REGISTRATION RIGHTS AGREEMENT
This
REGISTRATION
RIGHTS AGREEMENT
(this
“Agreement”),
is
dated as of May 31, 2007, by and between Natural Nutrition, Inc., a Nevada
corporation, with headquarters located at 000 Xxxxx Xxxx Xxx Xxxx, Xxxxx 000,
Xxxxxxx, Xxxxx 00000 (the “Company”)
and
Cornell Capital Partners, L.P. (“Buyer”).
WHEREAS:
In
connection with the Securities Purchase Agreement, dated as of May 31,
2007, by and between the Company and Buyer (the “Securities
Purchase Agreement”),
the
Company has agreed, upon the terms and subject to the conditions set forth
in
the Securities Purchase Agreement, to issue and sell to Buyer (i) a secured
convertible note of the Company (the “Note”),
which
shall, among other things, be convertible into shares of the Company’s common
stock, $0.001 par value per share (the “Common
Stock”
and
as
converted, the “Conversion
Shares”)
in
accordance with the terms of the Note, and (ii) a warrant (the
“Warrant”),
which
shall be exercisable to purchase shares of Common Stock (as exercised
collectively, the “Warrant
Shares”).
In
accordance with the terms of 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 Buyer hereby agree as follows:
1. Definitions.
Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
a. “Business
Day”
means
any day other than Saturday, Sunday or any other day on which commercial banks
in The City of Newark, New Jersey are authorized or required by law to remain
closed.
b. “Closing
Date”
shall
have the meaning set forth in the Securities Purchase Agreement.
c. “Effective
Date”
means
the date the Registration Statement has been declared effective by the
SEC.
d. “Effectiveness
Deadline”
means
the date which is (i) in the event that the Registration Statement is not
subject to a review by the SEC, 60 calendar days after the date of the
Registration Request, or (ii) in the event that the Registration Statement
is subject to a review by the SEC, 120 calendar days after the date of the
Registration Request.
e. “Filing
Deadline”
means
30 calendar days after the Company’s receipt of the Registration
Request.
f. “Investor”
means
Buyer or any transferee or assignee thereof to whom Buyer assigns its rights
under this Agreement in accordance with the requirements of the Transaction
Documents and who agrees to become bound by the provisions of this Agreement
in
accordance with Section 9 and any transferee or assignee thereof to whom a
transferee or assignee assigns its rights under this Agreement in accordance
with the requirements of the Transaction Documents and who agrees to become
bound by the provisions of this Agreement in accordance with
Section 9.
g. “Person”
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
h. “register,”
“registered,”
and
“registration”
refer
to a registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant
to
Rule 415 and the declaration or ordering of effectiveness of such
Registration Statement(s) by the SEC.
i. “Registrable
Securities”
means
(i) the Conversion Shares issued or issuable upon conversion or redemption
of the Note, (ii) the Warrant Shares issued or issuable upon exercise of
the Warrant and (iii) any capital stock of the Company issued or issuable
with respect to the Conversion Shares, the Note, the Warrant Shares, or the
Warrant as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise, without regard to any limitations on
conversion of the Note or exercises of the Warrant.
j. “Registration
Statement”
means
a
registration statement or registration statements of the Company filed under
the
1933 Act covering the Registrable Securities.
k. “Required
Holders”
means
the holders of at least a majority of the Registrable Securities.
l. “Rule 415”
means
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis.
m. “SEC”
means
the United States Securities and Exchange Commission.
2. Registration.
a. Mandatory
Registration.
Subject
to the conditions of this Section 2(a), if the Company shall receive at any
time and from time to time after the aggregate principal amount of the Note
is
below U.S. $1,500,000 (in whatever form, including without limitation, the
reduction of the outstanding balance by conversions by Buyer into shares of
Common Stock or cash payments by the Company) a written request (the
“Registration
Request”)
from
the holders of at least 50% of the Registrable Securities then outstanding,
that
the Company file with the SEC the Registration Statement on Form S-3
covering the resale of all of the Registrable Securities issuable upon then
outstanding Securities, then the Company shall, within thirty (30) days of
the receipt thereof, give written notice of such request to all other holders
of
Registrable Securities, if any, and file with the SEC such Registration
Statement, as soon as practicable, following receipt of the Registration Request
(but in no event later than the Filing Deadline). In the event that
Form S-3 is unavailable for such a registration, the Company shall use such
other form as is available for such a registration on another appropriate form
reasonably acceptable to the Required Holders, subject to the provisions of
Section 2(c). The Registration Statement prepared pursuant hereto shall
register for resale at least 33% of the Company’s market capitalization based on
the Company’s shares of Common Stock issued and outstanding and market price of
the Company’s shares of Common Stock at the time of the Registration Request
less any shares of Common Stock held by affiliates of the Company, or such
greater amount as the Company in good faith believes the SEC may permit to
be
registered (as evidenced in comments received to a filed Registration Statement
or other relevant precedent). The Registration Statement shall contain (except
if otherwise directed by the Required Holders) the “Selling
Stockholders”
and
“Plan
of Distribution”
sections in substantially the form attached hereto as Exhibit B.
The
Company shall use its best efforts to have the Registration Statement declared
effective by the SEC no later than the Effectiveness Deadline. By 9:30 am on
the
fifth (5th)
calendar day following the Effective Date, the Company shall file with the
SEC
in accordance with Rule 424 under the 1933 Act the final prospectus to be
used in connection with sales pursuant to such Registration
Statement.
-2-
b. Legal
Counsel.
Subject
to Section 5 hereof, the Required Holders shall have the right to select
one legal counsel to review and comment on any registration pursuant to this
Section 2 (“Legal
Counsel”),
which
shall be Xxxxxxxxxxxx Xxxx & Xxxxxxxxx LLP or such other counsel as
thereafter designated by the Required Holders. The Company and Legal Counsel
shall reasonably cooperate with each other in performing the Company’s
obligations under this Agreement.
c. Ineligibility
for Form S-3.
In the
event that Form S-3 is not available for the registration of the resale of
Registrable Securities hereunder, the Company shall (i) register the resale
of the Registrable Securities on another appropriate form reasonably acceptable
to the Required Holders and (ii) undertake to register the Registrable
Securities on Form S-3 as soon as such form is available, provided that the
Company shall maintain the effectiveness of the Registration Statement then
in
effect until such time as a Registration Statement on Form S-3 covering the
Registrable Securities has been declared effective by the SEC.
d. Effect
of Failure to File and Obtain and Maintain Effectiveness of Registration
Statement.
Subject
to Section 4(a), if (i) a Registration Statement covering all of the
Registrable Securities required to be covered thereby and required to be filed
by the Company pursuant to this Agreement is (A) not filed with the SEC on
or before the respective Filing Deadline (a “Filing
Failure”)
or
(B) not declared effective by the SEC on or before the respective
Effectiveness Deadline (an “Effectiveness
Failure”)
or
(ii) on any day after the Effective Date sales of all of the Registrable
Securities required to be included on such Registration Statement cannot be
made
(other than during an Allowable Grace Period (as defined in Section 3(r))
pursuant to such Registration Statement or otherwise (including, without
limitation, because of a failure to keep such Registration Statement effective,
to disclose such information as is necessary for sales to be made pursuant
to
such Registration Statement, to register a sufficient number of shares of Common
Stock or to maintain the listing of the Common Stock) (a “Maintenance
Failure”)
then,
as partial relief for the damages to any holder by reason of any such delay
in
or reduction of its ability to sell the underlying Shares of Common Stock (which
remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each holder of Registrable Securities relating
to such Registration Statement an amount in cash equal to two percent (2%)
of
the aggregate Purchase Price (as such term is defined in the Securities Purchase
Agreement) of such Investor’s Notes relating to the Registrable Securities
included in such Registration Statement on each of the following dates:
(i) the day of a Filing Failure and on every thirtieth (30th)
day
(pro rated for periods totaling less than thirty (30) days) after a Filing
Failure until such Filing Failure is cured; (ii) the day of an
Effectiveness Failure and on every thirtieth (30th)
day
(pro rated for periods totaling less than thirty (30) days) after an
Effectiveness Failure until such Effectiveness Failure is cured; and
(iii) the initial day of a Maintenance Failure and on every
thirtieth (30th)
day
(pro rated for periods totaling less than thirty (30) days) after a
Maintenance Failure until such Maintenance Failure is cured; provided, however,
that in no event shall the Company be liable for more than two percent (2%)
of penalties during any thirty (30) day period or for multiple events
during any thirty (30) day period. The payments to which a holder shall be
entitled pursuant to this Section 2(d) are referred to herein as
“Registration
Delay Payments”.
Registration Delay Payments shall accrue on the day of the Filing Failure,
Effectiveness Failure and the initial day of a Maintenance Failure, as
applicable, and thereafter shall accrue and be paid on the earlier of
(I) the thirtieth (30th)
day
after the event or failure giving rise to the Registration Delay Payments has
occurred and (II) the Business Day after the event or failure giving rise
to the Registration Delay Payments is cured. In the event the Company fails
to
make Registration Delay Payments in a timely manner, such Registration Delay
Payments shall bear interest at the rate of one and one-half percent (1.5%)
per month (prorated for partial months) until paid in full. Notwithstanding
anything herein to the contrary, in no event shall the Registration Delay
Payments exceed forty-eight percent (48%) of the aggregate Purchase Price
for all Investors (the “Registration
Delay Payments Cap”).
Any
amount in excess of the Registration Delay Payments Cap (the “Excess
Registration Delay Payments”)
shall
cause the Conversion Price of the Investor’s Notes to be lowered by an amount
equal to the quotient of the amount of such Investors Excess Registration Delay
Payments divided by the then outstanding amount of such Investor’s Notes.
Notwithstanding anything to the contrary contained herein, in no event shall
the
Company be liable for any damages in connection with the Warrant or Warrant
Shares.
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3. Related
Obligations.
At
such
time as the Company is obligated to file a Registration Statement with the
SEC
pursuant to Section 2(a) or 2(c), the Company will use its best efforts to
effect the registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company shall
have the following obligations:
a. The
Company shall promptly prepare and file with the SEC a Registration Statement
with respect to the Registrable Securities and use its reasonable best efforts
to cause such Registration Statement relating to the Registrable Securities
to
become effective as soon as practicable after such filing (but in no event
later
than the Effectiveness Deadline). Subject to Allowable Grace Periods, the
Company shall keep each Registration Statement effective pursuant to
Rule 415 at all times until the earlier of (i) the date as of which
the Investors may sell all of the Registrable Securities covered by such
Registration Statement without restriction pursuant to Rule 144(k) (or any
successor thereto) promulgated under the 1933 Act or (ii) the date on which
the Investors shall have sold all of the Registrable Securities covered by
such
Registration Statement (the “Registration
Period”).
The
Company shall ensure that each Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain
any
untrue statement of a material fact or omit to state a material fact required
to
be stated therein, or necessary to make the statements therein (in the case
of
prospectuses, in the light of the circumstances in which they were made) not
misleading other than such information as provided in writing by Investors
for
use in such Registration Statement or prospectus. The term “best efforts” means,
among other things, that the Company shall submit to the SEC, within two (2)
Business Days after the later of the date that (i) the Company learns that
no review of a particular Registration Statement will be made by the staff
of
the SEC or that the staff has no further comments on a particular Registration
Statement, as the case may be, and (ii) the approval of Legal Counsel
(which shall not be unreasonably withheld or delayed) pursuant to
Section 3(c) (which approval is immediately sought), a request for
acceleration of effectiveness of such Registration Statement to a time and
date
not later than two (2) Business Days after the submission of such
request.
-4-
b. The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and
the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
be necessary to keep such Registration Statement effective 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 such Registration Statement. In the case of amendments
and supplements to a Registration Statement which are required to be filed
pursuant to this Agreement (including pursuant to this Section 3(b)) by
reason of the Company filing a report on Form 10-QSB, Form 10-KSB or
any analogous report under the Securities Exchange Act of 1934, as amended
(the
“1934
Act”),
the
Company shall have incorporated such report by reference into such Registration
Statement, if applicable, or shall file such amendments or supplements with
the
SEC on the same day on which the 1934 Act report is filed which created the
requirement for the Company to amend or supplement such Registration
Statement.
c. The
Company shall (A) permit Legal Counsel and the Investors to review and
comment upon (i) a Registration Statement at least three (3) Business Days
prior to its filing with the SEC and (ii) all amendments and supplements to
all Registration Statements (except for Annual Reports on Form 10-KSB, and
Quarterly Reports on Form 10-QSB and any similar or successor reports)
within a reasonable number of days prior to their filing with the SEC, and
(B) not file any Registration Statement or amendment or supplement thereto
in a form to which Legal Counsel or any Investor reasonably objects;
provided,
however,
that no
liquidated damages under Section 2 shall be due to any Investor if Legal
Counsel or any Investor shall have unnecessarily objected to the filing or
effectiveness of any Registration Statement such as to delay its filing or
effectiveness. The Company shall furnish to Legal Counsel and the Investors,
without charge, (i) copies of any correspondence from the SEC or the staff
of the SEC to the Company or its representatives relating to any Registration
Statement, to the extent containing information which the Company believes
does
not constitute material, nonpublic information concerning the Company and
(ii) promptly after the same is prepared and filed with the SEC, one copy
of any Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference,
if
requested by an Investor (if not available pursuant to Rule 424(b)). The
Company shall reasonably cooperate with Legal Counsel and the Investors in
performing the Company’s obligations pursuant to this
Section 3.
-5-
d. The
Company shall use its best efforts to (i) register and qualify, unless an
exemption from registration and qualification applies, the resale by Investors
of the Registrable Securities covered by a Registration Statement under such
other securities or “blue sky” laws of all applicable jurisdictions in the
United States, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications
in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not
be
required in connection therewith or as a condition thereto to (x) qualify
to do business in any jurisdiction where it would not otherwise be required
to
qualify but for this Section 3(d), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service
of process in any such jurisdiction. The Company shall promptly notify Legal
Counsel and each Investor who holds Registrable Securities of the receipt by
the
Company of any notification with respect to the suspension of the registration
or qualification of any of the Registrable Securities for sale under the
securities or “blue sky” laws of any jurisdiction in the United States or its
receipt of notice of the initiation or threatening of any proceeding for such
purpose.
e. The
Company shall notify Legal Counsel and each Investor in writing of the happening
of any event, as promptly as practicable after becoming aware of such event,
as
a result of which the prospectus included in a Registration Statement, as then
in effect, includes an untrue statement of a material fact or omission to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (provided that in no event shall such notice contain any
material, nonpublic information), and, subject to Section 3(q), promptly
prepare a supplement or amendment to such Registration Statement to correct
such
untrue statement or omission, and deliver ten (10) copies of such supplement
or
amendment to Legal Counsel and each Investor (or such other number of copies
as
Legal Counsel or such Investor may reasonably request). The Company shall also
promptly notify Legal Counsel and each Investor in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to
Legal
Counsel and each Investor by facsimile or e-mail on the same day of such
effectiveness), (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related prospectus or related
information, and (iii) of the Company’s determination that a post-effective
amendment to a Registration Statement would be appropriate.
-6-
f. The
Company shall use its best efforts to prevent the issuance of any stop order
or
other suspension of effectiveness of a Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible moment and
to
notify Legal Counsel and each Investor who holds Registrable Securities being
sold of the issuance of such order and the resolution thereof or its receipt
of
notice of the initiation or threat of any proceeding for such
purpose.
g. If,
after
the execution of this Agreement, an Investor believes, after consultation with
its legal counsel, that it could reasonably be deemed to be an underwriter
of
Registrable Securities, at the request of such Investor, the Company shall
furnish to such Investor, on the date of the effectiveness of the Registration
Statement and thereafter from time to time on such dates as an Investor may
reasonably request (i) 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 Investors, and (ii) an
opinion, dated as of such date, of 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
Investors.
h. If
after
the execution of this Agreement an Investor believes, after consultation with
its legal counsel, that it could reasonably be deemed to be an underwriter
of
Registrable Securities, at the request of such Investor, the Company shall
make
available for inspection by (i) any Investor, (ii) Legal Counsel and
(iii) one firm of accountants or other agents retained by the Investors
(collectively, the “Inspectors”),
all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the “Records”),
as
shall be reasonably deemed necessary by each Inspector, and cause the Company’s
officers, directors and employees to supply all information which any Inspector
may reasonably request; provided, however, that each Inspector shall agree
to
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors
are
so notified, unless (a) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in any Registration Statement or
is
otherwise required under the 1933 Act, (b) the release of such Records is
ordered pursuant to a final, non-appealable subpoena or order from a court
or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this Agreement. 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 Investors’ ability to sell Registrable Securities in a manner which
is otherwise consistent with applicable laws and regulations.
i. 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
or
the rules and regulations of any applicable trading market, (ii) the
disclosure of such information is necessary to avoid or correct a misstatement
or omission in any Registration Statement, (iii) the release of such
information is ordered pursuant to a subpoena or other final order from a court
or governmental body of competent jurisdiction, or (iv) such information
has been made generally available to the public other than by disclosure in
violation of this Agreement or any other agreement. The Company agrees that
it
shall, upon learning that disclosure of such information concerning an Investor
is sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt written notice to such Investor and allow
such
Investor, at the Investor’s expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such
information.
-7-
j. The
Company shall use its best efforts either to (i) cause all of the
Registrable Securities covered by a Registration Statement to be listed on
each
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) upon
request, secure the inclusion for quotation of all of the Registrable Securities
on the Nasdaq National Market or (iii) if, despite the Company’s best
efforts, the Company is unsuccessful in satisfying the preceding clauses, to
secure the inclusion for quotation of all of the Registrable Securities on
the
NASD’s OTC Bulletin Board or the pink sheets. The Company shall pay all fees and
expenses in connection with satisfying its obligation under this
Section 3(j).
k. The
Company shall cooperate with the Investors who hold Registrable Securities
being
offered and, to the extent applicable, facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing
the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case
may
be, as the Investors may reasonably request and registered in such names as
the
Investors may request.
l. If
requested by an Investor, the Company shall (i) as soon as practicable
incorporate in a prospectus supplement or post-effective amendment such
information as an Investor reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being offered or sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such offering;
(ii) as soon as practicable make all required filings of such prospectus
supplement or post-effective amendment after being notified of the matters
to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) as soon as practicable, supplement or make amendments to any
Registration Statement if reasonably requested by an Investor holding any
Registrable Securities.
m. The
Company shall use its best efforts to cause the Registrable Securities covered
by a Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to consummate the
disposition of such Registrable Securities.
-8-
n. The
Company shall make generally available to its security holders as soon as
practical, but not later than ninety (90) calendar days after the close of
the period covered thereby, an earnings statement (in form complying with,
and
in the manner provided by, the provisions of Rule 158 under the 0000 Xxx)
covering a twelve (12)-month period beginning not later than the first day
of
the Company’s fiscal quarter next following the effective date of a Registration
Statement.
o. The
Company shall otherwise use its best efforts to comply with all applicable
rules
and regulations of the SEC in connection with any registration
hereunder.
p. Within
two (2) Business Days after a Registration Statement which covers Registrable
Securities is declared effective by the SEC, the Company shall deliver, and
shall cause legal counsel for the Company to deliver, to the transfer agent
for
such Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit A.
q. Notwithstanding
anything to the contrary herein, at any time after the Effective Date, the
Company may delay the disclosure of material, non-public information concerning
the Company the disclosure of which at the time is not, in the good faith
opinion of the Board of Directors of the Company (following consultation with
its counsel), in the best interest of the Company (a “Grace
Period”);
provided, that the Company shall promptly (i) notify the Investors in
writing that such determination has been made (provided that in each notice
the
Company will not disclose the content of such material, non-public information
to the Investors) and the date on which the Grace Period will begin, and
(ii) notify the Investors in writing of the date on which the Grace Period
ends; and, provided further, that during any three hundred sixty five (365)
day
period such Grace Periods shall not exceed an aggregate of thirty (30) days
and
the first day of any Grace Period must be at least two (2) trading days after
the last day of any prior Grace Period (each, an “Allowable
Grace Period”).
For
purposes of determining the length of a Grace Period above, the Grace Period
shall begin on and include the date the Investors receive the notice referred
to
in clause (i) and shall end on and include the later of the date the
Investors receive the notice referred to in clause (ii) and the date
referred to in such notice. The provisions of Section 3(f) hereof shall not
be applicable during the period of any Allowable Grace Period. Upon expiration
of the Grace Period, the Company shall again be bound by the first sentence
of
Section 3(g) with respect to the information giving rise thereto unless
such material, non-public information is no longer applicable. Notwithstanding
anything to the contrary, the Company shall cause its transfer agent to deliver
unlegended shares of Common Stock to a transferee of an Investor in accordance
with the terms of the Securities Purchase Agreement in connection with any
sale
of Registrable Securities with respect to which an Investor has entered into
a
contract for sale and delivered a copy of the prospectus included as part of
the
applicable Registration Statement (unless an exemption from such prospectus
delivery requirement exists) prior to the Investor’s receipt of the notice of a
Grace Period and for which the Investor has not yet settled.
-9-
4. Obligations
of the Investors.
a. At
least
five (5) Business Days prior to the first anticipated filing date of a
Registration Statement, the Company shall notify each Investor in writing of
the
information the Company requires from each such Investor if such Investor elects
to have any of such Investor’s Registrable Securities included in such
Registration Statement. It shall be a condition precedent to the obligations
of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor (and to the Company’s
liability for damages under Section 2(d) to such Investor) that such
Investor shall furnish to the Company a completed and updated “Selling
Stockholder Questionnaire” in the form attached hereto as Exhibit C,
and
such other 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 effectiveness of the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
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 any Registration Statement hereunder, unless
such Investor has notified the Company in writing of such Investor’s election to
exclude all of such Investor’s Registrable Securities from such Registration
Statement.
c. Each
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Investor’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or the
first sentence of 3(e) or receipt of notice that no supplement or amendment
is
required. Notwithstanding anything to the contrary, the Company shall cause
its
transfer agent to deliver unlegended shares of Common Stock to a transferee
of
an Investor in accordance with the terms of the Securities Purchase Agreement
in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the Investor’s receipt of
a notice from the Company of the happening of any event of the kind described
in
Section 3(f) or the first sentence of 3(e) and for which the Investor has
not yet settled.
d. Each
Investor covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act as applicable to it or an exemption therefrom
in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
5. Expenses
of Registration.
All
reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing
and qualifications fees, printers and accounting fees, and fees and
disbursements of counsel for the Company shall be paid by the Company. The
Company shall also reimburse the Investors for the fees and disbursements of
Legal Counsel in connection with registration, filing or qualification pursuant
to Sections 2 and 3 of this Agreement.
-10-
6. Indemnification.
In
the
event any Registrable Securities are included in a Registration Statement under
this Agreement:
a. To
the
fullest extent permitted by law, the Company will, and hereby does, indemnify,
hold harmless and defend each Investor, the directors, officers, members,
partners, employees, agents, representatives of, and each Person, if any, who
controls any Investor within the meaning of the 1933 Act or the 1934 Act (each,
an “Indemnified
Person”),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
expenses, joint or several, (collectively, “Claims”)
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto (“Indemnified
Damages”),
to
which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of
or are based upon: (i) any untrue statement or alleged untrue statement of
a material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other “blue sky” laws of any jurisdiction in
which Registrable Securities are offered (“Blue
Sky Filing”),
or
the omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein 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 the light of the
circumstances under which the statements therein were made, not misleading,
(iii) any violation or alleged violation by the Company of the 1933 Act,
the 1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of
the
Registrable Securities pursuant to a Registration Statement or (iv) any
violation of this Agreement (the matters in the foregoing clauses (i)
through (iv) being, collectively, “Violations”).
Subject to Section 6(c), the Company shall reimburse the Indemnified
Persons, promptly as such expenses are incurred and are due and payable, for
any
legal fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim by an Indemnified Person
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 such
Indemnified Person for such Indemnified Person expressly for use in connection
with the preparation of the Registration Statement or any such amendment thereof
or supplement thereto, if such prospectus was timely made available by the
Company and (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 or delayed. 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.
-11-
b. In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement and each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act (each,
an “Indemnified
Party”),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
or
Indemnified Damages arise out of or are based upon any Violation, in each case
to the extent, and only to the extent, that such Violation occurs in reliance
upon and in conformity with written information furnished to the Company by
such
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 reasonably incurred by an Indemnified Party in connection with
investigating or defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 6(b) and the agreement with respect to
contribution contained in Section 7 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld
or
delayed; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim or Indemnified Damages as
does not exceed the net proceeds to such 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.
c. Promptly
after receipt by an Indemnified Person or Indemnified Party under this
Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof
is
to be made against any indemnifying party under this Section 6, deliver to
the indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person
or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its
own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party 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. In the case of
an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least a majority in
interest of the Registrable Securities included in the Registration Statement
to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or Claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or Claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying
party
shall, without the prior written consent of the Indemnified Party or Indemnified
Person, consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving
by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of
a
release from all liability in respect to such Claim or litigation, and such
settlement shall not include any admission as to fault on the part of the
Indemnified Party. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party
or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure
to
deliver written notice to the indemnifying party within a reasonable time of
the
commencement of any such action shall not relieve such indemnifying party of
any
liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced
in its ability to defend such action.
-12-
d. The
indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or Indemnified Damages are
incurred.
e. The
indemnity agreements contained herein shall be in addition to (i) any cause
of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. Contribution.
To
the
extent any indemnification by an indemnifying party is prohibited or limited
by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to
the fullest extent permitted by law; provided, however, that: (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in
Section 6 of this Agreement, (ii) no Person involved in the sale of
Registrable Securities, which Person is guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 0000 Xxx) in connection with
such sale, shall be entitled to contribution from any Person involved in such
sale of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received
by
such seller from the sale of such Registrable Securities pursuant to such
Registration Statement.
-13-
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 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, if true, 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 report of the Company and
such other reports and documents so filed by the Company (but only if such
reports are not publicly available on the XXXXX system), 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 such Investor’s 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) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act or 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; and (v) such transfer shall have been made in accordance
with the applicable requirements of the Securities Purchase
Agreement.
10. Amendment
of Registration Rights.
Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders
of
at least two-thirds of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each
Investor and the Company. No such amendment shall be effective to the extent
that it applies to less than all of the holders of the Registrable Securities.
No consideration shall be offered or paid to any Person to amend or consent
to a
waiver or modification of any provision of any of this Agreement unless the
same
consideration also is offered to all of the parties to this
Agreement.
-14-
11. Miscellaneous.
a. A
Person
is deemed to be a holder of Registrable Securities whenever such Person owns
or
is deemed to own of record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more Persons with
respect to the same Registrable Securities, the Company shall act upon the
basis
of instructions, notice or election received from the such record owner of
such
Registrable Securities.
b. Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by
the
sending party); or (iii) one (1) Business Day after deposit with a
nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If
to the
Company:
Natural
Nutrition, Inc.
000
Xxxxx
Xxxx Xxx Xxxx, Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxxxxx, Chief Executive Officer
Copy
to:
Xxxxxxxxxxx
& Xxxxxxxx Xxxxxxx Xxxxx Xxxxx LLP
000
X.
Xxxxxxxx Xxxx.
Xxxxx
0000
Xxxxx,
XX
00000-0000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxxx, Esq.
c. If
to
Buyer, to its address and facsimile number set forth in the Securities Purchase
Agreement, with copies to Buyer’s representatives as set forth in the Securities
Purchase Agreement, or to such other address and/or facsimile number and/or
to
the attention of such other Person as the recipient party has specified by
written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by
the recipient of such notice, consent, waiver or other communication,
(B) mechanically or electronically generated by the sender’s facsimile
machine containing the time, date, recipient facsimile number and an image
of
the first page of such transmission or (C) provided by a courier or
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above,
respectively.
-15-
d. 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.
e. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
Jersey, without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of New Jersey or any other jurisdictions) that
would cause the application of the laws of any jurisdictions other than the
State of New Jersey. Each party hereby irrevocably submits to the exclusive
jurisdiction of the Superior Court of New Jersey, sitting in Xxxxxx County
and
the United States District Court for the District of New Jersey sitting in
Newark, New Jersey 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 brought
in an inconvenient forum or that the venue of 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 for such 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.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
f. This
Agreement, the other Transaction Documents (as defined in the Securities
Purchase Agreement) and the instruments referenced herein and therein 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, the other Transaction Documents and the instruments referenced herein
and therein 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, this Agreement shall inure to the benefit
of and be binding upon the permitted successors and assigns of each of the
parties hereto.
h. The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
-16-
i. This
Agreement may be executed in identical counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same agreement.
This Agreement, once executed by a party, may be delivered to the other party
hereto by 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 any 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. All
consents and other determinations required to be made by the Investors pursuant
to this Agreement shall be made, unless otherwise specified in this Agreement,
by the Required Holders.
l. 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.
m. This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
[Signature
Page Follows]
-17-
IN
WITNESS WHEREOF,
Buyer
and the Company have caused their respective signature page to this Registration
Rights Agreement to be duly executed as of the date first written
above.
|
COMPANY:
NATURAL
NUTRITION, INC.
|
||
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxxxxxx | |
|
Name: Xxxxxxx
X. Xxxxxxxx
Title: Chief
Executive Officer
|
||
-18-
IN
WITNESS WHEREOF,
Buyer
and the Company have caused their respective signature page to this Registration
Rights Agreement to be duly executed as of the date first written
above.
|
CORNELL
CAPITAL PARTNERS, L.P.
BY: YORKVILLE
ADVISORS, LLC
ITS: INVESTMENT
MANAGER
|
||
| |
|
|
| By: | /s/ Xxxx Xxxxx | |
|
Name: Xxxx
Xxxxx
Title: Senior
Managing Director
|
||
-19-
EXHIBIT A
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
[Transfer
Agent]
[Address]
Attention:
Re: NATURAL
NUTRITION, INC..
Ladies
and Gentlemen:
[We
are][I am] counsel to Natural Nutrition, Inc., a Nevada corporation (the
“Company”),
and
have represented the Company in connection with that certain Securities Purchase
Agreement (the “Securities
Purchase Agreement”)
entered into by and between the Company and Buyer named therein (collectively,
the “Holders”)
pursuant to which the Company issued to the Holders a secured convertible note
(the “Note”)
convertible into the Company’s common stock, $0.001 par value per share (the
“Common
Stock”)
and a
warrant exercisable for shares of Common Stock (the “Warrant”).
Pursuant to the Securities Purchase Agreement, the Company also has entered
into
a Registration Rights Agreement with the Holders (the “Registration
Rights Agreement”)
pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Registration Rights Agreement),
including the shares of Common Stock issuable upon conversion of the Note and
the shares of Common Stock issuable upon exercise of the Warrant, under the
Securities Act of 1933, as amended (the “1933
Act”).
In
connection with the Company’s obligations under the Registration Rights
Agreement, on _________, 200_, the Company filed a Registration Statement on
Form S-3 (File No. 333-__________) (the “Registration
Statement”)
with
the Securities and Exchange Commission (the “SEC”)
relating to the Registrable Securities which names each of the Holders as a
selling stockholder thereunder.
In
connection with the foregoing, [we][I] advise you that a member of the SEC’s
staff has advised [us][me] by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER
TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and [we][I] have no
knowledge, after telephonic inquiry of a member of the SEC’s staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and the
Registrable Securities are available for resale under the 1933 Act pursuant
to
the Registration Statement.
A-1
This
letter shall serve as our standing opinion to you that the shares of Common
Stock are freely transferable by the Holders pursuant to the Registration
Statement. You need not require further letters from us to effect any future
legend-free issuance or reissuance of shares of Common Stock to the Holders
as
contemplated by the Company’s Irrevocable Transfer Agent Instructions dated
May 31, 2007.
|
Very
truly yours,
[ISSUER’S
COUNSEL]
By:
______________________
|
|
CC:
|
[LIST
NAMES OF HOLDERS]
|
A-2
EXHIBIT B
SELLING
STOCKHOLDERS
The
shares of Common Stock being offered by the selling stockholders are issuable
upon conversion of the convertible notes and upon exercise of the warrants.
For
additional information regarding the issuance of those convertible notes and
warrants, see “Private Placement of Convertible Note and Warrant” above. We are
registering the shares of Common Stock in order to permit the selling
stockholders to offer the shares for resale from time to time. Except for the
ownership of the Convertible Note and the Warrant issued pursuant to the
Securities Purchase Agreement and the ownership of that certain Debenture,
dated
September 9, 2005, in connection with the Securities Purchase Agreement, of
even date therewith, and the related transactions contemplated thereunder,
the
selling stockholders have not had any material relationship with us within
the
past three years.
The
table
below lists the selling stockholders and other information regarding the
beneficial ownership of the shares of Common Stock by each of the selling
stockholders. The second column lists the number of shares of Common Stock
beneficially owned by each selling stockholder, based on its ownership of the
convertible notes and warrants, as of , 200 , assuming conversion of all
convertible notes and exercise of the warrants held by the selling stockholders
on that date, without regard to any limitations on conversions or
exercise.
The
third
column lists the shares of Common Stock being offered by this prospectus by
the
selling stockholders.
[In
accordance with the terms of a registration rights agreement with the selling
stockholders, this prospectus generally covers the resale of at least [130%]
of
the sum of (i) the number of shares of Common Stock issuable upon
conversion of the convertible notes as of the trading day immediately preceding
the date the registration statement is initially filed with the SEC and
(ii) the number of shares of Common Stock issuable upon exercise of the
related warrants as of the trading day immediately preceding the date the
registration statement is initially filed with the SEC. Because the conversion
price of the convertible notes and the exercise price of the warrants may be
adjusted, the number of shares that will actually be issued may be more or
less
than the number of shares being offered by this prospectus. The fourth column
assumes the sale of all of the shares offered by the selling stockholders
pursuant to this prospectus.]
Under
the
terms of the convertible notes and the warrants, a selling stockholder may
not
convert the convertible notes or exercise the warrants to the extent such
conversion or exercise would cause such selling stockholder, together with
its
affiliates, to beneficially own a number of shares of Common Stock which would
exceed 4.99% of our then outstanding shares of Common Stock following such
conversion or exercise, excluding for purposes of such determination shares
of
Common Stock issuable upon conversion of the convertible notes which have not
been converted and upon exercise of the warrants which have not been exercised.
The number of shares in the second column does not reflect this limitation.
The
selling stockholders may sell all, some or none of their shares in this
offering. See “Plan of Distribution.”
B-1
|
Name
of Selling Stockholder
|
Number
of Shares Owned Prior to Offering
|
Maximum
Number of Shares to be Sold Pursuant to this
Prospectus
|
Number
of Shares Owned After Offering
|
|||
|
Cornell
Capital Partners, L.P.
|
B-2
PLAN
OF DISTRIBUTION
We
are
registering the shares of Common Stock issuable upon conversion of the
convertible notes and upon exercise of the warrants to permit the resale of
these shares of Common Stock by the holders of the convertible notes and
warrants from time to time after the date of this prospectus. We will not
receive any of the proceeds from the sale by the selling stockholders of the
shares of Common Stock. We will bear all fees and expenses incident to our
obligation to register the shares of Common Stock.
The
selling stockholders may sell all or a portion of the shares of Common Stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the shares of
Common Stock are sold through underwriters or broker-dealers, the selling
stockholders will be responsible for underwriting discounts or commissions
or
agent’s commissions. The shares of Common Stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions,
| · |
on
any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of
sale;
|
| · |
in
the over-the-counter market;
|
| · |
in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
|
| · |
through
the writing of options, whether such options are listed on an options
exchange or otherwise;
|
| · |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
| · |
block
trades in which the broker-dealer will attempt to sell the shares as
agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
| · |
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
| · |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| · |
privately
negotiated transactions;
|
| · |
to
cover short sales made after the date this Registration Statement is
declared effective by the SEC;
|
| · |
sales
pursuant to Rule 144;
|
B-3
| · |
broker-dealers
may agree with the selling securityholders to sell a specified number
of
such shares at a stipulated price per
share;
|
| · |
a
combination of any such methods of sale;
and
|
| · |
any
other method permitted pursuant to applicable
law.
|
If
the
selling stockholders effect such transactions by selling shares of Common Stock
to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of Common Stock for whom they may act as agent or
to
whom they may sell as principal (which discounts, concessions or commissions
as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales
of
the shares of Common Stock or otherwise, the selling stockholders may enter
into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the shares of Common Stock in the course of hedging in positions they
assume. The selling stockholders may also sell shares of Common Stock short
and
deliver shares of Common Stock covered by this prospectus to close out short
positions and to return borrowed shares in connection with such short sales.
The
selling stockholders may also loan or pledge shares of Common Stock to
broker-dealers that in turn may sell such shares.
The
selling stockholders may pledge or grant a security interest in some or all
of
the convertible notes, warrants or shares of Common Stock owned by them and,
if
they default in the performance of their secured obligations, the pledgees
or
secured parties may offer and sell the shares of Common Stock from time to
time
pursuant to this prospectus or any amendment to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act of 1933,
as amended, amending, if necessary, the list of selling stockholders to include
the pledgee, transferee or other successors in interest as selling stockholders
under this prospectus. The selling stockholders also may transfer and donate
the
shares of Common Stock in other circumstances in which case the transferees,
donees, pledgees or other successors in interest will be the selling beneficial
owners for purposes of this prospectus.
The
selling stockholders and any broker-dealer participating in the distribution
of
the shares of Common Stock may be deemed to be “underwriters” within the meaning
of the Securities Act, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act. At the time a particular offering of
the
shares of Common Stock is made, a prospectus supplement, if required, will
be
distributed which will set forth the aggregate amount of shares of Common Stock
being offered and the terms of the offering, including the name or names of
any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to
broker-dealers.
Under
the
securities laws of some states, the shares of Common Stock may be sold in such
states only through registered or licensed brokers or dealers. In addition,
in
some states the shares of Common Stock may not be sold unless such shares have
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
B-4
There
can
be no assurance that any selling stockholder will sell any or all of the shares
of Common Stock registered pursuant to the shelf registration statement, of
which this prospectus forms a part.
The
selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of
1934,
as amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of Common Stock by the selling
stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of Common
Stock to engage in market-making activities with respect to the shares of Common
Stock. All of the foregoing may affect the marketability of the shares of Common
Stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of Common Stock.
We
will
pay all expenses of the registration of the shares of Common Stock pursuant
to
the registration rights agreement, estimated to be $[ ] in total, including,
without limitation, Securities and Exchange Commission filing fees and expenses
of compliance with state securities or “blue sky” laws; provided, however, that
a selling stockholder will pay all underwriting discounts and selling
commissions, if any. We will indemnify the selling stockholders against
liabilities, including some liabilities under the Securities Act, in accordance
with the registration rights agreements, or the selling stockholders will be
entitled to contribution. We may be indemnified by the selling stockholders
against civil liabilities, including liabilities under the Securities Act,
that
may arise from any written information furnished to us by the selling
stockholder specifically for use in this prospectus, in accordance with the
related registration rights agreement, or we may be entitled to
contribution.
Once
sold
under the shelf registration statement, of which this prospectus forms a part,
the shares of Common Stock will be freely tradable in the hands of persons
other
than our affiliates.
B-5
EXHIBIT C
SELLING
STOCKHOLDER QUESTIONNAIRE
The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
| 1. |
Name.
|
| (a) |
Full
Legal Name of Selling Securityholder
|
| (b) |
Full
Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities Listed in Item 3 below are
held:
|
| (c) |
Full
Legal Name of Natural Control Person (which means a natural person
who
directly or indirectly alone or with others has power to vote or dispose
of the securities covered by the
questionnaire):
|
| 2. |
Address
for Notices to Selling
Securityholder:
|
Telephone:
Fax:
Contact
Person:
| 3. |
Beneficial
Ownership of Registrable
Securities:
|
Type
and
Principal Amount of Registrable Securities beneficially owned:
| 4. |
Broker-Dealer
Status:
|
| (a) |
Are
you a broker-dealer?
|
Yes
o
No o
Note: If
yes,
the SEC’s staff has indicated that you should be identified as an underwriter in
the Registration Statement.
| (b) |
Are
you an affiliate of a broker-dealer?
|
Yes
o
No o
| (c) |
If
you are an affiliate of a broker-dealer, do you certify that you bought
the Registrable Securities in the ordinary course of business, and
at the
time of the purchase of the Registrable Securities to be resold, you
had
no agreements or understandings, directly or indirectly, with any person
to distribute the Registrable Securities?
|
Yes
o
No o
C-1
|
Note:
|
If
no, the SEC’s staff has indicated that you should be identified as an
underwriter in the Registration
Statement.
|
| 5. |
Beneficial
Ownership of Other Securities of the Company Owned by the Selling
Securityholder.
|
Except
as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable
Securities listed above in Item 3.
Type
and
Amount of Other Securities beneficially owned by the Selling
Securityholder:
| 6. |
Relationships
with the Company:
|
Except
as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity
securities of the undersigned) has held any position or office or has had any
other material relationship with the Company (or its predecessors or affiliates)
during the past three years.
State
any
exceptions here:
C-2
The
undersigned agrees to promptly notify the Company of any inaccuracies or changes
in the information provided herein that may occur subsequent to the date hereof
and prior to the Effective Date for the Registration Statement.
By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 6 and the inclusion of such
information in the Registration Statement and the related prospectus. The
undersigned understands that such information will be relied upon by the Company
in connection with the preparation or amendment of the Registration Statement
and the related prospectus.
IN
WITNESS WHEREOF
the
undersigned, by authority duly given, has caused this Questionnaire to be
executed and delivered either in person or by its duly authorized
agent.
|
Dated:
_______________________________
|
Beneficial
Owner:____________________________
|
|
By:
_________________________
Name:
Title:
|
PLEASE
FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
THE ORIGINAL BY OVERNIGHT MAIL, TO:
[__________]
C-3
