REGISTRATION RIGHTS
AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this “
Agreement ”), dated as of March 30, 2007, by
and among Veridicom International, Inc., a Delaware corporation
with its headquarters located at 55 Woodland Avenue, Verona, New
Jersey 07044 (the “ Company ”), and
each of the undersigned (together with their respective affiliates
and any assignee or transferee of all of their respective rights
hereunder, the “ Initial Investors
”).
A. In connection with the Securities Purchase
Agreement by and among the parties hereto of even date herewith
(the “Securities Purchase Agreement”), the Company has
agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors (i) secured
convertible notes in the aggregate principal amount of up to Three
Hundred Sixty Thousand Dollars ($360,000) (the “Notes”)
that are convertible into shares of the Company’s common
stock (the “Common Stock”), upon the terms and subject
to the limitations and conditions set forth in such Notes and (ii)
warrants (the “Warrants”) to acquire an aggregate of
8,000,000 shares of Common Stock, upon the terms and conditions and
subject to the limitations and conditions set forth in the
Warrants; and
B. To induce the Initial Investors to execute and
deliver the Securities Purchase Agreement, the Company has agreed
to provide certain registration rights under the Securities Act of
1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the “ 1933
Act ”), and applicable state securities
laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and each of the Initial Investors hereby
agree as follows:
a. As used in this Agreement, the following terms
shall have the following meanings:
(i) “ Investors ” means
the Initial Investors and any transferee or assignee who agrees to
become bound by the provisions of this Agreement in accordance with
Section 9 hereof.
(ii) “ register ,”
“ registered ,” and “
registration ” refer to a registration
effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415
under the 1933 Act or any successor rule providing for offering
securities on a continuous basis (“ Rule 415
”), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange
Commission (the “ SEC ”).
(iii) “ Registrable Securities
” means the Conversion Shares issued or issuable upon
conversion or otherwise pursuant to the Notes and Additional Notes
(as defined in the Securities Purchase Agreement) including,
without limitation, Damages Shares (as defined in the Notes) issued
or issuable pursuant to the Notes, shares of Common Stock issued or
issuable in payment of the Standard Liquidated Damages Amount (as
defined in the Securities Purchase Agreement), shares issued or
issuable in respect of interest or in redemption of the Notes in
accordance with the terms thereof) and any shares of capital stock
issued or issuable as a dividend on or in exchange for or otherwise
with respect to any of the foregoing.
(iv) “ Registration Statement
” means a registration statement of the Company under the
1933 Act.
b. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the
Securities Purchase Agreement or the Convertible Note.
a.
Mandatory
Registration .
The Company shall prepare, and, on or prior to thirty (30) days
from the date of obtaining Stockholder Approval (as defined in the
Securities Purchase Agreement) (the “ Filing
Date ”), file with the SEC a Registration Statement
on Form SB-2 (or, if Form SB-2 is not then available, on such form
of Registration Statement as is then available to effect a
registration of the Registrable Securities, subject to the consent
of the Initial Investors, which consent will not be unreasonably
withheld) covering the resale of the Registrable Securities
underlying the Notes issued or issuable pursuant to the Securities
Purchase Agreement, which Registration Statement, to the extent
allowable under the 1933 Act and the rules and regulations
promulgated thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon
conversion of or otherwise pursuant to the Notes to prevent
dilution resulting from stock splits, stock dividends or similar
transactions. The number of shares of Common Stock initially
included in such Registration Statement shall be no less than an
amount equal to the sum of the number of Conversion Shares that are
then issuable upon conversion of the Notes (based on the Variable
Conversion Price as would then be in effect and assuming the
Variable Conversion Price is the Conversion Price at such time),
without regard to any limitation on the Investor’s ability to
convert the Notes. The Company acknowledges that the number of
shares initially included in the Registration Statement represents
a good faith estimate of the maximum number of shares issuable upon
conversion of the Notes.
b.
Underwritten
Offering . If
any offering pursuant to a Registration Statement pursuant to
Section 2(a) hereof involves an underwritten offering, the
Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering, with the consent
of a majority-in-interest of the Initial Investors, shall have the
right to select one legal counsel and an investment banker or
bankers and manager or managers to administer the offering, which
investment banker or bankers or manager or managers shall be
reasonably satisfactory to the Company.
c.
Payments by the
Company . The
Company shall use its best efforts to obtain effectiveness of the
Registration Statement as soon as practicable. If (i) the
Registration Statement(s) covering the Registrable Securities
required to be filed by the Company pursuant to Section 2(a) hereof
is not filed by the Filing Date or declared effective by the SEC on
or prior to one hundred and five (105) days from the date of
obtaining Stockholder Approval (as defined in the Securities
Purchase Agreement) (the “ Effectiveness
Deadline ”), or (ii) after the Registration
Statement has been declared effective by the SEC, sales of all of
the Registrable Securities cannot be made pursuant to the
Registration Statement, or (iii) the Common Stock is not listed or
included for quotation on the Nasdaq National Market (“
Nasdaq ”), the Nasdaq SmallCap Market
(“ Nasdaq SmallCap ”), the New York
Stock Exchange (the “ NYSE ”) or the
American Stock Exchange (the “ AMEX ”)
after being so listed or included for quotation, or (iv) the Common
Stock ceases to be traded on the Over-the-Counter Bulletin Board
(the “OTCBB” ) or on the Pinksheets
(“ Pinksheets ”) or any equivalent
replacement exchange prior to being listed or included for
quotation on one of the aforementioned markets, then the Company
will make payments to the Investors in such amounts and at such
times as shall be determined pursuant to this Section 2(c) as
partial relief for the damages to the Investors by reason of any
such delay in or reduction of their ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity). The Company shall pay to
each holder of the Notes or Registrable Securities an amount equal
to the then outstanding principal amount of the Notes (and, in the
case of holders of Registrable Securities, the principal amount of
Notes from which such Registrable Securities were converted)
(“ Outstanding Principal Amount ”),
multiplied by the Applicable Percentage (as defined below) times
the sum of: (i) the number of months (prorated for partial months)
after the Filing Date or the end of the Effectiveness Deadline and
prior to the date the Registration Statement is declared effective
by the SEC, provided, however, that there shall be excluded from
such period any delays which are solely attributable to changes
required by the Investors in the Registration Statement with
respect to information relating to the Investors, including,
without limitation, changes to the plan of distribution, or to the
failure of the Investors to conduct their review of the
Registration Statement pursuant to Section 3(h) below in a
reasonably prompt manner; (ii) the number of months (prorated for
partial months) that sales of all of the Registrable Securities
cannot be made pursuant to the Registration Statement after the
Registration Statement has been declared effective (including,
without limitation, when sales cannot be made by reason of the
Company’s failure to properly supplement or amend the
prospectus included therein in accordance with the terms of this
Agreement, but excluding any days during an Allowed Delay (as
defined in Section 3(f)); and (iii) the number of months (prorated
for partial months) that the Common Stock is not listed or included
for quotation on the OTCBB, Pinksheets, Nasdaq, Nasdaq SmallCap,
NYSE or AMEX or that trading thereon is halted after the
Registration Statement has been declared effective. The term
“ Applicable Percentage ” means two
hundredths (.015). (For example, if the Registration Statement
becomes effective one (1) month after the end of the Effectiveness
Deadline, the Company would pay $5,000 for each $250,000 of
Outstanding Principal Amount. If thereafter, sales could not be
made pursuant to the Registration Statement for an additional
period of one (1) month, the Company would pay an additional $5,000
for each $250,000 of Outstanding Principal Amount.) Such amounts
shall be paid in cash or, at the Company’s option, in shares
of Common Stock priced at the Conversion Price (as defined in the
Notes) on such payment date.
d.
Piggy-Back
Registrations .
Subject to the last sentence of this Section 2(d), if at any time
prior to the expiration of the Registration Period (as hereinafter
defined) the Company shall determine to file with the SEC a
Registration Statement relating to an offering for its own account
or the account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then
equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other
bona fide , employee benefit plans), the
Company shall send to each Investor who is entitled to registration
rights under this Section 2(d) written notice of such determination
and, if within fifteen (15) days after the effective date of such
notice, such Investor shall so request in writing, the Company
shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered,
except that if, in connection with any underwritten public offering
for the account of the Company the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock
which may be included in the Registration Statement because, in
such underwriter(s)’ judgment, marketing or other factors
dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in
such Registration Statement only such limited portion of the
Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. Any
exclusion of Registrable Securities shall be made pro rata among
the Investors seeking to include Registrable Securities in
proportion to the number of Registrable Securities sought to be
included by such Investors; provided , however , that
the Company shall not exclude any Registrable Securities unless the
Company has first excluded all outstanding securities, the holders
of which are not entitled to inclusion of such securities in such
Registration Statement or are not entitled to pro rata inclusion
with the Registrable Securities; and provided ,
further , however , that, after giving effect to the
immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration
Statement other than holders of securities entitled to inclusion of
their securities in such Registration Statement by reason of demand
registration rights. No right to registration of Registrable
Securities under this Section 2(d) shall be construed to limit any
registration required under Section 2(a) hereof. If an offering in
connection with which an Investor is entitled to registration under
this Section 2(d) is an underwritten offering, then each Investor
whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using
the same underwriter or underwriters and, subject to the provisions
of this Agreement, on the same terms and conditions as other shares
of Common Stock included in such underwritten offering.
Notwithstanding anything to the contrary set forth herein, the
registration rights of the Investors pursuant to this Section 2(d)
shall only be available in the event the Company fails to timely
file, obtain effectiveness or maintain effectiveness of any
Registration Statement to be filed pursuant to Section 2(a) in
accordance with the terms of this Agreement.
e.
Eligibility for Form S-3,
SB-2 or S-1; Conversion to Form S-3
. The Company represents and
warrants that it meets the requirements for the use of Form S-3,
SB-2 or S-1 for registration of the sale by the Initial Investors
and any other Investors of the Registrable Securities. The Company
agrees to file all reports required to be filed by the Company with
the SEC in a timely manner so as to remain eligible or become
eligible, as the case may be, and thereafter to maintain its
eligibility, for the use of Form S-3. If the Company is not
currently eligible to use Form S-3, not later than fifteen (15)
business days after the Company first meets the registration
eligibility and transaction requirements for the use of Form S-3
(or any successor form) for registration of the offer and sale by
the Initial Investors and any other Investors of Registrable
Securities, the Company shall file a Registration Statement on Form
S-3 (or such successor form) with respect to the Registrable
Securities covered by the Registration Statement on Form SB-2 or
Form S-1, whichever is applicable, filed pursuant to Section 2(a)
(and include in such Registration Statement on Form S-3 the
information required by Rule 429 under the 1933 Act) or convert the
Registration Statement on Form SB-2 or Form S-1, whichever is
applicable, filed pursuant to Section 2(a) to a Form S-3 pursuant
to Rule 429 under the 1933 Act and cause such Registration
Statement (or such amendment) to be declared effective no later
than thirty (30) days after filing. In the event of a breach by the
Company of the provisions of this Section 2(e), the Company will be
required to make payments pursuant to Section 2(c)
hereof.
3.
OBLIGATIONS OF THE
COMPANY.
In connection with the registration of the
Registrable Securities, the Company shall have the following
obligations:
a. The Company shall prepare promptly, and file
with the SEC not later than the Filing Date, a Registration
Statement with respect to the number of Registrable Securities
provided in Section 2(a), and thereafter use its best efforts to
cause such Registration Statement relating to Registrable
Securities to become effective as soon as possible after such
filing but in no event later than one the Effectiveness Deadline,
and keep the Registration Statement effective pursuant to Rule 415
at all times until such date as is the earlier of (i) the date on
which all of the Registrable Securities have been sold and (ii) the
date on which the Registrable Securities (in the opinion of counsel
to the Initial Investors) may be immediately sold to the public
without registration or restriction (including, without limitation,
as to volume by each holder thereof) under the 1933 Act (the
“ Registration Period ”), which
Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein, or necessary to make the
statements therein not misleading.
b. The Company shall prepare and file with the SEC
such amendments (including post-effective amendments) and
supplements to the Registration Statements and the prospectus used
in connection with the Registration Statements as may be necessary
to keep the Registration Statements effective at all times during
the Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration
Statements until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the
Registration Statements. In the event the number of shares
available under a Registration Statement filed pursuant to this
Agreement is insufficient to cover all of the Registrable
Securities issued or issuable upon conversion of the Notes, the
Company shall amend the Registration Statement, or file a new
Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover all of the Registrable
Securities, in each case, as soon as practicable, but in any event
within fifteen (15) days after the necessity therefor arises (based
on the market price of the Common Stock and other relevant factors
on which the Company reasonably elects to rely). The Company shall
use its best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable
following the filing thereof, but in any event within thirty (30)
days after the date on which the Company reasonably first
determines (or reasonably should have determined) the need
therefor. The provisions of Section 2(c) above shall be applicable
with respect to such obligation, with the one hundred and five
(105) days running from the day the Company reasonably first
determines (or reasonably should have determined) the need
therefor.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in a Registration Statement and
its legal counsel (i) promptly (but in no event more than two (2)
business days) after the same is prepared and publicly distributed,
filed with the SEC, or received by the Company, one copy of each
Registration Statement and any amendment thereto, each preliminary
prospectus and prospectus and each amendment or supplement thereto,
and, in the case of the Registration Statement referred to in
Section 2(a), each letter written by or on behalf of the Company to
the SEC or the staff of the SEC, and each item of correspondence
from the SEC or the staff of the SEC, in each case relating to such
Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential
treatment), and (ii) promptly (but in no event more than two (2)
business days) after the Registration Statement is declared
effective by the SEC, such number of copies of a prospectus,
including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor. The Company will
immediately notify each Investor by facsimile of the effectiveness
of each Registration Statement or any post-effective amendment. The
Company will promptly respond to any and all comments received from
the SEC (which comments shall promptly be made available to the
Investors upon request), with a view towards causing each
Registration Statement or any amendment thereto to be declared
effective by the SEC as soon as practicable, shall promptly file an
acceleration request as soon as practicable (but in no event more
than two (2) business days) following the resolution or clearance
of all SEC comments or, if applicable, following notification by
the SEC that any such Registration Statement or any amendment
thereto will not be subject to review and shall, if required by SEC
Rules, promptly file with the SEC a final prospectus as soon as
practicable (but in no event more than two (2) business days)
following receipt by the Company from the SEC of an order declaring
the Registration Statement effective. In the event of a breach by
the Company of the provisions of this Section 3(c), the Company
will be required to make payments pursuant to Section 2(c)
hereof.
d. The Company shall use reasonable efforts to (i)
register and qualify the Registrable Securities covered by the
Registration Statements under such other securities or “blue
sky” laws of such jurisdictions in the United States as the
Investors who hold a majority in interest of the Registrable
Securities being offered reasonably request, (ii) prepare and file
in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness
thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration
Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided , however , that the Company
shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section
3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in
any such jurisdiction, (d) provide any undertakings that cause the
Company undue expense or burden, or (e) make any change in its
charter or bylaws, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the
Company and its shareholders.
e. In the event Investors who hold a
majority-in-interest of the Registrable Securities being offered in
the offering (with the approval of a majority-in-interest of the
Initial Investors) select underwriters for the offering, the
Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including,
without limitation, customary indemnification and contribution
obligations, with the underwriters of such offering.
f. As promptly as practicable after becoming aware
of such event, the Company shall notify each Investor of the
happening of any event, of which the Company has knowledge, as a
result of which the prospectus included in any Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and use its best efforts promptly to prepare a
supplement or amendment to any Registration Statement to correct
such untrue statement or omission, and deliver such number of
copies of such supplement or amendment to each Investor as such
Investor may reasonably request; provided that, for not more than
ten (10) consecutive trading days (or a total of not more than
twenty (20) trading days in any twelve (12) month period), the
Company may delay the disclosure of material non-public
informa
|
