REGISTRATION RIGHTS AGREEMENT
EXHIBIT
10.7
This
Registration Rights Agreement (this “Agreement”) is made
and entered into as of __________, 2008, among Balqon Corporation, a California
corporation (the “Company”), and the
purchasers signatory hereto (each such purchaser is a “Purchaser” and
collectively, the “Purchasers”).
This
Agreement is made pursuant to the Convertible Promissory Notes, dated as of the
date hereof between the Company and the Purchasers (the “Notes”).
The
Company and the Purchasers hereby agree as follows:
1.
Definitions. Capitalized
terms used and not otherwise defined herein that are defined in the Notes shall
have the meanings given such terms in the Notes. As used in this
Agreement, the following terms shall have the following meanings:
“Advice” shall have
the meaning set forth in Section 6(d).
“Cut-back” and “Cut-back Shares”
shall have the meanings set forth in Section 2(a).
“Effectiveness Period”
shall have the meaning set forth in Section 2(a).
“Filing Date” means,
with respect to the Registration Statement required hereunder, the 60th
calendar day following the effectiveness of the Merger.
“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).
“Proceeding” means an
action, claim, suit, investigation or proceeding (including, without limitation,
an investigation or partial proceeding, such as a deposition), whether commenced
or threatened.
“Prospectus” means the
prospectus included in a Registration Statement (including, without limitation,
a prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Securities covered by a Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
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“Registrable
Securities” means all of (i) the Shares issuable pursuant to the Notes,
(ii) the shares of Common Stock issuable upon exercise of the Warrants to
purchase Company Common Stock issued in connection with the Notes (the
“Warrants”), and (iii) any shares of Common Stock issued or issuable upon
any stock split, dividend or other distribution, recapitalization or similar
event with respect to the foregoing.
“Registration
Statement” means the registration statements required to be filed
hereunder, including (in each case) the Prospectus, amendments and supplements
to such registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration
statement.
“Rule 415” means Rule
415 promulgated by the Commission pursuant to the Securities Act, as such rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same purpose and effect as
such rule.
“Rule 424” means Rule
424 promulgated by the Commission pursuant to the Securities Act, as such rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same purpose and effect as
such rule.
“Selling Shareholder
Questionnaire” shall have the meaning set forth in Section
3(a).
2.
Shelf
Registration.
(a) On
or prior to the Filing Date, the Company shall prepare and file with the
Commission a Registration Statement covering the resale of 100% of the
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415; provided, however, that if the SEC takes the position that the
offering of some or all of the Registrable Securities is not eligible to be made
on a delayed or continuous basis under the provisions of Rule 415, the Company
shall amend the Registration Statement prior to its effectiveness to remove from
the Registration Statement such portion of the Registrable Securities (the
“Cut-back Shares”) and/or agree to such restrictions and limitations on the
registration and resale of the Registrable Securities as the SEC may require to
assure the Company’s compliance with the requirements of Rule 415 (collectively,
the “SEC Restrictions”). Any cut-back (“Cut-back”) of the Registrable Securities
pursuant to this Section 2(a) shall be subject to the priority of registration
for the Registrable Securities covered by that certain Registration Rights
Agreement dated July 11, 2008, as amended (the “Priority Shares”), and any
cut-backs shall be allocated to the Holders of Registrable Securities on a pro
rata basis, unless the SEC Restrictions require otherwise. In the
event there are holders of securities, other than the Registrable Securities and
the Priority Shares, who are entitled to registration rights (“Other Shares”),
the securities that are entitled to be included in the registration shall first
be allocated to the holders of Priority Shares, next to the Holders of
Registrable Securities and thereafter to the holders of Other Shares, subject to
such allocation priorities as set forth in the registration rights agreements
for such Other Shares. Such Registration Statement shall contain the
“Plan of
Distribution” section substantially in the form attached hereto as Annex A, with such
changes as are reasonably required to respond to the actual plan of distribution
or any comments to such section by the Commission and to comply with then
applicable securities laws. Subject to the terms of this Agreement,
the Company shall use its commercially reasonable efforts to cause such
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, and shall use its commercially
reasonable efforts to keep such Registration Statement continuously effective
under the Securities Act until the earlier of (A) the date that is two years
after the date on which all the Shares are issued to the Holders, (B) the date
on which there ceases to be outstanding any Registrable Securities, and (C) the
date on which the Company receives an opinion from its legal counsel to the
effect that all Registrable Securities can be freely traded without the
continued effectiveness of a Registration Statement (the “Effectiveness
Period”).
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(b) The
parties hereto agree that the Company will not be required to use a Registration
Statement for any registration in which securities of the Company are sold to an
underwriter for reoffering to the public, and the Company will in no event be
required to cooperate with or pay for any such underwritten
offering.
3.
Registration
Procedures
In
connection with the Company’s registration obligations hereunder, the Company
shall:
(a) Not
less than three trading days prior to the filing of each Registration Statement
or 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 the
“Principal and Selling Stockholders” and “Plan of Distribution” sections of such
Registration Statement or other documents proposed to be filed, if such sections
have been revised since the previous filing of such Registration Statement or
any amendment or supplement thereto, 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 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 included in such Registration Statement
shall reasonably object in good faith, provided that, the Company is notified of
such objection in writing no later than two trading days after the Holders have
been so furnished copies of such documents. In order to be included
in such registration, each Holder agrees to furnish to the Company a completed
Questionnaire substantially in the form attached to this Agreement as Annex B (a
“Selling
Securityholder Questionnaire”) not less than ten days after written
request therefore has been made by the Company. Any Holder who fails
to timely forward to the Company the completed Questionnaire shall be excluded
from the registration.
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(b) (i)
Prepare and file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep a Registration Statement continuously
effective as to the applicable Registrable Securities for the Effectiveness
Period and prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all of the
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement (subject to the terms of this
Agreement), and as so supplemented or amended to be filed pursuant to Rule 424;
(iii) respond as promptly as reasonably possible to any comments received from
the Commission with respect to a Registration Statement or any amendment thereto
and, upon written request by any Holder of at least 25% of the Registrable
Securities included in such Registration Statement, as promptly as reasonably
possible provide such Holders with true and complete copies of all material
written correspondence from and to the Commission relating to a Registration
Statement; 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) Use
its commercially reasonable efforts to notify the Holders (which notice shall,
pursuant to clauses (ii) 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 (if requested by any Holder of at least
25% of the Registrable Securities included in a Registration Statement) confirm
such notice in writing (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to a Registration Statement has been 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) 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 be
kept confidential by each Holder until such information otherwise becomes
public, unless disclosure by a Holder is required by law; provided, further,
notwithstanding each Holder’s agreement to keep such information confidential,
the Holders make no acknowledgement that any such information is material,
non-public information.
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(d) Use
its commercially reasonable efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) Furnish
to each Holder, without charge, to the extent requested in writing by such
Holder, 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, and all exhibits
to such Registration Statement (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(f) Promptly
deliver to each Holder, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Holder may reasonably request in writing in
connection with resales by such Holder. 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 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 on any notice
pursuant to Section 3(c).
(g) 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.
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(h) If
requested by a selling Holder, cooperate with such Holder 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 applicable law, 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.
(i) Upon
the occurrence of any event contemplated by this Section 3, as promptly as
reasonably possible under the circumstances taking into account the Company’s
good faith assessment of any adverse consequences to the Company and its
stockholders of the premature disclosure of such event, prepare a supplement or
amendment, including a post-effective amendment, to a Registration Statement or
a supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither a Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If the Company notifies the Holders in accordance
with clauses (ii) through (vi) of Section 3(c) 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 commercially reasonable 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(i) to suspend the
availability of a Registration Statement and Prospectus for a period not to
exceed 40 trading days (which need not be consecutive days) in any 12 month
period.
(j) Comply
with all applicable rules and regulations of the Commission until the end of the
Effectiveness Period.
(k) 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 the person who has voting and dispositive control over the such
shares. The Company shall have no obligation to keep a Prospectus
usable or to give notice that a Prospectus is not usable by a particular Holder,
and the Company will have no liability for, to the extent such Prospectus is not
usable by such Holder because current information with respect to such Holder is
not included therein because such Holder has not provided information to the
Company in accordance with Section 3(a) or this Section
3(k).
(l) Notwithstanding
any provision of this Agreement to the contrary, it shall not be a breach or
violation of any obligation of the Company hereunder if the Company fails to
take any action otherwise required hereunder because, in its reasonable
determination, such action would require the Company to disclose material,
non-public information that the Company has a bona fide business or legal
reason for not disclosing regardless of whether the Company caused such
material, non-public information to exist.
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4.
Registration
Expenses. All fees and expenses incident to the performance of
or compliance with this Agreement by the Company shall be borne by the Company
whether or not any Registrable Securities are sold pursuant to a Registration
Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the trading market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws reasonably agreed to by the Company in writing (including without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as requested in writing by the Holders),
(ii) printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is reasonably requested by the Holders of a majority of
the Registrable Securities included in a Registration Statement), (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 trading market as required hereunder. In no event
shall the Company be responsible for any broker or similar commissions or,
except to the extent provided for in the Transaction Documents, any legal fees
or other costs of the Holders.
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, 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 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, agents and employees 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 any untrue or alleged untrue statement
of a material fact contained in a Registration Statement, any Prospectus or any
form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, 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 or was not objected to in writing by such Holder
expressly for use in a Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto (it being understood that
each Holder has expressly 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(c)(ii)-(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 each other Holder, 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) in the case of an occurrence of an event of the type specified in
Section 3(c)(ii)-(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) or (z) any untrue or alleged
untrue statement of a material fact contained in any Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
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 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 or was not objected to in
writing by such Holder expressly for use in a Registration Statement (it being
understood that each Holder has expressly approved Annex A hereto for this
purpose), such Prospectus or such form of Prospectus or in any amendment or
supplement thereto. 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 such 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 thereof and the reasonable fees and expenses of 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. 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 following 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 not entitled to indemnification hereunder, determined based
upon the relative faults of the parties.
(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 reasonable 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 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, except
in the case of fraud by such Holder.
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 obligations
under this Agreement, each Holder or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law and under this
Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Piggyback on
Registrations. Except as set forth in Schedule 6(b)
attached hereto, and subject to the cut-back provisions of Section 2(a), neither
the Company nor any of its security holders may include securities of the
Company in the initial Registration Statement other than the Priority Shares,
the Registrable Securities and the Other Shares.
(c) Compliance. Each
Holder covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to a Registration Statement.
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(d) Discontinued
Disposition. Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Section 3(c), such Holder will
forthwith discontinue disposition of such Registrable Securities under a
Registration Statement until such Holder’s receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the “Advice”) by the
Company that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company will use its commercially
reasonable efforts to ensure that the use of the Prospectus may be resumed as
promptly as it practicable. The Company agrees and acknowledges that
any periods during which the Holder is required to discontinue the disposition
of the Registrable Securities hereunder shall be subject to the provisions of
Section 2(b).
(e) 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 a majority
of the then outstanding Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of all of the Registrable Securities to which such waiver or consent
relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding
sentence.
(f) Notices. All notices and other communications
required or permitted to be provided to a party hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile
(provided the sender receives a machine-generated confirmation of successful
transmission) or e-mail prior to 5:00 p.m. (Los Angeles, California time) on a
business day, (ii) the next business day after the date of transmission, if such
notice or communication is delivered via facsimile or e-mail on a day that is
not a business day or later than 4:59 p.m. (Los Angeles, California time) on any
business day, (iii) the business day following the date of mailing, if sent
overnight by an overnight courier service nationally recognized in the United
States, or (iv) upon actual receipt by the party to whom such notice is required
to be given. The address for such notices and communications for a party shall
be as set forth on the signature pages to the Notes or such other address as may
be designated in writing hereafter, in the same manner, by such
party.
11
(g) 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 its rights or
obligations hereunder without the prior written consent of all of the Holders of
the then-outstanding Registrable Securities except in the case of a merger (or
similar transaction) in which case the surviving entity shall succeed to the
rights and obligations of the Company. Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted under
the Notes, provided however that at least $100,000 of Registrable Securities are
assigned to an assignee who seeks to assert registration rights under this
agreement.
(h) No Inconsistent
Agreements. Except as set forth in Schedule 6(h),
neither the Company nor any of its subsidiaries has entered, as of the date
hereof, nor shall the Company or any of its subsidiaries, during the period
beginning on or after the date of this Agreement and ending at the end of the
Effectiveness Period, enter into any agreement with respect to its securities,
that would have the effect of impairing the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions
hereof. Except as set forth in Schedule 6(h),
neither the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person that have not been satisfied in full.
(i) Execution and
Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(j) Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be determined with the
provisions of the Notes.
(k) Cumulative
Remedies. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
(l) 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.
12
(m) Headings. The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
(n) 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.
13
IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as
of the date first written above.
BALQON CORPORATION | |||
|
By:
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/s/ Xxxxxxxxx Xxxxx | |
Name:
X. Xxxxx
Title: President
|
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
14
[SIGNATURE
PAGE OF HOLDERS]
Name of
Holder: __________________________
Signature of Authorized Signatory of
Holder: __________________________
Name of
Authorized Signatory: _________________________
Title of
Authorized Signatory: __________________________
[SIGNATURE
PAGES CONTINUE]
15
ANNEX
A
Plan of
Distribution
We are
registering the shares of common stock on behalf of the selling stockholders. A
“selling stockholder” is a person named on page ___ and also includes any donee,
pledgee, transferee, assignee, distributee or other successor-in-interest
selling shares received after the date of this prospectus from a selling
stockholder as a gift, pledge, partnership or limited liability company
distribution or other non-sale related transfer. The selling
stockholders may offer their shares of common stock at prevailing market prices,
at prices related to the prevailing market prices, at negotiated prices or at
fixed prices or in competitively bid transactions. Each selling
stockholder reserves the right to accept or reject, in whole or in part, any
proposed purchase of shares, whether the purchase is to be made directly or
through agents.
The
selling stockholders may offer their shares of common stock at various times in
one or more of the following transactions:
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·
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in
ordinary brokers’ transactions and transactions in which the broker
solicits purchasers;
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·
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purchases
by a broker-dealer for its account pursuant to this
prospectus;
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·
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in
transactions involving cross or block
trades;
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·
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in
transactions “at the market” to or through market makers in the common
stock or into an existing market for the common
stock;
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·
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in
other ways not involving market makers or established trading markets,
including direct sales of the shares to purchasers or sales of the shares
effected through agents;
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·
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in
privately negotiated transactions;
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·
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in
underwritten transactions; or
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·
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in
a combination of any of the foregoing
transactions.
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The
selling stockholders also may sell all or a portion of their shares in open
market transactions in accordance with Rule 144 under the Securities Act
provided that they meet the criteria and conform to the requirements of that
rule.
From time
to time, one or more of the selling stockholders may pledge or grant a security
interest in some or all of the shares owned by them. If the selling
stockholders default in performance of their secured obligations, the pledges or
secured parties may offer and sell the shares from time to time by this
prospectus. The selling stockholders also may transfer and donate
shares in other circumstances. The number of shares beneficially
owned by selling stockholders will decrease as and when the selling stockholders
transfer or donate their shares or default in performing obligations secured by
their shares. The plan of distribution for the shares offered and
sold under this prospectus will otherwise remain unchanged, except that the
transferees, donees, pledges, other secured parties or other
successors-in-interest will be selling stockholders for purposes of this
prospectus.
16
We have
advised the selling stockholders that during such times as they may be engaged
in a distribution of the shares, they are required to comply with
Regulation M under the Securities Exchange Act. With some exceptions,
Regulation M prohibits any selling stockholder, any affiliated purchasers
and other persons who participate in such a distribution from bidding for or
purchasing, or attempting to induce any person to bid for or purchase, any
security which is the subject of the distribution until the entire distribution
is complete.
The
selling stockholders may use broker-dealers to sell their shares of common
stock. If this occurs, broker-dealers will either receive discounts
or commission from the selling stockholders, or they will receive commissions
from the purchasers of shares of common stock for whom they acted as
agents. These brokers may act as dealers by purchasing any and all of
the shares covered by this prospectus either as agents for others or as
principals for their own accounts and reselling these securities under the
prospectus.
The
selling stockholders and any broker-dealers or other persons acting on behalf of
parties that participate in the distribution of the shares may be considered
underwriters under the Securities Act. As such, any commissions or
profits they receive on the resale of the shares may be considered underwriting
discounts and commissions under the Securities Act. Neither we nor
any selling stockholders can presently estimate the amount of such
compensation.
As of the
date of this prospectus, we are not aware of any agreement, arrangement or
understanding between any broker or dealer and any of the selling stockholders
with respect to the offer or sale of the shares under this prospectus. If we
become aware of any agreement, arrangement or understanding, to the extent
required under the Securities Act, we will file a supplemental prospectus to
disclose:
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·
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the
name of any the broker-dealers;
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·
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the
number of shares involved;
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·
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the
price at which the shares are to be
sold;
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·
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the
number of shares involved;
|
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·
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the
price at which the shares are to be
sold;
|
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·
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the
commissions paid or discounts or concessions allowed to broker-dealers,
where applicable;
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·
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that
the broker-dealers did not conduct any investigation to verify the
information set out in this prospectus, as supplemented;
and
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·
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other
facts material to the transaction.
|
In
addition, when we are notified by a selling stockholder that a donee, pledgee,
transferee, assignee, distributee or other successor-in-interest intends to sell
more than 500 shares of common stock, we will file a supplement to this
prospectus.
Certain
of the agreements with the selling stockholders contain reciprocal
indemnification provisions between us and the selling stockholders to indemnify
each other against certain liabilities, including liabilities under the
Securities Act, which may be based upon, among other things, any untrue
statement or alleged untrue statement of a material fact or any omission or
alleged omission of a material fact.
17
We have
agreed to pay substantially all of the expenses incidental to the registration,
offering and sale to the public of the shares of common stock covered by this
prospectus, other than commissions, fees and discounts of underwriters, brokers,
dealers and agents, if any.
It is
possible that a significant number of shares could be sold at the same
time. Such sales, or the perception that such sales could occur, may
adversely affect prevailing market prices for the common stock.
This
offering by any selling stockholder will terminate on the date on which the
selling stockholder has sold all of such selling stockholder’s
shares.
18
Schedule
6(b)
Schedule
6(h)
The
Company has entered into the following agreements concerning the registration of
securities:
1. Registration
Rights Agreement dated July 11, 2008, by and among Balqon and Xxxxxxxx Xxxxxx,
Xxx Xxxx, Xxxx Xxxxx and Xxxxxxx Xxxxxxxxxxxx, as amended by the Amended and
Restated Registration Rights Agreement between the parties dated September,
2008.
2. The
Registration Rights Agreement dated September, 2008 for the shares of common
stock and warrants issuable pursuant to the Convertible Promissory Note
financing (the “Bridge Financing”).
3. The
Company intends to offer registration rights to investors pursuant to the terms
of a private placement (”Private Placement”) of up to 3,000,000 Shares of
Company Common Stock and Warrants to purchase up to 3,000,000 Shares of Company
Common Stock.