Registration Rights Agreement - eMerge Interactive Inc. and Internet Capital Group Inc.
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made as of the 16th day of November, 1999 by and
among eMerge Interactive, Inc., a Delaware corporation (the "Company"), and
Internet Capital Group, Inc., a Delaware Corporation (the "Investor").
BACKGROUND
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The Investor is acquiring contemporaneously with the execution of this
Agreement shares of the Company's Series D Preferred Stock, which are
convertible into shares of the Company's Class B Common Stock, which are in turn
convertible into shares of the Company's Class A Common Stock and a Warrant for
shares of Class A Common Stock or, at the Warrant holder's election, shares of
Class B Common Stock which are convertible into shares of Class A Common stock.
The Company has agreed to provide the registration rights provided for in this
Agreement as an inducement for the Investor to purchase the Warrant and the
Series D Preferred Stock.
WITNESSETH:
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The parties hereto, each intending to be legally bound and in exchange
for the mutual covenants herein, agree as follows:
1. Demand Registrations.
(a) Requests for Registration. At any time after the earlier of three
years after the date hereof or six months after the Company's initial public
offering, the Investor, provided that it holds at least 1,000,000 Registrable
Securities (defined below) subject to adjustment for stock splits, stock
dividends, stock combinations and transactions with similar effect, may demand
registration (a "Demand Registration") under the Securities Act of 1933, as
amended (the "1933 Act"), of all or any portion of the Registrable Securities
owned by the Investor. In order to accomplish such demand, the Investor shall
send written notice of the demand to the Company, and such notice shall specify
the number of Registrable Securities sought to be registered. The Company shall
only be required to effect two Demand Registrations, and shall only be required
to proceed with a Demand Registration requested by the Investor if the number of
Registrable Securities that the Investor shall have elected to include in such
Demand Registration pursuant to this Section 1 has an aggregate fair market
value, in the opinion of an investment banker selected by the Investor and
reasonably acceptable to the the Company, in excess of $5 million.
(b) Expenses. In a Demand Registration, the Company will pay the
Registration Expenses (defined below), but the Underwriting Commissions (defined
below) will be shared by
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the Company and those holders of Registrable Securities whose Registrable
Securities are included in the Demand Registration in proportion to any
securities included on their behalf.
(c) Priority on Demand Registrations. If a Demand Registration is
underwritten and the managing underwriters advise the Company in writing that in
their opinion the number of Registrable Securities requested to be included
exceeds the number that can be sold in such offering, at a price reasonably
related to fair value, the Company will include in such Demand Registration (i)
first, the Registrable Securities requested to be included in such Demand
Registration by the Investor; (ii) second, any securities that the Company
desires to include on its own behalf; and (iii) third, any shares of Common
Stock held by any other stockholder of the Company to whom registration is
offered; provided, however, that if a Demand Registration would cause an Initial
Public Offering, the Company would be entitled to include for registration on
its own behalf securities representing up to 30% of the Fully-Diluted Common
Stock as of immediately prior to the Initial Public Offering. A registration
shall not be considered to be a Demand Registration under Section 1(a), and the
Company shall pay the Registration Expenses of such registration, if (i) as a
result of the foregoing allocation, the Investor is not able to register and
sell in the Demand Registration at least 75% of the Registrable Securities
sought to be included in the Demand Registration by the Investor; (ii) the gross
proceeds of the securities included in the registration on behalf of the Company
constitute at least 20% of the total gross proceeds of the Demand Registration;
or (iii) the registration statement requested by the Investor does not become
effective for any reason.
(d) Selection of Underwriters. If any Demand Registration is
underwritten, the selection of investment banker(s) and manager(s) and the other
decisions regarding the underwriting arrangements for the offering will be made
by the Investor and be reasonably acceptable to the Company.
(e) Restrictions on Demand Registrations. The Company will not be
obligated to effect any Demand Registration within six months after the
effective date of a previous registration of securities of the Company in an
underwritten offering.
(f) Contemporaneous Demand. If any holder of the Company's securities
that is not a holder of Registrable Securities under this Agreement exercises
demand registration rights to have the Company register its securities under the
1933 Act (a "Non-Investor Registration") within a period of 30 days before or
after the time the Investor shall have requested a Demand Registration, then the
Investor's Demand Registration shall have priority over the Non-Investor
Registration except any request by Safeguard Scientifics, Inc. to the Company to
effect a Rights Offering (as such term is defined in the Registration Rights
Agreement dated July 17, 1997 among the Company and the stockholders that are
parties thereto), made within 30 days before or after the Investor shall have
requested a Demand Registration, shall have priority over the Demand
Registration during the Rights Exclusivity Period.
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2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register any
of its securities under the 1933 Act for its account or for the account of
others (other than the Company's Initial Public Offering, a Demand Registration
or a registration with respect to a Rights Offering, and the registration form
to be used may be used for the registration of Registrable Securities (a
"Piggyback Registration"), the Company will give prompt written notice to all
holders of Registrable Securities and will include in such Piggyback
Registration, subject to the allocation provisions below, all Registrable
Securities with respect to which the Company has received written requests for
inclusion within 30 days after the Company's mailing of such notice. The Company
shall not select a form of registration statement which imposes, for its use,
limitations on the maximum value or number of securities to be registered if
these limitations would preclude registration of the Registrable Securities that
the Company has been requested to include in such registration.
(b) Piggyback Expenses. In all Piggyback Registrations, the Company
will pay the Registration Expenses related to the Registrable Securities of the
Investor, but the Investor will pay the Underwriting Commissions related to
their Registrable Securities.
(c) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number that
can be sold in such offering, at a price reasonably related to fair value, the
Company will allocate the securities to be included as follows: first, the
securities the Company proposes to sell on its own behalf; second, securities
requested to be included in such registration by the Investor and other
stockholders of the Company that hold registration rights as of the date hereof,
pro rata based on the number of shares that such person requested for inclusion
(it being understood that the Company will use its best efforts to obtain the
consent of the holders of such existing registration rights to treat the
Investor pari passu with such holders for the purposes of the underwriter
cutback provisions set forth above).
(d) Priority on Secondary Registrations. If a Piggyback Registration is
initiated as an underwritten secondary registration on behalf of holders of the
Company's securities (other than a Demand Registration pursuant to Section 1),
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number that can be sold in such offering, at a price reasonably
related to fair value, the Company will allocate the securities to be included
as follows: first, the securities requested to be included by the holders
initiating such registration; and second, Registrable Securities requested to be
included in such registration by the Investor.
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(e) Selection of Underwriters. If any Piggyback Registration is
underwritten, the selection of investment banker(s) and manager(s) and the other
decisions regarding the underwriting arrangements for the offering will be made
by the Company, if the registration is under Section 2(c), or if the
registration is under Section 2(d) by the holders initiating such registration
and reasonably acceptable to the Company.
3. Registration on Form S-3.
The Company shall use its best efforts to qualify for registration on
Form S-3 or any comparable or successor form or forms; and to that end, the
Company shall register (whether or not required by law to do so) its Common
Stock under the Securities Exchange Act of 1934, as amended, in accordance with
the provisions of that Act as soon as possible following the effective date of
the first registration of any of the Company's securities under the 1933 Act.
After the Company has so qualified, in addition to the rights contained in the
foregoing provisions of this Registration Rights Agreement, each holder of
Registrable Securities shall have the right to require registration of its
Registrable Securities on Form S-3 at the Company's expense and such
registration shall not be deemed a Demand Registration, provided that (a) the
Registrable Securities to be registered shall have a market value of at least $1
million and (b) the Company shall not be obligated to effect more than one such
registration during any 12-month period. When the Company receives notice of any
holder's request for a registration on Form S-3, it shall send notice of such
proposed registration to all other holders of Registrable Securities.
4. Holdback Agreements.
Neither the Company nor the Investor shall effect any public sale or
distribution of equity securities of the Company or any securities convertible
into or exchangeable or exercisable for such securities during the seven days
prior to and the 90 days after any underwritten Demand Registration,
underwritten Piggyback Registration or underwritten Rights Offering has become
effective (except as part of such underwritten registration).
5. Registration Procedures.
Whenever the Investor has requested that any Registrable Securities be
registered pursuant to Section 1 or 2 of this Agreement, the Company will, as
expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration
statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements
or term sheet thereto, the Company will furnish the Investor with
copies of all such documents proposed to be filed) as promptly as
practical;
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(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of
not less than 120 days;
(c) furnish to the Investor such number of copies of such
registration statement, each amendment and supplement thereto and the
prospectus included in such registration statement (including each
preliminary prospectus and any term sheet associated therewith), and
such other documents as the Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by the
Investor;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of
such jurisdictions as the managing underwriter(s) or the Investor may
reasonably request;
(e) notify the Investor at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act within the
period that the Company is required to keep the registration statement
effective of the happening of any event as a result of which the
prospectus included in such registration statement, together with any
associated term sheet, contains an untrue statement of a material fact
or omits any fact necessary to make the statement therein not
misleading, and, at the request of the Investor, the Company will
prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain an untrue statement of a material fact
or omit to state any fact necessary to make the statement therein not
misleading;
(f) cause all such Registrable Securities to be listed or
included on the Nasdaq Stock Market or on securities exchanges on which
similar securities issued by the Company are then listed or included;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such
registration statement;
(h) enter into such customary agreements (including an
underwriting agreement in customary form) and take such other customary
actions as may be reasonably necessary to expedite or facilitate the
disposition of such Registrable Securities;
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(i) obtain a "comfort" letter addressed to the Company from
its independent public accountants in customary form and covering such
matters of the type customarily covered by "comfort" letters;
(j) make available for inspection by the Investor, any
underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by Investor or any underwriter, all financial and other
records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply all
information reasonably requested by Investor or any such underwriter,
attorney, accountant or agent in connection with such registration
statement;
(k) use its best efforts to cause the Registrable
Securities to be registered with or approved by such
governmental agencies or authorities as may be
necessary by virtue of the business of the Company to
enable Investor to consummate the disposition of the
Registrable Securities; and
(l) furnish, on the date that the Registrable Securities
are delivered to the underwriters for sale, an
opinion dated as of the such date of the counsel
representing the Company for the purpose of such
registration in customary form and covering such
matters as is customarily given to underwriters in an
underwritten public offering.
6. Indemnification.
(a) The Company hereby indemnifies, to the extent permitted by law, the
Investor and its officers, directors, employees and agents, and each person, if
any, who controls any of them within the meaning of the 1933 Act (each, an
"Indemnified Party") against all losses, claims, damages, liabilities and
expenses (including attorney fees) arising out of, resulting from, or related to
any violation or alleged violation by the Company of the 1933 Act, the 1934 Act,
any federal or state securities law, or any rule or regulation promulgated
thereunder, any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or associated
term sheet or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such Indemnified Party
expressly for use therein or by any Indemnified Party's failure to deliver a
copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such Indemnified Party with
a sufficient number of copies of the same. In connection with an underwritten
offering, the Company will indemnify the underwriters, their officers and
directors, and each person who
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controls such underwriters (within the meaning of the 1933 Act) to the same
extent as provided above with respect to the indemnification of any Indemnified
Party.
(b) In connection with any registration statement in which the Investor
is participating, each such holder will furnish to the Company in writing such
information as is reasonably requested by the Company for use in any such
registration statement or prospectus and will indemnify, to the extent permitted
by law, the Company, its directors and officers and each person who controls the
Company (within the meaning of the 1933 Act) against any losses, claims,
damages, liabilities and expenses (including attorney fees) resulting from any
untrue or alleged untrue statement of material fact or any omission or alleged
omission of a material fact required to be stated in the registration statement
or prospectus or any amendment thereof or supplement thereto or necessary to
make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in information so furnished in writing
by such holder specifically for use in preparing the registration statement.
Notwithstanding the foregoing, the liability of the Investor under this Section
7(b) shall be limited to an amount equal to the net proceeds actually received
by the Investor from the sale of Registrable Securities covered by the
registration statement.
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(c) Any person entitled to indemnification hereunder will (i) give
prompt notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. Any failure to give prompt notice shall deprive a party of
its right to indemnification hereunder only to the extent that such failure
shall have adversely affected the indemnifying party. If the defense of any
claim is assumed, the indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled, or elects
not, to assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) In order to provide for just and equitable contribution to joint
liability under the 1933 Act in any case in which either: (i) Investor, its
officers, directors, employees, agents or any controlling person of any of them,
makes a claim for indemnification pursuant to this Section 6 but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 6 provides for indemnification in
such case, or (ii) contribution under the 1933 Act may be required on the part
of Investor, its officers, directors, employees, agents or any person
controlling them in circumstances for which indemnification is provided under
this Section 6; then, and in each such case, the Company and Investor will
contribute to the aggregate losses, claims, damages, liabilities or expenses to
which they may be subject (after contribution from others) as is appropriate to
reflect the relative fault of the Company and Investor in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as the relative benefit received by the Company
and Investor as a result of the offering in question, it being understood that
the parties acknowledge that the overriding equitable consideration to be given
effect in connection with this provision is the ability of one party or the
other to correct the statement or omission which resulted in such losses,
claims, damages or liabilities, and that it would not be just and equitable if
contribution pursuant hereto were to be determined by pro rata allocation or by
any other method of allocation that does not take into consideration the
foregoing equitable consideration; provided that, in any such case (A) Investor
will not be required to contribute any amount in excess of the public offering
price of all such Registrable Securities offered it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act will be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
7. Participation in Underwritten Registrations.
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The Investor may not participate in any underwritten registration
hereunder unless such holder (a) agrees to sell such holder's securities on the
basis provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements under Sections 1(e) or 2(e), and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
8. Definitions.
(a) The term "Initial Public Offering" means the first public offering
under the 1933 Act of any of the Company's equity securities.
(b) The term "Registrable Securities" means (i) the ________ shares of
Class A Common Stock purchased by Investor pursuant to the Stock Purchase
Agreement dated ____________, 1999, (ii) the shares of Class A Common Stock
issuable upon the conversion of shares of Class B Common Stock of the Company
registered in the name of the Investor from time to time and (iii) any
securities received by way of a stock split or as a dividend with respect to
such shares of Class A common Stock and any security into which such Class A
Common Stock may hereafter be changed or for which such Class A Common Stock may
be exchanged (by way of reorganization, recapitalization, merger, consolidation
or otherwise). As to any particular Registrable Securities, such securities will
cease to be Registrable Securities when they have been (A) effectively
registered under the 1933 Act and disposed of in accordance with the
registration statement covering them, or (B) transferred pursuant to Rule 144
(or any similar provision then in force).
(c) The term "Registration Expenses" means all expenses incident to the
Company's performance of or compliance with this Agreement, including without
limitation all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, printing expenses, messenger and delivery
expenses, expenses and fees for listing the securities to be registered on
exchanges or electronic quotation systems on which similar securities issued by
the Company are then listed, and fees and disbursements of counsel for the
Company and of all independent certified public accountants, underwriters (other
than Underwriting Commissions) and other persons retained by the Company
transfer agents' and registrars' fees and the fees and disbursements of counsel
for Investor related to the registration hereunder.
(d) The term "Underwriting Commissions" means all underwriting
discounts or commissions relating to the sale of securities of the Company, but
excludes any expenses reimbursed to underwriters.
9. Miscellaneous.
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(a) Termination of Other Agreements. This Agreement sets forth the
entire understanding of the parties hereto with respect to rights to the
registration of capital stock of the Company and supersedes all prior agreements
or understandings among the parties regarding such matters.
(b) Notices. Any notices required hereunder shall be deemed to be given
upon the earlier of the date when received at, or (i) the third business day
after the date when sent by certified or registered mail, (ii) the next business
day after the date sent by guaranteed overnight courier, or (iii) the date sent
by telecopier or delivered by hand, in each case, to the address of the
Company's corporate headquarters in the case of any notice to the Company, and
until changed by notice to the Company, the respective addresses of the
Investors on file with the Company in the case of any notice to the Investors.
(c) Amendments and Waivers. The provisions of this Agreement may be
amended or terminated and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, if approved in
writing by the Investor and or by any agreement permitted by Section 9.
(d) Registration Rights. The Company agrees that it will not enter into
any agreement or arrangement which would grant any party a right to participate
in any registration that is superior to or contravention of the rights to
participate set forth in this Registration Rights Agreement.
(e) Binding Effect. This Agreement will bind and inure to the benefit
of the respective successors (including any successor resulting from a merger or
similar reorganization), assigns, heirs, and personal representatives of the
parties hereto. Without limiting the generality of the foregoing, in addition,
if the Investor liquidates or reorganizes such that its assets are transferred
to its own stockholders or partners or to another entity, such stockholders,
partners or entity shall succeed to all of the rights of the Investor hereunder.
(f) Governing Law. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by the internal law, not
the law of conflicts, of the Commonwealth of Pennsylvania.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered to be an original instrument and
to be effective as of the date first written above. Each such copy shall be
deemed an original, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such counterpart.
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(h) Interpretation. Unless the context of this Agreement clearly
requires otherwise, (a) references to the plural include the singular, the
singular the plural, the part the whole, (b) references to one gender include
all genders, (c) "or" has the inclusive meaning frequently identified with the
phrase "and/or" and (d) "including" has the inclusive meaning frequently
identified with the phrase "but not limited to." The section and other headings
contained in this Agreement are for reference purposes only and shall not
control or affect the construction of this Agreement or the interpretation
thereof in any respect.
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IN WITNESS WHEREOF, the Company has executed and delivered this
Agreement as of the date first written above.
eMerge Interactive, Inc.
By:
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Title: Chief Executive Officer
Internet Capital Group, Inc.
By:
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Title:
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