REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (“Agreement”)
is entered into as of December _, 2006 by and among U.S. Dry Cleaning Corporation,
a Delaware corporation (the “Company”),
and Xxxxx X. Xxxxxx, as agent for himself and the other Holders (the “Lead
Investor”)
of the Company’s Series A Convertible Debentures pursuant to that certain
Subscription Agreement of even date herewith (the “Subscription
Agreement”)
and named in Exhibit A hereto.
WHEREAS,
in connection with the Company’s issuance of Series A Convertible Debenture
pursuant to the Subscription Agreement, the Company has agreed to enter into
this Registration Rights Agreement as a condition to the Closing
thereunder;
NOW
THEREFORE, in consideration of the mutual agreements and covenants contained
herein, the Company and the Lead Investor hereby agree as follows:
1. Definitions.
As used
herein:
1.1 The
term
“Holder”
means
any person owning or having the right to acquire Registrable Shares or any
assignee thereof in accordance with Section 2.8
hereof.
1.2 The
terms
“register,”
“registered,”
and
“registration”
refer
to a registration effected by preparing and filing a registration statement
in
compliance with the Securities Act (as defined below) and the applicable rules
and regulations thereunder, and the declaration or ordering of the effectiveness
of such registration statement.
1.3 For
the
purposes hereof, the term “Registrable
Shares”
means
and includes (i) the shares of common stock of the Company issued or
issuable upon conversion of the Series A Convertible Debenture (the
“Series
A Debentures”),
(ii)
the common stock issued to the Holder of the Series A Debentures pursuant to
the
subscription of the Series A Debenture, and (iii) any common stock of the
Company issued, or issuable upon the conversion or exercise of any warrant,
right or other security which is issued, as a result of a stock split, dividend
or other distribution with respect to or in exchange for or in replacement
of
the shares referenced in (i) above, excluding in all cases, however, any
Registrable Shares sold by a person in a transaction in which his or her rights
under Section 2
are not
assigned and that any particular shares of Common Stock shall cease to be
Registrable Shares when: (i) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act
and
such securities shall have been disposed of in accordance with such registration
statement, (ii) they shall have been distributed to the public pursuant to
Rule 144 (or any successor provision) under the Securities Act,
(iii) they shall have been otherwise transferred, new certificates for them
shall have been delivered by the Company and subsequent disposition of them
shall not require registration or qualification of them under the Securities
Act
or any similar state law then in force, (iv) they shall have ceased to be
outstanding, or (v) at such time as all of the Common Stock otherwise
constituting Registrable Securities of such Holder may be sold within a three
month period under Securities and Exchange Commission Rule 144.
1
1.4 The
term
“Securities
Act”
means
the Securities Act of 1933, as amended.
2. Registration
Rights.
2.1 Filing.
The
Company will use its best efforts to file, on or before two hundred seventy
days
(270) following the closing of the initial sale of the Series A Debentures,
a
registration statement under the Securities Act covering the registration of
the
sale of the Registrable Securities by the Holders. The Holders shall fully
cooperate with the Company in preparation of the registration statement and
provide all necessary information regarding the Holders, the underwriters,
the
manner of distribution and other material information reasonably requested
by
the Company.
2.2 Effectiveness.
(a) Following
effectiveness of the registration statement, the Company will use its best
efforts to maintain the effectiveness for up to three (3) months; provided,
however, that such three-month period shall be extended for a period of time
equal to the period the Holder refrains from selling any securities included
in
such registration at the request of an underwriter of common stock (or other
securities) of the Company.
(b) The
Company will from time to time amend or supplement such registration statement
and the prospectus contained therein as and to the extent necessary to comply
with the Securities Act and any applicable state securities statute or
regulation.
(c) Each
Holder selling Registrable Shares agrees that, upon receipt of any notice from
Company of the happening of any event of the kind described in
Section 2.6(c),
such
Holder will immediately discontinue disposition of Registrable Shares pursuant
to the Registration Statement until such Holder’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 2.6(c),
and, if
so directed by Company, each such Holder will deliver to Company (at Company’s
expense) all copies, other than permanent file copies then in such Holder’s
possession, of the prospectus covering such Registrable Shares current at the
time of receipt of such notice.
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2.3 Indemnification.
(a) Indemnification
of Holders.
In the
event that the Company registers any of the Registrable Shares under the
Securities Act, the Company will indemnify and hold harmless each Holder and
each underwriter of the Registrable Shares so registered (including any broker
or dealer through which such shares may be sold) and each person, if any, who
controls such Holder or any such underwriter within the meaning of
Section 15 of the Securities Act from and against any and all losses,
claims, damages, expenses or liabilities (or any action in respect thereof),
joint or several, to which they or any of them become subject under the
Securities Act or under any other statute or at common law or otherwise, and,
except as hereinafter provided, will reimburse each such Holder, each such
underwriter and each such controlling person, if any, for any legal or other
expenses reasonably incurred by them or any of them, as such expenses are
incurred, in connection with investigating or defending any actions whether
or
not resulting in any liability, insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of or are based upon (i) any
untrue statement of a material fact contained in the registration statement,
in
any preliminary or amended preliminary prospectus or in the prospectus (or
the
registration statement or prospectus as from time to time amended or
supplemented by the Company); (ii) any omission to state therein a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading; or (iii) any violation by the Company of the
Securities Act, the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”),
a
state securities law or any rule or regulation under the Securities Act, the
Exchange Act or any state securities law; provided, however, that the indemnity
contained in this Section 2.3(a)
will not
apply where such untrue statement or omission was made in such registration
statement, preliminary or amended, preliminary prospectus or prospectus in
reliance upon and in conformity with information furnished in writing to the
Company in connection therewith by such Holder of Registrable Shares, any such
underwriter or any such controlling person expressly for use therein or arises
from such Holder’s breach of its obligations under this Agreement. Promptly
after receipt by any Holder of Registrable Shares, any underwriter or any
controlling person of notice of the commencement of any action in respect of
which indemnity may be sought against the Company, such Holder of Registrable
Shares, or such underwriter or such controlling person, as the case may be,
will
notify the Company in writing of the commencement thereof, and, subject to
the
provisions hereinafter stated, the Company shall assume the defense of such
action (including the employment of counsel, who shall be counsel reasonably
satisfactory to such Holder of Registrable Shares, such underwriter or such
controlling person, as the case may be), and the payment of expenses insofar
as
such action shall relate to any liability in respect of which indemnity may
be
sought against the Company. Such Holder of Registrable Shares, any such
underwriter or any such controlling person shall have the right to employ
separate counsel in any such action and to participate in the defense thereof
in
the event the representation of such Holder, underwriter or controlling person
by counsel retained by or on the behalf of the Company would be inappropriate
due to conflicts of interest between any such person and any other party
represented by such counsel in such proceeding or action, in which case the
Company shall pay, as incurred, the reasonable fees and expenses of such
separate counsel. The Company shall not be liable to indemnify any person under
this Section 2.3(a)
for any
settlement of any such action effected without the Company’s consent (which
consent shall not be unreasonably withheld). The Company shall not, except
with
the approval of each party being indemnified under this
Section 2.3(a)
(which
approval will not be unreasonably withheld), consent to entry of any judgment
or
enter into any settlement that does not include as an unconditional term thereof
the giving by the claimant or plaintiff to the parties being so indemnified
of a
release from all liability in respect to such claim or litigation.
3
(b) Indemnification
of Company.
In the
event that the Company registers any of the Registrable Shares under the
Securities Act, each Holder of the Registrable Shares so registered will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each underwriter of the
Registrable Shares so registered (including any broker or dealer through which
any of such shares may be sold) and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act and all
other Holders and their respective officers, directors and controlling persons
from and against any and all losses, claims, damages, expenses or liabilities
(or any action in respect thereof), joint or several, to which they or any
of
them may become subject under the Securities Act or under any other statute
or
at common law or otherwise, and, except as hereinafter provided, will reimburse
the Company and each such director, officer, underwriter or controlling person
for any legal or other expenses reasonably incurred by them or any of them,
as
such expenses are incurred, in connection with investigating or defending any
actions whether or not resulting in any liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based
upon
any untrue statement of a material fact contained in the registration statement,
in any preliminary or amended preliminary prospectus or in the prospectus (or
the registration statement or prospectus as from time to time amended or
supplemented) or arise out of or are based upon the omission to state therein
a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, but only insofar as any such statement or
omission was made in reliance upon and in conformity with information furnished
in writing to the Company in connection therewith by such Holder, expressly
for
use therein; provided, however, that such Holder’s obligations hereunder shall
be limited to an amount equal to the proceeds to such Holder of the Registrable
Shares sold in such registration. Promptly after receipt of notice of the
commencement of any action in respect of which indemnity may be sought against
such Holder of Registrable Shares, the Company will notify such Holder of
Registrable Shares in writing of the commencement thereof, and such Holder
of
Registrable Shares shall, subject to the provisions hereinafter stated, assume
the defense of such action (including the employment of counsel, who shall
be
counsel reasonably satisfactory to the Company) and the payment of expenses
insofar as such action shall relate to the liability in respect of which
indemnity may be sought against such Holder of Registrable Shares. The Company
and each such director, officer, underwriter or controlling person shall have
the right to employ separate counsel in any such action and to participate
in
the defense thereof in the event the representation of the Company, any of
its
officers or directors or any underwriter or controlling person by counsel
retained by or on the behalf of such Holder would be inappropriate due to
conflicts of interest between any such person and any other party represented
by
such counsel in such proceeding or action, in which case such Holder shall
pay,
as incurred, the reasonable fees and expenses of such separate counsel. Such
Holder shall not be liable to indemnify any person for any settlement of any
such action effected without such Holder’s consent (which consent shall not be
unreasonably withheld). Such Holder shall not, except with the approval of
the
person being indemnified (which approval shall not be unreasonably withheld),
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to the party being so indemnified of a release from all liability in respect
to
such claim or litigation.
4
2.4 Contribution.
If the
indemnification provided for in Section 2.3
is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other
in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or
by
the indemnified party and the parties’ relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission.
2.5 Exchange
Act Registration.
With a
view to making available to the Holders the benefits of Rule 144
promulgated under the Act and any other rule or regulation of the Securities
Exchange Commission (the “SEC”)
that
may at any time permit a Holder to sell securities of the Company to the public
without registration, the Company agrees to:
(a) make
and
keep public information available, as those terms are understood and defined
in
SEC Rule 144, at all times after ninety (90) days after the effective date
of the first registration statement filed by the Company for the offering of
its
securities to the general public until termination of this
Agreement;
(b) file
on a
timely basis with the Securities and Exchange Commission all information that
the Commission may require under either of Section 13 or Section 15(d)
of the Exchange Act and, so long as it is required to file such information,
take all action that may be required as a condition to the availability of
Rule 144 under the Securities Act (or any successor exemptive rule
hereinafter in effect) with respect to the Company’s common stock;
and
(c) furnish
to any Holder forthwith upon request (i) a written statement by the Company
as to its compliance with the reporting requirements of Rule 144,
(ii) a copy of the most recent annual or quarterly report of the Company as
filed with the Securities and Exchange Commission, and (iii) any other
reports and documents that a Holder may reasonably request in order to avail
itself of any rule or regulation of the Securities and Exchange Commission
allowing a Holder to sell any such Registrable Shares without
registration.
5
2.6 Further
Obligations of the Company.
Whenever the Company is required hereunder to register Registrable Shares,
it
agrees that it shall also do the following:
(a) Furnish
to each selling Holder such copies of each preliminary and final prospectus
and
any other documents that such Holder may reasonably request to facilitate the
public offering of its Registrable Shares;
(b) Use
its
best efforts to register or qualify the Registrable Shares to be registered
pursuant to this Agreement under the applicable securities or “blue sky” laws of
such jurisdictions as any selling Holder may reasonably request; provided,
however, that the Company shall not be obligated to qualify to do business
in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to the service of process in suits other than those arising
out
of the offer or sale of the securities covered by the registration statement
in
any jurisdiction where it is not then so subject;
(c) Notify
each Holder of Registrable Shares covered by such registration statement at
any
time when a prospectus relating thereto is required to be delivered under the
Act of the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing;
(d) Cause
all
such Registrable Shares registered hereunder to be listed on each securities
exchange on which similar securities issued by the Company are then listed
if
such listing is then permitted under the rules of the exchange;
(e) Provide
a
transfer agent and registrar for all Registrable Shares registered pursuant
hereunder and a CUSIP number for all such Registrable Shares, in each case
not
later than the effective date of such registration;
(f) In
the
event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement;
(g) Furnish,
at the request of any Holder requesting registration of Registrable Shares
pursuant to this Section 2,
on the
date that such Registrable Shares are delivered to the underwriters for sale
in
connection with a registration pursuant to this Section 2,
if such
securities are being sold through underwriters, or, if such securities are
not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective:
(i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given
to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Shares;
and
6
(ii) “comfort”
letters signed by the Company’s independent public accountants who have examined
and reported on the Company’s financial statements included in the registration
statement, to the extent permitted by the standards of the American Institute
of
Certified Public Accountants, covering substantially the same matters with
respect to the registration statement (and the prospectus included therein)
and
(in the case of the accountants’ comfort letters) with respect to events
subsequent to the date of the financial statements, as are customarily covered
in opinions of issuer’s counsel and in accountants’ comfort letters delivered to
the underwriters in underwritten public offerings of securities, but only if
and
to the extent that the Company is required to deliver or cause the delivery
of
such opinion or comfort letters to the underwriters in an underwritten public
offering of securities;
(h) Permit
each selling Holder or his counsel or other representatives upon the receipt
of
commercially reasonable confidentiality agreements, to inspect and copy such
corporate documents and records as may reasonably be requested by them;
and
(i) Furnish
to each selling Holder, upon request, a copy of all documents filed and all
correspondence from or to the Securities and Exchange Commission in connection
with any such offering unless confidential treatment of such information has
been requested of the Securities and Exchange Commission.
2.7 Expenses.
The
Company shall bear all costs and expenses of the registration, including, but
not limited to, printing, legal and accounting expenses, Securities and Exchange
Commission filing fees and “blue sky” fees and expenses; provided, however, that
the Company shall have no obligation to pay or otherwise bear (i) any
portion of the fees or disbursements of more than one counsel for the Holders
in
connection with the registration of their Registrable Shares, which in no event
shall exceed a reasonable fee, (ii) any portion of the underwriter’s
commissions or discounts attributable to the Registrable Shares being offered
and sold by the Holders of Registrable Shares, or (iii) any of such
expenses if the payment of such expenses by the Company is prohibited by the
laws of a state in which such offering is qualified and only to the extent
so
prohibited.
2.8 Transfer
of Registration Rights.
The
registration rights of a Holder of Registrable Shares under this Agreement
may
be transferred as set forth below (provided (1) the transfer accompanies
the transfer of Series A Preferred or Common Stock in the Company, (2) the
transferee is bound by the terms of this Agreement and (3) the Company is
given reasonable advance written notice prior to such transfer) to any other
transferee of the Registrable Shares.
2.9 Market
Stand-Off Agreement.
No
Holder shall, to the extent requested by any managing underwriter of the
Company, sell or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any Registrable Shares during a period (the
“Stand-Off
Period”)
beginning ten (10) days prior to and ending 120 days following the effective
date of a registration statement of any direct offering of the Company under
the
Securities Act (or in each case such shorter period as the Company or managing
underwriter may authorize), and except in each case, for securities sold as
part
of the offering covered by such registration statement in accordance with the
provisions of this Agreement. In order to enforce the foregoing covenant, the
Company may impose stock transfer restrictions with respect to the Registrable
Shares of each Holder until the end of the Stand-Off Period. Notwithstanding
the
foregoing, the obligations described in this Section 2.9
shall
not apply to a registration relating solely to employee benefit plans on Form
S-1 or Form S-8 or similar forms which may be promulgated in the future, or
a
registration relating solely to an SEC Rule 145 transaction on Form S-4 or
similar forms which may be promulgated in the future.
7
2.10 Termination
of Registration Rights.
The
obligations of the Company to register any Holder’s Registrable Shares pursuant
to this Section 2
shall
terminate at such time as all of the Registrable Securities of such Holder
may
be sold within a three month period under Securities and Exchange Commission
Rule 144.
3. Assignability.
Subject
to the restrictions on transfer set forth in Section 2.8,
this
Agreement shall be binding upon and inure to the benefit of the respective
heirs, successors and assigns of the parties hereto.
4. Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of California; provided, however, that if any California law or laws
require or permit the application of the laws of any other jurisdiction to
this
Agreement, such California law or laws shall be disregarded with the effect
that
the remaining laws of the State of California shall nonetheless
apply.
5. Amendment.
Any
modification, amendment, or waiver of this Agreement or any provision hereof,
either retroactively or prospectively, shall be in writing and executed by
the
Company and the Holders of not less than a majority of the Registrable Shares
which shall be binding upon all of the parties hereto.
6. Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
an original, but all of which together shall constitute one
instrument.
7. Notice.
Any
notices and other communications required or permitted under this Agreement
shall be effective if in writing and delivered personally or sent by telecopier,
a well-recognized overnight courier service or registered or certified mail,
postage prepaid, addressed as follows:
| If to the Lead Investor, to: |
Xxxxx
X. Xxxxxx
|
|
00000
Xxxxxxxxxxxxx Xxxx.
|
|
Xxx.
0000
|
|
Xxx
Xxxxxxx, XX 00000
|
|
Fax: (000)
000-0000
|
8
|
If
to the Company, to:
|
U.S.
Dry Cleaning Corporation
|
|
000
X. Xxxxxxxx Xxxxxx, Xxxxx 000
|
|
Xxxx
Xxxxxxx, XX 00000
|
|
Attn: Xxxxxx
X. Xxx
|
|
Facsimile: (000)
000-0000
|
| with a copy to: |
Xxxxxxxxx
Traurig
|
|
000
Xxxx Xxxxxx Xxxxx
|
|
Xxxxx
0000
|
|
Xxxxx Xxxx,
XX 00000
|
|
Attn:
Xxxx X. Xxxxxxxxxx, Esq.
|
|
Facsimile:
(000) 000-0000
|
Unless
otherwise specified herein, such notices or other communications shall be deemed
effective (a) on the date delivered, if delivered personally, (b) two
business days after being sent, if sent by a well-recognized overnight courier
service, (c) one business day after being sent, if sent by telecopier with
confirmation of good transmission and receipt, and (d) three business days
after being sent, if sent by registered or certified mail, postage prepaid.
Each
of the parties herewith shall be entitled to specify another address by giving
notice as aforesaid to each of the other parties hereto.
7.1 Severability.
In case
any provision of this Agreement shall be invalid, illegal, or unenforceable,
it
shall, to the extent practicable, be modified so as to make it valid, legal
and
enforceable and to retain as nearly as practicable the intent of the parties;
and the validity, legality, and enforceability of the remaining provisions
shall
not in any way be affected or impaired thereby.
IN
WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
| COMPANY: | ||
| U.S.
Dry Cleaning Corporation,
a
Delaware corporation
|
||
| |
|
|
| By: | ||
|
|
||
|
|
||
|
|
||
| LEAD INVESTOR: | ||
| |
|
|
|
Name: Xxxxx X. Xxxxxx |
||
|
Address:
00000 Xxxxxxxxxxxxx Xxxx.
Xxx
0000
Xxx
Xxxxxxx, XX 00000
|
||
|
Fax:
(000) 000-0000
|
||
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