NEURO-HITECH, INC. REGISTRATION RIGHTS AGREEMENT
NEURO-HITECH,
INC.
This
Registration Rights Agreement (this “Agreement”)
is
made and entered into as of November 29, 2006 (the “Effective
Date”),
by
and among Neuro-Hitech, Inc., a Delaware corporation (the “Corporation”)
and
Xx. Xxxxx Xxxxxxxx, as “Representative” of the parties listed on Exhibit A
attached
hereto (the “Stakeholders”).
A. Pursuant
to that certain Agreement and Plan of Merger dated November 16, 2006, by and
among the Corporation, QA Acquisition Corp., a Delaware corporation, QA Merger
LLC, a Delaware limited liability company, Q-RNA, Inc., a Delaware corporation
(“Q-RNA”)
and
Xx. Xxxxx Xxxxxxxx, as “Representative” of the Stakeholders (the “Merger
Agreement”),
the
Stakeholders have been issued shares of the Corporation’s Common Stock
(“Common
Stock”),
Buyer
Warrants, Buyer Options and the Xxxxxx Option (as defined in the Merger
Agreement).
B. Pursuant
to the Merger Agreement, the Corporation is required to provide the Stakeholders
certain registration rights with respect to the Registrable Securities (as
defined below), the Buyer Options and the Xxxxxx Option.
NOW,
THEREFORE,
in
consideration of the foregoing recitals and the mutual promises hereinafter
set
forth, the parties hereto agree as follows:
1. REGISTRATION
RIGHTS.
1.1 Definitions.
For
purposes of this Section 1:
(a) Registration.
The
terms “register,”
“registration”
and
“registered”
refer
to a registration effected by preparing and filing a registration statement
in
compliance with the Securities Act of 1933, as amended (“Securities
Act”),
and
the declaration or ordering of effectiveness of such registration
statement.
(b) Registrable
Securities.
The
term “Registrable
Securities”
means:
(1) all
the
shares of Common Stock of the Corporation that are issued or issuable upon
exercise of the Buyer Warrants set forth on Exhibit
A;
(2) the
shares of Common Stock set forth in Exhibit A;
(3) any
shares of Common Stock of the Corporation issued (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
)
as a dividend or other distribution with respect to, or in exchange for or
in
replacement of, all such shares of Common Stock described in clause (1) or
(2)
of this subsection (b); excluding
in all
cases, however, any Registrable Securities sold by a person in a transaction
in
which rights under this Section 1
are not
assigned in accordance with this Agreement or any Registrable Securities with
respect to which, pursuant to Section 1.12
hereof,
the Holders are no longer entitled to registration rights pursuant to Sections
1.2,
1.3
or
1.4
hereof.
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(c) Registrable
Securities Then Outstanding.
The
number of shares of “Registrable
Securities then outstanding”
shall
mean the number of shares of Common Stock which are Registrable Securities
that
are then (1) issued and outstanding or (2) issuable pursuant to the
exercise or conversion of then outstanding and then exercisable or convertible
and qualifying options, warrants or convertible securities.
(d) Holder.
The
term “Holder”
means
any person owning of record Registrable Securities or any assignee of record
of
such Registrable Securities to whom rights set forth herein have been duly
assigned in accordance with this Agreement; provided,
however,
that
for purposes of this Agreement, a record holder of Buyer Warrants shall be
deemed to be the Holder of such Registrable Securities; and provided,
further,
that
the Corporation shall in no event be obligated to register Buyer Warrants,
and
that Holders of Registrable Securities will not be required to exercise their
Buyer Warrants into Common Stock in order to exercise the registration rights
granted hereunder, until immediately before the closing of the offering to
which
the registration relates.
(e) Form
S-3.
The
term “Form S-3”
means
such form under the Securities Act as is in effect on the date hereof or any
successor registration form under the Securities Act subsequently adopted by
the
SEC which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Corporation with the SEC.
(f) SEC.
The
term “SEC”
or
“Commission”
means
the U.S. Securities and Exchange Commission.
1.2 Demand
Registration.
(a) Request
by Holders.
If the
Corporation shall receive at any time after the Lock-up Termination
Date (as
defined in Section 1.10),
a
written request from the Holders of at least 50% of the Registrable Securities
then outstanding that the Corporation file a registration statement under the
Securities Act covering the registration of Registrable Securities pursuant
to
this Section 1.2,
then
the Corporation shall, within 20 days after the receipt of such written request,
give written notice of such request (the “Request
Notice”)
to the
Representative on behalf of the Holders, and effect, as soon as practicable,
the
registration under the Securities Act of all Registrable Securities which
Holders request to be registered and included in such registration by written
notice given by the Representative on behalf of such Holders to the Corporation
within 30 days after receipt of the Request Notice, subject only to the
limitations of this Section 1.
(b) Underwriting.
If the
Holders initiating the registration request under this Section 1.2
(the
“Initiating
Holders”)
intend
to distribute the Registrable Securities covered by their request by means
of an
underwriting, then they shall so advise the Corporation as a part of their
request made pursuant to this Section 1.2
and the
Corporation shall include such information in the Request Notice. In such event,
the right of any Holder to include his, her, or its Registrable Securities
in
such registration shall be conditioned upon such Holder’s participation in such
underwriting and the inclusion of such Holder’s Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of
the
Initiating Holders and such Holder) to the extent provided herein. The
Corporation shall not be required to include any securities of any Holder in
such underwriting unless such Holder accepts the terms of the underwriting
as
agreed upon between the Corporation and the underwriters selected by it, and
reasonably acceptable to the Representative, and enters into an underwriting
agreement in customary form with the underwriter or underwriters selected by
the
Corporation. Notwithstanding any other provision of this
Section 1.2,
if the
underwriter(s) advise(s) the Corporation in writing that marketing factors
require a limitation of the number of securities to be underwritten then the
Corporation shall so advise all Holders of Registrable Securities that would
otherwise be registered and underwritten pursuant hereto, and the number of
Registrable Securities that may be included in the underwriting shall be reduced
as required by the underwriter(s) and allocated among the Holders of Registrable
Securities on a pro rata basis according to the number of Registrable Securities
then outstanding held by each Holder requesting registration (including the
Initiating Holders). Any Registrable Securities excluded and withdrawn from
such
underwriting shall be withdrawn from the registration.
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(c) Maximum
Number of Demand Registrations.
The
Corporation is obligated to effect only one such registration pursuant to this
Section 1.2.
(d) Deferral.
Notwithstanding the foregoing, if the Corporation shall furnish to Holders
requesting the filing of a registration statement pursuant to this
Section 1.2,
a
certificate signed by the President or Chief Executive Officer of the
Corporation stating that in the good faith judgment of the Board of Directors
of
the Corporation, it would be seriously detrimental to the Corporation and its
shareholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, then the
Corporation shall have the right to defer such filing for a period of not more
than 90 days after receipt of the request of the Initiating Holders;
provided,
however,
that
the Corporation may not utilize this right more than once in any 12 month
period; and further provided,
that,
upon any such deferral by the Corporation, at the election of at least a
majority of the Holders participating in such registration, such Holders may
withdraw their request for registration under Section 1.2 without forfeiting
the
Holders’ rights thereunder.
(e) Expenses.
All
expenses incurred in connection with a registration pursuant to this
Section 1.2,
including without limitation all registration and qualification fees, printers’
and accounting fees, fees and disbursements of counsel for the Corporation,
and
the reasonable fees and disbursements of one counsel for the selling Holders
(but excluding underwriters’ discounts and commissions), shall be borne by the
Corporation. Each Holder participating in a registration pursuant to this
Section 1.2
shall
bear such Holder’s proportionate share (based on the number of shares sold by
such Holder over the total number of shares included in such registration at
the
time it is declared effective) of all discounts, commissions or other amounts
payable to underwriters or brokers in connection with such offering.
Notwithstanding the foregoing, the Corporation shall not be required to pay
for
any expenses of any registration proceeding begun pursuant to this
Section 1.2
if the
registration request is subsequently withdrawn at the request of the Holders
of
a majority of the Registrable Securities to be registered, unless the Holders
of
a majority of the Registrable Securities then outstanding agree to forfeit
their
right to demand registration pursuant to this Section 1.2
(in
which case such right shall be forfeited by all Holders of Registrable
Securities); provided,
further,
however,
that
(a) if any such withdrawal is during the period of deferral pursuant to Section
1.2(d) above, or (b) if at the time of such withdrawal, the Holders have learned
of a material adverse change in the condition, business, or prospects of the
Corporation not known to the Holders at the time of their request for such
registration and have withdrawn their request for registration with reasonable
promptness after learning of such material adverse change, then in each such
case the Holders shall not be required to pay any of such expenses and shall
retain their demand registration rights pursuant to this
Section 1.2.
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1.3 Piggyback
Registrations.
The
Corporation shall notify all Holders of Registrable Securities in writing at
least 30 days prior to filing any registration statement under the Securities
Act for purposes of effecting a public offering of securities of the Corporation
(including, but not limited to, registration statements relating to secondary
offerings of securities of the Corporation, but excluding
registration statements relating to any registration under
Section 1.2
or
Section 1.4
of this
Agreement or to any employee benefit plan or a corporate reorganization or
other
transaction covered by Rule 145 promulgated under the Securities Act, or a
registration on any registration form which does not permit secondary sales
or
does not include substantially the same information as would be required to
be
included in a registration statement covering the sale of Registrable
Securities,) and will afford each such Holder an opportunity to include in
such
registration statement all or any part of the Registrable Securities then held
by such Holder. Each Holder desiring to include in any such registration
statement all or any part of the Registrable Securities held by such Holder
shall, within 20 days after receipt of the above-described notice from the
Corporation, so notify the Corporation in writing, and in such notice shall
inform the Corporation of the number of Registrable Securities such Holder
wishes to include in such registration statement. If a Holder decides not to
include all of its Registrable Securities in any registration statement
thereafter filed by the Corporation, such Holder shall nevertheless continue
to
have the right to include any Registrable Securities in any subsequent
registration statement or registration statements as may be filed by the
Corporation with respect to offerings of its securities, all upon the terms
and
conditions set forth herein.
(a) Underwriting.
If a
registration statement under which the Corporation gives notice under this
Section 1.3
is for
an underwritten offering, then the Corporation shall so advise the Holders
of
Registrable Securities. In such event, the right of any such Holder’s
Registrable Securities to be included in a registration pursuant to this
Section 1.3
shall be
conditioned upon such Holder’s participation in such underwriting and the
inclusion of such Holder’s Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the managing underwriter or underwriter(s) selected
for
such underwriting. Notwithstanding any other provision of this Agreement, if
the
managing underwriter determine(s) in good faith that marketing factors require
a
limitation of the number of shares to be underwritten, then the managing
underwriter(s) may exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, first,
to the
Corporation, second
to
Holders requesting inclusion of their Registrable Securities in such
registration statement on a pro rata basis based on the number of shares
proposed to be registered by the Corporation and the number of Registrable
Securities each such Holder has requested to be included in the registration,
provided however,
that
the right of the underwriters to exclude shares (including Registrable
Securities) from the registration and underwriting as described above shall
be
restricted so that the number of Registrable Securities included in any such
registration is not reduced below 20% of the shares included in the
registration. If any Holder disapproves of the terms of any such underwriting,
such Holder may elect to withdraw therefrom by written notice, given in
accordance with Section 4.1
hereof,
to the Corporation and the underwriter, delivered at least 20 days prior to
the
effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration. For any Holder that is a partnership or corporation,
the
partners, retired partners and shareholders of such Holder, or the estates
and
family members of any such partners and retired partners and any trusts for
the
benefit of any of the foregoing persons shall be deemed to be a single “Holder,”
and any pro rata reduction with respect to such “Holder” shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such “Holder,” as defined in this
sentence.
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(b) Expenses.
All
expenses incurred in connection with a registration pursuant to this
Section 1.3,
including without limitation all registration and qualification fees, printers’
and accounting fees, fees and disbursements of counsel for the Corporation,
and
the reasonable fees and disbursements of one counsel for the selling
Holders (but
excluding underwriters’ discounts and commissions), shall be borne by the
Corporation. Each Holder participating in a registration pursuant to this
Section 1.3
shall
bear such Holder’s proportionate share (based on the number of shares sold by
such Holder over the total number of shares included in such registration at
the
time it goes effective) of all discounts, commissions or other amounts payable
to underwriters or brokers in connection with such offering.
1.4 Form
S-3 Registration.
Subject
to the Corporation’s eligibility to use Form S-3, in case the Corporation shall
receive from any Holder or Holders of at least 50% of Registrable
Securities then outstanding a written request or requests that the Corporation
effect a registration on Form S-3 and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such Holder
or Holders, then the Corporation will do the following:
(a) Notice.
Promptly give written notice of the proposed registration and the Holder’s or
Holders’ request therefor, and any related qualification or compliance, to all
other Holders of Registrable Securities.
(b) Registration.
As soon
as practicable, effect such registration and all such qualifications and
compliances as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Holder’s or Holders’ Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Holder or Holders joining in such
request as are specified in a written request given within 20 days after receipt
of such written notice from the Corporation; provided,
however,
that
the Corporation shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 1.4:
(1) if
Form S-3 is not available for such offering;
(2) if
the
Holders, together with the holders of any other securities of the Corporation
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public of less than $1,000,000;
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(3) if
the
Corporation shall furnish to the Holders a certificate signed by the President
or Chief Executive Officer of the Corporation stating that in the good faith
judgment of the Board of Directors of the Corporation, it would be seriously
detrimental to the Corporation and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Corporation shall
have the right to defer the filing of the Form S-3 registration statement
no more than once during any twelve month period for a period of not more than
90 days after receipt of the request of the Holder or Holders under this
Section 1.4;
(4) if
the
Corporation has, within the six month period preceding the date of such request,
already effected one registration on Form S-3 for the Holders pursuant to this
Section 1.4;
or
(5) in
any
particular jurisdiction in which the Corporation would be required to qualify
to
do business or to execute a general consent to service of process (other than
pursuant to a standard Form U-2 or any successor form) in effecting such
registration, qualification or compliance.
(c) Expenses.
Subject
to the foregoing, the Corporation shall file a Form S-3 registration
statement covering the Registrable Securities and other securities so requested
to be registered pursuant to this Section 1.4
as soon
as practicable after receipt of the request or requests of the Holders for
such
registration. The Corporation shall pay all expenses incurred in connection
with
the first registration requested pursuant to this Section 1.4,
(excluding underwriters’ or brokers’ discounts and commissions), including
without limitation all filing, registration and qualification, printers’
and accounting fees and the reasonable fees and disbursements of one counsel
for
the selling Holder or Holders and counsel for the Corporation. Each Holder
participating in a registration pursuant to this Section 1.3
shall
bear such Holder’s proportionate share (based on the number of shares sold by
such Holder over the total number of shares included in such registration at
the
time it goes effective) of all discounts, commissions or other amounts payable
to underwriters or brokers in connection with such offering. All expenses
incurred in connection with any subsequent registration requested pursuant
to
this Section 1.4
shall be
borne by the Holders who participate in such registration on a pro rata basis
according to the number of shares sold by such Holder over the total number
of
shares included in such registration at the time it goes effective.
(d) Not
Demand Registration.
Form S-3 registrations shall not be deemed to be demand registrations as
described in Section 1.2
above.
1.5 Form
S-8 Registration.
The
Corporation will cause the Common Stock issued upon exercise of the Buyer
Options and the Xxxxxx Option to be registered on Form S-8 of the SEC within
90
days after the Effective Date and will exercise reasonable efforts to maintain
the effectiveness of such registration statement for so long as such options
remain outstanding.
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1.6 Obligations
of the Corporation.
Whenever required to effect the registration of any Registrable Securities
under
Sections 1.2,
1.3
or
1.4
this
Agreement, the Corporation shall, subject to the provisions of
Section 1.5(g)
below,
as expeditiously as reasonably possible:
(a) Prepare
and file with the SEC a registration statement with respect to such Registrable
Securities and use reasonable efforts to cause such registration statement
to
become effective, and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such registration statement
effective for up to 90 days.
(b) Prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement.
(c) Furnish
to the Holders such number of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and
such
other documents as they may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by them that are included in
such registration.
(d) Use
reasonable efforts to register and qualify the securities covered by such
registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that
the
Corporation shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process (other than pursuant to a standard Form U-2 or any successor form)
in
any such states or jurisdictions.
(e) In
the
event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter(s) of such offering. Each Holder participating in
such
underwriting hereby agrees to also enter into and perform its obligations under
such an agreement.
(f) Notify
each Holder of Registrable Securities covered by 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 as a result of which the
prospectus included in such 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 in the light of the circumstances then existing.
(g) Notwithstanding
any other provision of this Agreement, from and after the time a registration
statement filed under this Section 1
covering
Registrable Securities is declared effective, the Corporation shall have the
right to suspend the registration statement and the related prospectus in order
to prevent premature disclosure of any material non-public information related
to corporate developments by delivering notice of such suspension to the
Holders, provided, however,
that
the Corporation may exercise the right to such suspension only once in any
12-month period and for a period not to exceed 90 days. From and after the
date
of a notice of suspension under this Section 1.5(g),
each
Holder agrees not to use the registration statement or the related prospectus
for resale of any Registrable Security until the earlier of (1) notice from
the
Corporation that such suspension has been lifted or (2) the 90th
day
following the giving of the notice of suspension.
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1.7 Furnish
Information.
It
shall be a condition precedent to the obligations of the Corporation to take
any
action pursuant to Sections 1.2,
1.3
or
1.4
that the
selling Holders shall furnish to the Corporation such information regarding
themselves, the Registrable Securities held by them, and the intended method
of
disposition of such securities as shall be required to timely effect the
registration of their Registrable Securities.
1.8 Delay
of Registration.
No
Holder shall have any right to obtain or seek an injunction restraining or
otherwise delaying any such registration as the result of any controversy that
might arise with respect to the interpretation or implementation of this
Section 1.
1.9 Indemnification.
In the
event any Registrable Securities are included in a registration statement under
Sections 1.2,
1.3
or
1.4:
(a) By
the
Corporation.
To the
extent permitted by law, the Corporation will indemnify and hold harmless each
Holder, the partners, officers and directors of each Holder, any underwriter
(as
defined in the Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act
or
the Securities Exchange Act of 1934, as amended, (the “Exchange
Act”),
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively, the “Violations”
and,
individually, a “Violation”):
(1) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto;
or
(2) 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
(3) any
violation or alleged violation by the Corporation of the Securities Act, the
Exchange Act, any federal or state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any federal or state
securities law in connection with the offering covered by such registration
statement.
The
Corporation will advance to each such Holder, partner, officer or director,
underwriter or 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 however,
that
the indemnity agreement contained in this subsection 1.9(a)
shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Corporation (which consent shall not be unreasonably withheld or delayed),
nor
shall the Corporation be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based
upon
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration
by
such Holder, partner, officer, director, underwriter or controlling person
of
such Holder.
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(b) By
Selling Holders.
To the
extent permitted by law, each selling Holder will indemnify and hold harmless
the Corporation, each of its directors, each of its officers who have signed
the
registration statement, each person, if any, who controls the Corporation within
the meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder’s
partners, directors or officers or any person who controls such Holder within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages or liabilities (joint or several) to which the Corporation
or
any such director, officer, controlling person, underwriter or other such
Holder, partner or director, officer or controlling person of such other Holder
may become subject under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration. Each such Holder will
reimburse any legal or other expenses reasonably incurred by the Corporation
or
any such director, officer, controlling person, underwriter or other Holder,
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action; within three months after a request for reimbursement
has
been received by the indemnifying Holder, provided,
however,
that
the indemnity agreement contained in this subsection 1.9(b)
shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld or delayed; and
provided further,
that
the total amounts payable in indemnity by a Holder under this
Section 1.9(b)
in
respect of any Violation shall not exceed the net proceeds received by such
Holder in the registered offering out of which such Violation
arises.
(c) Notice.
Promptly after receipt by an indemnified party under this
Section 1.9
of
notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 1.9,
deliver
to the indemnifying party a written notice of the commencement thereof. The
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided,
however,
that an
indemnified party shall have the right to retain its own counsel, with the
fees
and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential conflict of interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party
of
any liability to the indemnified party under this Section 1.9,
but the
omission so to deliver written notice to the indemnifying party will not relieve
it of any liability that it may have to any indemnified party otherwise than
under this Section 1.9.
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(d) Defect
Eliminated in Final Prospectus.
The
foregoing indemnity agreements of the Corporation and Holders are subject to
the
condition that, insofar as they relate to any Violation made in a preliminary
prospectus but eliminated or remedied in the amended prospectus on file with
the
SEC at the time the registration statement in question becomes effective or
the
amended prospectus filed with the SEC pursuant to SEC Rule 424(b) (the
“Final
Prospectus”),
such
indemnity agreement shall not inure to the benefit of any person if a copy
of
the Final Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act.
(e) Contribution.
If the
indemnification provided for in this Section 1.9
is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense referred to
herein, then the indemnifying party, in lieu of indemnifying the indemnified
party, shall contribute to the amount paid or payable by such indemnified party
with respect to such loss, liability, claim, damage or expense in the proportion
that is appropriate to reflect the relative fault of the indemnifying party
and
the indemnified party in connection with the statements or omissions that
resulted in such loss, liability, claim, damage or expense, as well as any
other
relevant equitable considerations. The relative fault of the indemnifying party
and the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of material fact or
the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. 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 and sold by such Holder pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
(f) Conflict
with Underwriting Agreement.
Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement will
control.
(g) Survival.
The
obligations of the Corporation and Holders under this Section 1.9
shall
survive the completion of any offering of Registrable Securities in a
registration statement, and otherwise.
1.10 “Market
Stand-Off” Agreement.
(a) Each
Holder hereby agrees that it shall not sell or otherwise transfer or dispose
of
any Registrable Securities then owned by such Holder (other than estate
planning transfers to the parents, siblings, children or grandchildren of the
Holder (or a trust or other entity for their exclusive benefit), other
transfers
to
donees or to partners of the Holder who agree to be similarly bound) prior
to
the Lock-up Termination Date (as defined below).
For
purposes of this Agreement, the “Lock-up Termination Date” shall mean the
earlier of (i) the two year anniversary of the Effective Date or (ii) the first
date on which (A) the average daily trading volume for the preceding 10
consecutive trading days of the Common stock is at least 150,000 shares, as
reported by Xxxxxxxxx.xxx (or its successor), and (B) the average closing price
for the preceding 10 consecutive trading days of one share of the Common Stock
is at least 2.5 times the per share purchase price of the Common Stock (on
an
as-converted to Common Stock basis) sold in the next transaction or series
of
related transactions occurring after the Effective Date, which sale or sales
result in aggregate proceeds to the Corporation of no less than $9,300,000,
or
such lesser amount as may be approved by Xxxxxxxx
MedTech Partners, L.P., Xxxxxxxx New York Partners LP and Xxxxxx Venture
Associates, LLC
(but in
no event, greater than $15.00 per share).
10
(b) Each
Holder hereby further agrees that it will not, without the prior written consent
of the managing underwriter, during the period commencing on the date of the
final prospectus relating to the Company’s initial underwritten public offering
and ending on the date specified by the Company and the managing underwriter
(such period not to exceed one hundred eighty (180) calendar days) (i) lend,
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant
to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
securities of the Company, including (without limitation) shares of Common
Stock
or any securities convertible into or exercisable or exchangeable for Common
Stock (whether now owned or hereafter acquired) or (ii) enter into any swap
or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of any securities of the Company, including
(without limitation) shares of Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock (whether now owned or hereafter
acquired), whether any such transaction described in clause (i) or (ii) above
is
to be settled by delivery of securities, in cash or otherwise. The foregoing
covenants shall apply only to the Company’s initial underwritten public offering
of equity securities, shall not apply to the sale of any shares by a Holder
to
an underwriter pursuant to an underwriting agreement and shall only be
applicable to the Holders if all the Company’s executive officers, directors and
greater than five percent (5%) stockholders enter into similar agreements.
Each
Holder agrees to execute an agreement(s) reflecting (i) and (ii) above as may
be
requested by the managing underwriter at the time of the initial underwritten
public offering. The underwriters in connection with the Company’s initial
underwritten public offering are intended third party beneficiaries of the
covenants in this Section 1.10(b) and shall have the right, power and authority
to enforce such covenants as though they were a party hereto.
(c) In
order
to enforce the foregoing covenants, the Corporation shall have the right to
place restrictive legends on the certificates representing the shares subject
to
this Section and to impose stop transfer instructions with respect to the
Registrable Securities (and the shares or securities of every other person
subject to the foregoing restriction) until the end of the applicable period.
11
1.11 Rule 144
Reporting.
With a
view to making available the benefits of certain rules and regulations of
the
Commission which may at any time permit the sale of the Registrable Securities
to the public without registration, after such time as a public market exists
for the Common Stock of the Corporation, the Corporation agrees to:
(a) Make
and
keep public information available, as those terms are understood and defined
in
Rule 144 under the Securities Act, at all times after the effective date of
the first registration under the Securities Act filed by the Corporation for
an
offering of its securities to the general public;
(b) Use
reasonable, diligent efforts to file with the Commission in a timely manner
all
reports and other documents required of the Corporation under the Securities
Act
and the Exchange Act; and
(c) So
long
as a Holder owns any Registrable Securities, to furnish to the Holder forthwith
upon request a written statement by the Corporation as to its compliance with
the reporting requirements of said Rule 144 and of the Securities Act and
the Exchange Act, a copy of the most recent annual or quarterly report of the
Corporation, and such other reports and documents of the Corporation as a Holder
may reasonably request in availing itself of any rule or regulation of the
Commission allowing a Holder to sell any such securities without registration
(at any time after the Corporation has become subject to the reporting
requirements of the Exchange Act).
1.12 Termination
of the Corporation’s Obligations.
The
Corporation shall have no obligations pursuant to Sections 1.2
through
1.4
with
respect to: (a) any request or requests for registration made by any Holder
on a date more than five years after the Lock-Up Termination Date; or
(b) any Registrable Securities proposed to be sold by a Holder in a
registration pursuant to Section 1.2,
1.3
or
1.4
if, in
the opinion of counsel to the Corporation, all such Registrable Securities
proposed to be sold by a Holder may be sold in a three month period without
registration under the Securities Act pursuant to Rule 144 under the
Securities Act.
2. ASSIGNMENT
AND AMENDMENT.
2.1 Assignment.
Notwithstanding anything herein to the contrary,
the
registration rights of a Holder under Section 1
hereof
may be assigned only to a party who (a) acquires at least 2,000 shares of Common
Stock and/or an equivalent number (on an as-converted basis) of Registrable
Securities issued upon conversion thereof or (b) is a partner, member or
affiliate of a Holder; provided,
however
that no
party may be assigned any of the foregoing rights unless the Corporation is
given written notice by the assigning party at the time of such assignment
stating the name and address of the assignee and identifying the securities
of
the Corporation as to which the rights in question are being assigned;
provided further,
that
any such assignee of such rights is not deemed by the Board of Directors of
the
Corporation, in its reasonable judgment, to be a competitor of the Corporation;
and provided further
that any
such assignee shall receive such assigned rights subject to all the terms and
conditions of this Agreement, including without limitation the provisions of
this Section 2.
2.2 Amendment
and Waiver of Rights.
Any
provision of this Agreement may be amended and the observance thereof may be
waived (either generally or in a particular instance and either retroactively
or
prospectively), only with the written consent of the Corporation and the
Representative. Any amendment or waiver effected in accordance with this
Section 2.2
shall be
binding upon each Holder, each permitted successor or assignee of such Holder
and the Corporation.
12
3. LEGEND.
3.1 Each
certificate representing the shares of Common Stock held by the Stakeholders
shall be endorsed with the following legend (the “Legend”).
THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP
TO
TWO YEARS FOLLOWING THE DATE OF ISSUANCE OF THESE SHARES, AS SET FORTH IN THAT
CERTAIN REGISTRATION RIGHTS AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL
HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE COMPANY’S
PRINCIPAL OFFICE. SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THESE
SHARES.
3.2 The
Corporation agrees that, during the term of this Agreement, it will not remove,
and will not permit to be removed (upon registration of transfer, re-issuance
or
otherwise), the Legend on any new certificate theretofore represented by a
certificate carrying the Legend.
4. GENERAL
PROVISIONS.
4.1 Notices.
Any
notice or other communication required or permitted to be given under this
Agreement will be in writing, will be delivered personally or by registered
or
certified mail, postage prepaid and will be deemed given upon delivery, if
delivered personally, or three days after deposit in the mails, if mailed,
to
the following addresses:
(a)
If
to the
Corporation:
Neuro-Hitech,
Inc.
Xxx
Xxxx
Xxxxx, Xxxxx 0000
Xxx
Xxxx,
XX 00000
Attention:
President
with
a
copy to:
Arent
Fox
PLLC
0000
Xxxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx,
XX 00000
Attn:
Xxxxxxx X. Xxxxxx, Esq.
(b)
If
to the
Representative or the Stakeholders:
Xx.
Xxxxx
Xxxxxxxx
c/o
Wheatley Partners
00
Xxxxxxxxxx Xxxx
Xxxxx
Xxxx, XX 00000
13
with
a
copy to:
Xxxxx
Xxxxxx LLP
000
Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx,
XX 00000
Attn:
Xxxxxx X. Xxxxxx and Xxxxx X. Xxxxxxx
or
to
such other address as a party may have furnished to the other parties in writing
pursuant to this Section 4.1.
4.2 Entire
Agreement.
This
Agreement and the documents referred to herein, together with all the Exhibits
hereto, constitute the entire agreement and understanding of the parties with
respect to the subject matter of this Agreement, and supersede any and all
prior
understandings and agreements, whether oral or written, between or among the
parties hereto with respect to the specific subject matter hereof.
4.3 Governing
Law.
The
internal laws of the State of Delaware (irrespective of its choice of law
principles) will govern the validity of this Agreement, the construction of
its
terms, and the interpretation and enforcement of the rights and duties of the
parties hereto.
4.4 Severability.
If any
provision of this Agreement, or the application thereof, will for any reason
and
to any extent be invalid or unenforceable, the remainder of this Agreement
and
application of such provision to other persons or circumstances will be
interpreted so as reasonably to effect the intent of the parties hereto. The
parties further agree to replace such void or unenforceable provision of this
Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of the void or
unenforceable provision.
4.5 Successors
And Assigns.
Subject
to the provisions of Section 2.1,
this
Agreement, and the rights and obligations of the parties hereunder, will be
binding upon and inure to the benefit of their respective successors, assigns,
heirs, executors, administrators and legal representatives.
4.6 Titles
and Headings.
The
titles, captions and headings of this Agreement are included for ease of
reference only and will be disregarded in interpreting or construing this
Agreement. Unless otherwise specifically stated, all references herein to
“sections” and “exhibits” will mean “sections” and “exhibits” to this
Agreement.
4.7 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which will
be
an original as regards any party whose signature appears thereon and all of
which together will constitute one and the same instrument. This Agreement
will
become binding when one or more counterparts hereof, individually or taken
together, will bear the signatures of both parties reflected hereon as
signatories.
14
4.8 Costs
And Attorneys’ Fees.
In the
event that any action, suit or other proceeding is instituted concerning or
arising out of this Agreement or any transaction contemplated hereunder, the
prevailing party shall recover all of such party’s costs and attorneys’ fees
incurred in each such action, suit or other proceeding, including any and all
appeals or petitions therefrom.
4.9 Adjustments
for Stock Splits, Etc.
Wherever
in this Agreement there is a reference to a specific number of shares of Common
Stock of the Corporation of any class or series, then, upon the occurrence
of
any subdivision, combination or stock dividend of such class or series of stock,
the specific number of shares so referenced in this Agreement shall
automatically be proportionally adjusted to reflect the affect on the
outstanding shares of such class or series of stock by such subdivision,
combination or stock dividend.
4.10 Further
Assurances.
The
parties agree to execute such further documents and instruments and to take
such
further actions as may be reasonably necessary to carry out the purposes and
intent of this Agreement.
4.11 Facsimile
Signatures.
This
Agreement may be executed and delivered by facsimile and upon such delivery
the
facsimile signature will be deemed to have the same effect as if the original
signature had been delivered to the other party.
[Signature
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15
IN
WITNESS WHEREOF,
the
parties hereto have executed this Agreement as of the date and year first
written above.
|
THE
CORPORATION:
NEURO-HITECH,
INC.
|
|
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Name:
|
/s/
Xxxxxx Xxxxxxx
|
|
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|
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By:
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Xxxxxx
Xxxxxxx
|
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Title:
|
Chief
Executive Officer
|
REPRESENTATIVE:
| /s/ Xxxxx Xxxxxxxx | |||
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Xx. Xxxxx Xxxxxxxx |
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