EXHIBIT 10.28
ANNEX IV
TO
SECURITIES PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of November 4, 1999 (this
"Agreement"), is made by and between EUROGAS, INC., a Utah corporation,
with headquarters located at 000 Xxxx 0000 Xxxxx, #000X, Xxxxxxx, Xxxx
00000 (the "Company"), and ARKLEDUN DRIVE LLC, a Cayman Islands limited
liability corporation (the "Initial Investor").
Terms not otherwise defined herein shall have the meanings ascribed to
them in the Securities Purchase Agreement, dated as of November 4, 1999
(the "Securities Purchase Agreement"), between the Initial Investor and
the Company.
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement, the Company has agreed to issue and sell to the
Initial Investor shares of the Convertible Preferred Stock having an
aggregate liquidation preference of up to $1,800,000 (the "Preferred
Stock"); and
WHEREAS, the Preferred Stock is convertible into shares of Company
Common Stock (the "Conversion Shares"; which term, for purposes of this
Agreement, shall include shares of Company Common Stock issuable in lieu
of accrued dividends on conversion as contemplated by the Securities
Purchase Agreement) upon the terms and subject to the conditions
contained in the Certificate of Designations and the Securities Purchase
Agreement; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and
the rules and regulations thereunder, or any similar successor statute
(collectively, the "Securities Act"), with respect to the Conversion
Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
Company and the Initial Investor hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Investor" means the Initial Investor and any permitted transferee
or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof and who holds Preferred
Stock or Registrable Securities.
(b) "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 a
determination 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 or contain a
material omission absent the inclusion of such information.
(c) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement
or Statements in compliance with the Securities Act and pursuant to Rule
415 under the Securities Act or any successor rule providing for
offering securities on a continuous basis ("Rule 415"), and the
declaration or ordering of effectiveness of such Registration Statement
by the United States Securities and Exchange Commission (the "SEC").
(d) "Registrable Securities" means shares of Company Common Stock
constituting Conversion Shares.
(e) "Registration Statement" means a registration statement of the
Company under the Securities Act covering the Registrable Securities.
(f) "Required Effective Date" means the relevant Initial Required
Effective Date or Increased Required Effective Date (as those terms are
defined below).
2. REGISTRATION.
(A) MANDATORY REGISTRATION.
(i) The Company shall prepare and file with the SEC, as soon as
possible after the Closing Date but no later than five (5) days after
the Closing Date (the "Required Filing Date"), a post-effective
amendment to the Company=s currently effective Registration Statement on
Form S-1 (as heretofore amended; the "Existing Registration Statement")
registering for resale by the Investor the number of shares equal to the
sum of a sufficient number of shares of Company Common Stock for the
Initial Investors to sell the Registrable Securities (or such lesser
number as may be required by the SEC, but in no event less than the
aggregate number of shares equal to two hundred percent (200%) of (I)
the aggregate number of shares into which the Preferred Stock would be
convertible at the time of filing of such amendment (assuming for such
purposes that all shares of Preferred Stock had been eligible to be
converted, and had been converted, into Conversion Shares consisting of
Company Common Stock in accordance with the terms of the Certificate of
Designations and the Transaction Agreements, whether or not such
eligibility or conversion had in fact occurred as of such date) and (II)
the aggregate number of shares which the Company might issue in lieu of
dividends on the Preferred Stock through the date which is two years
from the Closing Date (assuming for such purposes that all dividends
accrued on the liquidation preference of all of the Preferred Stock
issued to the Initial Investor through such date and had then been
converted into shares of Company Common Stock in accordance with the
terms of the Certificate of Designations, whether or not such accrual or
conversion had in fact occurred as of such date). The Registration
Statement (i) shall include only the Registrable Securities and the
shares referred to in the Existing Registration Statement and (ii) shall
also state that, in accordance with Rules 416 and 457 under the
Securities Act, it also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the
Preferred Stock to prevent dilution resulting from stock splits, or
stock dividends. The Company will use its reasonable best efforts to
cause such Registration Statement to be declared effective on a date (a
"Required Effective Date") which is no later than the earlier of (x)
five (5) days after notice by the SEC that it may be declared effective
or (y) ten (10) days after the Closing Date.
(ii) If at any time, the number of shares of Company Common Stock
represented by the Registrable Shares, issued or to be issued as
contemplated by the Transaction Agreements, exceeds the aggregate number
of shares of Company Common Stock then registered (an "Increased
Registered Shares Date"), the Company shall, within ten (10) business
days after receipt of a written notice from any Investor, either (X)
amend the Registration Statement filed by the Company pursuant to the
preceding provisions of this Section 2, if such Registration Statement
has not been declared effective by the SEC at that time, to register
such Registrable Shares, computed, (1)with respect to shares of Company
Common Stock previously issued, as the number of shares actually issued,
plus (2) with respect to shares of Company Common Stock not yet issued,
utilizing a Conversion Price which is the lower of the Conversion Price
then applicable or the Conversion Price contemplated by the immediately
preceding subparagraph (i), or (Y) if such Registration Statement has
been declared effective by the SEC at that time but for any reason
whatsoever can not be amended, file with the SEC an additional
Registration Statement on Form S-1 or other appropriate registration
statement form (an "Additional Registration Statement") to register the
shares of Company Common Stock represented by the Registrable
Securities, computed as contemplated by the immediately preceding
subparagraph (i), that exceed the aggregate number of shares of Company
Common Stock already registered. The Company will use its reasonable
best efforts to cause such Registration Statement to be declared
effective on a date (each, an "Increased Required Effective Date") which
is no later than (Q) with respect to a Registration Statement under
clause (X) of this subparagraph (ii), the Initial Required Effective
Date and (R) with respect to an Additional Registration Statement, the
earlier of (I) five (5) days after notice by the SEC that it may be
declared effective or (II) fifteen (15) days after the Increased
Registered Shares Date.
(B) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the Registrable Securities
is not filed with the SEC by the Required Filing Date in the proper form
required by this Agreement, the Company will make payment to the
Initial Investor in such amounts and at such times as shall be
determined pursuant to this Section 2(b).
(ii) If the Registration Statement covering the Registrable Securities
is not effective by the relevant Required Effective Date or if the
Investor is restricted from making sales of Registrable Securities
covered by a previously effective Registration Statement at any time
(the date such restriction commences, a ARestricted Sale Date@) after
the Effective Date other than during a Permitted Suspension Period (as
defined below), then the Company will make payments to the Initial
Investor in such amounts and at such times as shall be determined
pursuant to this Section 2(b).
(iii) The amount (the "Periodic Amount") to be paid by the Company to
the Initial Investor shall be determined as of each Computation Date (as
defined below) and such amount shall be equal to the Periodic Amount
Percentage of the Preference Principal (as those terms are defined
below) for the period from the date following the relevant Required
Filing Date, Required Effective Date or Restricted Sale Date, as the
case may be, to the first relevant Computation Date, and thereafter to
each subsequent Computation Date. The "Periodic Amount Percentage" means
(A) two percent (2%) for the period from the date following the relevant
Required Filing Date, Required Effective Date or Restricted Sale Date,
as the case may be, to the first relevant Computation Date, and (B)
three percent (3%) to each Computation Date thereafter. The "Preference
Principal" means (X) until the Effective Date, the liquidation
preference of all the Preferred Stock, and (Y) after the Effective Date,
the sum of (I) the liquidation preference of all Preferred Stock not yet
converted and (II) the Held Shares Value (as defined below). The "Held
Shares Value" means, for shares acquired by the Investor upon a
conversion within the thirty (30) days preceding the Restricted Sale
Date, but not yet sold by the Investor, the liquidation preference of
the Preferred Stock converted into such Conversion Shares; provided,
however, that if the Investor effected more than one conversion during
such thirty (30) day period and sold less than all of such shares, the
sold shares shall be deemed to be derived first from the conversions in
the sequence of such conversions (that is, for example, until the number
of shares from the first of such conversions have been sold, all shares
shall be deemed to be from the first conversion; thereafter, from the
second conversion until all such shares are sold). By way of
illustration and not in limitation of the foregoing, if the Registration
Statement is timely filed but is not declared effective until ninety
(90) days after the Initial Closing Date, the Periodic Amount will
aggregate eight percent (8%) of the Preference Principal (2% for days
11-40, plus 3% for days 41-70, plus 3% for days 71-90).
(iv) Each Periodic Amount will be payable by the Company in cash or
other immediately available funds to the Investor monthly, without
requiring demand therefor by the Investor.
(v) The parties acknowledge that the damages which may be incurred by
the Investor if the Registration Statement is not filed by the Required
Filing Date or if the Registration Statement has not been declared
effective by a Required Effective Date, including if the right to sell
Registrable Securities under a previously effective Registration
Statement is suspended, may be difficult to ascertain. The parties
agree that the Periodic Amounts represent a reasonable estimate on the
part of the parties, as of the date of this Agreement, of the amount of
such damages.
(vi) Notwithstanding the foregoing, the amounts payable by the Company
pursuant to this provision 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 Initial Investor or
its counsel, or in the event all of the Registrable Securities may be
sold pursuant to Rule 144 or another available exemption under the Act.
(vii) "Computation Date" means (A) the date which is the earlier of (1)
thirty (30) days after the Required Filing Date, any relevant Required
Effective Date or a Restricted Sale Date, as the case may be, or (2) the
date after the Required Filing Date, such Required Effective Date or
Restricted Sale Date on which the Registration Statement is filed (with
respect to payments due as contemplated by Section 2(b)(i) hereof) or is
declared effective or has its restrictions removed (with respect to
payments due as contemplated by Section 2(b)(ii) hereof), as the case
may be, and (B) each date which is the earlier of (1) thirty (30) days
after the previous Computation Date or (2) the date after the previous
Computation Date on which the Registration Statement is filed (with
respect to payments due as contemplated by Section 2(b)(i) hereof) or is
declared effective or has its restrictions removed (with respect to
payments due as contemplated by Section 2(b)(ii) hereof), as the case
may be.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of
the Registrable Securities, the Company shall do each of the following.
(a) Prepare promptly, and file with the SEC by the Required Filing Date
a Registration Statement with respect to not less than the number of
Registrable Securities provided in Section 2(a) above, and thereafter
use its reasonable best efforts to cause such Registration Statement
relating to Registrable Securities to become effective by the Required
Effective Date and keep the Registration Statement effective at all
times during the period (the "Registration Period") continuing until the
earliest of (i) the date that is two (2) years after the last day of the
calendar month following the month in which the Effective Date occurs,
(ii) the date when the Investors may sell all Registrable Securities
under Rule 144 without volume or other restrictions or limits or (iii)
the date the Investors no longer own any of the Registrable Securities,
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;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement
and the prospectus used in connection with the Registration Statement as
may be necessary to keep the Registration Statement effective at all
times during the Registration Period, and, during the Registration
Period, comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities of the Company covered by
the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(c) Permit a single firm of counsel designated by the Initial
Investors to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time (but not less than three
(3) business days) prior to their filing with the SEC, and not file any
document in a form to which such counsel reasonably objects.
(d) Notify each Investor, such Investor=s legal counsel identified to
the Company (which, until further notice, shall be deemed to be Xxxxxxx
& Xxxxxx, ATTN: Xxxxxx Xxxxxxx, Esq.; each, an "Investor's Counsel"),
and any managing underwriters immediately (and, in the case of (i)(A)
below, not less than five (5) days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later
than one (1) business day following the day (i)(A) when a Prospectus or
any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) whenever the SEC
notifies the Company whether there will be a Areview@ of such
Registration Statement; (C) whenever the Company receives (or a
representative of the Company receives on its behalf) any oral or
written comments from the SEC in respect of a Registration Statement
(copies or, in the case of oral comments, summaries of such comments
shall be promptly furnished by the Company to the Investors at least one
business day in advance of the filing of such responses with the SEC so
that the Investors shall have the opportunity to comment thereon); and
(D) with respect to the Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any request by
the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or
for additional information; (iii) of the issuance by the SEC of any stop
order suspending the effectiveness of the Registration Statement
covering any or all of the Registrable Securities or the initiation of
any Proceedings for that purpose; (iv) if at any time any of the
representations or warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be
true and correct in all material respects; (v) of the receipt by the
Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (vi) of the
occurrence of any event that to the best knowledge of the Company makes
any statement made in the Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the
case of the Registration Statement or the Prospectus, as the case may
be, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading.
(e) Furnish to each Investor and such Investor=s Counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC,
or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or
supplement thereto, and (ii) such number of copies of a prospectus, and
all amendments and supplements thereto and such other documents, as such
Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor;
(f) As promptly as practicable after becoming aware thereof, notify
each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the
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, in light of
the circumstances under which they were made, not misleading, and use
its best efforts promptly to prepare a supplement or amendment to the
Registration Statement or other appropriate filing with the SEC to
correct such untrue statement or omission, and deliver a number of
copies of such supplement or amendment to each Investor as such Investor
may reasonably request;
(g) As promptly as practicable after becoming aware thereof, notify
each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of a Notice of Effectiveness or any notice of
effectiveness or any stop order or other suspension of the effectiveness
of the Registration Statement at the earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the
Company notifies the Investors in writing of the existence of a
Potential Material Event, the Investors shall not offer or sell any
Registrable Securities, or engage in any other transaction involving or
relating to the Registrable Securities, from the time of the giving of
notice with respect to a Potential Material Event until such Investor
receives written notice from the Company that such Potential Material
Event either has been disclosed to the public or no longer constitutes a
Potential Material Event; provided, however, that the Company may not so
suspend the right to such holders of Registrable Securities during the
periods the Registration Statement is required to be in effect other
than during a Permitted Suspension Period. The term "Permitted
Suspension Period" means no more than two suspension periods during any
consecutive 12-month period, provided, however, that no one such
suspension period shall either (i) be for more twenty (20) days or (ii)
begin less than ten (10) business days after the last day of the
preceding suspension (whether or not such last day was during or after a
Permitted Suspension Period).
(i) Use its reasonable efforts to secure and maintain the designation
of all the Registrable Securities covered by the Registration Statement
on the "OTC Bulletin Board Market" of the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") within the
meaning of Rule 11Aa2-1 of the SEC under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the quotation of the
Registrable Securities on The NASDAQ Bulletin Board Market; and, without
limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National Association of Securities
Dealers, Inc. ("NASD") as such with respect to such Registrable Securities;
(j) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(k) Cooperate with the Investors to facilitate the timely preparation
and delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and enable such
certificates for the Registrable Securities to be in such denominations
or amounts as the case may be, as the Investors may reasonably request,
and, within three (3) business days after a Registration Statement which
includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the
Company to deliver, to the transfer agent for the Registrable Securities
(with copies to the Investors whose Registrable Securities are included
in such Registration Statement) an appropriate instruction and opinion
of such counsel; and
(l) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration
of the Registrable Securities, the Investors shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor
shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of
disposition of the Registrable Securities held by it, as shall be
reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least ten (10)
days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the
Company requires from each such Investor (the "Requested Information")
if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2)
business days prior to the filing date the Company has not received the
Requested Information from an Investor (a "Non-Responsive Investor"),
then the Company may file the Registration Statement without including
Registrable Securities of such Non-Responsive Investor;
(b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested
by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement; and
(c) Each Investor 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 3(h), above, such Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until such Investor's
receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(f) or 3(h) and, if so directed by the Company,
such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of
such notice.
5. EXPENSES OF REGISTRATION. (a) All reasonable expenses (other than
underwriting discounts and commissions of the Investor) incurred in
connection with registrations, filings or qualifications pursuant to
Section 3, but including, without limitation, all registration, listing,
and qualifications fees, printers and accounting fees, the fees and
disbursements of counsel for the Company and a fee for a single counsel
for the Investors not exceeding, in the aggregate for all Investors,
$3,500, shall be borne by the Company.
(b) Neither the Company nor any of its subsidiaries has, as of the date
hereof, nor shall the Company nor any of its subsidiaries, on or after
the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Investors
in this Agreement or otherwise conflicts with the provisions hereof.
Except as reflected in the Existing Registration Statement, neither the
Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its
securities to any Person. Without limiting the generality of the
foregoing, without the written consent of the Investors holding a
majority of the Registrable Securities, the Company shall not grant to
any person the right to request the Company to register any securities
of the Company under the Securities Act unless the rights so granted are
subject in all respects to the prior rights in full of the Investors set
forth herein, and are not otherwise in conflict or inconsistent with the
provisions of this Agreement and the other Transaction Agreements.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such
Investor, each person, if any, who controls any Investor within the
meaning of the Securities Act or the Exchange Act (each, an "Indemnified
Person" or "Indemnified Party"), against any losses, claims, damages,
liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such Claims (or actions
or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements,
omissions or violations in the Registration Statement, or any
post-effective amendment thereof, or any prospectus included therein:
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any post-effective amendment
thereof or 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, (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 Securities Act, the Exchange Act, any
state securities law or any rule or regulation under the Securities Act,
the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations").
Subject to clause (b) of this Section 6, the Company shall reimburse the
Investors, promptly as such expenses are incurred and are due and
payable, for any 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) shall not (I)
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 or on behalf of 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 was
timely made available by the Company pursuant to Section 3(c) hereof;
(II) be available to the extent such Claim is based on a failure of the
Investor to deliver or cause to be delivered the prospectus or the
amendment or supplement thereto made available by the Company; or (III)
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 or delayed. Each Investor will
indemnify the Company and its officers, directors and agents (each, an
"Indemnified Person" or "Indemnified Party") against any claims 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 or
on behalf of such Investor, expressly for use in connection with the
preparation of the Registration Statement or the amendment or supplement
thereto, subject to such limitations and conditions as are applicable to
the Indemnification provided by the Company to this Section 6. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), 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. In
case any such action is brought against any Indemnified Person or
Indemnified Party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, assume the defense thereof,
subject to the provisions herein stated and after notice from the
indemnifying party to such Indemnified Person or Indemnified Party of
its election so to assume the defense thereof, the indemnifying party
will not be liable to such Indemnified Person or Indemnified Party under
this Section 6 for any legal or other reasonable out-of-pocket expenses
subsequently incurred by such Indemnified Person or Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action
to its final conclusion. The Indemnified Person or Indemnified Party
shall have the right to employ separate counsel in any such action and
to participate in the defense thereof, but the fees and reasonable
out-of-pocket expenses of such counsel shall not be at the expense of
the indemnifying party if the indemnifying party has assumed the defense
of the action with counsel reasonably satisfactory to the Indemnified
Person or Indemnified Party, provided such counsel is of the opinion
that all defenses available to the Indemnified Party can be maintained
without prejudicing the rights of the indemnifying party. 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 such expense, loss, damage or liability is incurred and is
due and payable.
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 (a) 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; (b) no
seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation; and (c)
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 EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act
or any other similar rule or regulation of the SEC that may at any time
permit the Investors 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 Securities Act and the
Exchange Act, or, if the provisions of Rule 144(c)(2) are applicable,
ensure that the standards contemplated by Rule 144(c) to permit sales by
the Investors under said Rule 144 are satisfied at all times; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule
144, the Securities Act and the Exchange 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 Investors to sell such
securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall
be automatically assigned by the Investors to any transferee of the
Registrable Securities (or all or any portion of any unconverted
Preferred Stock) only if: (a) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after
such assignment, (b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (i) the name
and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or
assigned, (c) immediately following such transfer or assignment the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities
laws, and (d) at or before the time the Company received the written
notice contemplated by clause (b) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the
provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such
assignment, the Company shall not be liable for any damages arising from
such delay, or the payments set forth in Section 2(b) hereof arising
from such delay.
10. AMENDMENT OF REGISTRATION 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 Company and
Investors who hold, in the aggregate, at least a sixty-seven (67%)
percent interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. TERMINATION. This Agreement shall terminate on the date the
Investors no longer own any Registrable Securities or the right to
acquire any Registrable Securities; but without prejudice to (i) the
parties= rights and obligations arising from breaches of this Agreement
occurring prior to such termination and (ii) other indemnification
obligations under this Agreement.
12. MISCELLANEOUS.
(a) Notices required or permitted to be given hereunder shall be given
in the manner contemplated by the Securities Purchase Agreement, (i) if
to the Company or to the Initial Investor, to their respective address
contemplated by the Securities Purchase Agreement, and (iii) if to any
other Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 12(a).
(b) 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.
(c) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles
thereof regarding the conflict of laws. Each of the parties consents to
the jurisdiction of the federal courts whose districts encompass any
part of the City of New York or the state courts of the State of New
York sitting in the City of New York in connection with any dispute
arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum
non coveniens, to the bringing of any such proceeding in such
jurisdictions. To the extent determined by such court, the Company
shall reimburse the Buyer for any reasonable legal fees and
disbursements incurred by the Buyer in enforcement of or protection of
any of its rights under this Agreement.
(d) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this
Agreement or the validity or enforceability of this Agreement in any
other jurisdiction.
(e) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(f) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(g) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(h) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may
be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the
party so delivering this Agreement.
(i) The Company acknowledges that any failure by the Company to perform
its obligations under Section 3(a) hereof, or any delay in such
performance could result in loss to the Investors, and the Company
agrees that, in addition to any other liability the Company may have by
reason of such failure or delay, the Company shall be liable for all
direct damages caused by any such failure or delay, unless the same is
the result of force majeure. Neither party shall be liable for
consequential damages.
(j) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to
the subject matter hereof. This Agreement may be amended only by an
instrument in writing signed by the party to be charged with enforcement
thereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of
the day and year first above written.
COMPANY:
EUROGAS, INC.
By:
Name:
Title:
INITIAL INVESTOR:
ARKLEDUN DRIVE LLC
By:
Name:
Title:
