CALIBRE ENERGY, INC. REGISTRATION RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT (the “Agreement”)
is
made as of November 6, 2006, by and among Calibre Energy, Inc., a Nevada
corporation (the “Company”),
and
the undersigned holders of common stock (the “Company
Stock”)
of the
Company together with their qualifying transferees (the “Holders”).
RECITALS:
| A. |
The
Company has sold warrants exercisable for shares of the Company’s Common
Stock (collectively with the shares sold, the “Common
Shares”)
to the Holders pursuant to one or more Subscription Agreements (each
a
“Subscription”).
|
| B. |
The
sale of the warrants is conditional upon the granting of the rights
set
forth herein, and by this Agreement the Company and the Holders desire
to
provide for certain rights as set forth
herein.
|
NOW,
THEREFORE, in consideration of the foregoing and of the mutual promises and
covenants contained herein, the parties, severally and not jointly, hereby
agree
as follows:
AGREEMENT:
1. Registration
Rights.
1.1 Definitions.
As used
in this Agreement, the following terms shall have the following respective
meanings:
(a) The
terms
“register,”
“registered”
and
“registration”
refer
to a registration effected by preparing and filing a registration statement
in
compliance with the Securities Act of 1933, as amended (the “Securities
Act”),
and
the declaration or ordering of the effectiveness of such registration
statement.
(b) The
term
“Registrable
Securities”
means
(i) any and all Common Shares issued or issuable upon exercise of the warrants
issued and sold by the Company pursuant to the Subscriptions; (ii) stock
issued in lieu of the Common Shares referred to in (i) in any
reorganization which has not been sold to the public; or (iii) stock issued
in respect of the Common Shares referred to in (i) and (ii) as a
result of a stock split, stock dividend, recapitalization or the like, which
has
not been sold to the public.
(c) The
terms
“Holder”
or
“Holders”
means
any person or persons who hold Registrable Securities or qualifying transferees
under subsection 1.9 hereof who hold Registrable Securities.
(d) The
term
“SEC”
means
the Securities and Exchange Commission.
(e) The
term
“Registration
Expenses”
shall
mean all expenses incurred by the Company in complying with subsections 1.2,
1.3
and 1.4 hereof, including, without limitation, all registration, qualification
and filing fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be paid in
any
event by the Company).
1.2 Company
Registration.
(a) Registration.
If at
any time or from time to time, the Company shall determine to register any
shares of its common stock, for its own account or the account of any of its
shareholders, other than a registration on Form S-8 relating solely to
employee, director or consultant stock option or purchase plans or other equity
compensation plans, or a registration on Form S-4 relating solely to a SEC
Rule 145 transaction, the Company will:
(i) promptly
give to each Holder written notice thereof at least 10 days prior to the initial
filing of the registration statement relating to such registration; and
(ii) include
in such registration, and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests, made within
5
days after receipt of such written notice from the Company, by any Holder or
Holders, except as set forth in subsection 1.2(b) below.
Notwithstanding
the foregoing, if the Company shall have already registered for resale pursuant
to a registration in accordance with Section 1.3 all of the Registrable
Securities, the Company shall not be required to include such Registrable
Securities in the Company’s registration or to deliver the written notice to
each Holder as provided in subsection 1.2(a)(i).
(b) Underwriting.
(i) If
the
registration of which the Company gives notice is for a registered public
offering involving an underwriting, the Company shall so advise the Holders
as a
part of the written notice given pursuant to subsection 1.2(a)(i). In such
event
the right of any Holder to registration pursuant to subsection 1.2 shall be
conditioned upon such Holder’s participation in such underwriting and the
inclusion of such Holder’s Registrable Securities in the underwriting to the
extent provided herein. Notwithstanding the foregoing, if the Company proposes
to commence an underwriting with respect to shares of its common stock and
shall
not have otherwise been required to deliver a notice of the registration to
the
Holders of its Registrable Securities pursuant to the last sentence of
subsection 1.2(a), the Company shall deliver a written notice of such
underwriting at least 10 days prior to the commencement of such underwriting
and
provide the Holders an opportunity to participate in such underwriting in
accordance with this subsection 1.2(b). The Company shall, subject to subsection
1.2(b)(ii) below, include the Registrable Securities of any Holder in such
underwriting that specifies in a written request or requests, made within 5
days
after receipt of such written notice from the Company. All Holders proposing
to
distribute their Registrable Securities through any such underwriting pursuant
to this subsection 1.2(b) shall (together with the Company and the other
shareholders distributing their shares of common stock through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the
Company.
(ii) Notwithstanding
any other provision of this subsection 1.2, if the underwriter managing
such public offering determines that marketing factors require a limitation
of
the number of shares of common stock to be underwritten, and (A) if such
registration is the first registered offering of the sale of the Company’s
common stock to the general public, the underwriter may limit the number of
Registrable Securities to be included in the registration and underwriting,
or
may exclude Registrable Securities entirely from such registration and
underwriting, or (B) if such registration is other than the first
registered offering of the sale of the Company’s common stock to the general
public, the underwriter may limit the amount of Registrable Securities to be
included in the registration and underwriting by the Company’s shareholders;
provided, however, the number of Registrable Securities to be included in such
registration and underwriting under this subsection 1.2(b)(ii) shall not be
reduced to less than thirty percent (30%) of the aggregate shares of common
stock included in such underwriting without the prior consent of at least a
majority of the Holders who have requested their Registrable Securities to
be
included in such underwriting. The Company shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in
the
underwriting shall be allocated among Holders requesting inclusion in such
underwriting in proportion, as nearly as practicable, to the respective amounts
of Registrable Securities held by each of such Holders as of the date of the
notice pursuant to subsection 1.2(a)(i) above; provided that the number of
shares of Registrable Securities requested to be included in such underwriting
shall not be reduced unless all other shares of common stock being sold by
shareholders other than the Holders are first entirely excluded from the
underwriting. If any Holder disapproves of the terms of any such underwriting,
such Holder may elect to withdraw therefrom by written notice to the Company
and
the underwriter. Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
1.3 Form SB-2
or S-3.
In
addition to the rights and obligations set forth in subsection 1.2 above,
Company will use commercially reasonable efforts to prepare and file a
registration statement on Forms SB-2 or S-3 (or any successor to Forms SB-2
or
S-3) to register the resale from time to time of the Holder’s Registrable
Securities. In such a registration, the Company shall use commercially
reasonable efforts to cause such registration statement on Forms SB-2 or S-3
(or
any successor form to Forms SB-2 or S-3) to be declared effective by the
SEC as soon as practicable; provided, however, the Company shall not be required
to effect a registration pursuant to this subsection 1.3:
(a) in
any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service
in
such jurisdiction and except as may be required by the Securities Act;
or
(b) during
the period starting with the date of filing of, and ending on a date 90 days
following the effective date of, a registration statement pursuant to subsection
1.2, provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective
and
further provided that no other person or entity could require the Company to
file a registration statement in such period.
Any
Holder that intends to dispose of Registrable Securities pursuant to a
registration under this subsection 1.3 shall not offer, sell or otherwise
dispose of any Registrable Securities unless it has provided to the Company
a
written notice of its intent to offer and sell the Registrable Securities
pursuant to a registration under this subsection 1.3 at least ten (10) days
prior to the offer or sale of the Registrable Securities. Upon receipt of such
notice by the Company from a Holder, the Company may voluntarily suspend the
effectiveness of any registration statement filed pursuant to this subsection
1.3 for a limited time, which in no event shall be longer than 90 days in any
six-month period, if the Company has been advised by counsel or underwriters
to
the Company that the offering for resale of any Registrable Securities pursuant
to the registration statement would materially adversely affect, or would be
improper in view of (or improper without disclosure in a prospectus), a proposed
financing, a reorganization, recapitalization, merger, consolidation or other
transaction involving the Company.
1.4 Expenses
of Registration.
All
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to this Section 1 shall be borne by
the Company except as follows:
(a) The
Company shall not be required to pay fees or disbursements of more than one
firm
of legal counsel to the Holders, such fees to not exceed $10,000 in the
aggregate.
(b) The
Company shall not be required to pay underwriters’ fees, discounts or
commissions relating to Registrable Securities.
1.5 Registration
Procedures.
In the
case of each registration, qualification or compliance effected by the Company
pursuant to this Agreement, the Company will keep each Holder participating
therein advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof. Except as
otherwise provided in subsection 1.4, at its expense the Company
will:
(a) Prepare
and file with the SEC a registration statement with respect to such Registrable
Securities and use its commercially reasonable efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to 120 days, or if such registration
statement is on Form SB-2 or S-3 (or any successor to Form SB-2 or S-3) and
provides for sales of securities from time to time pursuant to Rule 415 under
the Securities Act, for up to one year.
(b) Prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such
registration statement.
(c) Furnish,
without charge, to the Holders such numbers of copies of a prospectus, including
each preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in
order
to facilitate the disposition of Registrable Securities owned by them. The
Holders shall not be entitled to use any selling materials other than a
prospectus and such other materials as may be approved by the Company, which
approval shall not be unreasonably withheld.
(d) Use
its
commercially reasonable efforts to register and qualify the securities covered
by such registration statement under such other securities or Blue Sky laws
of
such jurisdictions as shall be reasonably requested by the Holders or any
managing underwriter, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or
to
file a general consent to service of process in any such states or
jurisdictions.
(e) In
the
event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering. Notwithstanding the foregoing, the
Company shall not be obligated to enter into an underwriting agreement with
any
underwriter unless the Company was previously consulted with respect to the
selection of each underwriter and the Company consented to such selection,
which
consent shall not be unreasonably withheld. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement.
(f) Notify
each Holder of Registrable Securities covered by such registration statement
at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act or the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(g) The
Company shall:
(i) make
available for inspection by a representative of the Holders, the managing
underwriter participating in any disposition pursuant to such registration
statement and one firm of attorneys designated by the Holders (upon execution
of
customary confidentiality agreements reasonably satisfactory to the Company
and
its counsel), at reasonable times and in reasonable manner, financial and other
records, documents and properties of the Company that are pertinent to the
conduct of due diligence customary for an underwritten offering, and cause
the
officers, directors and employees of the Company to supply all information
reasonably requested by any such representative, underwriter or attorney in
connection with a registration statement as shall be necessary to enable such
persons to conduct a reasonable investigation within the meaning of Section
11
of the Securities Act.
(ii) use
its
commercially reasonable efforts to cause all Registrable Securities covered
by a
registration statement to be listed on any securities exchange or any automated
quotation system on which the shares of common stock of the Company are then
listed;
(iii) cause
to
be provided to the Holders that are selling Registrable Securities pursuant
to
such registration statement and to the managing underwriter if any disposition
pursuant to such registration statement is an underwritten offering, upon the
effectiveness of such registration statement, a customary “10b-5”
opinion
of independent counsel (an “Opinion”)
and a
customary “cold comfort” letter of independent auditors (a “Comfort
Letter”)
in
each case addressed to such Holders and managing underwriter, if
any;
(iv) notify
in
writing the Holders that are selling Registrable Securities pursuant to such
registration statement and any managing underwriter if any disposition pursuant
to such registration statement is an underwritten offering, (A) when the
registration statement has become effective and when any post-effective
amendment thereto has been filed and becomes effective, (B) of any request
by
the SEC or any state securities authority for amendments and supplements to
the
registration statement or of any material request by the SEC or any state
securities authority for additional information after the registration statement
has become effective, (C) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose, (D) if, between
the effective date of the registration statement and the closing of any sale
of
Registrable Securities covered thereby, the representations and warranties
of
the Company contained in any underwriting agreement, securities sales agreement
or other similar agreement, including this Agreement, relating to disclosure
cease to be true and correct in all material respects or if the Company receives
any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose, (E) of the happening of any event during the period
the registration statement is effective such that such registration statement
or
the related prospectus contains an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make
statements therein not misleading (in the case of a prospectus, in light of
circumstances under which they were made) and (F) of any determination by the
Company that a post-effective amendment to the registration statement would
be
appropriate. The Holders hereby agree to suspend, and to cause any managing
underwriter to suspend, use of the prospectus contained in a registration
statement upon receipt of such notice under clause (C), (E) or (F) above until,
in the case of clause (C), such stop order is removed or rescinded or, in the
case of clauses (E) and (F), the Company has amended or supplemented such
prospectus to correct such misstatement or omission or otherwise.
If
the
notification relates to an event described in clauses (E) or (F), the Company
shall promptly prepare and furnish to each selling Holder and each underwriter,
if any, a reasonable number of copies of a prospectus supplemented or amended
so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus shall not 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 not misleading.
(v) provide
and cause to be maintained a transfer agent and registrar for all such
Registrable Securities covered by such registration statement not later than
the
effective date of such registration statement;
(vi) deliver
promptly upon request to each Holder participating in the offering and each
underwriter, if any, copies of all correspondence between the SEC and the
Company, its counsel or auditors and all memoranda relating to discussions
with
the SEC and its staff with respect to the registration statement, other than
those portions of any such correspondence and memoranda which contain
information subject to attorney-client privilege with respect to the Company,
and, upon receipt of such confidentiality agreements as the Company may
reasonably request, make reasonably available for inspection by any Holder
of
such Registrable Securities covered by such registration statement, by any
underwriter, if any, participating in any disposition to be effected pursuant
to
such registration statement and by any attorney, accountant or other agent
retained by any such Holder or any such underwriter, all pertinent financial
and
other records, pertinent corporate documents and properties of the Company,
and
cause all of the Company’s officers, directors and employees to supply all
information reasonably requested by any such Holder, underwriter, attorney,
accountant or agent in connection with such registration statement;
(vii) use
commercially reasonable efforts to obtain the withdrawal of any order suspending
the effectiveness of the registration statement;
(viii) provide
a
CUSIP number for all Registrable Securities not later than the effective date
of
any registration statement;
(ix) make
reasonably available its employees and personnel and otherwise provide
reasonable assistance to the underwriters in the marketing of Registrable
Securities in any underwritten offering;
(x) promptly
prior to the filing of any document which is to be incorporated by reference
into the registration statement or the prospectus (after the initial filing
of
such registration statement) (other than a registration statement or prospectus
prepared pursuant to subsection 1.3) provide copies of such document to counsel
to the seller of Registrable Securities and to the managing underwriter, if
any,
and make the Company’s representatives reasonably available for discussion of
such document and make such changes in such document concerning such sellers
prior to the filing thereof as counsel for such sellers or underwriters may
reasonably request; and
(xi) cooperate
with the sellers of Registrable Securities and the managing underwriter, if
any,
to facilitate the timely preparation and delivery of certificates not bearing
any restrictive legends representing the Registrable Securities to be sold,
and
cause such Registrable Securities to be issued in such denominations and
registered in such names in accordance with the underwriting agreement prior
to
any sale of Registrable Securities to the underwriters or, if not an
underwritten offering, in accordance with the instructions of the sellers of
Registrable Securities at least three business days prior to any sale of
Registrable Securities.
1.6 Indemnification.
(a) The
Company will indemnify and hold harmless to the fullest extent permitted by
law
each Holder of Registrable Securities and each of its officers, directors and
partners, and each person controlling such Holder, with respect to which such
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls any
underwriter of the Registrable Securities held by or issuable to such Holder,
against all claims, losses, expenses, damages and liabilities (or actions in
respect thereto) arising out of or based on (i) any untrue statement (or alleged
untrue statement) of a material fact contained in any registration statement
under which such securities were registered under the Securities Act or the
omission or alleged omission to state therein 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 or final prospectus, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statement therein, in light of the circumstances under
which they were made, or not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act or any state
securities law applicable to the Company or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any such state law and relating
to
action or inaction required of the Company in connection with any such
registration, qualification of compliance, and will reimburse each such Holder,
each of its officers, directors and partners, and each person controlling such
Holder, each such underwriter and each person who controls any such underwriter,
within a reasonable amount of time after incurred for any reasonable legal
and
any other expenses incurred in connection with investigating, defending or
settling any such claim, loss, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 1.6(a) shall not
apply to amounts paid in settlement of any such claim, loss, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld); and provided further, that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage or liability arises out of or is based on any untrue
statement or omission based upon written information furnished to the Company
by
such Holder or underwriter specifically for use therein; and provided further,
however, that the Company will not be liable in any such case to the extent
that
any such claim, loss, damage or liability arises directly out of or is based
primarily upon an untrue statement or omission made in any preliminary or final
prospectus if (i) such Holder failed to send or deliver a copy of the final
prospectus or prospectus supplement with or prior to the delivery of written
confirmation of the sale of the Registrable Securities and (ii) the final
prospectus or prospectus supplement would have corrected such untrue statement
or omission.
(b) Each
Holder will, if Registrable Securities held by or issuable to such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, severally and not jointly, indemnify and hold
harmless to the fullest extent permitted by law the Company, each of its
directors and officers, each underwriter, if any, of the Company’s securities
covered by such a registration statement, each person who controls the Company
within the meaning of the Securities Act, and each other such Holder, each
of
its officers, directors and partners and each person controlling such Holder,
against all claims, losses, expenses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement or final prospectus, or based on any omission (or alleged omission)
to
state therein a material fact required to be stated therein or necessary to
make
the statements therein not misleading, and will reimburse the Company, such
Holders, such directors, officers, partners, persons or underwriters for any
reasonable legal or any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage, liability
or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement or prospectus in reliance upon and in
conformity with information furnished to the Company by such Holder specifically
for use therein; provided, however, that the indemnity agreement contained
in
this subsection 1.6(b) shall not apply to amounts paid in settlement of any
such
claim, loss, damage, liability or action if such settlement is effected without
the consent of the Holder, (which consent shall not be unreasonably withheld);
and provided further, that the total amount for which any Holder shall be liable
under this subsection 1.6(b) shall not in any event exceed the net proceeds
received by such Holder from the sale of Registrable Securities held by such
Holder in such registration; and provided further, that a Holder will not be
liable in any such case to the extent that any such claim, loss, damage or
liability arises out of or is based on any untrue statement or omission based
upon written information furnished to the Holder by the Company or underwriter
specifically for use therein.
(c) Each
party entitled to indemnification under this subsection 1.6 (the
“Indemnified
Party”)
shall
give notice to the party required to provide indemnification (the “Indemnifying
Party”)
promptly after such Indemnified Party has actual knowledge of any claim as
to
which indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim or any litigation resulting therefrom; provided
that counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose approval
shall not be unreasonably withheld), and the Indemnified Party may participate
in such defense at such party’s expense; and provided further, that the failure
of any Indemnified Party to give notice as provided herein shall not relieve
the
Indemnifying Party of its obligations hereunder, except to the extent such
failure resulted in material prejudice to the Indemnifying Party; and provided
further, that an Indemnified Party (together with all other Indemnified Parties
which may be represented without conflict by one counsel) shall have the right
to retain one separate counsel, with the fees and expenses to be paid by the
Indemnifying Party, if representation of such Indemnified Party by the counsel
retained by the Indemnifying Party would be inappropriate due to actual or
potential differing interests between such Indemnified Party and any other
party
represented by such counsel in such proceeding. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of
each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
(d) If
for
any reason the foregoing indemnity is unavailable or is insufficient to hold
harmless an indemnified party under subsection 1.6, then each Indemnifying
Party
shall contribute to the amount paid or payable by such Indemnified Party as
a
result of any claim in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party, on the one hand, and the Indemnified Party,
on
the other hand, with respect to such offering of securities. The relative fault
shall be determined by reference to, among other things, whether the untrue
or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Indemnifying
Party or the Indemnified Party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. If, however, the allocation provided in the second
preceding sentence is not permitted by applicable law, then each Indemnifying
Party shall contribute to the amount paid or payable by such Indemnified Party
in such proportion as is appropriate to reflect not only such relative faults,
but also any other relevant equitable considerations. The parties hereto agree
that it would not be just and equitable if contributions pursuant to this
subsection 1.6(d) were to be determined by pro rata allocation or by any other
method of allocation which does not take into account the equitable
considerations referred to in the preceding sentences of this
subsection 1.6(d). The amount paid or payable in respect of any claim shall
be deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such 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. Notwithstanding anything in
this subsection 1.6 to the contrary, no Indemnifying Party (other than the
Company) shall be required pursuant to this subsection 1.6(d) to contribute
any
amount in excess of the net proceeds received by such Indemnifying Party from
the sale of Registrable Securities in the offering to which the losses, claims,
damages or liabilities of the Indemnified Parties relate, less the amount of
any
indemnification payment made pursuant to subsection 1.6.
(e) The
indemnity agreements contained herein shall be in addition to any other rights
to indemnification or contribution which any Indemnified Party may have pursuant
to law or contract and shall remain operative and in full force and effect
regardless of any investigation made or omitted by, or on behalf of, any
Indemnified Party and shall survive the transfer of the Registrable Securities
by any such party.
1.7 Information
by Holder.
Any
Holder or Holders of Registrable Securities included in any registration shall
promptly furnish to the Company such information regarding such Holder or
Holders and the distribution proposed by such Holder or Holders as the Company
may reasonably request and as shall be required in connection with any
registration, qualification or compliance referred to herein.
1.8 Rule
144 Reporting.
With a
view to making available to Holders the benefits of certain rules and
regulations of the SEC which may permit the sale of the Registrable Securities
to the public without registration, the Company agrees at all times
to:
(a) make
and
keep public information available, as those terms are understood and defined
in
SEC Rule 144, after 90 days after the effective date of the first
registration filed by the Company for an offering of its securities to the
general public;
(b) file
with
the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act (at any time after it
has
become subject to such reporting requirements); and
(c) so
long
as a Holder owns any Registrable Securities, to furnish to such Holder forthwith
upon receipt of a written request a written statement by the Company as to
its
compliance with the reporting requirements of said Rule 144 (at any time
after 90 days after the effective date of the first registration statement
filed
by the Company for an offering of its securities to the general public), and
of
the Securities Act and the Exchange Act (at any time after it has become subject
to such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed by the
Company as the Holder may reasonably request in complying with any rule or
regulation of the SEC allowing the Holder to sell any such securities without
registration.
1.9 Transfer
of Registration Rights.
Holders’ rights to cause the Company to register their securities and keep
information available, granted to them by the Company under
subsections 1.2, 1.3 and 1.8, may be assigned to a transferee or assignee
of (i) at least 100,000 shares of Registrable Securities (as adjusted for
stock splits, stock dividends, recapitalizations and like events), (ii) the
transfer is in connection with the transfer of all the Registrable Securities
of
a Holder (including by way of transfer of a Holder’s Common Shares), or
(iii) to any constituent partners or members of a Holder which is a
partnership or limited liability company, or to affiliates (as such term is
defined in SEC Rule 405) of a Holder, provided, that (a) the Company is given
written notice by such Holder at the time of or within a reasonable time after
said transfer, stating the name and address of said transferee or assignee,
and
identifying the securities with respect to which such registration rights are
being assigned; (b) the assignee
or transferee of such rights agrees in writing to be bound by the terms and
conditions of this Agreement, and
(c)
solely as to transfers pursuant to clause (iii) above, any transferees or
assignees agree to act through a single representative. The Company may prohibit
the transfer of any Holders’ rights under this subsection 1.9 to any proposed
transferee or assignee who the Company reasonably believes is a competitor
of
the Company, or when such transfer may violate applicable securities laws.
Notwithstanding anything else in this subsection 1.9, any Holder may transfer
rights to a transferee of a Holder’s Registrable Securities (or Common Shares)
if such transferee is a partner, member or shareholder or a retired partner,
member or shareholder of such Holder.
1.10 “Market
Stand-Off” Agreement.
Each
Holder hereby agrees that, during the period of duration (not to exceed 180
days) specified by the Company and an underwriter of common stock or other
securities of the Company following the effective date of an IPO or reverse
merger with a public company, it shall not, to the extent requested by the
Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase, pledge or otherwise transfer or dispose of (other than
to
donees who agree to be similarly bound) any securities of the Company held
by it
at any time during such period except common stock included in such
registration. In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the securities of the Company held
by
any such Holder (and the shares of securities of every other person subject
to
the foregoing restriction) until the end of such period.
1.11 Delay
of Registration.
No
Holder shall have any rights to take any actions to restrain, enjoin, or
otherwise delay any registration as the result of any controversy that might
arise with respect to the interpretation or implementation of this Section
1.
1.12 Termination
of Registration Rights.
No
Holder shall be entitled to exercise any right provided for in this Section
1 at
any time, and the obligations of the Company to a Holder under this Section
1
shall terminate with respect to such Holder, when such Holder may sell all
its
Registrable Securities in a three (3) month period under Rule 144 of the Act
(whether or not such Registrable Securities are then held in the form of Common
Shares).
2. Affirmative
Covenants of the Company.
The
Company hereby covenants and agrees as follows:
2.1 Annual
Financial Information.
The
Company shall deliver to each Holder of at least ten thousand (10,000) (as
adjusted for stock splits or recapitalizations) Registrable Securities (a
“Qualified
Holder”)
as
soon as practicable after the end of each fiscal year of the Company, but in
any
event within 90 days thereafter, statements of operations, shareholders’
equity and cash flows of the Company for such year, and a balance sheet of
the
Company as of the end of such year, such year-end financial reports to be in
reasonable detail, prepared in accordance with generally accepted accounting
principles (“GAAP”),
and
audited by independent public accountants selected by the Company’s Board of
Directors.
2.2 Inspection.
The
Company shall permit each Qualified Holder, at such Qualified Holder’s expense,
to visit and inspect the Company’s properties, to examine its books of account
and records and to discuss the Company’s affairs, finances and accounts with its
officers, all at such reasonable times as may be requested by the Qualified
Holder; provided, however, that the Company shall not be obligated pursuant
to
this subsection to provide access to any information which it reasonably
considers to be a trade secret or similar confidential information.
2.3 Termination
of Information Covenants and Confidentiality of Information.
The
covenants of the Company set forth in subsections 2.1 and 2.2 shall terminate
as
to the Qualified Holder and be of no further force or effect when the Company
first becomes subject to the periodic reporting requirements of Section 12(b),
12(g) or 15(d) of the Securities Exchange Act of 1934, as amended. Each
Qualified Holder agrees that it will keep confidential and will not disclose
or
divulge any confidential, proprietary or secret information which such Purchaser
may obtain from the Company, and which the Company has prominently marked
“confidential”,
“proprietary”
or
“secret”
or
has
otherwise identified as being such, pursuant to financial statements, reports
and other materials submitted by the Company as required hereunder, unless
such
information is or becomes known to the Qualified Holder from a source other
than
the Company without violation of any rights of the Company, or is or becomes
publicly known, or unless the Company gives its written consent to the Qualified
Holder’s release of such information, except that no such written consent shall
be required (and the Qualified Holder shall be free to release such information
to such recipient) if such information is to be provided to a Qualified Holder’s
counsel or accountant (and the provision of such information is directly
necessary in order for such recipient provide services to Qualified Holder),
or
to an officer, director or partner of a Qualified Holder, provided that the
Qualified Holder shall inform the recipient of the confidential nature of such
information, and such recipient agrees in writing in advance of disclosure
to
treat the information as confidential.
3. General.
3.1 Waivers
and Amendments.
With
the written consent of the record holders of at least a majority of the
Registrable Securities, the obligations of the Company and the rights of the
parties under this Agreement may be waived (either generally or in a particular
instance, either retroactively or prospectively, and either for a specified
period of time or indefinitely), and with the same consent the Company, when
authorized by resolution of its Board of Directors, may enter into a
supplementary agreement for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement; provided,
however, that no such modification, amendment or waiver shall reduce the
aforesaid percentage of Registrable Securities without the consent of all of
the
Holders of the Registrable Securities. Notwithstanding the foregoing,
subsections 2.1, 2.2, and 2.3 may be amended only with the written consent
of the Company and a majority of the shares then held by Qualified Holders.
Upon
the effectuation of each such waiver, consent, agreement of amendment or
modification, the Company shall promptly give written notice thereof to the
record holders of the Registrable Securities or Qualified Holders, as the case
may be, who have not previously consented thereto in writing. This Agreement
or
any provision hereof may be changed, waived, discharged or terminated only
by a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, except to the extent
provided in this subsection 3.1.
3.2 Governing
Law.
This
Agreement shall be governed in all respects by the laws of the State of Nevada
without regard the principles of conflicts of law thereof.
3.3 Successors
and Assigns.
Except
as otherwise expressly provided herein, the provisions hereof shall inure to
the
benefit of, and be binding upon, the successors, assigns, heirs, executors
and
administrators of the parties hereto.
3.4 Entire
Agreement.
Except
as set forth below, this Agreement and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof, and this Agreement
shall
supersede and cancel all prior agreements between the parties hereto with regard
to the subject matter hereof.
3.5 Notices,
etc.
All
notices and other communications required or permitted hereunder shall be in
writing and shall be delivered by overnight courier service or mailed by first
class mail, postage prepaid, certified or registered mail, return receipt
requested, addressed (a) if to any Purchaser, at such party’s address as
set forth in the Company’s records, or at such other address as such party shall
have furnished to the Company in writing, or (b) if to the Company, at such
address as the Company shall have furnished to the Purchaser in
writing.
3.6 Severability.
In case
any provision of this Agreement shall be invalid, illegal, or unenforceable,
the
validity, legality and enforceability of the remaining provisions of this
Agreement or any provision of the other Agreement s shall not in any way be
affected or impaired thereby.
3.7 Titles
and Subtitles.
The
titles of the sections and subsections of this Agreement are for convenience
of
reference only and are not to be considered in construing this
Agreement.
3.8 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
an original, but all of which together shall constitute one
instrument.
-----
SIGNATURES ON NEXT PAGE -----
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
set
forth underneath their respective signatures below.
“COMPANY”
a
Nevada
corporation
By:
/s/
Xxxxxxx X. Xxxxxxxxx, Xx.
Xxxxxxx
X. Xxxxxxxxx, Xx.
President
Date:
April 18, 2006
“HOLDER”
If
Holder is an individual, sign here: /s/
(Signature)
Print
Name:_____________________________________
If
Holder is a company, trust or other entity, sign here:
Print
Entity Name:________________________________
By:_____________________________________________
(Signature)
Print
Name and Title:______________________________
