Registration Rights Agreement

REGISTRATION RIGHTS AGREEMENT


THIS REGISTRATION RIGHTS AGREEMENT, (the "Agreement") is entered into as of January 14, 2000, by and among NEX-I.COM INC., a New Jersey corporation (the "Company"), with its principal office located at 7 Wall Street, Princeton, New Jersey 08540, ALPHANET SOLUTIONS, INC., a New Jersey corporation with its principal office located at 7 Ridgedale Avenue, Cedar Knolls, New Jersey 07927 ("AlphaNet") and FALLEN ANGEL EQUITY FUND, L.P., a Delaware limited partnership, with its principal office located at 960 Holmdel Road, Holmdel, New Jersey 07733 ("Fallen Angel") and JOHN L. STEFFENS, an individual residing at 358 Wendover Drive, Princeton, New Jersey 08540 ("Steffens," and together with AlphaNet and Fallen Angel, the "Purchasers").


W I T N E S S E T H :


WHEREAS, in connection with the Securities Purchase Agreement dated as of the date hereof, between the Purchasers and the Company (the "Purchase Agreement"), the Company has agreed, upon the terms and subject to the conditions of the Purchase Agreement, to issue and sell to the Purchasers (the "Offering") 3,937,500 shares of the Company's Series A Convertible Participating Preferred Shares (the "Preferred Shares"), convertible into shares of the Company's Common Stock, par value $0.01 per share (the "Common Stock"). The shares of Common Stock of the Company into which the Preferred Shares are convertible are referred to herein as the "Common Shares;" and


WHEREAS, to induce the Purchasers to execute and deliver the Purchase Agreement and to purchase the Preferred Shares, 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 "Securities Act"), and applicable state securities laws with respect to the Common Shares;


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 the Purchasers hereby agree as follows:


1. Definitions. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:


(a) "Purchasers" means the Purchasers and any transferee or assignee of the Purchasers who agrees to become bound by the provisions of this Agreement in accordance with Section 9 hereof.


(b) "Registrable Securities" means the Common Shares, together with any shares of Common Stock which may be issued as a dividend or other distribution and any additional shares of the Common Stock which may be issued due to anti-dilution adjustments with respect to the Preferred Shares or Common Shares, which are required to be included in a Registration Statement pursuant to Section 2(a) below.


(c) "Registration Period" means the period between the date of this Agreement and the earlier of (i) the date on which all of the Registrable Securities have been sold, or (ii) the date on which all the Registrable Securities (in the opinion of Purchasers' counsel) may be immediately sold without registration pursuant to Rule 144(k) under the Securities Act without being subject to any volume limitations.


(d) "Registration Statement" means a registration statement filed with the Securities and Exchange Commission (the "SEC") under the Securities Act and any subsequent Registration Statement filed to register additional Registrable Securities.


(e) The terms "register," "registered," and "registration" refer to a registration effected by preparing and filing a Registration Statement in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of effectiveness of such Registration Statement by the SEC.


2. Registration.


(a) Mandatory Registration. In the event that the holders of no less than 30% of the Registrable Securities request (counting, for this purpose, the number of Common Shares then issuable on conversion of Preferred Shares or owned by the holders of Preferred Shares) that the Company file a Registration Statement with the SEC registering the Registrable Securities for resale for an aggregate amount of no less than $5 million (a "Registration Request"), the Company shall use its best efforts to cause such shares to be registered; provided, however, that the Company shall not be obligated to effect any such registration prior to the earlier of (i) January 14, 2003 or (ii) six months after the effective date of the Company's first Registration Statement filed with the SEC relating to a public offering of the Common Stock (an "IPO"). To the extent allowable under the Securities Act (including Rule 416), the Registration Statement shall include the Common Shares and such indeterminate number of additional shares of the Common Stock as may become issuable upon conversion of the Preferred Shares (i) to prevent dilution resulting from stock splits, stock dividends or similar transactions, or (ii) by reason of changes in the conversion price of the Preferred Shares in accordance with the terms thereof. The number of shares of Common Stock initially included in such Registration Statement shall be no less than 1 million Common Shares. The Registration Statement (and each amendment or supplement thereto) shall be provided to, and subject to the approval of, the Purchasers and their counsel, such approval not to be unreasonably withheld or delayed. The Company shall use its best efforts to cause such Registration Statement to be declared effective by the SEC in a timely manner, but in no event later than 120 days after the Company is notified of the Registration Request (the "Required Effective Date"). Such best efforts shall include, but not be limited to, promptly responding to all comments received from the staff of the SEC. The Purchasers shall use reasonable efforts to cause their counsel to provide any comments or approve of any amendment to the Registration Statement within two business days of receipt. Once declared effective by the SEC, the Company shall cause such Registration Statement to remain effective throughout the Registration Period, and any amendment of such Registration Statement that may be necessary shall not relieve the Company of its obligation to cause the Registration Statement to remain effective under this Agreement. A maximum of two Registration Requests may be made by the Purchasers pursuant to this Section 2(a), and the Company shall not be obligated under this Section 2(a) to comply with more than two such Registration Requests.


(b) Grace Period After Registration. The Corporation will not be obligated to effect any registration pursuant to Section 2(a) within ninety (90) days after the effective date of a registration in which the holders were entitled to include all of the Registrable Securities in a registration statement pursuant to Section 2(e) hereof. The Corporation may postpone for up to ninety (90) days the filing of a registration statement for a registration pursuant to Section 2(a) if the Corporation has delivered to the holders of the Registrable Securities a certificate signed by its Chief Executive Officer stating that the Board of Directors has determined in its good faith judgment, that the filing and completion of the such registration would be seriously detrimental to the Corporation and its stockholders because such registration might require premature public disclosure with respect to pending confidential matters (the "Board Deferral Right"); provided, that (i) in such event the holders requesting the registration will be entitled to withdraw such request and, if such request is withdrawn, such registration will not count as a registration hereunder and (ii) the Board may not exercise its Board Deferral Right more than once in any twelve (12) month period.


(c) Holdback Agreements. Each holder of Registrable Securities agrees (i) not to effect any public sale or distribution (including sales pursuant to Rule 144) of the Registrable Securities during the seven (7) days prior to and the ninety (90) day period beginning on the effective date of the Registration Statement for an IPO, unless the underwriters managing such offering otherwise agree and (ii) that all Registrable Securities which are excluded from any other underwriting by reason of the underwriter's marketing limitation and all other Registrable Securities not originally requested to be included in an underwriting shall not be included in the registration for such underwriting and shall be withheld from the market by the holders thereof for a period not to exceed the period commencing seven (7) days prior to, and ending ninety (90) days following, the effective date of such Registration Statement, which the managing underwriter reasonably determines is necessary to effect the underwritten public offering.


(d) Late Registration Payments. If the Registration Statement required pursuant to Section 2(a) above has not been declared effective by the Required Effective Date, the Company will make cash payments to the Purchasers as partial compensation for such delay (the "Late Registration Payments"). The Late Registration Payments will be equal to one percent (1.0%) of the Purchase Price (as defined in, and adjusted in accordance with the terms of, the Purchase Agreement and the terms of the Preferred Shares set forth in the Company's Certificate of Incorporation) paid for the Preferred Shares for each month following the Required Effective Date, continuing through the date the Registration Statement is declared effective by the SEC. The Late Registration Payments will be prorated on a daily basis for partial months and will be paid to the Purchasers in cash within five (5) business days following the earlier of: (i) the end of each month following the Required Effective Date, or (ii) the effective date of the Registration Statement. Nothing herein shall limit any Purchaser's right to pursue actual damages for the Company's failure to file a Registration Statement or to have the Registration Statement declared effective by the SEC on or prior to the Required Effective Date in accordance with the terms of this Agreement.


(e) Piggyback Registrations. If, at any time prior to the expiration of the Registration Period, the Company decides to register any of its securities for its own account or for the account of others (excluding registrations relating to equity securities to be issued solely in connection with an acquisition of any entity or business or in connection with stock option or other employee benefit plans), the Company will promptly give the Purchasers written notice thereof, and will use its best efforts to include in such registration all or any part of the Registrable Securities (excluding any Registrable Securities previously included in a Registration Statement which has become effective) so requested by such Purchasers (a "Piggyback Registration"). Each Purchaser's request for registration must be given to the Company in writing within ten (10) days after receipt of the notice from the Company. If the registration for which the Company gives notice is a public offering involving an underwriting, the Company will so advise the Purchasers as part of the above-described written notice. In such event, if the managing underwriter(s) of the public offering 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, such limitation would be necessary to effect an orderly public distribution, then the Company will be obligated to include only such limited portion, if any, of the Registrable Securities with respect to which such Purchasers have requested inclusion hereunder. Any exclusion of Registrable Securities shall be made pro-rata among all holders of the Company's securities seeking to include shares of Common Stock (including, for purposes of this Section 2(e) holders of securities of the Company other than the Registrable Securities who hold and are attempting to exercise registration rights) in proportion to the number of shares of Common Stock sought to be included by such holders; provided, however, that the Company will not exclude any Registrable Securities unless the Company has first excluded all outstanding securities the holders of which are not entitled by right to inclusion of securities in such Registration Statement and that Registerable Securities may not be reduced below 33% of the total securities offered by the Company in such Registration Statement. No right to registration of Registrable Securities under this Section 2(e) shall be construed to limit in any way the registration required under Section 2(a) above. The obligations of the Company under this Section 2(e) will expire upon the earlier of: (i) after the Company has afforded to the Purchasers the opportunity for the Purchasers to exercise registration rights under this Section 2(e) for two registrations; provided, however, that any Purchaser who shall have had any Registrable Securities excluded from any Registration Statement in accordance with this Section 2(e) shall be entitled to include in any additional Registration Statement filed by the Company the Registrable Securities so excluded; or (ii) when all of the Registrable Securities held by any Purchaser may be sold by such Purchaser under Rule 144(k) under the Securities Act without being subject to any volume restrictions.


(f) Unlimited S-3 Registration Rights. In the event that the Company becomes eligible to register shares with the SEC on a Form S-3 Registration Statement or similar form ("Form S-3"), the holders of no less than 30% of the then outstanding Registrable Securities may, on an unlimited number of occasions (while the Company remains eligible to file on Form S-3), require the Company to register at least $1 million worth of Registrable Securities on Form S-3 (an "S-3 Registration").


3. Additional Obligations of the Company. In connection with the registration of the Registrable Securities, the Company shall have the following additional obligations:


(a) The Company shall keep each Registration Statement required by Section 2(a) hereof effective pursuant to Rule 415 under the Securities Act at all times during the Registration Period as defined in Section 1(c) above.


(b) The Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) filed by the Company 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. The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to keep the Registration Statement effective at all times during the Registration Period, and, during such period, shall comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the sellers thereof as set forth in the Registration Statement. In the event the number of shares of Common Stock included in a Registration Statement filed pursuant to this Agreement (excluding Piggyback Registrations as provided for in Section 2(e) above) is insufficient to cover all of the Registrable Securities, the Company shall amend the Registration Statement and/or file a new Registration Statement so as to cover all of the Registrable Securities as soon as practicable, but in no event more than twenty (20) business days after the Company first determines (or reasonably should have determined) the need therefor. 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. The Late Registration Payment provisions of Section 2(d) above shall become applicable with respect to the effectiveness of such amendment and/or new Registration Statement on the sixtieth (60th) day following the date the Company first determines (or reasonably should have determined) the need for the amendment and/or new Registration Statement.


(c) The Company shall furnish to each Purchaser whose Registrable Securities are included in the Registration Statement (i) promptly after the Registration Statement is prepared and publicly distributed, filed with the SEC or received by the Company, one copy of the Registration Statement and any amendment thereto; each preliminary prospectus and final prospectus and each amendment or supplement thereto; and, in the case of the Registration Statement required under Section 2(a) above, each letter written by or on behalf of the Company to the SEC and each item of correspondence from the SEC, in each case relating to such Registration Statement (other than any portion of any item thereof which contains information for which the Company has sought confidential treatment); and (ii) such number of copies of a prospectus, including a preliminary prospectus, and all amendments and supplements thereto, and such other documents as such Purchaser may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Purchaser.


(d) The Company shall use its best efforts to (i) register and qualify the Registrable Securities covered by the Registration Statement under such other securities or blue sky laws of such jurisdictions as the Purchasers reasonably request, (ii) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such registrations 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. Notwithstanding the foregoing provision, the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) subject itself to general taxation in any such jurisdiction, (iii) file a general consent to service of process in any such jurisdiction, (iv) provide any undertakings that cause more than nominal expense or burden to the Company, or (v) 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 Purchasers who hold a majority in interest of the Registrable Securities being offered in an offering in which no less than 50% of such offering is comprised of Registrable Securities select underwriters for such 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 managing underwriter of such offering. If the Registration Statement required pursuant to Section 2(a) is not then effective, the Company shall be responsible for payment of the reasonable attorney fees and costs incurred by one law firm selected by such Purchasers to represent their interests in the underwritten offering.


(f) The Company shall notify each Purchaser who holds Registrable Securities being sold pursuant to a Registration Statement of the happening of any event of which the Company has knowledge as a result of which (i) the prospectus included in the Registration Statement as then in effect includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, not misleading, or (ii) sales cannot be made pursuant to such Registration Statement in compliance with the securities laws for any other reason (a "Suspension Event"). The Company shall make such notification as promptly as practicable after the Company becomes aware of such Suspension Event, shall promptly use its best efforts to prepare a supplement or amendment to the Registration Statement to correct such untrue statement or omission, and shall deliver a number of copies of such supplement or amendment to each Purchaser as such Purchaser may reasonably request. If a Purchaser reasonably believes that a Suspension Event is in effect, but has not received notice thereof from the Company, such Purchaser may deliver a written request, setting forth in reasonable detail the basis and source (including any individual) for such belief, that the Company confirm that no Suspension Event is in effect. The Company shall respond to any such request with a letter executed by an executive officer of the Company stating that, in consultation with its counsel, the Company has determined that a Suspension Event is or is not in effect, on or before the third business day following receipt of such request. If the Company fails to respond within such time period, a Suspension Event shall be deemed to be in effect commencing retroactively as of the day that the Purchaser delivered its request to the Company, and shall continue until the Purchaser is otherwise notified by the Company. Notwithstanding the foregoing provision, the Company shall not be required to maintain the effectiveness of the Registration Statement or to amend or supplement the Registration Statement for a period (a "Delay Period") beginning on the date of occurrence of the Suspension Event and expiring upon the earlier to occur of (i) the date on which such material information is disclosed to the public or ceases to be material, (ii) the date on which the Company is able to comply with its disclosure obligations and SEC requirements related thereto, or (iii) thirty (30) days after the occurrence of the Suspension Event; provided, however, that there shall not be more than two Delay Periods in any twelve (12) month period. In the e ...