INVESTOR RIGHTS AGREEMENT
This INVESTOR RIGHTS AGREEMENT (this "AGREEMENT") is made as of
June
17, 2005 by and among AXS-One Inc., a Delaware corporation (the
"COMPANY") and
the investors listed on Exhibit A hereto (each an "INVESTOR" and
collectively
the "INVESTORS")
WHEREAS, the Company desires to sell to the Investors, and the
Investors desire to purchase from the Company, (i) an aggregate of
4,534,461
shares of Common Stock of the Company (the "SHARES"), and (ii)
three-year
warrants, exercisable to purchase an aggregate of (A) 453,450
shares of Common
Stock, with pricing set at $1.90 per share (the "CLASS C
WARRANTS"), and (B)
453,442 shares of Common Stock at $2.15 per share (the "CLASS D
WARRANTS", and
together with the Class C Warrants, the "PURCHASED WARRANTS"), upon
the terms
and conditions set forth in that certain Unit Subscription
Agreement of even
date herewith, among the Company and the Investors (the "UNIT
SUBSCRIPTION
AGREEMENT"); and
WHEREAS, the terms of the Unit Subscription Agreement provide that
it
shall be a condition precedent to the closing of the transactions
thereunder for
the Company and the Investors to execute and deliver this
Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
covenants
contained herein, the parties hereto hereby agree as follows:
1. DEFINITIONS. Defined terms used herein but not defined herein
shall have the respective meanings ascribed to them in the Unit
Subscription
Agreement. The following terms shall have the meanings provided
below:
"BOARD OF DIRECTORS" shall mean the board of directors of the
Company.
"GROSS PROCEEDS" has the meaning set forth in Section 7(b).
"HOLDER" shall mean any of the Investors or any transferee of the
Purchased Warrants or Registrable Shares.
"MANDATORY REGISTRATION TERMINATION DATE" has the meaning set
forth in Section 3(c).
"NOTICE" has the meaning set forth in Section 11(d).
"OTHER SECURITIES" refers to any stock (other than Common Stock)
and other securities of the Company or any other Person (corporate
or otherwise)
which the Holders of the Purchased Warrants at any time shall be
entitled to
receive, or shall have received, upon the exercise of the Purchased
Warrants, in
lieu of or in addition to Common Stock, or which at any time shall
be issuable
or shall have been issued in exchange for or in replacement of
Common Stock or
Other Securities pursuant to the terms of the Purchased Warrants.
"REGISTER", "REGISTERED" and "REGISTRATION" refer to a
registration of Common Stock or other securities of the Company
effected by
preparing and filing a registration statement in compliance with
the Securities
Act and the declaration or ordering of the effectiveness of such
registration
statement.
"REGISTRABLE SHARES" shall mean any Shares or any shares of Common
Stock or Other Securities issued or issuable from time to time upon
the exercise
of a Purchased Warrant; provided, however, that as to any such
securities so
issued or issuable, such securities will cease to be Registrable
Shares when
such securities have been sold to the public pursuant to a
registration or
pursuant to Rule 144 or are eligible to be sold pursuant to Rule
144(k).
"REGISTRATION STATEMENT" has the meaning set forth in Section
3(a).
"RULE 144" shall mean Rule 144 promulgated under the Securities
Act and any successor or substitute rule, law or provision.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and all of the rules and regulations promulgated
thereunder.
"SUSPENSION" has the meaning set forth in Section 9(b).
2.
EFFECTIVENESS. This Agreement shall become effective upon the
Closing.
3.
MANDATORY REGISTRATION.
(a) No later than thirty (30) days after each Closing, the Company
will prepare and file with the SEC a registration statement on Form
S-3 (or, if
Form S-3 is not then available to the Company, on such form of
registration
statement that is then available to effect a registration of all
Registrable
Shares) for the purpose of registering under the Securities Act all
of the
Registrable Shares for resale by, and for the account of, the
applicable
Investors as selling stockholders thereunder (each a "REGISTRATION
STATEMENT").
Each Registration Statement shall permit the applicable Investors
to offer and
sell, on a delayed or continuous basis pursuant to Rule 415 under
the Securities
Act, any or all of such Investor's Registrable Shares. Each
Registration
Statement also shall cover, to the extent allowable under the
Securities Act and
the rules promulgated thereunder (including 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
Shares. The
offer and sale of the Registrable Shares pursuant to each
Registration Statement
shall not be underwritten.
(b) The Company agrees to use commercially reasonable efforts to
cause each Registration Statement to become effective within ninety
(90) days
after filing.
(c) The Company shall be required to keep each Registration
Statement, as amended, effective until such date that is the
earliest to occur
of (i) the second anniversary of the applicable Closing, (ii) the
date when all
of the Registrable Shares registered thereunder shall have been
sold, and (iii)
such time as all the Registrable Shares held by the applicable
Investors
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can be sold pursuant to Rule 144(k) under the Securities Act and
without
compliance with the registration requirements of the Securities Act
(each such
date is referred to herein, as applicable, as a "MANDATORY
REGISTRATION
TERMINATION DATE"). Thereafter, the Company shall be entitled to
withdraw such
Registration Statement and the Investors shall have no further
right to offer or
sell any of the Registrable Shares pursuant to such Registration
Statement (or
any prospectus relating thereto).
(d) During the period beginning on the Closing Date and ending
on the date of the effectiveness of each Registration Statement,
the Company
shall not grant any registration rights that are pari passu with or
senior to
the registration rights of the Investors under this Agreement if
such
registration rights would adversely affect the Investors' ability
to sell
Registrable Shares pursuant to each Registration Statement. Except
as set forth
in the SEC Documents or in the Company Disclosure Letter, the
Company represents
and warrants to the Investors that no stockholders other than the
Investors have
the right to sell any Common Stock or other securities of the
Company pursuant
to each Registration Statement.
(e) If: (i) the applicable Registration Statement is not filed
on or prior to the date that is thirty (30) days after the
applicable Closing,
or (ii) the Registration Statement is not declared effective by the
Securities
and Exchange Commission ("SEC") on or prior to the ninetieth (90)
day following
the filing thereof, or (iii) if the SEC reviews the Registration
Statement it is
not declared effective on or prior to the one hundred twentieth
(120) day
following the filing thereof, or (iv) after the effectiveness date
thereof, such
Registration Statement ceases to be effective and available to the
applicable
Holders as to all applicable Shares (but not as to any Registrable
Shares
underlying the Purchased Warrants) in violation of this Agreement
(any such
failure or breach being referred to as an "EVENT" and the date on
which such
Event occurs being referred to as "EVENT DATE"), then, in addition
to any other
rights available to the applicable Holders, on each such Event Date
and 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 applicable Holder in cash, as partial liquidated
damages and
not as a penalty, a payment ("PAYMENT") equal to 1% of the
aggregate purchase
price paid by such Investor to the Company with respect to the
Shares (but not
as to any Registrable Shares underlying the Purchased Warrants)
then held by
such Holder. The Payment pursuant to the terms hereof shall apply
on a pro rata
basis for any portion of a month prior to the cure of an Event.
Such cumulative
Payment shall not exceed 10% of the aggregate purchase price paid
by such
Investor, with such purchase price being computed exclusive of the
value of any
exercises of the Purchased Warrants.
4. OBLIGATIONS OF THE COMPANY. In connection with the Company's
obligation under Section 3 hereof to file each Registration
Statement with the
SEC and to use its reasonable efforts to cause such Registration
Statement to
become effective as soon as practicable after filing, the Company
shall, as
expeditiously and as reasonably as possible, subject to Section 9
hereof:
(a) Prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used
in connection
therewith as may be necessary to keep the Registration Statement
effective until
the Mandatory Registration Termination Date;
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(b) Furnish to the selling Investors such reasonable number of
copies of the Registration Statement, prospectus and preliminary
prospectus, in
conformity with the requirements of the Securities Act, and such
other documents
(including, without limitation, prospectus amendments and
supplements as are
prepared by the Company in accordance with Section 4(a) above) as
the selling
Investors may reasonably request, in order to facilitate the
disposition of such
selling Investors' Registrable Shares pursuant to the Registration
Statement;
(c) Use reasonable efforts to register and qualify the
Registrable Shares covered by the Registration Statement under all
applicable
Blue Sky Laws of all states requiring such registration or
qualification,
provided, however, that the Company shall not be required in
connection
therewith or as a condition thereto to qualify to do business or to
file a
general consent to service of process in any such states or
jurisdictions; and
(d) Use reasonable efforts to cause all such Registrable
Shares registered hereunder to be listed on each national
securities exchange on
which securities of the same class issued by the Company are then
listed.
5. FURNISH INFORMATION. (a) It shall be a condition precedent
to the obligations of the Company to take any action pursuant to
this Agreement
that the selling Investors shall furnish to the Company such
information
regarding them and the securities held by them as the Company shall
reasonably
request and as shall be required in order to effect any
registration by the
Company pursuant to this Agreement.
(b) Each Registration Statement will provide, at the request
of the applicable Investors, for a plan of distribution with
respect to the
applicable Registrable Shares substantially as follows: The
Registrable Shares
may be sold from time to time by the selling Investors. Such sales
may be made
on one or more exchanges or in the over-the-counter market, or
otherwise at
prices and at terms then prevailing or at prices related to the
then-current
market price, or in negotiated transactions. The Registrable Shares
may be sold
by selling Investors in one or more of the following types of
transactions: (i)
a block trade in which the broker or dealer so engaged will attempt
to sell the
shares as agent but may position and resell a portion of the block
as principal
to facilitate the transaction; (ii) purchases by a broker or dealer
as principal
and resale by such broker or dealer for its account pursuant to the
resale
registration statement; (iii) an exchange distribution in
accordance with the
rules of such exchange; (iv) ordinary brokerage transactions and
transactions in
which the broker solicits purchasers; and (v) transactions between
sellers and
purchasers without a broker/dealer. In addition, any securities
covered by the
Registration Statement which qualify for sale pursuant to Rule 144
may be sold
under Rule 144 rather than pursuant to the Registration Statement.
From time to
time the selling Investors may engage in short sales, short sales
versus the
box, puts and calls and other transactions in securities of the
issuer or
derivatives thereof, and may sell and deliver the shares in
connection
therewith. In effecting sales, brokers or dealers engaged by the
selling
Investors may arrange for other brokers or dealers to participate.
Brokers or
dealers will receive commissions or discounts from selling
Investors in amounts
to be negotiated immediately prior to the sale.
6. EXPENSES OF REGISTRATION. All expenses incurred by the
Company in connection with the registration of the Registrable
Shares pursuant
to this Agreement (excluding underwriting, brokerage and other
selling
commissions and discounts), including without
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limitation all registration and qualification and filing fees,
printing
expenses, fees and disbursements of counsel for the Company, and
the reasonable
fees and disbursements of one counsel for the selling Investors
selected by the
selling Investors, shall be borne by the Company; provided,
however, that the
Company shall not be required to pay any fees and expenses of such
counsel for
the selling Investors, which, together with the Legal Fee exceed
$30,000.
7. INDEMNIFICATION.
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each selling Investor (including the partners or
officers,
directors and stockholders of such Investor), and each Person, if
any, who
controls such selling Investor within the meaning of the Securities
Act, against
any losses, claims, damages or liabilities, joint or several, to
which they may
become subject under the Securities Act, the Exchange Act, and
other federal or
state securities laws, or otherwise, insofar as such losses,
claims, damages or
liabilities (or actions in respect thereof) (i) arise out of or are
based upon
any untrue or alleged untrue statement of any material fact
contained in the
applicable Registration Statement, in any preliminary prospectus or
final
prospectus relating thereto or in any amendments or supplements to
the
applicable Registration Statement or any such preliminary
prospectus or final
prospectus, (ii) arise out of or are based upon the omission or
alleged omission
to state therein a material fact required to be stated therein, or
necessary to
make the statements therein not misleading or (iii) arise out of
any violation
or alleged violation by the Company of the Securities Act, the
Exchange Act, any
other federal or state securities law or any rule or regulation
promulgated
under the Securities Act, the Exchange Act or any other federal or
state
securities law; and the Company will reimburse such selling
Investor (including
the partners, officers, directors and stockholders of such
Investor) or such
controlling Person for any legal or other expenses (but in no event
for more
than one law firm) reasonably incurred by them in connection with
investigating
or defending any such loss, claim, damage, liability or action;
provided,
however, that the indemnity agreement contained in this Section
7(a) shall not
apply to amounts paid in settlement of any such loss, claim,
damage, liability
or action if such settlement is effected without the consent of the
Company, nor
shall the Company be liable in any such case for any such loss,
damage,
liability or action to the extent that it arises out of or is based
upon an
untrue statement or alleged untrue statement or omission or alleged
omission
made in connection with the applicable Registration Statement, any
preliminary
prospectus or final prospectus relating thereto or any amendments
or supplements
to the applicable Registration Statement or any such preliminary
prospectus or
final prospectus, (i) in reliance upon and in conformity with
written
information furnished expressly for use in connection with the
applicable
Registration Statement or any such preliminary prospectus or final
prospectus or
any amendments or supplements to the applicable Registration
Statement,
preliminary prospectus or final prospectus by the selling
Investors, any
broker/dealer acting on their behalf or controlling person with
respect to them
or (ii) the plan of distribution described in Section 5(b).
(b) To the extent permitted by law, each selling Investor will
severally and not jointly indemnify and hold harmless the Company,
its
Affiliates, each of their respective directors, officers, partners,
members and
stockholders, each Person, if any, who controls the Company within
the meaning
of the Securities Act, any broker/dealer, any underwriter and all
other selling
Investors, against any losses, claims, damages or liabilities to
which the
Company
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or any such Affiliate, director, officer, partner, member,
stockholder,
controlling Person, broker/dealer, underwriter or such other
selling Investor
may become subject to, under the Securities Act, the Exchange Act,
any other
Federal securities laws, Blue Sky Laws, or otherwise, insofar as
such losses,
claims, damages or liabilities (or actions in respect thereof) (i)
arise out of
or are based upon any untrue or alleged untrue statement of any
material fact
contained in the Registration Statement or any preliminary
prospectus or final
prospectus relating thereto or in any amendments or supplements to
the
applicable Registration Statement or any such preliminary
prospectus or final
prospectus, (ii) arise out of or are based upon the omission or
alleged omission
to state therein a material fact required to be stated therein or
necessary to
make the statements therein not misleading, or (iii) arise out of
any violation
or alleged violation by the Company of the Securities Act, the
Exchange Act, any
other federal or state securities law or any rule or regulation
promulgated
under the Securities Act, the Exchange Act or any other federal or
state
securities law, in each case to the extent and only to the extent
(i) that such
untrue statement or alleged untrue statement or omission or alleged
omission was
made in the applicable Registration Statement, in any preliminary
prospectus or
final prospectus relating thereto or in any amendments or
supplements to the
applicable Registration Statement or any such preliminary
prospectus or final
prospectus, in reliance upon and in conformity with (A) written
information
furnished by the selling Investor expressly for use in connection
with the
applicable Registration Statement, or any preliminary prospectus or
final
prospectus or any such amendment or supplement, or (B) the plan of
distribution
described in Section 5(b), or (ii) such Investor fails to comply
with the
prospectus delivery requirements of the Securities Act as
applicable to it in
connection with sales of Registrable Shares pursuant to the
applicable
Registration Statement; and such selling Investor will reimburse
any legal or
other expenses reasonably incurred by the Company or any such
Affiliate,
director, officer, partner, member, stockholder, controlling
Person,
broker/dealer, underwriter or other selling Investor in connection
with
investigating or defending any such loss, claim, damage, liability
or action,
provided, however, that the liability of each selling Investor
hereunder (when
aggregated with amounts contributed, if any, pursuant to Section
7(d)) shall be
limited to the proceeds received by such Investor from the sale of
the
Registrable Securities pursuant to the applicable Registration
Statement (the
"GROSS PROCEEDS"), and provided further, however, that the
indemnity agreement
contained in this Section 7(b) shall not apply to amounts paid in
settlement of
any such loss, claim, damage, liability or action if such
settlement is effected
without the consent of those selling Investor(s) against which the
request for
indemnity is being made (which consent shall not be unreasonably
withheld or
delayed).
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such
indemnified party
will, if a claim in respect thereof is to be made against any
indemnifying party
under this Section 7, notify the indemnifying party in writing of
the
commencement thereof and the indemnifying party shall have the
right to
participate in and, to the extent the indemnifying party desires,
jointly with
any other indemnifying party similarly noticed, to assume at its
expense the
defense thereof with counsel mutually satisfactory to the
indemnifying parties
with the consent of the indemnified party which consent will not be
unreasonably
withheld, conditioned or delayed. In the event that the
indemnifying party
assumes any such defense, the indemnified party may participate in
such defense
with its own counsel and at its own expense; provided, however,
that the counsel
for the indemnifying party shall act as lead counsel in all matters
pertaining
to such defense or
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settlement of such claim and the indemnifying party shall only pay
for such
indemnified party's reasonable legal fees and expenses for the
period prior to
the date of its participation in such defense; provided further,
however, that
the indemnified party (together wi
