NetREIT REGISTRATION RIGHTS AGREEMENT
EXHIBIT 4.3
THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made on the 15th day of
February, 2005, by NetREIT, a California corporation (the “Company”), for the benefit of the
Holders in connection with the Registrable Securities. Unless expressly defined in this Agreement,
capitalized terms used in this Agreement shall have the meaning set forth in the Memorandum.
RECITALS
WHEREAS, the Company is offering for sale its Series AA Preferred Stock (the “Series AA
Preferred Stock”) and units (the “Units”), each unit consisting of two shares of common stock (the
“Common Stock”) and one $12.00 Common Stock Purchase Warrant (the “$12.00 Warrants”), pursuant to
the Private Placement Memorandum, to which the Agreement is attached as Exhibit E;
WHEREAS, the Company hereby agrees that this Agreement shall govern the rights of the Holders
to cause the Company to register shares of Common Stock issuable to the Investors and certain other
matters as set forth herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Agreement, the following capitalized terms have
the meanings stated.
(a) “Act” means the Securities Act of 1933, as amended.
(b) “Common Stock” means any of the Company’s Class A Common Stock.
(c) “Demand for Ownership Confirmation” means a demand in the form the Company determines for
written statement as to the active ownership of the Company’s Securities held of record by the
Holder as may then be required under the Regulations.
(d) “Holder” means, on the date determined, any person then holding as owner of record on the
Company’s stock register one or more of the Registrable Securities, provided such Holder has timely
returned in writing each Demand for Ownership Confirmation theretofore sent to Holder by the
Company and, if such Holder is a transferee of the Registrable Securities, or right to receive
them, by reason of purchase, gift or other transfer (all of which is referred to as an
“Assignment”), the Assignment of the Registrable Securities to the Holder was in compliance with
Section 4.
(e) “Memorandum” means the Company’s Private Placement Memorandum dated February 1, 2005.
(f) “1934 Act” means the Securities Exchange Act of 1934, as amended.
(g) The term “register”, “registered,” and “registration” refer to a registration effected by
preparing and filing a registration statement or similar document in compliance with the Act, and
the declaration or ordering of effectiveness of such registration statement or document.
(h) “Registrable Securities” means (i) the Common Stock issuable or issued upon conversion of
the Series AA Preferred Stock, (ii) any Common Stock of the Company issued as or issuable upon the
exercise or conversion of the $12.00 Warrants included in the Units, (iii) the Common Stock
included in the Units and (iv) the Common Stock issuable upon the exercise or conversion of any
warrant, right or other security which is issued as a dividend or other distribution with respect
to, or in exchange for or in replacement of the securities referenced in (i),(ii) and (iii).
(i) “Registrable Securities Then Outstanding” shall be the number of shares of Common Stock
which have been issued and the number of shares of Common Stock which are issuable.
(j) “Regulations” means the Regulations promulgated by the Service under the Internal Revenue
Code of 1986, as amended.
(k) “SEC” means the Securities and Exchange Commission.
(l) “Service” means the United States Internal Revenue Service.
1.2 Company Registration. If (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by the Company for
shareholders other than the Holders) any of its stock or other securities under the Act in
connection with the public offering of such securities solely for cash (other than a registration
on Forms S-8 or S-4 or any similar or successor form thereto or, a registration on any form which
is inappropriate for or which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the Registrable
Securities), the Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written confirmation of each Holder given within thirty (30) days after
mailing of such notice by the Company in accordance with Section 7.5, the Company shall,
subject to the provisions of Section 1.6, cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be registered.
1.3 Obligations of the Company. Whenever required under this Section 1 to
effect the registration of any Registrable Securities, the Company shall, as expeditiously as
reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to become effective, and
keep such registration statement effective for a period of up to sixty (60) days following the last
expiration date of any market stand-off agreements under Section 5 to which twenty percent
(20%) or more of the Holders are parties..
(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 Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Act, and, such other documents as they may
reasonably request in order to facilitate the disposition of Registrable Securities owned by them.
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(d) Use its best 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; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business 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. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.
(f) Notify each Holder covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Act of 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) Provide a transfer agent and registrar for all Registrable Securities registered
pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later
than the effective date of such registration.
(h) Cause all such Registrable Securities registered pursuant hereunder to be listed on each
securities exchange on which similar securities issued by the Company are then listed.
1.4 Holders Obligated to Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 1 with respect
to the Registrable Securities of any selling Holder that such Holder shall promptly upon request
furnish to the Company such information regarding the Holder, the Registrable Securities the Holder
owns, and the intended method of disposition of such securities as shall be required to effect the
registration of such Holder’s Registrable Securities.
1.5 Expenses of Company Registration. The Company shall bear and pay all expenses
incurred in connection with any registration, filing or qualification of Registrable Securities
with respect to the registrations pursuant to this Section 1.2 for each Holder, including
(without limitation) all registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements of one counsel for the
selling Holders, but excluding any underwriting discounts, brokerage commissions and stock transfer
taxes relating to Registrable Securities.
1.6 Underwriting Requirements. If the registration is for a registered public
offering involving an underwriting, the right of any Holder to registration pursuant to this
Agreement shall be conditioned upon such Holder’s participation in such underwriting and the
inclusion of such Holder’s Shares in the underwriting to the extent provided herein. All Holders
proposing to distribute their Registrable Securities through such underwriting shall (together with
the Company and other holders distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or underwriters selected for such
underwriting by the Company.
1.7 No Delay of Registration. No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to the interpretation
or implementation of this Section 1.
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2. Indemnification.
2.1 Regarding Registration Statement. In the event any Registrable Securities are
included in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder,
any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject under the Act or the
1934 Act insofar as such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or violations
(collectively a “Violation”): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) 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, or (iii) any violation or alleged violation by the Company of
the Act, the 1934 Act, or any rule or regulation promulgated under the Act or the 1934 Act; and the
Company will reimburse each such Holder, underwriter or controlling person any legal or other
expenses reasonably incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity agreement contained in
this section 2.1(a) shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for
any such loss, claim, damage, liability, or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with written information famished
expressly for use in connection with such registration by any such Holder, underwriter or
controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the registration statement,
each person, if any, who controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any controlling person of any
such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only
to the extent) that such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such registration; and
each such Holder will reimburse any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this Section 2.1(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 2.1(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected without the consent of
the Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall any
indemnity under this Section 2.1(b) exceed the gross proceeds from the offering received by such
Holder.
(c) Promptly after receipt by an indemnified party under this Section 2.1 of notice of the
commencement of any action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this Section 2.1,
deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying
party
shall have the right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, 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.
The failure to deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under this Section 2.1, but the
omission so to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this Section 2.1.
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(d) If the indemnification provided for in this Section 2.1 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim,
damage, or expense referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant equitable considerations.
The relative fault of the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the indemnifying party
or by the indemnified party and the parties’ relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection with the
underwritten public offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
(f) The obligations of the Company and Holders under this Section 2.1 shall survive the
completion of any offering of Registrable Securities in a registration statement under this Section
1, and otherwise.
3. Reports Under Securities Exchange Act of 1934.
3.1 Company’s Obligations. With a view to making available to the Holders the
benefits of Rule 144 promulgated under the Act and any other rule or regulation of the SEC that may
at any time permit a Holder to sell securities of the Company to the public without registration,
the Company agrees to:
(a) make and keep public information available, as those terms are understood and defined in
SEC Rule 144, at all times after ninety (90) days after the effective date of the first
registration statement filed by the Company for the 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 Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith
upon request (i) a written statement by the Company that it has complied with the
reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date
of the first registration statement filed by the Company), the Act and the 1934 Act (at any time
after it has become subject to such reporting requirements), (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed by the Company,
and (iii) such other information as may be reasonably requested in availing any Holder of any rule
or regulation of the SEC which permits the selling of any such securities without registration or
pursuant to such form.
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4. Assignment of Registration Rights.
4.1 Conditions to Company’s Recognition of Assignment. The rights to cause the
Company to register Registrable Securities pursuant to this Section 4 shall be assigned
(but only with all related obligations) by a Holder to a transferee or assignee or affiliated group
of transferees or assignees of such securities, provided: (a) the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address of such transferee
or assignee and the securities with respect to which such registration rights are being assigned;
(b) such transferee or assignee agrees in writing to be bound by and subject to the terms and
conditions of this Agreement, including without limitation the provisions of Section 5
below; and (c) such assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is restricted under the Act.
The minimum shareholding requirements described above shall not apply to the transfer of
registration rights to a partner or affiliate or immediate family member of the transferring
Holder. For the purposes of determining the number of shares of Registrable Securities held by a
transferee or assignee, the holdings of transferees and assignees of a partnership who are partners
or retired partners of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift, will or intestate
succession) shall be aggregated together and with the partnership; provided that all assignees and
transferees who would not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any
action under this Section 1.
5. “Market Stand-Off”Agreement.
5.1 Holder’s Obligations to Delay Sales. In consideration of the Company’s
registration of Holders’ Registrable Securities under Section 1, the Holder agrees that the Holder
shall, upon the Company’ request, promptly execute confirmation of such agreement, during the
period of duration specified by the Company and an underwriter of Common Stock or other securities
of the Company, following the date of the first sale to the public pursuant to a registration
statement of the Company filed under the Act pursuant to Section 1, the Holder 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 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; provided, however, that:
(a) all executive officers and directors of the Company enter into similar agreements; and
(b) such agreement shall not exceed (180) days after the effective date of the registration
statement filed with respect to the Company’s public offering.
In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions
with respect to the Registrable Securities of each Holder (and the shares or securities of every
other person subject to the foregoing restriction) until the end of such period.
6. Termination of Registration Rights.
6.1 Termination. No Holder shall be entitled to exercise any right provided for in
this Section 6 after such time as Rule 144 or another similar exemption under the Act is available
for the sale of all of such Holder’s shares during a three (3) month period without registration.
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7. Miscellaneous.
7.1 Successors and Assigns. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including transferees of any shares of Registrable
Securities). Nothing in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as expressly provided in
this Agreement.
7.2 Governing Law. This Agreement shall be governed by and construed under the laws
of the State of California as applied to agreements among California residents entered into and to
be performed entirely within California.
7.3 Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
7.4 References, Titles and Subtitles. Unless otherwise stated, any reference to an
Article, Section or paragraph in this Agreement shall refer to the corresponding Article, Section
or paragraph of this Agreement. The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this Agreement.
7.5 Notices. Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to
the party to be notified or upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified as follows:
If to the Company:
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NetREIT Attention: Xxxxxxx Xxxxxxxx, Secretary 000 X. Xxxxxx Xxxxx Xx Xxxx, Xxxxx 000 Xxx Xxxxxx, XX 00000 XXxxxxxxx@XXXxxxxxx.xxx |
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If to a Holder:
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The Holder’s last address as shown on the records of the Company or such different address as the Holder may designate by ten (10) days’ advance written notice to the Company. |
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7.6 Expenses. If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees,
costs and necessary disbursements in addition to any other relief to which such party may be
entitled.
7.7 Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written consent of the Company
and the holders of a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this Section 3.7 shall be binding upon each holder of any
Registrable Securities then outstanding, each future holder of all such Registrable Securities, and
the Company.
7.8 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.
7.9 Aggregation of Agreements and Stock. All Agreements identical to this Agreement
shall be treated as a single Agreement. All shares of Registrable Securities held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of determining the
availability of, any rights under this Agreement.
7.10 Entire Agreement; Amendment; Waiver. This Agreement (including the Exhibits
hereto, if any) constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
7.11 Effective Date. With respect to each Holder, this Agreement shall become
effective on the first date the Units and/or Series AA Preferred Stock to which give rise to
Holder’s Registrable Securities are first issued.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.
| NetREIT | ||||||
| By: | /s/ Xxxx X. Xxxxxxxx
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| Address: | ||||||
| 365 S. Xxxxxx Xxxxx Xx Xxxx, Xxxxx 000 | ||||||
| Xxx Xxxxxx, Xxxxxxxxxx 00000 | ||||||
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