EXHIBIT 99.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made
and entered into as of May 23, 2003, by and among Tag-It Pacific, Inc., a
Delaware corporation (the "COMPANY"), and the investors signatory hereto (each a
"PURCHASER" and collectively, the "PURCHASERS").
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"PURCHASE AGREEMENT").
The Company and the Purchasers hereby agree as follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined
herein that are defined in the Purchase Agreement shall have the meanings given
such terms in the Purchase Agreement. As used in this Agreement, the following
terms shall have the following meanings:
"EFFECTIVENESS DATE" means, with respect to the Registration
Statement required to be filed hereunder and subject to the Company's
right to suspend the Registration Statement in Section 2(a), the
earlier of the 90th calendar day following the Closing Date (150th
calendar day in the event of a full review by the Commission) and (b)
the tenth Trading Day following the date on which the Company is
notified by the Commission that the Registration Statement will not be
reviewed or is no longer subject to further review and comments;
PROVIDED, HOWEVER, if subsequent to receiving such notification from
the Commission the Company files a pre-effective amendment to the
Registration Statement, such 10 Trading Day period shall be from the
clearance by the Commission of such pre-effective amendment.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in
Section 2(a).
"FILING DATE" means, with respect to the Registration
Statement required to be filed hereunder and subject to the Company's
right to suspend the Registration Statement in Section 2(a), the 30th
calendar day following the Closing Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in
Section 5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in
Section 5(c).
"LOSSES" shall have the meaning set forth in Section 5(a).
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes
any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Securities covered by the Registration
Statement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" means the Shares, together with any
shares of Common Stock issued or issuable upon any stock split,
dividend or other distribution, recapitalization or similar event with
respect to the foregoing.
"REGISTRATION STATEMENT" means the registration statements
required to be filed hereunder, including (in each case) the
Prospectus, amendments and supplements to the registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be
incorporated by reference in the registration statement.
"RULE 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"RULE 424" means Rule 424 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
2. REGISTRATION.
(a) On or prior to the Filing Date, the Company shall prepare and file
with the Commission the Registration Statement covering the resale of
all of the Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement
required hereunder shall be on Form S-3 (except if the Company is not
then eligible to register for resale the Registrable Securities on Form
S-3, in which case the Registration shall be on another appropriate
form in accordance herewith). The Registration Statement required
hereunder shall contain (except if otherwise directed by the Holders or
required by the Commission) the "PLAN OF DISTRIBUTION" attached hereto
as ANNEX A. The Company shall cause the Registration Statement to
become effective and remain effective as provided herein. The Company
shall use its commercially reasonable efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly
as possible after the filing thereof, but in any event not later than
the Effectiveness Date, and shall use its commercially reasonable
efforts to keep the Registration Statement continuously effective under
the Securities Act until the date
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which is two years after the Closing Date or such earlier date when all
Registrable Securities covered by the Registration Statement have been
sold or may be sold without volume restrictions pursuant to Rule 144(k)
as determined by the counsel to the Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the
Company's transfer agent and the affected Holders (the "EFFECTIVENESS
PERIOD"). Notwithstanding the foregoing, the Company's obligations
hereunder to file a Registration Statement and to keep a registration
statement continuously effective under the Securities Act shall be
suspended without penalty as provided in Section 2(b) of this Agreement
if the fulfillment of such obligations would require the Company to
make a disclosure that would, in the reasonable judgment of the
Company's Board of Directors, have a Material Adverse Effect (as such
term is defined in the Securities Purchase Agreement) on the Company or
a material adverse effect on the future prospects of the Company or its
stockholders; provided, that the Registration Statement shall be
suspended for a total of no more than forty-five 45 days during any
twelve (12) month period.
(b) If: (i) a Registration Statement is not filed on or
prior to its Filing Date, or (ii) a Registration Statement filed or
required to be filed hereunder is not declared effective by the
Commission on or before the Effectiveness Date, or (iii) after a
Registration Statement is first declared effective by the Commission,
it ceases for any reason to remain continuously effective as to all
Registrable Securities for which it is required to be effective, or the
Holders are not permitted to utilize the Prospectus therein to resell
such Registrable Securities, for in any such cases fifteen Trading Days
(which need not be consecutive days) in the aggregate during any month
period (any such failure or breach being referred to as an "EVENT," and
for purposes of clause (i) or (iii) the date on which such Event
occurs, or for purposes of clause (iii) the date on which such fifteen
Trading Day period is exceeded being referred to as "EVENT DATE"), then
in addition to any other rights the Holders may have hereunder or under
applicable law: (x) on each such Event Date the Company shall pay to
each Holder an amount in cash, as liquidated damages and not as a
penalty, equal to 1% of the aggregate purchase price paid by such
Holder pursuant to the Purchase Agreement for any Registrable
Securities then held by such Holder; and (y) on each monthly
anniversary of each such Event Date (if the applicable Event shall not
have been cured by such date) until the applicable Event is cured, the
Company shall pay to each Holder an amount in cash, as liquidated
damages and not as a penalty, equal to 1% of the aggregate purchase
price paid by such Holder pursuant to the Purchase Agreement for any
Registrable Securities then held by such Holder.
3. REGISTRATION PROCEDURES
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Not less than two Trading Days prior to the filing of
the Registration Statement or any related Prospectus or any amendment
or supplement thereto, the Company shall, (i) furnish to the Holders
copies of all such documents proposed to be filed (including documents
incorporated or deemed incorporated by reference to the
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extent requested by such Person) which documents will be subject to the
review of such Holders, and (ii) cause its officers and directors,
counsel and independent certified public accountants to respond to such
inquiries as shall be necessary, in the reasonable opinion of
respective counsel to conduct a reasonable investigation within the
meaning of the Securities Act. The Company shall not file the
Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the
Registrable Securities shall reasonably object in good faith.
Notwithstanding anything herein to the contrary, failure of the Holders
to object within 2 Trading Days of receipt of a proposed filing shall
be deemed a consent of such filing by the Holders.
(b) (i) Prepare and file with the Commission such
amendments, including post-effective amendments, to the Registration
Statement and the Prospectus used in connection therewith as may be
necessary to keep the Registration Statement continuously effective as
to the applicable Registrable Securities for the Effectiveness Period;
(ii) cause the related Prospectus to be amended or supplemented by any
required Prospectus supplement, and as so supplemented or amended to be
filed pursuant to Rule 424; (iii) respond as promptly as reasonably
possible to any comments received from the Commission with respect to
the Registration Statement or any amendment thereto and, as promptly as
reasonably possible, upon request, provide the Holders true and
complete copies of all correspondence from and to the Commission
relating to the Registration Statement; and (iv) comply in all material
respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered
by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Holders
thereof set forth in the Registration Statement as so amended or in
such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be
sold as promptly as commercially practicable (i)(A) when any Prospectus
supplement or post-effective amendment to the Registration Statement is
proposed to be filed; (B) when the Commission notifies the Company
whether there will be a "review" of the Registration Statement and
whenever the Commission comments in writing on the Registration
Statement (the Company shall upon request provide true and complete
copies thereof and all written responses thereto to each of the
Holders); and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of
any request by the Commission or any other Federal or state
governmental authority during the period of effectiveness of the
Registration Statement for amendments or supplements to the
Registration Statement or Prospectus or for additional information;
(iii) of the issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness
of the Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv)
of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any
of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose; and (v)
of the occurrence of any event or passage of time that makes the
financial statements included in the Registration Statement ineligible
for inclusion therein or any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue
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in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the
case of the Registration Statement or the Prospectus, as the case may
be, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(d) Use its commercially reasonable efforts to avoid the
issuance of, or, if issued, obtain the withdrawal of (i) any order
suspending the effectiveness of the Registration Statement, or (ii) any
suspension of the qualification (or exemption from qualification) of
any of the Registrable Securities for sale in any jurisdiction, at the
earliest practicable moment.
(e) Furnish to each Holder, without charge, to the extent
requested by such Holder, at least one conformed copy of the
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits (including those
previously furnished or incorporated by reference), in each case as
soon as reasonably practicable following such request by the Holder.
(f) Promptly deliver to each Holder, without charge, as
many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons
may reasonably request in connection with resales by the Holder of
Registrable Securities. The Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the
selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto, except after the giving on any notice pursuant to
Section 3(c).
(g) Prior to any resale of Registrable Securities by a
Holder, use its commercially reasonable efforts to register or qualify
or cooperate with the selling Holders in connection with the
registration or qualification (or exemption from the Registration or
qualification) of such Registrable Securities for the resale by the
Holder under the securities or Blue Sky laws of such jurisdictions
within the United States as any Holder reasonably requests in writing,
to keep each the Registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and to do any and all other
acts or things reasonably necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration
Statement; PROVIDED, that the Company shall not be required to --------
qualify generally to do business in any jurisdiction where it is not
then so qualified, subject the Company to any material tax in any such
jurisdiction where it is not then so subject or file a general consent
to service of process in any such jurisdiction.
(h) If requested by the Holders, cooperate with the
Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a
transferee pursuant to the Registration Statement, which certificates
shall be free, to the extent permitted by the Purchase Agreement, of
all restrictive legends, and
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to enable such Registrable Securities to be in such denominations and
registered in such names as any such Holders may request.
(i) Upon the occurrence of any event contemplated by
Section 3(c)(v), as promptly as reasonably possible, prepare a
supplement or amendment, including a post-effective amendment, to the
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, neither the Registration Statement nor such Prospectus will
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, in light of the circumstances under which they were
made, not misleading.
(j) Comply with all applicable rules and regulations of
the Commission.
(k) The Company may require each selling Holder to
furnish to the Company a certified statement as to the number of shares
of Common Stock beneficially owned by such Holder and the person
thereof that has voting and dispositive control over the Shares. Each
Holder agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of the
Registration Statement, unless such Holder has notified the Company in
writing of such Holder's election to exclude all of such Holder's
Registrable Securities from the Registration Statement.
4. REGISTRATION EXPENSES. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
5. INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, the
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officers, directors, agents and employees of each of them, each Person
who controls any such Holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the
fullest extent permitted by applicable law, from and against any and
all losses, claims, damages, liabilities, costs (including, without
limitation, reasonable attorneys' fees) and expenses (collectively,
"LOSSES"), as incurred, to the extent arising out of or relating to any
untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in
any amendment or supplement thereto or in any preliminary prospectus,
or arising out of or relating to any omission or alleged omission of a
material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus
or supplement thereto, in light of the circumstances under which they
were made) not misleading, except to the extent, but only to the
extent, that (1) such untrue statements or omissions are based solely
upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that
such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or
in any amendment or supplement thereto (it being understood that the
Holder has approved Annex A hereto for this purpose) or (2) in the case
of an occurrence of an event of the type specified in Section
3(c)(ii)-(v), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that
the Prospectus is outdated or defective and prior to the receipt by
such Holder of the Advice contemplated in Section 6(c). The Company
shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection
with the transactions contemplated by this Agreement.
(b) INDEMNIFICATION BY HOLDERS. Each Holder shall,
severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the
Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, to the fullest extent permitted
by applicable law, from and against all Losses, as incurred, to the
extent arising out of or based upon: (x) such Holder's failure to
comply with the prospectus delivery requirements of the Securities Act
or (y) any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading (i) to the
extent, but only to the extent, that such untrue statement or omission
is contained in any information so furnished in writing by such Holder
to the Company specifically for inclusion in the Registration Statement
or such Prospectus or (ii) to the extent that (1) such untrue
statements or omissions are based solely upon information regarding
such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information
relates to such Holder or such Holder's proposed method of distribution
of Registrable Securities and was reviewed and expressly approved in
writing by such Holder expressly for use in the Registration Statement
(it being understood that
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the Holder has approved Annex A hereto for this purpose), such
Prospectus or such form of Prospectus or in any amendment or supplement
thereto or (2) in the case of an occurrence of an event of the type
specified in Section 3(c)(ii)-(v), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such
Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in
Section 6(c). In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any
Proceeding shall be brought or asserted against any Person entitled to
indemnity hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party
shall promptly notify the Person from whom indemnity is sought (the
"INDEMNIFYING PARTY") in writing, and the Indemnifying Party shall have
the right to assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations
or liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further
review) that such failure shall have prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless: (1) the
Indemnifying Party has agreed in writing to pay such fees and expenses;
(2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded
parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel
that a conflict of interest is likely to exist if the same counsel were
to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party
in writing that it elects to employ separate counsel at the expense of
the Indemnifying Party, the Indemnifying Party shall not have the right
to assume the defense thereof and the reasonable fees and expenses of
one separate counsel shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any settlement
of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party,
effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a 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.
All reasonable fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in
a manner not inconsistent with this Section) shall be paid to
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the Indemnified Party, as incurred, within ten Trading Days of written
notice thereof to the Indemnifying Party; PROVIDED, that the
Indemnified Party shall promptly reimburse the Indemnifying Party for
that portion of such fees and expenses applicable to such actions for
which such Indemnified Party is not entitled to indemnification
hereunder, determined based upon the relative faults of the parties.
(d) CONTRIBUTION. If a claim for indemnification under
Section 5(a) or 5(b) is unavailable to an Indemnified Party (by reason
of public policy or otherwise), then each Indemnifying Party, in lieu
of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses,
in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission of a material fact, has been taken or made
by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the
limitations set forth in Section 5(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection
with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided
for in this Section was available to such party in accordance with its
terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(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. Notwithstanding the provisions of this
Section 5(d), no Holder shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the proceeds
actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages
that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission,
except in the case of fraud by such Holder.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties
may have to the Indemnified Parties.
6. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Company or
by a Holder, of any of their obligations under this Agreement, each
Holder or the Company, as the case may be, in addition to being
entitled to exercise all rights granted by law and under this
Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and each
Holder agree that monetary
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damages would not provide adequate compensation for any losses incurred
by reason of a breach by it of any of the provisions of this Agreement
and hereby further agrees that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) NO PIGGYBACK ON REGISTRATIONS. Except as set forth in
the Disclosure Schedules to the Purchase Agreement, neither the Company
nor any of its security holders (other than the Holders in such
capacity pursuant hereto) may include securities of the Company in a
Registration Statement other than the Registrable Securities, and the
Company shall not after the date hereof enter into any agreement
providing any such right to any of its security holders. Except as set
forth in the SEC Reports or the Disclosure Schedules to the Purchase
Agreement, no Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company.
(c) COMPLIANCE. Each Holder covenants and agrees that it
will comply with the prospectus delivery requirements of the Securities
Act as applicable to it in connection with sales of Registrable
Securities pursuant to the Registration Statement.
(d) DISCONTINUED DISPOSITION. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a
notice from the Company of the occurrence of any event of the kind
described in Section 3(c), such Holder will forthwith discontinue
disposition of such Registrable Securities under the Registration
Statement until such Holder's receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement or until it is advised
in writing (the "ADVICE") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of
any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration
Statement. The Company may provide appropriate stop orders to enforce
the provisions of this paragraph.
(e) PIGGY-BACK REGISTRATIONS. If at any time during the
Effectiveness Period there is not an effective Registration Statement
covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of
others under the Securities Act of any of its equity securities, other
than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) 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 the stock
option or other employee benefit plans, then the Company shall send to
each Holder a written notice of such determination and, if within
fifteen days after the date of such notice, any such Holder shall so
request in writing, the Company shall include in such registration
statement all or any part of such Registrable Securities such Holder
requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights.
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(f) 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 same
shall be in writing and signed by the Company and each Holder of the
then outstanding Registrable Securities.
(g) NOTICES. Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be
in writing and shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number provided for below
prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the
Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number
provided for below later than 6:30 p.m. (New York City time) on any
date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Trading Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The
address for such notices and communications shall be delivered and
addressed as set forth in the Purchase Agreement
(h) SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted assigns
of each of the parties and shall inure to the benefit of each Holder.
Each Holder may assign their respective rights hereunder in the manner
and to the Persons as permitted under the Purchase Agreement.
(i) EXECUTION AND COUNTERPARTS. This Agreement may be
executed in any number of 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. In the event that any
signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose
behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.
(j) GOVERNING LAW. All questions concerning the
construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement (whether
brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New
York, New York. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the
City of New York, New York for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to the
enforcement of the any of this Agreement), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is improper. Each party
hereto hereby irrevocably waives personal
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service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all
right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby. If
either party shall commence an action or proceeding to enforce any
provisions of this Agreement, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its attorneys
fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.
(k) CUMULATIVE REMEDIES. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(m) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(n) INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND
RIGHTS. The obligations of each Purchaser hereunder is several and not
joint with the obligations of any other Purchaser hereunder, and no
Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser hereunder. Nothing contained herein
or in any other agreement or document delivered at any closing, and no
action taken by any Purchaser pursuant hereto or thereto, shall be
deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that
the Purchasers are in any way acting in concert with respect to such
obligations or the transactions contemplated by this Agreement. Each
Purchaser shall be entitled to protect and enforce its rights,
including without limitation the rights arising out of this Agreement,
and it shall not be necessary for any other Purchaser to be joined as
an additional party in any proceeding for such purpose.
*************************
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IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
TAG-IT PACIFIC, INC.
/s/ Colin Dyne
By: ___________________________________
Name: Colin Dyne
Title: CEO
[SIGNATURE PAGE CONTINUES]
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[PURCHASER SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT]
/s/ Neal I. Goldman
By: __________________________
Neal I. Goldman
[SIGNATURE PAGE CONTINUES]
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[PURCHASER SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT]
PRISM OFFSHORE FUND, LTD
/s/ Rebecca Rogers
By: __________________________
Name: Rebecca Rogers
Title: Chief Financial Officer
Delta Partners, LLC
[SIGNATURE PAGE CONTINUES]
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[PURCHASER SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT]
PRISM PARTNERS, LP
/s/ Rebecca Rogers
By: __________________________
Name: Rebecca Rogers
Title: Chief Financial Officer
Delta Partners, LLC
[SIGNATURE PAGE CONTINUES]
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[PURCHASER SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT]
SF CAPITAL PARTNERS, LTD.
/s/ Brian H. Davidson
By: ____________________________
Name: Brian H. Davidson
Title: Authorized Signatory
[SIGNATURE PAGE CONTINUES]
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[PURCHASER SIGNATURE PAGES TO RRA]
MICROCAPITAL FUND LIMITED PARTNERSHIP
/s/ Ian P. Ellis
By: __________________________
Name: Ian P. Ellis
Title: President of GP
[SIGNATURE PAGE CONTINUES]
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[PURCHASER SIGNATURE PAGES TO RRA]
MICROCAPITAL LLC
/s/ Ian P. Ellis
By: __________________________
Name: Ian P. Ellis
Title: President
[SIGNATURE PAGE CONTINUES]
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[PURCHASER SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT]
LAGUNITAS PARTNERS LP
/s/ J. Patterson McBaine
By: ____________________________
Name: J. Patterson McBaine
Title: as General Partner
[SIGNATURE PAGE CONTINUES]
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[PURCHASER SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT]
GRUBER & MCBAINE INTERNATIONAL
/s/ J. Patterson McBaine
By: ____________________________
Name: J. Patterson McBaine
Title: as Attorney-In-Fact
[SIGNATURE PAGE CONTINUES]
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[PURCHASER SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT]
JON D. GRUBER & LINDA W. GRUBER
/s/ J. Patterson McBaine
By: ____________________________
Name: Jon D. Gruber & Linda W. Gruber
Title: JTWROS
[SIGNATURE PAGE CONTINUES]
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[PURCHASER SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT]
J. PATTERSON MCBAINE
/s/ J. Patterson McBaine
By: ____________________________
Name: J. Patterson McBaine
Title: Individual
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ANNEX A
PLAN OF DISTRIBUTION
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o settlement of short sales;
o broker-dealers may agree with the Selling Stockholders to sell
a specified number of such shares at a stipulated price per
share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders may from time to time pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933
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amending the list of Selling Stockholders to include the pledgee, transferee or
other successors in interest as Selling Stockholders under this prospectus.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The Selling Stockholders have
informed the Company that it does not have any agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock.
The Company is required to pay all fees and expenses incident to the
registration of the shares. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
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