EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made
and entered into as of April , 2005, by and among Flexible Solutions
International, Inc., a Nevada corporation (the "COMPANY"), and the investors
signatory hereto (each a "INVESTOR" and collectively, the "INVESTORS").
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of April , 2005. by and among the Company and the Investors
(the "PURCHASE AGREEMENT").
The Company and the Investors hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement will have the meanings given such terms in the
Purchase Agreement. As used in this Agreement, the following terms have the
respective meanings set forth in this Section 1:
"ADDITIONAL SHARES" means any shares of Common Stock issuable
to Investors in accordance with Section 4.7 of the Purchase Agreement.
"EFFECTIVE DATE" means the date that the initial Registration
Statement filed pursuant to Section 2(a) is first declared effective by the
Commission.
"EFFECTIVENESS DATE" means (a) with respect to the initial
Registration Statement required to be filed under Section 2(a), the earlier of:
(a)(i) the 90th day following the Closing, and (ii) the fifth Trading Day
following the date on which the Company is notified by the Commission that the
initial Registration Statement will not be reviewed or is no longer subject to
further review and comments and (b) with respect to any additional Registration
Statements that may be required pursuant to Section 2(b), the earlier of (i) the
90th day following (x) if such Registration Statement is required because the
Commission shall have notified the Company in writing that certain Registrable
Securities were not eligible for inclusion on a previously filed Registration
Statement, the date or time on which the Commission shall indicate as being the
first date or time that such Registrable Securities may then be included in a
Registration Statement, (y) if the Company issues securities that require it to
issue Additional Shares under the Purchase Agreement, the day on which such
securities were issued, or (z) if such Registration Statement is required for a
reason other than as described in (x) or (y) above, the date on which the
Company first knows, or reasonably should have known, that such additional
Registration Statement(s) is required, and (ii) the fifth Trading Day following
the date on which the Company is notified by the Commission that such additional
Registration Statement will not be reviewed or is no longer subject to further
review and comments.
"EFFECTIVENESS PERIOD" has the meaning set forth in Section
2(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FILING DATE" means (a) with respect to the initial
Registration Statement required to be filed under Section 2(a), the 30th day
following the Closing and (b) with respect to any additional Registration
Statements that may be required pursuant to Section 2(b), the 30th day following
(x) if such Registration Statement is required because the Commission shall have
notified the Company in writing that certain Registrable Securities were not
eligible for inclusion on a previously filed Registration Statement, the date or
time on which the Commission shall indicate as being the first date or time that
such Registrable Securities may then be included in a Registration Statement,
(y) if the Company issues securities that require it to issue Additional Shares
under the Purchase Agreement, the day on which such securities were issued, or
(z) if such Registration Statement is required for a reason other than as
described in (x) or (y) above, the date on which the Company first knows, or
reasonably should have known, that such additional Registration Statement(s) is
required.
"HOLDER" or "HOLDERS" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"INDEMNIFIED PARTY" has the meaning set forth in Section 5(c).
"INDEMNIFYING PARTY" has the meaning set forth in Section
5(c).
"LOSSES" has the meaning set forth in Section 5(a).
"NEW YORK COURTS" means the state and federal courts sitting
in the City of New York, Borough of Manhattan.
"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.
"REGISTRABLE SECURITIES" means: (i) the Shares, (ii) the
Warrant Shares, (iii) any New Issue Securities acquired by a Holder pursuant to
Section 4.3 of the Purchase Agreement, (iv) any Additional Shares issued and/or
issuable pursuant to Section 4.7 of the Purchase Agreement, and (v) any
securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event, or any conversion price
adjustment with respect to any of the securities referenced in (i), (ii), (iii),
or (iv) above.
"REGISTRATION STATEMENT" means each of the following: (i) the
initial registration statement required to be filed in accordance with Section
2(a) and (ii) each additional registration statement that may be required to be
filed under Section 2(b), and including, in each case, the Prospectus,
amendments and supplements to each 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 144" means Rule 144 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 effect as such Rule.
"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 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 effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means the shares of Common Stock issued or issuable
to the Investors at Closing pursuant to the Purchase Agreement.
"WARRANTS" means the Common Stock purchase warrants issued or
issuable to the Investors pursuant to the Purchase Agreement.
"WARRANT SHARES" means the shares of Common Stock issued or
issuable upon exercise of the Warrants.
2. Registration.
(a) On or prior to each Filing Date, the Company shall prepare and file with the
Commission a Registration Statement covering the resale of all Registrable
Securities not already covered by an existing and effective Registration
Statement for an offering to be made on a continuous basis pursuant to Rule 415,
on Form S-3 (except if the Company is not then eligible to register for resale
the Registrable Securities on Form S-3, in which case such registration shall be
on another appropriate form for such purpose). Such Registration Statement shall
contain (except if otherwise required pursuant to written comments received from
the Commission upon a review of such Registration Statement) the "Plan of
Distribution" attached hereto as Annex A. The Company shall cause such
Registration Statement to be declared effective under the Securities Act as soon
as possible but, in any event, no later than its Effectiveness Date, and shall
use its reasonable best efforts to keep the Registration Statement continuously
effective under the Securities Act until the date which is the earlier of (i)
four years after its Effective Date, (ii) such time as all of the Registrable
Securities covered by such Registration Statement have been publicly sold by the
Holders, or (iii) such time as all of the Registrable Securities covered by such
Registration Statement may be sold by the Holders pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion letter to
such effect, addressed and acceptable to the Company's transfer agent and the
affected Holders (the "EFFECTIVENESS PERIOD").
(b) If for any reason the Commission does not permit all of the Registrable
Securities to be included in the Registration Statement filed pursuant to
Section 2(a), or for any other reason any outstanding or then issuable
Registrable Securities are not then covered by an effective Registration
Statement, then the Company shall prepare and file by the Filing Date for such
Registration Statement, an additional Registration Statement covering the resale
of all Registrable Securities not already covered by an existing and effective
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415, on Form S-3 (except if the Company is not then eligible to register
for resale the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form for such purpose). Each such
Registration Statement shall contain (except if otherwise required pursuant to
written comments received from the Commission upon a review of such Registration
Statement) the "Plan of Distribution" attached hereto as Annex A. The Company
shall use its best efforts to cause each such Registration Statement to be
declared effective under the Securities Act as soon as possible but, in any
event, by its Effectiveness Date, and shall use its reasonable best efforts to
keep such Registration Statement continuously effective under the Securities Act
during the entire Effectiveness Period.
(c) If: (i) a Registration Statement is not filed on or prior to its Filing Date
(if the Company files a Registration Statement without affording the Holders the
opportunity to review and comment on the same as required by Section 3(a) hereof
for at least two Business Days, the Company shall not be deemed to have
satisfied this clause (i)), or (ii) a Registration Statement is not declared
effective by the Commission on or prior to its required Effectiveness Date, or
(iii) after its Effective Date, without regard for the reason thereunder or
efforts therefore, such Registration Statement ceases for any reason to be
effective and available to the Holders as to all Registrable Securities to which
it is required to cover at any time prior to the expiration of its Effectiveness
Period for more than an aggregate of 30 Trading Days (which need not be
consecutive) (any such failure or breach being referred to as an "EVENT," and
for purposes of clauses (i) or (ii) the date on which such Event occurs, or for
purposes of clause (iii) the date which such 30 Trading Day-period is exceeded,
being referred to as "EVENT DATE"), then in addition to any other rights the
Holders may have hereunder or under applicable law: on the one-month anniversary
of each such Event Date, and on each monthly anniversary thereafter, the Company
shall pay to each Holder an amount in cash, as partial liquidated damages and
not as a penalty, equal to 1.0% of the aggregate Investment Amount paid by such
Holder pursuant to the Purchase Agreement until the applicable Event is cured.
The parties agree that the Company will not be liable for liquidated damages
under this Section in respect of the Warrants. The partial liquidated damages
pursuant to the terms hereof shall apply on a daily pro-rata basis for any
portion of a month prior to the cure of an Event, except in the case of the
first Event Date.
(d) Each Holder agrees to furnish to the Company a completed Questionnaire in
the form attached to this Agreement as Annex B (a "SELLING HOLDER
QUESTIONNAIRE"). The Company shall not be required to include the Registrable
Securities of a Holder in a Registration Statement and shall not be required to
pay any liquidated or other damages under Section 2(c) to any Holder who fails
to furnish to the Company a fully completed Selling Holder Questionnaire within
two Business Days of a request by the Company for such Selling Holder
Questionnaire (subject to the requirements set forth in Section 3(a)).
3. Registration Procedures.
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Not less than four Trading Days prior to the filing of a Registration
Statement or any related Prospectus or any amendment or supplement thereto, the
Company shall furnish to each Holder copies of the "Selling Stockholders"
section of such document, the "Plan of Distribution" and any risk factor
contained in such document that addresses specifically this transaction or the
Selling Stockholders, as proposed to be filed, which documents will be subject
to the review of such Holder for two Business Days after such Holder's receipt
thereof. The Company shall not file a Registration Statement, any Prospectus or
any amendments or supplements thereto in which the "Selling Stockholder" section
thereof differs from the disclosure received from a Holder in its Selling Holder
Questionnaire (as amended or supplemented).
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to each Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep such Registration
Statement continuously effective as to the applicable Registrable Securities for
its 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,
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 each Registration Statement or any amendment thereto
and, as promptly as reasonably possible provide the Holders true and complete
copies of all correspondence from and to the Commission relating to such
Registration Statement that would not result in the disclosure to the Holders of
material and non-public information concerning the Company; and (iv) comply in
all material respects with the provisions of the Securities Act and the Exchange
Act with respect to the Registration Statements and the disposition of all
Registrable Securities covered by each Registration Statement.
(c) Notify the Holders as promptly as reasonably possible (notification via
electronic mail shall be sufficient) (and, in the case of (i)(A) below, not less
than three Trading Days prior to such filing) and (if requested by any such
Person) confirm such notice in writing no later than one Trading Day following
the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to a Registration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement (the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders that pertain to
the Holders as a Selling Stockholder or to the Plan of Distribution, but not
information which the Company believes would constitute material and non-public
information); and (C) with respect to each 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 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; and (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
such 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 such Registration Statement, Prospectus or other
documents so that, in the case of such 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.
(d) Use its reasonable best 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, at least one conformed copy of each
Registration Statement and each amendment thereto and all exhibits to the extent
requested by such Person (including those previously furnished) promptly after
the filing of such documents with the Commission.
(f) Upon notification by the Commission that a Registration Statement will not
be reviewed or is no longer subject to further review and comments, the Company
shall request acceleration of such Registration Statement such that it becomes
effective at 5:00 p.m. (New York City time) on such Effective Date.
(g) Deliver to each Holder, by 9:00 a.m. (New York City time) on the day
following the Effective Date, without charge, an electronic copy of each
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request. The
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, to register or
qualify or cooperate with the selling Holders in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of all jurisdictions within the United States, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the Registration Statements.
(i) Cooperate with the Holders to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be delivered to a
transferee pursuant to the Registration Statements, which certificates shall be
free, to the extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any such Holders may request.
(j) Upon the occurrence of any event contemplated by Section 3(c)(v), as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the affected Registration Statements 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, no Registration Statement nor any 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.
4. Registration Expenses. All fees and expenses incident to the performance of
or compliance with this Agreement by the Company shall be borne by the Company
whether or not any Registrable Securities are sold pursuant to a Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to be
made with any Trading Market on which the Common Stock is then listed for
trading, and (B) in compliance with applicable state securities or Blue Sky
laws), (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 the 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
securities exchange as required hereunder.
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, investment advisors, partners, members 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 costs of preparation and 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 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 (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 (1) such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
(it being understood that the Holder has approved Annex A hereto for this
purpose) or (2) in the case of an occurrence of an event of the type specified
in Section 3(c)(ii)-(v), 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
an Advice or an amended or supplemented Prospectus, but only if and to the
extent that following the receipt of the Advice or the amended or supplemented
Prospectus the misstatement or omission giving rise to such Loss would have been
corrected. The Company shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding of which the Company is aware in
connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and
employees, each Person who controls the Company (within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to the fullest extent
permitted by applicable law, from and against all Losses, as incurred, arising
solely out of or based solely upon: (x) such Holder's failure to comply with the
prospectus delivery requirements of the Securities Act or (y) any untrue
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 arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent that, (1) such
untrue statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement (it being understood that the Holder has approved
Annex A hereto for this purpose), such Prospectus or such form of Prospectus or
in any amendment or supplement thereto or (2) in the case of an occurrence of an
event of the type specified in Section 3(c)(ii)-(v), 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 an Advice or an amended or supplemented Prospectus, but only
if and to the extent that following the receipt of the Advice or the amended or
supplemented Prospectus the misstatement or omission giving rise to such Loss
would have been corrected. 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 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 proximately and materially adversely prejudiced the
Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a 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 such 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.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses, 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 Section 5(c), 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.
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.
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 and to the extent specified in
Schedule 3.1(v) to the Purchase Agreement, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in a Registration Statement other than the
Registrable Securities, and the Company shall not during the Registration Period
enter into any agreement providing any such right to any of its security
holders.
(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 the Registration
Statement.
(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 the
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 may provide appropriate stop orders to enforce the provisions of this
paragraph.
(e) Piggy-Back Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities (including, but not limited to, any Additional Shares) and the
Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Holder written notice of such determination and, if within
fifteen days after receipt of such notice, any such Holder shall so request in
writing, the Company shall include in such registration statement all or any
part of such Registrable Securities (including, but not limited to, any
Additional Shares) such holder requests to be registered, subject to customary
underwriter cutbacks applicable to all holders of registration rights.
(f) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this Section 6(f), 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 no less than a majority in interest 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 certain Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of at
least a majority of the Registrable Securities to which such waiver or consent
relates.
(g) Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile (provided the sender receives
a machine-generated confirmation of successful transmission) at the facsimile
number specified in this Section prior to 6:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than 6:30
p.m. (New York City time) on any Trading Day, (c) the Trading Day following the
date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required
to be given. The address for such notices and communications shall be as
follows:
If to the Company: Flexible Solutions International, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇, ▇▇▇▇▇▇
Facsimile: 250.477.9912
Telephone: ▇▇▇.▇▇▇.▇▇▇▇
Attn: ▇▇▇ ▇'▇▇▇▇▇
If to an Investor: To the address set forth
under such Investor's name on the signature
pages hereto.
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears
in the stock transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(h) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and
shall inure to the benefit of each Holder. The Company may not assign its rights
or obligations hereunder without the prior written consent of each Holder. Each
Holder may assign their respective rights hereunder in the manner and to the
Persons as permitted under the Purchase Agreement.
(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 governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement (whether brought
against a party hereto or its respective Affiliates, employees or agents) will
be commenced in the New York Courts. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any New York Court, or that such
Proceeding has been commenced in an improper or inconvenient forum. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such Proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any Proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby. If either
party shall commence a Proceeding to enforce any provisions of this Agreement,
then the prevailing party in such Proceeding shall be reimbursed by the other
party for its attorney's fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.
(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 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.
(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 Investors' Obligations and Rights. The obligations of
each Investor under this Agreement are several and not joint with the
obligations of each other Investor, and no Investor shall be responsible in any
way for the performance of the obligations of any other Investor under this
Agreement. Nothing contained herein or in any Transaction Document, and no
action taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by this Agreement or any other Transaction Document. Each Investor
acknowledges that no other Investor will be acting as agent of such Investor in
enforcing its rights under this Agreement. Each Investor shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement, and it shall not be necessary for any
other Investor to be joined as an additional party in any Proceeding for such
purpose. The Company acknowledges that each of the Investors has been provided
with the same Registration Rights Agreement for the purpose of closing a
transaction with multiple Investors and not because it was required or requested
to do so by any Investor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES TO FOLLOW]
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
By:_________________________________
Name: ▇▇▇ ▇'▇▇▇▇▇
Title: CEO, President
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF INVESTORS TO FOLLOW]
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
NAME OF INVESTING ENTITY
By:
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Name:
Title:
ADDRESS FOR NOTICE
c/o:
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Street:
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City/State/Zip:
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Attention:
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Tel:
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Fax:
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Email:
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Annex A
Plan of Distribution
The Selling Stockholders and any of their pledgees, donees,
transferees, assignees and successors-in-interest may, from time to time, sell
any or all of their shares of Common Stock on any stock exchange, market or
trading facility on which the shares are traded or in private transactions.
These sales may be at fixed or negotiated prices. The Selling Stockholders may
use any one or more of the following methods when selling shares:
ordinary brokerage transactions and transactions in which the broker-dealer
solicits Investors;
block trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate
the transaction;
purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;
an exchange distribution in accordance with the rules of the applicable
exchange;
privately negotiated transactions;
to cover short sales made after the date that this Registration Statement is
declared effective by the Commission;
broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
a combination of any such methods of sale; and
any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders may from time to time pledge or grant a
security interest in some or all of the Shares owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell shares of Common Stock from time to time under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933 amending the list of
selling stockholders to include the pledgee, transferee or other successors in
interest as selling stockholders under this prospectus.
Upon the Company being notified in writing by a Selling Stockholder
that any material arrangement has been entered into with a broker-dealer for the
sale of Common Stock through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker or dealer, a
supplement to this prospectus will be filed, if required, pursuant to Rule
424(b) under the Securities Act, disclosing (i) the name of each such Selling
Stockholder and of the participating broker-dealer(s), (ii) the number of shares
involved, (iii) the price at which such the shares of Common Stock were sold,
(iv)the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not
conduct any investigation to verify the information set out or incorporated by
reference in this prospectus, and (vi) other facts material to the transaction.
In addition, upon the Company being notified in writing by a Selling Stockholder
that a donee or pledgee intends to sell more than 500 shares of Common Stock, a
supplement to this prospectus will be filed if then required in accordance with
applicable securities law.
The Selling Stockholders also may transfer the shares of Common Stock
in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Discounts, concessions,
commissions and similar selling expenses, if any, that can be attributed to the
sale of Securities will be paid by the Selling Stockholder and/or the
purchasers. Each Selling Stockholder has represented and warranted to the
Company that it acquired the securities subject to this registration statement
in the ordinary course of such Selling Stockholder's business and, at the time
of its purchase of such securities such Selling Stockholder had no agreements or
understandings, directly or indirectly, with any person to distribute any such
securities.
The Company has advised each Selling Stockholder that it may not use
shares registered on this Registration Statement to cover short sales of Common
Stock made prior to the date on which this Registration Statement shall have
been declared effective by the Commission. If a Selling Stockholder uses this
prospectus for any sale of the Common Stock, it will be subject to the
prospectus delivery requirements of the Securities Act. The Selling Stockholders
will be responsible to comply with the applicable provisions of the Securities
Act and Exchange Act, and the rules and regulations thereunder promulgated,
including, without limitation, Regulation M, as applicable to such Selling
Stockholders in connection with resales of their respective shares under this
Registration Statement.
The Company is required to pay all fees and expenses incident to the
registration of the shares, but the Company will not receive any proceeds from
the sale of the Common Stock. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act. If the Selling Stockholders use this
prospectus for any sale of the Common Stock, they will be subject to the
prospectus delivery requirements of the Securities Act.
Annex B
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE
The undersigned beneficial owner of common stock (the "COMMON STOCK"), of
Flexible Solutions International, Inc. (the "COMPANY") understands that the
Company has filed or intends to file with the Securities and Exchange Commission
(the "COMMISSION") a Registration Statement for the registration and resale of
the Registrable Securities, in accordance with the terms of the Registration
Rights Agreement, dated as of April , 2005 (the "REGISTRATION RIGHTS
AGREEMENT"), among the Company and the Investors named therein. A copy of the
Registration Rights Agreement is available from the Company upon request at the
address set forth below. All capitalized terms used and not otherwise defined
herein shall have the meanings ascribed thereto in the Registration Rights
Agreement.
The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
QUESTIONNAIRE
1. NAME.
(a) Full Legal Name of Selling Securityholder
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(b) Full Legal Name of Registered Holder (if not the same as (a)
above) through which Registrable Securities Listed in Item 3
below are held:
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(c) Full Legal Name of Natural Control Person (which means a
natural person who directly or indirectly alone or with others
has power to vote or dispose of the securities covered by the
questionnaire):
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2. ADDRESS FOR NOTICES TO SELLING SECURITYHOLDER:
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Telephone:
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Fax:
Contact Person:
3. BENEFICIAL OWNERSHIP OF REGISTRABLE SECURITIES:
Type and Number of Registrable Securities beneficially owned:
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4. BROKER-DEALER STATUS:
(a) Are you a broker-dealer?
Yes No
Note: If yes, the Commission's staff has indicated that you should
be identified as an underwriter in the Registration Statement.
(b) Are you an affiliate of a broker-dealer?
Yes No
(c) If you are an affiliate of a broker-dealer, do you certify that
you bought the Registrable Securities in the ordinary course of
business, and at the time of the purchase of the Registrable
Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to
distribute the Registrable Securities?
Yes No
Note: If no, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
5. BENEFICIAL OWNERSHIP OF OTHER SECURITIES OF THE COMPANY OWNED BY THE SELLING
SECURITYHOLDER.
Except as set forth below in this Item 5, the undersigned is not the
beneficial or registered owner of any securities of the Company other
than the Registrable Securities listed above in Item 3.
Type and Amount of Other Securities beneficially owned by the
Selling Securityholder:
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6. RELATIONSHIPS WITH THE COMPANY:
Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (owners of
5% of more of the equity securities of the undersigned) has held any
position or office or has had any other material relationship with the
Company (or its predecessors or affiliates) during the past three
years.
State any exceptions here:
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The undersigned agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein that may occur subsequent to the date
hereof and prior to the Effective Date for the Registration Statement.
By signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 6 and the inclusion of such
information in the Registration Statement and the related prospectus. The
undersigned understands that such information will be relied upon by the Company
in connection with the preparation or amendment of the Registration Statement
and the related prospectus.
IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.
Dated: Beneficial Owner:
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By:
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Name:
Title:
PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:
[ ]
