EXHIBIT 10.10
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of May 15, 2002,
by and among Torbay Holdings, Inc., a Delaware corporation, with its
headquarters located at 0 Xxxxxxx Xxxxx, Xxxxx 0X, Xxxxxxxxx, Xxx Xxxx 00000
(the "COMPANY"), and each of the undersigned (together with their respective
affiliates and any assignee or transferee of all of their respective rights
hereunder, the "INITIAL INVESTORS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"), the
Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors (i) convertible debentures
in the aggregate principal amount of up to Five Hundred Thousand Dollars
($500,000) (the "DEBENTURES") that are convertible into shares of the Company's
common stock (the "COMMON STOCK"), upon the terms and subject to the limitations
and conditions set forth in such Debentures and (ii) warrants (the
"WARRANTS") to acquire an aggregate of 1,500,000 shares of Common Stock, upon
the terms and conditions and subject to the limitations and conditions set forth
in the Warrants dated May 15, 2002; and
B. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the
Initial Investors hereby agree as follows:
1. DEFINITIONS.
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A. As used in this Agreement, the following terms shall have the
following meanings:
(i) "INVESTORS" means the Initial Investors and any transferee or
assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement
or Statements in compliance with the 1933 Act and pursuant to Rule 415
under the 1933 Act or any successor rule providing for offering
securities on a continuous basis ("RULE 415"), and the declaration or
ordering of effectiveness of such Registration Statement by the United
States Securities and Exchange Commission (the "SEC").
(iii) "REGISTRABLE SECURITIES" means the Conversion Shares issued
or issuable upon conversion or otherwise pursuant to the Debentures
and Additional Debentures (as
defined in the Securities Purchase Agreement) including, without
limitation, Damages Shares (as defined in the Debentures) issued or
issuable pursuant to the Debentures, shares of Common Stock issued or
issuable in payment of the Standard Liquidated Damages Amount (as
defined in the Securities Purchase Agreement), shares issued or
issuable in respect of interest or in redemption of the Debentures in
accordance with the terms thereof) and Warrant Shares issuable, upon
exercise or otherwise pursuant to the Warrants and Additional Warrants
(as defined in the Securities Purchase Agreement), and any shares of
capital stock issued or issuable as a dividend on or in exchange for
or otherwise with respect to any of the foregoing.
(iv) "REGISTRATION STATEMENT" means a registration statement of
the Company under the 0000 Xxx.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities
Purchase Agreement or the Convertible Debenture.
2. REGISTRATION.
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a. MANDATORY REGISTRATION. The Company shall prepare, and, on or
prior to thirty (30) days from the date of Closing (as defined in the
Securities Purchase Agreement) (the "FILING DATE"), file with the SEC
a Registration Statement on Form S-3 (or, if Form S-3 is not then
available, on such form of Registration Statement as is then available
to effect a registration of the Registrable Securities, subject to the
consent of the Initial Investors, which consent will not be
unreasonably withheld) covering the resale of the Registrable
Securities underlying the Debentures and Warrants issued or issuable
pursuant to the Securities Purchase Agreement, which Registration
Statement, to the extent allowable under the 1933 Act and the rules
and regulations promulgated thereunder (including Rule 416), shall
state that such Registration Statement also covers such indeterminate
number of additional shares of Common Stock as may become issuable
upon conversion of or otherwise pursuant to the Debentures and
exercise of the Warrants to prevent dilution resulting from stock
splits, stock dividends or similar transactions. The number of shares
of Common Stock initially included in such Registration Statement
shall be no less than an amount equal to two (2) times the sum of the
number of Conversion Shares that are then issuable upon conversion of
the Debentures and Additional Debentures (based on the Variable
Conversion Price as would then be in effect and assuming the Variable
Conversion Price is the Conversion Price at such time), and the number
of Warrant Shares that are then issuable upon exercise of the
Warrants, without regard to any limitation on the Investor's ability
to convert the Debentures or exercise the Warrants. The Company
acknowledges that the number of shares initially included in the
Registration Statement represents a good faith estimate of the maximum
number of shares issuable upon conversion of the Debentures and upon
exercise of the Warrants.
b. UNDERWRITTEN OFFERING. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an
underwritten offering, the Investors who hold a majority in
interest of the Registrable Securities subject to such underwritten
offering, with the consent of a majority-in-interest of the Initial
Investors, shall have the right to select one legal counsel and an
investment banker or bankers and manager or managers to administer the
offering, which investment banker or bankers or manager or managers
shall be reasonably satisfactory to the Company.
c. PAYMENTS BY THE COMPANY. The Company shall use its best
efforts to obtain effectiveness of the Registration Statement as soon
as practicable. If (i) the Registration Statement(s) covering the
Registrable Securities required to be filed by the Company pursuant to
Section 2(a) hereof is not filed by the Filing Date or declared
effective by the SEC on or prior to ninety (90) days from the date of
Closing, or (ii) after the Registration Statement has been declared
effective by the SEC, sales of all of the Registrable Securities
cannot be made pursuant to the Registration Statement, or (iii) the
Common Stock is not listed or included for quotation on the Nasdaq
National Market ("NASDAQ"), the Nasdaq SmallCap Market ("NASDAQ
SMALLCAP"), the New York Stock Exchange (the "NYSE") or the American
Stock Exchange (the "AMEX") after being so listed or included for
quotation, or (iv) the Common Stock ceases to be traded on the
Over-the-Counter Bulletin Board (the "OTCBB") prior to being listed or
included for quotation on one of the aforementioned markets, then the
Company will make payments to the Investors in such amounts and at
such times as shall be determined pursuant to this Section 2(c) as
partial relief for the damages to the Investors by reason of any such
delay in or reduction of their ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other remedies
available at law or in equity). The Company shall pay to each holder
of the Debentures or Registrable Securities an amount equal to the
then outstanding principal amount of the Debentures (and, in the case
of holders of Registrable Securities, the principal amount of
Debentures from which such Registrable Securities were converted)
("OUTSTANDING PRINCIPAL AMOUNT"), multiplied by the Applicable
Percentage (as defined below) times the sum of: (i) the number of
months (prorated for partial months) after the Filing Date or the end
of the aforementioned ninety (90) day period and prior to the date the
Registration Statement is declared effective by the SEC, provided,
however, that there shall be excluded from such period any delays
which are solely attributable to changes required by the Investors in
the Registration Statement with respect to information relating to the
Investors, including, without limitation, changes to the plan of
distribution, or to the failure of the Investors to conduct their
review of the Registration Statement pursuant to Section 3(h) below in
a reasonably prompt manner; (ii) the number of months (prorated for
partial months) that sales of all of the Registrable Securities cannot
be made pursuant to the Registration Statement after the Registration
Statement has been declared effective (including, without limitation,
when sales cannot be made by reason of the Company's failure to
properly supplement or amend the prospectus included therein in
accordance with the terms of this Agreement, but excluding any days
during an Allowed Delay (as defined in Section 3(f)); and (iii) the
number of months (prorated for partial months) that the Common Stock
is not listed or included for quotation on the OTCBB, Nasdaq, Nasdaq
SmallCap, NYSE or AMEX or that trading thereon is halted after the
Registration Statement has been declared effective. The term
"APPLICABLE PERCENTAGE" means two hundredths (.02). (For example, if
the Registration Statement becomes effective one (1) month after the
end of such thirty-day period, the Company would pay $5,000 for each
$250,000 of Outstanding Principal Amount. If thereafter, sales could
not be made pursuant to the Registration Statement for an additional
period of one (1) month, the Company would pay an additional $5,000
for each $250,000 of Outstanding Principal Amount.) Such amounts shall
be paid in cash or, at each Investor's option, in shares of Common
Stock priced at the Conversion Price (as defined in the Debentures) on
such payment date.
d. PIGGY-BACK REGISTRATIONS. Subject to the last sentence of this
Section 2(d), if at any time prior to the expiration of the
Registration Period (as hereinafter defined) the Company shall
determine to file with the SEC a Registration Statement relating to an
offering for its own account or the account of others under the 1933
Act of any of its equity securities (other than on Form S-4 or Form
S-8 or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or
business or equity securities issuable in connection with stock option
or other employee benefit plans), the Company shall send to each
Investor who is entitled to registration rights under this Section
2(d) written notice of such determination and, if within fifteen (15)
days after the effective date of such notice, such Investor shall so
request in writing, the Company shall include in such Registration
Statement all or any part of the Registrable Securities such Investor
requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the
managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the
Registration Statement because, in such underwriter(s)' judgment,
marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to
include in such Registration Statement only such limited portion of
the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. Any
exclusion of Registrable Securities shall be made pro rata among the
Investors seeking to include Registrable Securities in proportion to
the number of Registrable Securities sought to be included by such
Investors; provided, however, that the Company shall not exclude any
Registrable Securities unless the Company has first excluded all
outstanding securities, the holders of which are not entitled to
inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and
provided, further, however, that, after giving effect to the
immediately preceding proviso, any exclusion of Registrable Securities
shall be made pro rata with holders of other securities having the
right to include such securities in the - Registration Statement other
than holders of securities entitled to inclusion of their securities
in such Registration Statement by reason of demand registration
rights. No right to registration of Registrable Securities under this
Section 2(d) shall be construed to limit any registration required
under Section 2(a) hereof. If an offering in connection with which an
Investor is entitled to registration under this Section 2(d) is an
underwritten offering, then each Investor whose Registrable Securities
are included in such Registration Statement shall, unless otherwise
agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters
and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such
underwritten offering. Notwithstanding anything to the contrary set
forth herein, the registration rights of the Investors pursuant to
this Section 2(d) shall only be available in the event the Company
fails to timely file, obtain effectiveness or maintain effectiveness
of any Registration Statement to be filed pursuant to Section 2(a) in
accordance with the terms of this Agreement.
e. ELIGIBILITY FOR FORM S-3, SB-2 OR S-1: CONVERSION TO FORM S-3.
The Company represents and warrants that it meets the requirements for
the use of Form S-3, ---- SB-2 or S-1 for registration of the sale by
the Initial Investors and any other Investors of the Registrable
Securities. The Company agrees to file all reports required to be
filed by the Company with the SEC in a timely manner so as to remain
eligible or become eligible, as the case may be, and thereafter to
maintain its eligibility, for the use of Form S-3. If the Company is
not currently eligible to use Form S-3, not later than five (5)
business days after the Company first meets the
registration eligibility and transaction requirements for the use of
Form S-3 (or any successor form) for registration of the offer and
sale by the Initial Investors and any other Investors of Registrable
Securities, the Company shall file a Registration Statement on Form
S-3 (or such successor form) with respect to the Registrable
Securities covered by the Registration Statement on Form SB-2 or Form
S-1, whichever is applicable, filed pursuant to Section 2(a) (and
include in such Registration Statement on Form S-3 the information
required by Rule 429 under the 0000 Xxx) or convert the Registration
Statement on Form SB-2 or Form S-1, whichever is applicable, filed
pursuant to Section 2(a) to a Form S-3 pursuant to Rule 429 under the
1933 Act and cause such Registration Statement (or such amendment) to
be declared effective no later than forty-five (45) days after filing.
In the event of a breach by the Company of the provisions of this
Section 2(e), the Company will be required to make payments pursuant
to Section 2(c) hereof.
3. OBLIGATIONS OF THE COMPANY.
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In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC
not later than the Filing Date, a Registration Statement with
respect to the number of Registrable Securities provided in
Section 2(a), and thereafter use its best efforts to cause such
Registration Statement relating to Registrable Securities to
become effective as soon as possible after such filing but in no
event later than ninety (90) days from the date of Closing), and
keep the Registration Statement effective pursuant to Rule 415 at
all times until such date as is the earlier of (i) the date on
which all of the Registrable Securities have been sold and (ii)
the date on which the Registrable Securities (in the opinion of
counsel to the Initial Investors) may be immediately sold to the
public without registration or restriction (including without
limitation as to volume by each holder thereof) under the 1933
Act (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 not
misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements
to the Registration Statements and the prospectus used in
connection with the Registration Statements as may be necessary
to keep the Registration Statements effective at all times during
the Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration
Statements until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the
Registration Statements. In the event the number of shares
available under a Registration Statement filed pursuant to this
Agreement is insufficient to cover all of the Registrable
Securities issued or issuable upon conversion of the Debentures
and exercise of the Warrants, the Company shall amend the
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 fifteen (15) days after
the necessity therefor arises (based on the market price of the
Common Stock and other relevant factors on which the Company
reasonably elects to rely). The Company shall use its best
efforts to cause such
amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof,
but in any event within thirty (30) days after the date on which
the Company reasonably first determines (or reasonably should
have determined) the need therefor. The provisions of Section
2(c) above shall be applicable with respect to such obligation,
with the ninety (90) days running from the day the Company
reasonably first determines (or reasonably should have
determined) the need therefor.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in a Registration Statement
and its legal counsel (i) promptly (but in no event more than two
(2) business days) after the same is prepared and publicly
distributed, filed with the SEC, or received by the Company, one
copy of each Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or
supplement thereto, and, in the case of the Registration
Statement referred to in Section 2(a), each letter written by or
on behalf of the Company to the SEC or the staff of the SEC, and
each item of correspondence from the SEC or the staff of the SEC,
in each case relating to such Registration Statement (other than
any portion of any thereof which contains information for which
the Company has sought confidential treatment), and (ii) promptly
(but in no event more than two (2) business days) after the
Registration Statement is declared effective by the SEC, such
number of copies of a prospectus, including a preliminary
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. The Company will immediately notify each
Investor by facsimile of the effectiveness of each Registration
Statement or any post-effective amendment. The Company will
promptly (but in no event more than five (5) business days)
respond to any and all comments received from the SEC (which
comments shall promptly be made available to the Investors upon
request), with a view towards causing each Registration Statement
or any amendment thereto to be declared effective by the SEC as
soon as practicable, shall promptly file an acceleration request
as soon as practicable (but in no event more than two (2)
business days) following the resolution or clearance of all SEC
comments or, if applicable, following notification by the SEC
that any such Registration Statement or any amendment thereto
will not be subject to review and shall promptly file with the
SEC a final prospectus as soon as practicable (but in no event
more than two (2) business days) following receipt by the Company
from the SEC of an order declaring the Registration Statement
effective. In the event of a breach by the Company of the
provisions of this Section 3(c), the Company will be required to
make payments pursuant to Section 2(c) hereof. The Company shall
use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statements
under such other securities or "blue sky" laws of such
jurisdictions in the United States as the Investors who hold a
majority in interest of the Registrable Securities being offered
reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the
Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take
all other actions reasonably necessary or advisable to qualify
the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (a) qualify to
do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (b) subject itself
to general taxation
in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any
undertakings that cause the Company undue expense or burden, or
(e) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary
to the best interests of the Company and its stockholders.
e. In the event Investors who hold a majority-in-interest of
the Registrable Securities being offered in the offering (with
the approval of a majority-in-interest of the Initial Investors)
select underwriters for the offering, the Company shall enter
into and perform its obligations under an underwriting agreement,
in usual and customary form, including, without limitation,
customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of
any event, of which the Company has knowledge, as a result of
which the prospectus included in any Registration Statement, as
then in effect, includes an untrue statement of a material fact
or omission to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, and use its best efforts promptly to prepare a
supplement or amendment to any Registration Statement to correct
such untrue statement or omission, and deliver such number of
copies of such supplement or amendment to each Investor as such
Investor may reasonably request; provided that, for not more than
ten (10) consecutive trading days (or a total of not more than
twenty (20) trading days in any twelve (12) month period), the
Company may delay the disclosure of material non-public
information concerning the Company (as well as prospectus or
Registration Statement updating) the disclosure of which at the
time is not, in the good faith opinion of the Company, in the
best interests of the Company (an "ALLOWED DELAY"); provided,
further, that the Company shall promptly (i) notify the Investors
in writing of the existence of (but in no event, without the
prior written consent of an Investor, shall the Company disclose
to such investor any of the facts or circumstances regarding)
material non-public information giving rise to an Allowed Delay
and (ii) advise the Investors in writing to cease all sales under
such Registration Statement until the end of the Allowed Delay.
Upon expiration of the Allowed Delay, the Company shall again be
bound by the first sentence of this Section 3(f) with respect to
the information giving rise thereto.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness
of any Registration Statement, and, if such an order is issued,
to obtain the withdrawal of such order at the earliest possible
moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten
offering, the managing underwriters) of the issuance of such
order and the resolution thereof.
h. The Company shall permit a single firm of counsel
designated by the Initial Investors to review such Registration
Statement and all amendments and supplements thereto (as well as
all requests for acceleration or effectiveness thereof) a
reasonable period of time prior to their filing with the SEC, and
not file any document in a form to which such counsel reasonably
objects and will not request acceleration of such Registration
Statement without prior notice to such counsel. The sections of
such Registration Statement covering information with respect to
the Investors, the Investor's beneficial ownership of securities
of the Company or the Investors intended method of disposition of
Registrable Securities shall conform to the information provided
to the Company by each of the Investors.
i. The Company shall make generally available to its
security holders as soon as practicable, but not later than
ninety (90) 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 the Registration
Statement.
j. At the request of any Investor, the Company shall
furnish, on the date that Registrable Securities are delivered to
an underwriter, if any, for sale in connection with any
Registration Statement or, if such securities are not being sold
by an underwriter, on the date of effectiveness thereof (i) an
opinion, dated as of such date, from counsel representing the
Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten
public offering, addressed to the underwriters, if any, and the
Investors and (ii) a letter, dated such date, from the Company's
independent certified public accountants in form and substance as
is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to
the underwriters, if any, and the Investors.
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition
pursuant to a Registration Statement, (iii) one firm of attorneys
and one firm of accountants or other agents retained by the
Initial Investors, (iv) one firm of attorneys and one firm of
accountants or other agents retained by all other Investors, and
(v) one firm of attorneys retained by all such underwriters
(collectively, the "INSPECTORS") all pertinent financial and
other records, and pertinent corporate documents and properties
of the Company, including without limitation, records of
conversions by other holders of convertible securities issued by
the Company and the issuance of stock to such holders pursuant to
the conversions (collectively, the "RECORDS"), as shall be
reasonably deemed necessary by each Inspector to enable each
Inspector to exercise its due diligence responsibility, and cause
the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for
purposes of such due diligence; provided, however, that each
Inspector shall hold in confidence and shall not make any
disclosure (except to an Investor) 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, (b) the release of such Records is
ordered pursuant to a subpoena or other 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. The Company shall not be required to disclose any
confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality
agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form
of this Section 3(k). Each Investor 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. Nothing herein (or in any other
confidentiality agreement between the Company and any Investor)
shall be deemed to limit the Investor's ability to sell
Registrable Securities in a manner which is otherwise consistent
with applicable laws and regulations.
l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor 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 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 or any other agreement. The Company agrees that it shall,
upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice
to such Investor prior to making such disclosure, and allow the
Investor, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, such
information.
m. The Company shall (i) cause all the Registrable
Securities covered by the Registration Statement to be listed on
each national securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if
the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (ii) to the extent the
securities of the same class or series are not then listed on a
national securities exchange, secure the designation and
quotation, of all the Registrable Securities covered by the
Registration Statement on Nasdaq or, if not eligible for Nasdaq,
on Nasdaq SmallCap or, if not eligible for Nasdaq or Nasdaq
SmallCap, on the OTCBB 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.
n. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not
later than the effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter
or underwriters, if any, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends)
representing 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 managing
underwriter or underwriters, if any, or the Investors may
reasonably request and registered in such names as the managing
underwriter or underwriters, if any, or the Investors may
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 instruction in the form attached
hereto as EXHIBIT 1 and an opinion of such counsel in the form
attached hereto as EXHIBIT 2.
p. At the request of the holders of a majority-in-interest
of the Registrable Securities, the Company shall prepare and file
with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and any
prospectus used in connection with the Registration Statement as
may be necessary in order to change the plan of distribution set
forth in such Registration Statement.
q. From and after the date of this Agreement, the Company
shall not, and shall not agree to, allow the holders of any
securities of the Company to include any of their securities in
any Registration Statement under Section 2(a) hereof or any
amendment or supplement thereto under Section 3(b) hereof without
the consent of the holders of a majority-in-interest of the
Registrable Securities.
r. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors
of Registrable Securities pursuant to a 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
three (3) business 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.
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 Statements 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 Statements.
c. In the event Investors holding a majority-in-interest of
the Registrable Securities being registered (with the approval of
the Initial Investors) determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such
Investor's obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing
underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor
has notified the Company in writing of such Investor's election
to exclude all of such Investor's Registrable Securities from
such Registration Statement.
d. 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(g), 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(g) 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. B. No Investor may participate in any
underwritten registration hereunder unless such Investor (i)
agrees to sell such Investor's Registrable Securities on the
basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and
executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (iii)
agrees to pay its pro rata share of all underwriting discounts
and commissions and any expenses in excess of those payable by
the Company pursuant to Section 5 below.
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
qualification fees, printers and accounting fees, the fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
counsel selected by the Initial Investors pursuant to Sections 2(b) and 3(h)
hereof shall be borne by the Company.
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, hold harmless and defend (i) each Investor who holds
such Registrable Securities, (ii) the directors, officers,
partners, employees, agents and each person who controls any
Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 ACT"), if any, (iii)
any underwriter (as defined in the 0000 Xxx) for the Investors,
and (iv) the directors, officers, partners, employees and each
person who controls any such underwriter within the meaning of
the 1933 Act or the 1934 Act, if any (each, an "INDEMNIFIED
PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory
organization, whether commenced or threatened, in respect
thereof, "CLAIMS") to which any of them may become subject
insofar as such Claims arise out of or are based upon: (i) any
untrue statement or alleged untrue statement of a material fact
in a Registration Statement or the omission or alleged omission
to state therein a material fact required to be stated or
necessary to make the statements therein not misleading; (ii) any
untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in
the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the 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 (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
Indemnified Person, promptly as such expenses are incurred and
are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification
agreement contained in this Section 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 or underwriter
for such Indemnified Person expressly for use in connection with
the preparation of such Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was
timely made available by the Company pursuant to Section 3(c)
hereof; (ii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably
withheld; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person if the
untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, such corrected
prospectus was timely made available by the Company pursuant to
Section 3(c) hereof, and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to
the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain
in full force and effect regardless of any investigation made by
or on behalf of the Indemnified Person and shall survive the
transfer of the Registrable Securities by the Investors pursuant
to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally
and not jointly to indemnify, hold harmless and defend, to the
same extent and in the same manner 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, any
underwriter and any other stockholder selling securities pursuant
to the Registration Statement or any of its directors or officers
or any person who controls such stockholder or underwriter within
the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim to which any of them may become subject, under
the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
arises out of or is based upon any Violation by such Investor, 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 Investor expressly
for use in connection with such Registration Statement; and
subject to Section 6(c) such Investor will reimburse any legal or
other expenses (promptly as such expenses are incurred and are
due and payable) 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) shall
not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld;
provided, further, however, that the Investor shall be liable
under this Agreement (including this Section 6(b) and Section 7)
for only that amount as does not exceed the net proceeds to such
Investor 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 transfer of the Registrable Securities by the
Investors pursuant to Section 9. 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 was corrected on a timely
basis in the prospectus, as then amended or supplemented.
c. 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; 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 legal counsel shall
be selected by Investors holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to
which the Claim relates (with the approval of a
majority-in-interest of the Initial Investors), if the Investors
are entitled to indemnification hereunder, or the Company, if the
Company is entitled to indemnification hereunder, as applicable.
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 actually
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 (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 such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) 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 Investors 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 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 1933 Act and
the 1934 Act so long as the Company remains subject to such
requirements (it being understood that nothing herein shall limit
the Company's obligations under Section 4(c) of the Securities
Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144;
and
c. furnish to 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 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 Investors to sell such securities pursuant to Rule 144
without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
------------------------------------
The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of Registrable Securities if:
(i) 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, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the
written notice contemplated by clause (ii) of this sentence, the transferee
or assignee agrees in writing with the Company to be bound by all of the
provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an "ACCREDITED INVESTOR" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.
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 written consent of the Company, each of the Initial
Investors (to the extent such Initial Investor still owns Registrable
Securities) and Investors who hold a majority 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. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of
record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more
persons or entities with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such
Registrable Securities.
b. Any notices required or permitted to be given under the
terms hereof shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier
(including a recognized overnight delivery service) or by
facsimile and shall be effective five days after being placed in
the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each
case addressed to a party. The addresses for such communications
shall be:
If to the Company:
Torbay Holdings, Inc.
0 Xxxxxxx Xxxxx, Xxxxx 0X
Xxxxxxxxx, XX 00000
Attention: Xxxxxx Large
Telephone: 000-000-0000
Facsimile: 000-000-0000
Email: Xxxxxx_Xxxxx@xxx.xxx
With copy to:
Xxxx X. Xxxxxxx, PC
000 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Email: xxxxxxxxx@xxx.xxx
If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement. With a copy
to:
Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
Email: xxxxxxxx@xxxxxxxxxxxx.xxx
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. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF
THE UNITED STATES FEDERAL COURTS LOCATED NEW YORK, NEW YORK WITH
RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES
IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER
AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS
MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING
HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON
SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES
NOT PREVAIL IN ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE
RESPONSIBLE FOR ALL FEES AND
EXPENSES, INCLUDING ATTORNEYS' FEES, INCURRED BY THE PREVAILING
PARTY IN CONNECTION WITH SUCH DISPUTE.
e. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any
provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any
other provision hereof.
f. This Agreement, the Warrants and the Securities Purchase
Agreement (including all schedules and exhibits thereto)
constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement
and the Securities Purchase Agreement supersede all prior
agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
g Subject to the requirements of Section 9 hereof, this
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns.
h. The headings in this Agreement are for convenience of
reference only and shall not form part of, or affect the
interpretation of, this Agreement.
i. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same agreement and shall
become effective when counterparts have been signed by each party
and delivered to the other party. This Agreement, once executed
by a party, may be delivered to the other party hereto by
facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
j. 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.
k. Except as otherwise provided herein, all consents and
other determinations to be made by the Investors pursuant to this
Agreement shall be made by Investors holding a majority of the
Registrable Securities, determined as if the all of the
Debentures then outstanding have been converted into for
Registrable Securities.
l. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to each
Investor by vitiating the intent and purpose of the transactions
contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for breach of its obligations under this
Agreement will be inadequate and agrees, in the event of a breach
or threatened breach by the Company of any of the provisions
under this Agreement, that each Investor shall be entitled, in
addition to all other available remedies in law or in equity, and
in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of
this Agreement and to enforce specifically the terms and
provisions hereof, without the necessity of showing economic loss
and without any bond or other security being required.
m. 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company and the undersigned Initial Investors have
caused this Agreement to be duly executed as of the date first above written.
TORBAY HOLDINGS, INC.
______________________________________
Xxxxxxx Xxxxxx Large
President and Chief Executive Officer
AJW PARTNERS, LLC
By: SMS Group, LLC
______________________________________
Xxxxx X. Xxxxxxxx
Manager
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC
______________________________________
Xxxxx X. Xxxxxxxx
Manager
AJW/NEW MILLENNIUM OFFSHORE, LTD.
By: First Street Manager II, LLC
______________________________________
Xxxxx X. Xxxxxxxx
Manager
PEGASUS CAPITAL PARTNERS, LLC
By: Pegasus Manager, LLC
____________________________________
Xxxxx X. Xxxxxxxx
Manager
