REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as
of September 18, 1998, by and among D.H. Marketing & Consulting,
Inc., a Nevada corporation, with headquarters at 000 Xxxxxxxx
Xxxxxx, Xxxxxx Xxxxxxxxxxxx 00000 (the "Company"), and the
undersigned buyer (the "Buyer" ).
WHEREAS:
A. In connection with the Securities Purchase Agreement
by and among the parties of even date herewith (the "Securities
Purchase Agreement"), the Company has agreed, upon the terms and
subject to the conditions of the Securities Purchase Agreement,
(i) to issue and sell to the Buyer's shares of the Company's
Series A Preferred Stock (the "Preferred Stock"), which will be
convertible into shares of the Company's common stock, $.0003 par
value per share (the "Common Stock") (as converted, the
"Conversion Shares") in accordance with the terms of the
Preferred Stock; and
B. To induce the Buyers to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide
certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar
successor statute (collectively, the "1933 Act"), and applicable
state securities laws:
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Buyers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have
the following meanings:
a. "Investor" means the Buyer and any transferee
or assignee thereof to whom the Buyer assigns its rights
under this Agreement and who agrees to become bound by the
provisions of this Agreement in accordance with Section 9.
b. "Person" means a corporation, a limited
liability company, an association, a partnership, an
organization, a business, an individual, a governmental or
political subdivision thereof or a governmental agency.
c. "Register," "registered," and "registration"
refer to a registration effected by preparing and filing
one or more Registration Statements in compliance with the
1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s)
by the United States Securities and Exchange Commission
(the "SEC").
d. Registrable Securities" means the Conversion
Shares issued or issuable upon conversion of the Preferred
Stock and any shares of capital stock issued or issuable
with respect to the Conversion Shares or the Preferred
Stock as a result of any stock split, stock dividend,
recapitalization, exchange or similar event.
e."Registration Statement" means a registration
statement of the Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set for-the in the
Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall
prepare, and, on or prior to twenty (20) days after the
date of issuance of any Preferred Stock (the "Filing
Deadline"), file with the SEC a Registration Statement or
Registration Statements (as is necessary) on Form S-3 (or,
if such form is unavailable for such a registration, on
such other form as is available for such a registration,
subject to the consent of each Buyer and the provisions of
Section 2(e), which consent will not be unreasonably
withheld), covering the resale of all of the Registrable
Securities, which Registration Statement(s) shall state
that, in accordance with Rule 416 promulgated under the
1933 Act, such Registration Statement(s) also covers such
indeterminate number of additional shares of Common Stock
as may become issuable upon conversion of the Preferred
Stock (i) to prevent dilution resulting from stock splits,
stock dividends or similar transactions and (ii) by reason
of changes in the Conversion Price or Conversion Rate of
the Preferred Stock in accordance with the terms thereof
Such Registration Statement shall initially register for
resale at least 1,000,000 shares of Common Stock, subject
to adjustment as provided in Section 3(b), and such
registered shares of Common Stock shall be allocated among
the Investors pro rata based on the total number of
Registrable Securities issued or issuable as of each date
that a Registration Statement, as amended, relating to the
resale of the Registrable Securities is declared effective
by the SEC. The Company shall use its best efforts to have
the Registration Statement declared effective by the SEC
within ninety (90) days after the issuance of the Preferred
Stock (the "Registration Deadline"). The Company shall
permit the registration statement to become effective
within five (5) business days after receipt of a "no
review" notice from the SEC. In the event that the
Registration Statement is not filed by the Company with the
SEC by the Filing Deadline, then the Applicable Discount
(as defined in the Certificate of Designations) shall be
reduced by (i) an additional 2% for each 30 days from the
Filing Deadline for which the Registration is not filed by
the Company with the SEC. In the event that the
Registration Statement is not declared effective by the SEC
by the Registration Deadline then the Conversion Percentage
to be used in determining the Conversion Price (as defined
in the Certificate of Designations, Preferences, and Rights
filed by the Company on or before the date hereof in
connection herewith ("Certificate of Designations")shall be
reduced by (i) an
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additional 3% if the Registration Statement is not declared
effective by the SEC within thirty (30) days following the
Registration Deadline, or (ii) an additional 6% if the
Registration Statement is not declared effective by the SEC
within sixty (60) days of the Registration Deadline.
b. Underwritten Offering. If any offering
pursuant to a Registration Statement pursuant to Section
2(a) involves an underwritten offering, the Buyers shall
have the right to select one legal counsel and an
investment banker or bankers and manager or managers to
administer their interest in the offering, which investment
banker or bankers or manager or managers shall be
reasonably satisfactory to the Company.
c. Piggy-Back Registrations. If at any time prior
to the expiration of the Registration Period (as
hereinafter defined) the Company proposes to file with the
SEC a Registration Statement relating to an offering for
its own account or the account of others under the 1933 Act
of any of its securities (other than on Form S-4 or Form S-8 or
their then equivalents relating to 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) the Company shall promptly send to each Investor who
is entitled to registration rights under this Section 2(c)
written notice of the Company's intention to file a
Registration Statement and of such Investor's rights under
this Section 2(c) and, if within twenty (20) days after
receipt of such notice, such Investor shall so request in
writing, the Company shall include in such Registration
Statement all or any part of the Registrable Securities
such Investor requests to be registered, subject to the
priorities set forth in Section 2(d) below. No right to
registration of Registrable Securities under this Section
2(c) shall be construed to limit any registration required
under Section 2(a). The obligations of the Company under
this Section 2(c) may be waived by Investors holding a
majority of the Registrable Securities. If an offering in
connection with which an Investor is entitled to
registration under this Section 2(c) is an underwritten
offering, then each Investor whose Registrable Securities
are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using
the same underwriter or underwriters and, subject to the
provisions of this Agreement, on the same terms and
conditions as other shares of Common Stock included in such
underwritten offering.
d. Priority in Piggy-Back Registration Rights in
connection with Registrations or Company Account. If the
registration referred to in Section 2(c) is to be an
underwritten public offering for the account of the Company
and the managing underwriter(s) advise the Company in
writing, that in their reasonable good faith opinion,
marketing or other factors dictate that a limitation on the
number of shares of Common Stock which may be included in
the Registration Statement is necessary to facilitate and
not adversely affect the proposed offering, then the
Company shall include in such registration: (1) first, all
securities the Company proposes to sell for its own
account, (2) second, up to the full number of securities
proposed to be registered for the account of the holders of
securities entitled to inclusion of
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their securities in the Registration Statement by reason of
demand registration rights, and (3) third, the securities
requested to be registered by the Investors and other
holders of securities entitled to participate in the
registration, drawn from them pro rata based on the number
each has requested to be included in such registration.
e. Eligibility for Form S-3. The Company
represents, warrants covenants that, except as provided in
Schedule 2e. attached hereto, it has filed and shall file
all reports required to be filed by the Company with the
SEC in a timely manner. In the event that Form S-3 is not
available for sale by the Investors of the Registrable
Securities, then (i) the Company, with the consent of each
Investor pursuant to Section 2(a), shall register the sale
of the Registrable Securities on another appropriate form,
such as Form SB-2 and (ii) the Company shall undertake to
register the Registrable Securities on Form S-3 as soon as
such form is available.
3 . RELATED OBLIGATIONS.
Whenever an Investor has requested that any Registrable
Securities be registered pursuant to Section 2(c) or at such time
as the Company is obligated to file a Registration Statement with
the SEC pursuant to Section 2(a), the Company will use its best
efforts to effect the registration of the Registrable Securities
in accordance with the intended method of disposition thereof
and, pursuant thereto, the Company shall have the following
obligations:
a. The Company shall promptly prepare and file
with the SEC a Registration Statement with respect to the
Registrable Securities (on or prior to the forty-fifth
(45th) day following the date of issuance of any Preferred
Stock, for the registration of Registrable Securities
pursuant to Section 2(a)) and use its best efforts to cause
such Registration Statement(s) relating to Registrable
Securities to become effective as soon as possible after
such filing (by the ninetieth (90th) day following the
issuance of the relevant Preferred Stock for the
registration of Registrable Securities pursuant to Section
2(a), and keep the Registration Statement(s) effective
pursuant to Rule 415 at all times until the earlier of (i)
the date as of which the Investors may sell all of the
Registrable Securities without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor
thereto) or (ii) the date on which (A) the Investors shall
have sold all the Registrable Securities and (B) none of
the Preferred Stock is outstanding (the "Registration
Period"), which Registration Statement(s) (including any
amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement
of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which
they were made, not misleading.
b. The Company shall prepare and file with the SEC
such amendments (including post-effective amendments) and
supplements to the Registration Statement(s) and the
prospectus(es) used in connection with the Registration
Statement(s), which prospectus(es) are to be filed pursuant
to Rule 424 promulgated under the 1933 Act, as may be
necessary
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to keep the Registration Statement(s) effective at all
times during the Registration Period, and, during such
period, comply with the provisions of the 1933 Act with
respect to the disposition of all Registrable Securities of
the Company covered by the Registration Statement(s) until
such time as all of such Registrable Securities shall have
been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth
in the Registration Statement(s). In the event the number
of shares available under a Registration Statement filed
pursuant to this Agreement is insufficient to cover all of
the Registrable Securities, the Company shall amend the
Registration Statement, or file a new Registration
Statement (on the short form available therefor, if
applicable), or both, so as to cover all of the Registrable
Securities, in each case, as soon as practicable, but in
any event within fifteen (15) days after the necessity
therefor arises (based on the market price of the Common
Stock and other relevant factors on which the Company
reasonably elects to rely). The Company shall use its best
efforts to cause such amendment and/or new Registration
Statement to become effective as soon as practicable
following the filing thereof. For purposes of the
foregoing provision, the number of shares available under
a Registration Statement shall be deemed "insufficient to
cover all of the Registrable Securities" if at any time the
number of Registrable Securities issued or issuable upon
conversion of the Preferred Stock is greater than the
quotient determined by dividing (i) the number of shares of
Common Stock available for resale under such Registration
Statement by (ii) 1.5; provided that in the case of the
initial registration of the Registrable Securities pursuant
to Section 2(a), the Company shall be required to register
at least 1,000,000 shares of Common Stock for resale. For
purposes of the calculation set forth in the foregoing
sentence, any restrictions on the convertibility of the
Preferred Stock shall be disregarded and such calculation
shall assume that the Preferred Stock are then convertible
into shares of Common Stock at the then prevailing
Conversion Rate (as defined in the Preferred Stock).
c. The Company shall furnish to each Investor
whose Registrable Securities are included in the
Registration Statement(s) and its legal counsel without
charge (i) promptly after the same is prepared and filed
with the SEC at least one copy of the Registration
Statement and any amendment thereto, including financial
statements and schedules, all documents incorporated
therein by reference and all exhibits, the prospectus(es)
included in such Registration Statement(s) (including each
preliminary prospectus ) and, with regards to the
Registration Statement, any correspondence by or on behalf
of the Company to the SEC or the staff of the SEC and any
correspondence from the SEC or the staff of the SEC to the
Company or its representatives, (ii) upon the effectiveness
of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of
copies as such Investor may reasonably request) and (iii)
such other documents, including any preliminary prospectus,
as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities
owned by such Investor.
d. The Company shall use reasonable efforts to (i)
register and qualify the Registrable Securities covered by
the Registration Statement(s) under such other securities
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or "blue sky" laws of such jurisdictions in the United
States as any Investor reasonably requests, (ii) prepare
and file in those jurisdictions, such amendments (including
post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration
Period, (iii) take such other actions as may be necessary
to maintain such registrations and qualifications in effect
at all times during the Registration Period, and (iv) take
all other actions reasonably necessary or advisable to
quality the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall
not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for
this Section 3(d), (b) subject itself to general taxation
in any such jurisdiction, or (c) file a general consent to
service of process in any such jurisdiction. The Company
shall promptly notify each Investor who holds Registrable
Securities of the receipt by the Company of any
notification with respect to the suspension of the
registration or qualification of any of the Registrable
Securities for sale under the securities or "blue sky" laws
of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any
proceeding for such purpose.
e. In the event Investors who hold a majority of
the Registrable Securities being offered in the offering
select underwriters for the offering, the Company shall
enter into and perform its obligations under an
underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification
and contribution obligations, with the underwriters of such
offering.
f. As promptly as practicable after becoming aware
of such event, the Company shall notify each Investor in
writing of the happening of any event, of which the Company
has knowledge, as a result of which the prospectus included
in a Registration Statement, as then in effect, includes an
untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading, and
promptly prepare a supplement or amendment to the
Registration Statement to correct such untrue
statement or omission, and deliver ten (10)
copies of such supplement or amendment to each
Investor (or such other number of copies as such
Investor may reasonably request). The Company
shall also promptly notify each Investor in
writing (i) when a prospectus or any prospectus
supplement or post-effective amendment has been
filed, and when a Registration Statement or any
post-effective amendment has become effective
(notification of such effectiveness shall be
delivered to each Investor by facsimile on the
same day of such effectiveness and by overnight
mail) (ii) of any request by the SEC for
amendments or supplements to a Registration
Statement or related prospectus or related
information, (iii) of the Company's reasonable
determination that a post-effective amendment to
a Registration Statement would be appropriate.
g. The Company shall use its best efforts
to prevent the issuance of any stop order or
other suspension of effectiveness of a
Registration Statement, or the suspension of
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the qualification of any of the Registrable
Securities for sale in any jurisdiction and, if
such an order or suspension is issued, to obtain
the withdrawal of such order or suspension at the
earliest possible moment and to notify each
Investor who holds Registrable Securities being
sold (and, in the event of an underwritten
offering, the managing underwriters) of the
issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation
or threat of any proceeding for such purpose.
h. The Company shall permit each Investor
a single firm of counsel or such other counsel as
thereafter designated as selling stockholders'
counsel by the Investors who hold a majority of
the Registrable Securities being sold, to review
and comment upon the Registration Statement(s)
and all amendments and supplements thereto at
least seven (7) days prior to their filing with
the SEC, and not file any document in a form to
which such counsel reasonably objects. The
Company shall not submit a request for
acceleration of the effectiveness of a
Registration Statement(s) or any amendment or
supplement thereto without the prior approval of
such counsel, which consent shall not be
unreasonably withheld.
i. At the request of the Investors who
hold a majority of the Registrable Securities
being sold, the Company shall furnish, on the
date that Registrable Securities are delivered to
an underwriter, if any, for sale in connection
with the Registration Statement (i) if required
by an underwriter, a letter, dated such date,
from the Company's independent certified public
accountants in form and substance as is
customarily given by independent certified public
accountants to underwriters in an underwritten
public offering, addressed to the underwriters,
and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of
such Registration Statement, in form, scope and
substance as is customarily given in an
underwritten public offering, addressed to the
underwriters and the Investors.
j. The Company shall make available for
inspection by (i) any Investor, (ii) any
underwriter participating in any disposition
pursuant to a Registration Statement, (iii) one
firm of attorneys and one firm of accountants or
other agents retained by the Investors, and (iv)
one firm of attorneys retained by all such
underwriters (collectively, the "Inspectors") all
pertinent financial and other records, and
pertinent corporate documents and properties of
the Company (collectively, the "Records"), as
shall be reasonably deemed necessary by each
Inspector to enable each Inspector to exercise
its due diligence responsibility, and cause the
Company's officers, directors and employees to
supply all information which any Inspector may
reasonably request for purposes of such due
diligence provided, however, that each Inspector
shall hold in strict confidence and shall not
make any disclosure (except to an Investor) or
use of any Record or other information which the
Company determines in good faith to be
confidential, and of which determination the
Inspectors are so notified, unless (a) the
disclosure of such Records is necessary to avoid
or correct a misstatement or omission in any
Registration Statement or is otherwise required
under the 1933 Act, (b) the release of such
Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or
government body of competent jurisdiction, or (c)
the information in such Records has
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been made generally available to the public other
than by disclosure in violation of this or any
other agreement. Each Investor agrees that it
shall, upon learning that disclosure of such
Records is sought in or by a court or
governmental body of competent jurisdiction or
through other means, give prompt notice to the
Company and allow the Company, at its expense, to
undertake appropriate action to prevent
disclosure of, or to obtain a protective order
for, the Records deemed confidential.
k. The Company shall hold in confidence
and not make any disclosure of information
concerning an Investor provided to the Company
unless (i) disclosure of such information is
necessary to comply with federal or state
securities laws, (ii) the disclosure of such
information is necessary to avoid or correct a
misstatement or omission in any Registration
Statement, (iii) the release of such information
is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental
body of competent jurisdiction, or (iv) such
information has been made generally available to
the public other than by disclosure in violation
of this or any other agreement. The Company
agrees that it shall, upon learning that
disclosure of such information concerning an
Investor is sought in or by a court or
governmental body of competent jurisdiction or
through other means, give prompt written notice
to such Investor and allow such Investor, at the
Investor's expense, to undertake appropriate
action to prevent disclosure of, or to obtain a
protective order for, such information.
l. The Company shall use its best efforts
either to (i) cause all the Registrable
Securities covered by a Registration Statement to
be listed on each national securities exchange on
which securities of the same class or series
issued by the Company are then listed, if any, if
the listing of such Registrable Securities is
then permitted under the rules of such exchange,
(ii) to secure designation and quotation of all
the Registrable Securities covered by the
Registration Statement on the Nasdaq National
Market System, (iii) if, despite the Company's
best efforts to satisfy the preceding clause (i)
or (ii), the Company is unsuccessful in
satisfying the preceding clause (i) or (ii) to
secure the inclusion for quotation on the Nasdaq
SmallCap Market for such Registrable Securities
or, (iv) if, despite the Company's best efforts
to satisfy the preceding clause (iii), the
Company is unsuccessful in satisfying the
preceding clause (iii), to secure the inclusion
for quotation on the over-the-counter market for
such Registrable Securities, and, without
limiting the generality of the foregoing, in the
case of clause (iii) or (iv), to arrange for at
least two market makers to register with the
National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable
Securities. The Company shall pay all fees and
expenses in connection with satisfying its
obligation under this Section 3(l).
m. The Company shall cooperate with the
Investors who hold Registrable Securities being
offered and, to the extent applicable, any
managing underwriter or underwriters, to
facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend)
representing the Registrable Securities to be
offered pursuant to a Registration Statement and
enable such certificates to be in such
denominations or amounts,
8
as the case may be, as the managing underwriter
or underwriters, if any, or, if there is no
managing underwriter or underwriters, the
Investors may reasonably request and registered
in such names as the managing underwriter or
underwriters, if any, or the Investors may
request. Not later than the date on which any
Registration Statement registering the resale of
Registrable Securities is declared effective, the
Company shall deliver to its transfer agent
instructions, accompanied by any reasonably
required opinion of counsel, that permit sales of
unlegended securities in a timely fashion that
complies with then mandated securities settlement
procedures for regular way market transactions.
n. The Company shall take all other
reasonable actions necessary to expedite and
facilitate disposition by the Investors of
Registrable Securities pursuant to a Registration
Statement.
o. The Company shall provide a transfer
agent and registrar of all such Registrable
Securities not later than the effective date of
such Registration Statement.
p. If requested by the managing
underwriters or an Investor, the Company shall
immediately incorporate in a prospectus
supplement or post-effective amendment such
information as the managing underwriters and the
Investors agree should be included therein
relating to the sale and distribution of
Registrable Securities, including, without
limitation, information with respect to the
number of Registrable Securities being sold to
such underwriters, the purchase price being paid
therefor by such underwriters and with respect to
any other terms of the underwritten (or best
efforts underwritten) offering of the Registrable
Securities to be sold in such offering; make all
required filings of such prospectus supplement or
post-effective amendment as soon as notified of
the matters to be incorporated in such prospectus
supplement or post-effective amendment; and
supplement or make amendments to any Registration
Statement if requested by a shareholder or any
underwriter of such Registrable Securities.
q. The Company shall use its best efforts
to cause the Registrable Securities covered by
the applicable Registration Statement to be
registered with or approved by such other
governmental agencies or authorities as may be
necessary to consummate the disposition of such
Registrable Securities.
r. The Company shall otherwise use its
best efforts to comply with all applicable rules
and regulations of the SEC in connection with any
registration hereunder.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) days prior to the
first anticipated filing date of the Registration
Statement, the Company shall notify each Investor
in writing of the information the Company
requires from each such Investor if such Investor
elects to have any of such Investor's Registrable
Securities included in the Registration
Statement. It shall be a
9
condition precedent to the obligations of the
Company to complete the registration pursuant to
this Agreement with respect to the Registrable
Securities of a particular Investor that such
Investor shall furnish to the Company such
information regarding itself, the Registrable
Securities held by it and the intended method of
disposition of the Registrable Securities held by
it as shall be reasonably required to effect the
registration of such Registrable Securities and
shall execute such documents in connection with
such registration as the Company may reasonably
request.
b. Each Investor by such Investor's
acceptance of the Registrable Securities agrees
to cooperate with the Company as reasonably
requested by the Company in connection with the
preparation and filing of the Registration
Statement(s) hereunder, unless such Investor has
notified the Company in writing of such
Investor's election to exclude all of such
Investor's Registrable Securities from the
Registration Statement.
c. In the event Investors holding a
majority of the Registrable Securities being
registered determine to engage the services of an
underwriter, each Investor agrees to enter into
and perform such Investor's obligations under an
underwriting agreement, in usual and customary
form, including, without limitation, customary
indemnification and contribution obligations,
with the managing underwriter of such offering
and take such other actions as are reasonably
required in order to expedite or facilitate the
disposition of the Registrable Securities, unless
such Investor notifies the Company in writing of
such Investor's election to exclude all of such
Investor's Registrable Securities from the
Registration Statement(s).
d. Each Investor agrees that, upon receipt
of any notice from the Company of the happening
of any event of the kind described in Section
3(g) or the first sentence of 3(f), such Investor
will immediately discontinue disposition of
Registrable Securities pursuant to the
Registration Statement(s) covering such
Registrable Securities until such Investor's
receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(g)
or the first sentence of 3(f) and, if so directed
by the Company, such Investor shall deliver to
the Company (at the expense of the Company) or
destroy all copies in such Investor's possession,
of the prospectus covering such Registrable
Securities current at the time of receipt of such
notice.
e. No Investor may participate in any
underwritten registration hereunder unless such
Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in
any underwriting arrangements approved by the
Investors entitled hereunder to approve such
arrangements, (ii) completes and executes all
questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents
reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to
pay its pro rata share of all underwriting
discounts and commissions.
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5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting
discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees,
printers and accounting fees, and fees and
disbursements of counsel for the Company and fees and
disbursements of one counsel for the Investors, shall
be borne by the Company.
6. INDEMNIFICATION
In the event any Registrable Securities are
included in a Registration Statement under this
Agreement:
a. To the fullest extent permitted by law,
the Company will, and hereby does, indemnify,
hold harmless and defend each Investor who holds
such Registrable Securities, the directors,
officers, partners, employees, agents and each
Person, if any, who controls any Investor within
the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934
Act"), and any underwriter (as defined in the
0000 Xxx) for the Investors, and the directors
and officers of, and each Person, if any, who
controls, any such underwriter within the meaning
of the 1933 Act or the 1934 Act (each, an
"Indemnified Person"), against any losses,
claims, damages, liabilities, judgments, fines,
penalties, charges, costs, attorneys' fees,
amounts paid in settlement or expenses, joint or
several, (collectively, "Claims") incurred in
investigating, preparing or defending any action,
claim, suit, inquiry, proceeding, investigation
or appeal taken from the foregoing by or before
any court or governmental, administrative or
other regulatory agency, body or the SEC, whether
pending or threatened, whether or not an
indemnified party is or may be a party thereto
("Indemnified Damages"), to which any of them may
become subject insofar as such Claims (or actions
or proceedings, whether commenced or threatened,
in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration
Statement or any post-effective amendment thereto
or in any filing made in connection with the
qualification of the offering under the
securities or other "blue sky" laws of any
jurisdiction in which Registrable Securities are
offered ("Blue Sky Filing"), or the omission or
alleged omission to state a material fact
required to be stated therein or necessary to
make the statements therein, in light of the
circumstances under which the statements therein
were made, not misleading, (ii) any untrue
statement or alleged untrue statement of a
material fact contained in any preliminary
prospectus if used prior to the effective date of
such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if
the Company files any amendment thereof or
supplement thereto with the SEC) or the omission
or alleged omission to state therein any material
fact necessary to make the statements made
therein, in light of the circumstances under
which the statements therein were made, not
misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without
limitation, any state securities law, or any rule
or regulation thereunder relating to the offer or
sale of the Registrable Securities
11
pursuant to a Registration Statement (the matters
in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). Subject to the
restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the
Company shall reimburse the Investors and each
such underwriter or controlling person, promptly
as such expenses are incurred and are due and
payable, for any legal fees or other reasonable
expenses incurred by them in connection with
investigating or defending any such Claim.
Notwithstanding anything to the contrary
contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not
apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in
conformity with information furnished in writing
to the Company by any Indemnified Person or
underwriter for such Indemnified Person expressly
for use in connection with the preparation of the
Registration Statement or any such amendment
thereof or supplement thereto, if such prospectus
was timely made available by the Company pursuant
to Section 3(c); (ii) with respect to any
preliminary prospectus, shall not inure to the
benefit of any such person from whom the person
asserting any such Claim purchased the
Registrable Securities that are the subject
thereof (or to the benefit of any person
controlling such person) if the untrue statement
or mission of material fact contained in the
preliminary prospectus was corrected in the
prospectus, as then amended or supplemented, if
such prospectus was timely made available by the
Company pursuant to Section 3(c), and the
Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior
to the use giving rise to a violation and such
Indemnified Person, notwithstanding such advice,
used it; (iii) shall not be available to the
extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered
the prospectus made available by the Company (i)
and (iv) shall not apply to amounts paid in
settlement of any Claim if such settlement is
effected without the prior written consent of the
Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full
force and effect regardless of any investigation
made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section
9.
b. In connection with any Registration
Statement in which an Investor is participating,
each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to
the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its
directors, each of its officers who signs the
Registration Statement, each Person, if any, who
controls the Company within the meaning of the
1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an
"Indemnified Party"), against any Claim or
Indemnified Damages to which any of them may
become subject, under the 1933 Act, the 1934 Act
or otherwise, insofar as such Claim or
Indemnified Damages arise out of or are based
upon any Violation, in each case to the extent,
and only to the extent, that such Violation
occurs in reliance upon and in conformity with
written information furnished to the Company by
such Investor expressly for use in connection
with such Registration Statement; and, subject to
Section 6(d), such Investor will reimburse any
legal or other expenses reasonably incurred by
them in connection with investigating or
defending any such Claim; provided, however, that
the indemnity agreement contained in this Section
6(b) and Section 7 shall not apply to amounts
paid in settlement of any Claim if such
settlement is effected
12
without the prior written consent of such
Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the
Investor shall be liable under this Section 6(b)
for only that amount of a Claim or Indemnified
Damages as does not exceed the net proceeds to
such Investor as a result of the sale of
Registrable Securities pursuant to such
Registration Statement. Such indemnity shall
remain in full force and effect regardless of any
investigation made by or on behalf of such
Indemnified Party and shall survive the transfer
of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything
to the contrary contained herein, the
indemnification agreement contained in this
Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or
omission of material fact contained in the
preliminary prospectus was corrected on a timely
basis in the prospectus, as then amended or
supplemented.
c. The Company shall be entitled to
receive indemnities from underwriters, selling
brokers, dealer managers and similar securities
industry professionals participating in any
distribution, to the same extent as provided
above, with respect to information such persons
so furnished in writing expressly for inclusion
in the Registration Statement.
d. Promptly after receipt by an
Indemnified Person or Indemnified Party under
this Section 6 of notice of the commencement of
any action or proceeding (including any
governmental action or proceeding) involving a
Claim such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to
be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and
the indemnifying party shall have the right to
participate in, and, to the extent the
indemnifying party so desires, jointly with any
other indemnifying party similarly noticed, to
assume control of the defense thereof with
counsel mutually satisfactory to the indemnifying
party and the Indemnified Person or the
Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or
Indemnified Party shall have the right to retain
its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the
indemnifying party, the representation by such
counsel of the Indemnified Person or Indemnified
Party and the indemnifying party would be
inappropriate due to actual or potential
differing interests between such Indemnified
Person or Indemnified Party and any other party
represented by such counsel in such proceeding.
The Company shall pay reasonable fees for only
one separate legal counsel for the Investors, and
such legal counsel shall be selected by the
Investors holding a majority in interest of the
Registrable Securities included in the
Registration Statement to which the Claim
relates. The Indemnified Party or Indemnified
Person shall cooperate fully with the
indemnifying party in connection with any
negotiation or defense of any such action or
claim by the indemnifying party and shall furnish
to the indemnifying party all information
reasonably available to the Indemnified Party or
Indemnified Person which relates to such action
or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully
apprised at all times as to the status of the
defense or any settlement negotiations with
respect thereto. No indemnifying party shall be
13
liable for any settlement of any action, claim or
proceeding effected without its written consent,
provided, however, that the indemnifying party
shall not unreasonably withhold, delay or
condition its consent. No indemnifying party
shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of
any judgment or enter into any settlement or
other compromise which does not include as an
unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party
or Indemnified Person of a release from all
liability in respect to such claim or litigation.
Following indemnification as provided for
hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party
or Indemnified Person with respect to all third
parties, firms or corporations relating to the
matter for which indemnification has been made.
The failure to deliver written notice to the
indemnifying party within a reasonable time of
the commencement of any such action shall not
relieve such indemnifying party of any liability
to the Indemnified Person or Indemnified Party
under this Section 6, except to the extent that
the indemnifying party is prejudiced in its
ability to defend such action.
e. The indemnification required by this
Section 6 shall be made by periodic payments of
the amount thereof during the course of the
investigation or defense, as and when bills are
received or Indemnified Damages are incurred.
f. The indemnity agreements contained
herein shall be in addition to (i) any cause of
action or similar right of the Indemnified Party
or Indemnified Person against the indemnifying
party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to
the law.
7. CONTRIBUTION.
To the extent any indemnification by an
indemnifying party is prohibited or limited by
law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however,
that: (i) no contribution shall be made under
circumstances where the maker would not have been
liable for indemnification under the fault standards
set forth in Section 6; (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 0000 Xxx)
shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of
fraudulent misrepresentation; and (iii) contribution
by any seller of Registrable Securities shall be
limited in amount to the net amount of proceeds
received by such seller from the sale of such
Registrable Securities.
14
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors
the benefits of Rule 144 promulgated
under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the
investors to sell securities of the Company to the
public without registration ("Rule 144"), the Company
agrees to:
a. make and keep public information
available, as those terms are understood and
defined in Rule 144;
b. file with the SEC in a timely manner
all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such
requirements (it being understood that nothing
herein shall limit the Company's obligations
under Section 4(c) of the Securities Purchase
Agreement) and the filing of such reports and
other documents is required for the applicable
provisions of Rule 144; and
c. furnish to each Investor so long as
such Investor owns Registrable Securities,
promptly upon request, (i) a written statement by
the Company that it has complied with the
reporting requirements of Rule 144, the 1933 Act
and the 1934 Act, (ii) a copy of the most recent
annual or quarterly report of the Company and
such other reports and documents so filed by the
Company, and (iii) such other information as may
be reasonably requested to permit the investors
to sell such securities pursuant to Rule 144
without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register
Registrable Securities pursuant to this Agreement
shall be automatically assignable by the Investors to
any transferee of all or any portion of Registrable
Securities if: (i) the Investor agrees in writing with
the transferee or assignee to assign such rights, and
a copy of such agreement is furnished to the Company
within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice
of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which
such registration rights are being transferred or
assigned; (iii) immediately following such transfer or
assignment the further disposition of such securities
by the transferee or assignee is restricted under the
1933 Act and applicable state securities laws; (iv) at
or before the time the Company receives the written
notice contemplated by clause (ii) of this sentence
the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained
herein; (v) such transfer shall have been made in
accordance with the applicable requirements of the
Securities Purchase Agreement; (vi) such transferee
shall be an "accredited investor" as that term is
defined in Rule 501 of Regulation D promulgated under
the 1933 Act; and (vii) in the event the assignment
occurs subsequent to the date of effectiveness of the
Registration Statement required to be filed pursuant
to Section 2(a), the transferee agrees to pay all
reasonable expenses of amending or supplementing such
Registration Statement to reflect such assignment.
15
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and
the observance thereof may be waived (either generally
or in a particular instance and either retroactively
or prospectively), only with the written consent of
the Company and Investors who hold two-thirds of the
Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be
binding upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a
holder of Registrable Securities whenever such
person or entity owns of record such Registrable
Securities. If the Company receives conflicting
instructions, notices or elections from two or
more persons or entities with respect to the same
Registrable Securities, the Company shall act
upon the basis of instructions, notice or
election received from the registered owner of
such Registrable Securities.
b. Any notices consents, waivers or other
communications required or permitted to be given
under the terms of this Agreement must be in
writing and will be deemed to have been delivered
(i) upon receipt, when delivered personally; (ii)
upon receipt, when sent by facsimile, provided a
copy is mailed by U.S. certified mail, return
receipt requested; (iii) three (3) days after
being sent by U.S. certified mail, return receipt
requested, or (d) one (1) day after deposit with
a nationally recognized overnight delivery
service, in each case properly addressed to the
party to receive the same. The addresses and
facsimile numbers for such communications shall
be:
If to the Company: D.H. Marketing & Consulting,
Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
With a copy to: Xxx X. Xxxxxx, Esq.
Law Offices of Xxx X. Xxxxxx
0000 X. Xxxxxxxx Xxxx, Xxxxx X
Xxx Xxxxx, Xxxxxx 00000
Facsimile: (000) 000-0000
If to a Buyer, to its address and facsimile
number on the Schedule of Buyers, with copies to such
Buyer's counsel as set forth on the Schedule of
Buyers. Each party shall provide five (5) days' prior
written notice to the other party of any change in
address or facsimile number.
c. Failure of any party to exercise any
right or remedy under this Agreement or
otherwise, delay by a party in exercising such
right or remedy, shall not operate as a waiver
thereof.
16
d. This Agreement shall be governed by and
interpreted in accordance with the laws of the
State of Nevada without regard to the principles
of conflict of laws. If any provision of this
Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or
unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement
in that jurisdiction or the validity or
enforceability of any provision of this Agreement
in any other jurisdiction.
e. This Agreement and the Securities
Purchase Agreement constitute the entire
agreement among the parties hereto with respect
to the subject matter hereof and thereof. There
are no restrictions, promises, warranties or
undertakings, other than those set forth or
referred to herein and therein. This Agreement
and the Securities Purchase Agreement supersede
all prior agreements and understandings among the
parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section
9, this Agreement shall inure to the benefit and
of and be binding upon the permitted successors
and assigns of each of the parties hereto.
g. The headings in this Agreement are for
convenience of reference only and shall not limit
or otherwise affect the meaning hereof.
h. This Agreement may be executed in two
or more identical counterparts, each of which
shall be deemed an original but all of which
shall constitute one and the same agreement.
This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing
the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or
cause to be done and performed, all such further
acts and things, and shall execute and deliver
all such other agreements, certificates,
instruments and documents, as the other party may
reasonably request in order to carry out the
intent and accomplish the purposes of this
Agreement and the consummation of the
transactions contemplated hereby.
17
IN WITNESS WHEREOF, the parties have caused this
Registration Rights Agreement to be duly executed as
of day and year first above written.
COMPANY: BUYERS:
D.H. MARKETING & CONSULTING, ATLANTIS CAPITAL FUND, LTD.
INC.
By: /s/ XXXXX X. XXXXX By: /s/ XXXX XXXXXXXXX
Name: Xxxxx X. Xxxxx Name: Xxxx Xxxxxxxxx
Its: President and Chief Executive Its: Agent
Officer
ATLAS CAPITAL FUND, LTD.
By: /s/ XXXXXX XXXXXXX
Name: Xxxxxx Xxxxxxx
Its:
18
