REGISTRATION RIGHTS AGREEMENT
REGISTRATION
RIGHTS AGREEMENT (this “Agreement”), dated as of
October 15, 2007, and among Midnight Holdings Group, Inc., a Delaware
corporation with its headquarters located at 00000 Xxxx Xxxx, Xxxxx 000, Xxxxxxx
Xxxxxxxx, XX 00000 (the “Company”), and each of the
undersigned (together with their respective affiliates and any assignee or
transferee of all of their respective rights hereunder, the “Initial
Investors”).
WHEREAS:
A. In
connection with the Securities Purchase Agreement by and among the parties
hereto of even date herewith (the “Securities Purchase Agreement”), the Company
has agreed, upon the terms and subject to the conditions contained therein,
to
issue and sell to the Initial Investors (i) secured convertible notes in
the aggregate principal amount of up to Three Hundred Thousand Dollars
($300,000) (the “Notes”) that are convertible into shares of the Company’s
common stock (the “Common Stock”), upon the terms and subject to the limitations
and conditions set forth in such Notes and (ii) warrants (the “Warrants”)
to acquire an aggregate of 600,000 shares of Common Stock, upon the terms and
conditions and subject to the limitations and conditions set forth in the
Warrants; and
B. To
induce
the Initial Investors to execute and deliver the Securities Purchase Agreement,
the Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations thereunder,
or
any similar successor statute (collectively, the “1933 Act”), and applicable
state securities laws;
NOW,
THEREFORE, in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and each of the Initial Investors hereby agree
as follows:
1. DEFINITIONS.
a. As
used
in this Agreement, the following terms shall have the following
meanings:
(i) “Investors”
means
the Initial
Investors and any transferee or assignee who agrees to become bound by the
provisions of this Agreement in accordance with Section 9 hereof.
(ii) “register,”
“registered,”
and
“registration”
refer
to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis (“Rule 415”), and
the declaration or ordering of effectiveness of such Registration Statement
by
the United States Securities and Exchange Commission (the “SEC”).
(iii) “Registrable
Securities” means
the Conversion Shares issued or issuable upon conversion or otherwise pursuant
to the Notes and Additional Notes (as defined in the Securities Purchase
Agreement) including, without limitation, Damages Shares (as defined in the
Notes) issued or issuable pursuant to the Notes, shares of Common Stock issued
or issuable in payment of the Standard Liquidated Damages Amount (as defined
in
the Securities Purchase Agreement), shares issued or issuable in respect of
interest or in redemption of the Notes in accordance with the terms thereof)
and
Warrant Shares issuable, upon exercise or otherwise pursuant to the Warrants
and
Additional Warrants (as defined in the Securities Purchase Agreement), and
any
shares of capital stock issued or issuable as a dividend on or in exchange
for
or otherwise with respect to any of the foregoing.
(iv) “Registration
Statement” means
a registration statement of the Company under the 0000 Xxx.
b. Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement or the Convertible
Note.
2. REGISTRATION.
a. Mandatory
Registration. The Company shall prepare, and, on or
prior to one hundred and twenty (120) days from the date of Closing (as defined
in the Securities Purchase Agreement) (the “Filing Date”), file with the
SEC a Registration Statement on Form S-3 (or, if Form S-3 is not then available,
on such form of Registration Statement as is then available to effect a
registration of the Registrable Securities, subject to the consent of the
Initial Investors, which consent will not be unreasonably withheld) covering
the
resale of the Registrable Securities underlying the Notes and Warrants issued
or
issuable pursuant to the Securities Purchase Agreement, which Registration
Statement, to the extent allowable under the 1933 Act and the rules and
regulations promulgated thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of or otherwise
pursuant to the Notes and exercise of the Warrants to prevent dilution resulting
from stock splits, stock dividends or similar transactions. The
number of shares of Common Stock initially included in such Registration
Statement shall be no less than an amount equal to two (2) times the sum of
the
number of Conversion Shares that are then issuable upon conversion of the Notes
and Additional Notes (based on the Variable Conversion Price as would then
be in
effect and assuming the Variable Conversion Price is the Conversion Price at
such time), and the number of Warrant Shares that are then issuable upon
exercise of the Warrants, without regard to any limitation on the Investor’s
ability to convert the Notes or exercise the Warrants. The Company
acknowledges that the number of shares initially included in the Registration
Statement represents a good faith estimate of the maximum number of shares
issuable upon conversion of the Notes and upon exercise of the
Warrants.
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b. Underwritten
Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering,
the
Investors who hold a majority in interest of the Registrable Securities subject
to such underwritten offering, with the consent of a majority-in-interest of
the
Initial Investors, shall have the right to select one legal counsel and an
investment banker or bankers and manager or managers to administer the offering,
which investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company.
c. Payments
by the
Company. The Company shall use its best efforts to
obtain effectiveness of the Registration Statement as soon as
practicable. If (i) the Registration Statement(s) covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not filed by the Filing Date or declared effective by the SEC
on
or prior to one hundred and twenty (120) days from the Filing Date, or
(ii) after the Registration Statement has been declared effective by the
SEC, sales of all of the Registrable Securities cannot be made pursuant to
the
Registration Statement, or (iii) the Common Stock is not listed or included
for quotation on the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap
Market (“Nasdaq
SmallCap”), the New York Stock Exchange (the “NYSE”) or the American
Stock
Exchange (the “AMEX”)
after being so listed or included for quotation, or (iv) the Common Stock
ceases to be traded on the Over-the-Counter Bulletin Board (the “OTCBB”) or any equivalent
replacement exchange prior to being listed or included for quotation on one
of
the aforementioned markets, then the Company will make payments to the Investors
in such amounts and at such times as shall be determined pursuant to this
Section 2(c) as partial relief for the damages to the Investors by reason of
any
such delay in or reduction of their ability to sell the Registrable Securities
(which remedy shall not be exclusive of any other remedies available at law
or
in equity). The Company shall pay to each holder of the Notes or
Registrable Securities an amount equal to the then outstanding principal amount
of the Notes (and, in the case of holders of Registrable Securities, the
principal amount of Notes from which such Registrable Securities were converted)
(“Outstanding Principal
Amount”), multiplied by the Applicable Percentage (as defined below)
times the sum of: (i) the number of months (prorated for partial
months) after the Filing Date or the end of the aforementioned one hundred
and
twenty (120) day period and prior to the date the Registration Statement is
declared effective by the SEC, provided, however, that there shall be excluded
from such period any delays which are solely attributable to changes required
by
the Investors in the Registration Statement with respect to information relating
to the Investors, including, without limitation, changes to the plan of
distribution, or to the failure of the Investors to conduct their review of
the
Registration Statement pursuant to Section 3(h) below in a reasonably prompt
manner; (ii) the number of months (prorated for partial months) that sales
of
all of the Registrable Securities cannot be made pursuant to the Registration
Statement after the Registration Statement has been declared effective
(including, without limitation, when sales cannot be made by reason of the
Company’s failure to properly supplement or amend the prospectus included
therein in accordance with the terms of this Agreement, but excluding any days
during an Allowed Delay (as defined in Section 3(f)); and (iii) the number
of
months (prorated for partial months) that the Common Stock is not listed or
included for quotation on the OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX
or
that trading thereon is halted after the Registration Statement has been
declared effective. The term “Applicable Percentage” means
two hundredths (.02). (For example, if the Registration Statement
becomes effective one (1) month after the end of such one hundred and twenty
(120) day period, the Company would pay $5,000 for each $250,000 of Outstanding
Principal Amount. If thereafter, sales could not be made pursuant to
the Registration Statement for an additional period of one (1) month, the
Company would pay an additional $5,000 for each $250,000 of Outstanding
Principal Amount.) Such amounts shall be paid in cash or, at the
Company’s option, in shares of Common Stock priced at the Conversion Price (as
defined in the Notes) on such payment date.
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d. Piggy-Back
Registrations. Subject to the last sentence of this
Section 2(d), if at any time prior to the expiration of the Registration Period
(as hereinafter defined) the Company shall determine to file with the SEC a
Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other
than
on Form S-4 or Form S-8 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 with stock option or other bonafide,
employee
benefit plans), the Company shall send to each Investor who is entitled to
registration rights under this Section 2(d) written notice of such determination
and, if within fifteen (15) days after the effective date of such notice, such
Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)’ judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. Any exclusion
of
Registrable Securities shall be made pro rata among the Investors seeking to
include Registrable Securities in proportion to the number of Registrable
Securities sought to be included by such Investors; provided, however,
that the
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
to inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and provided, further,
however,
that, after
giving effect to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities having the
right to include such securities in the Registration Statement other than
holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No
right to registration of Registrable Securities under this Section 2(d) shall
be
construed to limit any registration required under Section 2(a)
hereof. If an offering in connection with which an Investor is
entitled to registration under this Section 2(d) is an underwritten offering,
then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer
and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement,
on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering. Notwithstanding anything to the contrary set
forth herein, the registration rights of the Investors pursuant to this Section
2(d) shall only be available in the event the Company fails to timely file,
obtain effectiveness or maintain effectiveness of any Registration Statement
to
be filed pursuant to Section 2(a) in accordance with the terms of this
Agreement.
e. Eligibility
for Form X-0,
XX-0 or S-1; Conversion to Form S-3. If the Company is
not currently eligible to use Form S-3, not later than five (5) business days
after the Company first meets the registration eligibility and transaction
requirements for the use of Form S-3 (or any successor form) for registration
of
the offer and sale by the Initial Investors and any other Investors of
Registrable Securities, the Company shall file a Registration Statement on
Form
S-3 (or such successor form) with respect to the Registrable Securities covered
by the Registration Statement on Form SB-2 or Form S-1, whichever is applicable,
filed pursuant to Section 2(a) (and include in such Registration Statement
on
Form S-3 the information required by Rule 429 under the 0000 Xxx) or convert
the
Registration Statement on Form SB-2 or Form S-1, whichever is applicable, filed
pursuant to Section 2(a) to a Form S-3 pursuant to Rule 429 under the 1933
Act
and cause such Registration Statement (or such amendment) to be declared
effective no later than forty-five (45) days after filing. In the
event of a breach by the Company of the provisions of this Section 2(e), the
Company will be required to make payments pursuant to Section 2(c)
hereof.
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3. OBLIGATIONS
OF THE
COMPANY.
In
connection with the registration of the Registrable Securities, the Company
shall have the following obligations:
a. The
Company shall prepare promptly, and file with the SEC not later than the Filing
Date, a Registration Statement with respect to the number of Registrable
Securities provided in Section 2(a), and thereafter use its best efforts to
cause such Registration Statement relating to Registrable Securities to become
effective as soon as possible after such filing but in no event later than
one
hundred and twenty (120) days from the Filing Date), and keep the Registration
Statement effective pursuant to Rule 415 at all times until such date as is
the
earlier of (i) the date on which all of the Registrable Securities have been
sold and (ii) the date on which the Registrable Securities (in the opinion
of
counsel to the Initial Investors) may be immediately sold to the public without
registration or restriction (including, without limitation, as to volume by
each
holder thereof) under the 1933 Act (the “Registration Period”), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein,
or
necessary to make the statements therein not misleading.
b. The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statements and
the prospectus used in connection with the Registration Statements as may be
necessary to keep the Registration Statements effective at all times during
the
Registration Period, and, during such period, comply with the provisions of
the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by the Registration Statements until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statements. In the event the number of shares available
under a Registration Statement filed pursuant to this Agreement is insufficient
to cover all of the Registrable Securities issued or issuable upon conversion
of
the Notes and exercise of the Warrants, the Company shall amend the Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover all of the Registrable
Securities, in each case, as soon as practicable, but in any event within
fifteen (15) days after the necessity therefor arises (based on the market
price
of the Common Stock and other relevant factors on which the Company reasonably
elects to rely). The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof, but in any event within thirty (30)
days after the date on which the Company reasonably first determines (or
reasonably should have determined) the need therefor. The provisions
of Section 2(c) above shall be applicable with respect to such obligation,
with
the ninety (90) days running from the day the Company reasonably first
determines (or reasonably should have determined) the need
therefor.
c. The
Company shall furnish to each Investor whose Registrable Securities are included
in a Registration Statement and its legal counsel (i) promptly (but in no
event more than two (2) business days) after the same is prepared and publicly
distributed, filed with the SEC, or received by the Company, one copy of each
Registration Statement and any amendment thereto, each preliminary prospectus
and prospectus and each amendment or supplement thereto, and, in the case of
the
Registration Statement referred to in Section 2(a), each letter written by
or on
behalf of the Company to the SEC or the staff of the SEC, and each item of
correspondence from the SEC or the staff of the SEC, in each case relating
to
such Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential treatment),
and (ii) promptly (but in no event more than two (2) business days) after
the Registration Statement is declared effective by the SEC, such number of
copies of a prospectus, including a preliminary prospectus, and all amendments
and supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor. The Company will immediately notify each
Investor by facsimile of the effectiveness of each Registration Statement or
any
post-effective amendment. The Company will promptly (but in no event
more than five (5) business days) respond to any and all comments received
from
the SEC (which comments shall promptly be made available to the Investors upon
request), with a view towards causing each Registration Statement or any
amendment thereto to be declared effective by the SEC as soon as practicable,
shall promptly file an acceleration request as soon as practicable (but in
no
event more than two (2) business days) following the resolution or clearance
of
all SEC comments or, if applicable, following notification by the SEC that
any
such Registration Statement or any amendment thereto will not be subject to
review and shall promptly file with the SEC a final prospectus as soon as
practicable (but in no event more than two (2) business days) following receipt
by the Company from the SEC of an order declaring the Registration Statement
effective. In the event of a breach by the Company of the provisions
of this Section 3(c), the Company will be required to make payments pursuant
to
Section 2(c) hereof.
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d. The
Company shall use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statements under such other
securities or “blue sky” laws of such jurisdictions in the United States as the
Investors who hold a majority in interest of the Registrable Securities being
offered reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications
in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however,
that the
Company shall not be required in connection therewith or as a condition thereto
to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject
itself to general taxation in any such jurisdiction, (c) file a general
consent to service of process in any such jurisdiction, (d) provide any
undertakings that cause the Company undue expense or burden, or (e) make
any change in its charter or bylaws, which in each case the Board of Directors
of the Company determines to be contrary to the best interests of the Company
and its shareholders.
e. In
the
event Investors who hold a majority-in-interest of the Registrable Securities
being offered in the offering (with the approval of a majority-in-interest
of
the Initial Investors) select underwriters for the offering, the Company shall
enter into and perform its obligations under an underwriting agreement, in
usual
and customary form, including, without limitation, customary indemnification
and
contribution obligations, with the underwriters of such offering.
f. As
promptly as practicable after becoming aware of such event, the Company shall
notify each Investor of the happening of any event, of which the Company has
knowledge, as a result of which the prospectus included in any Registration
Statement, as then in effect, includes an untrue statement of a material fact
or
omission to state a material fact required to be stated therein or necessary
to
make the statements therein not misleading, and use its best efforts promptly
to
prepare a supplement or amendment to any Registration Statement to correct
such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request; provided that, for not more than ten (10) consecutive trading days
(or
a total of not more than twenty (20) trading days in any twelve (12) month
period), the Company may delay the disclosure of material non-public information
concerning the Company (as well as prospectus or Registration Statement
updating) the disclosure of which at the time is not, in the good faith opinion
of the Company, in the best interests of the Company (an “Allowed Delay”); provided,
further, that the Company shall promptly (i) notify the Investors in
writing of the existence of (but in no event, without the prior written consent
of an Investor, shall the Company disclose to such investor any of the facts
or
circumstances regarding) material non-public information giving rise to an
Allowed Delay and (ii) advise the Investors in writing to cease all sales
under such Registration Statement until the end of the Allowed Delay. Upon
expiration of the Allowed Delay, the Company shall again be bound by the first
sentence of this Section 3(f) with respect to the information giving rise
thereto.
g. The
Company shall use its best efforts to prevent the issuance of any stop order
or
other suspension of effectiveness of any Registration Statement, and, if such
an
order is issued, to obtain the withdrawal of such order at the earliest possible
moment and to notify each Investor who holds Registrable Securities being sold
(or, in the event of an underwritten offering, the managing underwriters) of
the
issuance of such order and the resolution thereof.
h. The
Company shall permit a single firm of counsel designated by the Initial
Investors to review such Registration Statement and all amendments and
supplements thereto (as well as all requests for acceleration or effectiveness
thereof) a reasonable period of time prior to their filing with the SEC, and
not
file any document in a form to which such counsel reasonably objects and will
not request acceleration of such Registration Statement without prior notice
to
such counsel. The sections of such Registration Statement covering
information with respect to the Investors, the Investor’s beneficial ownership
of securities of the Company or the Investors intended method of disposition
of
Registrable Securities shall conform to the information provided to the Company
by each of the Investors.
i. The
Company shall make generally available to its security holders as soon as
practicable, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions
of
Rule 158 under the 0000 Xxx) covering a twelve-month period beginning not later
than the first day of the Company’s fiscal quarter next following the effective
date of the Registration Statement.
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j. At
the
request of any Investor, the Company shall furnish, on the date that Registrable
Securities are delivered to an underwriter, if any, for sale in connection
with
any Registration Statement or, if such securities are not being sold by an
underwriter, on the date of effectiveness thereof (i) an opinion, dated as
of such date, from counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given
in
an underwritten public offering, addressed to the underwriters, if any, and
the
Investors and (ii) a letter, dated such date, from the Company’s
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, if any, and the
Investors.
k. The
Company shall make available for inspection by (i) any Investor,
(ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of
accountants or other agents retained by the Initial Investors, (iv) one
firm of attorneys and one firm of accountants or other agents retained by all
other Investors, and (v) one firm of attorneys retained by all such
underwriters (collectively, the “Inspectors”) all pertinent
financial and other records, and pertinent corporate documents and properties
of
the Company, including without limitation, records of conversions by other
holders of convertible securities issued by the Company and the issuance of
stock to such holders pursuant to the conversions (collectively, the “Records”), as shall be
reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company’s officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however,
that each
Inspector shall hold in confidence and shall not make any disclosure (except
to
an Investor) of any Record or other information which the Company determines
in
good faith to be confidential, and of which determination the Inspectors are
so
notified, unless (a) the disclosure of such Records is necessary to avoid
or correct a misstatement or omission in any Registration Statement,
(b) the release of such Records is ordered pursuant to a subpoena or other
order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other
agreement. The Company shall not be required to disclose any
confidential information in such Records to any Inspector until and unless
such
Inspector shall have entered into confidentiality agreements (in form and
substance satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(k). Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or
by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein (or in any
other confidentiality agreement between the Company and any Investor) shall
be
deemed to limit the Investor’s ability to sell Registrable Securities in a
manner which is otherwise consistent with applicable laws and
regulations.
l. The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor provided to the Company unless (i) disclosure of
such information is necessary to comply with federal or state securities laws,
(ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release
of such information is ordered pursuant to a subpoena or other order from a
court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company
agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor prior to making such disclosure, and allow the Investor, at its
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
m. The
Company shall (i) cause all the Registrable Securities covered by the
Registration Statement to be listed on each national securities exchange on
which securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (ii) to the extent the securities of
the same class or series are not then listed on a national securities exchange,
secure the designation and quotation, of all the Registrable Securities covered
by the Registration Statement on Nasdaq or, if not eligible for Nasdaq, on
Nasdaq SmallCap or, if not eligible for Nasdaq or Nasdaq SmallCap, on the OTCBB
and, without limiting the generality of the foregoing, to arrange for at least
two market makers to register with the National Association of Securities
Dealers, Inc. (“NASD”)
as such with respect to such Registrable Securities.
n. The
Company shall provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of
the
Registration Statement.
o. The
Company shall cooperate with the Investors who hold Registrable Securities
being
offered and the managing underwriter or underwriters, if any, to facilitate
the
timely preparation and delivery of certificates (not bearing any restrictive
legends) representing Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the managing underwriter or underwriters,
if
any, or the Investors may reasonably request and registered in such names as
the
managing underwriter or underwriters, if any, or the Investors may request,
and,
within three (3) business days after a Registration Statement which includes
Registrable Securities is ordered effective by the SEC, the Company shall
deliver, and shall cause legal counsel selected by the Company to deliver,
to
the transfer agent for the Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement) an
instruction in a form reasonably acceptable to the Investors and an opinion
of
such counsel in a form reasonably acceptable to the Investors.
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p. At
the
request of the holders of a majority-in-interest of the Registrable Securities,
the Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and
any
prospectus used in connection with the Registration Statement as may be
necessary in order to change the plan of distribution set forth in such
Registration Statement.
q. From
and
after the date of this Agreement, the Company shall not, and shall not agree
to,
allow the holders of any securities of the Company to include any of their
securities in any Registration Statement under Section 2(a) hereof or any
amendment or supplement thereto under Section 3(b) hereof without the consent
of
the holders of a majority-in-interest of the Registrable
Securities.
r. The
Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of Registrable Securities pursuant
to a
Registration Statement.
4. OBLIGATIONS
OF THE
INVESTORS.
In
connection with the registration of the Registrable Securities, the Investors
shall have the following obligations:
a. It
shall
be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held
by it
and the intended method of disposition of the Registrable Securities held by
it
as shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request. At least three (3) business
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor.
b. Each
Investor, by such Investor’s acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of the Registration Statements hereunder, unless
such Investor has notified the Company in writing of such Investor’s election to
exclude all of such Investor’s Registrable Securities from the Registration
Statements.
c. In
the
event Investors holding a majority-in-interest of the Registrable Securities
being registered (with the approval of the Initial Investors) determine to
engage the services of an underwriter, each Investor agrees to enter into and
perform such Investor’s obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary indemnification
and
contribution obligations, with the managing underwriter of such offering and
take such other actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Securities, unless such Investor
has notified the Company in writing of such Investor’s election to exclude all
of such Investor’s Registrable Securities from such Registration
Statement.
d. Each
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(f) or 3(g), such
Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor’s receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(f) or 3(g) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor’s possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such
notice.
Page
7
e. No
Investor may participate in any underwritten registration hereunder unless
such
Investor (i) agrees to sell such Investor’s Registrable Securities on the
basis provided in any underwriting arrangements in usual and customary form
entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and any expenses in excess of those
payable by the Company pursuant to Section 5 below.
5. EXPENSES
OF
REGISTRATION.
All
reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration, listing and
qualification fees, printers and accounting fees, the fees and disbursements
of
counsel for the Company, and the reasonable fees and disbursements of one
counsel selected by the Initial Investors pursuant to Sections 2(b) and 3(h)
hereof shall be borne by the Company.
6. INDEMNIFICATION.
In
the
event any Registrable Securities are included in a Registration Statement under
this Agreement:
a. To
the
extent permitted by law, the Company will indemnify, hold harmless and defend
(i) each Investor who holds such Registrable Securities, (ii) the
directors, officers, partners, employees, agents and each person who controls
any Investor within the meaning of the 1933 Act or the Securities Exchange
Act
of 1934, as amended (the “1934
Act”), if any, (iii) any underwriter (as defined in the 0000 Xxx)
for the Investors, and (iv) the directors, officers, partners, employees
and each person who controls any such underwriter within the meaning of the
1933
Act or the 1934 Act, if any (each, an “Indemnified Person”), against
any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, “Claims”) to
which any of them may become subject insofar as such Claims arise out of or
are
based upon: (i) any untrue statement or alleged untrue statement of a material
fact in a Registration Statement or the omission or alleged omission to state
therein a material fact required to be stated or necessary to make the
statements therein not misleading; (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in
the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation,
any
state securities law, or any rule or regulation thereunder relating to the
offer
or sale of the Registrable Securities (the matters in the foregoing clauses
(i)
through (iii) being, collectively, “Violations”). Subject
to the restrictions set forth in Section 6(c) with respect to the number of
legal counsel, the Company shall reimburse the Indemnified Person, promptly
as
such expenses are incurred and are due and payable, for any reasonable legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything
to the contrary contained herein, the indemnification agreement contained in
this Section 6(a): (i) shall not apply to a Claim arising out of or based upon
a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person or underwriter
for
such Indemnified Person expressly for use in connection with the preparation
of
such Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (ii) shall not apply to amounts paid in settlement of any Claim
if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld; and (iii) with respect to
any
preliminary prospectus, shall not inure to the benefit of any Indemnified Person
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, such corrected prospectus was timely made
available by the Company pursuant to Section 3(c) hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus
prior
to the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf
of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
Page
8
b. In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees severally and not jointly to indemnify,
hold harmless and defend, to the same extent and in the same manner set forth
in
Section 6(a), the Company, each of its directors, each of its officers who
signs
the Registration Statement, each person, if any, who controls the Company within
the meaning of the 1933 Act or the 1934 Act, any underwriter and any other
shareholder selling securities pursuant to the Registration Statement or any
of
its directors or officers or any person who controls such shareholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively
and
together with an Indemnified Person, an “Indemnified Party”), against
any Claim to which any of them may become subject, under the 1933 Act, the
1934
Act or otherwise, insofar as such Claim arises out of or is based upon any
Violation by such Investor, 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 to the Company by such Investor expressly for use in
connection with such Registration Statement; and subject to Section 6(c) such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however,
that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the
prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further,
however,
that the
Investor shall be liable under this Agreement (including this Section 6(b)
and
Section 7) for only that amount as does not exceed the net proceeds to such
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of
any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
c. Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section
6
of notice of the commencement of any action (including any governmental action),
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
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 control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person
or
the Indemnified Party, as the case may be; provided, however,
that an
Indemnified Person or Indemnified Party shall have the right to retain its
own
counsel with the fees and expenses to be paid by the indemnifying party, if,
in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and
any
other party represented by such counsel in such proceeding. The
indemnifying party shall pay for only one separate legal counsel
for the Indemnified Persons or the Indemnified Parties, as
applicable, and such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the
Registration Statement to which the Claim relates (with the approval of a
majority-in-interest of the Initial Investors), if the Investors are entitled
to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of
any
liability to the Indemnified Person or Indemnified Party under this Section
6,
except to the extent that the indemnifying party is actually prejudiced in
its
ability to defend such action. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
Page
9
7. CONTRIBUTION.
To
the
extent any indemnification by an indemnifying party is prohibited or limited
by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however,
that
(i) no contribution shall be made under circumstances where the maker would
not have been liable for indemnification under the fault standards set forth
in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall
be
entitled to contribution from any seller of Registrable Securities who was
not
guilty of such fraudulent misrepresentation, and (iii)contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount
of
proceeds received by such seller from the sale of such Registrable
Securities.
8. REPORTS
UNDER THE 1934
ACT.
With
a
view to making available to the Investors the benefits of Rule 144 promulgated
under the 1933 Act or any other similar rule or regulation of the SEC that
may
at any time permit the investors to sell securities of the Company to the public
without registration (“Rule
144”), the Company agrees to:
a. make
and
keep public information available, as those terms are understood and defined
in
Rule 144;
b. file
with
the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains
subject to such requirements (it being understood that nothing herein shall
limit the Company’s obligations under Section 4(c) of the Securities Purchase
Agreement) and the filing of such reports and other documents is required for
the applicable provisions of Rule 144; and
c. furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company that it has complied
with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act,
(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 to permit the
Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT
OF REGISTRATION
RIGHTS.
The
rights under this Agreement shall be automatically assignable by the Investors
to any transferee of all or any portion of Registrable Securities if:
(i) the Investor agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (ii) the Company is, within
a reasonable time after such transfer or assignment, furnished with written
notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment, the
further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws, (iv) at
or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence, the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein, (v) such transfer
shall have been made in accordance with the applicable requirements of the
Securities Purchase Agreement, and (vi) such transferee shall be an “accredited investor” as that
term defined in Rule 501 of Regulation D promulgated under the 1933
Act.
10. AMENDMENT
OF REGISTRATION
RIGHTS.
Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with written consent of the Company, each of the Initial
Investors (to the extent such Initial Investor still owns Registrable
Securities) and Investors who hold a majority interest of the Registrable
Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.
Page
10
11. MISCELLANEOUS.
a. A
person
or entity is deemed to be a holder of Registrable Securities whenever such
person or entity owns of record such Registrable Securities. If the
Company receives conflicting instructions, notices or elections from two or
more
persons or entities with respect to the same Registrable Securities, the Company
shall act upon the basis of instructions, notice or election received from
the
registered owner of such Registrable Securities.
b. Any
notices required or permitted to be given under the terms hereof shall be sent
by certified or registered mail (return receipt requested) or delivered
personally or by courier (including a recognized overnight delivery service)
or
by facsimile and shall be effective five days after being placed in the mail,
if
mailed by regular United States mail, or upon receipt, if delivered personally
or by courier (including a recognized overnight delivery service) or by
facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If
to the
Company:
Midnight
Holdings Group, Inc.
00000
Xxxx Xxxx, Xxxxx 000
Xxxxxxx
Xxxxxxxx, XX 00000
Attention: Chief
Executive Officer
Telephone: 000-000-0000
Facsimile: 000-000-0000
With
a
copy to:
Xxxxxx
& Xxxxxx, LLP
000
Xxxxx
0 Xxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Attention: Xxxxx
X. Xxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
If
to an
Investor: to the address set forth immediately below such Investor’s name on the
signature pages to the Securities Purchase Agreement.
With
a
copy to:
Xxxxxxx
Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000
Xxxxxx Xxxxxx
00xx
Xxxxx
Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000
Attention: Xxxxxx
X. Xxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
Email: xxxxxxxx@xxxxxxxxxxxx.xxx
Page
11
c. Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as
a
waiver thereof.
d. THIS
AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF
LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION
OF THE UNITED STATES FEDERAL COURTS LOCATED NEW YORK, NEW YORK WITH RESPECT
TO
ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN
CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH
PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE
THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT
OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT
A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN
ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES
AND
EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
CONNECTION WITH SUCH DISPUTE.
e. In
the
event that any provision of this Agreement is invalid or unenforceable under
any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision
hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.
f. This
Agreement, the Notes, the Warrants and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and
therein. This Agreement and the Securities Purchase Agreement
supersede all prior agreements and understandings among the parties hereto
with
respect to the subject matter hereof and thereof.
g. Subject
to the requirements of Section 9 hereof, this Agreement shall be binding upon
and inure to the benefit of the parties and their successors and
assigns.
Page
12
h. The
headings in this Agreement are for convenience of reference only and shall
not
form part of, or affect the interpretation of, this Agreement.
i. This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original but all of which shall constitute one and the same agreement
and shall become effective when counterparts have been signed by each party
and
delivered to the other party. This Agreement, once executed by a
party, may be delivered to the other party hereto by facsimile transmission
of a
copy of this Agreement bearing the signature of the party so delivering this
Agreement.
j. Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
k. Except
as
otherwise provided herein, all consents and other determinations to be made
by
the Investors pursuant to this Agreement shall be made by Investors holding
a
majority of the Registrable Securities, determined as if the all of the Notes
then outstanding have been converted into for Registrable
Securities.
l. The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to each Investor by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for breach of its obligations under this
Agreement will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of any of the provisions under this Agreement, that each
Investor shall be entitled, in addition to all other available remedies in
law
or in equity, and in addition to the penalties assessable herein, to
an injunction or injunctions restraining, preventing or curing any breach of
this Agreement and to enforce specifically the terms and provisions hereof,
without the necessity of showing economic loss and without any bond or other
security being required.
m. The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
Page
13
IN
WITNESS WHEREOF, the
Company and the undersigned Initial Investors have caused this Agreement to
be
duly executed as of the date first above written.
MIDNIGHT
HOLDINGS GROUP,
INC.
/s/Xxxxxxxx
Xxxxx
Xxxxxxxx
Xxxxx
Chief
Executive Officer
AJW
PARTNERS, LLC
By: SMS
Group, LLC
/s/ Xxxxx
X.
Xxxxxxxx
Xxxxx
X.
Xxxxxxxx
Manager
AJW
OFFSHORE,
LTD.
By: First
Street Manager II, LLC
/s/ Xxxxx X. Xxxxxxxx
Xxxxx
X.
Xxxxxxxx
Manager
AJW
QUALIFIED PARTNERS,
LLC
By: AJW
Manager, LLC
/s/ Xxxxx
X.
Xxxxxxxx
Xxxxx
X.
Xxxxxxxx
Manager
NEW
MILLENNIUM CAPITAL PARTNERS II,
LLC
By: First
Street Manager II, LLC
/s/ Xxxxx
X.
Xxxxxxxx
Xxxxx
X.
Xxxxxxxx
Manager
Page
14
