REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (this "Agreement"),
dated
as of September 12, 2007, by and between VirtualScopics, Inc., a Delaware
corporation (the "Company"),
and
each buyer identified on the Schedule of Buyers attached hereto (collectively,
the “BUYERS” and each individually, the “BUYER”).
WHEREAS:
A.
In
connection with the Securities Purchase Agreement by and among the parties
hereto of even date herewith (the "Securities
Purchase Agreement"),
the
Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Buyers the following (as each capitalized
term
not otherwise defined herein shall have the meaning ascribed to it in the
Securities Purchase Agreement):
(i)
Series B Convertible Preferred Stock (“Preferred Stock”) of the Company (the
“Preferred
Stock”)
issued
pursuant to the Securities Purchase Agreement and the Certificate of Designation
of Rights and Preferences of the Company’s Series B Convertible Preferred Stock
(the “Certificate of Designation”), and
(ii)
Warrants in the amount described in the Securities Purchase
Agreement,
where
the
Preferred Stock is convertible into shares of the Company's common stock, par
value $0.001
per
share (the "Common
Stock"),
upon
the terms and subject to the limitations and conditions set forth in the
Certificate of Designation and where each of the Warrants is exercisable into
shares of the Company's Common Stock, each upon the terms and conditions and
subject to the limitations and conditions set forth in the Warrants, all subject
to the terms and conditions of the Securities Purchase Agreement;
and
B.
To
induce the Buyer to execute and deliver the Securities Purchase Agreement,
the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the "1933
Act"),
and
applicable state securities laws;
NOW,
THEREFORE,
In
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and the Buyer hereby agree as
follows:
1.
DEFINITIONS.
a.
As
used in this Agreement, the following terms shall have the following
meanings:
“Additional
Registration Statement” shall
have the meaning ascribed to it in Section 3(b) below.
1
“Additional
Registration Effectiveness Deadline” shall
have the meaning ascribed to it in Section 3(b) below.
“Additional
Registration Filing Deadline”
shall
have the meaning ascribed to it in Section 3(b) below.
"Buyer"
means
the purchaser of Preferred Stock and Warrants pursuant to the Securities
Purchase Agreement specified on the signature page hereof, and any transferee
or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 10 hereof.
"Cutback
Shares"
means
any of the Target Registration Amount of Registrable Securities not included
in
any of the Registration Statements previously declared effective hereunder
as a
result of a limitation on the maximum number of shares of Common Stock of the
Company permitted to be registered by the staff
of the SEC
pursuant
to Rule 415.
“Dividends”
shall
have the meaning ascribed to it in the Certificate of Designation.
“Dividend
Payment Shares”
shall
mean shares of Common Stock that are used to pay Dividends pursuant to the
terms
of the Certificate of Designation.
“Effective
Date”
shall
mean the date that the initial Registration Statement is first declared
effective by the Commission.
"Effectiveness
Period"
means,
as to any Registration Statement required to be filed pursuant to this
Agreement, the period commencing on the Effective Date of such Registration
Statement and ending on the earliest to occur of (a) the second anniversary
of
the date hereof, (b) such time as all of the Registrable Securities covered
by
such Registration Statement have been publicly sold by the Holders of the
Registrable Securities included therein, or (iii) such time as all of the
Registrable Securities covered by such Registration Statement may be sold by
the
Holders pursuant to Rule 144(k) as determined by the counsel to the Company
pursuant to a written opinion letter to such effect, addressed and acceptable
to
the Company's transfer agent and the affected Holders.
“Effectiveness
Deadline,”
(a) with
respect to the Initial Registration Statement, shall mean the date that is
the
120 days following the date hereof and with respect to any Additional
Registration Statements which may be required pursuant to Section 3(b), the
90th
calendar day following the date on which an additional Registration Statement
is
required to be filed hereunder; provided, however, that in the event the Company
is notified by the Commission that one or more of the above Registration
Statements will not be reviewed or is no longer subject to further review and
comments, the Effectiveness Deadline as to such Registration Statement shall
be
the fifth Trading Day following the date on which the Company is so notified
if
such date precedes the dates otherwise required above and (b) with respect
to
any Additional Registration Statement, shall mean the Additional Registration
Effectiveness Deadline.
2
“Exclusion
Period” shall
have the meaning set forth in Section 3(p) below.
“Filing
Deadline” shall
mean the Initial Registration Filing Deadline, or any applicable Additional
Registration Filing Deadline.
“Initial
Registration Filing Deadline”
shall
mean, with respect to the Initial Registration Statement required hereunder,
the
45th calendar day following the date hereof.
“Initial
Registration Minimum”
means a
number of Registrable Securities equal to the lesser of (i) the total number
of
Registrable Securities and (ii) the maximum number which would enable the
Company to conduct such offering in accordance with the provisions of Rule
415
as advised by the staff of the Commission in a written comment letter or
otherwise.
"Investor"
means a
Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights
under this Agreement and who agrees to become bound by the provisions of this
Agreement in accordance with Section 10 hereof and any transferee or assignee
thereof to whom a transferee or assignee assigns its rights under this Agreement
and who agrees to become bound by the provisions of this Agreement in accordance
with Section 10.
“Plan
of Distribution”
shall
have the meaning set forth in Section 2(a) below.
“Prospectus”
means
the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated by the Commission pursuant to the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by a
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such
Prospectus.
"Register,"
"Registered,"
and
"Registration"
refer to
a registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule
415"),
and
the declaration or ordering of effectiveness of such Registration Statement
by
the United States Securities and Exchange Commission (the "Commission").
"Registrable
Securities,"
for a
given Registration, means (a) the shares of Common Stock (the “Conversion
Shares”)
issued
or issuable upon full conversion of the Preferred Stock or otherwise pursuant
to
the Certificate of Designation, for which such Registration is being effected
(including, without limitation, any shares issued or issuable as Dividend
Payment Shares (as defined above) or as “Payment Shares” or otherwise pursuant
to the Securities Purchase Agreement), (b) any shares of Common Stock (the
“Warrant
Shares”)
issued
or issuable upon exercise of or otherwise pursuant to the Warrant(s), and (c)
any shares of capital stock issued or issuable as a dividend on or in exchange
for or otherwise with respect to any of the foregoing, (d) any additional shares
of Common Stock issuable in connection with any anti-dilution provisions in
the
Certificate of Designation or the Warrants (in each case, without giving effect
to any limitations on conversion set forth in the Certificate of Designation
or
limitations on exercise set forth in the Warrant), (e) any shares of Common
Stock issuable upon exercise of warrants issued to any placement agent as
compensation in connection with the financing that is the subject of the
Securities Purchase Agreement ("Placement Agent Warrant Shares"), and (f) any
securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the
foregoing.
3
"Registration
Statement(s)"
means a
registration statement(s) of the Company under the 1933 Act.
“Registration
Trigger Date”
shall
have the meaning set forth in Section 3(b) below.
“Rule
424” means
Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended or interpreted from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.
“SEC
Guidance”
means
(i) the Securities Act, and (ii) any publicly-available written or oral
guidance, comments, requirements or requests of the Commission
staff.
“SEC
Share Reduction”
shall
have the meaning ascribed to it in Section 2(a) below.
“Securities”
shall
have the meaning ascribed to it in the Securities Purchase
Agreement.
“Target
Registration Amount”
shall
have the meaning set forth in Section 2(a) below.
“Target
Registration Shortfall”
shall
have the meaning set forth in Section 2(a) below.
“Underlying
Preferred Shares”
means
the shares of Common Stock issuable upon conversion of the Preferred Stock
and
payment of Dividends thereunder.
“Warrants”
means
the warrants issued by the Company pursuant to the Securities Purchase
Agreement.
“Warrant
Shares”
means
the shares of Common Stock issuable upon exercise of the Warrants.
b.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement.
2.
REGISTRATION.
a.
MANDATORY REGISTRATION.
Following the Closing of any Preferred Stock pursuant to the Securities Purchase
Agreement, the Company shall prepare, and, on or prior to the Initial
Registration Filing Deadline (as defined above) file with the Commission a
Registration Statement on such form of Registration Statement as is then
available to effect a registration of the Registrable Securities, (the
“Initial
Registration Statement”)
covering the resale of the Registrable Securities which Registration Statement,
to the extent allowable under the 1933 Act and the rules and regulations
promulgated thereunder (including Rule 416), shall state that such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of or otherwise pursuant to the
Certificate of Designation and exercise of or otherwise pursuant to the Warrants
to prevent dilution resulting from stock splits, stock dividends or similar
transactions and shall contain (unless otherwise directed by at least a two
thirds (2/3) in interest of the Holders) substantially the “Plan
of Distribution”
attached hereto as Annex A. The number of shares of Common Stock initially
included in such Registration Statement shall be no less than 150%
of the
aggregate number of Conversion Shares that are then issuable upon conversion
of
the Preferred Stock or otherwise pursuant to the Certificate of Designation
(based on the Conversion Price [as defined in the Certificate of Designation]
then in effect) and assuming that all Dividends that would accrue on the
Preferred Stock for the immediately following 12 month period is payable in
Common Stock, plus the aggregate number of Warrant Shares that are then issuable
upon exercise of or otherwise pursuant to the Warrants, without regard to any
limitation on the Buyer's ability to convert the Preferred Stock or exercise
the
Warrants (collectively, the “Target
Registration Amount”).
Notwithstanding the foregoing, if the Company is advised by the staff of the
Commission in a written comment letter that it is not eligible to conduct the
offering of the Preferred Stock under Rule 415 promulgated under the 1933 Act
because of the number of shares sought to be included in the Registration
Statement, then the Company may reduce (an “SEC
Share Reduction”)
the
number of shares covered by such Registration Statement to the maximum number
which would enable the Company to conduct such offering in accordance with
the
provisions of Rule 415 (“Rule
415 Eligible”).
In the
event of an SEC Share Reduction, the inclusion of the Underlying Preferred
Shares in such initial Registration Statement shall take precedence over and
shall not be cut back until the following securities of the Company are cut
back
and removed from such Registration Statement (in the following order): (i)
any
securities of the Company to be included in such Registration Statement pursuant
to Section 3(r) and (ii) Warrant Shares. Any cut back of Underlying Preferred
Shares will be applied pro rata to each holder in proportion to the aggregate
Stated Value (as defined in the Certificate of Designation) of the Preferred
Stock held by each Holder. In the event that, due to an SEC Share Reduction
or
otherwise, any Registration Statement filed hereunder shall (when combined
with
any previous Registration Statements that are current and effective) register
a
number of shares of Common Stock which less than the Target Registration Amount
(a “Target
Registration Shortfall”),
then
the unregistered portion of the Target Registration Amount (the “Target
Registration Shortfall Amount”)
shall
be included in the next Additional Registration Statement (in accordance with
Section 3(b) below).
4
The
Company shall, by 9:30 a.m. New York City time on the Trading Day after the
effective date of such Registration Statement, file a final Prospectus with
the
Commission as required by Rule 424. The Company acknowledges that the number
of
shares initially included in each Registration Statement represents a good
faith
estimate of the maximum number of shares issuable upon conversion of the
Preferred Stock or otherwise pursuant to the Certificate of Designation and
exercise of or otherwise pursuant to the Warrants. Each Registration Statement
(and each amendment or supplement thereto, and each request for acceleration
of
effectiveness thereof) shall be provided to the Buyer prior to its filing or
other submission.
b.
PIGGY-BACK REGISTRATIONS.
If at
any time prior to the expiration of the Registration Period (as hereinafter
defined) the Company shall determine to file with the Commission a Registration
Statement relating to an offering for its own account or the account of others
under the 1933 Act of any of its equity securities (other than on Form S-4
or
Form S-8 or their then equivalents relating to equity securities to be issued
solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans), the Company shall send to Buyer written notice of such determination
and, if within fifteen (15) days after the effective date of such notice, the
Buyer shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities the Buyer
requests to be registered, except that if, (i) inclusion of such shares would
result in the offering not being Rule 415 Eligible, or (ii) in connection with
any underwritten public offering for the account of the Company, the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which the Buyer has
requested inclusion hereunder (i) as would enable the offering to be Rule 415
Eligible or (ii) as the underwriter shall permit;
5
PROVIDED,
HOWEVER,
that
the Company shall not exclude any Registrable Securities unless the Company
has
first excluded all outstanding securities, the holders of which are not entitled
by contract to inclusion of such securities in such Registration Statement
or
are not entitled to pro rata inclusion with the Registrable Securities;
and
PROVIDED,
FURTHER, HOWEVER,
that,
after giving effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the contractual right to include such securities in the Registration
Statement other than holders of securities entitled to inclusion of their
securities in such Registration Statement by reason of demand registration
rights. No right to registration of Registrable Securities under this Section
2(b) shall be construed to limit any registration required under Section 2(a)
hereof. If an offering in connection with which the Buyer is entitled to
registration under this Section 2(d) is an underwritten offering, then the
Buyer
shall, unless otherwise agreed by the Company, offer and sell such Registrable
Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same
terms
and conditions as other shares of Common Stock included in such underwritten
offering. Notwithstanding anything to the contrary set forth herein, the
registration rights of the Buyer pursuant to this Section 2(b) shall only be
available in the event the Company fails to timely file, obtain effectiveness
or
maintain effectiveness of any Registration Statement to be filed pursuant to
Section 2(a) in accordance with the terms of this Agreement.
3.
OBLIGATIONS OF THE COMPANY.
In
connection with the registration of the Registrable Securities, the Company
shall have the following obligations:
a.
The
Company shall prepare promptly, and file with the Commission as soon as
practicable after the date of the Closing under the Securities Purchase
Agreement (the "Closing
Date")
(but no
later than the Filing Deadline), Registration Statements with respect to the
number of Registrable Securities provided in Section 2(a), and thereafter use
its commercially reasonable efforts to cause each such Registration Statement
relating to Registrable Securities to become effective no later than the
Effectiveness Deadline, and except as provided in Section 3(e),
shall
keep the Registration Statement current and effective pursuant to Rule 415
at
all times until such date as is the earlier of (i) the date on which all of
the
Registrable Securities for such Registration Statement have been sold and (ii)
the date on which all of the Registrable Securities for such Registration
Statement (in the opinion of counsel to the Buyer) may be immediately sold
to
the public without registration or restriction (including without limitation
as
to volume by each holder thereof) under the 1933 Act, and (iii) two years from
the date hereof (the "Registration
Period").
6
b.
The
Company shall prepare and file with the Commission such amendments (including
post-effective amendments) and supplements to each Registration Statements
and
the prospectus used in connection with the Registration Statements as may be
necessary to keep the Registration Statements current and effective at all
times
during the Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statements until such
time
as all of such Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statements. In the event of a Target Registration
Shortfall (the date of each of which is referred to as a “Registration
Trigger Date”),
or in
the event that on any Trading Day (as defined in the Certificate of Designation)
(each such Trading Day is also referred to as a "Registration
Trigger Date")
the
number of shares available under a Registration Statement filed pursuant to
this
Agreement is otherwise insufficient to cover all of the Registrable Securities
issued or issuable upon conversion of the Preferred Stock or otherwise pursuant
to the Certificate of Designation (based on the Conversion Price of the
Preferred Stock [as defined in the Certificate of Designation] then in effect),
exercise of or otherwise pursuant to the Warrants (based on the Exercise Price
[as defined in the Warrants] then in effect), and otherwise issuable pursuant
to
the Transaction Documents, in each case without giving effect to any limitations
on the Buyer' ability to convert the Preferred Stock, exercise the Warrants
or
otherwise receive shares of Common Stock pursuant to the Transaction Documents,
the Company shall amend the Registration Statement, or file a new Registration
Statement, or both (each, an “Additional
Registration Statement”),
so as
to cover at least 150%
of the
total number of Registrable Securities so issued or issuable (based on the
Conversion Prices of the Preferred Stock, the Exercise Prices of the Warrants,
and other relevant factors on which the Company reasonably elects to rely,
and
without giving effect to any limitations on conversion of the Preferred Stock
contained in the Certificate of Designation, limitations on exercise contained
in the Warrants or limitations on conversion or exercise or other payment of
shares contained in the Securities Purchase Agreement) as of the Registration
Trigger Date (subject to an SEC Share Reduction, if applicable). The Company
shall prepare and file each Additional Registration Statement as soon as
practicable following any Registration Trigger Date, but not later than not
later than the date that is thirty (30) days following the applicable
Registration Trigger Date (the “Additional
Registration Filing Deadline”)
provided that, if Cutback Shares are required to be included in the Additional
Registration Statement, the “Additional
Registration Filing Deadline”
shall
mean the later of (i) the date that is sixty (60) days after the date
substantially all (as such term is then interpreted by the Commission) of the
Registrable Securities registered
under the immediately preceding Registration Statement are sold
and (ii)
the date that is six (6) months following the date of effectiveness of the
most
recently effective Registration Statement or Additional Registration Statement
filed hereunder. The Company shall use its commercially reasonable efforts
to
cause such amendment and/or new Registration Statement to become effective
within ninety (90) days of the Registration Trigger Date (the
“Additional Registration Effectiveness Deadline”)
or as
promptly as practicable in the event the Company is required to increase its
authorized shares.
7
c.
The
Company shall furnish to the Buyer and its legal counsel (i) promptly after
the
same is prepared and publicly distributed, filed with the Commission, or
received by the Company, one copy of each Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
Commission or the staff of the Commission, and each item of correspondence
from
the Commission or the staff of the Commission, in each case relating to such
Registration Statement (other than any portion of any thereof which contains
information for which the Company has sought confidential treatment), and (ii)
such number of copies of a prospectus, including a preliminary prospectus,
and
all amendments and supplements thereto and such other documents as the Buyer
may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by the Buyer. The Company will promptly notify the Buyer by
facsimile of the effectiveness of each Registration Statement or any
post-effective amendment. The Company will promptly respond to any and all
comments received from the Commission, with a view towards causing each
Registration Statement or any amendment thereto to be declared effective by
the
Commission as soon as practicable and shall file an acceleration request as
soon
as practicable, but no later than three (3) business days (the "Acceleration
Request Deadline"),
following the resolution or clearance of all Commission comments or, if
applicable, following notification by the Commission that any such Registration
Statement or any amendment thereto will not be subject to review.
d.
The
Company shall use commercially reasonable efforts to (i) register and qualify
the Registrable Securities covered by the Registration Statements under such
other securities or "blue sky" laws of such jurisdictions in the United States
as the Buyer shall reasonably request, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions;
e.
As
promptly as practicable after becoming aware of such event, the Company shall
notify the Buyer of the happening of any event, of which the Company has
knowledge, as a result of which the prospectus included in any Registration
Statement, as then in effect, includes an untrue statement of a material fact
or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and use its best efforts promptly
to
prepare a supplement or amendment to any Registration Statement to correct
such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to the Buyer as the Buyer may reasonably request;
provided that, for not more than twenty (20) consecutive days (or a total of
not
more than sixty (60) days in any twelve (12) month period), the Company may
delay the disclosure of material non-public information concerning the Company
(as well as prospectus or Registration Statement updating) the disclosure of
which at the time is not, in the good faith opinion of the Company, in the
best
interests of the Company (an "Allowed
Delay");
provided, further, that the Company shall promptly (i) notify the Buyer in
writing of the existence of (but in no event, without the prior notice to the
Buyer, shall the Company disclose to the Buyer any of the facts or circumstances
regarding) material non-public information giving rise to an Allowed Delay
and
(ii) advise the Buyer in writing to cease all sales under such Registration
Statement until the end of the Allowed Delay, provided the above actions are
consistent with the requirements of the 1933 Act and/or 1934 Act or other
applicable law. Upon expiration of the Allowed Delay, the Company shall again
be
bound by the first sentence of this Section 3(e) with respect to the information
giving rise thereto.
8
f.
The
Company shall use its commercially reasonable efforts to prevent the issuance
of
any stop order or other suspension of effectiveness of any Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest possible moment and to notify the Buyer who holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the resolution
thereof.
g.
The
Company shall use its commercially reasonable efforts to cause all the
Registrable Securities covered by the Registration Statement to be listed on
each national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such
exchange.
h.
The
Company shall provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of
the
Registration Statement.
i.
At the
request of the holders of a majority-in-interest of the Registrable Securities,
the Company shall prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to a Registration
Statement and any prospectus used in connection with the Registration Statement
as may be necessary in order to change the plan of distribution set forth in
such Registration Statement.
j.
The
Company shall not, and shall not agree to, allow the holders of any securities
of the Company to include any of their securities in any Registration Statement
under Section 2(a) hereof or any amendment or supplement thereto under Section
3(b) hereof without the consent of the holders of a majority-in-interest of
the
Registrable Securities, except for securities which have contractual piggyback
registration rights in effect at the time of the Initial Closing (as defined
in
the Securities Purchase Agreement). In addition, the Company shall not offer
any
securities for its own account or the account of others in any Registration
Statement under Section 2(a) hereof or any amendment or supplement thereto
under
Section 3(b) hereof without the consent of the holders of a majority-in-interest
of the Registrable Securities.
k.
The
Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Buyer of Registrable Securities pursuant to a
Registration Statement.
l.
The
Company shall comply with all applicable laws related to a Registration
Statement and offering and sale of securities and all applicable rules and
regulations of governmental authorities in connection therewith (including
without limitation the 1933 Act and the 1934 Act and the rules and regulations
promulgated by the Commission).
m.
Pre-Effective
Amendment.
Prior
to the effective date of any Registration Statement, the Company shall use
commercially reasonable efforts to file a pre-effective amendment in respect
of
any Registration Statement within 20 Business Days after the receipt of notice
from the Commission that such amendment is required in order for such
Registration Statement to be declared effective.
9
4.
Omitted.
5.
OBLIGATIONS OF THE BUYER.
In
connection with the registration of the Registrable Securities, the Buyer shall
have the following obligations:
a.
It
shall be a condition precedent to the obligations of the Company to complete
the
registration pursuant to this Agreement with respect to the Registrable
Securities of the Buyer that the Buyer shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as
shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request. At least three (3) business days prior to the
first anticipated filing date of the Registration Statement, the Company shall
notify the Buyer of the information the Company requires from each
Buyer.
b.
The
Buyer, by the Buyer's acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of the Registration Statements hereunder, unless
the Buyer has notified the Company in writing of the Buyer's election to exclude
all of the Buyer's Registrable Securities from the Registration
Statements.
c.
In the
event of an underwritten offering pursuant to Section 2(b) in which any
Registrable Securities are to be included, the Buyer agrees to enter into and
perform the Buyer's obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification and
contribution obligations, with the managing underwriter of such offering and
take such other actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Securities, unless the Buyer
has
notified the Company in writing of the Buyer's election to exclude all of the
Buyer's Registrable Securities from such Registration Statement.
d.
The
Buyer agrees that, upon receipt of any notice from the Company of the happening
of any event of the kind described in Section 3(e) or 3(f), the Buyer will
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until the Buyer's
receipt of the copies of the supplemented or amended prospectus contemplated
by
Section 3(e) or 3(f) and, if so directed by the Company, the Buyer shall deliver
to the Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in the Buyer's possession,
of
the prospectus covering such Registrable Securities current at the time of
receipt of such notice.
e.
No
Buyer may participate in any underwritten registration hereunder unless the
Buyer (i) agrees to sell the Buyer's Registrable Securities on the basis
provided in any underwriting arrangements in usual and customary form entered
into by the Company, (ii) completes and executes all questionnaires, powers
of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, and (iii) agrees
to
pay its pro rata share of all underwriting discounts and commissions and any
expenses in excess of those payable by the Company pursuant to Section 5
below.
10
f. Each
Holder agrees to furnish to the Company a completed questionnaire in the form
attached to this Agreement as Annex B (a “Selling
Shareholder Questionnaire”)
not
less than ten (10) days following the date hereof.
6.
EXPENSES OF REGISTRATION.
All
reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration, listing and
qualification fees, printers and accounting fees, the fees and disbursements
of
counsel for the Company shall be borne by the Company.
7.
INDEMNIFICATION.
In the
event any Registrable Securities are included in a Registration Statement under
this Agreement:
a.
To the
extent permitted by law, the Company will indemnify, hold harmless and defend
(i) the Buyer, (ii) the directors, officers, partners, managers, members,
employees, agents and each person who controls any Buyer within the meaning
of
the 1933 Act or the Securities Exchange Act of 1934, as amended (the
"1934
Act"),
if
any, (each, an "Indemnified
Person"),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, "Claims")
to
which any of them may become subject insofar as such Claims arise out of or
are
based upon: (i) any untrue statement or alleged untrue statement of a material
fact in a Registration Statement or the omission or alleged omission to state
therein a material fact required to be stated or necessary to make the
statements therein not misleading; (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in
the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the Commission) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading; or (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities (the matters in
the
foregoing clauses (i) through (iii) being, collectively, "Violations").
Subject to the restrictions set forth in Section 7(b) with respect to the number
of legal counsel, the Company shall reimburse the Indemnified Person, promptly
as such expenses are incurred and are due and payable, for any reasonable legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 7(a): (i) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person or underwriter
for
such Indemnified Person expressly for use in connection with the preparation
of
such Registration Statement or any such amendment thereof or supplement thereto;
(ii) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld; and (iii) with respect to any
preliminary prospectus, shall not inure to the benefit of any Indemnified Person
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, such corrected prospectus was timely made
available by the Company pursuant to Section 3(c) hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus
prior
to the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Buyer pursuant to Section 10.
11
b.
Promptly after receipt by an Indemnified Person under this Section 7 of notice
of the commencement of any action (including any governmental action), such
Indemnified Person shall, if Claim in respect thereof is to be made against
any
the Company under this Section 7, deliver to the Company a written notice of
the
commencement thereof, and the Company shall have the right to participate in,
and, to the extent the Company so desires, to assume control of the defense
thereof with counsel mutually satisfactory to the Company and the Indemnified
Person, as the case may be.
PROVIDED,
HOWEVER,
that an
Indemnified Person shall have the right to retain its own counsel with the
fees
and expenses to be paid by the Company, if, in the reasonable opinion of counsel
retained by the Company, the representation by such counsel of the Indemnified
Person and the Company would be inappropriate due to actual or potential
differing interests between such Indemnified Person and any other party
represented by such counsel in such proceeding. The Company shall pay for only
one separate legal counsel for the Indemnified Persons, and such legal counsel
shall be selected by Buyer, if the Buyer is entitled to indemnification
hereunder. The failure to deliver written notice to the Company within a
reasonable time of the commencement of any such action shall not relieve the
Company of any liability to the Indemnified Person under this Section 7, except
to the extent that the Company is actually prejudiced in its ability to defend
such action. The indemnification required by this Section 7 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.
c.
To the
extent permitted by law, the Buyer will indemnify, hold harmless and defend
(i)
the Company, and (ii) the directors, officers, partners, managers, members,
employees, or agents of the Company, if any (each, a "Company
Indemnified Person"),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, "Claims")
to
which any of them may become subject insofar as such Claims arise out of or
are
based upon a Claim arising out of or based upon any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities, which occurs due to the inclusion by the Company in a Registration
Statement of false or misleading information about the Buyer, where such
information was furnished in writing to the Company by the Buyer for the purpose
of inclusion in such Registration Statement.
12
8.
CONTRIBUTION.
To the
extent any indemnification by the Company or a Buyer is prohibited or limited
by
law, the Company, and the Buyer, as the case maybe, agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 7 to the fullest extent permitted by law, based upon a comparative
fault standard.
9.
REPORTS UNDER THE 1934 ACT.
With a
view to making available to the Buyer the benefits of Rule 144 promulgated
under
the 1933 Act or any other similar rule or regulation of the Commission that
may
at any time permit the Buyer to sell securities of the Company to the public
without registration ("Rule
144"),
the
Company agrees to:
a.
make
and keep public information available, as those terms are understood and defined
in Rule 144;
b.
file
with the Commission in a timely manner all reports and other documents required
of the Company under the 1933 Act and the 1934 Act so long as the Company
remains subject to such requirements (it being understood that nothing herein
shall limit the Company's obligations under Section 4(c) of the Securities
Purchase Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and
c.
furnish to the Buyer so long as the Buyer owns Registrable Securities, promptly
upon request, (i) a written statement by the Company that it has complied with
the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii)
a
copy of the most recent annual or quarterly report of the Company and such
other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Buyers to sell such securities
pursuant to Rule 144 without registration.
10.
ASSIGNMENT OF REGISTRATION RIGHTS.
The
rights under this Agreement shall be automatically assignable by the Buyers
to
any transferee of all or any portion of Registrable Securities if: (i) the
Buyer
agrees in writing with the transferee or assignee to assign such rights, and
a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after
such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect
to
which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all
of
the provisions contained herein, and (v) such transfer shall have been made
in
accordance with the applicable requirements of the Securities Purchase
Agreement. In the event that the Buyer transfers all or any portion of its
Registrable Securities pursuant to this Section, the Company shall have at
least
ten (10) days from the date transferee agrees in writing to be bound by this
Agreement, and notice is given to the Company, to file any amendments or
supplements necessary to keep the Registration Statement current and effective
pursuant to Rule 415.
11.
AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be
waived (either generally or in a particular instance and either retroactively
or
prospectively), only with written consent of the Company, the Buyer (to the
extent such Buyer still owns Registrable Securities) and Buyers who hold a
majority interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon the Buyer
and
the Company.
13
12.
MISCELLANEOUS.
a.
A
person or entity is deemed to be a holder of Registrable Securities whenever
such person or entity owns of record such Registrable Securities. If the Company
receives conflicting instructions, notices or elections from two or more persons
or entities with respect to the same Registrable Securities, the Company shall
act upon the basis of instructions, notice or election received from the
registered owner of such Registrable Securities.
b.
Any
notices required or permitted to be given under the terms hereof shall be sent
by certified or registered mail (return receipt requested) or delivered
personally or by courier (including a recognized overnight delivery service)
or
by facsimile and shall be effective five days after being placed in the mail,
if
mailed by regular United States mail, or upon receipt, if delivered personally
or by courier (including a recognized overnight delivery service) or by
facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If
to the
Company: To the address set forth immediately below such
Company’s
name on the signature pages hereto.
With
copy
to:
Xxxxxxx
X. Xxxxxxx
Xxxxx
Xxxxxx Xxxxxx LLP
000
Xxxxxxxxxx Xxxxxxxx
0
Xxxxx
Xxxxxx
Xxxxxxxxx,
Xxx Xxxx 00000
Phone:
(000) 000-0000
Fax:
(000) 000-0000
If
to a
Buyer: To the address set forth immediately below such Buyer's name on the
signature pages hereto.
Each
party shall provide notice to the other party of any change in
address.
c.
Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.
d.
Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York, without
regard to the principles of conflicts of law thereof. Each party agrees that
all
legal proceedings concerning the interpretations, enforcement and defense of
the
transactions contemplated by this Agreement (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably submits
to
the exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding
is
improper or is an inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in
any way any right to serve process in any other manner permitted by law. The
parties hereby waive all rights to a trial by jury. If either party shall
commence an action or proceeding to enforce any provisions of the this
Agreement, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.
14
e.
This
Agreement and the Securities Purchase Agreement (including all schedules and
exhibits thereto) constitute the entire agreement among the parties hereto
with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred
to
herein and therein. This Agreement and the Securities Purchase Agreement
supersede all prior agreements and understandings among the parties hereto
with
respect to the subject matter hereof and thereof.
f.
Subject to the requirements of Section 10 hereof, this Agreement shall inure
to
the benefit of and be binding upon the successors and assigns of each of the
parties hereto.
g.
The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
h.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original but all of which shall constitute one and the same agreement.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
i.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
j.
Except
as otherwise provided herein, all consents and other determinations to be made
by the Buyer pursuant to this Agreement shall be made by Buyers holding a
majority of the Registrable Securities, determined as if the all of the
Preferred Stock and Warrants then outstanding have been converted or exercised
into for Registrable Securities.
15
k.
The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to the Buyer by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that
the
remedy at law for breach of its obligations hereunder will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of any
of
the provisions hereunder, that the Buyer shall be entitled, in addition to
all
other available remedies in law or in equity, to an injunction or injunctions
to
prevent or cure breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, without the necessity of showing
economic loss and without any bond or other security being
required.
l.
The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
m.
In the
event that any provision of this Agreement is invalid or unenforceable under
any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof
which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
n.
The
initial number of Registrable Securities included in any Registration Statement
and each increase to the number of Registrable Securities included therein
shall
be allocated pro rata among the Buyers based on the number of Registrable
Securities held by the Buyer at the time of such establishment or increase,
as
the case may be. In the event a Buyer shall sell or otherwise transfer any
of
such holder's Registrable Securities, each transferee shall be allocated a
pro
rata portion of the number of Registrable Securities included in a Registration
Statement for such transferor. Any shares of Common Stock included in a
Registration Statement and which remain allocated to any person or entity which
does not hold any Registrable Securities shall be allocated to the remaining
Buyers, pro rata based on the number of shares of Registrable Securities then
held by the Buyers. For the avoidance of doubt, the number of Registrable
Securities held by a Buyer shall be determined as if all the Preferred Stock
and
Warrants then outstanding and held by a Buyer were converted into or exercised
for Registrable Securities, without regard to any limitation on the Buyer's
ability to convert the Preferred Stock or exercise the Warrants.
o.
There
shall be no oral modifications or amendments to this Agreement. This Agreement
may be modified or amended only in writing.
16
IN
WITNESS WHEREOF, the undersigned Buyer and the Company have caused this
Agreement to be duly executed as of the 12th
day of
September, 2007.
|
COMPANY:
|
BUYER:
|
||
|
|
|||
|
By:
/s/
Xxxxx Xxxxxxxxx
|
By: | ||
|
Print
Name: Xxxxx Xxxxxxxxx
|
|
||
|
Title:
Chief Financial Officer
|
|
||
|
|
|||
|
ADDRESS:
|
ADDRESS:
|
||
|
000
Xxxxxx Xxxx
|
|
||
|
Xxxxxxxxx,
Xxx Xxxx 00000
Phone:
(000) 000-0000
|
|
||
|
Fax:
(000) 000-0000
|
Phone: |
||
|
|
|||
|
|
17
SCHEDULE
OF BUYERS
|
Buyer
|
Address
and
Facsimile
Number
|
Legal
Representative’s
Address
and
Facsimile
Number
|
||
|
|
|
|
||
|
Bridgepointe
Master Fund Ltd.
|
0000
Xxxxxxxxx Xxxxxxx
Xxxxx
000
Xxxxxxxxxx,
XX 00000
Facsimile:
000-000-0000
|
P.
Xxxxxxxx Xxxxxxx, Esq.
Roswell
Capital Partners, LLC
0000
Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxx,
XX 00000
Facsimile:
000-000-0000
|
||
|
BayStar
Capital III Investment Fund, L.P.
|
00
X. Xxx Xxxxxxx Xxxxx Xxxx.
Xxxxx
0X
Xxxxxxxx,
XX 00000
Facsimile:
000-000-0000
|
Xxxx
X’Xxxxx, Esq.
Collette,
Erickson, Xxxxxx & X’Xxxxx
000
Xxxx Xxxxx
Xxxxx
0000
Xxx
Xxxxxxxxx, XX 00000
Facsimile:
000-000-0000
|
||
|
Crescent
International, Ltd.
|
x/x
Xxxxxxx (Xxxxxxxxxxx) X.X.
00
Xxxxxx Xxxxx-Xxxxx
XX-0000
Xxxxxxxx/Xxxxxx
Xxxxxxxxxxx
Facsimile:
x00 00 0000000
|
Xxxxxxx
Xxxxxxxxx & Xxxxx LLP
The
Graybar Building
000
Xxxxxxxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000-0000
Facsimile:
(000) 000-0000
|
||
|
Gemini
Master Fund, Ltd.
|
c/o
Gemini Strategies, LLC
00000
Xx Xxxxxx Xxxx
Xxxxx
000
Xxx
Xxxxx, XX 00000
Facsimile:
(000) 000-0000
|
Xxxxxx
Xxxxxxx
c/o
Gemini Strategies, LLC
00000
Xx Xxxxxx Xxxx
Xxxxx
000
Xxx
Xxxxx, XX 00000
Facsimile:
(000) 000-0000
|
||
|
Bristol
Investment Fund, Ltd.
|
c/o
Bristol Capital Advisors, LLC
00000
Xxxxxxxx Xxxxxxxxx
Xxxxx
0000
Xxx
Xxxxxxx, XX 00000
Facsimile:
(000) 000-0000
|
Xxx
Xxxx, Esq.
c/o
Bristol Capital Advisors, LLC
00000
Xxxxxxxx Xxxxxxxxx
Xxxxx
0000
Xxx
Xxxxxxx, XX 00000
Facsimile:
(000) 000-0000
|
||
|
Xxxxxx
X. Xxxxxxxxxxx
|
00
Xxxxxxxx Xxxx
Xxxxxxx
Xxxxx, XX 00000
|
00
Xxxxxxxx Xxxx
Xxxxxxx
Xxxxx, XX 00000
|
||
|
SRK
Management Co.
|
000
Xxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
|
000
Xxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
|
18
|
EGATNIV,
LLC
|
000
Xxxx 00xx
Xxxxxx
0xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Facsimile:
(000) 000-0000
|
Xxxxxx
Xxxxxxxxx
000
Xxxx 00xx
Xxxxxx
0xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Facsimile:
(000) 000-0000
|
19
Annex
A
Plan
of Distribution
Each
Selling Stockholder (the “Selling Stockholders”) of the common stock and any of
their pledgees, assignees and successors-in-interest may, from time to time,
sell any or all of their shares of common stock on the Nasdaq
Capital Market
or any
other stock exchange, market or trading facility on which the shares are traded
or in private transactions. These sales may be at fixed or negotiated prices.
A
Selling Stockholder may use any one or more of the following methods when
selling shares:
| · |
ordinary
brokerage transactions and transactions in which the brokerȭdealer
solicits purchasers;
|
| · |
block
trades in which the brokerȭdealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal
to
facilitate the
transaction;
|
| · |
purchases
by a brokerȭdealer as principal and resale by the brokerȭdealer for its
account;
|
| · |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| · |
privately
negotiated transactions;
|
| · |
settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a part;
|
| · |
brokerȭdealers
may agree with the Selling Stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
| · |
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
| · |
a
combination of any such methods of sale;
or
|
| · |
any
other method permitted pursuant to applicable
law.
|
The
Selling Stockholders may also sell shares under Rule 144 under the Securities
Act of 1933, as amended (the “Securities Act”), if available, rather than under
this prospectus.
Brokerȭdealers
engaged by the Selling Stockholders may arrange for other brokersȭdealers to
participate in sales. Brokerȭdealers may receive commissions or discounts from
the Selling Stockholders (or, if any brokerȭdealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated, but,
except as set forth in a supplement to this Prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in compliance
with
NASDR Rule 2440; and in the case of a principal transaction a markup or markdown
in compliance with NASDR IM-2440.
In
connection with the sale of the common stock or interests therein, the Selling
Stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
20
The
Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Stockholder has informed the
Company that it does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock. In
no
event shall any broker-dealer receive fees, commissions and markups which,
in
the aggregate, would exceed eight percent (8%).
The
Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the shares. The Company has agreed to indemnify
the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because
Selling Stockholders may be deemed to be “underwriters” within the meaning of
the Securities Act, they will be subject to the prospectus delivery requirements
of the Securities Act including Rule 172 thereunder. In addition, any securities
covered by this prospectus which qualify for sale pursuant to Rule 144 under
the
Securities Act may be sold under Rule 144 rather than under this prospectus.
There is no underwriter or coordinating broker acting in connection with the
proposed sale of the resale shares by the Selling Stockholders.
We
agreed
to keep this prospectus effective until the earlier of (i) the date on which
the
shares may be resold by the Selling Stockholders without registration and
without regard to any volume limitations by reason of Rule 144(k) under the
Securities Act or any other rule of similar effect or (ii) all of the shares
have been sold pursuant to this prospectus or Rule 144 under the Securities
Act
or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares may not
be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
Under
applicable rules and regulations under the 1934 Act, any person engaged in
the
distribution of the resale shares may not simultaneously engage in market making
activities with respect to the common stock for the applicable restricted
period, as defined in Regulation M, prior to the commencement of the
distribution. In addition, the Selling Stockholders will be subject to
applicable provisions of the 1934 Act and the rules and regulations thereunder,
including Regulation M, which may limit the timing of purchases and sales of
shares of the common stock by the Selling Stockholders or any other person.
We
will make copies of this prospectus available to the Selling Stockholders and
have informed them of the need to deliver a copy of this prospectus to each
purchaser at or prior to the time of the sale (including by compliance with
Rule
172 under the Securities Act).
21
Annex
B
Selling
Securityholder Notice and Questionnaire
The
undersigned beneficial owner of common stock (the “Registrable Securities”) of
Virtualscopics, Inc. a Delaware corporation (the “Company”), understands that
the Company has filed or intends to file with the Securities and Exchange
Commission (the “Commission”) a registration statement (the “Registration
Statement”) for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the “Securities Act”), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement (the
“Registration Rights Agreement”) to which this document is annexed. A copy of
the Registration Rights Agreement is available from the Company upon request
at
the address set forth below. All capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Registration Rights
Agreement.
Certain
legal consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus. Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Registration Statement and the related
prospectus.
NOTICE
The
undersigned beneficial owner (the “Selling Securityholder”) of Registrable
Securities hereby elects to include the Registrable Securities owned by it
in
the Registration Statement.
The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
0.Xxxx.
| (a) |
Full
Legal Name of Selling Securityholder:
|
|
________________________________________________
|
| (b) |
Full
Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities are held:
|
|
_________________________________________________
|
22
| (c) |
Full
Legal Name of Natural Control Person (which means a natural person
who
directly or indirectly alone or with others has power to vote or
dispose
of the securities covered by this
Questionnaire):
|
|
________________________________________________
|
2.Address
for Notices to Selling Securityholder:
Telephone:
__________
Fax:
_______________
Contact
Person: ______________
3.
Broker-Dealer Status:
(a) Are
you a
broker-dealer?
Yes
o No
o
(b) If
“yes”
to Section 3(a), did you receive your Registrable Securities as compensation
for
investment banking services to the Company?
Yes
o No
o
Note: If
“no”
to Section 3(b), the Commission’s staff has indicated that you should be
identified as an underwriter in the Registration Statement.
(c) Are
you
an affiliate of a broker-dealer?
Yes
o No
o
(d) If
you
are an affiliate of a broker-dealer, do you certify that you purchased the
Registrable Securities in the ordinary course of business, and at the time
of
the purchase of the Registrable Securities to be resold, you had no agreements
or understandings, directly or indirectly, with any person to distribute the
Registrable Securities?
Yes
o No
o
Note: If
“no”
to Section 3(d), the Commission’s staff has indicated that you should be
identified as an underwriter in the Registration Statement.
23
4.
Beneficial Ownership of Securities of the Company Owned by the Selling
Securityholder.
Except
as
set forth below in this Item 4, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the securities
issuable pursuant to the Purchase Agreement.
(a) Type
and
Amount of other securities beneficially owned by the Selling
Securityholder:
________________________________________________
________________________________________________
________________________________________________
5.
Relationships with the Company:
Except
as
set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity
securities of the undersigned) has held any position or office or has had any
other material relationship with the Company (or its predecessors or affiliates)
during the past three years.
State
any
exceptions here:
_____________________________________________
_____________________________________________
The
undersigned agrees to promptly notify the Company of any inaccuracies or changes
in the information provided herein that may occur subsequent to the date hereof
at any time while the Registration Statement remains effective.
By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 5 and the inclusion of such
information in the Registration Statement and the related prospectus and any
amendments or supplements thereto. The undersigned understands that such
information will be relied upon by the Company in connection with the
preparation or amendment of the Registration Statement and the related
prospectus.
24
IN
WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice
and Questionnaire to be executed and delivered either in person or by its duly
authorized agent.
| Date: | Beneficial Owner: | |
| |
|
|
| By: | ||
|
Name: |
||
|
Title
|
||
|
|
||
PLEASE
FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
THE ORIGINAL BY OVERNIGHT MAIL, TO:
___________________________
___________________________
___________________________
___________________________
25
