EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JANUARY ____, 2004
REGISTRATION RIGHTS AGREEMENT
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THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of January
27, 2004, by and among XECHEM INTERNATIONAL, INC., a Delaware corporation (the
"Company"), and the persons listed on the signature page hereto (each, an
"Investor" and collectively, the "Investors").
RECITALS
A. The parties to this Agreement are parties to an Agreement and Plan of
Merger dated December 23, 2003 (the "Merger Agreement"); and
B. As a condition to the consummation of the transaction contemplated by
the Merger Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement.
NOW THEREFORE, the parties hereto agree as follows:
1. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to register any
of its securities under the Securities Act of 1933, as amended, (other than
a registration relating to the sale of securities to participants in a
dividend reinvestment plan, a registration on Form S-4 relating to a
business combination or similar transaction permitted to be registered on
such Form S-4 or a registration on Form S-8 relating to the sale of
securities to participants in a stock or employee benefit plan) (a
"Piggyback Registration"), the Company shall give prompt written notice to
Investors of its intention to effect such a registration. The notice shall
offer to include in the registration statement any and all of the
Registrable Shares (as defined in SECTION 2 herein). Each Investor shall
have until the 10th day after receipt of such notice to send to the Company
a written request that shall specify the number of Registrable Shares which
Investor desires to have included in the registration statement. The
Company shall include in the filing for registration under the Securities
Act of 1933, as amended (the "Securities Act"), the aggregate number of
Registrable Shares which Investors requested be included in such filing
concurrently with the registration of such other securities, all to the
extent required to permit the public offering and sale of the Registrable
Shares. The Company will use its reasonable efforts through its officers,
directors, auditors, and counsel to cause such registration statement to
become effective as promptly as reasonably practicable; PROVIDED, HOWEVER,
that the number of Registrable Shares that may be registered pursuant to
this SECTION 1(A) on any such registration statement involving an
underwriting shall be subject to those reductions determined to be
necessary by the underwriter of the offering pursuant to SECTION 1(B).
(b) UNDERWRITING. If a Piggyback Registration is for a registered
public offering involving an underwriting, the Company shall so advise
Investors as part of the notice given pursuant to this SECTION 1. The
Company shall (together with all other holders of Common Stock proposing to
distribute their securities through such underwriting), if requested by the
underwriter, enter into an underwriting agreement in customary form with a
managing
underwriter selected for such underwriting by the Company. Notwithstanding
any other provision of this SECTION 1, if the managing underwriter advises
the Company in writing that market factors require exclusion of shares to
be sold by selling stockholders, or a limitation of the number of shares to
be so sold, then the Company shall so advise Investors and the number of
shares of Registrable Shares that may be included in the registration and
underwriting shall be allocated: (i) first, to the securities to be
registered on behalf of the Company; (ii) second, the Registrable Shares
sought to be registered by Investors and (iii) third, pro rata among
holders of all other securities requested to be included in the
registration. No Registrable Shares excluded from the underwriting by
reason of the underwriter market limitation shall be included in such
registration.
(c) EXPENSES OF REGISTRATION. All Registration Expenses (defined
below) incurred in connection with a Piggyback Registration shall be borne
by the Company. All Selling Expenses (defined below) incurred in connection
with a Piggyback Registration shall be borne by Investors for the
Registrable Shares so registered. For purposes of this SECTION 1(C):
(i) "Registration Expenses" shall mean all expenses incurred by
the Company in connection with a Piggyback Registration, including,
without limitation, all registration, filing and qualification fees,
underwriters expense allowances, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses
(but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
(ii) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of the Registrable Shares
in the Piggyback Registration and all fees and disbursements of any
special counsel (other than the Company's regular counsel) for
Investors.
(d) QUALIFICATION FOR SALE. In connection with a Piggyback
Registration, the Company shall use its reasonable best efforts to cause
the Registrable Shares so registered to be registered or qualified for sale
under the securities or blue sky laws of such jurisdictions as Investors
may reasonably request; PROVIDED, HOWEVER, that the Company shall not be
required to qualify to do business in any state by reason of this SECTION
1(D) in which it is not otherwise required to qualify to do business.
(e) EFFECTIVENESS. In connection with a Piggyback Registration, the
Company shall prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement with respect to the Registrable
Shares requested to be registered and use its reasonable best efforts to
cause such registration statement to become effective, and shall keep
effective any Piggyback Registration and shall from time to time amend or
supplement each applicable registration statement, preliminary prospectus,
final prospectus, Application, document and communication for such period
of time as shall be required to permit Investors to complete the offer and
sale of the Registrable Shares covered thereby. The Company shall in no
event be required to keep any such Piggyback Registration in effect for
more than twelve (12) months from the initial effective date of the
Piggyback Registration; PROVIDED, HOWEVER, that, if during the twelve (12)
month period of effectiveness
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of the registration statement, the Company gives to Investors a Blackout
Notice pursuant to SECTION 1(F), the Company shall extend the effectiveness
of the registration statement for the same time period as that set forth in
the Blackout Notice.
(f) BLACKOUT RIGHTS. Following the effective date of any registration
statement filed pursuant to SECTION 1(A) of this Agreement, the Company
shall be entitled, from time to time, to notify Investors to discontinue
offers or sales of shares pursuant to such registration statement for
Registrable Shares for the period of time stated in the written notice (the
"Blackout Notice"), if the Company determines, in its reasonable business
judgment, that the disclosure required in connection with the offers and
sales of the Registrable Shares could materially damage the Company's
ability to successfully complete an acquisition, corporate reorganization,
securities offering or other voluntary transaction undertaken by the
Company (which information the Company would not be required to disclose at
such time other than in connection with Investors' registration statement)
that is material to the Company and its subsidiaries taken as a whole. The
time period for which Investors must discontinue offers or sales of shares
pursuant to a Blackout Notice shall be for any period the Company
reasonably believes is necessary, and if, the Company is unable to
determine the duration of such period at the time the Blackout Notice is
issued, the Blackout Notice may state that the period extends "until the
Investor is otherwise notified by the Company"; provided that the Blackout
Notice may not exceed more than one hundred eighty (180) consecutive days
within any period of three hundred sixty-five (365) consecutive days. The
Blackout Notice shall be signed by an authorized officer of the Company and
shall certify the Company's determination. Each Investor agrees that upon
receipt of a Blackout Notice he shall discontinue offers or sales of
Registrable Shares pursuant to any such registration statement for the
period of time stated in the Blackout Notice.
(g) DISTRIBUTION OF REGISTRATION STATEMENT. In connection with
Piggyback Registration, the Company shall promptly furnish to Investors
such number of copies of the registration statement and of each amendment
and supplement thereto (in each case, including all exhibits), such
reasonable number of copies of each prospectus contained in such
registration statement and each supplement or amendment thereto (including
each preliminary prospectus), all of which shall conform to the
requirements of the Securities Act and the rules and regulations
thereunder, and such other documents, as Investors may reasonably request
to facilitate the disposition of the Registrable Shares included in such
registration.
(h) NOTIFICATION OF EFFECTIVENESS. The Company shall notify Investors
promptly when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration statement
has been filed.
(i) OTHER NOTIFICATIONS. The Company shall promptly notify Investors
at any time when the prospectus included in the Piggyback Registration, as
then in effect, would include an untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances then existing, and at the reasonable request of Investors
prepare and furnish to it such number of copies of a supplement to or an
amendment of such prospectus as may be
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necessary so that, as thereafter delivered to the purchasers of such
Registrable Shares, 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 in the
light of the circumstances under which they were made.
(j) INDEMNIFICATION BY COMPANY. Subject to the conditions set forth
below, the Company agrees to indemnify and hold harmless Investors from and
against any and all loss, liability, charge, claim, damage, and expense
whatsoever (which shall include, for all purposes of this SECTION 1(J), but
not be limited to, reasonable attorneys' fees and any and all reasonable
expenses whatsoever incurred in investigating, preparing, or defending
against any litigation, commenced or threatened, or any claim whatsoever,
and any and all amounts paid in settlement of any claim or litigation), as
and when incurred, arising out of, based upon, or in connection with any
untrue statement or alleged untrue statement of a material fact contained
(A) in any registration statement, preliminary prospectus, or final
prospectus (as from time to time amended and supplemented), or any
amendment or supplement thereto, relating to the sale of any of the
Registrable Shares or (B) in any Application or other document or
communication (in this SECTION 1(J) collectively called an "Application")
executed by or on behalf of the Company and based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order
to register or qualify any of the Registrable Shares under the Securities
Act or blue sky laws thereof or filed with the Commission or any securities
exchange; or any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements made
therein not misleading, unless such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of Investors for inclusion in any registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any Application, as the case may be.
If any action is brought against Investors in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph,
Investors shall promptly notify the Company in writing of the institution
of such action (the failure to notify the Company within a reasonable time
of the commencement of any such action, to the extent prejudicial to the
Company's ability to defend such action, shall relieve the Company of
liability to Investors pursuant to this SECTION 1(J) and the Company shall
promptly assume the defense of such action, including the employment of
counsel, provided that Investors shall have the right to employ his or her
own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of Investors unless the employment of such counsel
shall have been authorized in writing by the Company in connection with the
defense of such action or Investors shall have reasonably concluded that
there may be one or more legal defenses available to him or her which are
different from or additional to those available to the Company, in any of
which events such fees and expenses shall be borne by the Company and the
Company shall not have the right to direct the defense of such action on
behalf of Investors. Notwithstanding anything in this SECTION 1(J) to the
contrary, the Company shall not be liable for any settlement of any such
claim or action effected without its written consent. The Company shall
not, without the prior written consent of Investors, settle or compromise
any action, or permit a default or consent to the entry of judgment in or
otherwise seek to terminate any pending or threatened action, in respective
of which
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indemnity may be sought hereunder, unless such settlement, compromise,
consent, or termination includes an unconditional release of Investors from
all liability in respect of such action. The Company agrees promptly to
notify Investors of the commencement of any litigation or proceedings
against the Company or any of its officers or directors in connection with
the sale of any Registrable Shares or any preliminary prospectus,
prospectus, registration statement, or amendment or supplement thereto, or
any Application relating to any sale of any Registrable Shares.
(k) INDEMNIFICATION BY INVESTORS. Each Investor, severally and with
respect to himself only, agrees to indemnify and hold harmless the Company,
each director of the Company, each officer of the Company who shall have
signed any registration statement covering Registrable Shares held by
Investor, to the same extent as the foregoing indemnity from the Company to
Investor in SECTION 1(J), but only with respect to statements or omissions,
if any, made in any registration statement, preliminary prospectus, or
final prospectus (as from time to time amended and supplemented), or any
amendment or supplement thereto, or in any Application, in reliance upon
and in conformity with written information furnished to the Company with
respect to Investor by or on behalf of Investor, for inclusion in any such
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any Application, as the case may be.
If any action shall be brought against the Company or any other person so
indemnified based on any such registration statement, preliminary
prospectus, or final prospectus or any amendment or supplement thereto, or
in any Application, and in respect of which indemnity may be sought against
Investor pursuant to this SECTION 1(K), Investor shall have the rights and
duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to Investor, by the
provisions of SECTION 1(J).
(l) TERMINATION OF REGISTRATION RIGHTS. This Agreement shall terminate
on the date that all Registrable Shares have been distributed to the public
pursuant to an offering registered under the Securities Act or sold to the
public through a broker, dealer or market maker in compliance with Rule 144
under the Securities Act (or any similar rule then in force).
2. DEFINITIONS.
(a) "Person" means and includes any individual, corporation, a joint
venture, partnership, association, limited liability company, trust,
estate, or other entity.
(b) "Registrable Shares" means (i) shares of Common Stock of the
Company, par value, $0.00001 per share, issued upon conversion of the Class
C Series 7 Voting Preferred Stock issued to the Investors pursuant to the
Merger Agreement, (ii) those shares of Common Stock of the Company, par
value $0.00001, issued to the Investors pursuant to Section 1.7 of the
Merger Agreement, and (iii) any other Common Stock issued or issuable with
respect to the securities referred to in clause (i) or (ii) by way of a
stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As
to any particular Registrable Shares, such securities will cease to be
Registrable Shares when they have been distributed to the public pursuant
to an offering
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registered under the Securities Act or sold to the public through a broker,
dealer or market maker in compliance with Rule 144 under the Securities Act
(or any similar rule then in force). For purposes of this Agreement, a
Person will be deemed to be a holder of Registrable Shares whenever such
Person has the right to acquire directly or indirectly such Registrable
Shares (upon conversion or exercise in connection with a transfer of
securities or otherwise, but disregarding any restrictions or limitations
upon the exercise of such right), whether or not such acquisition has
actually been effected.
(c) Unless otherwise stated, other capitalized terms contained herein
have the meanings set forth in the Merger Agreement.
3. LOCK - UP. Each Investor hereby agrees that with respect to the
following portions of the Registrable Shares and for the corresponding periods
following the date of this Agreement, the Investor will not, without the prior
written consent of the Company, directly or indirectly: (i) issue, offer, agree
to offer to sell, grant an option for the purchase or sale of, transfer, pledge,
assign, hypothecate, distribute or otherwise encumber or dispose of any
Registrable Shares (whether pursuant to Rule 144 of the General Rules and
Regulations under the Securities Act of 1933, as amended, or otherwise) or (ii)
enter into any swap or other derivatives transaction that transfers to another,
in whole or in part, any of the economic benefits or risks of ownership of the
Registrable Shares:
(a) With respect to 10% of the Registrable Shares, for a period of
twelve months;
(b) With respect to 40% of the Registrable Shares, for a period of
eighteen months; and
(c) With respect to 50% of the Registrable Shares, for a period of
twenty four months.
Notwithstanding the foregoing, if applicable to the Investor, this
PARAGRAPH 3 shall not prohibit: (a) a bona fide gift or gifts of all or a
portion of the Registrable Units, provided that the Investor provides
written notice of such gifts to the Company and the donee or donees thereof
agree in writing to be bound by the terms and conditions of this Agreement;
(b) transfers upon the death of the Investor to his executors,
administrators, testamentary trustees, legatees or beneficiaries and (c)
transfers made by the Investor to a trust or custodianship, the
beneficiaries of which include the Investor, his spouse or descendants
(biological or adoptive); provided that the transferee or transferees agree
in writing to be bound by the terms and conditions of this Agreement. In
furtherance of the foregoing, the Company and its transfer agent are hereby
authorized to decline to make any transfer of the Registrable Shares if
such transfer would, or could be reasonably expected to, constitute a
violation or breach of this Agreement.
4. MISCELLANEOUS.
(a) ADJUSTMENTS AFFECTING REGISTRABLE SHARES. The Company will not
take any action, or permit any change to occur, with respect to its
securities which would materially
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and adversely affect the ability of the holders of Registrable Shares to
include such Registrable Shares in a registration undertaken pursuant to
this Agreement or which would materially and adversely affect the
marketability of such Registrable Shares in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(b) REMEDIES. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement
and to exercise all other rights granted by law. The parties hereto agree
and acknowledge that money damages may not be an adequate remedy for any
breach of the provisions of this Agreement and that any party may in its
sole discretion apply to any court of law or equity of competent
jurisdiction (without posting any bond or other security) for specific
performance and for other injunctive relief in order to enforce or prevent
violation of the provisions of this Agreement.
(c) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and Investor.
(d) SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure
to the benefit of the respective successors and permitted assigns of the
parties hereto whether so expressed or not.
(e) SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
(f) COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will
constitute one and the same Agreement.
(g) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(h) GOVERNING LAW. The corporate law of the State of Delaware will
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits and schedules hereto
shall be governed by the internal law, and not the law of conflicts, of
Delaware.
(i) NOTICES. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered
personally to the recipient, sent to the recipient by reputable express
courier service (charges prepaid) or mailed to the recipient by certified
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or registered mail, return receipt requested and postage prepaid. Such
notices, demands and other communications will be sent to the address
indicated below:
(i) if to the Company
Xechem International, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxx X Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx
Phone: 000-000-0000
Fax: 000-000-0000
with a copy to:
Xxxxxxx & Xxxxxxxx Ltd.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxxx X Xxxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
(ii) if to an Investor:
to the address listed on the Company's stockholder records
with a copy to:
Lampf, Lipkind, Prupis & Petigrow.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxx
Phone: 000-000-0000
Fax: 000-000-0000
or such other addresses or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
THE COMPANY:
XECHEM INTERNATIONAL, INC., a
Delaware corporation
By:
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Name:
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Its:
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INVESTOR:
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