Exhibit 10.1
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of February
3, 2004, by and between Xtreme Companies, Inc., a company organized under the
laws of state of Nevada, with its principal executive office at Xtreme
Companies, Inc., 00000 Xxxxxxx Xxxxxx, Xxxx 00 Xxxxxxx, XX 00000 (the
"Company"), and the undersigned Purchaser (the "Purchaser").
WHEREAS, upon the terms and subject to the conditions of the Subscription
Agreement between the Purchaser and the Company (the "Subscription Agreement"),
the Company has agreed to issue and sell to the Purchaser convertible debentures
of the Company (the "Debentures"), which will be convertible into shares of the
common stock, $.001 par value per share (the "Common Stock"), of the Company.
WHEREAS, to induce the Purchaser to execute and deliver the Subscription
Agreement and the Investment 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, with
respect to the shares of Common Stock issuable pursuant to the Subscription
Agreement and Debenture.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained hereinafter and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Purchaser hereby agree as follows:
DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "Closing Date" means the date funds are received by the Company pursuant to
the Subscription Agreement.
b. "Purchaser" means Preston Capital Partners, LP.
c. "Person" means a corporation, a limited liability company, an association,
a partnership, an organization, a business, an individual, a governmental or
political subdivision thereof or a governmental agency.
d. "Potential Material Event" means any of the following: (i) the possession by
the Company of material information not ripe for disclosure in a Registration
Statement, which shall be evidenced by determinations in good faith by the Board
of Directors of the Company that disclosure of such information in the
Registration Statement would be detrimental to the business and affairs of the
Company, or (ii) any material engagement or activity by the Company which would,
in the good faith determination of the Board of Directors of the Company, be
adversely affected by disclosure in a Registration Statement at such time, which
determination shall be accompanied by a good faith determination by the Board of
Directors of the Company that the Registration Statement would be materially
misleading absent the inclusion of such information.
e. "Principal Market" means either The American Stock Exchange, Inc., The New
York Stock Exchange, Inc., the Nasdaq National Market, The Nasdaq SmallCap
Market, the National Association of Securities Dealer's, Inc. OTC electronic
bulletin board or the proposed BBX, whichever is the principal market on which
the Common Stock is listed.
f. "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing with the United States Securities and Exchange
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Commission (the "SEC") one or more Registration Statements in compliance with
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the 1933 Act and pursuant to Rule 415 under the 1933 Act or any successor rule
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providing for offering securities on a continuous basis ("Rule 415"), and
effectiveness of such Registration Statement(s).
g. "Registrable Securities" means the shares of Common Stock issued or issuable
(i) pursuant to the Subscription Agreement, (ii) any shares of capital stock
issued or issuable with respect to the such shares of Common Stock and Warrants,
if any, as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise, which have not been (x) included in a
Registration Statement that has been declared effective by the SEC, or (y) sold
under circumstances meeting all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the 1933 Act.
h. "Registration Statement" means a registration statement of the Company filed
under the 1933 Act.
i. "Debenture" means the convertible debenture issued by the Company to the
Purchaser.
j. Face Amount means $28,000 to be invested by Preston Capital Partners, LP
All capitalized terms used in this Agreement and not otherwise defined
herein shall have the same meaning ascribed to them as in the Subscription
Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, as soon as
practicable file with the SEC a Registration Statement or Registration
Statements (as is necessary) on Form SB-2 (or, if such form is unavailable for
such a registration, on such other form as is available for such a
registration), covering the resale of all of the Registrable Securities, which
Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon stock splits, stock dividends or similar transactions. The Company shall
initially register for resale one million shares of Common Stock which would be
issuable on the date preceding the filing of the Registration Statement based on
the closing bid price of the Company's Common Stock on such date and the amount
reasonably calculated that represents the number of shares issuable pursuant to
the terms of the Offering. In the event the Company cannot register sufficient
shares of Common Stock, due to the remaining number of authorized shares of
Common Stock being insufficient, the Company will use its best efforts to
register the maximum number of shares it can based on the remaining balance of
authorized shares and will use its best efforts to increase the number of its
authorized shares as soon as reasonably practicable.
b. The Company shall use its best efforts to have the Registration Statement
filed with the SEC within thirty (30) calendar days after the Closing Date. If
the Registration Statement covering the Registrable Securities required to be
filed by the Company pursuant to Section 2(a) hereof is not filed within thirty
(30) calendar days following the Closing Date, then the Company shall pay the
Purchaser the sum of two percent (2%) of the of the Debentures outstanding as
liquidated damages, and not as a penalty, for each thirty (30) calendar day
period, pro rata, following the thirty (30) calendar day period until the
Registration Statement is filed compounded daily. In addition, for each sixty
(60) calendar period, the Conversion Price of the Debentures will decrease by
two percent (2%).
Notwithstanding the foregoing, the amounts payable by the Company pursuant
to this Section shall not be payable to the extent any delay in the filing of
the Registration Statement occurs because of an act of, or a failure to act or
to act timely by the Purchaser. The damages set forth in this Section shall
continue until the obligation is fulfilled and shall be paid within three (3)
business days after each thirty (30) day period, or portion thereof, until the
Registration Statement is filed. Failure of the Company to make payment within
said three (3) business days shall be considered a default.
The Company acknowledges that its failure to have the Registration Statement
filed within said thirty (30) calendar day period will cause the Purchaser to
suffer damages in an amount that will be difficult to ascertain. Accordingly,
the parties agree that it is appropriate to include in this Agreement a
provision for liquidated damages. The parties acknowledge and agree that the
liquidated damages provision set forth in this section represents the parties'
good faith effort to quantify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to register the Common Stock and deliver the Common Stock
pursuant to the terms of this Agreement, the Subscription Agreement and the
Debenture.
c. The Company shall use its best efforts to have the Registration Statement
declared effective by the SEC within ninety (90) calendar days after the Closing
Date. If the Registration Statement covering the Registrable Securities required
to be filed by the Company pursuant to Section 2(a) hereof has not become
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effective within ninety (90) calendar days following the Closing Date, then the
Company shall pay the Purchaser the sum of two percent (2%) of the amount of the
Debentures outstanding as liquidated damages and not as a penalty for each
thirty (30) calendar day period, pro rata, following the ninety (90) calendar
day period until the Registration Statement is declared effective. Upon
confirmation from the SEC of effectiveness of the registration statement, the
Company must request an accelerated effectiveness within 24 hours. Failure to
request accelerated effectiveness shall result in the Company paying the
Purchaser the sum of two percent (2%) of the amount of the Debentures
outstanding as liquidated damages and not as a penalty for each 24 hour period.
If the Registration Statement covering the Registrable Securities required
to be filed by the Company pursuant to Section 2(a) hereof has become effective,
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but after the effective date the Purchaser's right to sell is suspended, then
the Company shall pay the Purchaser the sum of 2% of the purchase price plus
interest and penalties due to the Purchaser for the Registrable Securities
pursuant to the Subscription Agreement for each thirty (30) calendar day period,
pro rata, following the suspension until such suspension ceases.
Notwithstanding the foregoing, the amounts payable by the Company pursuant
to this Section shall not be payable to the extent any delay in the
effectiveness of the Registration Statement occurs because of an act of, or a
failure to act or to act timely by the Purchaser. The damages set forth in this
Section shall continue until the obligation is fulfilled and shall be paid
within three (3) business days after each thirty (30) day period, or portion
thereof, until the Registration Statement is declared effective or such
suspension is released. Failure of the Company to make payment within said
three (3) business days shall be considered a default.
The Company acknowledges that its failure to have the Registration Statement
become effective within said ninety (90) calendar day period or to permit the
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suspension of the effectiveness of the Registration Statement, will cause the
Purchaser to suffer damages in an amount that will be difficult to ascertain.
Accordingly, the parties agree that it is appropriate to include in this
Agreement a provision for liquidated damages. The parties acknowledge and agree
that the liquidated damages provision set forth in this section represents the
parties' good faith effort to quantify such damages and, as such, agree that the
form and amount of such liquidated damages are reasonable and will not
constitute a penalty. The payment of liquidated damages shall not relieve the
Company from its obligations to register the Common Stock and deliver the Common
Stock pursuant to the terms of this Agreement, the Subscription Agreement and
the Debenture.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to prepare and file a Registration
Statement with the SEC pursuant to Section 2(a), the Company will use its best
efforts to effect the registration of the Registrable Securities in accordance
with the intended method of disposition thereof and, with respect thereto, the
Company shall have the following obligations:
The Company shall use its best efforts to cause such Registration Statement
relating to the Registrable Securities to become effective within ninety (90)
calendar days after the date and shall keep such Registration Statement
effective pursuant to Rule 415 until the earlier of (i) the date as of which the
Purchaser may sell all of the Registrable Securities without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act or (ii) the date on which
(A) the Purchaser shall have sold all the Registrable Securities and (B) the
Purchaser has no right to convert the Shares it owns into Common Stock under the
Subscription Agreement respectively (the "Registration Period"), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading. The Company shall respond to all SEC comments
within seven (7) business days of receipt by the Company. If the Company fails
to respond within seven (7) business days of receipt of SEC comments, the
Company shall pay to the Purchaser a cash amount within three (3) business days
of the end of the month equal to 2% per month, on a pro rata basis, of the
amount paid to purchase the Debentures then outstanding, as liquidated damages
and not as a penalty; provided that the seven (7) business day period provided
herein shall be extended as may be required by delays caused by Purchaser's
counsel pursuant to paragraph 3g below, and, provided further, that such seven
(7) business day period shall be extended two (2) business days for responses to
SEC staff accounting comments. The Company shall cause the Registration
Statement relating to the Registrable Securities to become effective no later
than three (3) business days after notice from the SEC that the Registration
Statement may be declared effective. Failure to do so will result in the
Debenture's Conversion Price to be lessened one percent (1%) per day the Company
does not request acceleration from the SEC.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective 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 such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the Purchaser
thereof as set forth in such Registration Statement. In the event the number of
shares of Common Stock available under a Registration Statement filed pursuant
to this Agreement is at any time insufficient to cover all of the Registrable
Securities, the Company shall amend such Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable), or
both, so as to cover all of the Registrable Securities, in each case, as soon as
practicable, but in any event within thirty (30) calendar days after the
necessity therefor arises (based on the then Purchase Price of the Common Stock
and other relevant factors on which the Company reasonably elects to rely),
assuming the Company has sufficient authorized shares at that time, and if it
does not, within thirty (30) calendar days after such shares are authorized.
The Company shall use it best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof.
Prior to conversion of all the Shares, if at any time the conversion of all the
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Shares outstanding would result in an insufficient number of authorized shares
of Common Stock being available to cover all the conversions, then in such
event, the Company will move to call and hold a sharePurchaser's meeting within
thirty (30) calendar days of such event for the sole purpose of authorizing
additional shares of Common Stock to facilitate the conversions. In such an
event the Company shall recommend to all sharePurchasers and management of the
Company to vote their shares in favor of increasing the authorized number of
shares of Common Stock. The Company represents and warrants that under no
circumstances will it deny or prevent Purchaser's right to convert the Shares as
permitted under the terms of this Subscription Agreement or this Registration
Rights Agreement. The Purchaser retains the right to request additional shares
upon the determination the company may not be able to facilitate conversions in
the future.
c The Company shall furnish to the Purchaser whose Registrable Securities
are included in any Registration Statement and its legal counsel without charge
(i) promptly after the same is prepared and filed with the SEC at least one copy
of such Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits, the prospectus included in such Registration Statement (including
each preliminary prospectus) and, with regards to such Registration
Statement(s), any correspondence by or on behalf of the Company to the SEC or
the staff of the SEC and any correspondence from the SEC or the staff of the SEC
to the Company or its representatives, (ii) upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as the Purchaser may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus, as the
Purchaser may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities.
d. The Company shall use reasonable efforts to (i) register and qualify the
Registrable Securities covered by a Registration Statement under the applicable
securities or "blue sky" laws of such states of the United States as specified
by the Purchaser, (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;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction.
The Company shall promptly notify each Purchaser who holds Registrable
Securities of the receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or "blue sky" laws of any jurisdiction
in the United States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.
e. As promptly as practicable after becoming aware of such event, the Company
shall notify each Purchaser in writing of the happening of any event as a result
of which the prospectus included in a Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
("Registration Default") and use all diligent efforts to promptly prepare a
supplement or amendment to such Registration Statement and take any other
necessary steps to cure the Registration Default, (which, if such Registration
Statement is on Form S-3, may consist of a document to be filed by the Company
with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as
defined below) and to be incorporated by reference in the prospectus) to correct
such untrue statement or omission, and deliver ten (10) copies of such
supplement or amendment to each Purchaser (or such other number of copies as
such Purchaser may reasonably request). Failure to cure the Registration Default
within five (5) business days shall result in the Company paying liquidated
damages of 2.0% of the price paid to purchase the Shares then held by the
Purchaser for each thirty (30) calendar day period or portion thereof, beginning
on the date of suspension. The Company shall also promptly notify each Purchaser
in writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a Registration Statement or any
post-effective amendment has become effective (notification of such
effectiveness shall be delivered to each Purchaser by facsimile on the same day
of such effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate, (iv)
in the event the Registration Statement is no longer effective or, (v) the
Registration Statement is stale for a period of more than five (5) Trading Days
as a result of the Company's failure to timely file its financials.
The Company acknowledges that its failure to cure the Registration Default
within ten (10) business days will cause the Purchaser to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages
provision set forth in this section represents the parties' good faith effort to
quantify such damages and, as such, agree that the form and amount of such
liquidated damages are reasonable and will not constitute a penalty.
It is the intention of the parties that interest payable under any of the terms
of this Agreement shall not exceed the maximum amount permitted under any
applicable law. If a law, which applies to this Agreement which sets the maximum
interest amount, is finally interpreted so that the interest in connection with
this Agreement exceeds the permitted limits, then: (1) any such interest shall
be reduced by the amount necessary to reduce the interest to the permitted
limit; and (2) any sums already collected (if any) from the Company which exceed
the permitted limits will be refunded to the Company. The Purchaser may choose
to make this refund by reducing the amount that the Company owes under this
Agreement or by making a direct payment to the Company. If a refund reduces the
amount that the Company owes the Purchaser, the reduction will be treated as a
partial payment. In case any provision of this Agreement is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Agreement will not in any way
be affected or impaired thereby.
f. The Company shall use its best efforts to prevent the issuance of any stop
order or other suspension of effectiveness of a Registration Statement, or the
suspension of the qualification of any of the Registrable Securities for sale in
any jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible moment and to
notify each Purchaser who holds Registrable Securities being sold of the
issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.
g. The Company shall permit each Purchaser and a single firm of counsel,
designated as selling sharePurchasers' counsel by the Purchaser who hold a
majority of the Registrable Securities being sold, to review and comment upon a
Registration Statement and all amendments and supplements thereto at least seven
(7) business days prior to their filing with the SEC, and not file any document
in a form to which such counsel reasonably objects. The Company shall not
submit to the SEC a request for acceleration of the effectiveness of a
Registration Statement or file with the SEC a Registration Statement or any
amendment or supplement thereto without the prior approval of such counsel,
which approval shall not be unreasonably withheld.
h. At the request of any Purchaser, the Company shall cause to be furnished
to such Purchaser, on the date of the effectiveness of a Registration Statement,
an opinion, dated as of such date, of counsel representing the Company for
purposes of such Registration Statement, in the form of Exhibit D attached to
the Subscription Agreement.
i. The Company shall make available for inspection by (i) any Purchaser and
(ii) one firm of attorneys and one firm of accountants or other agents retained
by the Purchaser (collectively, the "Inspectors") all pertinent financial and
other records, and pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed necessary by each
Inspector, and cause the Company's officers, directors and employees to supply
all information which any Inspector may reasonably request; provided, however,
that each Inspector shall hold in strict confidence and shall not make any
disclosure (except to a Purchaser) or use of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. Each Purchaser agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental body
of competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential.
j. The Company shall hold in confidence and not make any disclosure of
information concerning a Purchaser provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning a Purchaser is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Purchaser and allow such Purchaser, at the Purchaser's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
k. The Company shall use its best efforts to secure designation and
quotation of all the Registrable Securities covered by any Registration
Statement on the Principal Market. If, despite the Company's best efforts, the
Company is unsuccessful in satisfying the preceding sentence, it shall use its
best efforts to cause all the Registrable Securities covered by any Registration
Statement to be listed on each other national securities exchange and automated
quotation system, if any, on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange or system. If,
despite the Company's best efforts, the Company is unsuccessful in satisfying
the two preceding sentences, it will use its best efforts to secure the
inclusion for quotation with Pink Sheets, LLC. The Company shall pay all fees
and expenses in connection with satisfying its obligation under this Section
3(k).
l. The Company shall cooperate with the Purchaser to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be offered pursuant to a Registration
Statement and enable such certificates to be in such denominations or amounts,
as the case may be, as the Purchaser may reasonably request and registered in
such names of the Persons who shall acquire such Registrable Securities from the
Purchaser, as the Purchaser may request.
m. The Company shall provide a transfer agent for all the Registrable
Securities not later than the effective date of the first Registration Statement
filed pursuant hereto.
n. If requested by the Purchaser holding a majority of the Registrable
Securities, the Company shall (i) as soon as reasonably practical incorporate in
a prospectus supplement or post-effective amendment such information as such
Purchaser reasonably determine should be included therein relating to the sale
and distribution of Registrable Securities, including, without limitation,
information with respect to the offering of the Registrable Securities to be
sold in such offering; (ii) make all required filings of such prospectus
supplement or post-effective amendment as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) supplement or make amendments to any Registration Statement if reasonably
requested by such Purchaser.
o. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
p. The Company shall make generally available to its security Purchasers as
soon as reasonably practical, but not later than ninety (90) calendar days after
the close of the period covered thereby, an earnings statement (in form
complying with the provisions of Rule 158 under the 0000 Xxx) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of any Registration Statement.
q. The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
r. Within one (1) business day after the Registration Statement which
includes Registrable Securities is declared effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities, with copies to the Purchaser,
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A. Failure to do so will result in
the discount on the convertible increasing by one percentage point per day not
filed.
s. At or prior to the date of the first Conversion Notice (as that term is
defined in the Subscription Agreement) and at such other times as the Purchaser
may reasonably request, the Company shall cause to be delivered, letters from
the Company's independent certified public accountants (i) addressed to the
Purchaser that such accountants are independent public accountants within the
meaning of the 1933 Act and the applicable published rules and regulations
thereunder, and (ii) in customary form and covering such financial and
accounting matters as are customarily covered by letters of independent
certified public accountants delivered to underwriters in connection with public
offerings.
t. The Company shall take all other reasonable actions necessary to expedite
and facilitate disposition by the Purchaser of Registrable Securities pursuant
to a Registration Statement.
4. OBLIGATIONS OF THE PURCHASER.
a. At least five (5) calendar days prior to the first anticipated filing
date of a Registration Statement the Company shall notify each Purchaser in
writing of the information the Company requires from each such Purchaser if such
Purchaser elects to have any of such Purchaser's Registrable Securities included
in such Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Purchaser
that such Purchaser shall furnish in writing 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 reasonably be
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. Each Purchaser covenants and agrees that, in connection
with any resale of Registrable Securities by it pursuant to a Registration
Statement, it shall comply with the "Plan of Distribution" section of the
current prospectus relating to such Registration Statement.
b. Each Purchaser, by such Purchaser'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 any Registration
Statement hereunder, unless such Purchaser has notified the Company in writing
of such Purchaser's election to exclude all of such Purchaser's Registrable
Securities from such Registration Statement.
c. Each Purchaser agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e), such Purchaser will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Purchaser's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or the first
sentence of 3(e).
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printing and accounting fees, and fees and disbursements of
counsel for the Company shall be paid by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
To the fullest extent permitted by law, the Company will, and hereby does,
indemnify, hold harmless and defend each Purchaser who holds such Registrable
Securities, the directors, officers, partners, employees, agents,
representatives of, and each Person, if any, who controls, any Purchaser within
the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended
(the "1934 Act"), (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, attorneys'
fees, amounts paid in settlement or expenses, joint or several (collectively,
"Claims"), incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("Indemnified Damages"), to which any of them
may become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered ("Blue Sky Filing"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which the statements therein were
made, not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Purchaser and each such controlling
person, promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus were timely made available by the Company pursuant to Section 3(c);
(ii) shall not be available to the extent such Claim is based on (a) a failure
of the Purchaser to deliver or to cause to be delivered the prospectus made
available by the Company or (b) the Indemnified Person's use of an incorrect
prospectus despite being promptly advised in advance by the Company in writing
not to use such incorrect prospectus; and (iii) 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. 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 resale of the Registrable Securities by the Purchaser pursuant to
the Registration Statement.
In connection with any Registration Statement in which a Purchaser is
participating, each such Purchaser agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages 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 to the Company by such
Purchaser expressly for use in connection with such Registration Statement; and,
subject to Section 6(c), such Purchaser will reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Purchaser, which consent shall not be unreasonably withheld; provided, further,
however, that the Purchaser shall be liable under this Section 6(b) for only
that amount of a Claim or Indemnified Damages as does not exceed the net
proceeds to such Purchaser as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the resale of the Registrable Securities by
the Purchaser pursuant to the Registration Statement. Notwithstanding anything
to the contrary contained herein, the indemnification agreement contained in
this Section 6(b) with respect to any preliminary prospectus shall not inure to
the benefit of any Indemnified Party if the untrue statement or omission of
material fact contained in the preliminary prospectus were corrected on a timely
basis in the prospectus, as then amended or supplemented.
Promptly after receipt by an Indemnified Person or Indemnified Party under
this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The indemnifying
party shall pay for only one separate legal counsel for the Indemnified Persons
or the Indemnified Parties, as applicable, and such counsel shall be selected by
Purchaser holding a majority-in-interest of the Registrable Securities included
in the Registration Statement to which the Claim relates, if the Purchaser are
entitled to indemnification hereunder, or the Company, if the Company is
entitled to indemnification hereunder, as applicable. The Indemnified Party or
Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully appraised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such Claim.
Following indemnification as provided for hereunder, the indemnifying party
shall be surrogated to all rights of the Indemnified Party or Indemnified Person
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.
The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or Indemnified Damages are incurred.
The indemnity agreements contained herein shall be in addition to (i) any
cause of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that: (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Purchaser the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Purchaser to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms are understood
and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4(c) of the
Subscription Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and
c. furnish to the Purchaser, 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 Purchaser to sell such securities pursuant to Rule 144 without
registration.
9. NO ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall not be assignable.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and Purchaser
who hold two-thirds (2/3) of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Purchaser
and the Company. No such amendment shall be effective to the extent that it
applies to less than all of the Purchaser of the Registrable Securities. No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.
11. MISCELLANEOUS.
a. A Person is deemed to be a Purchaser of Registrable Securities whenever
such Person owns of record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more Persons 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, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided a confirmation
of transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Xtreme Companies, Inc.
00000 Xxxxxxx Xxxxxx, Xxxx 00
Xxxxxxx, Xx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Purchaser:
At the address listed in the Questionnaire.
Each party shall provide five (5) business days prior notice to the other
party of any change in address, phone number or facsimile number.
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. All disputes arising under this agreement shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts,
without regard to principles of conflict of laws. The parties to this agreement
will submit all disputes arising under this agreement to arbitration in Boston,
Massachusetts before a single arbitrator of the American Arbitration Association
("AAA"). The arbitrator shall be selected by application of the rules of the
AAA, or by mutual agreement of the parties, except that such arbitrator shall be
an attorney admitted to practice law in the Commonwealth of Massachusetts. No
party to this agreement will challenge the jurisdiction or venue provisions as
provided in this section.
e. This Agreement and the Transaction Documents(as defined in the
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Subscription Agreement) 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.
f. This Agreement and the Transaction Documents supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
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, all of which
taken together shall constitute one instrument. Execution and delivery of this
Agreement by exchange of facsimile copies bearing the facsimile signature of a
party shall constitute a valid and binding execution and delivery of this
Agreement by such party. Such facsimile copies shall constitute enforceable
original documents.
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. All consents and other determinations to be made by the Purchaser
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by Purchaser holding a majority of the Registrable Securities.
k. 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.
IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to be duly executed as of the day and year first above written.
XTREME COMPANIES, INC.
/s/ Xxxxx Xxxx
By: ____________________________________
Name: Xxxxx Xxxx
Title: President
PRESTON CAPITAL PARTNERS, L.P.
/s/ Xxxx Xxxxxx
By:__________________________________
Name: Xxxx Xxxxxx
Title: A Managing Member
