REGISTRATION RIGHTS AGREEMENT
Exhibit
4.6
This
Registration Rights Agreement (the “Agreement”) is made and entered into as of
7th day of March 2007 by and among NaturalNano,
Inc.,
a
Nevada
corporation (the “Company”), and the investors identified on the signature page
hereto (each an “Investor”
and
collectively “Investors”).
W
I T
N E S S E T H:
WHEREAS,
pursuant to the Loan Agreement, as hereinafter defined, the Investors are
purchasing the Company’s 8% Senior Secured Convertible Notes and Warrants, upon
conversion and exercise of which the Investors will receive shares of the
Company’s common stock, par value $.001 per share (“Common Stock”);
and
WHEREAS,
the
ability of the Investors to sell their shares of Common Stock is subject to
certain restrictions under the Securities Act; and
WHEREAS,
as a
condition to the Investors’ obligations to purchase the Notes and Warrants, the
Company has agreed to provide the Investors with a mechanism that will permit
the Investors to sell their shares of Common Stock in the future, as set forth
in this Agreement.
NOW,
THEREFORE,
in
consideration of the premises and of the mutual covenants and agreements, and
subject to the terms and conditions herein contained, the parties hereto hereby
agree as follows:
1. Definitions.
(a) Unless
otherwise defined herein, capitalized terms used herein shall have the following
meanings:
(i)
“Affiliate” of a Person means any Person: (a) which directly or indirectly
Controls, or is Controlled by, or is under common Control with, the subject
Person; (2) which directly or indirectly beneficially owns or holds a majority
of the outstanding shares of any class of voting stock of the subject Person;
or
(3) a majority of the shares of any class of voting stock of which is directly
or indirectly beneficially owned or held by the subject Person.
(ii)
“Black-Out Period” shall have the meaning set forth in Section 4(a)(ii) of this
Agreement.
(iii)
“Business Day” means any day except a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to be
closed.
(iv)
“Closing Date” shall have the meaning set forth in the Loan
Agreement.
(v)
“Common Stock” shall have the meaning set forth in the preamble and any other
capital stock of the Company which is issuable upon conversion of the Notes
and
exercise of the Warrants.
(vi)
“Commission” means the Securities and Exchange Commission
(vii)
“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or
otherwise.
(viii)
“Covered Securities” shall mean the Notes, the Warrants and any other securities
upon the conversion or exercise of which Registrable Securities may be
issued.
(ix)
“Daily Amount” shall have the meaning set forth in Section 2(f) of this
Agreement.
(x)
“Delay Period” shall have the meaning set forth in Section 2(f) of this
Agreement.
(xi)
“Demand Registration” shall have the meaning set forth in Section 2(b) of this
Agreement.
(xii)
“Exchange” means the principal stock exchange or market on which the Company’s
Common Stock is traded.
(xiii)
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder, or any similar or successor
statute.
(xiv)
“Expenses” means all expenses incident to the Company’s performance of or
compliance with its obligations under this Agreement, including, without
limitation, all registration, filing, listing, stock exchange and NASD fees,
all
fees and expenses of complying with state securities or blue sky laws (including
fees, disbursements and other charges of counsel for the underwriters only
in
connection with blue sky filings), all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees, disbursements and other
charges of counsel for the Company and of its independent public accountants,
including the expenses incurred in connection with “cold comfort” letters
required by or incident to such performance and compliance, any fees and
disbursements of underwriters customarily paid by the issuer of securities,
and
including legal fees of not more than twenty thousand dollars ($20,000) to
one
counsel selected by the Investors, but excluding from the definition of Expenses
underwriting discounts and commissions and applicable transfer taxes, if any,
or
legal and other expenses incurred by any sellers (except as provided above),
which discounts, commissions, transfer taxes and legal and other expenses shall
be borne by the seller or sellers of Registrable Stock in all
cases.
(xv)
“Filing Date” shall mean the date by which the Company shall file a registration
statement pursuant to Section 2(a) of this Agreement.
(xvi)
“Holder” shall mean a holder of Covered Securities or Registrable
Securities.
(xvii)
“Loan Agreement” shall mean the Loan and Security Agreement dated the date of
this Agreement among the Company and the Investors.
(xviii)
“NASD” means the National Association of Securities Dealers, Inc. and NASD
Regulation, Inc.
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(xix)
“Person” means any individual, corporation, partnership, limited liability
company, firm, joint venture, association, joint stock company, trust,
unincorporated organization, governmental or regulatory body or subdivision
thereof or other entity.
(xx)
“Purchase Price” shall mean $3,250,000.
(xxi)
“Recapitalization Event” shall mean any stock dividend, split or other
distribution, combination or shares or reverse split, or recapitalization.
(xxii)
“Registrable Securities” means and includes the shares of Common Stock issuable
upon conversion of the Notes and upon exercise of the Warrants issued pursuant
to the Loan Agreement and any additional shares of Common Stock which may be
issuable pursuant the Loan Agreement or this Agreement or upon conversion or
exercise of any securities issuable pursuant to the Loan Agreement or this
Agreement, including shares of Common Stock issuable as interest pursuant to
the
Note and any securities issued pursuant to Section 7.18 of the Loan Agreement
and such number of shares issuable pursuant to Section 2(f)(i) of this Agreement
as the Holders may request. As to any particular Registrable Securities, such
securities will cease to be Registrable Securities when (a) they have been
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) they are or may be freely
traded without registration and without restriction pursuant to Rule 144(k)
under the Securities Act (or any similar provisions that are then in effect),
or
(c) they have been otherwise transferred and new certificates for them not
bearing a restrictive legend have been properly issued by the Company, and
the
Company shall not have “stop transfer” instructions against them.
(xxiii)
“Registration Maintenance Period” has the meaning set forth in Section 4(a)(ii)
of this Agreement.
(xxiv)
“Required Effectiveness Date” shall have the meaning set forth in Section 2(a)
of this Agreement.
(xxv)
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar or successor statute.
(xxvi)
“Transfer” means any transfer, sale, assignment, pledge, hypothecation or other
disposition of any interest. “Transferor” and “Transferee” have correlative
meanings.
(b) Unless
defined otherwise, capitalized terms used in this Agreement that are defined
in
the Loan Agreement shall have the identical meaning herein as in the Loan
Agreement.
(c) All
references to laws, rules and forms shall relate to the laws, rules and forms
as
in effect on the date of the Agreement and shall include any amendments thereto
and any subsequent successor laws, rules and forms.
2. Registration
of Registrable Securities.
(a) Mandatory
Registration.
The
Company shall prepare and file within 60 days following the Closing Date (the
“Filing Date”) a registration statement (the “Registration Statement”) covering
the sale of such number of Registrable Securities as the Investors shall elect
by written notice to the Company, and absent such election, covering the sale
of
all of the Registrable Securities. The Company shall use its best efforts to
cause the Registration Statement to be declared effective by the Commission
on
the Required Effective Date. The Required Effective Date shall mean the first
to
occur of (i) 120 days following the Closing Date or 150 days from the Closing
Date if the staff of the Commission issues comments on the Registration
Statement, (ii) ten (10) days following the receipt of a “No Review” or similar
letter from the Commission with respect to the Registration Statement, or (iii)
the third (3rd)
business day following the day the Company receives notice from the Commission
that the Commission has determined that the Registration Statement is eligible
to be declared effective without further comments by the Commission. Nothing
contained herein shall be deemed to limit the number of Registrable Securities
to be registered by the Company pursuant to this Agreement. As a result, if
the
Registration Statement does not relate to the maximum number of Registrable
Securities acquired by (or issuable to) the holders of the Shares of the Company
issued to the Investors pursuant to the Notes, the Loan Agreement and the
Warrants the Company shall be required to promptly file a separate registration
statement (utilizing Rule 462 promulgated under the Securities Act, if
applicable) relating to such Registrable Securities which then remain
unregistered. The provisions of this Agreement shall relate to any such separate
registration statement as if it were an amendment to the Registration
Statement.
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(b) Demand
Registration.
Subject
to the limitations of Section 2(a) of this Agreement, at any time and from
time
to time, the Investors may request the registration under the Securities Act
of
all or part of the Registrable Shares then outstanding (a “Demand
Registration”). Subject to the conditions of Section 3 of this Agreement, the
Company shall use its best efforts to file such registration statement under
the
Securities Act as promptly as practicable, but not later than sixty (60) days
after the date any such request is received by the Company and to cause such
registration statement to be declared effective, subject to the policies of
the
Commission relating to the filing of registration statements relating to
securities acquired in the same or related transactions. The Company shall
notify the Investors promptly when any such registration statement has been
declared effective. The parties intend that all Registrable Securities are
to be
registered pursuant to Section 2(a) of this Agreement, and that this Section
2(b) is intended solely to provide the Investors with registration rights in
the
event that all of the Registrable Securities are not included in the
registration statement required by Section 2(a), either because the number
of
Registrable Shares had to be reduced in order for the offering to be deemed
a
secondary offering under Rule 415 of the Commission pursuant to the Securities
Act or because the Investors believed that the Commission’s formal or informal
guidelines would not permit the registration of all of the Registrable
Securities.
(c) Registration
Statement Form.
Registration statements under Section 2(a) and Section 2(b) shall be on the
appropriate registration form of the Commission as shall permit the disposition
of such Registrable Securities in accordance with the intended method or methods
of disposition specified in the Registration Statement.
(d) Expenses.
The
Company will pay all Expenses in connection with any registration required
by
under Sections 2(a) and 2(b) of this Agreement.
(e) Effective
Registration Statement.
A
registration required to be filed pursuant to Sections 2(a) and 2(b) shall
not
be deemed to have been effected (i) unless a registration statement with respect
thereto has become effective, provided that a registration which does not become
effective after the Company filed a registration statement with respect thereto
solely by reason of the refusal to proceed of any holder of Registrable
Securities (other than a refusal to proceed based upon the advice of counsel
set
forth in a letter signed by such counsel and provided to the Company relating
to
a disclosure matter unrelated to such holder) shall be deemed to have been
effected by the Company, (ii) if, after it has become effective, such
registration becomes subject to any stop order, injunction or other order or
extraordinary requirement of the Commission or other governmental agency or
court for any reason and such stop order or other action continues in effect
for
five trading days or (iii) if, after it has become effective, such registration
ceases to be effective for more than the allowable Black-Out
Periods.
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(f) Liquidated
Damages.
(i)
If
(a) the Company does not file a Registration Statement covering Registrable
Securities pursuant to Section 2(a) of this Agreement by the Filing Date, or
(b)
the Registration Statement filed pursuant to said Section 2(a) is not declared
effective by the Required Effective Date, or (c) the Registrable Securities
are
registered pursuant to an effective Registration Statement and such Registration
Statement or other Registration Statement(s) demanded by Investors including
the
Registrable Securities is not effective in the period from the Required
Effective Date through two years following the Closing Date, subject to
allowable Black-Out Periods, the Company shall pay the Investors in kind, as
liquidated damages and not as a penalty, an amount equal to the applicable
Daily
Amount for each day in each of the following periods (a “Delay Period”): the
period (x) between the Filing Date and the date that the Registration Statement
is filed with the Commission, (y) between the Required Effective Date and the
date that the Registration Statement is declared effective and (z) during which
the Registration Statement is not effective other than, in each case, for
permitted Black-Out Periods. The liquidated damages shall accrue on the first
day of each Delay Period and be payable on the same date of each of the
following calendar months which includes any part of the Delay Period. Such
shares shall be delivered not later than the first business day of the calendar
month following the month in which such shares accrued in accordance with the
preceding sentence. The parties agree that the only damages payable for a
violation of the terms of this Agreement with respect to which liquidated
damages are expressly provided shall be such liquidated damages. Nothing shall
preclude the Investors from pursuing or obtaining specific performance or other
equitable relief with respect to this Agreement. The parties hereto agree that
the liquidated damages provided for in this Section 2(f) constitute a reasonable
estimate of the damages that may be incurred by the Investors by reason of
the
failure of the Registration Statement(s) to be filed or declared effective
or to
be maintained effective in accordance with the provisions hereof. The term
“Daily Amount” shall mean 0.0333% of the principal amount of Notes relating to
the shares of Common Stock issuable upon conversion of the Notes registered
or
to be registered. For example, if the shares of Common Stock issuable upon
conversion of Notes in the principal amount of $1,000,000 are registered in
the
Registration Statement for sale by a Holder, the Daily Amount relating to such
Holder will be $333.33. The Daily Amount shall be paid in cash unless any Holder
shall elect, with respect to his securities, to receive payment of liquidated
damages in shares of Common Stock. Payment shall be made monthly, not later
than
the fifth business day of the month for liquidated damages accrued during the
prior calendar month. If a Holder desires to receive payment for liquidated
damages due with respect to any month in stock, such holder shall advise the
Company in writing not later than the last day of the month of such election.
Such election shall continue in force until and unless the Holder notifies
the
Company that it revokes the election, in which event the Company shall
thereafter make payment in cash. If, at the election of the Holder, the Company
pays liquidated damages in shares of Common Stock, such shares of Common Stock
shall be valued at the average of the closing price per share of the Common
Stock (as reported by Bloomberg L.P. or, if the Common Stock is traded on the
Nasdaq Stock Market or the New York or American Stock Exchange, as reported
by
such market or exchange) for the last five trading days of the calendar month
with respect to which the liquidated damages are accrued.
(ii)
Notwithstanding the provisions of Section 2(f)(i) of this
Agreement:
(A) The
obligation of the Company with respect to any Investor terminates when the
sum
of (x) the Registrable Securities issuable upon conversion of exercise of
Covered Securities owned by such Investor and its transferees plus (y) the
Registrable Securities such Investor and its transferees own, in the aggregate
represent less than 5% of its shares of Registrable Securities issuable upon
the
Covered Securities initially purchased by the Investor pursuant to the Loan
Agreement.
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(B) In
the
event that the Company shall fail to file the Registration Statement by the
Filing Date but the Registration Statement shall have been declared effective
by
the Required Effectiveness Date, then no liquidated damages shall be payable
with respect to the failure to file by the Filing Date. The Company shall pay
any such liquidated damages into an escrow account with counsel acceptable
to
the Holders, and, if the Registration Statement is not declared effective by
the
Required Effective Date, the liquidated damages for the failure to file by
the
Filing Date shall be promptly paid to the Holders on the first business day
following the Required Effectiveness Date.
(C) In
the
event that, because of the limitation resulting from the Commission’s
interpretation of Rule 415 of the Commission pursuant to the Securities Act,
the
Company is unable to register all of the Registrable Securities, the liquidated
damages per day shall be based on the number of shares of Common Stock issuable
upon conversion of the Notes which are included in the Registration Statement.
(D) In
the
event that, at the time of a failure of the Company to maintain the
effectiveness of the Registration Statement, the Holders have sold Registrable
Securities pursuant to the Registration Statement, no liquidated damages shall
be payable with respect to such Registrable Securities.
(E) The
maximum liquidated damages payable pursuant to this Section 2(f) shall be
$803,400.
(F) No
fractional shares of Common Stock shall be issued. Any fractional shares which
would otherwise be issued on any date on which Common Stock is to be issued
pursuant to this Section 2(f) of this Agreement, shall be carried forward;
provided, however, that if, at the expiration of the period during which
liquidated damages is payable there remains a fractional shall which has not
been applied to liquidated damages, the Company shall have no further obligation
to issue such fractional share.
(G) In
no
event shall the Company be required to pay any liquidated damages in the event
that the Company can demonstrate by clear and convincing evidence that the
failure of the registration statement to be declared effective by the Required
Effective Date results in whole or in part from either (a) the failure of any
Investor to provide information relating to the Investor and its proposed method
of sale or any other information concerning the Investor that is required to
be
included in the registration statement or (b) any delays resulting from
questions raised by the Commission or any other regulatory agency, market or
exchange concerning any Investor or the affiliates of any Investor.
3. Piggy-Back
Registration Rights.
(a) Registration
Statement.
Provided that the Registrable Securities have not been registered or if a
registration statement has not been filed with respect to the Registrable
Securities, if at any time after the date hereof but before the second
anniversary of the date hereof, the Company proposes to register any of its
securities under the Securities Act (other than by a registration in connection
with an acquisition in a manner which would not permit registration of
Registrable Securities for sale to the public, on Form S-8, or any successor
form thereto, on Form S-4, or any successor form thereto and other than pursuant
to Section 2 of this Agreement), whether or not on an underwritten basis (either
best-efforts or firm-commitment), then, the Company will each such time give
prompt written notice to all holders of Registrable Securities and Covered
Securities of its intention to do so and of such holders of Registrable
Securities’ rights under this Section 3(a). Upon the written request of any such
holders of Registrable Securities made within ten (10) days after the receipt
of
any such notice (which request shall specify the Registrable Securities intended
to be disposed of by such holders of Registrable Securities and the intended
method of disposition thereof), the Company will, subject to the terms of this
Agreement, use its commercially reasonable best efforts to effect the
registration under the Securities Act of the Registrable Securities, to the
extent requisite to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of such Registrable Securities so to be
registered, by inclusion of such Registrable Securities in the registration
statement which covers the securities which the Company proposes to register,
provided that if, at any time after written notice of its intention to register
any securities and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for
any
reason either not to register or to delay registration of such securities,
the
Company may, at its election, give written notice of such determination to
each
holders of Registrable Securities and, thereupon, (i) in the case of a
determination not to register, shall be relieved of this obligation to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay the Expenses in connection therewith), without prejudice,
however, to the rights of any holder or holders of Registrable Securities
entitled to do so to request that such registration be effected as a
registration under Section 2, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable Securities,
for the same period as the delay in registering such other securities. No
registration effected under this Section 3(a) shall relieve the Company of
its
obligation to effect any registration upon request under Section 2 except to
the
extent that Registrable Securities are registered and sold pursuant thereto.
The
Company will pay all Expenses in connection with each registration of
Registrable Securities requested pursuant to this Section 3(a).
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(b) Priority
In Incidental Registrations.
If the
managing underwriter of an underwritten offering contemplated by this Section
3
shall inform the Company and holders of the Registrable Securities requesting
such registration by letter of its belief that the number of securities
requested to be included in such registration exceeds the number which can
be
sold in such offering, then the Company will include in such registration,
to
the extent of the number which the Company is so advised can be sold in such
offering, (i) first securities proposed by the Company to be sold for its own
account, and (ii) second to holders of securities having demand registration
rights and exercising such rights in connection with such registration statement
and the holders of Registrable Securities and Covered Securities, on a pari
passu basis and (iii) third securities of other selling security holders
requesting to be included in such registration (other than affiliates of the
Company), on a pari passu basis, and (iv) to affiliates of the
Company.
4. Registration
Procedures.
(a) Procedures.
If and
whenever the Company is required to effect the registration of any Registrable
Securities under the Securities Act as provided in Section 2(a) and 2(b) of
this
Agreement, the Company shall, as expeditiously as possible:
(i)
prepare and file with the Commission the Registration Statement, or amendments
thereto, to effect such registration (including such audited financial
statements as may be required by the Securities Act or the rules and regulations
promulgated thereunder) and thereafter use its commercially reasonable best
efforts to cause such registration statement to be declared effective by the
Commission, as soon as practicable, but in any event no later than the Required
Effectiveness Date (with respect to a registration pursuant to Section 2(a)
of
this Agreement); provided, however, that before filing such registration
statement or any amendments thereto, the Company will furnish to one counsel
selected by the holders of Registrable Securities which are to be included
in
such registration, copies of all such documents proposed to be
filed;
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(ii)
with
respect to any registration statement pursuant to Section 2(a) or Section 2(b),
prepare and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be
necessary to keep such registration statement effective and to comply with
the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement until the earlier
to occur of two (2) years after the Closing Date (subject to the right of the
Company to suspend the effectiveness thereof for not more than 15 consecutive
Trading Days or an aggregate of 20 Trading Days during any calendar year (each
a
“Black-Out Period”)) or such time as all of the securities which are the subject
of such registration statement cease to be Registrable Securities (such period,
in each case, the “Registration Maintenance Period”);
(iii)
furnish to each holder of Registrable Securities covered by such registration
statement such number of conformed copies of such registration statement and
of
each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the Securities
Act, in conformity with the requirements of the Securities Act, and such other
documents, as such holder of Registrable Securities and underwriter, if any,
may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities owned by such holder of Registrable Securities;
(iv)
use
its commercially reasonable best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement under
such other U.S. federal or state securities laws or U.S. state blue sky laws
as
any U.S. holder of Registrable Securities thereof shall reasonably request,
to
keep such registrations or qualifications in effect for so long as such
registration statement remains in effect, and take any other action which may
be
reasonably necessary to enable such holder of Registrable Securities to
consummate the disposition in such jurisdictions of the securities owned by
such
holder of Registrable Securities, except that the Company shall not for any
such
purpose be required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of this
Section 4(a)(iv) be obligated to be so qualified or to consent to general
service of process in any such jurisdiction;
(v)
use
its commercially reasonable best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by
such
other governmental agencies or authorities as may be necessary to enable the
U.S. holder of Registrable Securities to consummate the disposition of such
Registrable Securities in accordance with the plan of distribution set forth
in
the registration statement;
(vi)
if
such registration includes an underwritten public offering, furnish to each
holder of Registrable Securities a signed counterpart, addressed to such holder
of Registrable Securities, and the underwriters, of an opinion of counsel for
the Company, dated the effective date of such registration statement and an
opinion dated the date of the closing under the underwriting agreement in the
form required by the underwriting agreement), and
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(vii)
notify the Investors and their counsel promptly and confirm such advice in
writing promptly after the Company has knowledge thereof:
(A) when
the
Registration Statement, the prospectus or any prospectus supplement related
thereto or post-effective amendment to the Registration Statement has been
filed, and, with respect to the Registration Statement or any post-effective
amendment thereto, when the same has become effective;
(B) of
any
request by the Commission for amendments or supplements to the Registration
Statement or the prospectus or for additional information;
(C) of
the
issuance by the Commission of any stop order suspending the effectiveness of
the
Registration Statement or the initiation of any proceedings by any Person for
that purpose; and
(D) of
the
receipt by the Company of any notification with respect to the suspension of
the
qualification of any Registrable Securities for sale under the securities or
blue sky laws of any jurisdiction or the initiation or threat of any proceeding
for such purpose;
(viii)
notify each holder of Registrable Securities covered by such registration
statement, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, upon discovery that, or upon the happening
of any event as a result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or
omits to state any material facts required to be stated therein or necessary
to
make the statements therein not misleading in the light of the circumstances
then existing, and at the request of any such holder of Registrable Securities
promptly prepare and furnish to such holder of Registrable Securities a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the Investors
of such securities, such prospectus shall not include an untrue statement of
a
material fact or omit to state a material fact required to be stated therein
or
necessary to make the statements therein not misleading in the light of the
circumstances then existing;
(ix)
use
its commercially reasonably efforts to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(x)
otherwise use its commercially reasonable best efforts to comply with all
applicable rules and regulations of the Commission;
(xi)
make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(xii)
enter into such agreements and take such other actions as the Investors shall
reasonably request in writing (at the expense of the requesting or benefiting
Investors) in order to expedite or facilitate the disposition of such
Registrable Securities; and
(xiii)
use its best efforts to list all Registrable Securities covered by such
registration statement on any securities exchange or market on which the Common
Stock is then listed.
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(xiv)
in
the event that the Company, with the consent of the Agent, as defined in the
Loan agreement, or of holders of a majority of the Registrable Securities,
includes in a registration statement filed pursuant to Section 2(a) or 2(b)
of
this Agreement any shares of Common Stock which are not Registrable Securities
and, as a result of comments from the Commission, the Company is required to
reduce the number of shares of Common Stock which may be registered pursuant
to
the registration statement, all of such other shares of Common Stock will be
withdrawn from the registration statement before any Registrable Securities
are
withdrawn.
(b) Limitation.
The
Company will not file any registration statement pursuant to Section 2(a) or
Section 2(b), or amendment thereto or any prospectus or any supplement thereto
to which the Investors shall reasonably object, provided that the Company may
file such documents in a form required by law or upon the advice of its
counsel.
(c) Necessary
Consents.
The
Company represents and warrants to each holder of Registrable Securities that
it
has obtained all necessary waivers, consents and authorizations necessary to
execute this Agreement and consummate the transactions contemplated hereby
other
than such waivers, consents and/or authorizations specifically contemplated
by
the Loan Agreement.
(d) Discontinuation
of Sales.
Each
holder of Registrable Securities agrees that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in Section
4(a)(viii), such Holder will forthwith discontinue such holder of Registrable
Securities’ disposition of Registrable Securities pursuant to the Registration
Statement relating to such Registrable Securities until such holder of
Registrable Securities’ receipt of the copies of the supplemented or amended
prospectus contemplated by said Section 4(a)(viii) and, if so directed by the
Company, will deliver to the Company (at the Company’s expense) or destroy all
copies, other than permanent file copies, then in such Holder’s possession of
the prospectus relating to such Registrable Securities current at the time
of
receipt of such notice.
5. Underwritten
Offerings.
(a) Incidental
Underwritten Offerings.
If the
Company at any time proposes to register any of its securities under the
Securities Act as contemplated by Section 3(a) of this Agreement and such
securities are to be distributed by or through one or more underwriters, the
Company will, if requested by any Holder, as provided in Section 3(a) and
subject to the provisions of Section 3(b), use its commercially reasonable
best
efforts to arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such Holder among the securities to be
distributed by such underwriters. In no event shall any Investor be deemed
an
underwriter for purposes of this Section 5. This Section 5 shall not apply
to
any Registrable Securities theretofore registered pursuant to Section 2 of
this
Agreement.
(b) Participation
In Underwritten Offerings.
No
Holder may participate in any underwritten offering under Section 3(a) unless
such holder of Registrable Securities (i) agrees to sell such Holder’s
securities on the basis provided in any underwriting arrangements approved,
subject to the terms and conditions hereof, by the holders of a majority of
Registrable Securities to be included in such underwritten offering and (ii)
completes and executes all questionnaires, indemnities, underwriting agreements
and other documents (other than powers of attorney) required under the terms
of
such underwriting arrangements. Notwithstanding the foregoing, no underwriting
agreement (or other agreement in connection with such offering) shall require
any holder of Registrable Securities to make a representation or warranty to
or
agreements with the Company or the underwriters other than representations
and
warranties contained in a writing furnished by such holder of Registrable
Securities expressly for use in the related registration statement or
representations, warranties or agreements regarding such Holder, such Holder’s
Registrable Securities and such Holder’s intended method of distribution and any
other representation required by law.
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(c) Preparation;
Reasonable Investigation.
In
connection with the preparation and filing of each registration statement under
the Securities Act pursuant to this Agreement, the Company will give the Holders
of Registrable Securities registered under such registration statement, and
their respective counsel and accountants, the opportunity to participate in
the
preparation of such registration statement, each prospectus included therein
or
filed with the Commission, and each amendment thereof or supplement thereto,
and
will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and
the
independent public accountants who have certified its financial statements
as
shall be necessary, in the reasonable opinion of such holders’ and such
underwriters’ respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
6. Indemnification.
(a) Indemnification
by the Company.
In
connection with any registration statement filed by the Company pursuant to
Section 2 or 3 of this Agreement, the Company shall, and hereby agrees to,
indemnify and hold harmless, each Holder and seller of any Registrable
Securities covered by such registration statement, each Person who participates
as an underwriter in the offering or sale of such securities and each other
Person, if any, who controls such Holder or any such underwriter within the
meaning of the Securities Act, and their respective directors, officers,
partners, agents and Affiliates from and against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Securities Act, the Exchange Act, or other federal
or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof), which
are collectively referred to as “Losses,” arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material fact made by the
Company contained in the Registration Statement, or any amendment thereof,
or in
any Preliminary Prospectus or the Prospectus, or any amendment thereof or
supplement thereto, or in any blue sky application or other document executed
by
the Company specifically for that purpose (or based upon written information
furnished by the Company) filed in any state or other jurisdiction in order
to
qualify any of the Securities or other Securities under the securities laws
thereof (any such application, document or information being referred to as
a
“Blue Sky Application”); or (ii) the omission or alleged omission to state in
any such Registration Statement, Preliminary Prospectus or Prospectus, or
amendment thereof or supplement thereto, or Blue Sky Application a material
fact
required to be stated therein or necessary to make the statements made therein
not misleading, and agrees to reimburse each such indemnified party for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending against any such loss, claim, damage, liability
or
action; provided, however, that the Company will not be liable in any such
case
to the extent that any such loss, claim, damage, or liability arises out of
or
is based upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein or omitted therefrom in reliance upon and
in
conformity with written information furnished to the Company by or on behalf
of
any Holder or any underwriter acting on behalf of any Holder specifically for
use in connection with the preparation thereof, and further provided, however,
that the foregoing indemnity with respect to any untrue statement, alleged
untrue statement, omission, or alleged omission contained in any Preliminary
Prospectus shall not inure to the benefit of any Holder or other Person from
whom the Person asserting any such loss, claims any of, damage, or liability
purchased any of the securities that are the subject thereof (or to the benefit
of any person who controls such Holder or other Person), if a copy of the
prospectus was not delivered to such person with or prior to the written
confirmation of the sale of such security to such person and such prospectus
corrected the matter from the preliminary prospectus. The indemnify provided
for
in this Section 6(a) shall remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party and shall survive
any transfer of the Registrable Shares by the indemnified party. This indemnity
agreement will be in addition to any liability that the Company may otherwise
have.
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(b) Indemnification
by Holder.
In
connection with any registration statement filed by the Company pursuant to
Section 2 or 3 of this Agreement in which a Holder has registered for sale
Registrable Securities, each Holder or seller of Registrable Securities shall,
and hereby agrees to, indemnify and hold harmless the Company and each of its
directors, officers, employees and agents, each other Person, if any, who
controls the Company and each other seller and such seller’s directors,
officers, stockholders, partners, employees, agents and affiliates from and
against any and all Losses to which they or any of them may become subject
under
the Securities Act, the Exchange Act, or other federal or state statutory law
or
regulation, at common law or otherwise, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, or any amendment thereof, or in any
preliminary prospectus or the prospectus, or any amendment thereof or supplement
thereto, or in a blue sky application, or (ii) the omission or the alleged
omission to state in any such Registration Statement, preliminary prospectus
or
prospectus, amendment thereof or supplement thereto, or Blue Sky Application
a
material fact required to be stated therein or necessary to make the statements
made therein not misleading, in each case to the extent, but only to the extent,
that the same was made therein or omitted therefrom in reliance upon and in
conformity with written information furnished to the Company by or on behalf
of
such Holder specifically for use in the preparation thereof, and agrees to
reimburse each such indemnified party for any legal or other expenses reasonably
incurred by it in connection with investigating or defending against any such
loss, claim, damage, liability or action. The indemnify provided for in this
Section 6(b) shall remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party and shall survive
any transfer of the Registrable Shares by the indemnified party. In no event
shall the liability of any Holder pursuant to this Section 6(b) exceed the
lesser of (x) the purchase price paid by the Holder for the Registrable
Securities sold pursuant to the Registration Statement or (y) the net proceeds
from the sale of the Registrable Securities by the Holder pursuant to the
Registration Statement..
(c) Procedure.
Within
five (5) days after receipt by an indemnified party under Section 6(a) or 6(b)
of this Agreement of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against an indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; the failure so to notify the indemnifying party shall
relieve the indemnifying party from any liability under this Section 8 as to
the
particular item for which indemnification is then being sought, unless such
indemnifying party has otherwise received actual notice of the action at least
thirty (30) days before any answer or response is required by the indemnifying
party in its defense of such action, but will not relieve it from any liability
that it may have to any indemnified party otherwise than under this Section
6.
If any such action is brought against any indemnified party and it notifies
the
indemnifying party of the commencement thereof, the indemnifying party will
be
entitled to participate therein and, to the extent that it may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof; provided,
that if the defendants in any such action include both the indemnified party
and
the indemnifying party and either (i) the indemnifying party or parties agree,
or (ii) in the opinion of counsel for the indemnified parties, representation
of
both the indemnifying party or parties and the indemnified party or parties
by
the same counsel is inappropriate under applicable standards of professional
conduct because of actual or potential conflicting interests between them,
then
the indemnified party or parties shall have the right to select separate counsel
to assume such legal defense and to otherwise participate in the defense of
such
action. The indemnifying party will not be liable to such indemnified party
under this Section 6 for any legal or other expenses subsequently incurred
by
such indemnified party in connection with the defense thereof unless (x) the
indemnified party shall have employed counsel in connection with the assumption
of legal defenses in accordance with the proviso to the immediately preceding
sentence (it being understood, however, that the indemnifying party shall not
be
liable for the expenses of more than one separate counsel in each jurisdiction
which counsel is approved by indemnified parties (whether pursuant to this
Agreement or other agreements if the claim relates to the same or similar
allegations) holding a majority of the shares as to which indemnification is
claimed), (ii) the indemnifying party shall not have employed counsel to
represent the indemnified party within a reasonable time after notice of
commencement of the action, or (iii) the indemnifying party has authorized
the
employment of counsel for the indemnified party at the expense of the
indemnifying party. In no event shall an indemnifying party be liable under
this
Section 6 for any settlement, effected without its written consent, which
consent shall not be unreasonably withheld, of any claim or action against
an
indemnified party.
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12 -
(d) Contribution.
If the
indemnification provided for in this Section 6 shall for any reason be
unavailable to an indemnified party under Sections 6(a) and 6(b) of this
Agreement in respect of any Losses, then, in lieu of the amount paid or payable
under said Section 6(a) or 6(b), the indemnified party and the indemnifying
party under said Section 6(a) or 6(b) shall contribute to the aggregate Losses
(including legal or other expenses reasonably incurred in connection with
investigating the same) (i) in such proportion as is appropriate to reflect
the
relative fault of the Company and the prospective sellers of Registrable
Securities covered by the registration statement which resulted in such Loss
or
action in respect thereof, with respect to the statements, omissions or action
which resulted in such Loss or action in respect thereof, as well as any other
relevant equitable considerations, or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as shall be
appropriate to reflect the relative benefits received by the Company, on the
one
hand, and such prospective sellers, on the other hand, from their sale of
Registrable Securities; provided, that, for purposes of this clause (ii), the
relative benefits received by any prospective sellers shall be deemed not to
exceed (and the amount to be contributed by any Holder shall not exceed) the
amount received by such Person. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. The obligations, if any, of the Selling Holders of
Registrable Securities to contribute as provided in this Section 6(d) are
several in proportion to the relative value of their respective Registrable
Securities covered by such registration statement and not joint. In addition,
no
Person shall be obligated to contribute hereunder any amounts in payment for
any
settlement of any action or Losses effected without such Person’s
consent.
7. Rule
144.
The
Company shall file in a timely manner the reports required to be filed by it
under the Securities Act and the 1934 Act (including but not limited to the
reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c) of Rule 144 adopted by the Commission under the Securities
Act)
and the rules and regulations adopted by the Commission thereunder (or, if
the
Company is not required to file such reports, will, upon the request of any
holder of Registrable Securities, make publicly available other information)
and
will take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable
such
holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under
the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any holder of Registrable Securities, the Company will deliver to such holder
a written statement as to whether it has complied with the requirements of
this
Section 7. The Company shall, within two business days after a Holder provides
documentation relating to a sale pursuant to Rule 144 or Rule 144(k), whichever
shall be appropriate, the Company will cause its legal counsel to provide such
opinion of counsel as the Company’s transfer agent may require in order to
enable the Holder to transfer the shares. If the Company fails to comply with
this Section 7, the Company shall pay the Holder the Daily amount applicable
to
the shares which the Holder is seeking to transfer, commencing on the third
business day after the documentation is presented to the Company’s or its
transfer agent. The Daily Amount shall be based on the conversion price
applicable to the Notes at the date of the transfer or, if the Notes shall
have
been paid or fully converted, the last conversion price. For example, if the
applicable conversion price is $.20, and the Holder is seeking to transfer
or
have the legend removed from 1,000,000 shares, daily amount will be based on
Notes in the principal amount of $200,000. The provisions of Section 2(d) of
the
Warrant and Section 2.9.3 of the Note shall also apply in the event that the
Company fails to deliver a timely opinion of counsel as required by this Section
7.
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8. Miscellaneous.
(a) Amendments
and Waivers.
This
Agreement may be amended and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of the Holder or Holders seventy five percent (75%) or more
of
the sum of the shares of (i) Registrable Securities issued at such time, plus
(ii) Registrable Securities issuable upon exercise or conversion of the Covered
Securities. Each holder of any Registrable Securities at the time or thereafter
outstanding shall be bound by any consent authorized by this Section 8(a),
whether or not such Registrable Securities shall have been marked to indicate
such consent.
(b) Nominees
For Beneficial Owners.
In the
event that any Registrable Securities are held by a nominee for the beneficial
owner thereof, the beneficial owner thereof shall be treated as the holder
of
such Registrable Securities for purposes of any request or other action by
any
Holder or Holders of Registrable Securities pursuant to this Agreement or any
determination of any number of percentage of shares of Registrable Securities
held by a holder or holders of Registrable Securities contemplated by this
Agreement. The Company may require assurances reasonably satisfactory to it
of
such owner’s beneficial ownership or such Registrable Securities.
(c) Notices.
Except
as otherwise provided in this Agreement, all notices, requests and other
communications to any Person provided for hereunder shall be in writing and
shall be given to such Person (a) in the case of a party hereto other than
the
Company, addressed to such party in the manner set forth in the Loan Agreement
or at such other address as such party shall have furnished to the Company
in
writing, or (b) in the case of any other Holder of Registrable Securities or
Covered Securities, at the address of such Holder set forth on the signature
page of this Agreement, or (c) in the case of the Company, at the address set
forth on the signature page hereto, to the attention of its Chief Financial
Officer or other officer designated by the Company, or at such other address,
or
to the attention of such other officer, as the Company shall have furnished
to
each holder of Registrable Securities at the time outstanding. Each such notice,
request or other communication shall be effective (i) upon receipt if given
by
mail, or (ii) if given by any other means (including, without limitation, by
fax
or air courier), when delivered at the address specified above, provided that
any such notice, request or communication shall not be effective until received,
provided, that notice by fax shall not be deemed received unless receipt is
acknowledged.
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(d) Assignment.
This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the parties hereto. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit
of
and enforceable by any subsequent holder of any Registrable Securities. Each
of
the holders of the Registrable Securities agrees, by accepting any portion
of
the Registrable Securities after the date hereof, to the provisions of this
Agreement including, without limitation, appointment of the Investor or the
Investor’s designated representative to act on behalf of such holder pursuant to
the terms hereof which such actions shall be made in the good faith discretion
of the Investors’ representative and be binding on all persons for all
purposes.
(e) Descriptive
Headings.
The
descriptive headings of the several sections and paragraphs of this Agreement
are inserted for reference only and shall not limit or otherwise affect the
meaning hereof.
(f) Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York applicable to agreements executed and to be performed wholly
within such State without regard to principles of conflicts of law. Each party
hereby (i) consent to the exclusive jurisdiction of the United States District
Court for the Southern District of New York and Supreme Court of the State
of
New York in the County of New York in any action relating to or arising out
of
this Agreement, (ii) agrees that any process in any such action may be served
upon it either (x) by certified or registered mail, return receipt requested,
or
by hand delivery or overnight courier service which obtains evidence of
delivery, with the same full force and effect as if personally served upon
such
party in New York City or (y) any other manner of service permitted by law,
and
(iii) waives any claim that the jurisdiction of any such tribunal is not a
convenient forum for any such action and any defense of lack of in personam
jurisdiction with respect thereto. The
parties executing this Agreement agree to waive trial by
jury.
The
prevailing party shall be entitled to recover from the other party its
reasonable attorney’s fees and costs. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule
of
law, then such provision shall be deemed inoperative to the extent that it
may
conflict therewith and shall be deemed modified to conform with such statute
or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of any agreement.
(g) Entire
Agreement.
This
Agreement sets forth the entire agreement and understanding between the parties
and supersedes all prior or contemporaneous written or oral agreements,
promises, representations, understandings, letters of intent and negotiations,
among the parties with respect to the subject matter of this Agreement. No
part
of this Agreement may be modified or amended, nor may any right be waived,
except by a written instrument which expressly refers to this Agreement, states
that it is a modification or amendment of this Agreement or a waiver and is
signed by the parties to this Agreement in the case of a modification or
amendment, or by the party granting the waiver in the case of a waiver, subject
to Section 8(a) of this Agreement. No course of conduct or dealing or trade
usage or custom and no course of performance shall be relied on or referred
to
by any party to contradict, explain or supplement any provision of this
Agreement, it being acknowledged by the parties to this Agreement that this
Agreement is intended to be, and is, the complete and exclusive statement of
the
agreement with respect to its subject matter. Any waiver shall be limited to
the
express terms thereof and shall not be construed as a waiver of any other
provisions or the same provisions at any other time or under any other
circumstances. No delay or failure by either party to exercise any right under
this Agreement, and no partial or single exercise of that right, shall
constitute a waiver of that or any other rights.
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15 -
(h) Severability.
If any
provision of this Agreement, or the application of such provisions to any Person
or circumstance, shall be held invalid, the remainder of this Agreement, or
the
application of such provision to Persons or circumstances other than those
to
which it is held invalid, shall not be affected thereby.
(i) Binding
Effect.
All the
terms and provisions of this Agreement whether so expressed or not, shall be
binding upon, inure to the benefit of, and be enforceable by the parties and
their respective administrators, executors, legal representatives, heirs,
successors and assignees.
(j) Preparation
of Agreement.
This
Agreement shall not be construed more strongly against any party regardless
of
who is responsible for its preparation. The parties acknowledge each contributed
and is equally responsible for its preparation.
(k) Counterparts.
This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall
be
deemed to be an original, but all of which taken together shall constitute
one
and the same agreement. A facsimile transmission of this signed Agreement shall
be legal and binding on all parties hereto.
[SIGNATURES
ON FOLLOWING PAGE]
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16 -
IN
WITNESS WHEREOF,
the
Investors and the Company have as of the date first written above executed
this
Agreement.
NATURALNANO,
INC.
| By: /s/ Xxxxx X. Xxxxxxxxx | |||
|
Name: Xxxxx X. Xxxxxxxxx |
|||
| Title: President |
INVESTORS
|
Investor
|
|||
| Platinum Partners Long Term Growth IV | |||
| By: /s/ Xxxx Xxxxxxxxx | |||
|
Name:
Xxxx Xxxxxxxxx
Title:
Pres
Address:
000
X. 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Telecopier:
(212)
|
|||
| Longview Special Financing, Inc. |
| By: /s/ François Morax | |||
|
Name:
François
Morax
Title:
Director
Address:
Xxxxxxxxxxxx
0
0000
Xxxx
Xxxxxxxxxxx
Telecopier:
|
|||
| Platinum Advisors, LLC |
| By: /s/ Xxxx Xxxxxxxxx | |||
|
Name:
Xxxx Xxxxxxxxx
Title:
Address:
000
X. 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Telecopier:
(212)
|
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