Exhibit 4.5
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 (Common
Stock 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) shares of the Company's common stock (THE
"COMMON STOCK") and (ii) warrants (the "WARRANTS"), which will be exercisable to
purchase shares of Common Stock (as exercised, collectively, the "WARRANT
SHARES"), in accordance with the terms of the Warrants.
B. In accordance with the terms of 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. "FILING DEADLINE" means the date that is 60 days after the
Closing Date.
h. "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.
i. "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.
j. "NOTES" means those certain Convertible Notes issued pursuant to
that certain Securities Purchase Agreement (Notes and Warrants) dated as of
November 8, 2006 by and among MLI, the Company (pursuant to that certain Joinder
Agreement dated as of the date hereof) and the purchasers thereof named therein.
k. "NOTES' WARRANTS" means those certain warrants issued pursuant to
that certain Securities Purchase Agreement (Notes and Warrants) dated as of
November 8, 2006 by and among MLI, the Company (pursuant to that certain Joinder
Agreement dated as of the date hereof) and the purchasers thereof named therein.
l. "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 Convertible Notes named therein.
m. "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.
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.
o. "REGISTRABLE SECURITIES" means (i) the Shares, (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 Shares, the
Warrant Shares and the Warrants as a
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result of any stock split, stock dividend, recapitalization, exchange or similar
event or otherwise, without regard to any limitations on 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.
r. "REQUIRED REGISTRATION AMOUNT" for the Registration Statement
means the sum of (i) the number of Shares issued pursuant to the Securities
Purchase Agreement and (ii) 130% of 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 (d) (without regard to any limitations on 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. "SHARES" means the shares of common stock purchased by Buyers
pursuant to the Securities Purchase Agreement.
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 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 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
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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 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 thirty (30) 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) Registerable 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 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 Notes' 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 and
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Notes' Warrants are then exercisable for shares of Common Stock at the then
prevailing Exercise Price (as defined in the Warrants or Notes' Warrants, as
applicable).
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 those
holders of the Company who held shares of the Company prior to the
effectiveness of the Merger, (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 of the Company who held
shares of the Company prior to the effectiveness of the Merger, the KRG
Entities, Xxxxxx & Xxxxxxx, LLC) until the reduction required by the SEC
is effected;
Third, if the exclusion of the sum of (i) the number of all shares of
Common Stock held by the Existing Holders and those holders of the Company
who held shares of the Company prior to the effectiveness of the Merger
and (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 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 Notes' Warrants included in such Registration Statement
shall be reduced (such 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
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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, as expeditiously as possible following a
Request, use its best efforts to cause to be filed 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 as soon as
practicable thereafter 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 150 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 three 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.
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 [Xxxxxxx Xxxx & Xxxxx 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
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Holders and (ii) undertake to register the Registrable Securities on Form S-3 as
soon as such form is available, 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 attempting diligently pursuing the effectiveness of such amendment to
such Registration Statement or Demand Registration Statement and for two
Business Days after the resolution of such comments) 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 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
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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 such Investor's Shares, 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 (i) two years after the Closing Date or, if on the
day prior to the second anniversary of the Closing Date the Registrable
Securities are required pursuant to the terms hereof to be registered for resale
on Form S-3, three years from the Closing Date, or (ii) such earlier 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"). The Company shall ensure that each Registration
Statement and each Demand Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein (in 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
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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 cooperate with Legal Counsel in performing the Company's
obligations pursuant to this Section 3.
d. Upon the reasonable request of any Investor whose Registrable
Securities are included in any Registration Statement or Demand Registration
Statement, as applicable, the Company shall furnish to such Investor, without
charge, to the extent the same is not available on the XXXXX system, (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, if requested by an Investor, 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
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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 after becoming
aware 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
Statement to correct such untrue statement or omission, and upon request 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.
10
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. If any Investor is required under applicable securities law to be
described in the Registration Statement or Demand Registration Statement, as
applicable, as an underwriter, at the reasonable request of such 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
filed with the Registration Statement in accordance with Item 601 (5) of
Regulation SB or S-K (as applicable) promulgated by the SEC (or any successor
rule or regulation thereto), 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 subpoena or order from a
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the Inspector
has knowledge. Each 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
11
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 amounts 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 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.
12
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 hereunder.
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 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 two (2) 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
13
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 (i) two years from the Closing Date or, if on the day prior to
the second anniversary of the Closing Date, the Registrable Securities are
required pursuant to the terms hereof to be registered for resale on a Form S-3,
three years from the Closing Date or (ii) such earlier 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.
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
14
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
[$15,000].
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, 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
15
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 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 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
16
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
selected by the Company and reasonably 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 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.
17
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
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.
18
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. 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.
b. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt, when delivered
personally 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:
19
If to the Company:
[ShellCo]
[address]
Telephone:
Facsimile:
Attention:
with a copy to:
Xxxxx Xxxxxxx Xxxxxxx 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:
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.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. 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,
20
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.
e. 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(e) 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.
21
f. 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.
g. 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.
h. 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.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as 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.
j. 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 Warrants
held by Investors then outstanding were exercised for Registrable Securities
without regard to any limitation on exercise of the Warrants.
k. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.
l. 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.
m. 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.
* * * * * *
22
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:
[SHELLCO]
By: ____________________________
Name:
Title:
[Signature Pages of Buyers Follow]
Name of Buyer: ________________________________
Signature of authorized
signatory of Buyer: ________________________________
Name of authorized signatory
of Buyer: ________________________________
Title of authorized signatory
of Buyer: ________________________________
[Signature Pages of Buyers Continue]
SCHEDULE OF BUYERS
BUYER'S ADDRESS BUYER'S REPRESENTATIVE'S ADDRESS
BUYER AND FACSIMILE NUMBER AND FACSIMILE NUMBER
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
Xxxx Xxxx - 18,500
FMI, INC. - 1,105,840 Xxxxxx X. XxXxxx - 18,750
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: [ShellCo]
Ladies and Gentlemen:
[We are][I am] counsel to [ShellCo], a Delaware corporation (the
"COMPANY"), and have represented Maritime Logistics US Holdings Inc. ("MLI") in
connection with that certain Securities Purchase Agreement (Common Shares and
Warrants) (the "SECURITIES PURCHASE AGREEMENT") entered into by and among MLI,
and the Company (pursuant to that certain Joinder Agreement dated as of October,
_____ 2006) and the buyers named therein (collectively, the "HOLDERS") pursuant
to which the Company issued to the Holders shares of the Company's common stock,
(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 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
issuable upon those previously issued to the selling stockholders and those
issuable to the selling stockholders 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_, assuming conversion of
all convertible notes and exercise of the warrants held by the selling
stockholders on that date, without regard to any limitations on conversions or
exercise.
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
B-1
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."
B-2
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-3
PLAN OF DISTRIBUTION
We are registering the shares of common stock issued pursuant to the
Securities Purchase Agreements (Common Stock 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-4
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-5
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares 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 stockholder and any discounts, commissions or concessions allowed or
reallowed or paid or 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-6
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-7
EXHIBIT C
[SHELLCO]
SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE
The undersigned beneficial owner of common stock (the "COMMON STOCK"), of
[ShellCo], a Delaware corporation (the "COMPANY"), (the "REGISTRABLE
SECURITIES") understands that the Company has filed or intends to file with the
Securities and Exchange Commission (the "COMMISSION") a registration statement
on [Form S-3/SB-2] (or such other form as the Company is eligible to use) (the
"REGISTRATION STATEMENT") for the registration and resale under Rule 415 of the
Securities Act of 1933, as amended (the "SECURITIES ACT"), of the Registrable
Securities, in accordance with the terms of the Registration Rights Agreement,
dated as of ________, 2006 (the "REGISTRATION RIGHTS AGREEMENT"), among the
Company and the Buyers named therein. A copy of the Registration Rights
Agreement is available from the Company upon request at the address set forth
below. All capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Registration Rights Agreement.
Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.
NOTICE
The undersigned beneficial owner (the "SELLING SECURITYHOLDER") of
Registrable Securities hereby elects to include the Registrable Securities owned
by it and listed below in Item 3 (unless otherwise specified under such Item 3)
in the Registration Statement.
C-1
The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
QUESTIONNAIRE
1. NAME.
(a) Full Legal Name of Selling Securityholder
--------------------------------------------------------------------
(b) Full Legal Name of Registered Holder (if not the same as (a) above)
through which Registrable Securities Listed in Item 3 below are
held:
--------------------------------------------------------------------
(c) Full Legal Name of Natural Control Person (which means a natural
person who directly or indirectly alone or with others has power to
vote or dispose of the securities covered by the questionnaire):
--------------------------------------------------------------------
2. ADDRESS FOR NOTICES TO SELLING SECURITYHOLDER:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Telephone:
---------------------------------------------------------------------
Fax:
---------------------------------------------------------------------------
Contact Person:
----------------------------------------------------------------
3. BENEFICIAL OWNERSHIP OF REGISTRABLE SECURITIES:
(a) Type and Number of Registrable Securities beneficially owned (not
including the Registrable Securities that are issuable pursuant to
the Purchase Agreement):
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
C-2
4. BROKER-DEALER STATUS:
(a) Are you a broker-dealer?
Yes |_| No |_|
(b) If "yes" to Section 4(a), did you receive your Registrable
Securities as compensation for investment banking services to the
Company.
Yes |_| No |_|
Note: If no, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
(c) Are you an affiliate of a broker-dealer?
Yes |_| No |_|
(d) If you are an affiliate of a broker-dealer, do you certify that you
bought the Registrable Securities in the ordinary course of
business, and at the time of the purchase of the Registrable
Securities to be resold, you had no agreements or understandings,
directly or indirectly, with any person to distribute the
Registrable Securities?
Yes |_| No |_|
Note: If no, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
5. BENEFICIAL OWNERSHIP OF OTHER SECURITIES OF THE COMPANY OWNED BY THE SELLING
SECURITYHOLDER.
EXCEPT AS SET FORTH BELOW IN THIS ITEM 5, THE UNDERSIGNED IS NOT THE
BENEFICIAL OR REGISTERED OWNER OF ANY SECURITIES OF THE COMPANY OTHER THAN
THE REGISTRABLE SECURITIES LISTED ABOVE IN ITEM 3.
(a) Type and Amount of Other Securities beneficially owned by the
Selling Securityholder:
--------------------------------------------------------------------
--------------------------------------------------------------------
C-3
6. RELATIONSHIPS WITH THE COMPANY:
EXCEPT AS SET FORTH BELOW, NEITHER THE UNDERSIGNED NOR ANY OF ITS
AFFILIATES, OFFICERS, DIRECTORS OR PRINCIPAL EQUITY HOLDERS (OWNERS OF 5%
OF MORE OF THE EQUITY SECURITIES OF THE UNDERSIGNED) HAS HELD ANY POSITION
OR OFFICE OR HAS HAD ANY OTHER MATERIAL RELATIONSHIP WITH THE COMPANY (OR
ITS PREDECESSORS OR AFFILIATES) DURING THE PAST THREE YEARS.
State any exceptions here:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
The undersigned agrees to promptly notify the Company of any inaccuracies
or changes in the information provided herein that may occur subsequent to the
date hereof at any time while the Registration Statement remains effective.
By signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items 1 through 6 and the
inclusion of such information in the Registration Statement and the related
prospectus and any amendments or supplements thereto. The undersigned
understands that such information will be relied upon by the Company in
connection with the preparation or amendment of the Registration Statement and
the related prospectus.
IN WITNESS WHEREOF the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.
Dated: Beneficial Owner:
---------------------------- -----------------------
By:
-------------------------------------
Name:
Title:
PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:
C-4
