IPO, the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Purchaser has
requested inclusion hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Purchasers seeking to
include Registrable Securities in proportion to the number of Registrable
Securities sought to be included by such Purchasers; PROVIDED, HOWEVER, that the
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
to inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and PROVIDED,
FURTHER, HOWEVER, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in the
Registration Statement other than holders of securities entitled to inclusion of
their securities in such Registration Statement by reason of demand registration
rights.
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(b) Piggy-Back Registrations. In the event that all Registrable
Securities are not registered for resale in connection with the IPO, should the
Company, after the IPO and at any time prior to the expiration of the
Registration Period (as hereinafter defined), determine to file with the SEC a
Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other than
on Form S-4 or Form S-8 or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other bona fide
employee benefit plans), the Company shall send to each Purchaser who is
entitled to registration rights under this Section 2(b) written notice of such
determination and, if within twenty (20) days after the effective date of such
notice (as provided for in Section 11(b) hereof), such Purchaser shall so
request in writing, the Company shall include in such Registration Statement all
or any part of the Registrable Securities such Purchaser requests to be
registered, except that if, in connection with any underwritten public offering
for the account of the Company the managing underwriter(s) thereof shall impose
a limitation on the number of shares of Common Stock which may be included in
the Registration Statement because, in such underwriter(s)' judgment, marketing
or other factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Purchaser has requested inclusion hereunder as the
underwriter shall permit. Any exclusion of Registrable Securities shall be made
pro rata among the Purchasers seeking to include Registrable Securities in
proportion to the number of Registrable Securities sought to be included by such
Purchasers; PROVIDED, HOWEVER, that the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not entitled to inclusion of such
securities in such Registration Statement or are not entitled to pro rata
inclusion with the Registrable Securities; and PROVIDED, FURTHER, HOWEVER, that,
after giving effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement other
than holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right to
registration of Registrable Securities under this Section 2(b) shall be
construed to limit any registration required under Section 2(a) hereof. If an
offering in connection with which a Purchaser is entitled to registration under
this Section 2(b) is an underwritten offering, then each Purchaser whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of the
Registrable Securities, the Company shall have the following obligations:
(a) The Company shall, promptly following the date hereof, use its
best efforts to prepare and file with the SEC a Registration Statement for the
IPO which shall include the Registrable Securities as provided for in Section
2(a) hereof (it being understood and agreed that the actual consummation of the
IPO is subject to, among other things, the agreement of the Company and the
underwriter thereof regarding customary matters relating to the IPO). Upon
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effectiveness, the Company shall keep such Registration Statement effective
pursuant to Rule 415 at all times until such date as is the earlier of: (i) the
date on which all of the Registrable Securities have been sold and (ii) the date
on which the Registrable Securities (in the opinion of counsel to the Purchasers
reasonably acceptable to the Company) may be immediately sold to the public
without registration or restriction (including, without limitation, as to volume
by each holder thereof) under the 1933 Act (the "REGISTRATION Period"). Such
Registration Statement (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 not misleading (it being agreed that
the foregoing shall not apply to statements made or statements omitted in
reliance upon and in conformity with information furnished in writing to the
Company by one or more Purchasers specifically for use in the Registration
Statement).
(b) The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statements and the prospectus used in connection with the Registration
Statements as may be necessary to keep the Registration Statements effective at
all times during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statements
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 Statements. In the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the Registrable Securities issued or issuable
upon conversion of the Notes and exercise of the Warrants, the Company shall
amend the Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover all of
the Registrable Securities, in each case, as soon as practicable, but in any
event within twenty (20) days after the necessity therefor arises (based on the
market price of the Common Stock and other relevant factors on which the Company
reasonably elects to rely). The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof.
(c) The Company shall furnish to each Purchaser whose Registrable
Securities are included in a Registration Statement and one legal counsel
designated by the Purchasers: (i) promptly (but in no event more than two (2)
business days) after the same is prepared and publicly distributed, filed with
the SEC, or received by the Company, one copy of each Registration Statement and
any amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, and, in the case of the Registration Statement
referred to in Section 2(a), each letter written by or on behalf of the Company
to the SEC or the staff of the SEC, and each item of correspondence from the SEC
or the staff of the SEC, in each case relating to such Registration Statement
(other than any portion of any thereof which contains information for which the
Company has sought confidential treatment), and (ii) promptly (but in no event
more than two (2) business days) after the Registration Statement is declared
effective by the SEC, such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as such Purchaser may reasonably request in order to facilitate
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the disposition of the Registrable Securities owned by such Purchaser. The
Company will promptly notify each Purchaser by facsimile of the effectiveness of
each Registration Statement or any post-effective amendment. The Company will
promptly (but in no event more than twenty (20) business days) respond to any
and all comments received from the SEC (which comments shall promptly be made
available to the Purchasers upon request), with a view towards causing each
Registration Statement or any amendment thereto to be declared effective by the
SEC as soon as practicable, shall promptly file an acceleration request as soon
as practicable (but in no event more than two (2) business days) following the
resolution or clearance of all SEC comments or, if applicable, following
notification by the SEC that any such Registration Statement or any amendment
thereto will not be subject to review and shall promptly file with the SEC a
final prospectus as soon as practicable (but in no event more than two (2)
business days) following receipt by the Company from the SEC of an order
declaring the Registration Statement effective.
(d) The Company shall use reasonable efforts to: (i) register and
qualify the Registrable Securities covered by the Registration Statements under
such other securities or "blue sky" laws of such jurisdictions in the United
States as the Purchasers who hold a majority in interest of the Registrable
Securities being offered reasonably request, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; PROVIDED, HOWEVER, that
the Company shall not be required in connection therewith or as a condition
thereto to: (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
cause the Company undue expense or burden, or (e) make any change in its charter
or bylaws, which in each case the Board of Directors of the Company determines
to be contrary to the best interests of the Company and its stockholders.
(e) As promptly as practicable after becoming aware of such event, the
Company shall notify each Purchaser of the happening of any event, of which the
Company has knowledge, as a result of which the prospectus included in any
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to any Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Purchaser as such Purchaser
may reasonably request; PROVIDED, HOWEVER, that, for not more than fifteen (15)
consecutive trading days (or a total of not more than thirty (30) trading days
in any twelve (12) month period), the Company may delay the disclosure of
material non-public information concerning the Company (as well as prospectus or
Registration Statement updating) the disclosure of which at the time is not, in
the good faith opinion of the Company, in the best interests of the Company (an
"ALLOWED DELAY"); AND PROVIDED, FURTHER, that the Company shall promptly: (i)
notify the Purchasers in writing of the existence of (but in no event, without
the prior written consent of a Purchaser, shall the Company disclose to such
investor any of the facts or circumstances regarding) material non-public
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information giving rise to an Allowed Delay and (ii) advise the Purchasers in
writing to cease all sales under such Registration Statement until the end of
the Allowed Delay. Upon expiration of the Allowed Delay, the Company shall again
be bound by the first sentence of this Section 3(e) (but excluding the provisos
therein) with respect to the information giving rise thereto.
(f) The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of any Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest possible moment and to notify each Purchaser who holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the resolution
thereof.
(g) The Company shall permit a single firm of counsel designated by
the Purchasers to review such Registration Statement and all amendments and
supplements thereto (as well as all requests for acceleration or effectiveness
thereof) a reasonable period of time prior to their filing with the SEC, and not
file any document in a form to which such counsel reasonably objects and will
not request acceleration of such Registration Statement without prior notice to
such counsel. The fees of such counsel for such review shall not exceed $5,000
without the consent of the Company. The sections of such Registration Statement
covering information with respect to the Purchasers, the Purchaser's beneficial
ownership of securities of the Company or the Purchasers intended method of
disposition of Registrable Securities shall conform to the information provided
to the Company by each of the Purchasers.
(h) The Company shall make generally available to its security holders
as soon as practicable, but not later than ninety (90) days after the close of
the period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
(i) At the request of the holders of a majority-in-interest of the
Registrable Securities, the Company shall furnish, on the date that Registrable
Securities are delivered to an underwriter, if any, for sale in connection with
any Registration Statement or, if such securities are not being sold by an
underwriter, on the date of effectiveness thereof: (i) an opinion, dated as of
such date, from counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the underwriters, if any, and the
Purchasers and (ii) a letter, dated such date, from the Company's independent
registered public accounting firm in form and substance as is customarily given
by independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and the Purchasers.
(j) The Company shall make available for inspection by: (i) any
Purchaser, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Purchasers and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company, including without limitation, records of conversions by other
holders of convertible securities issued by the Company and the issuance of
stock to such holders pursuant to the conversions (collectively, the "RECORDS"),
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as shall be reasonably deemed necessary by each Inspector to enable each
Inspector to exercise its due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information which any Inspector
may reasonably request for purposes of such due diligence; PROVIDED, HOWEVER,
that each Inspector shall hold in confidence and shall not make any disclosure
(except to a Purchaser) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless: (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (b) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction, or (c)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Each Purchaser agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Purchaser) shall be deemed to limit the Purchaser's ability
to sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
(k) The Company shall hold in confidence and not make any disclosure
of information concerning a Purchaser provided to the Company unless: (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning a
Purchaser is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Purchaser prior
to making such disclosure, and allow the Purchaser, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
(l) The Company shall cause all the Registrable Securities covered by
the Registration Statement to be listed on each national securities exchange or
quotation system on which securities of the same class or series issued by the
Company are then listed, if any, if the listing of such Registrable Securities
is then permitted under the rules of such exchange or system.
(m) The Company shall 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.
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(n) The Company shall cooperate with the Purchasers who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Purchasers may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Purchasers may request. Within three (3) 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 Purchasers whose Registrable
Securities are included in such Registration Statement) a customary instruction
letter and opinion of such counsel to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities.
(o) At the request of the holders of a majority-in-interest of the
Registrable Securities, the Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and any prospectus used in connection with the
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.
(p) From and after the date of this Agreement, the Company shall not,
and shall not agree to, allow the holders of any securities of the Company to
include any of their securities in any Registration Statement under Section 2(a)
hereof or any amendment or supplement thereto under Section 3(b) hereof without
the consent of the holders of a majority-in-interest of the Registrable
Securities.
(q) The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Purchasers of Registrable Securities
pursuant to a Registration Statement.
4. OBLIGATIONS OF THE PURCHASERS. In connection with the registration of
the Registrable Securities, the Purchasers shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Purchaser that such Purchaser 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 three (3)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Purchaser of the information the
Company requires from each such Purchaser.
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(b) Each Purchaser, by such Purchaser's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statements hereunder, unless such Purchaser has notified the Company in writing
of such Purchaser's election to exclude all of such Purchaser's Registrable
Securities from the Registration Statements.
(c) In the event Purchasers holding a majority-in-interest of the
Registrable Securities being registered (with the approval of the Purchasers)
determine to engage the services of an underwriter, each Purchaser agrees to
enter into and perform such Purchaser's obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing underwriter of
such offering and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the Registrable Securities, unless
such Purchaser has notified the Company in writing of such Purchaser's election
to exclude all of such Purchaser's Registrable Securities from such Registration
Statement.
(d) Each Purchaser agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), such Purchaser will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Purchaser's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, such Purchaser shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Purchaser's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
(e) No Purchaser may participate in any underwritten registration
hereunder unless such Purchaser: (i) agrees to sell such Purchaser's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualification fees,
printers and accounting fees, the fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements of one counsel selected by
the Purchasers pursuant to Sections 2(b) and 3(j) hereof shall be borne by the
Company.
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, hold
harmless and defend: (i) each Purchaser who holds such Registrable Securities,
(ii) the directors, officers, partners, employees, agents and each person who
controls any Purchaser within the meaning of the 1933 Act or the Securities
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Exchange Act of 1934, as amended (the "1934 ACT"), if any, (iii) any underwriter
(as defined in the 1933 Act) for the Purchasers, and (iv) the directors,
officers, partners, employees and each person who controls any such underwriter
within the meaning of the 1933 Act or the 1934 Act, if any (each, an
"INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "CLAIMS") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading; (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or 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 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse the Indemnified Person, promptly as such expenses are incurred and are
due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them 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): (i) shall not 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 any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of such Registration Statement or any such amendment thereof or
supplement thereto; (ii) shall not 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; and (iii) with
respect to any preliminary prospectus, shall not inure to the benefit of any
Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Purchasers pursuant to Section 9.
(b) In connection with any Registration Statement in which a Purchaser
is participating, each such Purchaser agrees severally and not jointly to
indemnify, hold harmless and defend, to the same extent and in the same manner
set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement, each person, if any, who controls
the Company within the meaning of the 1933 Act or the 1934 Act, any underwriter
and any other stockholder selling securities pursuant to the Registration
Statement or any of its directors or officers or any person who controls such
stockholder or underwriter within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
10
against any Claim to which any of them may become subject, under the 1933 Act,
the 1934 Act or otherwise, insofar as such Claim arises out of or is based upon
any Violation by such Purchaser, 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 to the Company by such Purchaser expressly for use
in connection with such Registration Statement; and subject to Section 6(c) such
Purchaser will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; PROVIDED, HOWEVER, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Purchaser, which consent shall not be unreasonably
withheld; PROVIDED, FURTHER, HOWEVER, that the Purchaser shall be liable under
this Agreement (including this Section 6(b) and Section 7) for only that amount
as does not exceed the net proceeds to such Purchaser as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Purchasers pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
(c) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or 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 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 Person or the Indemnified Party, as the
case may be; PROVIDED, HOWEVER, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such legal counsel shall be selected by Purchasers holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates (with the approval of a
majority-in-interest of the Purchasers), if the Purchasers are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. 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 Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually 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.
11
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: (I) 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, (II) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of such fraudulent misrepresentation, and (iii)contribution
(together with any indemnification or other obligations under this Agreement) 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 THE 1934 ACT. With a view to making available to the
Purchasers the benefits of Rule 144 promulgated under the 1933 Act or any other
similar rule or regulation of the SEC that may at any time permit the investors
to sell securities of the Company to the public without registration ("RULE
144"), the Company agrees to:
(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 1933 Act and the
1934 Act so long as the Company remains subject to such requirements (it being
understood that nothing herein shall limit the Company's obligations under
Section 4(c) of the Securities Purchase Agreement) and the filing of such
reports and other documents is required for the applicable provisions of Rule
144; and
(c) furnish to each Purchaser so long as such Purchaser owns
Registrable Securities, promptly 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 and (ii) such other information as may be reasonably
requested to permit the Purchasers to sell such securities pursuant to Rule 144
without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights under this Agreement shall
be automatically assignable by the Purchasers to any transferee of all or any
portion of Registrable Securities if: (i) the Purchaser agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company promptly after such assignment, (ii) the Company is,
promptly after such transfer or assignment, furnished with written notice of (A)
the name and address of such transferee or assignee, and (B) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
12
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an "accredited investor" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS. The terms and provisions 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 written consent of the Company and Purchasers who hold
a majority interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Purchaser
and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Any notices required or permitted to be given under the terms
hereof shall be sent by certified or registered mail (return receipt requested)
or delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed in
the mail, if mailed by regular United States mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service) or
by facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
Debt Resolve, Inc.
707 Westchester Avenue, Lobby Level
White Plains, NY 10604
Attention: James D. Burchetta
Telephone: (914) 949-5500
Facsimile: (914) 428-3044
With a copy to:
Greenberg Traurig LLP
MetLife Building
200 Park Avenue, 15th Floor
New York, NY 10166
Attention: Spencer G. Feldman, Esq.
Telephone: (212) 801-9200
Facsimile: (212) 801-6400
13
If to a Purchaser: To the address and fax number set forth immediately
below such Purchaser's name on the counterpart signature
pages hereto.
With copy to:
Ellenoff Grossman & Schole LLP
370 Lexington Avenue
New York, NY 10017
Attention: Douglas S. Ellenoff, Esq.
Telephone: (212) 370-1300
Facsimile: (212) 370-7889
Each party shall provide notice to the other party of any change in
address.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICTS OF LAW.
(e) THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF
THE NEW YORK STATE OR UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK
WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. THE PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. THE PARTIES
FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN
ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT A PARTY'S RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. THE PARTIES AGREE THAT A
FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY
OTHER LAWFUL MANNER.
(f) THE PARTY OR PARTIES WHICH DO NOT PREVAIL IN ANY DISPUTE ARISING
UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.
(g) EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
14
(h) In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any
provision hereof which may prove invalid or unenforceable under any law shall
not affect the validity or enforceability of any other provision hereof.
(i) This Agreement and the other Transaction Documents (including all
schedules and exhibits thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the Securities
Purchase Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.
(j) Subject to the requirements of Section 9 hereof, this Agreement
shall be binding upon and inure to the benefit of the parties and their
successors and assigns.
(k) The headings in this Agreement are for convenience of reference
only and shall not form part of, or affect the interpretation of, this
Agreement.
(l) This Agreement may be executed in one or more counterparts (with
the Purchasers each executing the counterpart in the form of Annex A hereto.
Each of such counterparts shall be deemed an original, and all of which shall,
when taken together, constitute one and the same agreement, and shall become
effective when counterparts have been signed by each party and delivered to the
other party. This Agreement, once executed by a party (including in the manner
described above), may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
(m) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(n) Except as otherwise provided herein, all consents and other
determinations to be made by the Purchasers pursuant to this Agreement shall be
made by Purchasers holding a majority of the Registrable Securities, determined
as if the all of the Notes then outstanding have been converted into for
Registrable Securities.
(o) The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to each Purchaser by vitiating the intent
and purpose of the transactions contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for breach of its obligations under this
Agreement will be inadequate and agrees, in the event of a breach or threatened
15
breach by the Company of any of the provisions under this Agreement, that each
Purchaser shall be entitled, in addition to all other available remedies in law
or in equity, and in addition to the penalties assessable herein, to an
injunction or injunctions restraining, preventing or curing any breach of this
Agreement and to enforce specifically the terms and provisions hereof, without
the necessity of showing economic loss and without any bond or other security
being required.
(p) The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
[Signature Page Follows]
16
IN WITNESS WHEREOF, the undersigned Purchasers and the Company have
caused this Registration Rights Agreement to be duly executed as of the date
first above written.
DEBT RESOLVE, INC.
By: /s/ James D. Burchetta
------------------------------------
Name: James D. Burchetta
Title: Chief Executive Officer
PURCHASERS:
The Purchasers executing the Signature
Page in the form attached hereto as
Annex A and delivering the same to the
Company or its agents shall be deemed to
have executed this Agreement and agreed
to the terms hereof.
17
ANNEX A
REGISTRATION RIGHTS AGREEMENT
PURCHASER COUNTERPART SIGNATURE PAGE
The undersigned, desiring to enter into that certain Registration Rights
Agreement, dated June 28, 2005 (the "AGREEMENT"), between the undersigned, Debt
Resolve, Inc., a Delaware corporation (the "COMPANY"), and the other parties
thereto, in or substantially in the form furnished to the undersigned, hereby
agrees to join the Agreement as a party thereto, with all the rights and
privileges appertaining thereto, and to be bound in all respects by the terms
and conditions thereof.
IN WITNESS WHEREOF, the undersigned has executed the Agreement as of June
28, 2005.
PURCHASER:
NAME, ADDRESS, FAX NO. AND SOCIAL SECURITY
NO./EIN OF PURCHASER:
______________________________________
______________________________________
______________________________________
______________________________________
Fax No.: _____________________________
Soc. Sec. No./EIN: ___________________
IF A PARTNERSHIP, CORPORATION, TRUST OR
OTHER BUSINESS ENTITY:
By:___________________________________
Name:
Title:
IF AN INDIVIDUAL:
______________________________________
Signature