EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of June 30, 2006, among Consolidated Energy, Inc., a Wyoming
corporation (the "Company"), and the several purchasers signatory hereto (each
such purchaser is a "Purchaser" and collectively, the "Purchasers").
This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof between the Company and each Purchaser (the
"Purchase Agreement").
The Company and each Purchaser hereby agrees as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"Advice" shall have the meaning set forth in Section 6(d).
"Effectiveness Date" means, with respect to the initial
Registration Statement required to be filed hereunder, the 60th
calendar day following the Filing Date and, with respect to any
additional Registration Statements which may be required pursuant to
Section 3(c), the 60th calendar day following the date on which the
Company first knows, or reasonably should have known, that such
additional Registration Statement is required hereunder; provided,
however, in the event the Company is notified by the Commission that
one of the above Registration Statements will not be reviewed or is no
longer subject to further review and comments, the Effectiveness Date
as to such Registration Statement shall be the fifth Trading Day
following the date on which the Company is so notified if such date
precedes the dates required above.
"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Event" shall have the meaning set forth in Section 2(b).
"Event Date" shall have the meaning set forth in Section 2(b).
"Filing Date" means, with respect to the initial Registration
Statement required hereunder, the earlier of (i) the 60th calendar day
following the date hereof or (ii) the 20th calendar day following the
date on which the Company's registration statement on file with the
Commission as of the Closing Date is declared effective and, with
respect to any additional Registration Statements which may be
required pursuant to Section 3(c), the 30th day following the date on
which the Company first knows, or reasonably should have known that
such additional Registration Statement is required hereunder.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
5(c).
"Indemnifying Party" shall have the meaning set forth in Section
5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Plan of Distribution" shall have the meaning set forth in
Section 2(a).
"Prospectus" means the prospectus included in a Registration
Statement (including, without limitation, a prospectus that includes
any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), 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 a Registration
Statement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such
Prospectus.
"Registrable Securities" means (i) all of the shares of Common
Stock issuable upon conversion in full of the Debentures, (ii) all
shares issuable as interest on the Debentures assuming all permissible
interest payments are made in shares of Common Stock and the
Debentures are held until maturity, (iii) all Financing Shares and
Additional Financing Shares, (iv) all shares issuable upon the
exercise of the Financing Warrants, (v) any additional shares issuable
in connection with any anti-dilution provisions in the Debentures (in
each case, without giving effect to any limitations on conversion set
forth in the Debenture), and (vi) any securities issued or issuable
upon any stock split, dividend or other distribution, recapitalization
or similar event with respect to the foregoing.
"Registration Statement" means the registration statements
required to be filed hereunder and any additional registration
statements contemplated by Section 3(c), including (in each case) the
Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed
to be incorporated by reference in such registration statement.
"Rule 415" means Rule 415 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such Rule.
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"Rule 424" means Rule 424 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such Rule.
"Selling Shareholder Questionnaire" shall have the meaning set
forth in Section 3(a).
2. Shelf Registration
(a) On or prior to each Filing Date, the Company shall prepare
and file with the Commission a "Shelf" Registration Statement covering
the resale of 130% of the Registrable Securities on such Filing Date
for an offering to be made on a continuous basis pursuant to Rule 415.
The Registration Statement shall be on Form SB-2 (except if the
Company is not then eligible to register for resale the Registrable
Securities on Form SB-2, in which case such registration shall be on
another appropriate form in accordance herewith) and shall contain
(unless otherwise directed by at least a 67% majority in interest of
the Holders) substantially the "Plan of Distribution" attached hereto
as Annex A. Subject to the terms of this Agreement, the Company shall
use its best commercial efforts to cause a Registration Statement to
be declared effective under the Securities Act as promptly as possible
after the filing thereof, but in any event prior to the applicable
Effectiveness Date, and shall use its best efforts to keep such
Registration Statement continuously effective under the Securities Act
until the earlier of (i) the date on which all Registrable Securities
covered by such Registration Statement have been sold or (ii) the date
on which all Registrable Securities may be sold without volume
restrictions pursuant to Rule 144(k), as determined by the counsel to
the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Transfer Agent and the affected
Holders (the "Effectiveness Period"). The Company shall telephonically
request effectiveness of a Registration Statement as of 5:00 p.m. New
York City time on a Trading Day. The Company shall immediately notify
the Holders via facsimile of the effectiveness of a Registration
Statement on the same Trading Day that the Company telephonically
confirms effectiveness with the Commission, which shall be the date
requested for effectiveness of a Registration Statement. The Company
shall, by 9:30 a.m. New York City time on the second Trading Day after
the Effective Date (as defined in the Purchase Agreement), file a
final Prospectus with the Commission as required by Rule 424. Failure
to so notify the Holder within 1 Trading Day of such notification of
effectiveness or failure to file a final Prospectus as a foresaid
shall be deemed an Event under Section 2(b).
(b) If: (i) a Registration Statement is not filed on or prior to
its Filing Date (if the Company files a Registration Statement without
affording the Holders the opportunity to review and comment on the
same as required by Section 3(a), the Company shall not be deemed to
have satisfied this clause (i)), or (ii) the Company fails to file
with the Commission a request for acceleration in accordance with Rule
461 promulgated under the Securities Act within 5 Trading Days of the
date that the Company is notified (orally or in writing, whichever is
earlier) by the Commission that a Registration Statement will not be
"reviewed," or not subject to further review, or (iii) prior to its
Effectiveness Date, the Company fails to file a pre-effective
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amendment and otherwise respond in writing to comments made by the
Commission in respect of such Registration Statement within 30
calendar days after the receipt of comments by or notice from the
Commission that such amendment is required in order for a Registration
Statement to be declared effective, or (iv) a Registration Statement
filed or required to be filed hereunder is not declared effective by
the Commission by its Effectiveness Date, or (v) after the
Effectiveness Date, a Registration Statement ceases for any reason to
remain continuously effective as to all Registrable Securities for
which it is required to be effective, or the Holders are otherwise not
permitted to utilize the Prospectus therein to resell such Registrable
Securities for more than 10 consecutive calendar days or more than an
aggregate of 15 calendar days (which need not be consecutive calendar
days) during any 12-month period (any such failure or breach being
referred to as an "Event", and for purposes of clause (i) or (iv) the
date on which such Event occurs, or for purposes of clause (ii) the
date on which such 5 Trading Day period is exceeded, or for purposes
of clause (iii) the date which such 30 calendar day period is
exceeded, or for purposes of clause (v) the date on which such 10 or
15 calendar day period, as applicable, is exceeded being referred to
as "Event Date"), then in addition to any other rights the Holders may
have hereunder or under applicable law, on each such Event Date and on
each monthly anniversary of each such Event Date (if the applicable
Event shall not have been cured by such date) until the applicable
Event is cured, the Company shall pay to each Holder an amount in
cash, as partial liquidated damages and not as a penalty, equal to
1.5% of the aggregate purchase price paid by such Holder pursuant to
the Purchase Agreement for any Registrable Securities then held by
such Holder, provided that such liquidated damages shall not exceed
18% in the aggregate. If the Company fails to pay any partial
liquidated damages pursuant to this Section in full within seven days
after the date payable, the Company will pay interest thereon at a
rate of 18% per annum (or such lesser maximum amount that is permitted
to be paid by applicable law) to the Holder, accruing daily from the
date such partial liquidated damages are due until such amounts, plus
all such interest thereon, are paid in full. The partial liquidated
damages pursuant to the terms hereof shall apply on a daily pro-rata
basis for any portion of a month prior to the cure of an Event.
3. Registration Procedures.
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Not less than 3 Trading Days prior to the filing of each
Registration Statement and not less than 1 Trading Day prior to the
filing of any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed
to be incorporated therein by reference), the Company shall (i)
furnish to each Holder copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such
Holders and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries
as shall be necessary, in the reasonable opinion of respective counsel
to each Holder to conduct a reasonable investigation within the
meaning of the Securities Act. The Company shall not file a
Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the
Registrable Securities shall reasonably object in good faith, provided
that, the Company is notified of such objection in writing no later
than 3 Trading Days after the Holders have been so furnished copies of
a Registration Statement or 1 Trading Day after the Holders have been
so furnished copies of any related Prospectus or amendments or
supplements thereto. Each Holder agrees to furnish to the Company a
completed Questionnaire in the form attached to this Agreement as
Annex B (a "Selling Shareholder Questionnaire") not less than 2
Trading Days prior to the Filing Date or by the end of the fourth
Trading Day following the date on which such Holder receives draft
materials in accordance with this Section.
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(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to a Registration Statement and
the Prospectus used in connection therewith as may be necessary to
keep a Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and
prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus
to be amended or supplemented by any required Prospectus supplement
(subject to the terms of this Agreement), and as so supplemented or
amended to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably possible to any comments received from the Commission with
respect to a Registration Statement or any amendment thereto and as
promptly as reasonably possible provide the Holders true and complete
copies of all correspondence from and to the Commission relating to a
Registration Statement, provided that the Company may excise any
information contained therein which would constitute material
non-public information as to any Holder which has not executed a
confidentiality agreement with the Company; and (iv) comply in all
material respects with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all Registrable
Securities covered by a Registration Statement during the applicable
period in accordance (subject to the terms of this Agreement) with the
intended methods of disposition by the Holders thereof set forth in
such Registration Statement as so amended or in such Prospectus as so
supplemented.
(c) If during the Effectiveness Period, the number of Registrable
Securities at any time exceeds 90% of the number of shares of Common
Stock then registered in a Registration Statement, then the Company
shall file as soon as reasonably practicable but in any case prior to
the applicable Filing Date, an additional Registration Statement
covering the resale by the Holders of not less than 130% of the number
of such Registrable Securities.
(d) Notify the Holders of Registrable Securities to be sold
(which notice shall, pursuant to clauses (iii) through (vi) hereof, be
accompanied by an instruction to suspend the use of the Prospectus
until the requisite changes have been made) as promptly as reasonably
possible (and, in the case of (i)(A) below, not less than 1 Trading
Day prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than 1 Trading Day following
the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to a Registration Statement is proposed to be
filed; (B) when the Commission notifies the Company whether there will
be a "review" of such Registration Statement and whenever the
Commission comments in writing on such Registration Statement; and (C)
with respect to a Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any request by
the Commission or any other Federal or state governmental authority
for amendments or supplements to a Registration Statement or
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Prospectus or for additional information; (iii) of the issuance by the
Commission or any other federal or state governmental authority of any
stop order suspending the effectiveness of a Registration Statement
covering any or all of the Registrable Securities or the initiation of
any Proceedings for that purpose; (iv) of the receipt by the Company
of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation
or threatening of any Proceeding for such purpose; (v) of the
occurrence of any event or passage of time that makes the financial
statements included in a Registration Statement ineligible for
inclusion therein or any statement made in a Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires
any revisions to a Registration Statement, Prospectus or other
documents so that, in the case of a Registration Statement or the
Prospectus, as the case may be, it will not contain any 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, in light of the circumstances under which they were made, not
misleading; and (vi) the occurrence or existence of any pending
corporate development with respect to the Company that the Company
believes may be material and that, in the determination of the
Company, makes it not in the best interest of the Company to allow
continued availability of a Registration Statement or Prospectus;
provided that any and all of such information shall remain
confidential to each Holder until such information otherwise becomes
public, unless disclosure by a Holder is required by law; provided,
further, notwithstanding each Holder's agreement to keep such
information confidential, the Holders make no acknowledgement that any
such information is material, non-public information.
(e) Use its best commercial efforts to avoid the issuance of, or,
if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of a Registration Statement, or (ii) any suspension of
the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest
practicable moment.
(f) Furnish to each Holder, without charge, at least one
conformed copy of each such Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference to the
extent requested by such Person, and all exhibits to the extent
requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents
with the Commission.
(g) Subject to the terms of this Agreement, the Company hereby
consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with
the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto, except after the
giving of any notice pursuant to Section 3(d).
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(h) If NASDR Rule 2710 requires any broker-dealer to make a
filing prior to executing a sale by a Holder, if requested by the
Holder the Company shall (i) make an Issuer Filing with the NASDR,
Inc. Corporate Financing Department pursuant to NASDR Rule 2710(b)(4),
(ii) respond within 5 Trading Days to any comments received from NASDR
in connection therewith and (iii) pay the filing fee required in
connection therewith.
(i) Prior to any resale of Registrable Securities by a Holder,
use its commercially reasonable efforts to register or qualify or
cooperate with the selling Holders in connection with the registration
or qualification (or exemption from the Registration or qualification)
of such Registrable Securities for the resale by the Holder under the
securities or Blue Sky laws of such jurisdictions within the United
States as any Holder reasonably requests in writing, to keep each
registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or
things reasonably necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by each
Registration Statement, provided that the Company shall not be
required to qualify generally to do business in any jurisdiction where
it is not then so qualified, subject the Company to any material tax
in any such jurisdiction where it is not then so subject or file a
general consent to service of process in any such jurisdiction.
(j) If requested by the Holders, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be delivered to a transferee
pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by the Purchase Agreement, of all
restrictive legends, and to enable such Registrable Securities to be
in such denominations and registered in such names as any such Holders
may request.
(k) Upon the occurrence of any event contemplated by this Section
3, as promptly as reasonably possible under the circumstances taking
into account the Company's good faith assessment of any adverse
consequences to the Company and its stockholders of the premature
disclosure of such event, prepare a supplement or amendment, including
a post-effective amendment, to a Registration Statement or a
supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, and file any other
required document so that, as thereafter delivered, neither a
Registration Statement nor such Prospectus will 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, in
light of the circumstances under which they were made, not misleading.
If the Company notifies the Holders in accordance with clauses (iii)
through (vi) of Section 3(d) above to suspend the use of any
Prospectus until the requisite changes to such Prospectus have been
made, then the Holders shall suspend use of such Prospectus. The
Company will use its best commercial efforts to ensure that the use of
the Prospectus may be resumed as promptly as is practicable. The
Company shall be entitled to exercise its right under this Section
3(k) to suspend the availability of a Registration Statement and
Prospectus, subject to the payment of partial liquidated damages
pursuant to Section 2(b), for a period not to exceed 60 calendar days
(which need not be consecutive days) in any 12 month period.
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(l) Comply with all applicable rules and regulations of the
Commission.
(m) The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common
Stock beneficially owned by such Holder and, if required by the
Commission, the natural persons thereof that have voting and
dispositive control over the Shares. During any periods that the
Company is unable to meet its obligations hereunder with respect to
the registration of the Registrable Securities solely because any
Holder fails to furnish such information within 3 Trading Days of the
Company's request, any liquidated damages that are accruing at such
time as to such Holder only shall be tolled and any Event that may
otherwise occur solely because of such delay shall be suspended, until
such information is delivered to the Company.
4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with any Trading Market on which the Common Stock is then
listed for trading, (B) in compliance with applicable state securities or Blue
Sky laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities) and (C) if
not previously paid by the Company in connection with an Issuer Filing, with
respect to any filing that may be required to be made by any broker through
which a Holder intends to make sales of Registrable Securities with NASD
Regulation, Inc. pursuant to the NASD Rule 2710, so long as the broker is
receiving no more than a customary brokerage commission in connection with such
sale, (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities), (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company,
(v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions of any Holder or, except to
the extent provided for in the Transaction Documents, any legal fees or other
costs of the Holders.
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5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, the officers, directors, members, partners,
agents, brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and
employees (and any other Persons with a functionally equivalent role
of a Person holding such titles, notwithstanding a lack of such title
or any other title) of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers, directors, members,
shareholders, partners, agents and employees (and any other Persons
with a functionally equivalent role of a Person holding such titles,
notwithstanding a lack of such title or any other title) of each such
controlling Person, to the fullest extent permitted by applicable law,
from and against any and all losses, claims, damages, liabilities,
costs (including, without limitation, reasonable attorneys' fees) and
expenses (collectively, "Losses"), as incurred, arising out of or
relating to (1) any untrue or alleged untrue statement of a material
fact contained in a Registration Statement, any Prospectus or any form
of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of
the circumstances under which they were made) not misleading or (2)
any violation or alleged violation by the Company of the Securities
Act, the Exchange Act or any state securities law, or any rule or
regulation thereunder, in connection with the performance of its
obligations under this Agreement, except to the extent, but only to
the extent, that (i) such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to
the Company by such Holder expressly for use therein, or to the extent
that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in a
Registration Statement, such Prospectus or such form of Prospectus or
in any amendment or supplement thereto (it being understood that the
Holder has approved Annex A hereto for this ------- purpose) or (ii)
in the case of an occurrence of an event of the type specified in
Section 3(d)(iii)-(vi), the use by such Holder of an outdated or
defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in Section 6(d). The
Company shall notify the Holders promptly of the institution, threat
or assertion of any Proceeding arising from or in connection with the
transactions contemplated by this Agreement of which the Company is
aware.
(b) Indemnification by Holders. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act), and the directors, officers, agents or employees
of such controlling Persons, to the fullest extent permitted by
applicable law, from and against all Losses, as incurred, to the
extent arising out of or based solely upon: (x) such Holder's failure
to comply with the prospectus delivery requirements of the Securities
Act or (y) any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, any Prospectus, or any form
of prospectus, or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission
9
or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading (i) to the
extent, but only to the extent, that such untrue statement or omission
is contained in any information so furnished in writing by such Holder
to the Company specifically for inclusion in such Registration
Statement or such Prospectus or (ii) to the extent that such
information relates to such Holder's proposed method of distribution
of Registrable Securities and was reviewed and expressly approved in
writing by such Holder expressly for use in a Registration Statement
(it being understood that the Holder has approved Annex A hereto for
this purpose), such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence
of an event of the type specified in Section 3(d)(iii)-(vi), the use
by such Holder of an outdated or defective Prospectus after the
Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the
Advice contemplated in Section 6(d). In no event shall the liability
of any selling Holder hereunder be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of
the Registrable Securities giving rise to such indemnification
obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "Indemnified Party"), such Indemnified Party shall
promptly notify the Person from whom indemnity is sought (the
"Indemnifying Party") in writing, and the Indemnifying Party shall
have the right to assume the defense thereof, including the employment
of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and
only) to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal
or further review) that such failure shall have prejudiced the
Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless: (1) the
Indemnifying Party has agreed in writing to pay such fees and
expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded
parties) include both such Indemnified Party and the Indemnifying
Party, and counsel to the Indemnified Party shall reasonably believe
that a material conflict of interest is likely to exist if the same
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counsel were to represent such Indemnified Party and the Indemnifying
Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate
counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense thereof and the
reasonable fees and expenses of no more than one separate counsel
shall be at the expense of the Indemnifying Party). The Indemnifying
Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be
unreasonably withheld or delayed. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on
claims that are the subject matter of such Proceeding.
Subject to the terms of this Agreement, all reasonable fees and
expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with
this Section) shall be paid to the Indemnified Party, as incurred,
within ten Trading Days of written notice thereof to the Indemnifying
Party; provided, that the Indemnified Party shall promptly reimburse
the Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is
judicially determined to be not entitled to indemnification hereunder.
(d) Contribution. If the indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party or insufficient to hold an
Indemnified Party harmless for any Losses, then each Indemnifying
Party shall contribute to the amount paid or payable by such
Indemnified Party, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in
connection with the actions, statements or omissions that resulted in
such Losses 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 any
action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable
by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in this Agreement, any reasonable
attorneys' or other fees or expenses incurred by such party in
connection with any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification
provided for in this Section was available to such party in accordance
with its terms.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of
this Section 5(d), no Holder shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the net
proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of
any damages that such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or
alleged omission.
11
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties
may have to the Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder of any of their respective obligations under this Agreement,
each Holder or the Company, as the case may be, in addition to being
entitled to exercise all rights granted by law and under this
Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of
any of the provisions of this Agreement and hereby further agrees
that, in the event of any action for specific performance in respect
of such breach, it shall not assert or shall waive the defense that a
remedy at law would be adequate.
(b) No Piggyback on Registrations. Except as set forth on
Schedule 6(b) attached hereto, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant
hereto) may include securities of the Company in the initial
Registration Statement other than the Registrable Securities. The
Company shall not file any other registration statements until the
initial Registration Statement required hereunder is declared
effective by the Commission, provided that this Section 6(b) shall not
prohibit the Company from filing amendments to registration statements
already filed.
(c) Compliance. Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act
as applicable to it in connection with sales of Registrable Securities
pursuant to a Registration Statement.
(d) Discontinued Disposition. Each Holder agrees by its
acquisition of Registrable Securities that, upon receipt of a notice
from the Company of the occurrence of any event of the kind described
in Section 3(d)(iii) through (vi), such Holder will forthwith
discontinue disposition of such Registrable Securities under a
Registration Statement until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus (as it may
have been supplemented or amended) may be resumed. The Company will
use its best commercial efforts to ensure that the use of the
Prospectus may be resumed as promptly as it practicable. The Company
agrees and acknowledges that any periods during which the Holder is
required to discontinue the disposition of the Registrable Securities
hereunder shall be subject to the provisions of Section 2(b).
(e) Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement
covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account
of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection
12
with the stock option or other employee benefit plans, then the
Company shall send to each Holder a written notice of such
determination and, if within fifteen days after the date of such
notice, any such Holder shall so request in writing, the Company shall
include in such registration statement all or any part of such
Registrable Securities such Holder requests to be registered;
provided, however, that the Company shall not be required to register
any Registrable Securities pursuant to this Section 6(e) that are
eligible for resale pursuant to Rule 144(k) promulgated under the
Securities Act or that are the subject of a then effective
Registration Statement.
(f) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the same shall be in
writing and signed by the Company and each Holder of the then
outstanding Registrable Securities. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to
a matter that relates exclusively to the rights of Holders and that
does not directly or indirectly affect the rights of other Holders may
be given by Holders of all of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of
this sentence may not be amended, modified, or supplemented except in
accordance with the provisions of the immediately preceding sentence.
(g) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be
delivered as set forth in the Purchase Agreement.
(h) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder. The
Company may not assign (except by merger) its rights or obligations
hereunder without the prior written consent of all of the Holders of
the then-outstanding Registrable Securities, which consent shall not
be unreasonably withheld. Each Holder may assign their respective
rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.
(i) No Inconsistent Agreements. Neither the Company nor any of
its Subsidiaries has entered, as of the date hereof, nor shall the
Company or any of its Subsidiaries, on or after the date of this
Agreement, enter into any agreement with respect to its securities,
that would have the effect of impairing the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions
hereof. Except as set forth on Schedule 6(i), neither the Company nor
any of its Subsidiaries has previously entered into any agreement
granting any registration rights with respect to any of its securities
to any Person that have not been satisfied in full.
(j) Execution and Counterparts. This Agreement may be executed in
two or more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a ".pdf" format data file, such
signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile or ".pdf" signature page
were an original thereof.
13
(k) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be
determined in accordance with the provisions of the Purchase
Agreement.
(l) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any other remedies provided by law.
(m) Severability. 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 commercially
reasonable 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.
(n) Headings. The headings in this Agreement are for convenience
only, do not constitute a part of the Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
(o) Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with
the obligations of any other Holder hereunder, and no Holder shall be
responsible in any way for the performance of the obligations of any
other Holder hereunder. Nothing contained herein or in any other
agreement or document delivered at any closing, and no action taken by
any Holder pursuant hereto or thereto, shall be deemed to constitute
the Holders as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Holders are in
any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be
entitled to protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall not
be necessary for any other Holder to be joined as an additional party
in any proceeding for such purpose.
********************
14
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
CONSOLIDATED ENERGY, INC.
By:__________________________________________
Name: Xxxxx Xxxxxxx
Title: President
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
15
[SIGNATURE PAGE OF HOLDERS TO CEIW RRA]
Name of Holder: __________________________
Signature of Authorized Signatory of Holder: __________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
[SIGNATURE PAGES CONTINUE]
16
Annex A
Plan of Distribution
Each Selling Stockholder (the "Selling Stockholders") of the common
stock and any of their pledgees, assignees and successors-in-interest may, from
time to time, sell any or all of their shares of common stock on the OTC
Bulletin Board or any other stock exchange, market or trading facility on which
the shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. A Selling Stockholder may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o settlement of short sales entered into after the effective date of the
registration statement of which this prospectus is a part;
o broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
o through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
o a combination of any such methods of sale; or
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.
17
In connection with the sale of the common stock or interests therein,
the Selling Stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each Selling Stockholder has
informed the Company that it does not have any written or oral agreement or
understanding, directly or indirectly, with any person to distribute the Common
Stock. In no event shall any broker-dealer receive fees, commissions and markups
which, in the aggregate, would exceed eight percent (8%).
The Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the shares. The Company has agreed
to indemnify the Selling Stockholders against certain losses, claims, damages
and liabilities, including liabilities under the Securities Act.
Because Selling Stockholders may be deemed to be "underwriters" within
the meaning of the Securities Act, they will be subject to the prospectus
delivery requirements of the Securities Act including Rule 172 thereunder. In
addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather
than under this prospectus. There is no underwriter or coordinating broker
acting in connection with the proposed sale of the resale shares by the Selling
Stockholders.
We agreed to keep this prospectus effective until the earlier of (i)
the date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule
144(k) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
18
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the resale shares may not simultaneously
engage in market making activities with respect to the common stock for the
applicable restricted period, as defined in Regulation M, prior to the
commencement of the distribution. In addition, the Selling Stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of shares of the common stock by the Selling Stockholders or
any other person. We will make copies of this prospectus available to the
Selling Stockholders and have informed them of the need to deliver a copy of
this prospectus to each purchaser at or prior to the time of the sale (including
by compliance with Rule 172 under the Securities Act).
19
Annex B
CONSOLIDATED ENERGY, INC.
Selling Securityholder Notice and Questionnaire
The undersigned beneficial owner of common stock, par value $0.001 per
share (the "Common Stock"), of Consolidated Energy, Inc., a Wyoming corporation
(the "Company"), (the "Registrable Securities") understands that the Company has
filed or intends to file with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (the "Registration
Statement") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "Securities Act"), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement, dated as of June
30, 2006 (the "Registration Rights Agreement"), among the Company and the
Purchasers named therein. A copy of the Registration Rights Agreement is
available from the Company upon request at the address set forth below. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.
Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.
NOTICE
The undersigned beneficial owner (the "Selling Securityholder") of
Registrable Securities hereby elects to include the Registrable Securities owned
by it and listed below in Item 3 (unless otherwise specified under such Item 3)
in the Registration Statement.
20
The undersigned hereby provides the following information to the Company
and represents and warrants that such information is accurate:
QUESTIONNAIRE
1. Name.
(a) Full Legal Name of Selling Securityholder
--------------------------------------------------------------
(b) Full Legal Name of Registered Holder (if not the same as (a)
above) through which Registrable Securities Listed in Item 3
below are held:
--------------------------------------------------------------
(c) Full Legal Name of Natural Control Person (which means a
natural person who directly or indirectly alone or with others
has power to vote or dispose of the securities covered by the
questionnaire):
--------------------------------------------------------------
2. Address for Notices to Selling Securityholder:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Telephone:______________________________________________________________________
Fax:____________________________________________________________________________
Contact Person:_________________________________________________________________
3. Beneficial Ownership of Registrable Securities:
(a) Type and Principal Amount of Registrable Securities beneficially owned
(not including the Registrable Securities that are issuable pursuant
to the Purchase Agreement):
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
21
4. Broker-Dealer Status:
(a) Are you a broker-dealer?
Yes [ ] No [ ]
(b) If "yes" to Section 4(a), did you receive your Registrable
Securities as compensation for investment banking services to the
Company.
Yes [ ] No [ ]
Note: If no, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
(c) Are you an affiliate of a broker-dealer?
Yes [ ] No [ ]
(d) If you are an affiliate of a broker-dealer, do you certify that
you bought the Registrable Securities in the ordinary course of
business, and at the time of the purchase of the Registrable
Securities to be resold, you had no agreements or understandings,
directly or indirectly, with any person to distribute the
Registrable Securities?
Yes [ ] No [ ]
Note: If no, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
5. Beneficial Ownership of Other Securities of the Company Owned by the Selling
Securityholder.
Except as set forth below in this Item 5, the undersigned is not the
beneficial or registered owner of any securities of the Company other than
the Registrable Securities listed above in Item 3.
(a) Type and Amount of Other Securities beneficially owned by the Selling
Securityholder:
----------------------------------------------------------------------
----------------------------------------------------------------------
22
6. Relationships with the Company:
Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (owners of 5%
of more of the equity securities of the undersigned) has held any position
or office or has had any other material relationship with the Company (or
its predecessors or affiliates) during the past three years.
State any exceptions here:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
The undersigned agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein that may occur
subsequent to the date hereof at any time while the Registration Statement
remains effective.
By signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items 1 through 6 and the
inclusion of such information in the Registration Statement and the related
Prospectus and any amendments or supplements thereto. The undersigned
understands that such information will be relied upon by the Company in
connection with the preparation or amendment of the Registration Statement and
the related prospectus.
IN WITNESS WHEREOF the undersigned, by authority duly given, has
caused this Notice and Questionnaire to be executed and delivered either in
person or by its duly authorized agent.
Dated: __________ Beneficial Owner:_____________________
By:___________________________________
Name:
Title:
PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:
Xx. Xxxxx Xxxxxxxxx, Esq.
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
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