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Exhibit 4.1
REGISTRATION RIGHTS AGREEMENT
Dated As of October , 2005
among
IONATRON, INC.
and
THE PURCHASERS NAMED HEREIN
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REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into this ___th day of October 2005, among Ionatron, Inc., a Delaware
corporation (the "Company") and each of the purchasers set forth on Schedule A
attached hereto (collectively, the "Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated October [
], 2005, by and among the Company and each of the Purchasers (the "Purchase
Agreement"), which provides for the sale by the Company to the Purchasers of an
aggregate of up to 920,000 shares (the "Shares", which includes the Offered
Shares and Option Shares, each as defined in the Purchase Agreement) of the
Company's 6.5% Series A Redeemable Convertible Preferred Stock, par value $0.001
per share (the "Preferred Stock"). The execution of this Agreement is a
condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time to
time.
"1934 Act" shall mean the Securities Exchange Act of l934, as amended from
time to time.
"Black-out Periods" shall mean suspensions of the effectiveness of the
Shelf Registration Statement as permitted by Section 3 hereof.
"Certificate of Designation" shall mean the Certificate of Designation
relating to the Preferred Stock, which sets forth the powers, preferences and
rights, and the qualifications, limitations and restrictions of the Preferred
Stock.
"Closing Date" shall mean the Closing Date as defined in the Purchase
Agreement.
"Common Stock" shall mean the common stock, par value $0.001 per share, of
the Company.
"Conversion Shares" shall mean the shares of Common Stock issued or
issuable upon conversion of the Shares.
"Company" shall have the meaning set forth in the preamble and shall also
include the Company's successors.
"Depositary" shall mean The Depository Trust Company, or any other
depositary appointed by the Company, provided, however, that such depositary
must have an address in the Borough of Manhattan, in the City of New York.
"Dividend Shares" shall mean the shares of Common Stock issued as payment
of dividends on the Shares.
"Holder" shall mean a Purchaser, for so long as it owns any Registrable
Securities, and each of its successors, assigns and direct and indirect
transferees who become registered owners of Registrable Securities.
"Majority Holders" shall mean the Holders of a majority of the Conversion
Shares whether issued or issuable upon conversion of the Shares.
"Person" shall mean an individual, partnership (general or limited),
corporation, limited liability company, trust or unincorporated organization, or
a government or agency or political subdivision thereof.
"Prospectus" shall mean the prospectus included in a Shelf Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, and by all other
amendments and supplements to a prospectus, including post-effective amendments,
and in each case including all material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the preamble.
"Registrable Securities" shall mean the Shares, Conversion Shares and
Dividend Shares; provided, however, that Shares and Conversion Shares shall
cease to be Registrable Securities when (i) a Shelf Registration Statement with
respect to such Shares, Conversion Shares and Dividend Shares shall have been
declared effective under the 1933 Act and such Shares, Conversion Shares and
Dividend Shares shall have been disposed of pursuant to such Shelf Registration
Statement, (ii) such Shares, Conversion Shares and Dividend Shares have been
sold to the public pursuant to Rule l44 (or any similar provision then in force,
but not Rule 144A) under the 1933 Act or (iii) such Shares, Conversion Shares
and Dividend Shares shall have ceased to be outstanding.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. (the "NASD") registration and filing fees, including,
if applicable, the fees and expenses of any "qualified independent underwriter"
(and its counsel) that is required to be retained by any holder of Registrable
Securities in accordance with the rules and regulations of the NASD, (ii) all
expenses of the Company in preparing or assisting in preparing, word processing,
printing and distributing any Shelf Registration Statement, any Prospectus, any
amendments or supplements thereto, any underwriting agreements, securities sales
agreements and other documents relating to the performance of and compliance
with this Agreement, (iii) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Securities on any securities exchange
or exchanges, and (iv) the fees and disbursements of counsel for the Company and
of the independent public accountants of the Company, but excluding underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by a Holder.
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"SEC" shall mean the Securities and Exchange Commission or any successor
agency or government body performing the functions currently performed by the
United States Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2.1 hereof.
"Shelf Registration Statement" shall mean a "shelf" registration statement
of the Company pursuant to the provisions of Section 2.1 of this Agreement which
covers all of the Registrable Securities on an appropriate form under Rule 415
under the 1933 Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Transfer Agent" shall mean the transfer agent with respect to the
Preferred Stock.
2. Registration Under the 1933 Act.
2.1 Shelf Registration. The Company shall, for the benefit of the Holders,
at the Company's cost:
(a) As promptly as practicable, use its reasonable best efforts to file
with the SEC no later than 45 days after the original issue of the Preferred
Stock, a Shelf Registration Statement relating to the offer and sale of the
Registrable Securities by the Holders from time to time in accordance with the
methods of distribution elected by the Majority Holders participating in the
Shelf Registration and set forth in such Shelf Registration Statement.
(b) Use its reasonable best efforts to cause the Shelf Registration
Statement to be declared effective under the 1933 Act within 150 days of the
Closing Date, provided, however, that if the Company is proceeding with the
registration process but the registration statement is subject to review by the
SEC and audited financial statements for the year ending December 31, 2005 are
required to be included in the Shelf Registration Statement, such date shall be
extended to March 31, 2006, if later (the "Effectiveness Deadline").
(c) Use its reasonable best efforts to keep the Shelf Registration
Statement continuously effective, other than during Black-out Periods, in order
to permit the Prospectus forming part thereof to be usable by Holders for a
period of two years from the date the Shelf Registration Statement is declared
effective by the SEC, or for such shorter period that will terminate when all
Registrable Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement or cease to be outstanding or
otherwise to be Registrable Securities (the "Effectiveness Period").
(d) Notwithstanding any other provisions hereof, use their best efforts to
ensure that (i) any Shelf Registration Statement and any amendment thereto and
any Prospectus forming part thereof and any supplement thereto complies in all
material respects with the 1933 Act and the rules and regulations thereunder,
(ii) any Shelf Registration Statement and any amendment thereto does not, when
it becomes effective, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) any Prospectus forming part of any
Shelf Registration Statement, and any supplement to such Prospectus (as amended
or supplemented from time to time), does not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements, in light of the circumstances under which they were made, not
misleading.
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The Company agrees, if necessary, to supplement or amend the Shelf
Registration Statement, as required by Section 3(b) below, and to furnish to the
Holders of Registrable Securities copies of any such supplement or amendment
promptly after its being used or filed with the SEC.
2.2 Expenses. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2.1. Each Holder shall pay
all underwriting discounts and commissions and transfer taxes, if any, relating
to the sale or disposition of such Holder's Registrable Securities pursuant to
the Shelf Registration Statement and the expenses of any attorney or advisor of
the Holders.
2.3 Effectiveness. (a) The Company will be deemed not have used its
reasonable best efforts to cause the Shelf Registration Statement to become, or
to remain, effective during the requisite period if they voluntarily take any
action that would, or omit to take any action which omission would, result in
any such Shelf Registration Statement not being declared effective or in the
Holders of Registrable Securities covered thereby not being able to offer and
sell such Registrable Securities during that period as and to the extent
contemplated hereby, unless such action is required by applicable law.
(b) A Shelf Registration Statement pursuant to Section 2.1 hereof will not
be deemed to have become effective unless it has been declared effective by the
SEC; provided, however, that if, after it has been declared effective, the
offering of Registrable Securities pursuant to a Shelf Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Shelf Registration
Statement will be deemed not to have become effective during the period of such
interference, until the offering of Registrable Securities pursuant to such
Shelf Registration Statement may legally resume.
2.4 Dividends. The Certificate of Designation designating the rights and
preferences of the Preferred Stock will provide that in the event that either
(a) the Shelf Registration Statement is not filed with the Commission on or
prior to the 45th calendar day following the date of the original issue of the
Securities or (b) the Shelf Registration Statement is not declared effective on
or prior to the Effectiveness Deadline (such event referred to above, a
"Registration Default"), the dividend rate for the Preferred Stock shall be
increased ("Additional Dividends") by one percent (1%) per annum of the
liquidation preference of the Preferred Stock upon the occurrence of each
Registration Default, and if the Registration Default shall continue for 90
consecutive days, the dividend rate of the Preferred Stock shall increase to 10%
per annum of the liquidation preference of the Preferred Stock. Following the
cure of all Registration Defaults the accrual of Additional Dividends will cease
and the dividend rate of the Preferred Stock will revert to its original
dividend rate.
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The Certificate of Designation designating the rights and preferences of
the Preferred Stock will also provide that a Registration Default shall also be
deemed to occur if the Shelf Registration Statement is unusable by the Holders
named as selling stockholders therein for any reason, and the aggregate number
of days in any consecutive twelve-month period for which the Shelf Registration
Statement shall not be usable exceeds 90 days in the aggregate.
3. Registration Procedures. In connection with the obligations of the
Company with respect to the Shelf Registration Statements pursuant to Sections
2.1, the Company shall:
(a) prepare and file with the SEC a Shelf Registration Statement, within
the relevant time period specified in Section 2, on the appropriate form under
the 1933 Act, which form (i) shall be selected by the Company, (ii) shall be
available for the sale of the Registrable Securities by the selling Holders
thereof, (iii) shall comply as to form in all material respects with the
requirements of the applicable form and include or incorporate by reference all
financial statements required by the SEC to be filed therewith or incorporated
by reference therein, and (iv) use its reasonable best efforts to cause such
Shelf Registration Statement to become effective and remain effective in
accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Shelf Registration Statement as may be necessary under
applicable law to keep such Shelf Registration Statement effective for the
applicable period; and cause each Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provision then in force) under the 1933 Act and comply with the
provisions of the 1933 Act, the 1934 Act and the rules and regulations
thereunder applicable to them with respect to the disposition of all securities
covered by the Shelf Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the selling
Holders thereof;
(c) (i) notify each Holder of Registrable Securities, that a Shelf
Registration Statement with respect to the Registrable Securities is being filed
and participating in the Shelf Registration; (ii) furnish to each Holder of
Registrable Securities without charge, as many copies of each Prospectus, and
any amendment or supplement thereto and such other documents as such Holder or
underwriter may reasonably request, including financial statements and schedules
and, if the Holder so requests, all exhibits in order to facilitate the public
sale or other disposition of the Registrable Securities; and (iii) hereby
consent to the use of the Prospectus or any amendment or supplement thereto by
each of the selling Holders of Registrable Securities in connection with the
offering and sale of the Registrable Securities covered by the Prospectus or any
amendment or supplement thereto;
(d) use its best efforts to register or qualify the Registrable Securities
under all applicable state securities or "blue sky" laws of such jurisdictions
as any Holder of Registrable Securities covered by a Shelf Registration
Statement may reasonably request, and do any and all other acts and things which
may be reasonably necessary or advisable to enable each such Holder and
underwriter to consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; provided, however, that the Company
shall not be required to (i) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), or (ii) take any action which would subject
it to general service of process or taxation in any such jurisdiction where it
is not then so subject;
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(e) notify promptly each Holder of Registrable Securities under a Shelf
Registration and, if requested by such Holder, confirm such advice in writing
promptly (i) when a Shelf Registration Statement has become effective and when
any post-effective amendments and supplements thereto become effective, (ii) of
any request by the SEC or any state securities authority for post-effective
amendments and supplements to a Registration Statement and Prospectus or for
additional information after the Shelf Registration Statement has become
effective, (iii) of the issuance by the SEC or any state securities authority of
any stop order suspending the effectiveness of a Shelf Registration Statement or
the initiation of any proceedings for that purpose, (iv) in the case of a Shelf
Registration, if, between the effective date of a Shelf Registration Statement
and the closing of any sale of Registrable Securities covered thereby, the
representations and warranties of the Company contained in any underwriting
agreement, securities sales agreement or other similar agreement, if any,
relating to the offering cease to be true and correct in all material respects,
(v) of the happening of any event or the discovery of any facts during the
period a Shelf Registration Statement is effective which makes any statement of
a material fact made in such Shelf Registration Statement or the related
Prospectus untrue in any material respect or which requires the making of any
changes in such Shelf Registration Statement or Prospectus in order to make the
statements therein not misleading, (vi) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose and (vii) of any determination by
the Company that a post-effective amendment to such Shelf Registration Statement
would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Shelf Registration Statement at the earliest
possible moment;
(g) upon the occurrence of any event or the discovery of any facts, each
as contemplated by Sections 3(e)(v) and 3(e)(vi) hereof, as promptly as
practicable after the occurrence of such an event, use their best efforts to
prepare a supplement or post-effective amendment to the Shelf Registration
Statement or the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities, such Prospectus will not
contain at the time of such delivery any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading or will remain
so qualified. At such time as such public disclosure is otherwise made or the
Company determines that such disclosure is not necessary, in each case to
correct any misstatement of a material fact or to include any omitted material
fact, the Company agrees promptly to notify each Holder of such determination
and to furnish each Holder such number of copies of the Prospectus as amended or
supplemented, as such Holder may reasonably request;
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(h) a reasonable time prior to the filing of any Shelf Registration
Statement, any Prospectus, any amendment to a Shelf Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus after
initial filing of a Shelf Registration Statement, provide copies of such
document to the Initial Purchasers on behalf of such Holders; and make
representatives of the Company as shall be reasonably requested by the Holders
of Registrable Securities, or the Initial Purchasers on behalf of such Holders,
available for discussion of such document; and
(i) obtain a CUSIP number for all Registrable Securities not later than
the date on which the Preferred Stock is first quoted on the OTC Bulletin Board,
and provide the Transfer Agent with printed certificates for the Registrable
Securities in a form eligible for deposit with the Depositary.
(j) make available for inspection by representatives of the Holders of the
Registrable Securities, any underwriters participating in any disposition
pursuant to a Shelf Registration Statement, and any counsel or accountant
retained by any of the foregoing, all financial and other records, pertinent
corporate documents and properties of the Company reasonably requested by any
such persons, and cause the respective officers, directors, employees, and any
other agents of the Company to supply all information reasonably requested by
any such representative, underwriter, special counsel or accountant in
connection with a Shelf Registration Statement, and make such representatives of
the Company available for discussion of such documents as shall be reasonably
requested by the Initial Purchasers;
(k) a reasonable time prior to filing any Shelf Registration Statement,
any Prospectus forming a part thereof, any amendment to such Shelf Registration
Statement or amendment or supplement to such Prospectus, provide copies of such
document to the Holders of Registrable Securities, and to counsel for the
Holders make such changes in any such document prior to the filing thereof as
the counsel to the Holders reasonably request and not file any such document in
a form to which the Majority Holders or counsel for the Holders of Registrable
Securities or any underwriter shall not have previously been advised and
furnished a copy of or to which the Majority Holders or counsel to the Holders
of Registrable Securities shall reasonably object, and make the representatives
of the Company available for discussion of such document as shall be reasonably
requested by the Holders of Registrable Securities on behalf of such Holders or
counsel for the Holders of Registrable Securities;
(l) use its best efforts to cause all Registrable Securities to be listed
on any securities exchange on which similar securities issued by the Company are
then listed if requested by the Majority Holders, if any;
(m) otherwise comply with all applicable rules and regulations of the SEC
and make available to its security holders, as soon as reasonably practicable,
an earnings statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder; and
(n) cooperate and assist in any filings required to be made with the NASD
and in the performance of any due diligence investigation by any underwriter and
its counsel (including any "qualified independent underwriter" that is required
to be retained in accordance with the rules and regulations of the NASD).
7
The Company may (as a condition to such Holder's participation in the
Shelf Registration) require each Holder of Registrable Securities to furnish to
the Company such information regarding the Holder and the proposed distribution
by such Holder of such Registrable Securities as the Company may from time to
time reasonably request in writing. Notwithstanding anything herein to the
contrary, no Holder of Registrable Securities may include any of its Registrable
Securities in any Shelf Registration Statement pursuant to this Agreement unless
and until such holder (i) furnishes to the Company the information required by
the Questionnaire included as Annex D in the Offering Memorandum, (ii) agrees to
promptly furnish additional information required to be disclosed in order to
make the information previously furnished to the Company by such Holder not
materially misleading and (iii) at the Company's request, acknowledges in
writing its agreement to be bound by the provisions of this Agreement in
accordance with Section 3 hereof. No holder shall be entitled to Additional
Dividends during any period in which the exclusion of any Registrable Securities
of such Holder from any Shelf Registration results from the operation of this
paragraph.
Each Holder agrees that, upon receipt of any notice from the Company of
the happening of any event or the discovery of any facts, each of the kind
described in Section 3(e)(v) or (vi) hereof, such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to a Shelf
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(g) hereof, and, if
so directed by the Company, such Holder will deliver to the Company (at its
expense) all copies in such Holder's possession, other than permanent file
copies then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice. If the
Company shall give any such notice to suspend the disposition of Registrable
Securities pursuant to the Shelf Registration Statement, the Company shall
extend the period during which the Shelf Registration Statement shall be
maintained effective pursuant to this Agreement by the number of days during the
period from and including the date of giving such notice to and including the
date when the Holders shall have received copies of the supplemented or amended
Prospectus necessary to resume such dispositions. Such suspensions may not
exceed 90 days in the aggregate in any consecutive 365-day period.
4. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Holder,
each person, if any, who controls any Holder within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act, and each affiliate of
any Holder within the meaning of Rule 405 under the 1933 Act from and against
any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement or any amendment thereof, any preliminary prospectus or
the Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto), caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except that the Company
shall not be liable to indemnify any Holder insofar as such losses, claims,
damages or liabilities are (i) caused by any such untrue statement or omission
or alleged untrue statement or omission based upon information relating to any
Holder furnished to the Company in writing by such Holder expressly for use
therein, (ii) based upon a Holder's failure to provide the Company with a
material fact relating to the Holder which is required to be included in the
Registration Statement or necessary to make a statement in the Registration
Statement not be misleading, (iii) relate to sales of Registrable Securities by
a Holder to the person asserting any such losses, claims, damages or
liabilities, if such person was not sent or given a Prospectus by or on behalf
of the Holder, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Registrable Securities to such person,
and if the Prospectus (as so amended or supplemented) would have cured the
defect giving rise to such losses, claims, damages or liabilities, unless such
failure is the result of noncompliance by the Company or based upon the Holder's
use of a prospectus during a period when the Holder has been notified that the
use of the prospectus has been suspended.
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(b) Each Holder agrees severally and not jointly to indemnify and
hold harmless the Company and its directors, officers and each person, if any,
who controls the Company (within the meaning of either Section 15 of the 1933
Act or Section 20 of the 1934 Act) and any of their affiliates or any other
Holder or its affiliates, to the same extent as the foregoing indemnity from the
Company to such Holder, but only with reference to (i) information relating to
such Holder furnished to the Company in writing by or on behalf of such Holder
expressly for use in such Registration Statement or Prospectus or amendment or
supplement thereto, (ii) information relating to the Holder which the Holder
fails to provide in writing for use in the Registration Statement or Prospectus
resulting in an omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, or in connection with a
sale of Registrable Securities for which the Holder would not be entitled to
indemnification pursuant under Section 4(a)(ii) or 4(a)(iii).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to Section 4(a) or 4(b) hereof, such person
(the "indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party shall assume the defense of such proceedings and retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the reasonable fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate under applicable ethical legal standards due to actual or
potential differing interests between them based upon the indemnified party's
reasonable judgment upon advice of counsel to the indemnified party. It is
understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm for all such indemnified parties and that all such
fees and expenses shall be reimbursed as they are incurred. Such firm shall be
reasonably acceptable to the Company and shall be designated in writing by, in
the case of parties indemnified pursuant to Section 4(a) the Holders of a
majority (with Holders of Preferred Stock deemed to be the Holders, for purposes
of determining such majority, of the number of shares of underlying Common Stock
into which such shares of Preferred Stock are or would be convertible as of the
date on which such designation is made) of the Registrable Securities covered by
the Registration Statement held by Holders that are indemnified parties pursuant
to Section 4(a) and, in the case of parties indemnified pursuant to 4(b), the
Company. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
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party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment that is indemnifiable
pursuant to Section 4(a) or 4(b), as the case may be. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) To the extent that the indemnification provided for in Section
4(a) or 4(b) is unavailable to an indemnified party or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party or parties on the other hand or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the indemnifying party or
parties on the one hand and of the indemnified party or parties on the other
hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company shall be deemed to
be equal to the total net proceeds from the initial placement pursuant to the
Purchase Agreement (before deducting expenses) of the Registrable Securities to
which such losses, claims, damages or liabilities relate. The relative benefits
received by any Holder shall be deemed to be equal to the value of receiving
Registrable Securities that are registered under the 1933 Act. The relative
fault of the Holders on the one hand and the Company on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Holders or by the Company
or the failure of such party to provide information, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Holders' respective obligations to contribute
pursuant to this Section 4(d) are several in proportion to the respective number
of Registrable Securities they have sold pursuant to a Registration Statement,
and not joint.
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The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding this Section 4(d), no indemnifying party that is a selling
Holder shall be required to contribute any amount in excess of the amount by
which the total price at which the Registrable Securities sold by it and
distributed to the public were offered to the public exceeds the amount of any
damages that such indemnifying party has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(e) The remedies provided for in this Section 4 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
an indemnified party at law or in equity, hereunder, under the Purchase
Agreement or otherwise.
(f) The indemnity and contribution provisions contained in this
Section 4 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Holder, any person controlling any Holder or any affiliate of any Holder
or by or on behalf of the Company, its officers or directors or any person
controlling the Company and (iii) the sale of any Registrable Securities by any
Holder.
For purposes of this Section 4, each Person, if any, who controls a
Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as such Holder, and each
director of the Company, and each Person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
shall have the same rights to contribution as the Company.
5. Miscellaneous.
5.1 Rule 144. For so long as the Company is subject to the reporting
requirements of Section 13 or 15 of the 1934 Act, the Company covenants that it
will use its best efforts to file the reports required to be filed by it under
the 1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules and
regulations adopted by the SEC thereunder. If the Company ceases to be so
required to file such reports, the Company covenants that it will upon the
request of any Holder of Registrable Securities (a) make publicly available such
information as is necessary to permit sales pursuant to Rule 144 under the 1933
Act and (b) take such further action that is reasonable in the circumstances, in
each case, to the extent required from time to time to enable such Holder to
sell its Registrable Securities without registration under the 1933 Act within
the limitation of the exemptions provided by (i) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time or (ii) any similar rules or
regulations hereafter adopted by the SEC. Upon the request of any Holder of
Registrable Securities, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
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5.2 No Inconsistent Agreements. The Company has not entered into and the
Company will not after the date of this Agreement enter into any agreement which
is inconsistent with the rights granted to the Holders of Registrable Securities
in this Agreement or otherwise conflicts with the provisions hereof. The rights
granted to the Holders hereunder do not and will not for the term of this
Agreement in any way conflict with the rights granted to the holders of the
Company's other issued and outstanding securities under any such agreements.
5.3 Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company has obtained the written consent of Holders of at least
a majority of the shares of outstanding Registrable Securities affected by such
amendment, modification, supplement, waiver or departure.
5.4 Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (a) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 5.4, which address initially is the address set forth in the Purchase
Agreement with respect to the Initial Purchasers; and (b) if to the Company, to
the attention of its Chief Executive Officer, initially at the Company's address
set forth in the Purchase Agreement, and thereafter at such other address of
which notice is given in accordance with the provisions of this Section 5.4,
with a copy to Blank Rome LLP, 405 Lexington Avenue, New York, New York 10174,
attention, Robert J. Mittman, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; two business days
after being deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when receipt is acknowledged, if telecopied; and on the next
business day if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Transfer Agent, at
the address specified herein.
5.5 Successor and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Securities
in violation of the terms of the Purchase Agreement or the Certificate of
Designation. If any transferee of any Holder shall acquire Registrable
Securities, in any manner, whether by operation of law or otherwise, such
Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities such person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement, including the restrictions on resale
set forth in this Agreement and, if applicable, the Purchase Agreement, and such
person shall be entitled to receive the benefits hereof.
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5.6 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
5.7 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
5.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS THEREOF.
5.9 Submission to Jurisdiction; Waiver of Jury Trial. No proceeding
related to this Agreement or the transactions contemplated hereby may be
commenced, prosecuted or continued in any court other than the courts of the
State of New York located in the City and County of New York or in the United
States District Court for the Southern District of New York, which courts shall
have jurisdiction over the adjudication of such matters, and the Company hereby
consent to the jurisdiction of such courts and personal service with respect
thereto. The Company hereby waive all right to trial by jury in any proceeding
(whether based upon contract, tort or otherwise) in any way arising out of or
relating to this Agreement. The Company agrees that a final judgment in any such
proceeding brought in any such court shall be conclusive and binding upon the
Company and may be enforced in any other courts in the jurisdiction of which the
Company are or may be subject, by suit upon such judgment.
5.10 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
IONATRON, INC.
By: ________________________________
Name:
Title:
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SCHEDULE A
Purchasers