EXHIBIT 10.5
SKYFRAMES, INC.
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
August 5, 2003, is made by and between Skyframes, Inc., a Utah corporation (the
"Company"), and Ocean Drive SF Associates, LLC, a New York limited liability
company (the "Investor").
WHEREAS, in connection with that certain Securities Purchase Agreement
by and between the Company and the Investor of even date herewith (the
"Securities Purchase Agreement"), the Company desires to sell to the Investor,
and the Investor desires to purchase from the Company, (a) a convertible
promissory note (the "Note"), and (b) a warrant (the "Warrant") to purchase
250,000 shares of the Company's common stock, $0.10 par value per share (the
"Common Stock") for an aggregate purchase price of Two Hundred Fifty Thousand
($250,000) Dollars; and
WHEREAS, to induce the Investors to purchase the Note and the Warrant,
the Company has agreed to register the shares of Common Stock into which the
Notes are convertible and the shares of Common Stock issuable upon exercise of
the Warrant pursuant to the terms of this Agreement;
NOW, THEREFORE, the Company and the Investor hereby covenant and agree
as follows: 1. 1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the common stock, par value $0.10 per share,
of the Company.
"Eligible Securities" shall mean all Registrable Securities other than
Excluded Securities.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
"Excluded Securities" shall mean Registrable Securities that are free
of restriction on resale under the Securities Act (by removal of all restrictive
legends, instructions to transfer agent or otherwise) pursuant to Rule 144(k).
"Register," "registered" and "registration" each shall refer to a
registration effected by preparing and filing a registration statement or
statements or similar documents in compliance with the Securities Act and the
declaration or ordering of effectiveness of such registration statement or
document by the Commission.
"Registrable Securities" shall mean (i) the Common Stock issuable upon
conversion of the Note, (ii) the Common stock issuable upon exercise of the
Warrant, and (iii) any other shares of Common Stock otherwise acquired by the
Investor, but excluding any shares of Common Stock satisfying clause (i) or (ii)
above but which shares (x) are eligible for resale under Rule 144A, or (y) are
sold by the Investor in a transaction in which the Investor's registration
rights under this Agreement have not been assigned.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder, all as the same shall be
in effect at the applicable time.
"Capitalized terms" used but not defined herein shall have the meanings
set forth in the Securities Purchase Agreement.
2. AUTOMATIC REGISTRATION
(a) On or before _______, 2003 (the "Registration Date"), the Company
shall file with the Commission a Registration Statement on Form S-3 or such
other appropriate form in accordance with the Securities Act, covering the
Registrable Securities.
(b) The Company shall use commercially reasonable efforts to have such
registration statement declared effective within ninety (90) days after such
filing, and to maintain the effectiveness and use of such registration statement
for a period of no less than the earlier of (i) the date on which all of the
Registrable Securities may be resold without restriction pursuant to Rule 144(k)
under the Securities Act, or (ii) the date on which all of the Registrable
Securities have been sold.
3. PIGGYBACK REGISTRATION.
(a) If the Company, at any time during the two (2) year period
commencing after the date hereof, proposes to register any of its securities
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with respect to
registration statements on Forms X-0, X-0 and any successor forms thereto as
well as registrations that do not permit resales) (a "Piggyback Registration"),
each such time it will give written notice to such effect to all holders of
outstanding Registrable Securities at least thirty (30) days prior to such
filing. Upon the written request of any such holder received by the Company
within thirty (30) days after the giving of any such notice by the Company to
register any of its Eligible Securities, the Company will cause the Eligible
Securities as to which registration shall have been so requested to be included
in the securities to be covered by the registration statement proposed to be
filed by the Company, all to the extent required to permit the sale or other
disposition by the holder of such Eligible Securities so registered.
(b) If the registration for which the Company gives notice
pursuant to Section 3(a) is a registered public offering involving an
underwriting, the Company shall so advise the holders as a part of the written
notice given pursuant to Section (a). In such event, (i) the right of any holder
to include its Registrable Shares in such registration pursuant to this Section
3 shall be conditioned upon such holder's participation in such underwriting on
the terms set forth herein and (ii) all holders including Registrable Shares in
such registration shall enter into an underwriting agreement with the
underwriter or underwriters selected for the underwriting by the Company. If any
holder who has requested inclusion of its Registrable Shares in such
registration as provided above disapproves of the terms of the underwriting,
such holder may elect, by written notice to the Company, to withdraw its shares
from such registration statement and underwriting. If the managing underwriter
advises the Company in writing that in its good faith determination marketing
factors require a limitation on the number of shares to be underwritten, the
shares to be included in the underwriting shall be allocated, FIRST to the
Company, and SECOND, to each of the holders requesting inclusion of their
Registrable Securities in such registration statement; PROVIDED HOWEVER, that
the, right of the underwriters to exclude including Registrable Shares from the
registration and underwriting as described above shall be restricted so that (i)
the number of Registrable Shares included in any such registration is not
reduced below fifty percent (50%) of the shares included in the registration,
from which all Registrable Shares may be excluded; and (ii) all shares that are
not Registrable Shares and are held by persons who are employees or directors of
the Company (or any subsidiary of the Company) shall first be excluded from such
registration and underwriting before any Registrable Shares are so excluded. The
number of shares that may be included in such registration statement and
underwriting shall be allocated among all holders requesting registration in
proportion, as nearly as practicable, to the respective number of shares of
Common Stock (on an as-converted basis) held by them on the date the Company
gives the notice specified in Section 3(a). If any holder would thus be entitled
to include more shares than such holder requested to be registered, the excess
shall be allocated among other requesting holders pro rata in the manner
described in the preceding sentence.
4. REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions of Section 2 and 3 hereof to use its best efforts to effect the
registration of any Registrable Securities under the Securities Act, the Company
will, as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become effective not later than 60 days from the date
of its filing;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by such registration statement in
accordance with the intended method of disposition set forth in such
registration statement for such period;
(c) furnish to each seller of Registrable Securities and to
each underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the intended disposition
of the Registrable Securities covered by such registration statement;
(d) use its best efforts (i) to register or qualify the
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the sellers of
Registrable Securities or, in the case of an underwritten public offering, the
managing underwriter, reasonably shall request, (ii) to prepare and file in
those jurisdictions such amendments (including post-effective amendments) and
supplements, and take such other actions, as may be necessary to maintain such
registration and qualification in effect at all times for the period of
distribution contemplated thereby and (iii) to take such further action as may
be necessary or advisable to enable the disposition of the Registrable
Securities in such jurisdictions, PROVIDED, that the Company shall not for any
such purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) use its best efforts to list the Registrable Securities
covered by such registration statement with any securities exchange on which the
Common Stock of the Company is then listed;
(f) immediately notify each seller of Registrable Securities
and each underwriter under such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event of which the Company has knowledge as a
result of which the prospectus contained in such registration statement, as then
in effect, includes any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing and promptly
amend or supplement such registration statement to correct any such untrue
statement or omission;
(g) notify each seller of Registrable Securities 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 and
make every reasonable effort to prevent the issuance of any stop order and, if
any stop order is issued, to obtain the lifting thereof at the earliest possible
time;
(h) if the offering is an underwritten offering, enter into a
written agreement with the managing underwriter selected in the manner herein
provided in such form and containing such provisions as are usual and customary
in the securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature, including, without
limitation, customary indemnification and contribution provisions;
(i) if the offering is an underwritten offering, at the
request of any seller of Registrable Securities, use its best efforts to furnish
to such seller on the date that Registrable Securities are delivered to the
underwriters for sale pursuant to such registration: (i) a copy of an opinion
dated such date of counsel representing the Company for the purposes of such
registration, addressed to the underwriters, stating that such registration
statement has become effective under the Securities Act and that (A) to the best
knowledge of
such counsel, no stop order suspending the effectiveness thereof has been issued
and no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act, (B) the registration statement, the
related prospectus and each amendment or supplement thereof comply as to form in
all material respects with the requirements of the Securities Act (except that
such counsel need not express any opinion as to financial statements or other
financial or statistical information contained therein) and (C) to such other
effects as reasonably may be requested by counsel for the underwriters; and (ii)
a copy of a letter dated such date from the independent public accountants
retained by the Company, addressed to the underwriters, stating that they are
independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the
Company included in the registration statement or the prospectus, or any
amendment or supplement thereof, comply as to form in all material respects with
the applicable accounting requirements of the Securities Act, and such letter
shall additionally cover such other financial matters (including information as
to the period ending no more than five business days prior to the date of such
letter) with respect to such registration as such underwriters reasonably may
request;
(j) take all actions reasonably necessary to facilitate the
timely preparation and delivery of certificates (not bearing any legend
restricting the sale or transfer of such securities) representing the
Registrable Securities to be sold pursuant to the Registration Statement and to
enable such certificates to be in such denominations and registered in such
names as the Investors or any underwriters may reasonably request; and
(k) take all other reasonable actions necessary to expedite
and facilitate the registration of the Registrable Securities pursuant to the
Registration Statement.
5. OBLIGATIONS OF HOLDERS.
Each holder of Registrable Securities shall furnish to the Company such
information regarding such holder, the number of Registrable Securities owned
and proposed to be sold by it, the intended method of disposition of such
securities and any other information as shall be required to effect the
registration of the Registrable Securities, and cooperate with the Company in
preparing the registration statement and in complying with the requirements of
the Securities Act.
6. EXPENSES. All expenses incurred by the Company in complying with
Sections 2, 3 and 4 including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
fees of the National Association of Securities Dealers, Inc., fees of transfer
agents and registrars and fees and disbursements of one counsel for the sellers
of Registrable Securities, not to exceed $7,500, but excluding any Selling
Expenses, are called "Registration Expenses." All underwriting discounts and
selling commissions applicable to the sale of Registrable Securities are called
"Selling Expenses."
The Company will pay all Registration Expenses in connection with any
registration statement filed hereunder, and the Selling Expenses in connection
with each such registration statement shall be borne by the participating
sellers in proportion to the number of Registrable Securities sold by each or as
they may otherwise agree.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to the terms of this Agreement, the
Company will indemnify and hold harmless and pay and reimburse, each seller of
such Registrable Securities thereunder, each underwriter of such Registrable
Securities thereunder and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities were registered under the Securities Act
pursuant hereto or any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation or alleged violation of the Securities Act or any state
securities or blue sky laws and will reimburse each such seller, each such
underwriter and each such controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, that the Company will
not be liable in any such case if and to the extent that any such loss, claim,
damage or liability arises out of or is based upon the Company's reliance on an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by any such seller, any such
underwriter or any such controlling person in writing specifically for use in
such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant hereto each seller of such
Registrable Securities thereunder, severally and not jointly, will indemnify and
hold harmless the Company, each person, if any, who controls the Company within
the meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon reliance on any untrue statement or alleged untrue statement of
any material fact contained in the registration statement under which such
Registrable Securities were registered under the Securities Act pursuant hereto
or any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, that such seller will be liable hereunder in any
such case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to such seller, as such, furnished in
writing to the Company by such seller specifically for use in such registration
statement or prospectus, and provided, that the liability of each seller
hereunder shall be limited to the proceeds received by such seller from the sale
of Registrable Securities covered by such registration statement.
Notwithstanding the foregoing, the indemnity provided in this Section 7(b) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of such
indemnified party and provided further, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage or liability (or
action in respect thereof) arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission in such registration
statement, which untrue statement or alleged untrue statement or omission or
alleged omission is completely corrected in an amendment or supplement to the
registration statement and the undersigned indemnitees thereafter fail to
deliver or cause to be delivered such registration statement as so amended or
supplemented prior to or concurrently with the sale of the Registrable Shares to
the person asserting such loss, claim, damage or liability (or actions in
respect thereof) or expense after the Company has furnished the undersigned with
the same.
(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 7 and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 7 if and to the extent the indemnifying party is materially prejudiced
by such omission. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with counsel
reasonably satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 7 for any legal expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation and of liaison with counsel so selected,
PROVIDED, that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded based upon written advise of its counsel that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified party shall have the right to select a separate counsel
and to assume such legal defenses and otherwise to participate in the defense of
such action, with the expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i) any
holder of Registrable Securities exercising rights under this Agreement, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this Section 7 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 7 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 7; then, and in each such case, the Company and such
holder will contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (after contribution from others) in such proportion
so that such holder is responsible for the portion represented by the percentage
that the public offering price of its Registrable Securities offered by the
registration statement bears to the public offering price of all securities
offered by such registration statement, and the Company is responsible for the
remaining portion; PROVIDED, that, in any such case, (A) no such holder will be
required to contribute any amount in excess of the public offering price of all
such Registrable Securities offered by it pursuant to such registration
statement and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 12(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
5.
8. CHANGES IN CAPITAL STOCK. If, and as often as, there is any change
in the capital stock of the Company by way of a stock split, stock dividend,
combination or reclassification, or through a merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions hereof so that the rights and
privileges granted hereby shall continue as so changed.
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Investor as follows:
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the Charter or By-laws of the Company or any provision of any
indenture, agreement or other instrument to which it or any or its properties or
assets is bound, conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company or its subsidiaries.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to any applicable bankruptcy,
insolvency or other laws affecting the rights of creditors generally and to
general equitable principles and the availability of specific performance.
10. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to have the Company
register Registrable Securities pursuant to this Agreement may be assigned by
the Investor to transferees or assignees of such securities; PROVIDED, that the
Company is, within a reasonable time after such transfer, 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 assigned. The term
"Investor" as used in this Agreement shall include such permitted assigns.
11. MISCELLANEOUS.
(a) All covenants and agreements contained in this Agreement
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto (including
without limitation transferees of any Registrable Securities), whether so
expressed or not.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier or
telex, addressed (i) if to the Company, at Skyframes, Inc. 000 Xxxxx Xxxxxxxxx,
Xxxxx 0000, Xxxxx Xxxx, XX 00000, or (b) if to the Investor, c/o Ocean Drive
Holdings LLC, 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000; and (ii) if to
any subsequent holder of Registrable Securities, to it at such address as may
have been furnished to the Company in writing by such holder; or, in any case,
at such other address or addresses as shall have been furnished in writing to
the Company (in the case of a holder of Registrable Securities) or to the
holders of Registrable Securities (in the case of the Company) in accordance
with the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
entered into and to be performed wholly within said State.
(d) Any judicial proceeding brought against any of the parties
to this Agreement on any dispute arising out of this Agreement of any matter
related hereto shall be brought in the courts of the State of New York and
County of New York or in the United States District Court for the Southern
District of New York, and, by execution and delivery of this Agreement, each of
the parties hereto accepts for itself and himself the process in any such action
or proceeding by the mailing of copies of such process to it or him, at its or
his address as set forth in paragraph 11(b) and irrevocably agrees to be bound
by any judgment rendered thereby in connection with this Agreement. Each party
hereto irrevocably waives to the fullest extent permitted by law any objection
that it or he may now or hereafter have to the laying of the venue of any
judicial proceeding brought in such courts and any claim that any such judicial
proceeding has been brought in an inconvenient forum. The foregoing consent to
jurisdiction shall not constitute general consent to service of process in the
State of New York for any purpose except as provided above and shall not be
deemed to confer rights on any person other than the respective parties to this
Agreement.
(e) This Agreement may not be amended or modified without the
written consent of the Company and the holders of at least a majority of the
Registrable Securities.
(f) 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. No waiver shall be effective
unless and until it is in writing and signed by the party granting the waiver.
(g) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(h) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
(i) This Agreement constitutes the entire contract among the
Company and the Purchasers relative to the subject matter hereof and supersedes
in its entirety any and all prior agreements, understandings and discussions
with respect thereto.
(j) The headings of the Sections of this Agreement are for
convenience and shall not by themselves determine the interpretation of this
Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
SKYFRAMES, INC.
By:
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Name: Xxxxx X. France
Title: CEO and President
OCEAN DRIVE SF ASSOCIATES, LLC
By:
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Name: Xxxxxx X. Xxxxx
Title: Managing Director
