Exhibit 10.65
INVESTOR RIGHTS
AGREEMENT
This Investor Rights Agreement (this
“ Agreement ”) is made and entered into as of
January , 2007 among Avatech
Solutions, Inc., a Delaware corporation (the “ Company
”), and each of the purchasers executing this Agreement and
listed on Schedule 1 attached hereto (collectively, the
“ Purchasers ”).
This Agreement is being entered into
pursuant to the Common Stock and Warrant Purchase Agreement, dated
as of January , 2007, by and
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 shall have the meanings given such terms
in the Purchase Agreement. As used in this Agreement, the following
terms shall have the following meanings:
“ Advice ” shall
have the meaning set forth in Section 3(m).
“ Affiliate ”
means, with respect to any Person, any other Person that directly
or indirectly controls or is controlled by or under common control
with such Person. For the purposes of this definition,
“control,” when used with respect to any Person, means
the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or
otherwise; and the terms of “affiliated,”
“controlling” and “controlled” have
meanings correlative to the foregoing.
“ Blackout Period
” shall have the meaning set forth in
Section 3(n).
“ Board ” shall
have the meaning set forth in Section 3(n).
“ Business Day ”
means any day except Saturday, Sunday and any day which shall be a
legal holiday or a day on which banking institutions in the State
of New York generally are authorized or required by law or other
government actions to close.
“ Commission ”
means the Securities and Exchange Commission.
“ Common Stock ”
means the Company’s Common Stock, par value $0.01 per
share.
“ Effectiveness Period
” shall have the meaning set forth in
Section 2.
“ Event ” shall
have the meaning set forth in Section 8(e).
“ Exchange Act ”
means the Securities Exchange Act of 1934, as amended.
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“ Filing
Deadline ” means the twentieth (20
th
) 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, including
without limitation the Purchasers and their assignees.
“ 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).
“ Person ” means
an individual or a corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
“ 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 any 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
such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments,
and all material incorporated by reference in such
Prospectus.
“ Registrable
Securities ” means (a) the Shares and the Warrant
Shares or other securities issued or issuable to each Purchaser or
its transferee or designee (i) upon exchange of the Shares
and/or as dividends on the Shares and/or upon exercise of the
Warrants, or (ii) upon any distribution with respect to, any
exchange for or any replacement of such Shares or Warrants or
(iii) upon any exercise or exchange of any securities issued
in connection with any such distribution, exchange or replacement;
(b) securities issued or issuable upon any stock split, stock
dividend, recapitalization or similar event with respect to the
foregoing; and (c) any other security issued as a dividend or
other distribution with respect to, in exchange for, in replacement
or redemption of, or in reduction of the liquidation value of, any
of the securities referred to in the preceding clauses; provided,
however, that such securities shall cease to be Registrable
Securities when such securities have been sold to or through a
broker or dealer or underwriter in a public distribution or a
public securities transaction or when such securities may be sold
without any restriction pursuant to Rule 144(k) as determined by
the counsel to the Company pursuant to a written opinion letter,
addressed to the Company’s transfer agent to such effect as
described in Section 2 of this Agreement.
“ Registration
Statement ” means the registration statements and any
additional registration statements contemplated by Section 2,
including (in each case) the Prospectus,
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amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by
reference in such registration statement.
“ Rule 144 ”
means Rule 144 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 158 ”
means Rule 158 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 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.
“ Securities Act
” means the Securities Act of 1933, as amended.
“ Shares ” means
the shares of Common Stock issued or to be issued to the Purchasers
or their assignees or designees in connection with the offering
consummated under the Purchase Agreement.
“ Special Counsel
” means Moomjian, Waite, Wactlar & Coleman,
LLP.
“ Warrant Shares
” means the shares of Common Stock issuable upon the exercise
of the warrants issued or to be issued to the Purchasers or their
assignees or designees in connection with the offering consummated
under the Purchase Agreement.
2. Registration . As soon as
possible following the Closing Date (but not later than the Filing
Deadline), the Company shall prepare and file with the Commission a
“shelf” Registration Statement covering all Registrable
Securities for a secondary or resale offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement
shall be on Form S-3 (or if such form is not available to the
Company on another form appropriate for such registration in
accordance herewith). The Company shall use its best efforts to
cause the Registration Statement to be declared effective under the
Securities Act not later than one hundred (100) days after the
Closing Date (including filing with the Commission a request for
acceleration of effectiveness in accordance with Rule 461
promulgated under the Securities Act within five (5) Business
Days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that a
Registration Statement will not be “reviewed,” or not
be subject to further review) and to keep such Registration
Statement continuously effective under the Securities Act until
such date as is the earlier of (x) the date when all
Registrable Securities covered by such Registration Statement have
been sold or (y) the date on which all Registrable Securities
may be sold without any restriction pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written
opinion
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letter, addressed to the Company’s
transfer agent to such effect (the “ Effectiveness
Period ”). Upon the initial filing thereof and upon the
filing of any pre-effective amendment thereto, the Registration
Statement shall cover all of the Shares and 115% of the shares of
Common Stock for issuance upon the exercise of the Warrants. If the
Commission informs the Company that it will not allow the
Registration Statement to cover at least 115% of the shares of
Common Stock for issuance upon the exercise of the Warrants, then
the Registration Statement shall cover the highest percentage of
such Common Stock that the Commission will allow. Such Registration
Statement also shall cover, to the extent allowable under the
Securities Act and the Rules promulgated thereunder (including
Securities Act Rule 416), such indeterminate number of additional
shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Registrable
Securities.
3. Registration Procedures
.
In connection with the
Company’s registration obligations hereunder, the Company
shall:
(a) Prepare and file with the
Commission on or prior to the Filing Deadline, a Registration
Statement on Form S-3 (or if such form is not available to the
Company on another form appropriate for such registration in
accordance herewith) (which shall include a Plan of Distribution
substantially in the form of Exhibit A attached hereto), and
cause the Registration Statement to become effective and remain
effective as provided herein; provided, however, that not less than
three (3) Business 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
Special Counsel, copies of all such documents proposed to be filed,
which documents (other than those incorporated by reference) will
be subject to the review of such Special Counsel, and (ii) at
the request of any Holder 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
counsel to such Holders, 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 or the Special Counsel shall
reasonably object in writing within three (3) Business Days
after their receipt thereof, unless counsel to the Company
determines in writing that such objection is without
merit.
(b) (i) Prepare and file with the
Commission such amendments, including post-effective amendments, to
the Registration Statement as may be necessary to keep the
Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and to the
extent any Registrable Securities are not included in such
Registration Statement for reasons other than the failure of the
Holder to comply with Section 3(m) hereof, shall prepare and
file with the Commission such additional Registration Statements in
order to register for resale under the Securities Act all
Registrable Securities; (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
(or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as
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promptly as possible, and in no event later than
10 Business Days, to any comments received from the Commission with
respect to the Registration Statement or any amendment thereto and
as promptly as possible 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 and the Special Counsel as
promptly as possible (A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration
Statement is proposed to be filed (but in no event in the case of
this subparagraph (A), less than three (3) Business Days prior
to date of such filing); (B) when the Commission notifies the
Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in
writing on such Registration Statement; and (C) with respect
to the Registration Statement or any post-effective amendment, when
the same has become effective (which notice shall be delivered to
the Lead Investor and Special Counsel on the same day as such
effectiveness), and after the effectiveness thereof: (i) of
any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information;
(ii) of the issuance by the Commission 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; (iii) 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
(iv) if the financial statements included in the Registration
Statement become ineligible for inclusion therein or of the
occurrence of any event that makes any statement made in the
Registration Statement or Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to the Registration
Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be,
it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Without
limitation to any remedies to which the Holders may be entitled
under this Agreement, if any of the events described in clauses
(i) through (iv) of Section 3(c)(C) occurs, the
Company shall use its best efforts to respond to and correct the
event.
(d) Use its best efforts to avoid
the issuance of, or, if issued, use best efforts to 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) If requested by any Holder of
Registrable Securities, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment to the
Registration Statement such
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information as the Company reasonably agrees
should be included therein and (ii) make all required filings
of such Prospectus supplement or such post-effective amendment as
soon as practicable after the Company has received notification of
the matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that the Company shall
not be required to take any action pursuant to this
Section 3(e) that would, in the written opinion of counsel for
the Company (addressed to the Special Counsel), violate applicable
law.
(f) Furnish to each Holder and the
Special Counsel, without charge, at least one conformed copy of
each Registration Statement and each amendment thereto, including
financial statements and schedules, and all exhibits to the extent
requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such
documents with the Commission.
(g) Promptly deliver to each Holder
and the Special Counsel, 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; and 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.
(h) Prior to any public offering of
Registrable Securities, use its best efforts to register or qualify
or cooperate with the selling Holders and the Special Counsel in
connection with the registration or qualification (or exemption
from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder
requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, that the Company shall
not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any
action that would subject it to general service of process in any
jurisdiction where it is not then so subject or subject the Company
to any material tax in any such jurisdiction where it is not then
so subject.
(i) Cooperate with the Holders to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold pursuant to a
Registration Statement, which certificates shall be free, to the
extent permitted by applicable law and the Purchase Agreement, of
all restrictive legends, and to enable such Registrable Securities
to be in such denominations and registered in such names as any
Holder may request at least two (2) Business Days prior to any
sale of Registrable Securities. In connection therewith, the
Company shall promptly after the effectiveness of the Registration
Statement (but no later than one day thereafter) cause an opinion
of counsel to be delivered to and maintained with its transfer
agent, together with any other authorizations, certificates and
directions required by the transfer agent, which authorize and
direct the transfer agent to issue such Registrable Securities
without legend upon sale by the Holder of such shares of
Registrable Securities under the Registration Statement.
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(j) Upon the occurrence of any event
contemplated by Section 3(c)(C)(iii) or (iv), as promptly as
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 the light of the circumstances under which
they were made, not misleading.
(k) Cause all Registrable Securities
relating to such Registration Statement to be listed on the New
York Stock Exchange, the American Stock Exchange, the Nasdaq Stock
Market or the OTC Bulletin Board.
(l) Comply in all material respects
with all applicable rules and regulations of the Commission and
make generally available to its security holders earnings
statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of
any 3-month period (or 90 days after the end of any 12-month period
if such period is a fiscal year) commencing on the first day of the
first fiscal quarter of the Company after the effective date of the
Registration Statement, which statement shall conform to the
requirements of Rule 158.
(m) Request each selling Holder to
furnish to the Company information regarding such Holder and the
distribution of such Registrable Securities as is required by law
or the Commission to be disclosed in the Registration Statement,
and the Company may exclude from such registration the Registrable
Securities of any such Holder who fails (i) to furnish such
information or (ii) to agree to furnish, upon request, such
additional information regarding such Holder as may later be
required by law to be disclosed, in each case, within a reasonable
time prior to the filing of each Registration Statement,
supplemented Prospectus and/or amended Registration
Statement.
If the Registration Statement refers
to any Holder by name or otherwise as the holder of any securities
of the Company, then such Holder shall have the right to require
(if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then
in force) the deletion of the reference to such Holder in any
amendment or supplement to the Registration Statement filed or
prepared subsequent to the time that such reference ceases to be
required.
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)(i), 3(c)(ii), 3(c)(iii), 3(c)(iv) or
3(n), 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 contemplated by
Section 3(j), 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.
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(n) If (i) there is material
non-public information regarding the Company which the
Company’s Board of Directors (the “ Board
”) reasonably determines not to be in the Company’s
best interest to disclose and which the Company is not otherwise
required to disclose, or (ii) there is a significant business
opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer or other
similar transaction) available to the Company which the Board
reasonably determines not to be in the Company’s best
interest to disclose and which the Company would be required to
disclose under the Registration Statement, then the Company may
postpone or suspend filing or effectiveness of a registration
statement for a period not to exceed 20 consecutive days, provided
that the Company may not postpone or suspend its obligation under
this Section 3(n) for more than 30 days in the aggregate
during any 12 month period (each, a “ Blackout Period
”).
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 the Registration
Statement is filed or becomes effective and 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 each other securities exchange, quotation system, market or
over-the-counter bulletin board on which Registrable Securities are
required hereunder to be listed, (B) with respect to filings
required to be made with the Commission, and (C) in compliance
with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of Special Counsel in connection
with Blue Sky qualifications of the Registrable Securities and
determination of the eligibility of the Registrable Securities for
investment under the laws of such jurisdictions as the Holders of a
majority of Registrable Securities may designate)),
(ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities and of
printing or photocopying prospectuses), (iii) messenger,
telephone and delivery expenses, (iv) Securities Act liability
insurance, if the Company so desires such insurance, (v) fees
and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated
by this Agreement, including, without limitation, the
Company’s independent public accountants (including, in the
case of an underwritten offering, the expenses of any comfort
letters or costs associated with the delivery by independent public
accountants of a comfort letter or comfort letters) and legal
counsel, and (vi) fees and expenses of the Special Counsel in
connection with any Registration Statement hereunder. 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, the
fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange as required
hereunder.
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5. Indemnification
.
(a) Indemnification by the
Company . The Company shall, notwithstanding any termination of
this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, brokers (including brokers who offer
and sell Registrable Securities as principal as a result of a
pledge or any failure to perform under a margin call of Common
Stock), investment advisors 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
