REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (this "Agreement") is made and entered into as
of
July 19, 2006, by and between FRIENDLYWAY CORPORATION, a Nevada corporation
(the
"Company"), XXXXX SECURITIES CORP. (“Placement Agent”) and certain accredited
investors purchasing the securities offered in private placement by the Company.
Such investors are each referred to herein as a “Purchaser” and collectively as
the "Purchasers".
WHEREAS,
this Agreement is made pursuant to the Securities Purchase Agreement, dated
as
of the date hereof, by and between the Purchasers and the Company (as amended,
modified or supplemented from time to time, the "Securities Purchase
Agreement"), and pursuant to the Notes and the Warrants referred to
therein.
WHEREAS,
to induce the Purchasers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights with
respect to the shares of Common Stock issuable upon conversion of the Notes
and
exercise of the Warrants and the Company has also agreed to provide certain
registration rights with respect to the shares of Common Stock issuable upon
exercise of the warrants (“Placement Agent Warrants”), issued to the Placement
Agent and its permitted transferees (the “Placement Agent Warrant Shares”), both
on the terms and conditions provided herein.
NOW,
THEREFORE, for good and valuable consideration, the parties hereby agree as
follows:
1.
Definitions.
Capitalized terms used and not otherwise defined herein that are defined in
the
Securities Purchase Agreement shall have the meanings given such terms in the
Securities Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:
"Commission"
means the Securities and Exchange Commission.
"Common
Stock" means shares of the Company's common stock, par value $0.001 per
share.
"Effectiveness
Date" means (i) with respect to the initial Registration Statement required
to
be filed hereunder, a date no later than one-hundred-eighty (180) days following
the last closing held pursuant to the Securities Purchase Agreement and (ii)
with respect to each additional Registration Statement required to be filed
hereunder, a date no later than forty (40) days following the applicable Filing
Date.
"Effectiveness
Period" shall have the meaning set forth in Section 2(a).
"Exchange
Act" means the Securities Exchange Act of 1934, as amended, and any successor
statute.
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"Filing
Date" means, (i) with respect to the initial Registration Statement required
to
be filed hereunder, a date no later than sixty (60) days following the date
of
the last closing held pursuant to the Securities Purchase Agreement, and (ii)
with respect to shares of Common Stock issuable to the Holders as a result
of
adjustments to the Fixed Conversion Price set forth in any Notes or the Warrant
Price set forth in any Warrants, thirty (30) days after the occurrence of such
event or the date of the adjustment of the Conversion Price.
"Holder"
or "Holders" means a Purchaser or the Purchasers, as the case may be or any
of
their affiliates or transferees to the extent any of them hold Registrable
Securities.
"Indemnified
Party" shall have the meaning set forth in Section 5(c).
"Indemnifying
Party" shall have the meaning set forth in Section 5(c).
"Proceeding"
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
"Prospectus"
means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by the Registration Statement,
and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"Registrable
Securities" means the shares of Common Stock issued upon (i) the conversion
of
the Notes or payable thereunder in lieu of a cash payment of principal or
accrued interest,
(ii) the
exercise of the Warrants, (iii) the exercise of the Placement Agent Warrants
and
(iv) the issuance of Penalty Shares under the Securities Purchase Agreement,
if
any.
"Registration
Statement" means each registration statement required to be filed hereunder,
including the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Rule
144" means Rule 144 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.
"Rule
415" means Rule 415 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.
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"Rule
424" means Rule 424 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.
"Securities
Act" means the Securities Act of 1933, as amended, and any successor
statute.
"Securities
Purchase Agreement" shall have the meaning provided above.
"Trading
Market" means any of the OTCBB, NASDAQ SmallCap Market, the Nasdaq National
Market, the American Stock Exchange or the New York Stock Exchange.
"Warrants"
means, collectively, the Common Stock purchase warrants issued pursuant to
the
Securities Purchase Agreement.
2.
Registration.
(a)
On
or
prior to the applicable Filing Date the Company shall prepare and file with
the
Commission a Registration Statement covering the Registrable Securities for
an
offering to be made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form SB-2 (except if the Company is not then eligible
to
register for resale the Registrable Securities on Form SB-2, in which case
such
registration shall be on another appropriate form in accordance herewith).
The
Company shall cause the Registration Statement to become effective and remain
effective as provided herein. The Company shall use its reasonable commercial
efforts to cause the Registration Statement to be declared effective under
the
Securities Act as promptly as possible after the filing thereof, but in any
event no later than the Effectiveness Date. The Company shall use its reasonable
commercial efforts to keep the Registration Statement continuously effective
under the Securities Act until the date which is the earlier date of when (i)
all Registrable Securities have been sold or (ii) all Registrable Securities
may
be sold immediately without registration under the Securities Act and without
volume restrictions pursuant to Rule 144(k), as determined by the counsel to
the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent and the affected Holders (the
"Effectiveness Period").
(b)
If: (i)
the Registration Statement is not filed on or prior to the Filing Date; (ii)
the
Company fails to respond in writing to comments received from the Commission
in
connection with the Registration Statement within 15 business days of receipt
thereof, (iii) the Registration Statement is not declared effective by the
Commission by the Effectiveness Date; (iv) after the Registration Statement
is
filed with and declared effective by the Commission, the Registration Statement
ceases to be effective (by suspension or otherwise) as to any Registrable
Securities to which it is required to relate at any time prior to the expiration
of the Effectiveness Period (without being succeeded immediately by an
additional registration statement filed and declared effective) for a period
of
time which shall exceed 30 days in the aggregate per year or more than 20
consecutive calendar days (defined as a period of 365 days commencing on the
date the Registration Statement is declared effective); or (v) the Common Stock
is not listed or quoted, or is suspended from trading on any Trading Market
for
a period of three (3) consecutive Trading Days (provided the Company shall
not
have been able to cure such trading suspension within 30 days of the notice
thereof or list the Common Stock on another Trading Market); (any such failure
or breach being referred to as an "Event," and for purposes of clause (i) or
(ii) the date on which such Event occurs, or for purposes of clause (iv) the
date on which such 30 day or 20 consecutive day period (as the case may be)
is
exceeded, or for purposes of clause (v) the date on which such three (3) Trading
Day period is exceeded, being referred to as "Event Date"), then until the
applicable Event is cured, the Company shall pay to each Holder an amount in
cash, as liquidated damages and not as a penalty, equal to 2.0% for each thirty
(30) day period (prorated for partial periods) on a daily basis of the sum
of
the original principal amount of the Note held by such Holder. While such Event
continues, such liquidated damages shall be paid not less often than each thirty
(30) days. Any unpaid liquidated damages as of the date when an Event has been
cured by the Company shall be paid within three (3) days following the date
on
which such Event has been cured by the Company.
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(c)
Within
three business days of the Effectiveness Date, the Company shall cause its
counsel to issue a blanket opinion in the form attached hereto as Exhibit A,
to
the transfer agent stating that the shares are subject to an effective
registration statement and can be reissued free of restrictive legend upon
notice of a sale by any of the Purchasers and confirmation by such Purchaser
that it has complied with the prospectus delivery requirements, provided that
the Company has not advised the transfer agent orally or in writing that the
opinion has been withdrawn. Copies of the blanket opinion required by this
Section 2(c) shall be delivered to the Purchasers within the time frame set
forth above.
3.
Registration
Procedures.
If and
whenever the Company is required by the provisions hereof to effect the
registration of any Registrable Securities under the Securities Act, the Company
will, as expeditiously as possible:
(a)
prepare
and file with the Commission the Registration Statement with respect to such
Registrable Securities, respond as promptly as possible to any comments received
from the Commission, and use its best efforts to cause the Registration
Statement to become and remain effective for the Effectiveness Period with
respect thereto, and promptly provide to the Purchasers copies of all filings
and Commission letters of comment relating thereto;
(b)
prepare
and file with the Commission such amendments and supplements to the Registration
Statement and the Prospectus used in connection therewith as may be necessary
to
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by the Registration Statement and to
keep
such Registration Statement effective until the expiration of the Effectiveness
Period;
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(c)
furnish
to the Purchasers such number of copies of the Registration Statement and the
Prospectus included therein (including each preliminary Prospectus) as the
Purchasers reasonably may request to facilitate the public sale or disposition
of the Registrable Securities covered by the Registration
Statement;
(d)
use
its
commercially reasonable efforts to register or qualify the Purchasers'
Registrable Securities covered by the Registration Statement under the
securities or "blue sky" laws of such jurisdictions within the United States
as
the Purchasers may reasonably request, provided, however, that the Company
shall
not for any such purpose be required to qualify generally to transact business
as a foreign corporation in any jurisdiction where it is not so qualified or
to
consent to general service of process in any such jurisdiction;
(e)
list
the
Registrable Securities covered by the Registration Statement with any securities
exchange on which the Common Stock of the Company is then listed;
(f)
immediately
notify the Purchasers at any time when a Prospectus relating thereto is required
to be delivered under the Securities Act, of the happening of any event of
which
the Company has knowledge as a result of which the Prospectus contained 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 light of the
circumstances then existing; and
(g)
make
available for inspection by the Purchasers and any attorney, accountant or
other
agent retained by the Purchasers, all publicly available, non-confidential
financial and other records, pertinent corporate documents and properties of
the
Company, and cause the Company's officers, directors and employees to supply
all
publicly available, non-confidential information reasonably requested by the
attorney, accountant or agent of the Purchasers.
(h) promptly
notify each seller of Registrable Securities of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration Statement
or
the initiation of any proceedings for that purpose and make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible time;
(i) if
the
offering is an underwritten offering, enter into a written agreement with the
managing underwriter selected in the manner herein provided in such form and
containing such provisions as are usual and customary in the securities business
for such an arrangement between such underwriter and companies of the Company’s
size and investment stature, including, without limitation, customary
indemnification and contribution provisions;
(j) if
the
offering is an underwritten offering, at the request of any seller of
Registrable Securities, use its best efforts to furnish to such seller on the
date that Registrable Securities are delivered to the underwriters for sale
pursuant to such registration: (i) a copy of an opinion dated such date of
counsel representing the Company for the purposes of such registration,
addressed to the underwriters, stating that such Registration Statement has
become effective under the Securities Act and that (A) to the best knowledge
of
such counsel, no stop order suspending the effectiveness thereof has been issued
and no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act, (B) the Registration Statement, the
related prospectus and each amendment or supplement thereof comply as to form
in
all material respects with the requirements of the Securities Act (except that
such counsel need not express any opinion as to financial statements or other
financial or statistical information contained therein) and (C) to such other
effects as reasonably may be requested by counsel for the underwriters; and
(ii)
a copy of a letter dated such date from the independent public accountants
retained by the Company, addressed to the underwriters, stating that they are
independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the
Company included in the Registration Statement or the prospectus, or any
amendment or supplement thereof, comply as to form in all material respects
with
the applicable accounting requirements of the Securities Act, and such letter
shall additionally cover such other financial matters (including information
as
to the period ending no more than five business days prior to the date of such
letter) with respect to such registration as such underwriters reasonably may
request;
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(k) take
all
actions reasonably necessary to facilitate the timely preparation and delivery
of certificates (not bearing any legend restricting the sale or transfer of
such
securities) representing the Registrable Securities to be sold pursuant to
the
Registration Statement and to enable such certificates to be in such
denominations and registered in such names as the Investors or any underwriters
may reasonably request; and
(l) take
all
other reasonable actions necessary to expedite and facilitate the registration
of the Registrable Securities pursuant to the Registration
Statement.
4.
Registration
Expenses.
All
expenses relating to the Company's compliance with Sections 2 and 3 hereof,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel and independent public accountants
for the Company, fees and expenses (including counsel fees) incurred in
connection with complying with state securities or "blue sky" laws, fees of
the
NASD, transfer taxes, fees of transfer agents and registrars, fees of, and
disbursements incurred by, one counsel for the Holders, are called "Registration
Expenses". All selling commissions applicable to the sale of Registrable
Securities, including any fees and disbursements of any special counsel to
the
Holders beyond those included in Registration Expenses, are called "Selling
Expenses." The Company shall only be responsible for all Registration
Expenses.
5.
Indemnification.
(a)
In
the
event of a registration of any Registrable Securities under the Securities
Act
pursuant to this Agreement, the Company will indemnify and hold harmless each
of
the Purchasers, and their respective officers, directors and each other person,
if any, who controls any of the Purchasers within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or several,
to
which any of the Purchasers, or such persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any
untrue statement or alleged untrue statement of any material fact contained
in
any Registration Statement under which such Registrable Securities were
registered under the Securities Act pursuant to this Agreement, any preliminary
Prospectus or final Prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission
to
state therein a material fact required to be stated therein or necessary to
make
the statements therein not misleading, and will reimburse the Purchasers, and
each such person for any reasonable legal or other expenses incurred by them
in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable
in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by or on behalf of any of the Purchasers or any such person in writing
specifically for use in any such document.
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(b)
In
the
event of a registration of the Registrable Securities under the Securities
Act
pursuant to this Agreement, each of the Purchasers will indemnify and hold
harmless the Company, and its officers, directors and each other person, if
any,
who controls the Company within the meaning of the Securities Act, against
all
losses, claims, damages or liabilities, joint or several, to which the Company
or such persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact which was furnished in writing by such Purchaser
to the Company expressly for use in (and such information is contained in)
the
Registration Statement under which such Registrable Securities were registered
under the Securities Act pursuant to this Agreement, any preliminary Prospectus
or final Prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the
statements therein not misleading, and will reimburse the Company and each
such
person for any reasonable legal or other expenses incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action, provided, however, that such Purchaser will be liable in any such case
if and only to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission so made in conformity with information furnished
in
writing to the Company by or on behalf of such Purchaser specifically for use
in
any such document. Notwithstanding the provisions of this paragraph, no
Purchaser shall be required to indemnify any person or entity in excess of
the
amount of the aggregate net proceeds received by such Purchaser in respect
of
Registrable Securities in connection with any such registration under the
Securities Act.
(c)
Promptly
after receipt by a party entitled to claim indemnification hereunder (an
"Indemnified Party") of notice of the commencement of any action, such
Indemnified Party shall, if a claim for indemnification in respect thereof
is to
be made against a party hereto obligated to indemnify such Indemnified Party
(an
"Indemnifying Party"), notify the Indemnifying Party in writing thereof, but
the
omission so to notify the Indemnifying Party shall not relieve it from any
liability which it may have to such Indemnified Party other than under this
Section 5(c) and shall only relieve it from any liability which it may have
to
such Indemnified Party under this Section 5(c) if and to the extent the
Indemnifying Party is prejudiced by such omission. In case any such action
shall
be brought against any Indemnified Party and it shall notify the Indemnifying
Party of the commencement thereof, the Indemnifying Party shall be entitled
to
participate in and, to the extent it shall wish, to assume and undertake the
defense thereof with counsel satisfactory to such Indemnified Party, and, after
notice from the Indemnifying Party to such Indemnified Party of its election
so
to assume and undertake the defense thereof, the Indemnifying Party shall not
be
liable to such Indemnified Party under this Section 5(c) for any legal expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof; if the Indemnified Party retains its own counsel, then the Indemnified
Party shall pay all fees, costs and expenses of such counsel, provided, however,
that, if the defendants in any such action include both the Indemnified Party
and the Indemnifying Party and the Indemnified Party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the Indemnifying Party or
if
the interests of the Indemnified Party reasonably may be deemed to conflict
with
the interests of the Indemnifying Party, the Indemnified Party shall have the
right to select one separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the reasonable
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the Indemnifying Party as
incurred.
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(d)
In
order
to provide for just and equitable contribution in the event of joint liability
under the Securities Act in any case in which either (i) the Purchasers, or
any
officer, director or controlling person of the Purchasers, makes a claim for
indemnification pursuant to this Section 5 but it is judicially determined
(by
the entry of a final judgment or decree by a court of competent jurisdiction
and
the expiration of time to appeal or the denial of the last right of appeal)
that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 5 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of the
Purchasers or such officer, director or controlling person of the Purchasers
in
circumstances for which indemnification is provided under this Section 5; then,
and in each such case, the Company and the Purchasers will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that each Purchaser
is
responsible only for the portion represented by the percentage that the public
offering price of its securities offered by the Registration Statement bears
to
the public offering price of all securities offered by such Registration
Statement, provided, however, that, in any such case, (A) no Purchaser will
be
required to contribute any amount in excess of the public offering price of
all
such securities offered by it pursuant to such Registration Statement; and
(B)
no person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 10(f) of the Act) will be entitled to contribution from any person
or
entity who was not guilty of such fraudulent misrepresentation.
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6. Changes
in Capital Stock. If,
and
as often as, there is any change in the capital stock of the Company by way
of a
stock split, stock dividend, combination or reclassification, or through a
merger, consolidation, reorganization or recapitalization, or by any other
means, appropriate adjustment shall be made in the provisions hereof so that
the
rights and privileges granted hereby shall continue as so changed.
7.
Representations
and Warranties. The
Company represents and warrants to the Purchasers as follows:
(a) The
execution, delivery and performance of this Agreement by the Company have been
duly authorized by all requisite corporate action and will not violate any
provision of law, any order of any court or other agency of government, the
Charter or By-laws of the Company or any provision of any indenture, agreement
or other instrument to which it or any or its properties or assets is bound,
conflict with, result in a breach of or constitute (with due notice or lapse
of
time or both) a default under any such indenture, agreement or other instrument
or result in the creation or imposition of any lien, charge or encumbrance
of
any nature whatsoever upon any of the properties or assets of the Company or
its
subsidiaries.
(b) This
Agreement has been duly executed and delivered by the Company and constitutes
the legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to any applicable bankruptcy, insolvency
or
other laws affecting the rights of creditors generally and to general equitable
principles and the availability of specific performance.
(c)
The
Common Stock of the Company is registered pursuant to Section 12(b) or 12(g)
of
the Exchange Act and, except with respect to certain matters which the Company
has disclosed to the Purchasers on Schedule 4.21 to the Securities Purchase
Agreement, the Company has timely filed all proxy statements, reports,
schedules, forms, statements and other documents required to be filed by it
under the Exchange Act. The Company has filed (i) its Annual Report on Form
10-KSB for its fiscal year ended October 31, 2005, (ii) its Quarterly Report
on
Form 10-QSB for the fiscal quarter ended January 31, 2006 and a Current Report
on Form 8-K, filed with the Commission on May 3, 2006 (collectively, the "SEC
Reports"). Each SEC Report was, at the time of its filing, in substantial
compliance with the requirements of its respective form and none of the SEC
Reports, nor the financial statements (and the notes thereto) included in the
SEC Reports, as of their respective filing dates, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply as to form in
all
material respects with applicable accounting requirements and the published
rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") applied
on
a consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the
case
of unaudited interim statements, to the extent they may not include footnotes
or
may be condensed) and fairly present in all material respects the financial
condition, the results of operations and the cash flows of the Company and
its
subsidiaries, on a consolidated basis, as of, and for, the periods presented
in
each such SEC Report.
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(d)
The
Common Stock is listed for trading on the OTCBB and satisfies all requirements
for the continuation of such listing. The Company has not received any notice
that its Common Stock will be delisted from the OTCBB (except for prior notices
which have been fully remedied) or that the Common Stock does not meet all
requirements for the continuation of such listing.
(e)
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security
or
solicited any offers to buy any security under circumstances that would cause
the offering of the Securities pursuant to the Securities Purchase Agreement
to
be integrated with prior offerings by the Company for purposes of the Securities
Act which would prevent the Company from selling the Common Stock pursuant
to
Rule 506 under the Securities Act, or any applicable exchange-related
stockholder approval provisions, nor will the Company or any of its affiliates
or subsidiaries take any action or steps that would cause the offering of such
Securities to be integrated with other offerings.
(f)
The
Warrants, the Notes and the shares of Common Stock which the Purchasers may
acquire pursuant to the Warrants and the Notes are all restricted securities
under the Securities Act as of the date of this Agreement. The Company will
not
issue any stop transfer order or other order impeding the sale and delivery
of
any of the Registrable Securities at such time as such Registrable Securities
are registered for public sale or an exemption from registration is available,
except as required by federal or state securities laws.
(g)
The
Company understands the nature of the Registrable Securities issuable upon
the
conversion of the Notes and the exercise of the Warrants and recognizes that
the
issuance of such Registrable Securities may have a potential dilutive effect.
The Company specifically acknowledges that its obligation to issue the
Registrable Securities is binding upon the Company and enforceable regardless
of
the dilution such issuance may have on the ownership interests of other
shareholders of the Company.
(h)
Except
for agreements made in the ordinary course of business, there is no agreement
that has not been filed with the Commission as an exhibit to a registration
statement or to a form required to be filed by the Company under the Exchange
Act, the breach of which could reasonably be expected to have a material and
adverse effect on the Company and its subsidiaries, or would prohibit or
otherwise interfere with the ability of the Company to enter into and perform
any of its obligations under this Agreement in any material
respect.
(i)
The
Company will at all times have authorized and reserved a sufficient number
of
shares of Common Stock for the full conversion of the Notes and the exercise
of
the Warrants.
8.
Miscellaneous.
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(a)
Remedies.
In the
event of a breach by the Company or by a Holder, of any of their respective
obligations under this Agreement, each Holder or the Company, as the case may
be, in addition to being entitled to exercise all rights granted by law and
under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement.
(b)
No
Piggyback on Registrations.
Neither
the Company nor any of its security holders (other than the Holders in such
capacity pursuant hereto) may include securities of the Company in any
Registration Statement other than the Registrable Securities, and the Company
shall not after the date hereof enter into any agreement providing any such
right for inclusion of shares in the Registration Statement to any of its
security holders. The Company has not previously entered into any agreement
granting any registration rights with respect to any of its securities to any
Person that have not been fully satisfied.
(c)
Compliance.
Each
Holder covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement.
(d)
Discontinued
Disposition.
Each
Holder agrees by its acquisition of such Registrable Securities that, upon
receipt of a notice from the Company of the occurrence of a Discontinuation
Event (as defined below), such Holder will forthwith discontinue disposition
of
such Registrable Securities under the applicable Registration Statement until
such Holder's receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and,
in
either case, has received copies of any additional or supplemental filings
that
are incorporated or deemed to be incorporated by reference in such Prospectus
or
Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph. For purposes of this Section 8(d),
a
"Discontinuation Event" shall mean (i) when the Commission notifies the Company
whether there will be a "review" of such Registration Statement and whenever
the
Commission comments in writing on such Registration Statement (the Company
shall
provide true and complete copies thereof and all written responses thereto
to
each of the Holders); (ii) any request by the Commission or any other Federal
or
state governmental authority for amendments or supplements to such Registration
Statement or Prospectus or for additional information; (iii) the issuance by
the
Commission of any stop order suspending the effectiveness of such Registration
Statement covering any or all of the Registrable Securities or the initiation
of
any Proceedings for that purpose; (iv) the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and/or (v) the occurrence of any event or passage of time that makes
the financial statements included in such Registration Statement ineligible
for
inclusion therein or any statement made in such Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein
by
reference untrue in any material respect or that requires any revisions to
such
Registration Statement, Prospectus or other documents so that, in the case
of
such Registration Statement or Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.
11
(e)
Piggy-Back
Registrations.
If at
any time during the Effectiveness Period there is not an effective Registration
Statement covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under
the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Holder written notice of such determination and, if within
fifteen days after receipt of such notice, any such Holder shall so request
in
writing, the Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered to
the
extent the Company may do so without violating registration rights of others
which exist as of the date of this Agreement, subject to customary underwriter
cutbacks applicable to all holders of registration rights and subject to
obtaining any required consent of any selling stockholder(s) to such inclusion
under such registration statement.
(f)
Amendments
and Waivers.
The
provisions of this Agreement, including the provisions of this sentence, may
not
be amended, modified or supplemented, and waivers or consents to departures
from
the provisions hereof may not be given, unless the same shall be in writing
and
signed by the Company and the Holders of the then outstanding Registrable
Securities. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to
the
rights of certain Holders and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of at least a majority of the
Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified,
or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(g)
Notices.
Any
notice or request hereunder may be given to the Company or the Purchasers at
the
respective addresses set forth below or as may hereafter be specified in a
notice designated as a change of address under this Section 8(g). Any notice
or
request hereunder shall be given by registered or certified mail, return receipt
requested, hand delivery, overnight mail, Federal Express or other national
overnight next day carrier (collectively, "Courier") or telecopy (confirmed
by
mail). Notices and requests shall be, in the case of those by hand delivery,
deemed to have been given when delivered to any party to whom it is addressed,
in the case of those by mail or overnight mail, deemed to have been given three
(3) business days after the date when deposited in the mail or with the
overnight mail carrier, in the case of a Courier, the next business day
following timely delivery of the package with the Courier, and, in the case
of a
telecopy, when confirmed. The address for such notices and communications shall
be as follows:
12
If
to the
Company:
Friendlyway
Corporation
0000
Xxxxxxx Xxxxxx, Xxxxx 000
Xxx
Xxxxxxxxx, XX 00000
Attention:
Xxx
Xxxxxxx, Chief
Executive Officer and President
Fax:
000-000-0000
With
a
copy to:
Xxxxxxxxxxx
X. Xxxxxxx, P.C.
000
X.
Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx
Xxxxxxx, XX 00000
Attention:
Xxxxxxxxxxx X. Xxxxxxx, Esq.
Fax
No.:
(000)
000-0000
If
to the
Holders, at their respective addresses as set forth on the Financing Signature
Page to the Securities Purchase Agreement.
If
to
Xxxxx:
Xxxxx
Securities Corp.
000
Xxxxxxx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxx
X. Xxxxxxxx, President
& Chief Executive Officer
Fax:
(000) 000-0000
With
a
copy to:
Xxxxxxx
Xxxxxx LLP
000
Xxxxx
Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxx
Xxxxxxx, Esq.
Fax:
(000) 000-0000
or
such
other address as may be designated in writing hereafter in accordance with
this
Section 8(g) by such Person.
(h)
Successors
and Assigns.
This
Agreement shall inure to the benefit of and be binding upon the successors
and
permitted assigns of each of the parties and shall inure to the benefit of
each
Holder. The Company may not assign its rights or obligations hereunder without
the prior written consent of each Holder. Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted under
the Securities Purchase Agreement and each Term Note.
(i)
Execution
and Counterparts.
This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and all of which taken together
shall
constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
13
(j)
Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all Proceedings
concerning the interpretation, enforcement and defense of the transactions
contemplated by this Agreement shall be commenced exclusively in the state
and
federal courts sitting in the City of New York, Borough of Manhattan. Each
party
hereto 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 Proceeding, any claim that it is not
personally subject to the jurisdiction of any such court or that such Proceeding
is improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such Proceeding by mailing
a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to
it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. If either party shall commence a Proceeding to enforce
any
provisions of this Agreement, the Securities Purchase Agreement, or any Related
Agreement, then the prevailing party in such Proceeding shall be reimbursed
by
the other party for its reasonable attorney’s fees and other costs and expenses
incurred with the investigation, preparation and prosecution of such
Proceeding.
(k)
Cumulative
Remedies.
The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
(l)
Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
14
(m)
Headings.
The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
[BALANCE
OF PAGE INTENTIONALLY LEFT BLANK;
15
IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as
of the date first written above.
| FRIENDLYWAY CORPORATION | ||
| |
|
|
| By: | /S/ XXX XXXXXXX | |
|
Xxxxxxx
X. Xxxxxxx
President
and Chief Executive Officer
|
||
| XXXXX SECURITIES CORP., | ||
| |
|
|
| By: | /S/ XXXXX X. XXXXXXXX | |
|
Xxxxx X. Xxxxxxxx President
and Chief Executive Officer
|
||
|
PURCHASER
[to
sign Omnibus Signature Page
annexed
to Securities Purchase Agreement]
|
||
| |
|
|
16
EXHIBIT
A
[Month
__, 2006]
[Transfer
Agent]
Re:
friendlyway Corporation Registration Statement on Form ____
Ladies
and Gentlemen:
As
counsel to friendlyway Corporation, a Nevada corporation (the "Company"), we
have been requested to render our opinion to you in connection with the resale
by the individuals or entitles listed on Schedule A attached hereto (the
"Selling Stockholders"), of an aggregate of [amount] shares (the "Shares")
of
the Company's Common Stock.
A
Registration Statement on Form _____ under the Securities Act of 1933, as
amended (the "Act"), with respect to the resale of the Shares was declared
effective by the Securities and Exchange Commission on [date]. Enclosed is
the
Prospectus dated [date]. We understand that the Shares are to be offered and
sold in the manner described in the Prospectus.
Based
upon the foregoing, upon request by the Selling Stockholders at any time while
such registration statement remains effective, it is our opinion that the Shares
have been registered for resale under the Act and new certificates evidencing
the Shares upon their transfer or re-registration by the Selling Stockholders
may be issued without restrictive legend. We will advise you if such
registration statement is not available or effective at any point in the
future.
Very
truly yours,
17
Schedule
A to Opinion to Transfer Agent
18
