EXHIBIT 10.36
COLORADO GREENHOUSE HOLDINGS, INC.
REGISTRATION RIGHTS AGREEMENT
Dated as of January 21, 1997
REGISTRATION RIGHTS AGREEMENT
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This Registration Rights Agreement (the "Agreement") is entered into as of
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the 21st day of January, 1997 by and among XXXXXXXXX-XXXXX PARTNERS III, L.P., a
Delaware limited partnership ("Xxxxxxxxx"), BCI GROWTH IV, L.P. a Delaware
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limited partnership ("BCI") and the other co-investors listed on Schedule 1
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attached hereto (the "Co-Investors"), (Xxxxxxxxx, BCI and the Co-Investors each
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being referred to herein as a "Purchaser" and collectively referred to herein as
the "Purchasers") and COLORADO GREENHOUSE HOLDINGS, INC., a Delaware corporation
(the "Company").
This Agreement is made pursuant to the Stock Purchase Agreement, dated as
of January 21, 1997 by and among the Company and the Purchasers (the "Stock
Purchase Agreement"). In order to induce the Purchasers to enter into the Stock
Purchase Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to closing under the Stock Purchase Agreement.
The parties hereby agree as follows:
1. Definitions.
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As used in this Agreement, and unless the context requires a different
meaning, the following terms shall have the meanings indicated:
"Agent" means any Person authorized to act and who acts on behalf of any
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holder of Registrable Securities with respect to the transactions contemplated
by this Agreement or the Purchase Agreement.
"Agreement Year" means each consecutive twelve-month period beginning with
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the date of this Agreement.
"Business Days" means all days other than Saturday or Sunday or any day on
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which banking institutions in New York, New York are authorized or obligated by
law to close.
"Common Stock" means capital stock of the Company, however designated,
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which is not limited as to the amount of dividends, or which is not limited as
to the amount of distributions upon liquidation or dissolution of the Company,
and shall include, without limitation, the Company's presently authorized
10,600,000 shares of Common Stock, par value $.001 per share.
"Demand Registration" means a registration pursuant to Section 3(a).
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"Exchange Act" means the Securities Exchange Act of 1934, and the rules and
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regulations thereunder as amended from time to time.
"NASD" means National Association of Securities Dealers, Inc.
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"Person" means an individual, firm, partnership, corporation, trust,
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incorporated or unincorporated association, joint venture, joint stock company
or a government or agency or political subdivision thereof.
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"Piggy-Back Registration" means a registration pursuant to Section 3(f).
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"Prospectus" means the prospectus included in any Registration Statement,
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as amended or supplemented by any prospectus supplement with respect to the
terms of the offering of any portion of the Registrable Securities covered by
the Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference in such prospectus.
"Preferred Stock" means the Series B Preferred Stock.
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"Registrable Securities" means: (a) all shares of Common Stock owned now or
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in the future by any Purchaser; (b) the shares of Common Stock issued or
issuable upon conversion of the Preferred Stock, whether owned by any Purchaser
or not; and (c) any shares of Common Stock issued or issuable with respect to
such Common Stock by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or
reorganization; provided, however, that any such share or other security shall
be deemed to be a Registrable Security only if and so long as it is a Transfer
Restricted Security.
"Registration Expenses" See Section 6 hereof.
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"Registration Statement" means any registration statement of the Company
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which covers Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, and all exhibits
and all material incorporated by reference in such Registration Statement.
"S-3 Registration" means a registration pursuant to Section 3(g).
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"Securities Act" means the Securities Act of 1933, as amended from time to
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time.
"SEC" means the Securities and Exchange Commission.
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"Series A Registration Rights Agreement" means the Registration Rights
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Agreement dated January 21, 1997 among the holders of Series A Preferred Stock
and the Company.
"Series A Preferred Stock" means the Series A Convertible Preferred Stock
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of the Company, par value $.001 per share.
"Series B Preferred Stock" means the Series B Convertible Preferred Stock
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of the Company, par value $.001 per share, issued or sold pursuant to the Stock
Purchase Agreement, or issued by way of stock dividend or stock split in respect
thereof, together with any securities issued in substitution or exchange
therefor.
"Transfer Restricted Securities" means securities acquired by the holder
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thereof other than pursuant to an effective registration under Section 5 of the
Securities Act or pursuant to Rule 144; provided that a Registrable Security
that has ceased to be a Transfer Restricted Security cannot thereafter become a
Transfer Restricted Security.
"Underwritten Registration or Underwritten Offering" means a registration
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in which securities of the Company are sold (whether by the Company or by
selling stockholders) to an underwriter for reoffering to the public.
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2. Securities Subject to this Agreement.
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Registrable Securities. The securities entitled to the benefits of this
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Agreement are the Registrable Securities.
(a) Holders of Registrable Securities. A Person is deemed to be
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a holder of Registrable Securities whenever such Person owns Registrable
Securities or has the right to acquire such Registrable Securities, whether or
not such acquisition has actually been effected and disregarding the legal
restrictions upon the exercise of such right; provided, however, that a Person
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shall not be deemed to be a holder of Registrable Securities who, together with
such Person's affiliates, then holds Registrable Securities constituting less
than one percent (1%) of the then issued and outstanding Common Stock and who
may then sell all Registrable Securities owned by such holder in reliance upon
Rule 144 of the Securities Act within six months pursuant to the volume
restrictions under said Rule based upon the average weekly reported trading
volume of trading (currently Rule 144(e)(1)(ii)).
3. Demand Registration, Piggy-Back Registration and S-3
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Registration.
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(a) Request for Registration by Holders of Registrable
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Securities. At any time after the earlier of (i) the last day of the second
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Agreement Year or (ii) sixty (60) days after the effective date of any
registration of any of the Company's securities (subject to any hold-back period
agreed upon by the holders of Registrable Securities), if the Company receives
from the holders of at least 30% of the then outstanding Registrable Securities,
a written request specifying that the Company effect any registration or
qualification with respect to the Registrable Securities pursuant to this
Section 3(a) (a "Demand Registration"), the Company will:
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(1) within ten (10) days of receipt of such a request, give
written notice of the proposed registration or qualification to all other
holders of Registrable Securities; and
(2) as soon as practicable, use its best efforts to effect
such registration or qualification (including, without limitation, the execution
in the applicable Registration Statement of an undertaking to file required
post-effective amendments, appropriate qualification under the applicable blue
sky or other state securities laws and appropriate compliance with exemptive
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as are reasonably
necessary to permit or facilitate the sale and distribution of all or such
portion of such holder's or holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other holder or holders joining in such request, or the Company in the case
of securities requested by the Company to be registered (provided, however, the
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Company shall be permitted to participate in such registration only to the
extent that all Registrable Securities as are specified by any holder in a
Demand Registration request have been included in such registration), as are
specified in a written notice given to the Company within 20 days after the date
of such written notice from the Company pursuant to Section 3(a)(1); provided,
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however that the Company will not be obligated to take any action to effect any
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such registration, qualification or compliance pursuant to this Section 3(a)
after the completion of four (4) Demand Registrations as set forth in Section
3(b).
Subject to the foregoing provisions, the Company will file a registration
statement covering the Registrable Securities so requested to be registered as
soon as practicable, but in any event within one hundred twenty (120) days,
after receipt of the request or requests of the initiating holders, and shall
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use its best efforts to cause such Registration Statement and Prospectus through
which such Demand Registration is effected to remain effective until all
Registrable Securities are sold.
Notwithstanding anything to the contrary set forth in this Agreement, if at
any time any request to register securities pursuant to this Section 3(a) or
Section 3(g), such registration would, in the good faith determination of the
Board of Directors, be substantially detrimental to the Company, then the
Company may direct in writing ("Delay Notice") to the holders of Registrable
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Securities that such request of registration be delayed for a period of time not
to exceed sixty (60) days from the date of the request, which right to delay may
be exercised not more than once in any one year period. Upon receipt of a Delay
Notice, the holders of Registrable Securities requesting the Demand Registration
or S-3 Registration (as the case may be) may, upon written notice to the
Company, withdraw such request.
(b) Effective Registration. A registration of Registrable
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Securities will not count as a Demand Registration until it has become effective
and all Registrable Securities included in such Demand Registration have been
sold pursuant thereto. A Demand Registration under Section 3(a) shall be
effected pursuant to a Registration Statement on Form S-3 at any time that the
Company is eligible to use such form for such purpose.
(c) Priority on Demand Registrations. If the holder or holders
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of a majority in number of the Registrable Securities to be registered in a
Demand Registration under this Section 3 (or the holder or holders who initiated
the Demand Registration) so elect, the offering of such Registrable Securities
pursuant to such Demand Registration shall be in the form of an Underwritten
Offering. In such event, if the managing underwriter or underwriters of such
offering advise the Company and the holders in writing that in their opinion the
Registrable Securities requested to be included in such offering is sufficiently
large so as to materially and adversely affect the success of the offering, the
Company shall include in such registration the maximum amount of Registrable
Securities which in the opinion of such managing underwriter or underwriters can
be sold without any such material adverse effect. The Company shall include
Registrable Securities in such registration as follows: (i) first, pro rata
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among the holders of Registrable Securities who have requested to be included in
such registration pursuant to Section 3(a); (ii) second, all securities held by
the Company for which the Company has requested inclusion pursuant to Section
3(a); and (iii) third, any other holders of securities of the Company who have
requested to be included in such registration statement.
(d) Contemporaneous Demands. Subject to the proviso in the last
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sentence of Section 3(h) of the Series A Registration Rights Agreement, in the
event that the Company shall receive a request to effect a registration of its
securities pursuant to the Series A Registration Rights Agreement or otherwise
(an "Other Demand Registration"), the Company shall, within five (5) days after
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receipt of such request, give written notification of such proposed registration
(which notice shall include without limitation the identity of the parties
making such request, the nature and amount of the securities proposed to be
registered and the estimated gross proceeds of such offering) to all holders of
Registrable Securities. If, within thirty (30) days after receipt of such
notice, the holders of Registrable Securities shall deliver to the Company a
request to effect a Demand Registration, then the Company shall effect such
Demand Registration and shall not effect the Other Demand Registration, which
Other Demand Registration shall be withdrawn and shall be of no further force
and effect.
(e) Selection of Underwriters. In the event any such
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registration is in the form of an Underwritten Offering, the investment banker
or bankers and manager or managers that will administer the offering will be
nationally recognized investment banking firm(s) selected by the
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Company with the prior written consent of the holders of a majority in number of
Registrable Securities to be included in such offering, such consent not to be
unreasonably withheld.
(f) Piggy-Back Registration. If the Company determines to file
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a Registration Statement under the Securities Act relating to a proposed sale to
the public of shares of its securities (but excluding registrations relating
solely to employees' stock option or purchase plans or relating solely to a
transaction employing Securities and Exchange Commission Form S-4 or Form S-8 or
successor forms thereto), either for its own account or the account of a
security holder or holders, the Company shall:
(1) promptly give to each holder of Registrable Securities
written notice thereof (which will include, to the extent known at the time, a
list of the jurisdictions in which the Company intends to qualify such
securities under the applicable blue sky or other state securities laws, the
proposed offering price or price range, and the plan of distribution);
(2) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within forty-five (45) days after such written notice from the
Company, by holders of Registrable Securities; and
(3) use its best efforts to cause the managing underwriter
or underwriters of such proposed Underwritten Offering to permit the Registrable
Securities requested to be included in the registration statement for such
offering to be included on the same terms and conditions as any similar
securities of the Company included therein. Notwithstanding the foregoing, if
the managing underwriter or underwriters of such offering deliver a written
opinion to the Company and the holders of such Registrable Securities that
marketing considerations require a limitation on the number of shares of Common
Stock offered pursuant to any Registration Statement filed under this Section
3(e), such limitation shall be allocated among all holders of Common Stock
(other than such holders, if any, initiating the registration pursuant to demand
registration rights granted by the Company, which holders shall receive priority
with respect to inclusion in such registration in accordance with such
contractual rights) and the holders of Registrable Securities who requested
inclusion in the registration as follows: (i) first, Registrable Securities
shall be included in such registration in a number equal to the greater of (A)
the pro rata portion (in proportion to all shares of Registrable Securities and
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other shares of Common Stock requested to be included in the offering which are
subject to such underwriter's limitation) of Registrable Securities requested to
be included in such registration and (B) seventy-five percent (75%) of the total
number of shares to be included in such registration (other than such holders,
if any, initiating the registration pursuant to demand registration rights
granted by the Company) after giving effect to such underwriter's limitation;
and (ii) second, any other holders of securities of the Company who have
requested to be included in such registration statement pursuant to contractual
piggy-back registration rights.
(g) Request for Registration on Form S-3 by Holders of
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Registrable Securities. At any time after the Company becomes eligible to file
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a Registration Statement on Form S-3, if the Company receives from the holders
of at least 25% of the then outstanding Registrable Securities, a written
request specifying that the Company effect any registration or qualification
with respect to the Registrable Securities pursuant to this Section 3(g) (an "S-
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3 Registration"), the Company will:
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(1) within ten (10) days of receipt of such a request, give
written notice of the proposed registration or qualification to all other
holders of Registrable Securities; and
(2) as soon as practicable, effect such registration or
qualification (including, without limitation, the execution in the applicable
Registration Statement of an undertaking to file required post-effective
amendments, appropriate qualification under the applicable blue sky or other
state securities laws and appropriate compliance with exemptive regulations
issued under the Securities Act and any other governmental requirements or
regulations) as may be so requested and as are reasonably necessary to permit or
facilitate the sale and distribution of all or such portion of such holder's or
holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other holder or holders
joining in such request, or the Company in the case of securities requested by
the Company to be registered (provided, however, the Company shall be permitted
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to participate in such registration only to the extent that all Registrable
Securities as are specified by any holder in a S-3 Registration request have
been included in such registration), as are specified in a written notice given
to the Company within 20 days after the date of such written notice from the
Company pursuant to Section 3(a)(1); provided, however that the Company will not
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be obligated to take any action to effect any such registration, qualification
or compliance pursuant to this Section 3(g) after the completion of two (2) S-3
Registrations as set forth in Section 3(g).
Subject to the foregoing provisions, the Company will file a registration
statement covering the Registrable Securities so requested to be registered as
soon as practicable, but in any event within one hundred twenty (120) days,
after receipt of the request or requests of the initiating holders, and shall
use its best efforts to cause such Registration Statement and Prospectus through
which such S-3 Registration is effected to remain effective until all
Registrable Securities are sold.
(h) Effective Registration. A registration of Registrable
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Securities will not count as an S-3 Registration until it has become effective
and all Registrable Securities included in such S-3 Registration have been sold
pursuant thereto.
(i) Minimum Requirement for Registration. The Company shall be
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obligated to effect a registration or qualification pursuant to Section 3(a) and
Section 3(g) only if the anticipated gross offering proceeds pursuant to: (1) a
Demand Registration requested pursuant to Section 3(a) hereof equals or exceeds
$10,000,000 and (2) an S-3 Registration requested pursuant to Section 3(g)
hereof equals or exceeds $1,000,000.
4. Hold-Back Agreements.
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(a) Restrictions on Public Sale by the Company of Registrable
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Securities. Each holder of Registrable Securities whose Registrable Securities
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are covered by a Registration Statement filed pursuant to Section 3 hereof
agrees, if requested in writing by the managing underwriters in an Underwritten
Offering, not to effect any public sale or distribution of securities of the
Company of the same class as the securities included in such Registration
Statement, including a sale pursuant to Rule 144 under the Securities Act
(except as part of such Underwritten Registration), during the ninety (90) day
period subsequent to the filing of the Registration Statement for each
Underwritten Offering pursuant to such Registration Statement and during such
other period (not less than ninety (90) days) following such effective date as
shall be reasonably agreed upon by the Company, the holders of the Registrable
Securities whose Registrable Securities are covered by such registration and the
managing underwriters.
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(b) Restrictions on Public Sale by the Company and Others. The
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Company agrees:
(1) not to effect any public or private sale or
distribution of its debt or equity securities, including a sale pursuant to
Regulation D under the Securities Act, during the ninety (90) day period prior
to the filing of a Registration Statement under Section 3 hereof, and during the
one hundred twenty (120) day period beginning on, the closing date of each
Underwritten Offering made pursuant to a Registration Statement filed under
Section 3 hereof, to the extent timely requested in writing by the managing
underwriters (except as part of such Underwritten Registration or pursuant to
registrations on Forms S-4 or S-8 or any successor forms thereto), and
(2) to cause each holder of its privately placed debt or
equity securities issued by the Company at any time on or after the date of this
Agreement (other than securities issued upon the exercise or conversion of
securities outstanding as of the date hereof) to agree not to effect any public
sale or distribution of any such securities, including a sale pursuant to Rule
144 under the Securities Act (except as part of such Underwritten Registration,
if permitted), during the ninety (90) day period subsequent to the filing of the
Registration Statement for each Underwritten Offering and during the 180 day
period following the effective date of such Registration Statement, in each case
to the extent the managing underwriter makes a timely written request that
specifically identifies such holder(s).
5. Registration Procedures.
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In connection with the Company's registration obligations pursuant to
Section 3 hereof, the Company will use its best efforts to effect such
registration to permit the sale of such Registrable Securities in accordance
with the intended method or methods of disposition thereof, and pursuant thereto
the Company will as expeditiously as possible:
(a) before filing a Registration Statement or Prospectus or any
amendments or supplements thereto, furnish to the holders of the Registrable
Securities covered by such Registration Statement and the managing underwriters,
if any, copies of all such documents proposed to be filed, which documents will
be made available for review by such holders and managing underwriters, and (i)
with respect to any Demand Registration or S-3 Registration, the Company will
not file any such Registration Statement or amendment thereto or any such
Prospectus or any supplement thereto to which the holders of a majority in
number of the Registrable Securities covered by such Registration Statement or
the underwriters, if any, shall reasonably object; and (ii) with respect to any
Piggy-Back Registration, the Company will not file any such Registration
Statement or amendment thereto or any such Prospectus or any supplement thereto
to which the holders of a majority in number of the Registrable Securities
covered by such Registration Statement or the underwriters, if any, shall
reasonably object to any information contained therein related to such holders
or the plan of distribution of such holders' Registrable Securities;
(b) prepare and file with the Securities and Exchange Commission
such amendments and post-effective amendments to any Registration Statement, and
such supplements to the Prospectus, as may be reasonably requested by any
holders of a majority of Registrable Securities covered by the Registration
Statement or any managing underwriter of Registrable Securities or as may be
required by the rules, regulations or instructions applicable to the
registration form utilized by the Company or by the Securities Act or otherwise
necessary to keep such Registration Statement effective for the applicable
period and cause the Prospectus as so supplemented to be filed pursuant to Rule
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under the Securities Act; and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended methods
of disposition by the sellers thereof set forth in such Registration Statement
or supplement to the Prospectus;
(c) notify the counsel to the selling holders of Registrable
Securities and the managing underwriters, if any, promptly, and (if requested by
any such Person) confirm such advice in writing,
(1) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to the Registration
Statement or any post-effective amendment, when the same has become effective,
(2) of any request by the Securities and Exchange
Commission for amendments or supplements to the Registration Statement or the
Prospectus or for additional information,
(3) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose,
(4) if at any time the representations and warranties of
the Company contemplated by paragraph (n) below cease to be true and correct,
(5) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, and
(6) of the existence of any fact which results in the
Registration Statement, the Prospectus or any document incorporated therein by
reference containing an untrue statement of material fact or omitting to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading;
(d) use every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(e) if reasonably requested by the managing underwriter or
underwriters or a holder of Registrable Securities being sold in connection with
an Underwritten Offering, immediately incorporate in a Prospectus supplement or
post-effective amendment such necessary information as the managing underwriters
and the holders of a majority of the Registrable Securities being sold
reasonably request to have included therein relating to the plan of distribution
with respect to such Registrable Securities, including, without limitation,
information with respect to the amount 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; and 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;
(f) at the request of any selling holder of Registrable
Securities, furnish to such selling holder of Registrable Securities and each
managing underwriter, without charge, such number of conformed copies of the
Registration Statement and any post-effective amendment thereto,
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including financial statements and schedules, all documents incorporated therein
by reference and all exhibits (including those incorporated by reference) as
such holder may reasonable request;
(g) deliver to each selling holder of Registrable Securities and
the underwriters, if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as such Persons may reasonably request; the Company consents to the use of the
Prospectus or any amendment or supplement thereto by each of the selling holders
of Registrable Securities and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by the Prospectus or any
amendment or supplement thereto;
(h) prior to any public offering of Registrable Securities,
register or qualify or cooperate with the selling holders of Registrable
Securities, the managing underwriters, if any, and their respective counsel in
connection with the registration or qualification of such Registrable Securities
for offer and sale under the securities or blue sky laws of such jurisdictions
as any seller or underwriter reasonably requests in writing and do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration
Statement; provided that the Company will not be required to qualify generally
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to do business in any jurisdiction where it is not then so qualified or to take
any action which would subject it to general service of process in any such
jurisdiction where it is not then so subject;
(i) cooperate with the selling holders of Registrable Securities
and the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and, if
not required by applicable law, not bearing any restrictive legends; and enable
such Registrable Securities to be in such denominations and registered in such
names as the managing underwriters may request at least two business days prior
to any sale of Registrable Securities to the underwriters;
(j) 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 enable the seller or sellers thereof or the underwriters, if any, to
consummate the disposition of such Registrable Securities;
(k) if any fact contemplated by paragraph (c)(6) above shall
exist during the period that the Company shall be required hereunder to use its
best efforts to maintain the effectiveness of the applicable Registration
Statement, prepare a supplement or post-effective amendment to the Registration
Statement or the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities, the Prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading;
(l) use its best efforts to cause all Registrable Securities
covered by the Registration Statement to be listed on each securities exchange
on which similar securities issued by the Company are then listed if requested
by the holders of a majority in number of such Registrable Securities or by the
managing underwriters, if any;
(m) not later than the effective date of the applicable
Registration Statement, provide a CUSIP number for all Registrable Securities
and provide the applicable trustees or
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transfer agents with printed certificates for the Registrable Securities which
are in a form eligible for deposit with Depository Trust Company;
(n) enter into agreements (including underwriting agreements) in
a form reasonably satisfactory to the Company and take all other appropriate and
reasonable actions in order to expedite or facilitate the disposition of such
Registrable Securities and in such connection, whether or not an underwriting
agreement is entered into and whether or not the registration is an Underwritten
Registration:
(1) make such representations and warranties to the holders
of such Registrable Securities and the underwriters, if any, in form, substance
and scope as are customarily made by issuers to underwriters in primary
Underwritten Offerings, in a manner reasonably satisfactory to the Company;
(2) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and the counsel to
the holders of Registrable Securities being sold) addressed to each selling
holder and the underwriters, if any, covering the matters customarily covered in
opinions requested in Underwritten Offerings, in a manner reasonably
satisfactory to the Company;
(3) obtain "cold comfort" letters and updates thereof from
the Company's independent certified public accountants addressed to the selling
holders of Registrable Securities and the underwriters, if any, such letters to
be in customary form and covering matters of the type customarily covered in
"cold comfort" letters to underwriters in connection with primary Underwritten
Offerings;
(4) if an underwriting agreement is entered into, cause the
same to set forth in full the indemnification provisions and procedures of
Section 7 hereof (or such other substantially similar provisions and procedures
as the underwriters shall reasonably request) with respect to all parties to be
indemnified pursuant to said Section; and
(5) deliver such documents and certificates as may be
reasonably requested by the holders of a majority of the Registrable Securities
being sold and the managing underwriters, if any, to evidence compliance with
paragraph (k) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.
The actions set forth in the above paragraph (n) shall be done at the
effectiveness of such Registration Statement, each closing under any
underwriting or similar agreement as and to the extent required thereunder and
from time to time as may reasonably be requested by any selling holder in
connection with the disposition of Registrable Securities pursuant to such
Registration Statement, all in a manner consistent with customary industry
practice;
(o) make available to a representative of the holders of a
majority in number of the Registrable Securities being sold, any managing
underwriter participating in any disposition pursuant to such Registration
Statement, and any attorney or accountant retained by the sellers or managing
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with the
registration, with respect to each at such time or times as the Company shall
10
reasonably determine; provided that any records, information or documents that
--------
are designated by the Company in writing as confidential shall be kept
confidential by such Persons unless disclosure of such records, information or
documents is required by court or administrative order;
(p) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
generally available to its security holders, earnings statements satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 promulgated
thereunder;
(q) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter" that is required
to be retained in accordance with the rules and regulations of the NASD); and
(r) promptly prior to the filing of any document which is to be
incorporated by reference into the Registration Statement or the Prospectus
(after initial filing of the Registration Statement) provide copies of such
document to counsel to the selling holders of Registrable Securities and to the
managing underwriters, if any, make the Company's representatives available for
discussion of such document and make such changes in such document prior to the
filing thereof as counsel for such selling holders or underwriters may
reasonably request.
The Company may require each seller of Registrable Securities as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in paragraph (k) above, such holder
will forthwith discontinue disposition of Registrable Securities until such
holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by paragraph (k) above, or until it is advised in writing by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings which are incorporated by reference in
the Prospectus, and, if so directed by the Company, such holder will deliver to
the Company (at the Company's expense, unless such supplement or amendment is
due to inaccurate information supplied by such holder to the Company in writing
specifically for inclusion in the applicable Registration Statement) all copies,
other than permanent file copies then in such holder's possession, of the
Prospectus covering such Registrable Securities current at the time of receipt
of such notice. In the event the Company shall give any such notice, the time
periods mentioned in Section 4(a) hereof shall be extended by the number of days
during the period from and including the date of the giving of such notice to
and including the date when each seller of Registrable Securities covered by
such Registration Statement either receives the copies of the supplemented or
amended Prospectus contemplated by paragraph (k) above or is advised in writing
by the Company that the use of the Prospectus may be resumed.
6. Registration Expenses.
---------------------
(a) Except as set forth in Section 6(c), all expenses incident
to the Company's performance of or compliance with this Agreement will be paid
by the Company, regardless whether the Registration Statement becomes effective
including without limitation:
11
(1) all registration and filing fees (including, without
limitation, with respect to filings required to be made with the NASD);
(2) fees and expenses of compliance with securities or blue
sky laws (including, without limitation, fees and disbursements of counsel for
the underwriters or selling holders in connection with blue sky qualifications
of the Registrable Securities and determination of their eligibility for
investment under the laws of such jurisdictions as the managing underwriters or
holders of a majority of the Registrable Securities being sold may designate);
(3) printing (including, without limitation, expenses of
printing or engraving certificates for the Registrable Securities in a form
eligible for deposit with Depository Trust Company and of printing
prospectuses), messenger, telephone and delivery expenses;
(4) fees and disbursements of counsel for the Company, the
underwriters and for the selling holders of the Registrable Securities;
(5) fees and disbursements of all independent certified
public accountants of the Company (including, without limitation, the expenses
of any special audit and "cold comfort" letters required by or incident to such
performance);
(6) fees and disbursements of underwriters as reasonably
approved by the Company (excluding (x) discounts, commissions or fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals relating to the distribution of the Registrable Securities or (y)
legal expenses of any Person other than the Company, the underwriters and the
selling holders);
(7) securities acts liability insurance if the Company so
desires, and in such event, coverage for, the underwriters or selling holders of
Registrable Securities should they so request;
(8) fees and expenses associated of other Persons retained
by the Company; and
(9) fees and expenses associated with any NASD filing
required to be made in connection with the Registration Statement, including, if
applicable, the fees and expenses of any "qualified independent underwriter"
(and its counsel) that is required to be retained in accordance with the rules
and regulations of the NASD (all such expenses being herein called "Registration
Expenses").
The Company will, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the securities to
be registered on each securities exchange on which similar securities issued by
the Company are then listed, rating agency fees and the fees and expenses of any
Person, including special experts, retained by the Company.
(b) In connection with each Registration Statement required
hereunder, the Company will reimburse the holders of Registrable Securities
being registered (together with the holders of all other securities being
registered) pursuant to such Registration Statement for the reasonable fees and
disbursements of not more than one counsel (or more than one counsel if a
conflict
12
exists among such selling holders in the exercise of the reasonable judgment of
counsel for the selling holders and counsel for the Company) chosen by the
holders of a majority of such Registrable Securities and such other securities
being registered under such Registration Statement.
(c) All expenses incident to the Company's performance of or
compliance with Section 3(g) of this Agreement will be paid by the holders of
Registrable Securities participating in such registration, on a pro rata basis,
regardless whether the Registration Statement becomes effective.
7. Indemnification.
---------------
(a) Indemnification by the Company. The Company agrees to
------------------------------
indemnify and hold harmless each holder of Registrable Securities, its officers,
directors, employees and Agents and each Person who controls such holder within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each such person being sometimes hereinafter referred to as an
"Indemnified Holder") from and against all losses, claims, damages, liabilities
------------------
and expenses (including reasonable costs of investigation and legal expenses)
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement or Prospectus or in any
amendment or supplement thereto or in any preliminary Prospectus, or arising out
of or based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
allegation thereof based upon information furnished in writing to the Company by
such holder expressly for use therein; provided, however, that the Company shall
-------- -------
not be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any preliminary
Prospectus if (i) such holder failed to send or deliver a copy of the Prospectus
with or prior to the delivery of written confirmation of the sale of Registrable
Securities and (ii) the Prospectus would have corrected such untrue statement or
omission; and provided, further, that the Company shall not be liable in any
-------- -------
such case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission in the Prospectus, if such untrue statement or
alleged untrue statement, omission or alleged omission is corrected in an
amendment or supplement to the Prospectus and if, having previously been
furnished by or on behalf of the Company with copies of the Prospectus as so
amended or supplemented, such holder thereafter fails to deliver such Prospectus
as so amended or supplemented prior to or concurrently with the sale of a
Registrable Security to the person asserting such loss, claim, damage, liability
or expense who purchased such Registrable Security which is the subject thereof
from such holder. This indemnity will be in addition to any liability which the
Company may otherwise have. The Company will also provide customary
indemnification to underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers and directors and each Person who controls such Persons (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
to the same extent as provided above with respect to the indemnification of the
Indemnified Holders of Registrable Securities.
If any action or proceeding (including any governmental investigation or
inquiry) shall be brought or asserted against an Indemnified Holder in respect
of which indemnity may be sought from the Company, such Indemnified Holder shall
promptly notify the Company in writing, and the Company shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Indemnified Holder and the payment of all expenses. Such Indemnified Holder
shall have the right to employ separate counsel in any such action and to
participate in the defense
13
thereof, but the fees and expenses of such counsel shall be the expense of such
Indemnified Holder unless (a) the Company has agreed to pay such fees and
expenses or (b) the Company shall have failed to assume the defense of such
action or proceeding or has failed to employ counsel reasonably satisfactory to
such Indemnified Holder in any such action or proceeding or (c) if the
representation of such Indemnified Holder by the counsel retained by the Company
would be inappropriate due to actual or potential conflicts of interests between
the Indemnified Holder and any other party represented by such counsel in such
proceeding based on written advice of counsel made available to the Company (in
which case, if such Indemnified Holder notifies the Company in writing that it
elects to employ separate counsel at the expense of the Company, the Company
shall not have the right to assume the defense of such action or proceeding on
behalf of such Indemnified Holder, it being understood, however, that the
Company shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for such Indemnified Holder and any other Indemnified
Holders, which firm shall be designated in writing by such Indemnified Holders).
The Company shall not be liable for any settlement of any such action or
proceeding effected without its written consent, but if settled with its written
consent, or if there be a final judgment for the plaintiff in any such action or
proceeding, the Company agrees to indemnify and hold harmless such Indemnified
Holders from and against any loss or liability by reason of such settlement or
judgment.
(b) Indemnification by Holder of Registrable Securities. Each
---------------------------------------------------
holder of Registrable Securities agrees to indemnify and hold harmless the
Company, its directors and officers and each Person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act to the same extent as the foregoing indemnity from the
Company to such holder, but only with respect to information relating to such
holder furnished in writing by such holder expressly for use in any Registration
Statement or Prospectus, or any amendment or supplement thereto, or any
preliminary Prospectus. In case any action or proceeding shall be brought
against the Company or its directors or officers or any such controlling person,
in respect of which indemnity may be sought against a holder of Registrable
Securities, such holder shall have the rights and duties given the Company and
the Company or its directors or officers or such controlling person shall have
the rights and duties given to each holder by Section 7(a). In no event shall
the liability of any selling holder of Registrable Securities under this Section
7(b) be greater in amount than the dollar amount of the net proceeds received by
such holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
The Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in the distribution, to the same extent as provided above with
respect to information so furnished in writing by such Persons specifically for
inclusion in any Prospectus or Registration Statement or any amendment or
supplement thereto, or any preliminary Prospectus.
(c) Contribution. If the indemnification provided for in this
------------
Section 7 is unavailable to an indemnified party under Section 7(a) or Section
7(b) hereof (other than by reason of exceptions provided in those Sections) in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the Company, on the one hand, and of the Indemnified Holder, on the other hand,
in connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities
14
or expenses, as well as any other relevant equitable considerations. The
relative fault of the Company, on the one hand, and of the Indemnified Holder,
on the other hand, shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Indemnified Holder and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in the second paragraph
of Section 7(a), any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim.
The Company and each holder of Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this Section 7(c) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
7(c), an Indemnified Holder shall not be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities sold by such Indemnified Holder or its affiliated Indemnified Holders
and distributed to the public were offered to the public exceeds the amount of
any damages which such Indemnified Holder, or its affiliated Indemnified
Holders, has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
8. Rule 144.
--------
The Company covenants that it will file the reports required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder and, at all times after the effective date of the
first registration filed by the Company which involves a sale of securities of
the Company to the general public, will take such further action as any holder
of Registrable Securities may reasonably request, all to the extent required
from time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time or (b) any similar rule or regulation hereafter adopted by the
SEC. Upon the request of any holder of Registrable Securities, the Company will
deliver to such holder a written statement as to whether it has complied with
such information and requirements.
9. Participation in Underwritten Registrations.
-------------------------------------------
No holder of Registrable Securities (or its successors or assigns) may
participate in any Underwritten Registration hereunder unless such Person (a)
agrees to sell such Person's Registrable Securities on the basis provided in any
underwriting arrangements approved by the underwriters and other Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
10. Miscellaneous.
-------------
(a) Remedies. Each holder of Registrable Securities, in addition
--------
to being entitled to exercise all rights provided herein, and as provided in the
Transaction Agreements, and
15
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. The Company will not on or after
--------------------------
the date of this Agreement enter into any agreement, and as of the date of this
Agreement the Company is not a party to any agreement, with respect to its
securities which is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof or impairs the rights granted hereunder. The Company has not
previously entered into any agreement with respect to its securities granting
any registration rights to any Person which has not been terminated on or prior
to the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of holders
of at least 66 2/3% of the then outstanding Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other holders of Registrable Securities may be given by the holders of
50% of the Registrable Securities being sold.
(d) Notices. All notices and other communications provided for
-------
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or air courier guaranteeing overnight
delivery:
(1) if to a holder of Registrable Securities, at the most
current address given by such holder to the Company in accordance with the
provisions of this Section 10(d) (with the initial addresses for each person
which the Purchaser comprises as set forth in the Purchase Agreement, and with
copies to be sent as specified in the Purchase Agreement); and
(2) if to the Company, initially at its address set forth
in the Purchase Agreement and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section 11(e), with copies to
be sent as specified in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; when received if
deposited in the mail, postage prepaid, if mailed; and on the next business day,
if timely delivered to an air courier guaranteeing overnight delivery.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the
parties, including, without limitation, and without the need for an express
assignment, subsequent holders of Registrable Securities.
(f) Counterparts. This Agreement may be executed in any number
------------
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall
16
be deemed to be an original and all of which taken together shall constitute one
and the same agreement.
(g) Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
(i) Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(j) Entire Agreement. This Agreement is intended by the parties
----------------
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings as to the subject matter, other than those
set forth or referred to herein with respect to the registration rights granted
by the Company with respect to the securities sold pursuant to the Purchase
Agreement. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
[signature pages follow]
17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Colorado Greenhouse Holdings, Inc.
By: /s/ Xx Xxxxxxxxx
--------------------------------------------
Name:
Title: CEO
Xxxxxxxxx-Xxxxx Partners III, L.P.
By: Xxxxxxxxx-Xxxxx Managing Partner III, L.L.C.,
its General Partner
By: /s/ Xxxxx Xxxxx
--------------------------------------------
Name:
Title: Authorized Person
Xxxxxxxxx-CGH Partners, L.L.C.
By: Xxxxxxxxx Partners Management Company,
L.L.C., its Managing Member
By: /s/ Xxxxx Xxxxx
-----------------------------------------
Name:
Title: Member
BCI Growth IV, L.P.
By: Glenpointe Associates, L.L.C., its
General Partner
By: /s/ Xxxxxxx Xxxx
--------------------------------------------
Name:
Managing Member
18
H&Q Colorado Greenhouse Investors, L.P.
By: /s/ Xxxxxx Xxxxxxxxxxxx
--------------------------------------------
Name: Xxxxxx Xxxxxxxxxxxx
Title: Attorney-in-Fact
19
SCHEDULE 1
----------
CO-INVESTORS
Xxxxxxxxx-CGH Partners, L.L.C.
H&Q Colorado Greenhouse Investors, L.P.
20
