EXHIBIT 10.28
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June 12,
2002, by and between CAN-CAL RESOURCES, LTD., a company organized under the laws
of state of Nevada, with its principal executive office at 0000 Xxxxxx Xxxx
Xxxx, Xxx Xxxxx, XX 00000 (the "Company"), and the undersigned investor (the
"Investor").
WHEREAS, upon the terms and subject to the conditions of the Subscription
Agreement between the Investor and the Company (the "Subscription Agreement"),
the Company has agreed to issue and sell to the Investor a convertible debenture
of the Company (the "Debenture"), which will be convertible into shares of the
common stock, $.001 par value per share (the "Common Stock"), of the Company,
and a Warrant to purchase 50,000 shares of Common Stock, upon the terms and
subject to the conditions of such Debenture and Warrant; and
WHEREAS, to induce the Investor to execute and deliver the Subscription
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, with respect to the shares of Common Stock
issuable pursuant to the Subscription Agreement and Debenture.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained hereinafter and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investor hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "Closing Date" means the date funds are received by the Company pursuant to
the Subscription Agreement.
b. "Holder" means the Investor.
c. "Person" means a corporation, a limited liability company, an association, a
partnership, an organization, a business, an individual, a governmental or
political subdivision thereof or a governmental agency.
d. "Potential Material Event" means any of the following: (i) the possession by
the Company of material information not ripe for disclosure in a Registration
Statement, which shall be evidenced by determinations in good faith by the Board
of Directors of the Company that disclosure of such information in the
Registration Statement would be detrimental to the business and affairs of the
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Company, or (ii) any material engagement or activity by the Company which would,
in the good faith determination of the Board of Directors of the Company, be
adversely affected by disclosure in a Registration Statement at such time, which
determination shall be accompanied by a good faith determination by the Board of
Directors of the Company that the Registration Statement would be materially
misleading absent the inclusion of such information.
e. "Principal Market" means either The American Stock Exchange, Inc., The New
York Stock Exchange, Inc., the Nasdaq National Market, The Nasdaq SmallCap
Market or the National Association of Securities Dealer's, Inc. OTC electronic
bulletin board whichever is the principal market on which the Common Stock is
listed.
f. "Register," "Registered," and "Registration" refer to a registration effected
by preparing and filing one or more Registration 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(s) by
the United States Securities and Exchange Commission (the "SEC").
g. "Registrable Securities" means the shares of Common Stock issued or issuable
(i) pursuant to the Subscription Agreement, (ii) upon exercise of the Warrants,
and (iii) any shares of capital stock issued or issuable with respect to the
such shares of Common Stock and Warrants, if any, as a result of any stock
split, stock dividend, recapitalization, exchange or similar event or otherwise,
which have not been (x) included in a Registration Statement that has been
declared effective by the SEC, or (y) sold under circumstances meeting all of
the applicable conditions of Rule 144 (or any similar provision then in force)
under the 1933 Act.
h. "Registration Statement" means a registration statement of the Company filed
under the 1933 Act.
i. "Debenture" means the convertible debenture issued by the Company to the
Investor.
All capitalized terms used in this Agreement and not otherwise defined
herein shall have the same meaning ascribed to them as in the Subscription
Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, as soon as
practicable file with the SEC a Registration Statement or Registration
Statements (as is necessary) on Form SB-2 (or, if such form is unavailable for
such a registration, on such other form as is available for such a
registration), covering the resale of all of the Registrable Securities, which
Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon stock splits, stock dividends or similar transactions. The Company shall
initially register for resale 950,000 shares of Common Stock which would be
issuable on the date preceding the filing of the Registration Statement based on
the closing bid price of the Company's Common Stock on such date and the amount
reasonably calculated that represents the number of shares underlying the
Warrants issuable pursuant to the terms of the
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Offering. In the event the Company cannot register sufficient shares of Common
Stock, due to the remaining number of authorized shares of Common Stock being
insufficient, the Company will use its best efforts to register the maximum
number of shares it can based on the remaining balance of authorized shares and
will use its best efforts to increase the number of its authorized shares as
soon as reasonably practicable.
b. The Company shall use its best efforts to have the Registration Statement
filed with the SEC within forty-five (45) calendar days after the Closing Date.
c. The Company shall use its best efforts to have the Registration Statement
declared effective by the SEC within one hundred five (105) calendar days after
the Closing Date.
d. The Company agrees not to include any other securities, other than those for
Xxxxxx X. XxXxxxx, in this Registration Statement without Investor's prior
written consent. Furthermore, the Company agrees that it will not file any other
Registration Statement for other securities (other than those for the equity
credit line financing, existing option holders, strategic partners or in
connection with a merger or acquisition), until ninety (90) days after the
Registration Statement for the Registrable Securities is declared effective.
This restriction will exclude issuance to existing option holders and strategic
partners or in connection with a merger or acquisition.
e. The Company shall use its best efforts to file an amended Registration
Statement (such as a Form S-1, Form X-0, Xxxx X-0, etc) with the SEC covering
all underlying shares within 45 calendar days of closing date. The Company shall
use its best efforts to have the Registration Statement declared effective
within 105 calendar days following the closing date. Company must also respond
to any comments from SEC regarding the registration within 15 calendar days. In
the event that the Company (a) does not have the Registration Statement filed
within 45 calendar days of closing date; (b) does not have the Registration
Statement declared effective within 105 calendar days following the closing date
or (c) does not respond to any comments from SEC regarding the registration
within 15 calendar days following receipt from the SEC, then in such event, in
the Investor's sole and absolute discretion pursuant to written notice sent to
the Company, the Company must issue put notices to draw down on the equity line
with the proceeds being credited against 120% of the principal amount owed on
the Debenture, plus accrued interest, and such draw downs shall continue until
the earlier of the date the Debenture is redeemed in full or the date the
Registration Statement is declared effective.
f. Counsel. Subject to Section 5 hereof, in connection with any offering
pursuant to this Section 2, the Investor shall have the right to select one
legal counsel to administer its interests in the Offering. The Company shall
reasonably cooperate with any such counsel.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to prepare and file a Registration
Statement with the SEC pursuant to Section 2(a), the Company will use its best
efforts to effect the registration of the Registrable Securities in accordance
with the intended method of disposition thereof and, with respect thereto, the
Company shall have the following obligations:
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a. The Company shall use its best efforts to cause such Registration Statement
relating to the Registrable Securities to become effective within one hundred
five (105) days after the date and shall keep such Registration Statement
effective pursuant to Rule 415 until the earlier of (i) the date as of which the
Investor may sell all of the Registrable Securities without restriction pursuant
to Rule 144(k) promulgated under the 1933 Act or (ii) the date on which (A) the
Investor shall have sold all the Registrable Securities and (B) the Investor has
no right to convert the Shares it owns into Common Stock under the Subscription
Agreement respectively (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, in light of the circumstances in which they were made, not
misleading. The Company shall respond to all SEC comments within fifteen (15)
business days of receipt by the Company. The Company shall cause the
Registration Statement relating to the Registrable Securities to become
effective no later than three (3) business days after notice from the SEC that
the Registration Statement may be declared effective.
b. The Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep such Registration Statement effective 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 such Registration Statement until such time as all of such Registrable
Securities shall have been disposed of in accordance with the intended methods
of disposition by the Investor thereof as set forth in such Registration
Statement. In the event the number of shares of Common Stock available under a
Registration Statement filed pursuant to this Agreement is at any time
insufficient to cover all of the Registrable Securities, the Company shall amend
such 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 thirty (30) calendar days after the necessity therefor arises (based on
the then Purchase Price of the Common Stock and other relevant factors on which
the Company reasonably elects to rely), assuming the Company has sufficient
authorized shares at that time, and if it does not, within thirty (30) calendar
days after such shares are authorized. The Company shall use it best efforts to
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof.
Prior to conversion of all the Shares, if at anytime the conversion of all
the Shares outstanding would result in an insufficient number of authorized
shares of Common Stock being available to cover all the conversions, then in
such event, the Company will move to call and hold a shareholder's meeting
within thirty (30) days of such event for the sole purpose of authorizing
additional shares of Common Stock to facilitate the conversions. In such an
event the Company shall recommend to all shareholders and management of the
Company to vote their shares in favor of increasing the authorized number of
shares of Common Stock. The Company represents and warrants that under no
circumstances will it deny or prevent Purchaser's right to
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convert the Shares as permitted under the terms of this Subscription Agreement
or this Registration Rights Agreement.
c. The Company shall furnish to the Investor whose Registrable Securities are
included in any Registration Statement and its legal counsel without charge (i)
promptly after the same is prepared and filed with the SEC at least one copy of
such Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits, the prospectus included in such Registration Statement (including
each preliminary prospectus) and, with regards to such Registration
Statement(s), any correspondence by or on behalf of the Company to the SEC or
the staff of the SEC and any correspondence from the SEC or the staff of the SEC
to the Company or its representatives, (ii) upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as the Investor may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus, as the
Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities.
d. The Company shall use reasonable efforts to (i) register and qualify the
Registrable Securities covered by a Registration Statement under such other
securities or "blue sky" laws of such states in the United States as any Holder
reasonably requests, (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 (x) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify each Holder who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
e. As promptly as practicable after becoming aware of such event, the Company
shall notify each Holder in writing of the happening of any event as a result of
which the prospectus included in a 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,
in light of the circumstances under which they were made, not misleading,
("Registration Default") and use all diligent efforts to promptly prepare a
supplement or amendment to such Registration Statement and take any other
necessary steps to cure the Registration Default, (which, if such Registration
Statement is on Form S-3, may consist of a document to be filed by the Company
with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as
defined below) and to be incorporated by reference in the prospectus) to correct
such untrue statement or omission, and deliver ten (10) copies of such
supplement or amendment to each
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Holder (or such other number of copies as such Holder may reasonably request).
Failure to cure the Registration Default within ten (10) business days shall
result in the Company paying liquidated damages of 2.0% of the price paid to
purchase the Shares then held by the Holders for each thirty (30) calendar day
period or portion thereof, beginning on the date of suspension. The Company
shall also promptly notify each Holder in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each Holder by
facsimile on the same day of such effectiveness and by overnight mail), (ii) of
any request by the SEC for amendments or supplements to a Registration Statement
or related prospectus or related information, (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate, (iv) in the event the Registration Statement is no longer
effective or, (v) the Registration Statement is stale for a period of more than
five (5) Trading Days as a result of the Company's failure to timely file its
financials.
The Company acknowledges that its failure to cure the Registration Default
within ten (10) business days will cause the Investor to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty.
It is the intention of the parties that interest payable under any of the
terms of this Agreement shall not exceed the maximum amount permitted under any
applicable law. If a law, which applies to this Agreement which sets the maximum
interest amount, is finally interpreted so that the interest in connection with
this Agreement exceeds the permitted limits, then: (1) any such interest shall
be reduced by the amount necessary to reduce the interest to the permitted
limit; and (2) any sums already collected (if any) from the Company which exceed
the permitted limits will be refunded to the Company. The Investor may choose to
make this refund by reducing the amount that the Company owes under this
Agreement or by making a direct payment to the Company. If a refund reduces the
amount that the Company owes the Investor, the reduction will be treated as a
partial payment. In case any provision of this Agreement is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Agreement will not in any way
be affected or impaired thereby.
f. The Company shall use its best efforts to prevent the issuance of any stop
order or other suspension of effectiveness of a Registration Statement, or the
suspension of the qualification of any of the Registrable Securities for sale in
any jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible moment and to
notify each Holder who holds Registrable Securities being sold of the issuance
of such order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.
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g. The Company shall permit each Holder and a single firm of counsel, designated
as selling shareholders' counsel by the Holders who hold a majority of the
Registrable Securities being sold, to review and comment upon a Registration
Statement and all amendments and supplements thereto at least seven (7) business
days prior to their filing with the SEC, and not file any document in a form to
which such counsel reasonably objects. The Company shall not submit to the SEC a
request for acceleration of the effectiveness of a Registration Statement or
file with the SEC a Registration Statement or any amendment or supplement
thereto without the prior approval of such counsel, which approval shall not be
unreasonably withheld.
h. At the request of any Holder, the Company shall cause to be furnished to such
Holder, on the date of the effectiveness of a Registration Statement, an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in the form of Exhibit D attached to the
Subscription Agreement.
i. The Company shall make available for inspection by (i) any Holder and (ii)
one firm of attorneys and one firm of accountants or other agents retained by
the Holders (collectively, the "Inspectors") all pertinent financial and other
records, and pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed necessary by each
Inspector, and cause the Company's officers, directors and employees to supply
all information which any Inspector may reasonably request; provided, however,
that each Inspector shall hold in strict confidence and shall not make any
disclosure (except to a Holder) or use of any Record or other information which
the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. Each Holder agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental body
of competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential.
j. The Company shall hold in confidence and not make any disclosure of
information concerning a Holder provided to the Company unless (i) disclosure of
such information is necessary to comply with federal or state securities laws,
(ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning a Holder is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to such Holder and allow such Holder, at the Holder's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
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k. The Company shall use its best efforts to secure designation and quotation of
all the Registrable Securities covered by any Registration Statement on the
Principal Market. If, despite the Company's best efforts, the Company is
unsuccessful in satisfying the preceding sentence, it shall use its best efforts
to cause all the Registrable Securities covered by any Registration Statement to
be listed on each other national securities exchange and automated quotation
system, if any, on which securities of the same class or series issued by the
Company are then listed, if any, if the listing of such Registrable Securities
is then permitted under the rules of such exchange or system. If, despite the
Company's best efforts, the Company is unsuccessful in satisfying the two
preceding sentences, it will use its best efforts to secure the inclusion for
quotation on the Nasdaq SmallCap Market for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. as such with respect to such Registrable Securities. The Company shall pay
all fees and expenses in connection with satisfying its obligation under this
Section 3(k).
l. The Company shall cooperate with the Investor to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be offered pursuant to a Registration
Statement and enable such certificates to be in such denominations or amounts,
as the case may be, as the Holders may reasonably request and registered in such
names of the Persons who shall acquire such Registrable Securities from the
Holders, as the Holders may request.
m. The Company shall provide a transfer agent for all the Registrable Securities
not later than the effective date of the first Registration Statement filed
pursuant hereto.
n. If requested by the Holders holding a majority of the Registrable Securities,
the Company shall (i) as soon as reasonably practical incorporate in a
prospectus supplement or post-effective amendment such information as such
Holders reasonably determine should be included therein relating to the sale and
distribution of Registrable Securities, including, without limitation,
information with respect to the offering of the Registrable Securities to be
sold in such offering; (ii) make all required filings of such prospectus
supplement or post-effective amendment as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) supplement or make amendments to any Registration Statement if reasonably
requested by such Holders.
o. The Company shall use its best efforts to cause the Registrable Securities
covered by the applicable Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to consummate the disposition of such Registrable Securities.
p. The Company shall make generally available to its security holders as soon as
reasonably practical, but not later than ninety (90) calendar days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 0000 Xxx) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of any Registration Statement.
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q. The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
r. Within one (1) business day after the Registration Statement which includes
Registrable Securities is declared effective by the SEC, the Company shall
deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities, with copies to the Investor,
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A.
s. At or prior to the date of the first Put Notice (as that term is defined in
the Subscription Agreement) and at such other times as the Holders may
reasonably request, the Company shall cause to be delivered, letters from the
Company's independent certified public accountants (i) addressed to the Holders
that such accountants are independent public accountants within the meaning of
the 1933 Act and the applicable published rules and regulations thereunder, and
(ii) in customary form and covering such financial and accounting matters as are
customarily covered by letters of independent certified public accountants
delivered to underwriters in connection with public offerings.
t. The Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Holders of Registrable Securities pursuant to a
Registration Statement.
4. OBLIGATIONS OF THE HOLDERS.
a. At least five (5) calendar days prior to the first anticipated filing date of
a Registration Statement the Company shall notify each Holder in writing of the
information the Company requires from each such Holder if such Holder elects to
have any of such Holder's Registrable Securities included in such Registration
Statement. It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Holder that such Holder shall furnish in
writing to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall reasonably be required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. Each Holder
covenants and agrees that, in connection with any resale of Registrable
Securities by it pursuant to a Registration Statement, it shall comply with the
"Plan of Distribution" section of the current prospectus relating to such
Registration Statement.
b. Each Holder, by such Holder's acceptance of the Registrable Securities,
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of any Registration Statement
hereunder, unless such Holder has notified the Company in writing of such
Holder's election to exclude all of such Holder's Registrable Securities from
such Registration Statement.
c. Each Holder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e), such Holder will
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immediately discontinue disposition of Registrable Securities pursuant to any
Registration Statement(s) covering such Registrable Securities until such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(f) or the first sentence of 3(e).
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printing and accounting fees, and fees and disbursements of
counsel for the Company shall be paid by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and hereby does,
indemnify, hold harmless and defend each Holder who holds such Registrable
Securities, the directors, officers, partners, employees, agents,
representatives of, and each Person, if any, who controls, any Holder within the
meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act"), (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, attorneys'
fees, amounts paid in settlement or expenses, joint or several (collectively,
"Claims"), incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("Indemnified Damages"), to which any of them
may become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered ("Blue Sky Filing"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which the statements therein were
made, not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Holders and each such controlling
person, promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses
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incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus were timely made available by the Company pursuant to Section 3(c);
(ii) shall not be available to the extent such Claim is based on (a) a failure
of the Holder to deliver or to cause to be delivered the prospectus made
available by the Company or (b) the Indemnified Person's use of an incorrect
prospectus despite being promptly advised in advance by the Company in writing
not to use such incorrect prospectus; and (iii) shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the resale of the Registrable Securities by the Holders pursuant to the
Registration Statement.
b. In connection with any Registration Statement in which a Holder is
participating, each such Holder agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement, each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
or Indemnified Damages to which any of them may become subject, under the 1933
Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages
arise out of or are based upon any Violation, in each case to the extent, and
only to the extent, that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Holder
expressly for use in connection with such Registration Statement; and, subject
to Section 6(c), such Holder will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) and the agreement with respect to contribution contained in Section
7 shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of such Holder, which consent
shall not be unreasonably withheld; provided, further, however, that the Holder
shall be liable under this Section 6(b) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Holder as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the resale of the Registrable Securities by the Holders pursuant to the
Registration Statement. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus were corrected on a timely basis in the
prospectus, as then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified Party under
this Section 6 of notice of the commencement of any action or proceeding
(including any governmental
11
action or proceeding) involving a Claim, such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such counsel shall be selected by Holders holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates, if the Holders are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The Indemnified Party or Indemnified
Person shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the Indemnified Party or Indemnified Person which relates to such action or
claim. The indemnifying party shall keep the Indemnified Party or Indemnified
Person fully appraised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the Indemnified Party or Indemnified Person,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such Claim. Following indemnification
as provided for hereunder, the indemnifying party shall be surrogated to all
rights of the Indemnified Party or Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which indemnification
has been made. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.
d. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or Indemnified Damages are incurred.
e. The indemnity agreements contained herein shall be in addition to (i) any
cause of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
12
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that: (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Holders the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Holders to sell securities of the Company to
the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms are understood
and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents required
of the Company under the 1933 Act and the 1934 Act so long as the Company
remains subject to such requirements (it being understood that nothing herein
shall limit the Company's obligations under Section 4(c) of the Subscription
Agreement) and the filing of such reports and other documents is required for
the applicable provisions of Rule 144; and
c. furnish to the Investor, promptly upon request, (i) a written statement by
the Company that it has complied with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested to
permit the Investor to sell such securities pursuant to Rule 144 without
registration.
9. NO ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall not be assignable.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and Holders who
hold two-thirds (2/3) of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Holder
and the Company. No such amendment shall be effective to
13
the extent that it applies to less than all of the Holders of the Registrable
Securities. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.
11. MISCELLANEOUS.
a. A Person is deemed to be a Holder of Registrable Securities whenever such
Person owns of record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more Persons with
respect to the same Registrable Securities, the Company shall act upon the basis
of instructions, notice or election received from the registered owner of such
Registrable Securities.
b. Any notices, consents, waivers or other communications required or permitted
to be given under the terms of this Agreement must be in writing and will be
deemed to have been delivered (i) upon receipt, when delivered personally; (ii)
upon receipt, when sent by facsimile (provided a confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to the Company:
CAN-CAL Resources, Ltd.
0000 Xxxxxx Xxxx Xxxx
Xxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, President
Telephone: 000-000-0000
Facsimile: 000-000-0000
With a copy to:
The Law Office of Xxxxxxx X. Xxxxxx
0000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx XXX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Investor:
At the address listed in the Questionnaire.
With a copy to:
x/x Xxxxxx X. XxXxxxx, Xxx.
00 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
14
Each party shall provide five (5) business days prior notice to the other
party of any change in address, phone number or facsimile number.
c. Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.
d. The laws of the State of Nevada shall govern all issues concerning the
relative rights of the Company and its stockholders. All other questions shall
be governed by and interpreted in accordance with the laws of the State of New
York without regard to the principles of conflict of laws. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. This Agreement and the Transaction Documents constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein.
f. This Agreement and the Transaction Documents supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.
g. The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
15
j. All consents and other determinations to be made by the Holders pursuant to
this Agreement shall be made, unless otherwise specified in this Agreement, by
Holders holding a majority of the Registrable Securities.
k. The language used in this Agreement will be deemed to be the language chosen
by the parties to express their mutual intent and no rules of strict
construction will be applied against any party.
IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to be duly executed as of the day and year first above written.
CAN-CAL RESOURCES, LTD.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxx
Title: President
DUTCHESS PRIVATE EQUITIES FUND, L.P. BY
DUTCHESS CAPITAL MANAGEMENT, LLC ITS
GENERAL PARTNER
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: A Managing Member
16
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
Date: __________
[TRANSFER AGENT]
Re: CAN-CAL Resources, Ltd.
Ladies and Gentlemen:
We are counsel to CAN-CAL Resources, Ltd., a Nevada corporation (the
"Company"), and have represented the Company in connection with that certain
Subscription Agreement (the "Subscription Agreement") entered into by and among
the Company and _________________________ (the "Investor") pursuant to which the
Company has agreed to issue to the Investor shares of the Company's common
stock, $.001 par value per share (the "Common Stock") on the terms and
conditions set forth in the Subscription Agreement. Pursuant to the Subscription
Agreement, the Company also has entered into a Registration Rights Agreement
with the Investor (the "Registration Rights Agreement") pursuant to which the
Company agreed, among other things, to register the Registrable Securities (as
defined in the Registration Rights Agreement), including the shares of Common
Stock issued or issuable under the Subscription Agreement under the Securities
Act of 1933, as amended (the "1933 Act"). In connection with the Company's
obligations under the Registration Rights Agreement, on ____________ ___, 2002,
the Company filed a Registration Statement on Form S- ___ (File No.
333-________) (the "Registration Statement") with the Securities and Exchange
Commission (the "SEC") relating to the Registrable Securities which names the
Investor as a selling shareholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [enter the time of
effectiveness] on [enter the date of effectiveness] and to the best of our
knowledge, after telephonic inquiry of a member of the SEC's staff, no stop
order suspending its effectiveness has been issued and no proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[Company Counsel]
By: ______________________
cc: [Investor]
17
