REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement dated as of January 29, 2003 (this
"AGREEMENT") by and between Thinka Weight-Loss Corporation, a Nevada
corporation, with principal executive offices located at 00000 Xxx Xxxxxx Xxx.,
Xxxxx 0000, Xxxxxx, XX 00000 (the "COMPANY"), and La Jolla Cove Investors, Inc.
(the "INITIAL INVESTOR").
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement dated as of January 29, 2003, by and between the Initial
Investor and the Company (the "SECURITIES PURCHASE AGREEMENT"), the Company has
agreed to issue and sell to the Initial Investor an 8% Convertible Debenture
(the "DEBENTURE") of the Company in the aggregate principal amount of $300,000
which, upon the terms of and subject to the conditions contained therein, is
convertible into shares of the Company's Common Stock (the "COMMON STOCK") ; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common Stock issued upon conversion of the Debenture and the Warrant Shares
certain registration rights under the Securities Act;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Definitions
(A) As used in this Agreement, the following terms shall
have the meanings:
(1) "AFFILIATE" of any specified Person means any other
Person who directly, or indirectly through one or more intermediaries, is in
control of, is controlled by, or is under common control with, such specified
Person. For purposes of this definition, control of a Person means the power,
directly or indirectly, to direct or cause the direction of the management and
policies of such Person whether by contract, securities, ownership or otherwise;
and the terms "CONTROLLING" and "CONTROLLED" have the respective meanings
correlative to the foregoing.
(2) "CLOSING DATE" means January 29, 2003.
(3) "COMMISSION" means the Securities and Exchange
Commission.
(4) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute.
(5) "INVESTOR" means each of the Initial Investor and any
transferee or assignee of Registrable Securities which agrees to become bound by
all of the terms and provisions of this Agreement in accordance with Section 8
hereof.
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(6) "PERSON" means any individual, partnership, corporation,
limited liability company, joint stock company, association, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
(7) "PROSPECTUS" means the prospectus (including, without
limitation, any preliminary prospectus and any final prospectus filed pursuant
to Rule 424(b) under the Securities Act, including any prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance on Rule 430A under the Securities Act)
included in the Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by the Registration Statement and by all
other amendments and supplements to such prospectus, including all material
incorporated by reference in such prospectus and all documents filed after the
date of such prospectus by the Company under the Exchange Act and incorporated
by reference therein.
(8) "PUBLIC OFFERING" means an offer registered with the
Commission and the appropriate state securities commissions by the Company of
its Common Stock and made pursuant to the Securities Act.
(9) "REGISTRABLE SECURITIES" means the Common Stock issued or
issuable (i) upon conversion or redemption of the Debenture, (ii) exercise of
the Conversion Warrants (iii) pursuant to the terms and provisions of the
Debenture or the Securities Purchase Agreement, provided, however, a share of
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Common Stock shall cease to be a Registrable Security for purposes of this
Agreement when it no longer is a Restricted Security.
(10) "REGISTRATION STATEMENT" means a registration statement
of the Company filed on an appropriate form under the Securities Act providing
for the registration of, and the sale on a continuous or delayed basis by the
Initial Investor pursuant to Rule 415 under the Securities Act, including the
Prospectus contained therein and forming a part thereof, any amendments to such
registration statement and supplements to such Prospectus, and all exhibits to
and other material incorporated by reference in such registration statement and
Prospectus.
(11) "RESTRICTED SECURITY" means any share of Common Stock
issued upon conversion or redemption of the Debenture or Warrant except any such
share that (i) has been registered pursuant to an effective registration
statement under the Securities Act and sold in a manner contemplated by the
prospectus included in such registration statement, (ii) has been transferred in
compliance with the resale provisions of Rule 144 under the Securities Act (or
any successor provision thereto) or is transferable pursuant to paragraph (k) of
Rule 144 under the Securities Act (or any successor provision thereto) or (iii)
otherwise has been transferred and a new share of Common Stock not subject to
transfer restrictions under the Securities Act has been delivered by or on
behalf of the Company.
(12) "SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute.
(B) All capitalized terms used and not defined herein have
the respective meaning assigned to them in the Securities Purchase Agreement or
the Debenture.
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2. Registration
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(A) FILING AND EFFECTIVENESS OF REGISTRATION STATEMENT. The Company
shall prepare and file with the Commission as soon as practicable a Registration
Statement relating to the offer and sale of the Registrable Securities and shall
use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but in
no event later than ninety (90) days after the Closing Date. The Company shall
promptly (and, in any event, no more than one (1) business day after it receives
comments from the Commission), notify the Buyer when and if it receives any
comments from the Commission on the Registration Statement and promptly forward
a copy of such comments, if they are in writing, to the Buyer. At such time
after the filing of the Registration Statement pursuant to this Section 2(A) as
the Commission indicates, either orally or in writing, that it has no further
comments with respect to such Registration Statement or that it is willing to
entertain appropriate requests for acceleration of effectiveness of such
Registration Statement, the Company shall promptly, and in no event later than
two (2) business days after receipt of such indication from the Commission,
request that the effectiveness of such Registration Statement be accelerated
within forty-eight (48) hours of the Commission's receipt of such request. The
Company shall notify the Initial Investor by written notice that such
Registration Statement has been declared effective by the Commission within one
(1) business day of such declaration by the Commission.
(B) ELIGIBILITY FOR USE OF FORM S-3 OR AN SB-2. The Company shall, if
available to the Company, use the Securities Act Registration Statement on Form
S-3 or SB-2 and it shall file all reports and information required to be filed
by it with the Commission in a timely manner and take all such other action so
as to maintain such eligibility for the use of such form.
(C) ADDITIONAL REGISTRATION STATEMENT. In the event the Current Market
Price declines to a price per share the result of which is that the Company
cannot satisfy its conversion obligations to Initial Investor hereunder, the
Company shall, to the extent required by the Securities Act (because the
additional shares were not covered by the Registration Statement filed pursuant
to Section 2(a)), as reasonably determined by the Initial Investor, file an
additional Registration Statement with the Commission for such additional number
of Registrable Securities as would be issuable upon conversion of the Debenture
(the "ADDITIONAL REGISTRABLE SECURITIES") in addition to those previously
registered. The Company shall, to the extent required by the Securities Act, as
reasonably determined by the Initial Investor, prepare and file with the
Commission not later than the 30th day thereafter, a Registration Statement
relating to the offer and sale of such Additional Registrable Securities and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but not
later than 90 days thereafter. The Company shall not include any other
securities in the Registration Statement relating to the offer and sale of such
Additional Registrable Securities.
(D) (i) If the Company proposes to register any of its warrants,
Common Stock or any other shares of common stock of the Company under the
Securities Act (other than a registration (A) on Form S-8 or S-4 or any
successor or similar forms, (B) relating to Common Stock or any other shares of
common stock of the Company issuable upon exercise of employee share options or
in connection with any employee benefit or similar plan of the Company or (C) in
connection with a direct or indirect acquisition by the Company of another
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Person or any transaction with respect to which Rule 145 (or any successor
provision) under the Securities Act applies), whether or not for sale for its
own account, it will each such time, give prompt written notice at least 20 days
prior to the anticipated filing date of the registration statement relating to
such registration to the Initial Investor, which notice shall offer the Initial
Investor the opportunity to include in such registration statement such number
of Registrable Securities as the Initial Investor may request. Upon the written
request of the Initial Investor made within 10 days after the receipt of notice
from the Company (which request shall specify the number of Registrable
Securities intended to be disposed of by the Initial Investor), the Company will
use its best efforts to effect the registration under the Securities Act of all
Registrable Securities that the Company has been so requested to register by the
Initial Investor, to the extent requisite to permit the disposition of the
Registrable Securities so to be registered; provided, however, that (A) if such
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registration involves a Public Offering, the Initial Investor must sell its
Registrable Securities to any underwriters selected by the Company on the same
terms and conditions as apply to the Company and (B) if, at any time after
giving written notice of its intention to register any Registrable Securities
pursuant to this Section 2 and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register such Registrable Securities, the
Company shall give written notice to the Initial Investor and, thereupon, shall
be relieved of its obligation to register any Registrable Securities in
connection with such registration. The Company's obligations under this Section
2(D) shall terminate on the date that the registration statement to be filed in
accordance with Section 2(A) is declared effective by the Commission.
(ii) If a registration pursuant to this Section 2(D)
involves a Public Offering and the managing underwriter thereof advises the
Company that, in its view, the number of shares of Common Stock that the Company
and the Initial Investor intend to include in such registration exceeds the
largest number of shares of Common Stock that can be sold without having an
adverse effect on such Public Offering (the "MAXIMUM OFFERING SIZE"), the
Company will include in such registration only such number of shares of Common
Stock as does not exceed the Maximum Offering Size, and the number of shares in
the Maximum Offering Size shall be allocated among the Company, the Initial
Investor and any other sellers of Common Stock in such Public Offering
("THIRD-PARTY SELLERS"), on the basis of the relative number of shares of Common
Stock originally proposed to be offered for sale under such registration by each
of the Initial Investors, the Company and the Third-Party Sellers, as the case
may be. If as a result of the proration provisions of this Section 2(D)(ii), the
Initial Investor is not entitled to include all such Registrable Securities in
such registration, the Initial Investor may elect to withdraw its request to
include any Registrable Securities in such registration. With respect to
registrations pursuant to this Section 2(D), the number of securities required
to satisfy any underwriters' over-allotment option shall be allocated among the
Company, the Initial Investors and any Third Party Seller pro rata on the basis
of the relative number of securities offered for sale under such registration by
each of the Initial Investor, the Company and any such Third Party Sellers
before the exercise of such over-allotment option.
3. Obligations of the Company
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In connection with the registration of the Registrable Securities, the
Company shall:
(A) Promptly (i) prepare and file with the Commission such
amendments (including post-effective amendments) to the Registration Statement
and supplements to the
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Prospectus as may be necessary to keep the Registration Statement continuously
effective and in compliance with the provisions of the Securities Act applicable
thereto so as to permit the Prospectus forming part thereof to be current and
useable by the Initial Investors for resales of the Registrable Securities for a
period of three (3) years from the date on which the Registration Statement is
first declared effective by the Commission (the "EFFECTIVE TIME") or such
shorter period that will terminate when all the Registrable Securities covered
by the Registration Statement have been sold pursuant thereto in accordance with
the plan of distribution provided in the Prospectus, transferred pursuant to
Rule 144 under the Securities Act or otherwise transferred in a manner that
results in the delivery of new securities not subject to transfer restrictions
under the Securities Act (the "REGISTRATION PERIOD") and (ii) take all lawful
action such that each of (A) the Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, not misleading and (B) the Prospectus
forming part of the Registration Statement, and any amendment or supplement
thereto, does not at any time during the Registration Period include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(B) During the Registration Period, comply with the provisions
of the Securities Act with respect to the Registrable Securities of the Company
covered by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Initial Investor as set forth in the Prospectus forming part
of the Registration Statement;
(C) (i) Prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and the distribution
or delivery of any Prospectus (including any supplements thereto), provide (A)
draft copies thereof to the Initial Investor and reflect in such documents all
such comments as the Initial Investor (and their counsel) reasonably may propose
and (B) to the Initial Investor a copy of the accountant's consent letter to be
included in the filing and (ii) furnish to the Initial Investor whose
Registrable Securities are included in the Registration Statement and its legal
counsel identified to the Company, (A) promptly after the same is prepared and
publicly distributed, filed with the Commission, or received by the Company, one
copy of the Registration Statement, each Prospectus, and each amendment or
supplement thereto and (B) such number of copies of the Prospectus and all
amendments and supplements thereto and such other documents, as the Initial
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by the Initial Investor;
(D) (i) Register or qualify the Registrable Securities covered by
the Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Initial Investor, (ii) prepare and file in such
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period and (iv) take all such other lawful 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
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therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(D), (B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;
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(E) As promptly as practicable after becoming aware of such event,
notify the Initial Investor of the occurrence of any event, as a result of which
the Prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to the Initial Investor as the
Initial Investor may reasonably request;
(F) As promptly as practicable after becoming aware of such event,
notify the Initial Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension;
(G) Cause all the Registrable Securities covered by the
Registration Statement to be listed on the principal national securities
exchange, and included in an inter-dealer quotation system of a registered
national securities association, on or in which securities of the same class or
series issued by the Company are then listed or included;
(H) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(I) Cooperate with the Initial Investor to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to the registration statement and enable such certificates for
the Registrable Securities to be in such denominations or amounts, as the case
may be, as the Initial Investor reasonably may request and registered in such
names as the Investor may request; and, within three (3) business days after a
registration statement which includes Registrable Securities is declared
effective by the Commission, deliver and cause legal counsel selected by the
Company to deliver to the transfer agent for the Registrable Securities (with
copies to the Initial Investor if the Registrable Securities are included in
such registration statement) an appropriate instruction and, to the extent
necessary, an opinion of such counsel;
(J) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Initial Investor of its
Registrable Securities in accordance with the intended methods therefor provided
in the Prospectus which are customary under the circumstances;
(K) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
(L) (i) Make reasonably available for inspection by the Initial
Investor, any underwriter participating in any disposition pursuant to the
Registration Statement, and any
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attorney, accountant or other agent retained by the Initial Investor or any such
underwriter all relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and (ii) cause the
Company's officers, directors and employees to supply all information reasonably
requested by the Initial Investor or any such underwriter, attorney, accountant
or agent in connection with the Registration Statement, in each case, as is
customary for similar due diligence examinations; provided, however, that all
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records, information and documents that are designated in writing by the
Company, in good faith, as confidential, proprietary or containing any material
nonpublic information shall be kept confidential by the Initial Investor and any
such underwriter, attorney, accountant or agent (pursuant to an appropriate
confidentiality agreement in the case of any such holder or agent), unless such
disclosure is made pursuant to judicial process in a court proceeding (after
first giving the Company an opportunity promptly to seek a protective order or
otherwise limit the scope of the information sought to be disclosed) or is
required by law, or such records, information or documents become available to
the public generally or through a third party not in violation of an
accompanying obligation of confidentiality; and provided, further, that, if the
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foregoing inspection and information gathering would otherwise disrupt the
Company's conduct of its business, such inspection and information gathering
shall, to the maximum extent possible, be coordinated on behalf of the Initial
Investor and the other parties entitled thereto by one firm of counsel designed
by and on behalf of the majority in interest of the Initial Investor and other
parties;
(M) In connection with any underwritten offering, make such
representations and warranties to the Initial Investor participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;
(N) In connection with any underwritten offering, obtain opinions
of counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the Effective Time of the Registration Statement or
most recent post-effective amendment thereto, as the case may be, the absence
from the Registration Statement and the Prospectus, including any documents
incorporated by reference therein, of an untrue statement of a material fact or
the omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, subject to customary
limitations);
(O) In connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public accountants of
the Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
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(P) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any, and
(Q) In the event that any broker-dealer registered under the
Exchange Act shall be an "AFFILIATE" (as defined in Rule 2729(b)(1) of the rules
and regulations of the National Association of Securities Dealers, Inc. (the
"NASD RULES") (or any successor provision thereto)) of the Company or has a
"CONFLICT OF INTEREST" (as defined in Rule 2720(b)(7) of the NASD Rules (or any
successor provision thereto)) and such broker-dealer shall underwrite,
participate as a member of an underwriting syndicate or selling group or assist
in the distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "QUALIFIED INDEPENDENT UNDERWRITER" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 6 hereof and (C) providing
such information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.
4. Obligations of the Initial Investor
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In connection with the registration of the Registrable Securities, the
Initial Investor shall have the following obligations:
(A) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that the Initial 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 registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request;
(B) The Initial Investor by its acceptance of the Registrable
Securities agrees to cooperate with the Company in connection with the
preparation and filing of the Registration Statement hereunder, unless the
Initial Investor has notified the Company in writing of its election to exclude
all of its Registrable Securities from the Registration Statement; and
(C) The Initial Investor agrees that, upon receipt of any notice
from the Company of the occurrence of any event of the kind described in Section
3(E) or 3(F), it shall immediately discontinue its disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until the Initial Investor's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(E) and, if so
directed by the Company, the Initial Investor shall deliver to the Company (at
the expense of the Company) or destroy (and deliver to the Company a certificate
of destruction) all copies in the Initial Investor's possession, of the
Prospectus covering such Registrable Securities current at the time of receipt
of such notice.
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5. Expenses of Registration
--------------------------
All expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Section 3, but including, without limitation, all registration, listing, and
qualifications fees, printing and engraving fees, accounting fees, and the fees
and disbursements of counsel for the Company, and the reasonable fees of one
firm of counsel to the holders of a majority in interest of the Registrable
Securities shall be borne by the Company.
6. Indemnification and Contribution
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(A) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify
and hold harmless the Initial Investor and each underwriter, if any, which
facilitates the disposition of Registrable Securities, and each of their
respective officers and directors and each person who controls the Initial
Investor or underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act (each such person being sometimes hereinafter
referred to as an "INDEMNIFIED PERSON") from and against any losses, claims,
damages or liabilities, joint or several, to which such Indemnified Person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement of a material fact made by the Company
contained in any Registration Statement or Prospectus or an omission or alleged
omission to state therein a material fact required to be stated therein by the
Company or necessary to make the statements made therein by the Company, not
misleading; and the Company hereby agrees to reimburse such Indemnified Person
for all reasonable legal and other expenses incurred by them in connection with
investigating or defending any such action or claim as and when such expenses
are incurred; provided, however, that the Company shall not be liable to any
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such Indemnified Person in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon (i) an untrue
statement or alleged untrue statement made in, or an omission or alleged
omission from, such Registration Statement or Prospectus in reliance upon and in
conformity with written information furnished to the Company by such Indemnified
Person or (ii) in the case of the occurrence of an event of the type specified
in Section 3(E), the use by the Indemnified Person of an outdated or defective
Prospectus after the Company has provided to such Indemnified Person an updated
Prospectus correcting the untrue statement or alleged untrue statement or
omission or alleged omission giving rise to such loss, claim, damage or
liability.
(B) NOTICE OF CLAIMS, ETC. Promptly after receipt by a party
seeking indemnification pursuant to this Section 6 (an "INDEMNIFIED PARTY") of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "CLAIM"), the
Indemnified Party promptly shall notify the party against whom indemnification
pursuant to this Section 6 is being sought (the "INDEMNIFYING PARTY") of the
commencement thereof; but the omission to so notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the
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reasonable fees, out-of-pocket costs and expenses of such separate legal counsel
to the Indemnified Party if (and only if): (x) the Indemnifying Party shall have
agreed to pay such fees, costs and expenses, (y) the Indemnified Party and the
Indemnifying Party shall reasonably have concluded that representation of the
Indemnified Party by the Indemnifying Party by the same legal counsel would not
be appropriate due to actual or, as reasonably determined by legal counsel to
the Indemnified Party, potentially differing interests between such parties in
the conduct of the defense of such Claim, or if there may be legal defenses
available to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party or (z) the Indemnifying Party shall
have failed to employ legal counsel reasonably satisfactory to the Indemnified
Party within a reasonable period of time after notice of the commencement of
such Claim. If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (x), (y) or (z) above, the
fees, costs and expenses of such legal counsel shall be borne exclusively by the
Indemnified Party. Except as provided above, the Indemnifying Party shall not,
in connection with any Claim in the same jurisdiction, be liable for the fees
and expenses of more than one firm of counsel for the Indemnified Party
(together with appropriate local counsel). The Indemnified Party shall not,
without the prior written consent of the Indemnifying Party (which consent shall
not unreasonably be withheld), settle or compromise any Claim or consent to the
entry of any judgment that does not include an unconditional release of the
Indemnifying Party from all liabilities with respect to such Claim or judgment.
(C) CONTRIBUTION. If the indemnification provided for in this
Section 6 is unavailable to or insufficient to hold harmless an Indemnified
Person under subsection (A) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(D) were determined by
pro rata allocation (even if the Initial Investor or any underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in this
Section 6(D). The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Initial Investor and any
underwriters in this Section 6(D) to contribute shall be several in proportion
to the percentage of Registrable Securities registered or underwritten, as the
case may be, by them and not joint.
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(D) Notwithstanding any other provision of this Section 6, in no
event shall any (i) Investor be required to undertake liability to any person
under this Section 6 for any amounts in excess of the dollar amount of the
proceeds to be received by the Initial Investor from the sale of the Initial
Investor's Registrable Securities (after deducting any fees, discounts and
commissions applicable thereto) pursuant to any Registration Statement under
which such Registrable Securities are to be registered under the Securities Act
and (ii) underwriter be required to undertake liability to any Person hereunder
for any amounts in excess of the aggregate discount, commission or other
compensation payable to such underwriter with respect to the Registrable
Securities underwritten by it and distributed pursuant to the Registration
Statement.
(E) The obligations of the Company under this Section 6 shall be
in addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
7. Rule 144
---------
With a view to making available to the Initial Investor the benefits
of Rule 144 under the Securities Act or any other similar rule or regulation of
the Commission that may at any time permit the Initial Investor to sell
securities of the Company to the public without registration ("RULE 144"), the
Company agrees to use its best efforts to:
(1) comply with the provisions of paragraph (c) (1) of Rule 144
and
(2) file with the Commission in a timely manner all reports and
other documents required to be filed by the Company pursuant to Section 13 or
15(d) under the Exchange Act; and, if at any time it is not required to file
such reports but in the past had been required to or did file such reports, it
will, upon the request of any Investor, make available other information as
required by, and so long as necessary to permit sales of, its Registrable
Securities pursuant to Rule 144.
8. Assignment
----------
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall not be assigned.
9. Amendment and Waiver
----------------------
Any provision 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 Initial Investor who hold a majority-in-interest of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section 9
shall be binding upon the Initial Investor and the Company.
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10. Changes in Common Stock
--------------------------
If, and as often as, there are any changes in the Common Stock by way
of stock split, stock dividend, reverse split, combination or reclassification,
or through merger, consolidation, reorganization or recapitalization, or by any
other means, appropriate adjustment shall be made in the provisions hereof, as
may be required, so that the rights and privileges granted hereby shall continue
with respect to the Common Stock as so changed.
11. Miscellaneous
-------------
(A) A person or entity shall be deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(B) Except as may be otherwise provided herein, any notice
or other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally, or sent by telecopier machine or by a
nationally recognized overnight courier service, and shall be deemed given when
so delivered personally, or by telecopier machine or overnight courier service
as follows:
(1) if to the Company, to:
Thinka Weight-Loss Corporation
00000 Xxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
With a copy to:
XXX XXXXXXX LLP
00000 Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
(2) if to the Buyer, to:
La Jolla Cove Investors, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
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The Company or the Initial Investor may change the foregoing address by notice
given pursuant to this Section 11(C).
(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) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California. Each of the parties
consents to the jurisdiction of the federal courts whose districts encompass any
part of the City of San Diego or the state courts of the State of California
sitting in the City of San Diego in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent permitted by law, any
objection including any objection based on forum non conveniens, to the bringing
of any such proceeding in such jurisdictions.
(E) Should any party hereto employ an attorney for the purpose of
enforcing or construing this Agreement, or any judgment based on this Agreement,
in any legal proceeding whatsoever, including insolvency, bankruptcy,
arbitration, declaratory relief or other litigation, the prevailing party shall
be entitled to receive from the other party or parties thereto reimbursement for
all reasonable attorneys' fees and all reasonable costs, including but not
limited to service of process, filing fees, court and court reporter costs,
investigative costs, expert witness fees, and the cost of any bonds, whether
taxable or not, and that such reimbursement shall be included in any judgment or
final order issued in that proceeding. The "prevailing party" means the party
determined by the court to most nearly prevail and not necessarily the one in
whose favor a judgment is rendered.
(F) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(G) The Company shall not enter into any agreement with respect
to its securities that is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing, without
the written consent of the holders of a majority in interest of the Registrable
Securities, the Company shall not grant to any person the right to request it to
register any of its securities under the Securities Act unless the rights so
granted are subject in all respect to the prior rights of the holders of
Registrable Securities set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement. The restrictions on the
13
Company's rights to grant registration rights under this paragraph shall
terminate on the date the Registration Statement to be filed pursuant to Section
2(A) is declared effective by the Commission.
(H) This Agreement, the Securities Purchase Agreement, the
Debenture and the Conversion Warrants Agreement, of even date herewith among the
Company and the Initial Investor constitute the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. These Agreements supersede all prior agreements and
undertakings among the parties hereto with respect to the subject matter hereof.
(I) Subject to the requirements of Section 8 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(J) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(K) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(L) The Company acknowledges that any failure by the Company to
perform its obligations under Section 3, or any delay in such performance, could
result in direct damages to the Initial Investor and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct damages caused by
such failure or delay.
(M) This Agreement may be executed in counterparts, each of which
shall be deemed an original but both of which shall constitute one and the same
agreement. A facsimile transmission of this signed Agreement shall be legal and
binding on the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to
be executed and delivered on the date first above written.
Thinka Weight-Loss Corporation
By: /s/ Xxxxx X. Xxx Xxxxx
--------------------------
Name: Xxxxx X. Xxx Xxxxx
Title: President
La Jolla Cove Investors, Inc.
By: /s/ Xxxxxx Xxxx
-----------------
Name: Xxxxxx Xxxx
Title: Portfolio Manager
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