REGISTRATION RIGHTS AGREEMENT
REGISTRATION
RIGHTS AGREEMENT (this “Agreement”),
dated
as of July 15, 2008, by and among Optigenex Inc., a Delaware corporation with
its headquarters located at 0000 Xxxxxx Xxxxx Xxxxxx, Xxxxxxxxx, XX 00000 (the
“Company”),
and
each of the undersigned (together with their respective affiliates and any
assignee or transferee of all of their respective rights hereunder, the
“Initial
Investors”).
WHEREAS:
A. In
connection with the Securities Purchase Agreement by and among the parties
hereto of even date herewith (the “Securities Purchase Agreement”), the Company
has agreed, upon the terms and subject to the conditions contained therein,
to
issue and sell to the Initial Investors secured convertible notes in the
aggregate principal amount of Twenty Five Thousand Dollars ($25,000) (the
“Notes”) that are convertible into shares of the Company’s common stock (the
“Common Stock”), upon the terms and subject to the limitations and conditions
set forth in such Notes and warrants (the “Warrants”) to acquire an
aggregate of 30,000,000 shares of Common Stock, upon the terms and conditions
and subject to the limitations and conditions set forth in the Warrants;
and
B. To
induce
the Initial Investors to execute and deliver the Securities Purchase Agreement,
the Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations thereunder,
or
any similar successor statute (collectively, the “1933
Act”),
and
applicable state securities laws;
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and each of the Initial Investors hereby agree
as follows:
1. DEFINITIONS.
a. As
used
in this Agreement, the following terms shall have the following
meanings:
(i) “Investors”
means
the Initial Investors and any transferee or assignee who agrees to become bound
by the provisions of this Agreement in accordance with Section 9
hereof.
(ii) “register,”
“registered,”
and
“registration”
refer
to a registration effected by preparing and filing a Registration Statement
or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis (“Rule
415”),
and
the declaration or ordering of effectiveness of such Registration Statement
by
the United States Securities and Exchange Commission (the “SEC”).
(iii) “Registrable
Securities”
means
the Conversion Shares issued or issuable upon conversion or otherwise pursuant
to the Notes and Additional Notes (as defined in the Securities Purchase
Agreement) including, without limitation, Damages Shares (as defined in the
Notes) issued or issuable pursuant to the Notes, shares of Common Stock issued
or issuable in payment of the Standard Liquidated Damages Amount (as defined
in
the Securities Purchase Agreement), shares issued or issuable in respect of
interest or in redemption of the Notes in accordance with the terms thereof)
and
Warrant Shares issuable, upon exercise or otherwise pursuant to the Warrants
and
Additional Warrants (as defined in the Securities Purchase Agreement), and
any
shares of capital stock issued or issuable as a dividend on or in exchange
for
or otherwise with respect to any of the foregoing.
(iv) “Registration
Statement”
means
a
registration statement of the Company under the 0000 Xxx.
b. Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement or the Convertible
Note.
2. REGISTRATION.
a. Mandatory
Registration.
The
Company shall prepare, and, on or prior to ten (10) days from the date of
receipt of written demand of the Investors (in the Securities Purchase
Agreement) (the “Filing
Date”),
file
with the SEC a Registration Statement on Form S-3 (or, if Form S-3 is not then
available, on such form of Registration Statement as is then available to effect
a registration of the Registrable Securities, subject to the consent of the
Initial Investors, which consent will not be unreasonably withheld) covering
the
resale of the Registrable Securities underlying the Notes and Warrants issued
or
issuable pursuant to the Securities Purchase Agreement, which Registration
Statement, to the extent allowable under the 1933 Act and the rules and
regulations promulgated thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of or otherwise
pursuant to the Notes and exercise of the Warrants to prevent dilution resulting
from stock splits, stock dividends or similar transactions. The number of shares
of Common Stock initially included in such Registration Statement shall be
no
less than an amount equal to two (2) times the sum of the number of Conversion
Shares that are then issuable upon conversion of the Notes and Additional Notes
(based on the Variable Conversion Price as would then be in effect and assuming
the Variable Conversion Price is the Conversion Price at such time), and the
number of Warrant Shares that are then issuable upon exercise of the Warrants,
without regard to any limitation on the Investor’s ability to convert the Notes
or exercise the Warrants. The Company acknowledges that the number of shares
initially included in the Registration Statement represents a good faith
estimate of the maximum number of shares issuable upon conversion of the Notes
and upon exercise of the Warrants.
b. Underwritten
Offering.
If any
offering pursuant to a Registration Statement pursuant to Section 2(a) hereof
involves an underwritten offering, the Investors who hold a majority in interest
of the Registrable Securities subject to such underwritten offering, with the
consent of a majority-in-interest of the Initial Investors, shall have the
right
to select one legal counsel and an investment banker or bankers and manager
or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the
Company.
c. Payments
by the Company.
The
Company shall use its best efforts to obtain effectiveness of the Registration
Statement as soon as practicable. If the Registration Statement(s)
covering the Registrable Securities required to be filed by the Company pursuant
to Section 2(a) hereof is not filed by the Filing Date or declared effective
by
the SEC on or prior to ninety (90) days from the date of receipt of written
demand of the Investors (in the Securities Purchase Agreement), or after
the Registration Statement has been declared effective by the SEC, sales of
all
of the Registrable Securities cannot be made pursuant to the Registration
Statement, or the Common Stock is not listed or included for quotation on
the Nasdaq National Market (“Nasdaq”),
the
Nasdaq SmallCap Market (“Nasdaq
SmallCap”),
the
New York Stock Exchange (the “NYSE”)
or the
American Stock Exchange (the “AMEX”)
after
being so listed or included for quotation, or the Common Stock ceases to
be traded on the Over-the-Counter Bulletin Board (the “OTCBB”)
or any
equivalent replacement exchange prior to being listed or included for quotation
on one of the aforementioned markets, then the Company will make payments to
the
Investors in such amounts and at such times as shall be determined pursuant
to
this Section 2(c) as partial relief for the damages to the Investors by reason
of any such delay in or reduction of their ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other remedies available
at law or in equity). The Company shall pay to each holder of the Notes or
Registrable Securities an amount equal to the then outstanding principal amount
of the Notes (and, in the case of holders of Registrable Securities, the
principal amount of Notes from which such Registrable Securities were converted)
(“Outstanding
Principal Amount”),
multiplied by the Applicable Percentage (as defined below) times the sum of:
(i)
the number of months (prorated for partial months) after the Filing Date or
the
end of the aforementioned ninety (90) day period and prior to the date the
Registration Statement is declared effective by the SEC, provided, however,
that
there shall be excluded from such period any delays which are solely
attributable to changes required by the Investors in the Registration Statement
with respect to information relating to the Investors, including, without
limitation, changes to the plan of distribution, or to the failure of the
Investors to conduct their review of the Registration Statement pursuant to
Section 3(h) below in a reasonably prompt manner; (ii) the number of months
(prorated for partial months) that sales of all of the Registrable Securities
cannot be made pursuant to the Registration Statement after the Registration
Statement has been declared effective (including, without limitation, when
sales
cannot be made by reason of the Company’s failure to properly supplement or
amend the prospectus included therein in accordance with the terms of this
Agreement, but excluding any days during an Allowed Delay (as defined in Section
3(f)); and (iii) the number of months (prorated for partial months) that the
Common Stock is not listed or included for quotation on the OTCBB, Nasdaq,
Nasdaq SmallCap, NYSE or AMEX or that trading thereon is halted after the
Registration Statement has been declared effective. The term “Applicable
Percentage”
means
two hundredths (.02). (For example, if the Registration Statement becomes
effective one (1) month after the end of such ninety (90) day period, the
Company would pay $5,000 for each $250,000 of Outstanding Principal Amount.
If
thereafter, sales could not be made pursuant to the Registration Statement
for
an additional period of one (1) month, the Company would pay an additional
$5,000 for each $250,000 of Outstanding Principal Amount.) Such amounts shall
be
paid in cash or, at the Company’s option, in shares of Common Stock priced at
the Conversion Price (as defined in the Notes) on such payment date.
d. Piggy-Back
Registrations.
Subject
to the last sentence of this Section 2(d), if at any time prior to the
expiration of the Registration Period (as hereinafter defined) the Company
shall
determine to file with the SEC a Registration Statement relating to an offering
for its own account or the account of others under the 1933 Act of any of its
equity securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other bona fide,
employee benefit plans), the Company shall send to each Investor who is entitled
to registration rights under this Section 2(d) written notice of such
determination and, if within fifteen (15) days after the effective date of
such
notice, such Investor shall so request in writing, the Company shall include
in
such Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)’ judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. Any exclusion
of
Registrable Securities shall be made pro rata among the Investors seeking to
include Registrable Securities in proportion to the number of Registrable
Securities sought to be included by such Investors; provided,
however,
that
the Company shall not exclude any Registrable Securities unless the Company
has
first excluded all outstanding securities, the holders of which are not entitled
to inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and provided,
further,
however,
that,
after giving effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement other
than holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right to
registration of Registrable Securities under this Section 2(d) shall be
construed to limit any registration required under Section 2(a) hereof. If
an
offering in connection with which an Investor is entitled to registration under
this Section 2(d) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities
in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering. Notwithstanding
anything to the contrary set forth herein, the registration rights of the
Investors pursuant to this Section 2(d) shall only be available in the event
the
Company fails to timely file, obtain effectiveness or maintain effectiveness
of
any Registration Statement to be filed pursuant to Section 2(a) in accordance
with the terms of this Agreement.
e. Eligibility
for Form S-3, or S-1; Conversion to Form S-3.
The
Company represents and warrants that it meets the requirements for the use
of
Form S-3 or S-1 for registration of the sale by the Initial Investors and any
other Investors of the Registrable Securities. The Company agrees to file all
reports required to be filed by the Company with the SEC in a timely manner
so
as to remain eligible or become eligible, as the case may be, and thereafter
to
maintain its eligibility, for the use of Form S-3. If the Company is not
currently eligible to use Form S-3, not later than five (5) business days after
the Company first meets the registration eligibility and transaction
requirements for the use of Form S-3 (or any successor form) for registration
of
the offer and sale by the Initial Investors and any other Investors of
Registrable Securities, the Company shall file a Registration Statement on
Form
S-3 (or such successor form) with respect to the Registrable Securities covered
by the Registration Statement on Form S-1, whichever is applicable, filed
pursuant to Section 2(a) (and include in such Registration Statement on Form
S-3
the information required by Rule 429 under the 0000 Xxx) or convert the
Registration Statement on Form S-1, whichever is applicable, filed pursuant
to
Section 2(a) to a Form S-3 pursuant to Rule 429 under the 1933 Act and cause
such Registration Statement (or such amendment) to be declared effective no
later than thirty (30) days after filing. In the event of a breach by the
Company of the provisions of this Section 2(e), the Company will be required
to
make payments pursuant to Section 2(c) hereof.
3. OBLIGATIONS
OF THE COMPANY.
In
connection with the registration of the Registrable Securities, the Company
shall have the following obligations:
a. The
Company shall prepare promptly, and file with the SEC not later than the Filing
Date, a Registration Statement with respect to the number of Registrable
Securities provided in Section 2(a), and thereafter use its best efforts to
cause such Registration Statement relating to Registrable Securities to become
effective as soon as possible after such filing but in no event later than
ninety (90) days from the date of Investor demand, and keep the Registration
Statement effective pursuant to Rule 415 at all times until such date as is
the
earlier of (i) the date on which all of the Registrable Securities have been
sold and (ii) the date on which the Registrable Securities (in the opinion
of
counsel to the Initial Investors) may be immediately sold to the public without
registration or restriction (including, without limitation, as to volume by
each
holder thereof) under the 1933 Act (the “Registration
Period”),
which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein,
or
necessary to make the statements therein not misleading.
b. The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statements and
the prospectus used in connection with the Registration Statements as may be
necessary to keep the Registration Statements effective at all times during
the
Registration Period, and, during such period, comply with the provisions of
the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by the Registration Statements until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statements. In the event the number of shares available under
a
Registration Statement filed pursuant to this Agreement is insufficient to
cover
all of the Registrable Securities issued or issuable upon conversion of the
Notes and exercise of the Warrants, the Company shall amend the Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover all of the Registrable
Securities, in each case, as soon as practicable, but in any event within
fifteen (15) days after the necessity therefor arises (based on the market
price
of the Common Stock and other relevant factors on which the Company reasonably
elects to rely). The Company shall use its best efforts to cause such amendment
and/or new Registration Statement to become effective as soon as practicable
following the filing thereof, but in any event within thirty (30) days after
the
date on which the Company reasonably first determines (or reasonably should
have
determined) the need therefor. The provisions of Section 2(c) above shall be
applicable with respect to such obligation, with the ninety (90) days running
from the day the Company reasonably first determines (or reasonably should
have
determined) the need therefor.
c. The
Company shall furnish to each Investor whose Registrable Securities are included
in a Registration Statement and its legal counsel promptly (but in no
event more than two (2) business days) after the same is prepared and publicly
distributed, filed with the SEC, or received by the Company, one copy of each
Registration Statement and any amendment thereto, each preliminary prospectus
and prospectus and each amendment or supplement thereto, and, in the case of
the
Registration Statement referred to in Section 2(a), each letter written by
or on
behalf of the Company to the SEC or the staff of the SEC, and each item of
correspondence from the SEC or the staff of the SEC, in each case relating
to
such Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential treatment),
and promptly (but in no event more than two (2) business days) after the
Registration Statement is declared effective by the SEC, such number of copies
of a prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor. The Company will immediately notify each Investor by
facsimile of the effectiveness of each Registration Statement or any
post-effective amendment. The Company will promptly respond to any and all
comments received from the SEC (which comments shall promptly be made available
to the Investors upon request), with a view towards causing each Registration
Statement or any amendment thereto to be declared effective by the SEC as soon
as practicable, shall promptly file an acceleration request as soon as
practicable (but in no event more than two (2) business days) following the
resolution or clearance of all SEC comments or, if applicable, following
notification by the SEC that any such Registration Statement or any amendment
thereto will not be subject to review and shall, if required by SEC Rules,
promptly file with the SEC a final prospectus as soon as practicable (but in
no
event more than two (2) business days) following receipt by the Company from
the
SEC of an order declaring the Registration Statement effective. In the event
of
a breach by the Company of the provisions of this Section 3(c), the Company
will
be required to make payments pursuant to Section 2(c) hereof.
d. The
Company shall use reasonable efforts to register and qualify the
Registrable Securities covered by the Registration Statements under such other
securities or “blue sky” laws of such jurisdictions in the United States as the
Investors who hold a majority in interest of the Registrable Securities being
offered reasonably request, 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, take such other
actions as may be necessary to maintain such registrations and qualifications
in
effect at all times during the Registration Period, and take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided,
however,
that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), subject itself
to general taxation in any such jurisdiction, file a general consent to
service of process in any such jurisdiction, provide any undertakings that
cause the Company undue expense or burden, or make any change in its
charter or bylaws, which in each case the Board of Directors of the Company
determines to be contrary to the best interests of the Company and its
shareholders.
e. In
the
event Investors who hold a majority-in-interest of the Registrable Securities
being offered in the offering (with the approval of a majority-in-interest
of
the Initial Investors) select underwriters for the offering, the Company shall
enter into and perform its obligations under an underwriting agreement, in
usual
and customary form, including, without limitation, customary indemnification
and
contribution obligations, with the underwriters of such offering.
f. As
promptly as practicable after becoming aware of such event, the Company shall
notify each Investor of the happening of any event, of which the Company has
knowledge, as a result of which the prospectus included in any Registration
Statement, as then in effect, includes an untrue statement of a material fact
or
omission to state a material fact required to be stated therein or necessary
to
make the statements therein not misleading, and use its best efforts promptly
to
prepare a supplement or amendment to any Registration Statement to correct
such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request; provided that, for not more than ten (10) consecutive trading days
(or
a total of not more than twenty (20) trading days in any twelve (12) month
period), the Company may delay the disclosure of material non-public information
concerning the Company (as well as prospectus or Registration Statement
updating) the disclosure of which at the time is not, in the good faith opinion
of the Company, in the best interests of the Company (an “Allowed
Delay”);
provided, further, that the Company shall promptly notify the Investors in
writing of the existence of (but in no event, without the prior written consent
of an Investor, shall the Company disclose to such investor any of the facts
or
circumstances regarding) material non-public information giving rise to an
Allowed Delay and advise the Investors in writing to cease all sales under
such Registration Statement until the end of the Allowed Delay. Upon expiration
of the Allowed Delay, the Company shall again be bound by the first sentence
of
this Section 3(f) with respect to the information giving rise
thereto.
g. The
Company shall use its best efforts to prevent the issuance of any stop order
or
other suspension of effectiveness of any Registration Statement, and, if such
an
order is issued, to obtain the withdrawal of such order at the earliest possible
moment and to notify each Investor who holds Registrable Securities being sold
(or, in the event of an underwritten offering, the managing underwriters) of
the
issuance of such order and the resolution thereof.
h. The
Company shall permit a single firm of counsel designated by the Initial
Investors to review such Registration Statement and all amendments and
supplements thereto (as well as all requests for acceleration or effectiveness
thereof) a reasonable period of time prior to their filing with the SEC, and
not
file any document in a form to which such counsel reasonably objects and will
not request acceleration of such Registration Statement without prior notice
to
such counsel. The sections of such Registration Statement covering information
with respect to the Investors, the Investor’s beneficial ownership of securities
of the Company or the Investors intended method of disposition of Registrable
Securities shall conform to the information provided to the Company by each
of
the Investors.
i. The
Company shall make generally available to its security holders as soon as
practicable, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions
of
Rule 158 under the 0000 Xxx) covering a twelve-month period beginning not later
than the first day of the Company’s fiscal quarter next following the effective
date of the Registration Statement.
j. At
the
request of any Investor, the Company shall furnish, on the date that Registrable
Securities are delivered to an underwriter, if any, for sale in connection
with
any Registration Statement or, if such securities are not being sold by an
underwriter, on the date of effectiveness thereof an opinion, dated as of
such date, from counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given
in
an underwritten public offering, addressed to the underwriters, if any, and
the
Investors and a letter, dated such date, from the Company’s independent
certified public accountants in form and substance as is customarily given
by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and the
Investors.
k. The
Company shall make available for inspection by any Investor, any
underwriter participating in any disposition pursuant to a Registration
Statement, one firm of attorneys and one firm of accountants or other
agents retained by the Initial Investors, one firm of attorneys and one
firm of accountants or other agents retained by all other Investors, and
one firm of attorneys retained by all such underwriters (collectively, the
“Inspectors”)
all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company, including without limitation, records of conversions
by other holders of convertible securities issued by the Company and the
issuance of stock to such holders pursuant to the conversions (collectively,
the
“Records”),
as
shall be reasonably deemed necessary by each Inspector to enable each Inspector
to exercise its due diligence responsibility, and cause the Company’s officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided,
however,
that
each Inspector shall hold in confidence and shall not make any disclosure
(except to an Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, the release of such Records is ordered pursuant to a subpoena
or other order from a court or government body of competent jurisdiction, or
the information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other agreement.
The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered
into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall, upon learning that disclosure of
such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and
allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investor’s ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
l. The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor provided to the Company unless disclosure of such
information is necessary to comply with federal or state securities laws,
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, or such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees that it shall,
upon
learning that disclosure of such information concerning an Investor is sought
in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to such Investor prior to making such disclosure,
and
allow the Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such
information.
m. The
Company shall cause all the Registrable Securities covered by the
Registration Statement to be listed on each national securities exchange on
which securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or to the extent the securities of the
same class or series are not then listed on a national securities exchange,
secure the designation and quotation, of all the Registrable Securities covered
by the Registration Statement on Nasdaq or, if not eligible for Nasdaq, on
Nasdaq SmallCap or, if not eligible for Nasdaq or Nasdaq SmallCap, on the OTCBB
and, without limiting the generality of the foregoing, to arrange for at least
two market makers to register with the Financial Industry Regulatory Authority
(“FINRA”)
as
such with respect to such Registrable Securities.
n. The
Company shall provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of
the
Registration Statement.
o. The
Company shall cooperate with the Investors who hold Registrable Securities
being
offered and the managing underwriter or underwriters, if any, to facilitate
the
timely preparation and delivery of certificates (not bearing any restrictive
legends) representing Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the managing underwriter or underwriters,
if
any, or the Investors may reasonably request and registered in such names as
the
managing underwriter or underwriters, if any, or the Investors may request,
and,
within three (3) business days after a Registration Statement which includes
Registrable Securities is ordered effective by the SEC, the Company shall
deliver, and shall cause legal counsel selected by the Company to deliver,
to
the transfer agent for the Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement) an
instruction in the form attached hereto as Exhibit
1
and an
opinion of such counsel in the form attached hereto as Exhibit 2.
p. At
the
request of the holders of a majority-in-interest of the Registrable Securities,
the Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and
any
prospectus used in connection with the Registration Statement as may be
necessary in order to change the plan of distribution set forth in such
Registration Statement.
q. From
and
after the date of this Agreement, the Company shall not, and shall not agree
to,
allow the holders of any securities of the Company to include any of their
securities, in excess of 250,000 shares of Common Stock, in any Registration
Statement under Section 2(a) hereof or any amendment or supplement thereto
under
Section 3(b) hereof without the consent of the holders of a majority-in-interest
of the Registrable Securities.
r. The
Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of Registrable Securities pursuant
to a
Registration Statement.
4. OBLIGATIONS
OF THE INVESTORS.
In
connection with the registration of the Registrable Securities, the Investors
shall have the following obligations:
a. It
shall
be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held
by it
and the intended method of disposition of the Registrable Securities held by
it
as shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request. At least three (3) business days prior
to
the first anticipated filing date of the Registration Statement, the Company
shall notify each Investor of the information the Company requires from each
such Investor.
b. Each
Investor, by such Investor’s acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of the Registration Statements hereunder, unless
such Investor has notified the Company in writing of such Investor’s election to
exclude all of such Investor’s Registrable Securities from the Registration
Statements.
c. In
the
event Investors holding a majority-in-interest of the Registrable Securities
being registered (with the approval of the Initial Investors) determine to
engage the services of an underwriter, each Investor agrees to enter into and
perform such Investor’s obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary indemnification
and
contribution obligations, with the managing underwriter of such offering and
take such other actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Securities, unless such Investor
has notified the Company in writing of such Investor’s election to exclude all
of such Investor’s Registrable Securities from such Registration
Statement.
d. Each
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(f) or 3(g), such
Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor’s receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(f) or 3(g) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor’s possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such
notice.
e. No
Investor may participate in any underwritten registration hereunder unless
such
Investor agrees to sell such Investor’s Registrable Securities on the
basis provided in any underwriting arrangements in usual and customary form
entered into by the Company, completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements, and
agrees to pay its pro rata share of all underwriting discounts and
commissions and any expenses in excess of those payable by the Company pursuant
to Section 5 below.
5. EXPENSES
OF REGISTRATION.
All
reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration, listing and
qualification fees, printers and accounting fees, the fees and disbursements
of
counsel for the Company, and the reasonable fees and disbursements of one
counsel selected by the Initial Investors pursuant to Sections 2(b) and 3(h)
hereof shall be borne by the Company.
6. INDEMNIFICATION.
In
the
event any Registrable Securities are included in a Registration Statement under
this Agreement:
a. To
the
extent permitted by law, the Company will indemnify, hold harmless and defend
each Investor who holds such Registrable Securities, the directors,
officers, partners, employees, agents and each person who controls any Investor
within the meaning of the 1933 Act or the Securities Exchange Act of 1934,
as
amended (the “1934
Act”),
if
any, any underwriter (as defined in the 0000 Xxx) for the Investors, and
the directors, officers, partners, employees and each person who controls
any such underwriter within the meaning of the 1933 Act or the 1934 Act, if
any
(each, an “Indemnified
Person”),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, “Claims”)
to
which any of them may become subject insofar as such Claims arise out of or
are
based upon: (i) any untrue statement or alleged untrue statement of a material
fact in a Registration Statement or the omission or alleged omission to state
therein a material fact required to be stated or necessary to make the
statements therein not misleading; (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in
the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation,
any
state securities law, or any rule or regulation thereunder relating to the
offer
or sale of the Registrable Securities (the matters in the foregoing clauses
(i)
through (iii) being, collectively, “Violations”).
Subject to the restrictions set forth in Section 6(c) with respect to the number
of legal counsel, the Company shall reimburse the Indemnified Person, promptly
as such expenses are incurred and are due and payable, for any reasonable legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person or underwriter
for
such Indemnified Person expressly for use in connection with the preparation
of
such Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (ii) shall not apply to amounts paid in settlement of any Claim
if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld; and (iii) with respect to
any
preliminary prospectus, shall not inure to the benefit of any Indemnified Person
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, such corrected prospectus was timely made
available by the Company pursuant to Section 3(c) hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus
prior
to the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.
b. In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees severally and not jointly to indemnify,
hold harmless and defend, to the same extent and in the same manner set forth
in
Section 6(a), the Company, each of its directors, each of its officers who
signs
the Registration Statement, each person, if any, who controls the Company within
the meaning of the 1933 Act or the 1934 Act, any underwriter and any other
shareholder selling securities pursuant to the Registration Statement or any
of
its directors or officers or any person who controls such shareholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively
and
together with an Indemnified Person, an “Indemnified
Party”),
against any Claim to which any of them may become subject, under the 1933 Act,
the 1934 Act or otherwise, insofar as such Claim arises out of or is based
upon
any Violation by such Investor, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for
use
in connection with such Registration Statement; and subject to Section 6(c)
such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; provided,
however,
that
the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided,
further,
however,
that
the Investor shall be liable under this Agreement (including this Section 6(b)
and Section 7) for only that amount as does not exceed the net proceeds to
such
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
c. Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section
6
of notice of the commencement of any action (including any governmental action),
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to
the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person
or
the Indemnified Party, as the case may be; provided,
however,
that an
Indemnified Person or Indemnified Party shall have the right to retain its
own
counsel with the fees and expenses to be paid by the indemnifying party, if,
in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and
any
other party represented by such counsel in such proceeding. The indemnifying
party shall pay for only one separate legal counsel for the Indemnified Persons
or the Indemnified Parties, as applicable, and such legal counsel shall be
selected by Investors holding a majority-in-interest of the Registrable
Securities included in the Registration Statement to which the Claim relates
(with the approval of a majority-in-interest of the Initial Investors), if
the
Investors are entitled to indemnification hereunder, or the Company, if the
Company is entitled to indemnification hereunder, as applicable. The failure
to
deliver written notice to the indemnifying party within a reasonable time of
the
commencement of any such action shall not relieve such indemnifying party of
any
liability to the Indemnified Person or Indemnified Party under this Section
6,
except to the extent that the indemnifying party is actually prejudiced in
its
ability to defend such action. The indemnification required by this Section
6
shall be made by periodic payments of the amount thereof during the course
of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
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
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, no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall
be
entitled to contribution from any seller of Registrable Securities who was
not
guilty of such fraudulent misrepresentation, and contribution (together with
any
indemnification or other obligations under this Agreement) by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable
Securities.
8. REPORTS
UNDER THE 1934 ACT.
With
a
view to making available to the Investors the benefits of Rule 144 promulgated
under the 1933 Act or any other similar rule or regulation of the SEC that
may
at any time permit the investors to sell securities of the Company to the public
without registration (“Rule
144”),
the
Company agrees to:
a. make
and
keep public information available, as those terms are understood and defined
in
Rule 144;
b. file
with
the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains
subject to such requirements (it being understood that nothing herein shall
limit the Company’s obligations under Section 4(c) of the Securities Purchase
Agreement) and the filing of such reports and other documents is required for
the applicable provisions of Rule 144; and
c. furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, a written statement by the Company that it has complied with
the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, 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 such other information
as may be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
9. ASSIGNMENT
OF REGISTRATION RIGHTS.
The
rights under this Agreement shall be automatically assignable by the Investors
to any transferee of all or any portion of Registrable Securities if:
(i) the Investor agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (ii) the Company is, within
a reasonable time after such transfer or assignment, furnished with written
notice of the name and address of such transferee or assignee, and
the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment, the
further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws, (iv) at
or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence, the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein, (v) such transfer
shall have been made in accordance with the applicable requirements of the
Securities Purchase Agreement, and (vi) such transferee shall be an
“accredited
investor”
as
that
term defined in Rule 501 of Regulation D promulgated under the 1933
Act.
10. AMENDMENT
OF REGISTRATION RIGHTS.
Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with written consent of the Company, each of the Initial
Investors (to the extent such Initial Investor still owns Registrable
Securities) and Investors who hold a majority interest of the Registrable
Securities. Any amendment or waiver affected 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 required or permitted to be given under the terms hereof shall be sent
by certified or registered mail (return receipt requested) or delivered
personally or by courier (including a recognized overnight delivery service)
or
by facsimile and shall be effective five days after being placed in the mail,
if
mailed by regular United States mail, or upon receipt, if delivered personally
or by courier (including a recognized overnight delivery service) or by
facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If
to the
Company:
0000
Xxxxxx Xxxxx Xxxxxx,
0xx
Xxxxx,
Xxxxx X
Xxxxxxxxx,
XX 00000
Attention:
Xxxxxx Xxxxxx
Telephone:
(000)000-0000
Facsimile:
(000) 000-0000
With
a
copy to:
Xxxxxx
& Jaclin, LLP
000
Xxxxx
0, Xxxxx 000
Xxxxxxxxx,
XX 00000
Attention:
Xxxxx Xxxxxx, Esq.
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
If
to an
Investor: to the address set forth immediately below such Investor’s name on the
signature pages to the Securities Purchase Agreement.
With
a
copy to:
Xxxxxxx
Xxxxx Xxxxxxx & Ingersoll, LLP
0000
Xxxxxx Xxxxxx
00xx
Xxxxx
Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000
Attention:
Xxxxxx X. Xxxxxxxx, Esq.
Telephone:
000-000-0000
Facsimile:
000-000-0000
c. Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as
a
waiver thereof.
d.
THIS
AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF
LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
UNITED STATES FEDERAL COURTS LOCATED NEW YORK, NEW YORK WITH RESPECT TO ANY
DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION
HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES
IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS
UPON
A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN
SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH
SUIT
OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS
BY
SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT
PREVAIL IN ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR
ALL
FEES AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY
IN CONNECTION WITH SUCH DISPUTE.
e. In
the
event that any provision of this Agreement is invalid or unenforceable under
any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof
which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
f. This
Agreement, the Notes, the Warrants and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and
thereof.
g. Subject
to the requirements of Section 9 hereof, this Agreement shall be binding upon
and inure to the benefit of the parties and their successors and
assigns.
h. The
headings in this Agreement are for convenience of reference only and shall
not
form part of, or affect the interpretation of, this Agreement.
i. This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original but all of which shall constitute one and the same agreement
and shall become effective when counterparts have been signed by each party
and
delivered to the other party. This Agreement, once executed by a party, may
be
delivered to the other party hereto by facsimile transmission of a copy of
this
Agreement bearing the signature of the party so delivering this
Agreement.
j. Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
k. Except
as
otherwise provided herein, all consents and other determinations to be made
by
the Investors pursuant to this Agreement shall be made by Investors holding
a
majority of the Registrable Securities, determined as if the all of the Notes
then outstanding have been converted into for Registrable
Securities.
l. The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to each Investor by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that
the
remedy at law for breach of its obligations under this Agreement will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of any of the provisions under this Agreement, that each Investor shall
be entitled, in addition to all other available remedies in law or in equity,
and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Agreement
and
to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being
required.
m. The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
Company and the undersigned Initial Investors have caused this Agreement to
be
duly executed as of the date first above written.
|
Xxxxxx
Xxxxxx
|
|
Chief
Executive Officer
|
|
By: First
Street Manager II, LLC
|
|
Xxxxx
X. Xxxxxxxx
|
|
Manager
|
