Exhibit 4.4
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
November 8, 2006, by and among Aerobic Creations, Inc., a Delaware corporation,
with headquarters located at 000 Xxxxxxxxx, Xxxxxxxxxx, XX 00000 (the
"COMPANY"), and the undersigned buyers (each, a "BUYER", and collectively, the
"BUYERS").
WHEREAS:
A. In connection with the Securities Purchase Agreement (Notes and
Warrants), dated as of November 8, 2006 by and among Maritime Logistics US
Holdings Inc., a Delaware corporation ("MLI"), the Company (pursuant to that
certain Joinder Agreement dated as of the date hereof) and the Buyers (the
"SECURITIES PURCHASE AGREEMENT"), the Company has agreed, upon the terms and
subject to the conditions set forth in the Securities Purchase Agreement, to
issue and sell to each Buyer (i) senior secured convertible notes of the Company
(the "NOTES"), which will, among other things, be convertible into shares of the
Company's common stock, $0.001 par value per share (the "COMMON STOCK", the
shares of Common Stock issuable upon conversion of the Notes, the "CONVERSION
SHARES") in accordance with the terms of the Notes, and (ii) warrants (the
"WARRANTS"), which will be exercisable to purchase shares of Common Stock (the
shares of Common Stock issuable upon exercise of the Warrants, the "WARRANT
SHARES") in accordance with the terms of the Warrants.
B. In order to induce the Buyers to purchase the Notes and its
Warrants pursuant to the Securities Purchase Agreement, the Company has agreed
to provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the "1933 ACT"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Buyers hereby agree as follows:
1. DEFINITIONS.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement. As
used in this Agreement, the following terms shall have the following meanings:
a. "BUSINESS DAY" means any day other than Saturday, Sunday or
any other day on which commercial banks in the City of New York are authorized
or required by law to remain closed.
b. "CLOSING DATE" shall have the meaning set forth in the
Securities Purchase Agreement.
c. "DEMAND REGISTRATION" shall mean a registration required to
be effected by the Company pursuant to Section 2 (e).
d. "DEMAND REGISTRATION STATEMENT" shall mean a registration
statement of the Company which covers those Registrable Securities requested to
be included therein pursuant to the provisions of Section 2(e) and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the prospectus contained
therein, all exhibits thereto and all material incorporated by reference (or
deemed to be incorporated by reference) therein.
e. "EFFECTIVE DATE" means the date the Registration Statement
has been declared effective by the SEC.
f. "EFFECTIVENESS DEADLINE" means the date that is (i) 90 days
after the Closing Date (if the Registration Statement is not reviewed by the
SEC) or (ii) within 150 days after the Closing Date if the Registration
Statement is reviewed by the SEC.
g. "ELIGIBLE MARKET" means the Initial Principal Market, The
New York Stock Exchange, Inc., the American Stock Exchange, The NASDAQ Global
Select Market, The NASDAQ Global Market or The NASDAQ Capital Market.
h. "FILING DEADLINE" means the date that is 60 days after the
Closing Date.
i. "INVESTOR" means a Buyer or any permitted transferee or
assignee thereof to whom a Buyer assigns its rights under this Agreement and who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9 and any transferee or assignee thereof to whom a permitted transferee
or assignee assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9.
j. "KRG ENTITIES" means collectively KRG Capital Fund II,
L.P.; KRG Capital Fund II (PA), L.P.; KRG Capital Fund II (FF), L.P.; and KRG Co
Invest, LLC.
k. "OTHER SECURITIES" means the shares identified as
"Registrable Securities" in the Registration Rights Agreement dated the date
hereof among the Company and the purchasers of the Company's Common Stock named
therein.
l. "PERSON" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
m. "PRINCIPAL MARKET" means, from time to time, the Eligible
Market upon which the Common Stock is admitted or listed and principally trades.
n. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 and the declaration or ordering of effectiveness of such Registration
Statement(s) by the SEC.
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o. "REGISTRABLE SECURITIES" means (i) the Conversion Shares
issued or issuable upon conversion of the Notes, (ii) the Warrant Shares issued
or issuable upon exercise of the Warrants and (iii) any shares of capital stock
of the Company issued or issuable in respect of the Conversion Shares, the
Notes, the Warrant Shares and the Warrants as a result of any stock split, stock
dividend, recapitalization, exchange, merger, consolidation or other
reorganization or similar event or otherwise, without regard to any limitations
on conversions of the Notes or exercises of the Warrants.
p. "REGISTRATION STATEMENT" means a registration statement or
registration statements of the Company filed under the 1933 Act covering the
Registrable Securities.
q. "REQUIRED HOLDERS" means the holders of at least a majority
of the Registrable Securities); provided, that any Registrable Securities that
are held by an Affiliate of the Company shall not be deemed to be outstanding
for purposes of the determination of "Required Holders."
r. "REQUIRED REGISTRATION AMOUNT" for the Registration
Statement means 130% of the sum of (x) the aggregate of the maximum number of
Conversion Shares issued and issuable pursuant to the Notes at the then
applicable Conversion Price as of the Trading Day immediately preceding the
applicable date of determination and, (y) the number of Warrant Shares issued
and issuable pursuant to the Warrants as of the trading day immediately
preceding the applicable date of determination each subject to adjustment as
provided in Sections 2(c) and 2(d) (without regard to any limitations on
conversion of the Notes or exercise of the Warrants).
s. "RULE 415" means Rule 415 promulgated under the 1933 Act or
any successor rule providing for offering securities on a continuous or delayed
basis.
t. "SEC" means the United States Securities and Exchange
Commission.
u. "TRADING DAY" means any day on which the Common Stock is
traded on the Principal Market, or, if the Principal Market is not the principal
trading market for the Common Stock, then on the Eligible Market which is the
principal securities exchange or securities market on which the Common Stock is
then traded; provided that "Trading Day" shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York Time).
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall prepare, and, as
soon as practicable but in no event later than the Filing Deadline, file with
the SEC the Registration Statement on Form S-3 covering the resale of all of the
Registrable Securities (the date of such filing the "FILING DATE"). In the event
that Form S-3 is unavailable for such a registration, the
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Company shall use such other form as is available for such a registration on
another appropriate form reasonably acceptable to the Required Holders, subject
to the provisions of Section 2(h). The Registration Statement prepared pursuant
hereto shall register for resale at least the number of shares of Common Stock
equal to the Required Registration Amount as of the Trading Day immediately
preceding the date the Registration Statement is initially filed with the SEC.
The Registration Statement shall contain (except if otherwise directed by the
Required Holders) the "SELLING STOCKHOLDERS" and "PLAN OF DISTRIBUTION" sections
in substantially the form attached hereto as EXHIBIT B; PROVIDED, HOWEVER, that
each of the "Selling Stockholders" and "Plan of Distribution" sections shall be
amended as necessary to comply with then applicable securities law and
regulation. The Company shall use its best efforts to have the Registration
Statement declared effective by the SEC as soon as practicable, but in no event
later than the Effectiveness Deadline. By 9:30 a.m. on the first Business Day
following the Effective Date, the Company shall file with the SEC in accordance
with Rule 424 under the 1933 Act the final prospectus to be used in connection
with sales pursuant to such Registration Statement.
b. ALLOCATION OF REGISTRABLE SECURITIES. The initial number of
Registrable Securities included in any Registration Statement and any increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such
Investor's Registrable Securities, each transferee shall be allocated a pro rata
portion of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities covered by such Registration Statement
shall be allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement. In no event shall the Company include on any
Registration Statement without the prior written consent of the Required Holders
any securities other than (i) Registrable Securities, (ii) Other Securities,
(iii) Common Stock issuable upon the exercise of warrants issued to Xxxxxx &
Xxxxxxx, LLC as placement agent in respect of the offerings of the Registrable
Securities and Other Securities, (iv) the shares of Common Stock (increased to
reflect the effect of any stock split or decreased to reflect the effect of any
reverse stock split, as applicable) held by those holders of the Company who
held shares of the Company prior to the effectiveness of the Merger (as defined
in the Securities Purchase Agreement), and (v) the shares of Common Stock held
by the persons listed on SCHEDULE 2(B) (the "EXISTING HOLDERS") hereto not to
exceed that number of shares of Common Stock set forth next to the respective
Existing Holder's name on SCHEDULE 2(B) (PROVIDED, however, that such limit
shall be increased to reflect the effect of any stock split and decreased to
reflect the effect of any reverse stock split).
c. SUFFICIENT NUMBER OF SHARES REGISTERED. Subject to Section
2(d), in the event the number of shares available under a Registration Statement
filed pursuant to Section 2(a) is insufficient to cover all of the Registrable
Securities required to be covered by such Registration Statement or an
Investor's allocated portion of the Registrable Securities pursuant to Section
2(b), the Company shall amend the applicable Registration Statement, or file a
new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover at least the Required Registration Amount
as of the Trading Day immediately preceding
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the date of the filing of such amendment or new Registration Statement, in each
case, as soon as practicable, but in any event not later than fifteen (15)
Trading Days after the necessity therefor arises. 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. For purposes of
the foregoing provision, the number of shares available under a Registration
Statement shall be deemed "insufficient to cover all of the Registrable
Securities" if at any time the number of shares of Common Stock available for
resale under the Registration Statement is less than the sum of the number of
(i) the Required Registration Amount, (ii) Other Securities, (iii) Common Stock
issuable upon the exercise of warrants issued to Xxxxxx & Xxxxxxx, LLC as
placement agent in respect of the offerings of the Registrable Securities and
Other Securities, (iv) the shares of Common Stock held by those holders of the
Company who held shares of the Company prior to the effectiveness of the Merger
and (v) the shares of Common Stock held by the Existing Holders. The calculation
set forth in the foregoing sentence shall be made without regard to any
limitations on the conversion of the Notes or the exercise of the Warrants and
such calculation shall assume that the Notes are then convertible into shares of
Common Stock at the then prevailing Conversion Rate (as defined in the Notes)
and that the Warrants are then exercisable for shares of Common Stock at the
then prevailing Exercise Price (as defined in the Warrants).
d. MANDATED REDUCTION OF SECURITIES REGISTERED. If the SEC
requires that the number of shares of Common Stock to be registered for resale
pursuant to the Registration Statement be reduced, such reduction shall be
accomplished as follows:
First, the number of shares of Common Stock held by the Existing Holders
other than the KRG Entities included in such Registration Statement shall
be reduced (such reduction allocated pro rata among such Existing Holders)
until the reduction required by the SEC is effected;
Second, if the exclusion of the number of all shares of Common Stock held
by the Existing Holders is insufficient to meet the reduction required by
the SEC, then (i) the number of shares of Common Stock held by R&R Biotech
Partners, LLC prior to the effectiveness of the Merger after giving effect
to the Reverse Split, (ii) 130% of the number of shares of Common Stock
issuable upon the exercise of warrants issued to Xxxxxx & Xxxxxxx, LLC as
placement agent in respect of the offerings of the Registrable Securities
and Other Securities and (iii) securities held by the KRG Entities
included in such Registration Statement shall be reduced (such reduction
allocated pro rata among those holders who held shares of the Company
prior to the effectiveness of the Merger, the KRG Entities and Xxxxxx &
Xxxxxxx, LLC) until the reduction required by the SEC is effected;
Third, if the exclusion of the sum of (i) the number of shares of Common
Stock held by R&R Biotech Partners, LLC prior to the effectiveness of the
Merger after giving effect to the Reverse Split, (ii) 130% of the number
of shares of Common Stock issuable upon the exercise of warrants issued to
Xxxxxx & Xxxxxxx, LLC as placement agent in respect of the offerings of
the Registrable Securities and Other Securities and (iii) the securities
held by KRG is insufficient to meet the reduction required by the SEC,
then 130% of the number of shares of Common Stock issuable upon the
exercise of Warrants and the Common Warrants included in such Registration
Statement shall be reduced (such
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reduction allocated pro rata among the holders thereof) until the
reduction required by the SEC is effected.
e. DEMAND REGISTRATION. Subject to Section 2(f), at any time
or from time to time after the six-month anniversary of the Effectiveness Date,
any Holder whose Registrable Securities were excluded from the Registration
Statement in accordance with the provisions of Section 2(d) shall have the right
to request in writing that the Company register all or part of such Holder's
previously excluded Registrable Securities (a "REQUEST") (which Request shall
specify the amount of Registrable Securities intended to be disposed of by such
Holder and the intended method of disposition thereof) by filing with the SEC a
Demand Registration Statement. In the event that Form S-3 is unavailable for
such a registration, the Company shall use such other form as is available for
such a registration on another appropriate form reasonably acceptable to the
requesting Holder(s), subject to the provisions of Section 2(h). As promptly as
practicable, but no later than 10 days after receipt of a Request, the Company
shall give written notice of such requested registration to all Holders of
Registrable Securities which were previously excluded. Subject to Section 2(f),
the Company shall include in a Demand Registration (i) the Registrable
Securities intended to be disposed of by the requesting Holder(s) and (ii) the
Registrable Securities intended to be disposed of by any other Holder which
shall have made a written request (which request shall specify the amount of
Registrable Securities to be registered and the intended method of disposition
thereof) to the Company for inclusion thereof in such registration within 20
days after the receipt of such written notice from the Company. The Company
shall, promptly, and in any event within 40 days following a Request, file with
the SEC a Demand Registration Statement providing for the registration under the
Securities Act of the Registrable Securities which the Company has been so
requested to register in accordance herewith by all such Holders, to the extent
necessary to permit the disposition of such Registrable Securities so to be
registered in accordance with the intended methods of disposition thereof
specified in such Request or further requests. The Company shall use its best
efforts to have such Demand Registration Statement declared effective by the SEC
not later than 45 days after a Request and to keep such Demand Registration
Statement continuously effective for the period specified in Section 2(h).
f. LIMITATIONS ON DEMAND REGISTRATIONS. The rights of Holders
of Registrable Securities to request Demand Registrations pursuant to Section
2(d) are subject to the following limitations: (i) the Company shall not be
obligated to effect a Demand Registration unless 120 days have elapsed since the
last day that a prior Demand Registration Statement remained effective (or, if
earlier, the day on which the last of the Registrable Securities covered by such
prior Demand Registration Statement was sold), and (ii) in no event shall the
Company be required to pay Registration Expenses of more than four Demand
Registrations. The Company shall not be required to file a Demand Registration
Statement unless the aggregate number of shares of Common Stock requested to be
registered for resale thereby shall be at least the lesser of (i) 500,000 shares
of Common Stock (subject to adjustment for stock splits, stock dividends and the
like) and (ii) the Registerable Securities, Other Securities, Common Stock
issuable upon the exercise of warrants issued to Xxxxxx & Xxxxxxx, LLC as
placement agent in respect of the offerings of the Registrable Securities and
Other Securities, the shares of Common Stock held by those holders of the
Company who held shares of the Company prior to the effectiveness of the Merger
and the shares of Common Stock held by the Existing Holders not theretofore
registered for resale on a Registration Statement or Demand Registration
Statement.
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g. LEGAL COUNSEL. Subject to Section 5 hereof, the Holders
shall have the right to select one legal counsel to review and oversee for such
Holders any registrations pursuant to this Section 2 ("LEGAL COUNSEL"), which
shall be Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx LLP or such other counsel as
thereafter designated by (i) the Required Holders in the case of the
Registration Statement and (ii) the Holders of the majority of requesting
Holder(s) in the case of a Demand Registration Statement. The Company and Legal
Counsel shall reasonably cooperate with each other in performing the Company's
obligations under this Agreement.
h. INELIGIBILITY FOR FORM S-3. In the event that Form S-3 is
not available for the registration of the resale of Registrable Securities
hereunder, the Company (unless at such time the Company is eligible to register
its Common Stock for resale on Form SB-2, and the Registrable Securities are
duly registered for resale on Form SB-2) shall (i) register the resale of the
Registrable Securities on another appropriate form reasonably acceptable to the
Required Holders and (ii) undertake to promptly register the Registrable
Securities on Form S-3 if such form becomes available to the Company during the
two year period following the Closing Date, provided that the Company shall
maintain the effectiveness of the Registration Statement then in effect until
such time as a Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the SEC.
i. EFFECT OF FAILURE TO FILE AND OBTAIN AND MAINTAIN
EFFECTIVENESS OF REGISTRATION STATEMENT. If (i) a Registration Statement
covering all of the Registrable Securities required to be covered thereby and
required to be filed by the Company pursuant to this Agreement is (A) not filed
with the SEC on or before the Filing Deadline (a "FILING FAILURE") or (B) not,
subject to the reductions provided for by Section 2(d), declared effective by
the SEC on or before the Effectiveness Deadline (an "EFFECTIVENESS FAILURE") or
(ii) on any day after the Effective Date sales of all of the Registrable
Securities required to be included on such Registration Statement or Demand
Registration Statement, as applicable, cannot be made (other than (A) during an
Allowable Grace Period (as defined in Section 3(r)) or (B) during any period in
which the Company is diligently pursuing the effectiveness under the 1933 Act of
any amendment to such Registration Statement or Demand Registration Statement (a
"MAINTENANCE GRACE PERIOD")) pursuant to such Registration Statement or Demand
Registration Statement (including, without limitation, because of a failure to
keep such Registration Statement, subject to the reductions provided for by
Section 2(d), or Demand Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to such Registration
Statement or Demand Registration Statement, as applicable, to register a
sufficient number of shares of Common Stock or to maintain the listing of such
shares of Common Stock) (a "MAINTENANCE FAILURE") then, as partial relief for
the damages to any holder by reason of any such delay in or reduction of its
ability to sell the underlying shares of Common Stock (which remedy shall not be
exclusive of any other remedies available at law or in equity), the Company
shall pay to each holder of Registrable Securities relating to such Registration
Statement, or Demand Registration Statement, as applicable, an amount in cash,
equal to one percent (1.0%) of the aggregate Purchase Price (as such term is
defined in the Securities Purchase Agreement) of such Investor's Registrable
Securities included (or required to be included) in such Registration Statement
(or, in the case of a Maintenance Failure, Demand Registration Statement, as
applicable) on each of the following dates: (i) the thirtieth day (prorated for
periods totaling less than thirty (30) days) after any Filing Failure; (ii) the
thirtieth day (prorated for periods totaling less than thirty (30) days) after
any Effectiveness Failure; and (iii) the thirtieth day (prorated for
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periods totaling less than thirty (30) days) after any Maintenance Failure is
cured and an amount in cash equal to two percent (2.0%) of the aggregate
Purchase Price of such Investor's Registrable Securities included (or required
to be included) in such Registration Statement (or, in the case of a Maintenance
Failure, Demand Registration Statement, as applicable) on each of the following
dates: (i) on every thirtieth day (prorated for periods totaling less than
thirty (30) days) starting with the sixtieth day after the Filing Deadline until
such Filing Failure is cured; (ii) on every thirtieth day (prorated for periods
totaling less than thirty (30) days) starting with the sixtieth day after the
Effectiveness Deadline until such Effectiveness Failure is cured; and (iii) on
every thirtieth day (prorated for periods totaling less than thirty (30) days)
after the occurrence of a Maintenance Failure until such Maintenance Failure is
cured. The payments to which a holder shall be entitled pursuant to this Section
2(i) are referred to herein as "REGISTRATION DELAY PAYMENTS." Registration Delay
Payments shall be paid on the earlier of (I) the last day of the calendar month
during which such Registration Delay Payments are incurred and (II) the third
Business Day after the event or failure giving rise to the Registration Delay
Payments is cured. In the event the Company fails to make Registration Delay
Payments in a timely manner, such Registration Delay Payments shall bear
interest at the rate of one and one-half percent (1.5%) per month (prorated for
partial months) until paid in full. Notwithstanding anything herein or in the
Securities Purchase Agreement to the contrary, (i) no Registration Delay
Payments shall be due and payable in respect of the Warrants or the Warrant
Shares, (ii) in no event shall the aggregate amount of Registration Delay
Payments payable to any Investor (other than Registration Delay Payments payable
pursuant to events that are within the control of the Company or MLI) exceed, in
the aggregate, 10% of the aggregate Purchase Price of the Notes, and (iii) in no
case shall Registration Delay Payments be payable from and after the date the
Conversion Shares are eligible for sale pursuant to Rule 144(k) under the 1933
Act.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to file a Registration
Statement or Demand Registration Statement with the SEC pursuant to Section
2(a), 2(c) 2(e) or 2(h), 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, pursuant thereto, the Company shall have the
following obligations:
a. The Company shall submit to the SEC, within two (2)
Business Days after the Company learns that no review of a particular
Registration Statement or Demand Registration Statement, as applicable, will be
made by the staff of the SEC or that the staff of the SEC has no further
comments on a particular Registration Statement or Demand Registration
Statement, as the case may be, a request for acceleration of effectiveness of
such Registration Statement or Demand Registration Statement, as applicable to a
time and date not later than 48 hours after the submission of such request. The
Company shall keep each Registration Statement and Demand Registration Statement
effective pursuant to Rule 415 at all times until the earliest of (i) the date
as of which the Investors may sell all of the Registrable Securities covered by
such Registration Statement without restriction pursuant to Rule 144(k) (or
successor thereto) promulgated under the 1933 Act, (ii) the third anniversary
hereof, or (iii) the date on which the Investors shall have sold all of the
Registrable Securities covered by such Registration Statement or Demand
Registration Statement, as applicable (the "REGISTRATION PERIOD"). Each
Registration Statement and each Demand Registration Statement (including any
amendments or
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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 the case of
prospectuses, in the light of the circumstances in which they were made) not
misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement or Demand Registration Statement, as applicable, and the
prospectus used in connection with such Registration Statement or Demand
Registration Statement, as applicable, which prospectus is to be filed pursuant
to Rule 424 promulgated under the 1933 Act, as may be necessary to keep such
Registration Statement or Demand Registration Statement, as applicable,
effective at all times during the applicable Registration Period, and, during
such period, comply with the provisions of the 1933 Act in respect of the
disposition of all Registrable Securities of the Company covered by such
Registration Statement or Demand Registration Statement, as applicable, until
such time as all of such Registrable Securities shall have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in such Registration Statement. In the case of amendments
and supplements to a Registration Statement which are required to be filed
pursuant to this Agreement (including pursuant to this Section 3(b)) by reason
of the Company filing a report on Form 10-Q, Form 10-QSB, Form 10-K, Form 10-KSB
or any analogous report under the Securities Exchange Act of 1934, as amended
(the "1934 ACT"), the Company shall have incorporated such report by reference
into such Registration Statement, if applicable, or shall file such amendments
or supplements with the SEC on the same day on which the 1934 Act report is
filed which created the requirement for the Company to amend or supplement such
Registration Statement or Demand Registration Statement, as applicable.
c. The Company shall (A) permit Legal Counsel to review and
comment upon (i) a Registration Statement or Demand Registration Statement, as
applicable, at least five (5) Business Days prior to its filing with the SEC and
(ii) all amendments and supplements to all Registration Statements or Demand
Registration Statements, as applicable, (except for Annual Reports on Form 10-K
and Form 10-KSB, and Reports on Form 10-Q and Form 10-QSB and any similar or
successor reports) within a reasonable number of days prior to their filing with
the SEC, and (B) not file any Registration Statement or Demand Registration
Statement or amendment or supplement thereto in a form to which Legal Counsel
reasonably objects. The Company shall not submit a request for acceleration of
the effectiveness of a Registration Statement or Demand Registration Statement,
as applicable, or any amendment or supplement thereto without prior consent of
Legal Counsel, which consent shall not be unreasonably withheld. The Company
shall furnish to Legal Counsel, without charge, (i) copies of any correspondence
from the SEC or the staff of the SEC to the Company or its representatives
relating to any Registration Statement or Demand Registration Statement, as
applicable, (ii) promptly after the same is prepared and filed with the SEC, one
copy of any Registration Statement or Demand Registration Statement and any
amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, if requested by an Investor and not
available on the XXXXX system, and all exhibits and (iii) upon the effectiveness
of any Registration Statement or Demand Registration Statement, as applicable,
one copy of the prospectus included in such Registration Statement or Demand
Registration Statement and all amendments and supplements thereto. The Company
shall reasonably
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cooperate with Legal Counsel in performing the Company's obligations pursuant to
this Section 3.
d. The Company shall furnish to such Investor whose
Registrable Securities are included in any Registration Statement or Demand
Registration Statement, as applicable, without charge, (i) promptly after the
same is prepared and filed with the SEC, at least one copy of such Registration
Statement or Demand Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference that have not been made available on the XXXXX system, all exhibits
and each preliminary prospectus, (ii) upon the effectiveness of any Registration
Statement or Demand Registration Statement, as applicable, ten (10) copies of
the prospectus included in such Registration Statement or Demand Registration
Statement and all amendments and supplements thereto (or such other number of
copies as such Investor may reasonably request) and (iii) such other documents,
including copies of any preliminary or final prospectus, as such Investor may
reasonably request from time to time in order to facilitate the disposition of
the Registrable Securities owned by such Investor.
e. The Company shall use its best efforts to (i) register and
qualify, unless an exemption from registration and qualification applies, the
resale by Investors of the Registrable Securities covered by a Registration
Statement or Demand Registration Statement, as applicable, under such other
securities or "blue sky" laws of all applicable jurisdictions in the United
States, (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 applicable Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in effect at all
times during the applicable 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(e), (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 Legal Counsel and each Investor
who holds Registrable Securities of the receipt by the Company of any
notification in respect of 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 notice of the
initiation or threatening of any proceeding for such purpose.
f. The Company shall notify Legal Counsel and each Investor in
writing of the happening of any event, as promptly as practicable, and in any
event within forty-eight (48) hours after becoming aware (provided that if the
time of awareness is not a Trading Day, such forty-eight hour period shall start
at the beginning of the next Trading Day) of such event, as a result of which
the prospectus included in a Registration Statement or Demand Registration
Statement, as applicable, 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 the light of the circumstances
under which they were made, not misleading (provided that in no event shall such
notice contain any material, nonpublic information), and, subject to Section
3(r), promptly prepare a supplement or amendment to such Registration Statement
or Demand Registration
10
Statement to correct such untrue statement or omission, and deliver ten (10)
copies of such supplement or amendment to each investor and Legal Counsel (or
such other number of copies as such Investor or Legal Counsel may reasonably
request). The Company shall also promptly notify Legal Counsel and each Investor
in writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a Registration Statement or Demand
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to Legal Counsel and each
Investor by facsimile within one Business Day of such effectiveness and by
overnight mail), (ii) of any request by the SEC for amendments or supplements to
a Registration Statement or Demand Registration Statement or related prospectus
or related information, and (iii) of the Company's reasonable determination that
a post-effective amendment to a Registration Statement or Demand Registration
Statement, as applicable, would be appropriate.
g. 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 Demand Registration Statement, as applicable, 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 Legal Counsel and each Investor who holds Registrable Securities being
sold of the issuance of such order and the resolution thereof or its receipt of
notice of the initiation or threat of any proceeding for such purpose.
h. At the reasonable request of any Investor, the Company
shall furnish to such Investor, on the date of the effectiveness of the
Registration Statement or Demand Registration Statement, as applicable, and
thereafter from time to time on such dates as an Investor may reasonably request
(i) a letter, dated such date, from the Company's independent certified public
accountants in respect of the numeric values in the Registration Statement or
Demand Registration Statement, as applicable, which are taken from the audited
or reviewed financial statements of the Company (and its Subsidiaries on a
consolidated basis), addressed to the Investors, and (ii) an opinion, dated as
of such date, of counsel representing the Company for purposes of such
Registration Statement or Demand Registration Statement, as applicable, in form,
scope and substance as is customarily given in an underwritten public offering
and filed with the Registration Statement, addressed to the Investors.
i. Upon the written request of any Investor in connection with
any Investor's due diligence requirements, if any, the Company shall make
available for inspection by (i) such Investor, (ii) Legal Counsel and (iii) one
firm of accountants or other agents retained by all such Investors
(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 agree in writing to hold in strict confidence and shall not make any
disclosure (except to an Investor) 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
11
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 of the terms. Each Investor 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. Nothing herein (or in any other
confidentiality agreement between the Company and any Investor) shall be deemed
to limit the Investors' ability to sell Registrable Securities in a manner which
is otherwise consistent with applicable laws and regulations.
j. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor 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 or Demand
Registration Statement, as applicable, (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 an Investor is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt written notice to such Investor and allow such Investor, at
the Investor's expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, such information.
k. The Company shall use its best efforts either to (i) cause
all of the Registrable Securities covered by a Registration Statement or Demand
Registration Statement, as applicable, to be listed on each securities exchange
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 (ii) if, despite the Company's best efforts
to satisfy, the preceding clause (i) the Company is unsuccessful in satisfying
the preceding clause (i), to maintain the inclusion for quotation on the
National Association of Securities Dealers Inc.'s OTC Bulletin Board or the
American Stock Exchange for such Registrable Securities and, without limiting
the generality of the foregoing, to use its best efforts to arrange for at least
two market makers to register with the National Association of Securities
Dealers, Inc. as such in respect of 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 Investors who hold
Registrable Securities being offered and, to the extent applicable, facilitate
the timely preparation and delivery of certificates 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
Investors may reasonably request and registered in such names as the Investors
may request.
m. If requested by an Investor, the Company shall (i) as soon
as practicable incorporate in a prospectus supplement or post-effective
amendment such
12
information as an Investor reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without
limitation, information in respect of the number of Registrable Securities being
offered or sold, the purchase price being paid therefor and any other terms of
the offering of the Registrable Securities to be sold in such offering; (ii) as
soon as practicable make all required filings of such prospectus supplement or
post-effective amendment after being notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment; and (iii) as soon as
practicable, supplement or make amendments to any Registration Statement or
Demand Registration Statement, as applicable, if reasonably requested by an
Investor holding any Registrable Securities.
n. The Company shall use its best efforts to cause the
Registrable Securities covered by a Registration Statement or Demand
Registration Statement, as applicable, 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.
o. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with, and in the manner provided by, 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 a Registration
Statement or Demand Registration Statement, as applicable.
p. NASD RULE 2710 FILING; BROKER COMPENSATION. The Company
shall effect a filing in respect of the public offering contemplated by the
Registration Statement (an "ISSUER FILING") with the National Association of
Securities Dealers, Inc. ("NASD") Corporate Financing Department pursuant to
NASD Rule 2710 (b)(10)(A)(i) within one Trading Day of the date that the
Registration Statement is first filed with the Commission and pay the filing fee
required by such Issuer Filing. The Company shall use commercially reasonable
efforts to pursue the Issuer Filing until the NASD issues a letter confirming
that it does not object to the terms of the offering contemplated by the
Registration Statement. The Company shall otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC in connection with
any registration.
q. Within two (2) Business Days after a Registration Statement
or Demand Registration Statement, as applicable, which covers Registrable
Securities is ordered 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 Investors whose Registrable
Securities are included in such Registration Statement or Demand Registration
Statement, as applicable) confirmation that such Registration Statement or
Demand Registration Statement, as applicable, has been declared effective by the
SEC in the form attached hereto as EXHIBIT A.
r. Notwithstanding anything to the contrary herein, at any
time after the Effective Date, the Company may delay the disclosure of material,
non-public information concerning the Company the disclosure of which at the
time is not, in the good faith opinion of the Board of Directors of the Company
and its counsel, in the best interest of the Company and, in the opinion of
counsel to the Company, otherwise required (a "GRACE PERIOD"); provided that
13
the Company shall promptly (i) notify the Investors in writing of the existence
of material, non-public information giving rise to a Grace Period in conformity
with the provisions of this Section 3(r) (provided that in each notice the
Company will not disclose the content of such material, non-public information
to the Investors) and the date on which the Grace Period will begin, and (ii)
notify the Investors in writing of the date on which the Grace Period ends; and,
provided further, that no Grace Period shall exceed ten (10) consecutive days
and during any three hundred sixty five (365) day period there shall be no more
than three such Grace Periods and the first day of any Grace Period must be at
least five (5) Trading Days after the last day of any prior Grace Period (each,
an "ALLOWABLE GRACE PERIOD"). For purposes of determining the length of a Grace
Period above, the Grace Period shall begin on and include the date the Investors
receive the notice referred to in clause (i) and shall end on and include the
later of the date the Investors receive the notice referred to in clause (ii)
and the date referred to in such notice. The provisions of Section 3(g) hereof
shall not be applicable during the period of any Allowable Grace Period. Upon
expiration of the Grace Period, the Company shall again be bound by the first
sentence of Section 3(f) in respect of the information giving rise thereto
unless such material, non-public information is no longer applicable. Subject to
compliance with applicable securities laws, notwithstanding anything else to the
contrary, the Company shall cause its transfer agent to deliver unlegended
shares of Common Stock to a transferee of an Investor in accordance with the
terms of the Securities Purchase Agreement, and delivered a copy of the
prospectus included as part of the applicable Registration Statement (unless an
exemption from such prospectus delivery requirement exists), prior to the
Investor's receipt of the notice of a Grace Period and for which the Investor
has not yet settled.
s. The Company shall use its best efforts to maintain the
eligibility of its registration statement(s) on Form SB-2, or S-3, as
applicable, until the earliest of (i) the date as of which the Investors may
sell all of the Registrable Securities covered by such Registration Statement
without restriction pursuant to Rule 144(k) (or successor thereto) promulgated
under the 1933 Act, (ii) the third anniversary hereof, or (iii) the date on
which the Investors shall have sold all of the Registrable Securities covered by
such Registration Statement or Demand Registration Statement, as applicable.
4. OBLIGATIONS OF THE INVESTORS.
a. At least five (5) Business Days prior to the first
anticipated filing date of a Registration Statement or Demand Registration
Statement, as applicable, the Company shall notify each Investor in writing of
the information the Company requires from each such Investor if such Investor
elects to have any of such Investor's Registrable Securities included in such
Registration Statement or Demand Registration Statement, if applicable to such
Investor pursuant to Section 2(e). It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement in respect of the Registrable Securities of a particular Investor that
such Investor shall furnish 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 be reasonably required to effect
the effectiveness of the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.
14
b. Each Investor, by such Investor'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 Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
or Demand Registration Statement(s), as applicable, covering such Registrable
Securities until such Investor's receipt of copies of the supplemented or
amended prospectus contemplated by Section 3(g) or the first sentence of 3(f)
has been filed with the SEC or receipt of notice that no supplement or amendment
is required. Subject to compliance with applicable securities laws,
notwithstanding anything else to the contrary, the Company shall cause its
transfer agent to deliver unlegended shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Securities Purchase Agreement if
requested by such Investor prior to the Investor's receipt of a notice from the
Company of the happening of any event of the kind described in Section 3(g) or
the first sentence of 3(f) and as to the sale of which the Investor has not yet
settled.
d. Each Investor covenants and agrees that it will comply with
the prospectus delivery requirements of the 1933 Act as applicable to it or an
exemption therefrom in connection with sales of Registrable Securities pursuant
to the Registration Statement or Demand Registration Statement, as applicable.
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, printers and accounting fees, and fees and
disbursements of counsel for the Company, shall be paid by the Company. The
Company shall also reimburse the Investors for the fees and disbursements of
Legal Counsel in connection with registration, filing or qualification pursuant
to Sections 2 and 3 of this Agreement which amount shall be limited to $35,000.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement or Demand Registration Statement, as applicable, under
this Agreement:
a. To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Investor, the
directors, officers, members, partners, employees, agents, representatives of,
and each Person, if any, who controls any Investor within the meaning of the
1933 Act or the 1934 Act (each, an "INDEMNIFIED PERSON"), against any losses,
claims, damages, liabilities, judgments, fines, penalties, charges, costs,
reasonable attorneys' fees, amounts paid in settlement or expenses, joint or
several, (collectively, "CLAIMS") incurred in investigating, preparing or
defending any action, claim, suit,
15
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 Demand 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 not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement or Demand Registration Statement, as applicable, or 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 the light of the circumstances under which the statements therein
were made, not misleading, (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 or Demand Registration Statement, as applicable, or (iv)
any violation of this Agreement (the matters in the foregoing clauses (i)
through (iv) being, collectively, "VIOLATIONS"). Subject to Section 6(c), the
Company shall reimburse the Indemnified Persons, promptly as such expenses are
incurred and are due and payable, for reasonable legal fees or other reasonable
expenses 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 by an Indemnified Person 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 such Indemnified Person for such Indemnified Person expressly
for use in connection with the preparation of the Registration Statement or
Demand Registration Statement or any such amendment thereof or supplement
thereto if the prospectus contained therein was timely made available by the
Company to such Indemnified Person and (ii) 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 or
delayed. 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 transfer of the Registrable Securities by the Investors pursuant to Section
9.
b. In connection with any Registration Statement or Demand
Registration Statement, as applicable, in which an Investor is participating,
each such Investor 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 or Demand Registration Statement, as applicable, and each
Person, if any, who controls the Company within the meaning of the 1933 Act or
the 1934 Act (each, 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
16
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 Investor
expressly for use in connection with such Registration Statement or Demand
Registration Statement, as applicable; and, subject to Section 6(c), such
Investor will reimburse any legal or other expenses reasonably incurred by an
Indemnified Party in connection with investigating or defending any such Claim;
PROVIDED, HOWEVER, that the indemnity agreement contained in this Section 6(b)
and the agreement in respect of 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 Investor, which consent shall not be
unreasonably withheld or delayed; PROVIDED, FURTHER, HOWEVER, that the Investor
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 Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement or Demand Registration Statement, as applicable. 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 transfer of the
Registrable Securities by the Investors pursuant to Section 9.
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 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 of not more than one counsel for such
Indemnified Person or Indemnified Party 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. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least a majority in
interest of the Registrable Securities included in the Registration Statement or
Demand Registration Statement, as applicable, to which the Claim relates. 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 reasonably apprised at
all times as to the status of the defense or any settlement negotiations in
respect thereof. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its prior written consent;
PROVIDED, HOWEVER, that the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall, without the prior
written 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
17
Indemnified Party or Indemnified Person of a release from all liability in
respect to such Claim or litigation, and such settlement shall not include any
admission as to fault on the part of the Indemnified Party. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person in
respect of 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 materially 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.
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 in respect of any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; PROVIDED, HOWEVER, that:
(i) no Person involved in the sale of Registrable Securities, which Person is
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 0000 Xxx) in connection with such sale, shall be entitled to contribution
from any Person involved in such sale of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (ii) 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 pursuant to
such Registration Statement or Demand Registration Statement, as applicable.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors 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 Investors 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 and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and
18
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company, if true, 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 Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of such Investor's
Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee and (b) the securities in respect of which such registration rights are
being transferred or assigned; (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act or applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence, the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein; and (v)
such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement.
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 the Required Holders. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company. No such
amendment shall be effective to 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. The provisions of this Agreement shall apply to the full
extent set forth herein in respect of (i) the shares of Common Stock, (ii) any
and all shares of voting common stock of the Company into which the shares of
Common Stock are converted, exchanged or substituted in any recapitalization or
other capital reorganization by the Company and (iii) any and all equity
securities of the Company or any successor or assign of the Company (whether by
merger, consolidation, sale of assets or otherwise) which may be issued in
respect of, in conversion of, in exchange for or in substitution of, the shares
of Common Stock and shall be appropriately adjusted for any stock dividends,
splits, reverse splits (other than the Reverse Split as defined in the
Securities Purchase Agreement), combinations, recapitalizations and the like
occurring after the date hereof. The Company shall not enter into an agreement
in respect of a Fundamental Transaction (as defined in the Notes) which does not
provide that the Successor
19
Entity (as defined in the Notes), if any, shall assume the obligations set forth
herein or enter into a new registration rights agreement with the Investors on
terms substantially the same as those remaining under this Agreement as a
condition of any such transaction.
b. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons in respect of the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the record owner of such Registrable Securities.
c. 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 provided same is on a Business Day and, if not, on the next
Business Day; (ii) upon receipt, when sent by facsimile (provided confirmation
of transmission is mechanically or electronically generated and kept on file by
the sending party) provided same is on a Business Day and, if not, on the next
Business Day; (iii) one (1) Business Day after deposit with an overnight courier
service, in each case properly addressed to the party to receive the same; or
(iv) if sent by certified mail, return receipt requested, when received or three
(3) days after deposited in the mails, whichever occurs first. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Aerobic Creations, Inc.
000 Xxxxxxxxx
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxxx
with a copy to:
Xxxxx Xxxxxxx Berlack Israels LLP
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx XxXxxxxxx, Esq.
Xxxx X. Xxxxxxx, Xx., Esq.
If to an Investor, to its address and facsimile number set forth in the records
of the Company or the Transfer Agent, as applicable, with copies to such Buyer's
representatives as set forth on the Schedule of Buyers,
with a copy (for informational purposes) to:
20
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by a courier or overnight courier service shall be rebuttable evidence
of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.
d. 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.
e. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by the internal laws of
the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of New York. Each party hereby irrevocably submits to the
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. The Company hereby appoints Corporation
Service Company, as its agent for service of process in New York. 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.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
21
f. This Agreement supersedes all other prior oral or written
agreements between the Company, their affiliates and Persons acting on their
behalf in respect of the matters discussed herein, and this Agreement, the
Transaction Documents and the instruments referenced herein contain the entire
understanding of the parties in respect of the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking in respect of such matters. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company, and the
Required Holders, and any amendment to this Agreement made in conformity with
the provisions of this Section 11(f) shall be binding on all Buyers and holders
of Securities as applicable. No provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought. No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the applicable Securities then outstanding. 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 the Transaction Documents unless the
same consideration also is offered to all of the parties to the Transaction
Documents, holders of Notes or holders of the Warrants, as the case may be. The
Company has not, directly or indirectly, made any agreements with any Buyers
relating to the terms or conditions of the transactions contemplated by the
Transaction Documents except as set forth in the Transaction Documents. Without
limiting the foregoing, the Company confirms that, except as set forth in this
Agreement and the applicable Transaction Documents, no Buyer has made any
commitment or promise or has any other obligation to provide any financing to
the Company or otherwise.
g. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.
h. The headings in this Agreement are for convenience of reference
only and shall not form a part of, or affect the interpretation of this
Agreement.
i. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
j. 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 any 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.
k. All consents and other determinations required to be made by the
Investors pursuant to this Agreement shall be made, unless otherwise specified
in this Agreement, by the Required Holders, determined as if all of the (i)
Notes held by Investors were converted into, and (ii) Warrants held by Investors
then outstanding were exercised for, Registrable Securities without regard to
any limitation on conversion of the Notes or exercise of the Warrants.
22
l. 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.
m. This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person except
to the extent set forth in Section 6.
n. The obligations of each Investor hereunder are several and not
joint with the obligations of any other Investor, and no provision of this
Agreement is intended to confer any obligations on any Investor vis-a-vis any
other Investor. Nothing contained herein, and no action taken by any Investor
pursuant hereto, shall be deemed to constitute the Investors as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group in
respect of such obligations or the transactions contemplated herein.
o. This Agreement and each of the provisions hereof shall be subject
to the Intercreditor Agreement
* * * * * *
23
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.
COMPANY:
AEROBIC CREATIONS, INC.
By: _________________________________
Name:
Title:
[Signature Pages of Buyers Follow]
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.
BUYERS:
SILVER OAK CAPITAL, L.L.C.
By: _________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.
BUYERS:
[BUYER]
By: _________________________________
Name:
Title:
SCHEDULE OF BUYERS
BUYER'S ADDRESS BUYER'S REPRESENTATIVE'S ADDRESS
BUYER AND FACSIMILE NUMBER AND FACSIMILE NUMBER
Silver Oak Capital, L.L.C. [ ]
Attention: XXXX, WEISS, RIFKIND, XXXXXXX &
Facsimilie: XXXXXXXX LLP
Telephone: 1285 Avenue of the Americas | New
Residence: Xxxx, XX 00000-0000
Attn: Xxxx Xxxx
Alexandra Global Master Fund LTD c/o Alexandra Investment Management, LLC
000 Xxxxx Xxxxxx,
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Dov Gal
Xxxxxxx Xxxxxxxxx
Facsimilie:
Telephone:
Residence:
Bay Harbour Management 000 Xxxxx Xxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
Xxxxxx Xxx Xxxx
Facsimilie:
Telephone:
Residence:
CAMOFI Master LDC c/o Centrecourt Asset Management LLC
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
Facsimilie:
Telephone:
Residence:
Diamond Opportunity Fund, LLC 000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Facsimilie:
Telephone:
Residence:
Evolution Master Fund LTD SPC, c/o Evolution Capital Management, LLC
Segregated Portfolio M 0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Facsimilie:
Telephone:
Residence:
Harvest Capital, LP Xxxxxxxx X. Xxxxxxx
c/o Harvest Management LLC
000 Xxxxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention:
Facsimilie:
Telephone:
Residence:
Harvest Offshore Investors, Ltd. c/o Harvest Management LLC
000 Xxxxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxxx
Facsimilie:
Telephone:
Residence:
TE Harvest Portfolio, Ltd. c/o Harvest Management LLC
000 Xxxxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxxx
Facsimilie:
Telephone:
Residence:
JMG Capital Partners, LP 00000 Xxxxxxxx Xxxx,
Xxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
JMG Triton Offshore Fund, Ltd Xxxxxxx Xxx
Road Town Tortola BVI
00000 Xxxxxxxx Xxxx, Xxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Facsimilie:
Telephone:
Residence:
Shoshone Partners, L.P. 000 Xxxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxx
Xxx Xxxxx-Xxxxxxxx
Xxxxxxx Xxxxxxxx
Xxxxx Xxxxx
Facsimilie:
Telephone:
Residence:
Xxxxx Partners, L.P. 000 Xxxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxx
Xxx Xxxxx-Xxxxxxxx
Xxxxxxx Xxxxxxxx
Xxxxx Xxxxx
Facsimilie:
Telephone:
Residence:
Finderne LLC 000 Xxxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxx
Xxx Xxxxx-Xxxxxxxx
Xxxxxxx Xxxxxxxx
Xxxxx Xxxxx
Facsimilie:
Telephone:
Residence:
Mulsanne Partners, L.P. 000 Xxxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxx
Xxx Xxxxx-Xxxxxxxx
Xxxxxxx Xxxxxxxx
Xxxxx Xxxxx
Facsimilie:
Telephone:
Residence:
Matterhorn Offshore Fund Ltd. 000 Xxxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxx
Xxx Xxxxx-Xxxxxxxx
Xxxxxxx Xxxxxxxx
Xxxxx Xxxxx
Facsimilie:
Telephone:
Residence:
CommonFund Hedged Equity Company 000 Xxxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxx
Xxx Xxxxx-Xxxxxxxx
Xxxxxxx Xxxxxxxx
Xxxxx Xxxxx
Facsimilie:
Telephone:
Residence:
Good Xxxxxxx Trading Co. s.p.c. 000 Xxxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxx
Xxx Xxxxx-Xxxxxxxx
Xxxxxxx Xxxxxxxx
Xxxxx Xxxxx
Facsimilie:
Telephone:
Residence:
Radcliffe SPC, Ltd. for and on c/o RG Capital Management, L.P.
behalf of the Class A Segregated 3 Bala Plaza - East
Portfolio Xxxxx 000
Xxxx Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Facsimilie:
Telephone:
Residence:
Wolverine Convertible Arbitrage c/o Wolverine Asset Management
Trading, Limited 000 X Xxxxxxx #000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Xxxxxx Xxxxx
Facsimilie:
Telephone:
Residence:
SCHEDULE 2(B)
EXISTING HOLDERS
Xxxxxx Xxxxxxx - 434,561 Xxxxxxx XxXxxx - 43,750
Xxxxxxxxxxx Xxxxxxxx - 351,897 Xxxxx Xxxxxx - 208,713
Xxxx Xxxxxx - 36,000 Xxxxx Xxxxxx - 283,995
Xxxxxx XxXxxxxxx - 370,033 Xxxxxx X'Xxxxx - 43,750
Xxxx Xxxxxxxxxx - 197,959 Xxxxx Xxxxx - 142,695
Xxxxxxx XxXxxx - 43,750 Xxxxxxx Xxxxxx - 345,772
Xxxxxx Xxx - 334,875 Xxxxxx Xx - 334,875
Protex Holdings Limited - 450,000 Xxxx Xxxxxx - 18,500
Xxxxx Xxxxxx - 27,250 Xxxxxx Xxxxx - 12,500
Xxxx Xxxxx - 18,500 Xxxxxxx Xxxxxxx - 15,500
Xxxxxxx Xxxxxxx - 2,000 Xxxxx X'Xxxxx - 15,500
Xxxxxxx Xxxxxxxx - 14,000 Xxxxxx Xxxxxxxxx - 15,500
Xxxx Xxxxxxxx - 15,500 Xxxxx Xxx Xxxxxx - 13,500
Xxxx Xxxxx - 15,500 Xxxx Xxxxx - 2,500
Xxxxxx Xxxxxxxx - 2,500 Xxxxxxx Xxxxxxxx - 7,500
Xxxx Xxxxx - 12,500 Xxxxxx Xxxxxxx - 2,500
Xxxxx Xxxxxxxxx - 8,500 Xx Xxxx
Xxxxx Xxxxxx - 2,500 Han Xxx Xxxx - 1,000
Xxxxxxx Xxxxxxx - 500 Xxxxxx X. XxXxxx - 18,750
Xxxx Xxxx - 18,500
FMI, INC. - 1,105,840
KRG CAPITAL FUND (FF), L.P. - 7,423 KRG CO-INVESTMENT, LLC - 654
KRG CAPITAL FUND II, L.P. - 301,695 KRG CAPITAL FUND (PA), L.P. - 94,388
INDOSUEZ CAPITAL PARTNERS. 2003, ACAS EQUITY HOLDING CORP. - 99,610
L.L.C. - 41,780
INDOSUEZ CMII, INC. - 16,110
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Transfer Agent]
[address]
Attention: [ ]
Re: Aerobic Creations, Inc.
Ladies and Gentlemen:
[We are][I am] counsel to Aerobic Creations, Inc., a Delaware
corporation (the "COMPANY"), and have represented Maritime Logistics US Holdings
Inc. ("MLI") in connection with that certain Securities Purchase Agreement
(Notes) (the "SECURITIES PURCHASE AGREEMENT") entered into by and among MLI, and
the Company (pursuant to that certain Joinder Agreement dated as of November 8,
2006) and the buyers named therein (collectively, the "HOLDERS") pursuant to
which the Company issued to the Holders secured convertible notes (the "NOTES")
convertible into the Company's common stock, $0.001 par value per share (the
"COMMON STOCK") and warrants exercisable for shares of Common Stock (the
"WARRANTS"). Pursuant to the Securities Purchase Agreement, the Company also has
entered into a Registration Rights Agreement with the Holders (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 issuable upon conversion of the
Notes and the shares of Common Stock issuable upon exercise of the Warrants,
under the Securities Act of 1933, as amended (the "1933 ACT"). In connection
with the Company's obligations under the Registration Rights Agreement, on
____________ ___, 200_, the Company filed a Registration Statement on Form
[S-3/SB-2] (File No. 333-_____________) (the "REGISTRATION STATEMENT") with the
Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities which names each of the Holders as a selling stockholder thereunder.
Please notify us immediately upon the request of any Holder to
transfer shares of Common Stock pursuant to the Registration Statement. We will
then provide you a letter regarding the transferability of the shares of Common
Stock under the Registration Statement.
Very truly yours,
Xxxxx Xxxxxxx Berlack Israels LLP
By:_____________________
CC: [LIST NAMES OF HOLDERS]
A-1
EXHIBIT B
SELLING STOCKHOLDERS
The shares of Common Stock being offered by the selling stockholders are
those previously issued to the selling stockholders and those issuable upon
conversion of the convertible notes and upon exercise of the warrants. For
additional information regarding the issuance of those shares of Common Stock
and warrants and convertible notes and warrants, see "Private Placement of
Common Stock and Warrants" and "Private Placement of Convertible Notes and
Warrants" above. We are registering the shares of Common Stock in order to
permit the selling stockholders to offer the shares for resale from time to
time. Except for the ownership of the shares of common stock, convertible notes
and warrants issued pursuant to the Securities Purchase Agreements, the selling
stockholders who acquired their securities pursuant to the Securities Purchase
Agreements have not had any material relationship with us within the past three
years. [INCLUDE IF SUCH PERSONS ARE "SELLING SHAREHOLDERS" - MODIFY AS
APPLICABLE: ______________, _________________, and _________________ are
officers, directors, and/or consultants of the company subject to the provisions
of a lock up agreement pursuant to which, although their shares of Common Stock
are being registered for resale hereunder, are generally not permitted to sell
their shares for a period of at least two years from the date of the reverse
merger described under "_______________" in this prospectus. _______________,
_______________, and __________________ acquired their shares of Common Stock
registered for resale hereunder, in connection with various transactions
pursuant to which the company acquired businesses and/or business interests
previously [controlled] by such persons. Although their shares of Common Stock
are being registered for resale hereunder, they are generally not permitted to
sell their shares for a period of at least two years from the date of the
reverse merger. For a description of the acquisitions of such businesses and
business interests, see "_______________________" in this prospectus.
________________, __________________ and __________________ held shares of the
Company prior to the date of the reverse merger and may therefore be considered
"promoters". Xxxxxx & Xxxxxxx, LLC acted as our placement agent in respect of
the issuance of the convertible notes and warrants and the shares of Common
Stock, and received warrants exercisable for shares of Common Stock in
connection therewith.]
The table below lists the selling stockholders and other information
regarding the beneficial ownership of the shares of Common Stock by each of the
selling stockholders. The second column lists the number of shares of Common
Stock beneficially owned by each selling stockholder, based on its ownership of
the convertible notes and warrants, as of ________, 200_.(1) In computing the
number of shares beneficially owned by a selling stockholder and the
----------
(1) Note to Draft: Each Investor's entry in this column should be footnoted with
the following text: As described below, all conversions of, or exercises under,
the convertible notes and the warrants are subject to the restriction that such
conversions or exercises do not result in the holder and its affiliates
beneficially owning more than 9.99% of our outstanding shares of common stock.
Based on the [_______] shares of our common stock that were outstanding as of
[insert date], as of such date, each of these selling stockholders may be deemed
to beneficially own and may only convert and/or exercise a maximum of [_______]
shares of our common stock under its respective convertible note and warrant.
B-1
percentage of ownership of that selling stockholder, shares of common stock
underlying the convertible notes and the warrants held by that selling
stockholder that are convertible or exercisable, as the case may be, within 60
days of [insert date] are included. Those shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any other
selling stockholder. Each selling stockholder's percentage of ownership in the
following table is based upon [______] shares of common stock outstanding as of
[insert date]. We will not receive any of the proceeds from the sale of our
common stock by the selling stockholders. None of these selling stockholders
are, or are affiliates of, a broker-dealer registered under the Exchange Act.
The third column lists the shares of Common Stock being offered by this
prospectus by each selling stockholder.
In accordance with the terms of registration rights agreements among the
Company and the selling stockholders, this prospectus generally covers the
resale of at least the shares of Common Stock issued in the private placement of
Common Stock and warrants and 130% of the sum of the number of shares of Common
Stock issued or issuable (x) upon conversion of the convertible notes, and (y)
upon exercise of the warrants, determined as if the outstanding notes were
converted and warrants were exercised in full, each as of the trading day
immediately preceding the date the registration statement is initially filed
with the SEC. Because the conversion price of the convertible notes may be
adjusted and the exercise price of the warrants may be adjusted, the number of
shares that will actually be issued may be more or less than the number of
shares being offered by this prospectus. The fourth column assumes the sale of
all of the shares offered by the selling stockholders pursuant to this
prospectus.
Under the terms of the convertible notes and the warrants, a selling
stockholder may not convert the convertible notes or exercise the warrants to
the extent such conversion or exercise would cause such selling stockholder,
together with its affiliates, to beneficially own a number of shares of Common
Stock which would exceed [9.99%] of our then outstanding shares of Common Stock
following such conversion or exercise, excluding for purposes of such
determination shares of Common Stock issuable upon conversion of the convertible
notes which have not been converted and upon exercise of the warrants that have
not been exercised. The number of shares in the second column does not reflect
this limitation. The selling stockholders may sell all, some or none of their
shares in this offering. See "Plan of Distribution."
MAXIMUM NUMBER OF SHARES
NUMBER OF SHARES OWNED TO BE SOLD PURSUANT TO NUMBER OF SHARES
NAME OF SELLING STOCKHOLDER PRIOR TO OFFERING THIS PROSPECTUS OWNED AFTER OFFERING
0
B-2
PLAN OF DISTRIBUTION
We are registering the shares of Common Stock issued pursuant to the
Securities Purchase Agreement (Common and Warrants) and the shares of Common
Stock issuable upon conversion of the convertible notes and upon exercise of the
warrants to permit the resale of these shares of Common Stock by the holders of
the convertible notes and warrants from time to time after the date of this
prospectus. [INCLUDE IF SUCH PERSONS ARE "SELLING SHAREHOLDERS" - MODIFY AS
APPLICABLE: We are also registering the shares of Common Stock held by
______________, _________________, and _________________ who are officers,
directors, and/or consultants of the company, by _______________,
_______________, and __________________ who acquired their shares of Common
Stock in connection with various transactions pursuant to which the company
acquired businesses and/or business interests previously [controlled] by such
persons, by ________________, __________________ and __________________ who held
shares of the company prior to the date of the reverse merger and by Xxxxxx &
Xxxxxxx, LLC who received warrants exercisable for shares of Common Stock in
connection services performed to the company as placement agent.] We will not
receive any of the proceeds from the sale by the selling stockholders of the
shares of Common Stock. We will bear all fees and expenses incident to our
obligation to register the shares of Common Stock.
The selling stockholders may sell all or a portion of the shares of Common
Stock beneficially owned by them and offered hereby from time to time directly
or through one or more underwriters, broker-dealers or agents. If the shares of
Common Stock are sold through underwriters or broker-dealers, the selling
stockholders will be responsible for underwriting discounts or commissions or
agent's commissions. The shares of Common Stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions,
o on any national securities exchange or quotation service on which
the securities may be listed or quoted at the time of sale;
o in the over-the-counter market;
o in transactions otherwise than on these exchanges or systems or in
the over-the-counter market;
o through the writing of options, whether such options are listed on
an options exchange or otherwise;
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
B-3
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o sales pursuant to Rule 144;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
If the selling stockholders effect such transactions by selling shares of
Common Stock to or through underwriters, broker-dealers or agents, such
underwriters, broker-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling stockholders or
commissions from purchasers of the shares of Common Stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved); provided that
the commissions payable to, or discounts received by, any member of the National
Securities Dealers Association, Inc. shall not exceed 8% of the sale of any
shares of Common Stock being registered pursuant to Rule 415. In connection with
sales of the shares of Common Stock or otherwise, the selling stockholders may
enter into hedging transactions with broker-dealers, which may in turn engage in
short sales of the shares of Common Stock in the course of hedging in positions
they assume. The selling stockholders may also sell shares of Common Stock short
and deliver shares of Common Stock covered by this prospectus to close out short
positions and to return borrowed shares in connection with such short sales. The
selling stockholders may also loan or pledge shares of Common Stock to
broker-dealers that in turn may sell such shares.
The selling stockholders may pledge or grant a security interest in some
or all of the convertible notes, warrants or shares of Common Stock owned by
them and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of Common Stock from
time to time pursuant to this prospectus or any amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of
1933, as amended, amending, if necessary, the list of selling stockholders to
include the pledgee, transferee or other successors in interest as selling
stockholders under this prospectus. The selling stockholders also may transfer
and donate the shares of Common Stock in other circumstances in which case the
transferees, donees, pledgees or other successors in interest will be the
selling beneficial owners for purposes of this prospectus.
B-4
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares of Common Stock may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. In such event, any commissions received by such broker dealers or agents
and any profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. Each Selling
Stockholder has informed the Company that it does not have any written or oral
agreement or understanding, directly or indirectly, with any person to
distribute the Common Stock. The maximum commission or discount to be received
by any NASD member or independent broker/dealer will not be greater than eight
percent (8.0%) for the sale of any securities registered pursuant to this
registration statement. At the time a particular offering of the shares of
Common Stock is made, a prospectus supplement, if required, will be distributed
which will set forth the aggregate amount of shares of Common Stock being
offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to broker-dealers.
Under the securities laws of some states, the shares of Common Stock may
be sold in such states only through registered or licensed brokers or dealers.
In addition, in some states the shares of Common Stock may not be sold unless
such shares have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and is complied with.
There can be no assurance that any selling stockholder will sell any or
all of the shares of Common Stock registered pursuant to the registration
statement, of which this prospectus forms a part.
The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may limit the timing
of purchases and sales of any of the shares of Common Stock by the selling
stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of Common
Stock to engage in market-making activities with respect to the shares of Common
Stock. All of the foregoing may affect the marketability of the shares of Common
Stock and the ability of any person or entity to engage in market-making
activities in respect of the shares of Common Stock.
We will pay all expenses of the registration of the shares of Common Stock
pursuant to the registration rights agreements, estimated to be $[ ] in total,
including, without limitation, Securities and Exchange Commission filing fees
and expenses of compliance with state securities or "blue sky" laws; PROVIDED,
HOWEVER, that a selling stockholder will pay all underwriting discounts and
selling commissions, if any. We will indemnify the selling stockholders against
liabilities, including some liabilities under the Securities Act, in accordance
with the registration rights agreements, or the selling stockholders will be
entitled to contribution. We may be indemnified by the selling stockholders
against civil liabilities, including liabilities under the Securities Act, that
may arise from any written information furnished to us by the selling
stockholder specifically for use in this prospectus, in accordance with the
related registration rights agreements, or we may be entitled to contribution.
B-5
Once sold under the registration statement, of which this prospectus forms
a part, the shares of Common Stock will be freely tradable in the hands of
persons other than our affiliates.
B-6
