REGISTRATION RIGHTS AGREEMENT
Exhibit
10.2
REGISTRATION
RIGHTS AGREEMENT
(this
“Agreement”),
dated
as of November 3, 2006, by and among Orion Ethanol, Inc. (formerly, RTO
Holdings, Inc.), a Nevada corporation, with headquarters located at 000
Xxxxx
Xxxx, Xxxxx, Xxxxxx 00000 (the “Company”),
and
the undersigned buyers (each, a “Buyer”,
and
collectively, the “Buyers”).
WHEREAS:
A. In
connection with the Subscription Agreement, by and among the Company and
the
Buyers (the “Subscription
Agreement”),
the
Company has agreed, upon the terms and subject to the conditions set forth
in
the Subscription Agreement, to issue and sell to each Buyer (i) senior
convertible notes of the Company (the “Notes”),
which
will, among other things, be convertible into shares of the Company’s common
stock, $0.001 par value per share (the “Common
Stock”,
as
converted, the “Conversion
Shares”)
in
accordance with the terms of the Notes.
B. In
accordance with the terms of the Subscription Agreement, the Company has
agreed
to provide certain registration rights under the Securities Act of 1933,
as
amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the “1933
Act”),
and
applicable state securities laws.
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants contained herein
and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and each of the Buyers hereby agree as
follows:
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1.
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Definitions.
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Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Subscription 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 New York are authorized or required by law to remain
closed.
b. “Closing
Date”
shall
have the meaning set forth in the Subscription 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, 180 calendar days after the Closing Date
or (ii)
in the event that the Registration Statement is subject to a review by
the
SEC,
1
240
calendar days after the Closing Date; provided, however, that if the Company
effects a Qualified Financing on or before a date that is 150 calendar
days
after the Closing Date, then the Effectiveness Deadline shall be extended
to
such date as the Company is required to cause any resale registration statement
relating to securities issued in a Qualified Financing to go
effective.
e. “Filing
Deadline”
means
150 calendar days after the Closing Date; provided, however, that if the
Company
effects a Qualified Financing on or before the end of such 150 day period,
then
the Filing Deadline shall be extended to such date as the Company is required
to
cause any resale registration statement relating to securities issued in
a
Qualified Financing to be filed.
f. “Investor”
means
a
Buyer or any transferee or assignee thereof to whom a 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 Notes and (ii) any capital stock of the Company issued or issuable
with
respect to the Conversion Shares, as a result of any stock split, stock
dividend, recapitalization, exchange or similar event or otherwise, without
regard to any limitations on conversions of the Notes.
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. “Required
Registration Amount”
means
130% (or such lesser amount as the SEC may permit as evidenced in comments
received to a filed Registration Statement) of the number of Conversion
Shares
issued and issuable pursuant to the Notes as of the trading day immediately
preceding the applicable date of determination.
m. “Rule
415”
means
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis.
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n. “SEC”
means
the United States Securities and Exchange Commission.
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2.
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Registration.
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a. Mandatory
Registration.
On or
before the Filing Deadline, the Company shall prepare and 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. 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(d).
The Registration Statement prepared pursuant hereto shall register for
resale at
least the number of shares of Common Stock equal to the Required Registration
Amount as of date the Registration Statement is initially filed with the
SEC.
The Registration Statement shall contain “Selling
Stockholders”
and
“Plan
of Distribution”
sections that are reasonably satisfactory to the Legal Counsel. The Company
shall use its best efforts to have the Registration Statement declared
effective
by the SEC as soon as practicable, but in no event later than the Effectiveness
Deadline. By 9:30 am on the date 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.
b. Allocation
of Registrable Securities.
The
initial number of Registrable Securities included in any Registration Statement
and any increase in the number of Registrable Securities included therein
shall
be allocated pro rata among the Investors based on the number of Registrable
Securities held by each Investor at the time the Registration Statement
covering
such initial number of Registrable Securities or increase thereof is declared
effective by the SEC. In the event that an Investor sells or otherwise
transfers
any of such Investor’s Registrable Securities, each transferee shall be
allocated a pro rata portion of the then remaining number of Registrable
Securities included in such Registration Statement for such transferor.
Any
shares of Common Stock included in a Registration Statement and which remain
allocated to any Person which ceases to hold any Registrable Securities
covered
by such Registration Statement shall be allocated to the remaining Investors,
pro rata based on the number of Registrable Securities then held by such
Investors which are covered by such Registration Statement. Other than
securities issued in a Qualified Financing and the securities set forth
in
Schedule
2(b),
in no
event shall the Company include any securities other than Registrable Securities
on any Registration Statement without the prior written consent of the
Required
Holders.
c. Legal
Counsel.
Subject
to Section 5 hereof, the Required Holders shall have the right to select
one
legal counsel to review and oversee any registration pursuant to this Section
2
(“Legal
Counsel”),
as
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.
d. 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
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acceptable
to the Legal Counsel 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.
e. Sufficient
Number of Shares Registered.
In the
event the number of shares available under a Registration Statement filed
pursuant to Section 2(a) is insufficient to cover all of the Registrable
Securities required to be covered by such Registration Statement or an
Investor’s allocated portion of the Registrable Securities pursuant to Section
2(b), the Company shall amend the applicable Registration Statement, or
file a
new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover at least the Required Registration
Amount
as of the trading day immediately preceding the date of the filing of such
amendment or new Registration Statement, in each case, as soon as practicable,
but in any event not later than thirty (30) days after the necessity therefor
arises. The Company shall use its best efforts to cause such amendment
and/or
new Registration Statement to become effective as soon as practicable following
the filing thereof. For purposes of the foregoing provision, the number
of
shares available under a Registration Statement shall be deemed “insufficient to
cover all of the Registrable Securities” if at any time the number of shares of
Common Stock available for resale under the Registration Statement is less
than
the product determined by multiplying (i) the Required Registration Amount
as of
such time by (ii) 0.90. The calculation set forth in the foregoing sentence
shall be made without regard to any limitations on the conversion of the
Notes
such calculation shall assume that the Notes are then convertible into
shares of
Common Stock at the then prevailing Conversion Rate (as defined in the
Notes).
f. 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 one and one-half
percent (1.5%) of the aggregate Purchase Price (as such term is defined
in the
Subscription 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 day (pro
rated for
periods totaling less than thirty days) after a Filing Failure until such
Filing
Failure is cured; (ii) the day of an Effectiveness Failure and on every
thirtieth day (pro rated for periods totaling
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less
than
thirty days) after an Effectiveness Failure until such Effectiveness Failure
is
cured; and (iii) the initial day of a Maintenance Failure and on every
thirtieth
day (pro rated for periods totaling less than thirty 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 one and one-half percent
(1.5%)
of penalties during any thirty day period or for multiple events during
any
thirty day period. The payments to which a holder shall be entitled pursuant
to
this Section 2(g) 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 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. Notwithstanding
anything herein to the contrary, in no event shall the Registration Delay
Payments exceed twelve and one-half percent (12.5%) of the aggregate Purchase
Price for all Investors (the “Registration
Delay Payments Cap”).
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3.
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Related
Obligations.
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At
such
time as the Company is obligated to file a Registration Statement with
the SEC
pursuant to Section 2(a), 2(d) or 2(e), 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” shall
mean, 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.
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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 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.
d. The
Company shall furnish to each Investor whose Registrable Securities are
included
in any Registration Statement, without charge, (i) promptly after the same
is
prepared and filed with the SEC, at least one copy of such Registration
Statement and any amendment(s) thereto, including financial statements
and
schedules, all documents incorporated therein by reference, if requested
by an
Investor, all exhibits and each preliminary prospectus, (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the prospectus
included in such Registration Statement and all amendments and supplements
thereto (or such other number of copies as such Investor may reasonably
request)
and (iii) such other documents, including copies of any preliminary or
final
prospectus, as such Investor may reasonably request from time to time in
order
to facilitate the disposition of the Registrable Securities owned by such
Investor.
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e. 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(e), (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.
f. 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(r), 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.
g. 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.
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h. 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.
i. 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) 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 (i) and (ii), to secure the inclusion
for
quotation of all of the Registrable Securities on the American Stock Exchange
for such Registrable Securities and, without limiting the generality of
the
foregoing, to use its best efforts to arrange for at least two market makers
to
register with the National Association of Securities Dealers, Inc.
(“NASD”)
as
such with respect to such Registrable Securities or (iv) if, despite the
Company’s best efforts, the Company is unsuccessful in satisfying the preceding
clauses (i)-(iii), to secure the inclusion for quotation of all of the
Registrable Securities on the NASD’s OTC Bulletin Board. The Company shall pay
all fees and expenses in connection with satisfying its obligation under
this
Section 3(k).
j. 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.
k. 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
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to
any
Registration Statement if reasonably requested by an Investor holding any
Registrable Securities.
l. 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.
m. The
Company shall make generally available to its security holders as soon
as
practical, but not later than ninety (90) 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-month period beginning not later than the first day of the Company’s
fiscal quarter next following the effective date of a Registration
Statement.
n. 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.
o. 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 a form
that is
reasonably satisfactory to the Legal Counsel.
p. 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(g) 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(f) 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
Subscription Agreement in connection with any sale of Registrable Securities
with respect to which an
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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.
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4.
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Obligations
of the Investors.
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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(f) to such Investor) that such Investor
shall furnish to the Company a completed and updated “Selling Stockholder
Questionnaire,” in a form reasonably satisfactory to Legal Counsel, 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(g) or the first
sentence of 3(f), 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(g) or the
first
sentence of 3(f) 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 Subscription 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(g) or the first sentence of 3(f) 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.
|
10
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.
|
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 by the Company (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,
11
if
such
prospectus was timely made available by the Company pursuant to Section
3(d) 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.
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
12
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.
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 Subscription Agreement.
|
10.
|
Amendment
of Registration Rights; Automatic Termination of Agreement.
|
a. 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 Required
Holders. 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
14
this
Agreement unless the same consideration also is offered to all of the parties
to
this Agreement.
b. If
a
Qualified Financing occurs on or before the 150th
day
after the Closing Date and in connection with such Qualified Financing
the
Investors enter into a separate agreement relating to the registration
of the
Registrable Securities, then this Agreement shall automatically terminate
and
the obligations of the parties hereunder shall automatically cease and
such
other agreement shall supersede this Agreement.
|
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 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:
000
Xxxxx
Xxxx
Xxxxx,
Xxxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Chief Financial Officer
With
a
copy (which shall not constitute notice) to:
Xxxxxx
Xxxx & Priest LLP
000
Xxxxxx Xxxxxx, XX
Xxxxxxxxxx,
XX 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxx X. Xxxxxxxxxx, Esq.
If
to a
Buyer, to its address and facsimile number set forth on the signature page
of
the Subscription 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
15
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.
c. Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate
as a
waiver thereof.
d. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of
New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdictions) that
would
cause the application of the laws of any jurisdictions other than the State
of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, 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.
e. 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.
16
f. 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.
g. The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
h. This
Agreement may be executed in 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.
i. Each
party shall do and perform, or cause to be done and performed, all such
further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as 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.
j. 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.
k. The
language used in this Agreement will be deemed to be the language chosen
by the
parties to express their mutual intent and no rules of strict construction
will
be applied against any party.
l. 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.
m. The
obligations of each Buyer hereunder are several and not joint with the
obligations of any other Buyer, and no provision of this Agreement is intended
to confer any obligations on any Buyer vis-à-vis any other Buyer. Nothing
contained herein, and no action taken by any Buyer pursuant hereto, shall
be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers
are
in any way acting in concert or as a group with respect to such obligations
or
the transactions contemplated herein.
[Signature
Page Follows]
17
IN
WITNESS WHEREOF,
each
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.
|
|
||
|
By:
|
/s/Xxxxxxx
X. Xxxxxx
|
|
|
Name:
Xxxxxxx X. Xxxxxx
Title:
EVP-Devlopment
|
||
18
IN
WITNESS WHEREOF,
each
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.
|
BUYERS:
/s/Xxxx
Xxxxxxxx
|
||
|
/s/Xxxxx
X.
Xxxxx
|
|
/s/
Xxxx X.
Xxxxx
|
||
|
/s/
Xxxxx X.
Xxxxxxx
|
|
/s/
Xxxxxx X.
Xxxxxxxxx
|
||
|
/s/
Xxxxx and
Xxxxxxxxx Xxxxxx
|
||
|
/s/
Xxxx X.
Xxxxx
|
||
|
/s/
Xxxxx X.
Xxxxxx
|
||
|
/s/
Xxxxx X.
Xxxxxx
|
|
/s/
Paxton
White
|
||
|
/s/
Xxxxx
White
|
||
|
/s/
Xxxx X.
Xxxxxx
|
|
DOC
Investments, LLC
|
||
|
By:
|
/s/
Xxxxx
Xxxxxxx
|
|
|
President/Managing
Member
|
||
|
DOC
Investment No. 2, LLC
|
||
|
By:
|
/s/
Xxxxx
Xxxxxxx
|
|
|
President/Managing
Member
|
|
HB
Partners,
L.L.C.
|
||
|
By:
|
/s/
Xxxxxxx
X. Xxxxx
|
|
|
Vice
President
|
|
West
Coast
Opportunity Fund, LLC
|
||
|
By:
|
/s/
Atticus
Xxxx
|
|
|
Vice
President
|
||
|
Iwanta
Oil,
LLC
|
||
|
By:
|
/s/
Xxxxxxx
X. Xxxxx
|
|
|
Managing
Partner
|
|
R.E.
Trust
|
||
|
|
/s/
|
|
|
|
|
E.I.G.
LLC
|
||
|
By:
|
/s/
Xxxxx
Xxxxxxxx
|
|
|
Authorized
Agent
|
19
