REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated November
16, 2004, is made by and among DERMISONICS, INC., a Nevada corporation (the
"Company"), and XXXXXXX XXXXXX (the "Investor").
Capitalized terms not defined herein shall have the meaning ascribed to
such terms in the Subscription Agreement.
W I T N E S S E T H:
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WHEREAS, the Company and the Investor are parties to a certain Subscription
Agreement (the "Subscription Agreement") dated the date hereof pursuant to which
the Company offered and sold and the Investor purchased $25,000.00 in principal
amount of its Convertible Promissory Notes ("Notes") which are convertible into
(i) a number of shares of Common Stock ("Conversion Shares") which shall be
calculated by dividing the principal amount of the Notes by $1.23, and (ii) a
one-year warrant entitling the Investor to purchase a number of shares of Common
Stock ("Warrant Shares") calculated by dividing by two the number of shares of
Common Stock issuable upon conversion of the Note at a price of $2.00 per share;
and
WHEREAS, in order to induce the Company to enter into the Subscription
Agreement, and to induce the Investor to purchase Units offered thereby, the
Investor and the Company hereby agree that this Agreement shall govern the
rights of the Investor to cause the Company to register (i) the Shares and (ii)
the shares of Common Stock issuable upon exercise of the Warrants ("Underlying
Shares") and certain other matters set forth herein.
NOW, THEREFORE, THE PARTIES HERBY AGREE AS FOLLOWS:
1. Certain Definitions
(a) Definitions. For purposes of this Agreement, the following terms
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shall have the meaning ascribed to them below:
The terms "Affiliate" means, with respect to any Person, any other
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Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
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used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
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meanings correlative to the foregoing.
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"Business Day" means any day except Saturday, Sunday and any day which
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shall be a legal holiday or a day on which banking institutions in the State of
Nevada generally are authorized or required by law or other government actions
to close.
"Common Stock" means the Common Stock of the Company, par value $.01
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per share.
"Effectiveness Period" means a date which is three years after the
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date that a Registration Statement is declared effective by the SEC.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Filing Date" means March 31, 2005.
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"Holder" or "Holders" means the holder or holders, as the case may be,
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from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
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2.05(c).
"Indemnifying Party" shall have the meaning set forth in Section
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2.05(c).
"Losses" shall have the meaning set forth in Section 2.05(a).
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"Nevada Courts" shall have the meaning set forth in Section 4.09.
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"Person" means an individual or corporation, partnership, trust,
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incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
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(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
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Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
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"Registrable Securities" means (a) the Conversion Shares, and (b) the
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Warrant Shares.
"Registration Statement" means the registration statement contemplated
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by either Section 2(a) or 3(a), including the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
"SEC" means the United States Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended.
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The plural of any defined term shall have a meaning correlative to such
defined term.
2. Piggyback Registrations.
(a) If, at any time, the Company proposes or is required to register
any of its equity securities under the Securities Act (other than a registration
statement on Form S-8 or Form S-4, or their successors, or any other form for a
similar limited purpose, or any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another
corporation), whether for its own account or the account of other security
holders, the Company shall give prompt written notice of its intention to do so
to each of the Holders of Registrable Securities. Upon the written request of
any Holder, made within 15 days following the receipt of any such written notice
(which request shall specify the maximum number of Registrable Securities
intended to be disposed of by such Holder and the intended method of
distribution thereof), the Company shall use, subject to Sections 2(b) and 2(d)
hereof, its best efforts to cause all such Registrable Securities, the Holders
of which have so requested the registration thereof, to be registered under the
Securities Act (with the securities which the Company at the time proposes to
register) to permit the sale or other disposition by the Holders (in accordance
with the intended method of distribution thereof) of the Registrable Securities
to be so registered. There is no limitation on the number of such piggyback
registrations pursuant to the preceding sentence which the Company is obligated
to effect.
(b) Abandonment or Delay. If, at any time after giving written notice
of its intention to register any equity securities and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register or to delay
registration of such equity securities, the Company may, at its election, give
written notice of such determination to all Holders of record of Registrable
Securities and (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in connection
with such abandoned registration, without prejudice, however, to the rights
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of Holders under Section 3, and (ii) in the case of a determination to delay
such registration of its equity securities, shall be permitted to delay the
registration of such Registrable Securities for the same period as the delay in
registering such other equity securities.
(c) Holder's Right to Withdraw. Any Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
registration statement pursuant to this Section 2 by giving written notice to
the Company of its request to withdraw; provided, however, that (i) such request
must be made in writing prior to the earlier of the execution of the
underwriting agreement or the execution of the custody agreement with respect to
such registration and (ii) such withdrawal shall be irrevocable and, after
making such withdrawal, a Holder shall no longer have any right to include
Registrable Securities in the registration as to which such withdrawal was made.
(d) Cutbacks. If the managing underwriter of any underwritten offering
shall inform the Company by letter of its belief that the number of Registrable
Securities requested to be included in a registration under this Section 2 would
materially adversely affect such offering, then the Company will include in such
registration, first, the securities being sold by the Company in such
registration, and second, the Registrable Securities to be included in such
registration to the extent of the number and type, if any, which the Company is
so advised can be sold in (or during the time of) such offering, pro rata among
the Holders requesting to participate in such offering pursuant to this Section
2 in accordance with the number of Registrable Shares held by, or issuable upon
conversion of Convertible Notes and Warrants held by, each such Holder. For
purposes of this Section 2(d), for any selling shareholder which is a holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and shareholders of each holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
shareholder", and any pro-rata reduction with respect to such "selling
shareholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling shareholder", as defined in this sentence.
(e) In the case of a filing of a Registration Statement under this
Section 2, the Company shall use its best efforts to keep such Registration
Statement continuously effective under the Securities Act during the
Effectiveness Period; provided, however, that the Company shall not be deemed to
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have used its best efforts to keep the Registration Statement effective during
the Effectiveness Period if it voluntarily takes any action that would result in
the Holders not being able to sell the Registrable Securities covered by such
Registration Statement during the Effectiveness Period, unless such action is
required under applicable law or the Company has filed a post-effective
amendment to the Registration Statement and the SEC has not declared it
effective.
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3. Mandatory Registration.
(a) If the Company has not undertaken the registration of all
Registrable Securities pursuant to Section 2, above, then, on or prior to the
Filing Date the Company shall prepare and file with the SEC a Registration
Statement covering any and all Registrable Securities not covered in a
registration statement filed pursuant to Section 2. The Registration Statement
shall be on Form SB-2 (or, if, for any reason, the Company does not register the
resale of the Registrable Securities on Form SB-2, the Registration Statement
shall be on such other appropriate form in accordance with the Rules and
Regulations promulgated under the Securities Act). The Company shall use its
best efforts to cause the Registration Statement to be declared effective under
the Securities Act as promptly as possible after the filing thereof and shall
use its best efforts to keep such Registration Statement continuously effective
under the Securities Act during the Effectiveness Period; provided, however,
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that the Company shall not be deemed to have used its best efforts to keep the
Registration Statement effective during the Effectiveness Period if it
voluntarily takes any action that would result in the Holders not being able to
sell the Registrable Securities covered by such Registration Statement during
the Effectiveness Period, unless such action is required under applicable law or
the Company has filed a post-effective amendment to the Registration Statement
and the SEC has not declared it effective.
(b) Right to Postpone or Interrupt the Effective Date of the
Registration Statement. The Company will be entitled to postpone or interrupt
the effective date of the Registration Statement filed in connection with such
registration (and the use of the prospectus contained therein) if the Company
determines, in its best judgment, after consultation with counsel, that such
Registration Statement would require the premature announcement of any material
financing, acquisition, corporate reorganization or other material corporate
transaction or development involving the Company which, in the Company's
reasonable determination, would be materially detrimental to the interests of
the Company and all of its stockholders. Any such postponement or interruption
will be for a minimum period reasonably required to avoid such premature
disclosure. The Company promptly will give the Holders written notice of such
postponement or interruption.
4. Obligations of the Company. Whenever required under this Agreement to
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affect the registration of any Registrable Securities, the Company shall:
(a) Prepare and file with the SEC a Registration Statement (and any
additional Registration Statements as may be required) and cause the
Registration Statement to become effective and remain effective as provided
herein.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to a Registration Statement as may be necessary to
keep the
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Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424 (or any similar
provisions then in force) promulgated under the Securities Act; (iii) respond as
promptly as practicable to any comments received from the SEC with respect to
the Registration Statement or any amendment thereto and promptly provide the
Special Counsel true and complete copies of all correspondence from and to the
SEC relating to the Registration Statement; and (iv) comply with the provisions
of the Securities Act and the Exchange Act with respect to the disposition of
all Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.
(c) Notify the Holders immediately (and, in the case of (i)(A) below,
not less than five days prior to such filing): (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to a Registration Statement is
proposed to be filed; (B) when the SEC comments in writing on such Registration
Statement and (C) 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 Proceeding for that
purpose; (iv) 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 (v) of the occurrence of any
event that 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.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) Upon the occurrence of any event contemplated by Section 4(c)(v),
as promptly as practicable, prepare a supplement or amendment, including a
post-effective amendment, to a Registration Statement or a supplement to the
related
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Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, neither the Registration Statement nor such Prospectus will contain
an 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 under which they were made, not misleading.
(f) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(g) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders and
any underwriters in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions as any Holder or underwriter requests in writing, to keep each
such registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; provided, however, that the
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Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(h) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligation under such
an agreement.
(i) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances than
existing.
(j) Cause all such Registrable Securities registered pursuant hereunder
to be listed on each securities exchange on which similar securities issued by
the Company are then listed.
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(k) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(l) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to a Registration Statement and to
enable such Registrable Securities to be in such denominations and registered in
such names as any such managing underwriters or Holders may request at least
three Business Days prior to any sale of Registrable Securities.
(m) Upon the occurrence of any event contemplated by Section 4(c)(v),
as promptly as practicable, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an 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 under which they were made, not misleading.
(n) In the case of an Underwritten Offering, enter into such customary
agreements on terms which are customary in connection with such transactions
(including an underwriting agreement in form, scope and substance as is
customary in Underwritten Offerings) and take all such other actions in
connection therewith (including those reasonably requested by any managing
underwriters and the Holders of a majority of the Registrable Securities being
sold) in order to expedite or facilitate the disposition of such Registrable
Securities, and whether or not an underwriting agreement is entered into, (i)
make such representations and warranties to such Holders and such underwriters
as are customarily made by issuers to underwriters in underwritten public
offerings, and confirm the same if and when requested; (ii) obtain and deliver
copies thereof to each Holder and the managing underwriters, if any, of opinions
of counsel to the Company and updates thereof addressed to each selling Holder
and each such underwriter, in form, scope and substance reasonably satisfactory
to any such managing underwriters covering the matters customarily covered in
opinions requested in Underwritten Offerings and such other matters as may be
reasonably requested by underwriters; (iii) immediately prior to the
effectiveness of the Registration Statement or at the time of delivery of any
Registrable Securities sold pursuant thereto (at the option of the
underwriters), obtain and deliver copies to the Holders and the managing
underwriters, if any, of "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data is, or is required to be, included in the Registration
Statement),
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addressed to each Person and in such form and substance as are customary in
connection with Underwritten Offerings; (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and procedures
no less favorable to the selling Holders and the underwriters, if any, than
those set forth in Section 10 (or such other provisions and procedures
acceptable to the managing underwriters, if any, and holders of a majority of
Registrable Securities participating in such Underwritten Offering; and (v)
deliver such documents and certificates as may be reasonably requested by the
Holders of a majority of the Registrable Securities being sold and any managing
underwriters to evidence the continued validity of the representations and
warranties made pursuant to clause 4(l)(i) above and to evidence compliance with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
(o) Comply with all applicable rules and regulations of the SEC and
make generally available to its security holders earning statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 not later
than 45 days after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) (i) commencing at the end
of any fiscal quarter in which Registrable Securities are sold to underwriters
in a firm commitment or best efforts Underwritten Offering and (ii) if not sold
to underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of the Registration
Statement, which statement shall cover said 12-month period, or such shorter
periods as is consistent with the requirements of Rule 158.
5. Covenants of the Holder.
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(a) It shall be a condition precedent to the obligations of the Company
to take any action pursuant to Section 2 or Section 3 hereof with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) Each Holder agrees by its acquisition of such Registrable
Securities that (i) it will not offer or sell any Registrable Securities under
the Registration Statement until it has received copies of the Prospectus as
then amended or supplemented as contemplated in Section 4(g) and notice from the
Company that such Registration Statement and any post-effective amendments
thereto have become effective as contemplated by Section 4(b) and (c) it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
(c) Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind
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described in Section 4(c)(ii), 4(c)(iii), 4(c)(iv), or 4(c)(v), such Holder will
forthwith discontinue disposition of such Registrable Securities until such
Holder's receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement contemplated by Section 4(j), or until it is advised in
writing (the "Advice") by the Company that the use of the applicable Prospectus
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may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement.
(d) Each Holder agrees that upon any sale of Registrable Securities
pursuant to the Registration Statement that it shall so advise the Company of
such sale by delivering to the Company a completed and executed copy of the
Notice of Sale Letter, a copy of which is attached hereto as Exhibit A.
(e) Each Holder agrees that for so long as it owns Registrable
Securities, it will comply with the provisions of Section 9 of the Exchange Act,
and the rules promulgated thereunder, with respect to transactions involving the
Common Stock.
(f) Each Holder agrees that for so long as it owns Registrable
Securities, it will comply with Regulation M under the Exchange Act, if
applicable
6. Expenses of Registration.
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(a) Expenses of Mandatory Registration. All expenses other than
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underwriting discounts and commissions incurred in connection with
registrations, filings or qualification pursuant to Section 3, including
(without limitation) all registration, filing and qualification fees, printers;
and accounting fees,; provided, however, that the Company shall not be required
to pay for any expenses of any registration proceeding begun pursuant to Section
3 if the registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered (in which
case all participating holders shall bear such expenses).
(b) Expenses of Company Registration. The Company shall bear and pay
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all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 2 for each Holder (which right may be assigned as provided
in Section 11), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto, but excluding underwriting discounts and commissions relating to
Registrable Securities.
7. Underwriting Requirements. In connection with any offering involving an
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underwriting of shares of the Company's capital stock, the Company shall not be
required under Section 2 to include any of the Holder's securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company
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and the underwriter(s) selected by it (or by other persons entitle to select the
underwriters).
8. Delay of Registration. No Holder shall have any right to obtain or seek
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an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Agreement.
9. Reports under the Exchange Act. With a view to making available to the
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Holders the benefits of Rule 144 promulgated under the Act and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after 90 days after the
effective date of the Registration Statement filed by the Company for the
offering of the Registrable Securities;
(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;
and
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144, the Securities
Act and the Exchange Act (at any time after it has become subject to such
reporting requirements), or that it qualifies as a registrant whose securities
may be resold pursuant to Form S-3 (at any time after it so qualifies), (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 in availing any Holder of any rule or regulation
of the SEC which permits the selling of any such securities without registration
or pursuant to such form.
10. Indemnification
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(a) Indemnification by the Company. The Company shall, notwithstanding
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any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents (including any underwriters retained by such Holder
in connection with the offer and sale of Registrable Securities), brokers,
investment advisors and employees of each of them, each Person who controls any
such Holder (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and the officers, directors, agents and employees of
each such controlling Person, to the fullest extent permitted by applicable law,
from and against any and all losses, claims, damages, liabilities, settlements,
judgments, costs (including, without limitation,
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costs of preparation and reasonable attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or relating to any untrue or alleged
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untrue statement of a material fact contained in the Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by or on behalf of
such Holder expressly for use therein, or to the extent that such information
relates to such Holder or such Holder's proposed method of distribution of
Registerable Securities and was reviewed and expressly approved in writing by
such Holder expressly for use in the Registration Statement, such Prospectus or
such form of Prospectus or in any amendment or supplement thereto. The Company
shall notify the Holders promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the transactions
contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
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jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or arising solely out of or based solely
upon any omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading to the extent, but only to the
extent, that such untrue statement or omission is contained in any information
so furnished in writing by such Holder to the Company specifically for inclusion
in the Registration Statement or such Prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
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brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
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from whom indemnity is sought (the "Indemnifying Party") in writing, and the
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Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within 10 Business
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
--------
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 10(a)
------------
or 10(b) is unavailable to an Indemnified Party because of a failure or refusal
of a governmental authority to enforce such indemnification in accordance with
its terms (by reason of
Page 13
public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such proportion
as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 10(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 10(d) were determined by pro rata
--- ----
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 10(d), the Holders shall not be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by the Investor from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that the Holders have otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
(e) The obligations of the Company and the Holders under this Section
10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Article IV, and otherwise.
11. Assignment of Registration Rights. The rights of a Holder hereunder,
------------------------------------
including the right to have the Company register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be
automatically assignable by such Holder to any assignee or transferee of all or
a portion of the securities referenced in the definition of Registrable
Securities without the consent of the Company if: (i) such Holder agrees
Page 14
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 (but in no event less than 10 days prior to the filing of a
Registration Statement), (ii) the Company is, within a reasonable time after
such transfer or assignment (but in no event less than 10 days prior to the
filing of a Registration Statement), furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to such registration rights are being transferred or assigned, (iii) at
or before the time the Company receives the written notice contemplated by
clause (ii) of this Section, the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions of this Agreement, and (iv)
such transfer shall have been made in accordance with the applicable
requirements hereof and the Subscription Agreement. The rights to assignment
shall apply to the Holders' (and to subsequent) successors and assigns.
12. "Market Stand-Off" Agreement. Each Investor hereby agrees that during
-----------------------------
the period of duration specified by the Company and an underwriter of Common
Stock or other securities of the Company, following the effective date of a
Registration Statement, it shall not, to the extent requested by the Company and
such underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by it at any time during such period
except Registrable Securities included in such registration; provided, however,
that such agreement shall be applicable only during the six-month period
following the effective date of any such Registration Statement.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to any securities of each Investor (and
the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 12 shall not apply to a registration relating solely to employee benefit
plans on Form S-8 or similar forms which may be promulgated in the future, or a
registration relating solely to a Commission rule 145 transaction on Form S-4 or
similar form which may be promulgated in the future.
13. Miscellaneous.
-------------
(a) Aggregation of Stock. All shares of Registrable Securities held or
--------------------
acquired by persons who are Affiliates shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
(b) Entire Agreement; Amendments. This Agreement, together with the
------------------------------
Exhibits and Schedules hereto, contains the entire understanding of the parties
with
Page 15
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters.
(c) Notices. Any and all notices or other communications or deliveries
-------
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 4:30 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than 4:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If to the Company: DERMISONICS, INC.
c/o Xxxxx X. Xxxxxxx
0 Xxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Facsimile: 000-000-0000
If to the Undersigned: At the address or facsimile
number set forth on the signature page
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
(d) Amendments; Waivers. No provision of this Agreement may be waived
--------------------
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and the Investor; or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
(e) Headings. The headings herein are for convenience only, do not
--------
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
(f) Successors and Assigns. This Agreement shall be binding upon and
------------------------
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior
Page 16
written consent of the Investor. Except as provided in Section 11, the Investor
may not assign this Agreement or any rights or obligations hereunder.
(g) No Third-Party Beneficiaries. This Agreement is intended for the
------------------------------
benefit of the parties hereto and their respective permitted successors and
assigns and, other than with respect to permitted assignees under Section 11,
not for the benefit of, nor may any provision hereof be enforced by, any other
person.
(h) Governing Law. This Agreement shall be governed by and construed
--------------
and enforced in accordance with the internal laws of the State of Nevada without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in Xxxxx County, Nevada (the "Courts"), for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address in effect
for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.
(i) Survival. The representations, warranties, agreements and covenants
--------
contained in this Agreement shall survive the Closing.
(j) Severability. In case any one or more of the provisions of this
------------
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
IN WITNESS WHEREOF, the Company has caused this Registration Rights
Agreement to be signed on the date first set forth above.
THE COMPANY:
DERMISONICS, INC.
By:
----------------------------
Xxxxx X. Xxxxxxx, Chairman
Page 17
THE INVESTOR:
----------------------------------
XXXXXXX XXXXXX
Address of the Investor:
----------------------------------
----------------------------------
----------------------------------
Facsimile:
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Page 18
EXHIBIT A
NOTICE OF SALE LETTER
DERMISONICS, INC.
Ladies and Gentlemen:
In accordance with the provisions of Section 5(d) of the Registration
Rights Agreement between DERMISONICS, INC. and the undersigned dated September
___, 2004, the undersigned advises you that:
On , the undersigned sold
-------------- ------------------------------
shares of Common Stock pursuant to the Registration Statement.
I understand that of the terms and provisions of the Registration Rights
Agreement continue to be applicable in connection with the sale described
herein,
Capitalized terms have the meaning ascribed to them in the Registration
Rights Agreement.
Sincerely,
------------------------------
(Signature)
------------------------------
(Print Name)
