REGISTRATION RIGHTS AGREEMENT
Exhibit
10.3
This
Registration Rights Agreement (this “Agreement”) is made and
entered into as of December 19, 2017, SINCERITY APPLIED MATERIALS
HOLDINGS CORP., a Nevada corporation (the “Company”) and each of the
purchasers signatory hereto (each such purchaser, 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).
“Commission” means the
United States Securities and Exchange Commission.
“Effectiveness Date”
means, with respect to the Initial Registration Statement required
to be filed hereunder, the 180th calendar day
following the Closing Date, and with respect to any additional
Registration Statements which may be required pursuant to Section
2(c) or Section 3(c), the 60th calendar day
following the date on which an additional Registration Statement is
required to be filed hereunder; provided, if such Effectiveness
Date falls on a day that is not a Trading Day, then the
Effectiveness Date shall be the next succeeding Trading Day, and
provided further, that in the event that the applicable
Registration Statement is subject to a full review by the
Commission, then such date shall be extended by 30
days.
“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 the
30th
calendar day following the date hereof.
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“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 by
the Commission pursuant to 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) seven times the number of shares of Common Stock that is
actually issuable or issued upon full conversion of the Note
(without regard to any conversion or exercise limitations therein),
(ii) any additional shares of Common Stock issuable in connection
with any anti-dilution provisions in the Purchase Agreement, Note
and (iii) 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 statement 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 or
interpreted 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.
“Rule 424” means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted 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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“SEC Guidance” means (i)
any publicly-available written or oral guidance, comments,
requirements or requests of the Commission staff and (ii) the
Securities Act.
“Trading Day” means the
hours of 9:00 a.m. (Eastern Time) through 5:00 p.m. (Eastern Time)
of a day other than a Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required
to be closed.
2.
Company Registration
(a) On or prior to each
Filing Date, the Company shall prepare and file with the Commission
a Registration Statement covering the resale of all Registrable
Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form
S-1 or, if the Company is so eligible, on Form S-3 (except if the
Company is not then eligible to register for resale the Registrable
Securities on Form S-1 or Form S-3, as the case may be, in which
case such registration shall be on another appropriate form in
accordance herewith) and shall contain substantially the
“Plan of
Distribution” attached hereto as Annex A. Subject to the terms
of this Agreement, the Company shall use its reasonable best
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 reasonable best efforts to keep such
Registration Statement continuously effective under the Securities
Act until all Registrable Securities covered by such Registration
Statement have been sold, or may be sold without volume
restrictions, notice or manner of sale requirements pursuant to
Rule 144, including without limitation 144(i), as determined by the
counsel to the Company pursuant to a written opinion letter to such
effect, addressed and reasonably acceptable to the Transfer Agent
and the affected Holders that such securities may be sold without
registration and may be issued without legends thereon (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 or by e-mail 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 such Registration
Statement. The Company shall, by 9:30 a.m. New York City time on
the Trading Day after the effective date of such Registration
Statement, 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 foresaid shall be deemed an Event under Section
2(b).
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(b) If: (i) the
Registration Statement is not filed on or prior to its Filing Date
(if the Company files the Registration Statement without affording
the Holders the opportunity to review and comment on the same as
required by Section 3(a) herein, the Company shall be deemed to
have not satisfied this clause (i)), or (ii) the Company fails to
file with the Commission a request for acceleration of a
Registration Statement in accordance with Rule 461 promulgated by
the Commission pursuant to the Securities Act, within five Trading
Days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that such
Registration Statement will not be “reviewed” or will
not be subject to further review, or (iii) prior to the effective
date of a Registration Statement, the Company fails to file a
pre-effective amendment and otherwise respond in writing to
comments made by the Commission in respect of such Registration
Statement within 15 calendar days after the receipt of comments by
or notice from the Commission that such amendment is required in
order for such Registration Statement to be declared effective, or
(iv) as to, in the aggregate among all Holders on a pro-rata basis
based on their purchase of the Securities pursuant to the Purchase
Agreement, a Registration Statement registering for resale all of
the Registrable Securities is not declared effective by the
Commission by the Effectiveness Date of the Registration Statement,
or (v) all of the Registrable Securities are not registered for
resale pursuant to one or more effective Registration Statements on
or before the Effectiveness Date (except as may be limited by the
Commission pursuant to its authority with respect to “Rule
415”), or (vi) after the effective date of a Registration
Statement, such Registration Statement ceases for any reason to
remain continuously effective as to all Registrable Securities
included in such Registration Statement, 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 20 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), (iv) and (v) the date on which such Event occurs,
and for purpose of clause (ii) the date on which such five Trading
Day period is exceeded, and for purpose of clause (iii) the date
which such 10 calendar day period is exceeded, and for purpose of
clause (vi) the date on which such 10 or 20 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 unregistered Registrable Securities then
held by such Holder, up to a maximum of 24% of the Purchase Price
of such Purchaser’s Notes. 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.
Notwithstanding the foregoing, the Company shall not be required to
make any payments pursuant to this Section if an Event occurred at
such time that all Registrable Securities are eligible for resale
pursuant to Rule 144 (without volume restrictions or current public
information requirements) promulgated by the Commission pursuant to
the Securities Act; provided, further, that the Company shall
not be required to make any payments pursuant to this Section with
respect to any Registrable Securities the Company is unable to
register due to limits imposed by the SEC Guidance on Rule 415
under the Securities Act.
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(c) Notwithstanding the
registration obligations set forth in this Section, if the
Commission informs the Company that all of the Registrable
Securities cannot, as a result of the application of Rule 415, be
registered for resale as a secondary offering on a single
registration statement, the Company agrees to promptly inform each
of the Holders thereof and use its commercially reasonable efforts
to file amendments to the Registration Statement as required by the
Commission, covering the maximum number of Registrable Securities
permitted to be registered by the Commission, on Form S-3 or such
other form available to register for resale the Registrable
Securities as a secondary offering; provided, however, that prior to filing
such amendment, the Company shall be obligated to use diligent
efforts to advocate with the Commission for the registration of all
of the Registrable Securities in accordance with the SEC Guidance,
including without limitation, Compliance and Disclosure
Interpretation 612.09.
(d) Notwithstanding any
other provision of this Agreement, if the Commission or any SEC
Guidance sets forth a limitation on the number of Registrable
Securities permitted to be registered on a particular Registration
Statement as a secondary offering (and notwithstanding that the
Company used diligent efforts to advocate with the Commission for
the registration of all or a greater portion of Registrable
Securities), unless otherwise directed in writing by a Holder as to
its Registrable Securities, the number of Registrable Securities to
be registered on such Registration Statement will be reduced by
Registrable Securities represented by Conversion Shares, as defined
in the Note (applied, in the case that some Conversion Shares may
be registered, to the Holders on a pro rata basis based on the
total number of unregistered Conversion Shares held by such
Holders. In the event of a cutback hereunder, the Company shall
give the Holder at least 5 Trading Days prior written notice along
with the calculations as to such Holder’s
allotment.
(e) In
the event of a cutback hereunder, the Company shall give the Holder
at least five (5) Trading Days prior written notice along with the
calculations as to such Holder’s allotment. In the event the
Company amends the Initial Registration Statement in accordance
with the foregoing, the Company will use its reasonable best
efforts to file with the Commission, as promptly as allowed by the
Commission or SEC Guidance provided to the Company or to
registrants of securities in general, one or more registration
statements on Form S-3 or such other form available to register for
resale those Registrable Securities that were not registered for
resale on the Initial Registration Statement, as
amended.
3.
Registration
Procedures.
In
connection with the Company’s registration obligations
hereunder, the Company shall:
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(a) Not less than 5
Trading Days prior to the filing of each Registration Statement and
not less than one 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 5
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. No selling stockholders other than the
Purchaser, and no securities other than those held by the Purchase,
shall be included in and covered by the Registration Statement
without the prior written consent of the Purchaser, which shall not
be unreasonably withheld.
(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 provide as
promptly as reasonably possible to 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 100% 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 the number of
such Registrable Securities.
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(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 one
Trading Day prior to such filing) and (if requested by any such
Person) confirm such notice in writing no later than one 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 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) of 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, that notwithstanding
each Holder’s agreement to keep such information
confidential, each such Holder makes no acknowledgement that any
such information is material, non-public information.
(e) Use its best
efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any order stopping or 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; provided, that any such item which
is available on the XXXXX system need not be furnished in physical
form.
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(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).
(h) The Company
shall cooperate with any broker-dealer through which a Holder
proposes to resell its Registrable Securities in effecting a filing
with the FINRA Corporate Financing Department pursuant to FINRA
Rule 5110, as requested by any such Holder, and the Company shall
pay the filing fee required by such filing within 2 Business Days
of written request therefor.
(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 a
Holder, cooperate with such 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 Holder may
request.
(k) Upon
the occurrence of any event contemplated by Section 3(d), 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 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
otherwise required 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 three 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 as to such Holder only, until such information is
delivered to the Company.
3.
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 Holder may withhold and offset the balance of such
amount from the payment of its Purchase Price (as defined in the
Purchase Agreement) at the closing of the transaction described in
the Purchase Agreement. 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 of the Company’s counsel and auditors and up to
$2,500 of fees and expenses of a single counsel for the Holders)
(A) with respect to filings made with the Commission, (B) with
respect to filings required to be made with any Trading Market on
which the Common Stock is then listed for trading, (C) 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 (D) 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 the
FINRA pursuant to Rule 5110, 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 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 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.
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(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 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 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 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.
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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
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
of the Indemnified Party 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.
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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.
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, shall 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) 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.
(c) Discontinued Disposition. By
its acquisition of Registrable Securities, each Holder agrees 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 efforts to ensure that the use of the Prospectus may be
resumed as promptly as is 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).
-13-
(d) 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 the Holders of at least 67% of the then outstanding
Registrable Securities (including, for this purpose any Registrable
Securities issuable upon exercise or conversion of any Security).
If a Registration Statement does not register all of the
Registrable Securities pursuant to a waiver or amendment done in
compliance with the previous sentence, then the number of
Registrable Securities to be registered for each Holder shall be
reduced pro rata among all Holders and each Holder shall have the
right to designate which of its Registrable Securities shall be
omitted from such Registration Statement. 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
a Holder or some Holders and that does not directly or indirectly
affect the rights of other Holders may be given by such Holder or
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 first sentence of this
Section 6(d).
(e) 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.
(f) 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. Each Holder may assign their respective
rights hereunder in the manner and to the Persons as permitted
under the Purchase Agreement.
(g) 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.
(h) 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.
(i) Cumulative Remedies. The
remedies provided herein are cumulative and not exclusive of any
other remedies provided by law.
-14-
(j) 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.
(k) 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.
(l) 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.
********************
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IN
WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
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By:
/s/ Xxxxx
Xxxxx
Name:
Xxxxx Xxxxx
Title:
CEO
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EMA FINANCIAL, LLC
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By:
/s/ Xxxxx
Xxxxxxx
Name:
Xxxxx Xxxxxxx
Title:
Authorized Signatory
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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 Nasdaq Stock Market 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:
●
ordinary brokerage
transactions and transactions in which the broker-dealer solicits
purchasers;
●
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;
●
purchases by a
broker-dealer as principal and resale by the broker-dealer for its
account;
●
an exchange
distribution in accordance with the rules of the applicable
exchange;
●
privately
negotiated transactions;
●
settlement of short
sales entered into after the effective date of the registration
statement of which this prospectus is a part;
●
broker-dealers may
agree with the Selling Stockholders to sell a specified number of
such shares at a stipulated price per share;
●
through the writing
or settlement of options or other hedging transactions, whether
through an options exchange or otherwise;
●
a combination of
any such methods of sale; or
●
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 FINRA NASD Rule 2440; and in the case of a
principal transaction a markup or markdown in compliance with NASD
IM-2440.
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
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.
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).
