REGISTRATION RIGHTS AGREEMENT
This
REGISTRATION RIGHTS AGREEMENT (this “Agreement”),
dated
as of May __, 2007, is by and between VeruTEK Technologies, Inc., a Nevada
corporation (the “Company”),
and
each of the entities whose names appear on the signature pages hereof. Such
entities are each referred to herein as “Purchaser”
and,
collectively, as the “Purchasers”.
WHEREAS:
A.
The
Company has agreed, on the terms and subject to the conditions set forth in
the
Securities Purchase Agreement, dated as of May __, 2007 (the “Securities
Purchase Agreement”),
to
issue and sell to each Purchaser named therein (A) a 6.0% Secured Convertible
Note in the form attached to the Securities Purchase Agreement (each, a
“Note”
and,
collectively, the “Notes”)
and
(B) a Warrant in the form attached to the Securities Purchase Agreement (each,
a
“Warrant”
and,
collectively, the “Warrants”).
B.
The
Notes are convertible, subject to the terms and conditions specified therein
and
in the Securities Purchase Agreement, into shares (the “Conversion
Shares”)
of the
Company’s common stock, par value $0.001 per share (the “Common
Stock”).
The
Warrants are exercisable, subject to the terms and conditions specified therein
and in the Securities Purchase Agreement, into shares of Common Stock (the
“Warrant
Shares”).
C.
In
order to induce each Purchaser to enter into the Securities Purchase Agreement,
the Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended (the “Securities
Act”),
and
under applicable state securities laws.
NOW,
THEREFORE, in consideration of each Purchaser entering into the Securities
Purchase Agreement, and other good and valuable consideration, the receipt
and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. DEFINITIONS.
For
purposes of this Agreement, the following terms shall have the meanings
specified:
“Business
Day”
means
any day other than a Saturday, a Sunday or a day on which the Commission is
closed or on which banks in the City of New York are authorized by law to be
closed.
“Commission”
means
the Securities and Exchange Commission.
“Effective
Date”
means
the date on which the Registration Statement is declared effective by the
Commission.
“Filing
Deadline”
means
the date that is the earliest of the following: (i) the date on which the
Company files a registration statement covering any of its securities issued
on
or after the date of this Agreement; (ii) the date on which the Company is
contractually required to file a registration statement covering any of its
securities (other than the Registrable Securities) issued after the Closing
Date; and (iii) the date that is the sixtieth (60th) calendar day following
the
Closing Date.
“Holder”
means
any person owning or having the right to acquire, through conversion of the
Notes or exercise of the Warrants or otherwise, Registrable Securities,
including initially each Purchaser and thereafter any permitted assignee
thereof.
“Registrable
Securities”
means
the Conversion Shares, the Warrant Shares, and any other shares of Common Stock
issuable pursuant to the terms of the Note or the Warrants, and any shares
of
capital stock issued or issuable from time to time (with any adjustments) in
replacement of, in exchange for or otherwise in respect of the Conversion Shares
and the Warrant Shares.
“Registration
Deadline”
means
the earliest of the following: (i) the one hundred eightieth (180th) calendar
day following the Closing Date, and (ii) the fifth (5th) Business Day after
the
Company learns that no review of the Registration Statement will be made by
the
staff of the Commission or that the staff of the Commission has no further
comments on the Registration Statement.
“Registration
Statement”
means
a
registration statement or statements of the Company prepared in compliance
with
the Securities Act and covering the Registrable Securities.
Capitalized
terms used herein and not otherwise defined shall have the respective meanings
specified in the Securities Purchase Agreement.
2. REGISTRATION
(a) Filing
of Registration Statement.
On or
before the Filing Deadline, the Company shall prepare and file with the
Commission a Registration Statement covering the resale of a number of shares
of
Registrable Securities equal to one hundred and fifty percent (150%) of the
number of shares of Common Stock issuable upon conversion of the Notes and
exercise of the Warrants (such number to be determined using the Conversion
Price (as defined in the Notes) and Exercise Price (as defined in the Warrants)
in effect on the date on which the Registration Statement is filed and without
regard to any restriction on such conversion or exercise). Such Registration
Statement shall include the Plan of Distribution attached hereto as Exhibit
A.
Such
Registration Statement shall also state, to the extent permitted by Rule 416
under the Securities Act (“Rule
416”),
that
it also covers such indeterminate number of additional shares of Common Stock
as
may become issuable upon the conversion of the Notes and exercise of the
Warrants in order to prevent dilution resulting from stock splits, stock
dividends or similar events.
(b) Effectiveness.
The
Company shall use reasonable best efforts to cause the Registration Statement
to
become effective as soon as practicable following the filing thereof, but in
no
event later than the Registration Deadline. The Company shall respond promptly
to any and all comments made by the staff of the Commission on with respect
to a
Registration Statement, and shall submit to the Commission, within two (2)
Business Days after the Company learns that no review of such Registration
Statement will be made by the staff of the Commission or that the staff of
the
Commission has no further comments on such Registration Statement, as the case
may be, a request for acceleration of the effectiveness of such Registration
Statement to a time and date not later than two (2) Business Days after the
submission of such request. The Company will maintain the effectiveness of
each
Registration Statement filed pursuant to this Agreement until the earliest
to
occur of (i) the date on which all of the Registrable Securities eligible for
resale thereunder have been publicly sold pursuant to either the Registration
Statement or Rule 144 under the Securities Act (“Rule
144”),
(ii)
the date on which all of the Registrable Securities remaining to be sold under
such Registration Statement (in the reasonable opinion of counsel to the
Company) may be immediately sold to the public under Rule 144(k) under the
Securities Act (“Rule
144(k)”)
or any
successor provision and (iii) the date that is the second (2nd) anniversary
of
the Effective Date (the period beginning on the Closing Date and ending on
the
earliest to occur of (i), (ii) or (iii) above being referred to herein as the
“Registration
Period”).
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(c) Registration
Default.
If (i)
the Registration Statement is not filed on or before the Filing Deadline or
declared effective by the Commission on or before the Registration Deadline,
(ii) after a Registration Statement has been declared effective by the
Commission, sales of Registrable Securities (other than such Registrable
Securities as are then freely saleable pursuant to Rule 144(k)) cannot be made
by a Holder under a Registration Statement for any reason not within the
exclusive control of such Holder, or (iii) an amendment or supplement to a
Registration Statement, or a new registration statement, required to be filed
pursuant to the terms of Section
3(j)
below,
is not filed on or before the date required by such section (each of the
foregoing clauses (i), (ii) and (iii) being referred to herein as a
“Registration
Default”),
the
Company shall make cash payments to each Holder equal to such Holder’s pro rata
share (based on the aggregate number of Registrable Securities then held by
or
issuable to such Holder as of the occurrence of the Registration Deadline)
equal
to two percent (2%) of the aggregate Purchase Price paid by such Holder for
such
Holder’s Note and Warrants for each thirty (30) day period (pro rated for
partial periods) in which a Registration Default exists. Notwithstanding any
provision of this Agreement to the contrary, the Company shall be permitted
to
suspend the Registration Statement for one or more periods (provided that the
aggregate length of such suspension shall not exceed ten (10) consecutive
Business Days or an aggregate of twenty (20) Business Days in any 365 day
period, with at least thirty (30) calendar days between each such suspension)
the actions required under Section
2(a)
of this
Agreement to the extent that the Board of Directors of the Company concludes
reasonably and in good faith that the disclosure of information in the
prospectus is not in the best interest of the Company. Each such payment
required to be made under this Section
2(c)
shall be
made within five (5) Business Days following the last day of each calendar
month
in which a Registration Default exists. Any such payment made following such
five (5) Business Day window shall be subject to interest at the lower of ten
percent (10%) and the maximum rate permitted by applicable law. Any such payment
shall be in addition to any other remedies available to each Holder at law
or in
equity, whether pursuant to the terms hereof, the Securities Purchase Agreement,
the Notes, or otherwise.
(d) Allocation
of Conversion Shares and Warrant Shares.
The
initial number of Conversion Shares and Warrant Shares included in any
Registration Statement and each increase in the number thereof included therein
shall be allocated pro
rata
among
the Holders based on the aggregate number of Registrable Securities issuable
to
each Holder at the time the Registration Statement covering such initial number
of Registrable Securities or increase thereof is declared effective by the
Commission (such number to be determined using the Conversion Price or Exercise
Price, as applicable, in effect at such time and without regard to any
restriction on the ability of a Holder to convert such Holder’s Note or exercise
such Holder’s Warrant as of such date). In the event that a Holder sells or
otherwise transfers any of such Holder’s Registrable Securities, each transferee
shall be allocated the portion of the then remaining number of Registrable
Securities included in such Registration Statement allocable to the
transferor.
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(e) Additional
Registration Statements.
The
Purchasers acknowledge that the Commission has recently given enhanced scrutiny
to registration statements attempting to register the resale of shares and
warrant shares obtained by purchasers in private placements and that such
Commission reviews have resulted in registrants being denied the use of Rule
415(a)(1)(i) under the Securities Act. Accordingly, notwithstanding anything
herein to the contrary, the Purchasers agree that (i) the Company shall not
be
obligated to pay any amount of liquidated damages under Section
2(c)
in the
event the Registration Statement is not declared effective on or prior to the
Registration Deadline solely as a result of or in connection with a
determination by the Commission that either the Company or the Purchasers are
ineligible to rely on Rule 415(a)(1)(i) under the Securities Act with respect
to
the registration of any of the Registrable Securities for resale by the
Purchasers on a continuous or delayed basis; provided, that the Company shall
thereafter use its commercially reasonable efforts to find alternative methods
to register the Registrable Securities with the Commission for resale; and
(ii)
in the event the Company, after conducting a pre-filing conference with the
Commission, if possible, reasonably determines that it is unable to, or it
is
inadvisable for the Company to attempt to, register all of the Registrable
Securities in a single Registration Statement, the Company may elect to fulfill
the registration requirements of this Section
2
by
registering the Registrable Securities in two or more Registration Statements,
provided that the Company shall use its best efforts to file each subsequent
Registration Statement no later than the later of (A) 60 days following the
date
on which the last of the Registrable Securities registered under the preceding
Registration Statement were sold or (B) six (6) months following the date on
which the preceding Registration Statement was declared effective.
(f) Registration
of Other Securities.
During
the period beginning on the date hereof and ending on the Effective Date, the
Company shall refrain from filing any registration statement (other than (i)
a
Registration Statement filed hereunder, (ii) a registration statement on Form
S-8 with respect to stock option plans and agreements and stock plans currently
in effect and disclosed in the Securities Purchase Agreement or the schedules
thereto, or (iii) a registration statement on Form S-4 with respect to an
acquisition or other business combination involving the Company).
3. OBLIGATIONS
OF THE COMPANY.
In
addition to performing its obligations hereunder, including without limitation
those pursuant to Section
2
above,
the Company shall, with respect to each Registration Statement:
(a) prepare
and file with the Commission such amendments and supplements to such
Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to comply with the provisions of
the
Securities Act or to maintain the effectiveness of such Registration Statement
during the Registration Period, or as may be reasonably requested by a Holder
in
order to incorporate information concerning such Holder or such Holder’s
intended method of distribution and further incorporating such additional
information as may be reasonably requested by such Holder;
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(b) at
such
time following the Closing that the Company is eligible to do so, use
commercially reasonable efforts to secure the listing on the Principal Market
of
all Registrable Securities issuable upon conversion of the Notes and exercise
of
the Warrants, and at any Holder’s request, provide such Holder with reasonable
evidence thereof;
(c) so
long
as a Registration Statement is effective covering the resale of the applicable
Registrable Securities owned by a Holder, furnish to each Holder such number
of
copies of the prospectus included in such Registration Statement, including
a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as such Holder may reasonably request in order
to
facilitate the disposition of such Holder’s Registrable Securities;
(d) use
commercially reasonable efforts to register or qualify the Registrable
Securities under the securities or “blue sky” laws of such jurisdictions within
the United States as shall be reasonably requested from time to time by a
Holder, and do any and all other acts or things which may reasonably be
necessary or advisable to enable such Holder to consummate the public sale
or
other disposition of the Registrable Securities in such jurisdictions;
provided
that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process
in
any such jurisdiction;
(e) notify
each Holder immediately after becoming aware of the occurrence of (i) any
request by the Commission or any other federal/state governmental authority
during the period of effectiveness of the Registration Statement for amendments
or supplements to a Registration Statement or related prospectus or for
additional information or (ii) any other event (but shall not, without the
prior
written consent of such Holder, disclose to such Holder any facts or
circumstances constituting material non-public information) as a result of
which
the prospectus included in such Registration Statement, as then in effect,
contains an untrue statement of material fact or omits 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, and
as
promptly as practicable prepare and file with the Commission and furnish to
each
Holder a reasonable number of copies of a supplement or an amendment to such
prospectus as may be necessary so that such prospectus does not contain an
untrue statement of material fact or omit 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. The parties hereto acknowledge that
the Company shall be permitted to suspend the Registration Statement for one
or
more periods (provided that the aggregate length of such suspension shall not
exceed ten (10) consecutive Business Days or an aggregate of twenty (20)
Business Days in any 365 day period, with at least thirty (30) calendar days
between each such suspension) the actions required under Section
2(a)
of this
Agreement to the extent that the Board of Directors of the Company concludes
reasonably and in good faith that the disclosure of information in the
prospectus is not in the best interest of the Company;
-5-
(f) use
commercially reasonable efforts to prevent the issuance of any stop order or
other order suspending the effectiveness of such Registration Statement and,
if
such an order is issued, to notify each Holder immediately after becoming aware
thereof and to use commercially reasonable efforts obtain the withdrawal thereof
at the earliest possible time and to notify each Holder in writing of the
issuance of such order and the resolution thereof. The parties hereto
acknowledge that the Company shall be permitted to suspend the Registration
Statement for one or more periods (provided that the aggregate length of such
suspension shall not exceed ten (10) consecutive Business Days or an aggregate
of twenty (20) Business Days in any 365 day period, with at least thirty (30)
calendar days between each such suspension) the actions required under
Section
2(a)
of this
Agreement to the extent that the Board of Directors of the Company concludes
reasonably and in good faith that the disclosure of information in the
prospectus is not in the best interest of the Company;
(g) furnish
to each Holder, on the date that such Registration Statement, or any successor
registration statement, becomes effective, a letter, dated such date, signed
by
an officer of or counsel to the Company and addressed to such Holder, confirming
such effectiveness and, to the knowledge of such counsel, the absence of any
stop order;
(h) provide
to each Holder and its representatives the reasonable opportunity to conduct
a
reasonable inquiry of the Company’s financial and other records during normal
business hours and make available during normal business hours and with
reasonable advance notice its officers, directors and employees for questions
regarding information which such Holder may reasonably request in order to
fulfill any due diligence obligation on its part;
(i) permit
counsel for each Holder to review such Registration Statement and all amendments
and supplements thereto, and any comments made by the staff of the Commission
concerning such Holder and/or the transactions contemplated by the Transaction
Documents and the Company’s responses thereto, within a reasonable period of
time prior to the filing thereof with the Commission (or, in the case of
comments made by the staff of the Commission, within a reasonable period of
time
following the receipt thereof by the Company);
(j) in
the
event that, at any time, the number of shares available under the Registration
Statement is insufficient to cover one hundred and twenty-five percent (125%)
of
the Registrable Securities issuable under the Notes and Warrants (such number
to
be determined using the Conversion Price or Exercise Price, as applicable,
in
effect at such time and without regard to any restriction on the ability of
any
Holder to convert such Holder’s Note or exercise such Holder’s Warrant) the
Company shall promptly amend such Registration Statement or file a new
registration statement, in any event as soon as practicable, but not later
than
the tenth (10th)
day
following notice from a Holder of the occurrence of such event, so that such
Registration Statement or such new registration statement, or both, covers
no
less than one hundred and fifty percent (150%) of the Registrable Securities
eligible for resale thereunder and issuable under the Notes and Warrants (such
number to be determined using the Conversion Price or Exercise Price, as
applicable, in effect at the time of such amendment or filing and without regard
to any restriction on the ability of any Holder to convert such Holder’s Note or
exercise such Holder’s Warrant). The Company shall use its best efforts to cause
such amendment and/or new Registration Statement to become effective as soon
as
practicable following the filing thereof. Any Registration Statement filed
pursuant to this Section
3(j)
shall
state that, to the extent permitted by Rule 416, such Registration Statement
also covers such indeterminate number of additional shares of Common Stock
as
may become issuable upon conversion of the Note and exercise of the Warrants
in
order to prevent dilution resulting from stock splits, stock dividends or
similar events. Unless and until such amendment or new Registration Statement
becomes effective, each Holder shall have the rights described in Section
2(d)
above;
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(k) cause
to
be furnished to each Holder, upon request therefore, comfort letters from the
Company’s independent auditors and/or outside counsel, with respect to such
Holder’s status as an underwriter; and
(l) cause
to
be timely furnished to each Holder, earnings statements of the Company
conforming to the requirements of Rule 158 under the Securities
Act.
4. OBLIGATIONS
OF EACH HOLDER.
In
connection with the registration of Registrable Securities pursuant to a
Registration Statement, each Holder shall:
(a) timely
furnish to the Company (i) a completed Selling Shareholder Questionnaire
attached hereto as Exhibit
B
and (ii)
such information in writing regarding itself and the intended method of
disposition of such Registrable Securities as the Company shall reasonably
request in order to effect the registration thereof;
(b) upon
receipt of any notice from the Company of the happening of any event of the
kind
described in Sections
3(e)
or
3(f),
immediately discontinue any sale or other disposition of such Registrable
Securities pursuant to such Registration Statement until the filing of an
amendment or supplement as described in Section
3(e)
or
withdrawal of the stop order referred to in Section
3(f),
and use
commercially reasonable efforts to maintain the confidentiality of such notice
and its contents;
(c) to
the
extent required by applicable law, deliver a prospectus to the purchaser of
such
Registrable Securities;
(d) notify
the Company when it has sold all of the Registrable Securities held by it;
and
(e) notify
the Company in the event that any information supplied by such Holder in writing
for inclusion in such Registration Statement or related prospectus is untrue
or
omits to state a material fact required to be stated therein or necessary to
make such information not misleading in light of the circumstances then
existing; immediately discontinue any sale or other disposition of such
Registrable Securities pursuant to such Registration Statement until the filing
of an amendment or supplement to such prospectus as may be necessary so that
such prospectus does not contain an untrue statement of material fact or omit
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 use commercially reasonable efforts to assist the Company as may be
appropriate to make such amendment or supplement effective for such
purpose.
-7-
5. INDEMNIFICATION.
In
the
event that any Registrable Securities are included in a Registration Statement
under this Agreement:
(a) To
the
fullest extent permitted by law, the Company will, and hereby does, indemnify,
hold harmless and defend each Holder, the directors, officers, members,
partners, employees, agents, representatives of, and each Person, if any, who
controls any Holder within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange
Act")
(each,
an “Indemnified
Person”),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
expenses, joint or several, (collectively, “Claims”)
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the Commission, whether pending or threatened, whether or not an
indemnified party is or may be a party thereto (“Indemnified
Damages”),
to
which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of
or are based upon: (i) any untrue statement or alleged untrue statement of
a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other “blue sky” laws of any jurisdiction in
which Registrable Securities are offered (“Blue
Sky Filing”),
or
the omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact contained in
any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented,
if
the Company files any amendment thereof or supplement thereto with the
Commission) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in the light of the
circumstances under which the statements therein were made, not misleading,
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer
or
sale of the Registrable Securities pursuant to a Registration Statement or
(iv)
any violation of this Agreement (the matters in the foregoing clauses (i)
through (iv) being, collectively, “Violations").
Subject to Section
5(c),
the
Company shall reimburse the Indemnified Persons, promptly as such expenses
are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any
such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section
5(a):
(i)
shall not apply to a Claim by an Indemnified Person arising out of or based
upon
a Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person for such
Indemnified Person expressly for use in connection with the preparation of
the
Registration Statement or any such amendment thereof or supplement thereto,
if
such prospectus was timely made available by the Company pursuant to
Section
3(c)
and (ii)
shall not be available to the extent such Claim is based on a failure of the
Holder to deliver or to cause to be delivered the prospectus made available
by
the Company, including a corrected prospectus, if such prospectus or corrected
prospectus was timely made available by the Company pursuant to Section
3(c);
and
(iii) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld or delayed. Such indemnity shall
remain in full force and effect regardless of any investigation made by or
on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Holders pursuant to Section
7(d).
-8-
(b) In
connection with any Registration Statement in which a Holder is participating,
each such Holder agrees to severally and not jointly indemnify, hold harmless
and defend, to the same extent and in the same manner as is set forth in
Section
5(a),
the
Company, each of its directors, each of its officers who signs the Registration
Statement and each Person, if any, who controls the Company within the meaning
of the Securities Act or the Exchange Act (each, an “Indemnified
Party"),
against any Claim or Indemnified Damages to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim or Indemnified Damages arise out of or are based upon any Violation,
in each case to the extent, and only to the extent, that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Holder expressly for use in connection with such Registration
Statement; and, subject to Section
5(c),
such
Holder will reimburse any legal or other expenses reasonably incurred by an
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section
5(b)
shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Holder, which consent shall
not be unreasonably withheld or delayed; provided, further, however, that the
Holder shall be liable under this Section
5(b)
for only
that amount of a Claim or Indemnified Damages as does not exceed the net
proceeds to such Holder as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Holders pursuant to Section
7(d).
(c) Promptly
after receipt by an Indemnified Person or Indemnified Party under this
Section
5
of
notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person
or
Indemnified Party shall, if a Claim in respect thereof is to be made against
any
indemnifying party under this Section
5,
deliver
to the indemnifying party a written notice of the commencement thereof, and
the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person
or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its
own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party,
the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and
any
other party represented by such counsel in such proceeding. In the case of
an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Holders holding at least a majority in
interest of the Registrable Securities included in the Registration Statement
to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or Claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or Claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying
party
shall, without the prior written consent of the Indemnified Party or Indemnified
Person, consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving
by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of
a
release from all liability in respect to such Claim or litigation, and such
settlement shall not include any admission as to fault on the part of the
Indemnified Party. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party
or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure
to
deliver written notice to the indemnifying party within a reasonable time of
the
commencement of any such action shall not relieve such indemnifying party of
any
liability to the Indemnified Person or Indemnified Party under this Section
5,
except
to the extent that the indemnifying party is prejudiced in its ability to defend
such action.
-9-
(d) The
indemnification required by this Section
5
shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
(e) The
indemnity agreements contained herein shall be in addition to (i) any cause
of
action or similar right of the Indemnified Party or Indemnified Person against
the indemnifying party or others, and (ii) any liabilities the indemnifying
party may be subject to pursuant to the law.
6. REPORTS.
With
a
view to making available to each Holder the benefits of Rule 144 and any other
similar rule or regulation of the Commission that may at any time permit such
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
Rule 144;
(b) file
with
the Commission in a timely manner all reports and other documents required
of
the Company under the Exchange Act; and
(c) furnish
to such Holder, so long as such Holder owns any Registrable Securities, promptly
upon written request (i) a written statement by the Company, if true, that
it
has complied with the reporting requirements of Rule 144 and the Exchange Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company with the Commission,
and (iii) such other information as may be reasonably requested by such Holder
in connection with such Holder’s compliance with any rule or regulation of the
Commission which permits the selling of any such securities without
registration.
-10-
7. MISCELLANEOUS.
(a) Expenses
of Registration; Additional Covenants of the Company.
Except
as otherwise provided in the Securities Purchase Agreement, all reasonable
expenses, other than underwriting discounts and commissions and fees and
expenses of counsel and other advisors to each Holder, incurred in connection
with the registrations, filings or qualifications described herein, including
(without limitation) all registration, filing and qualification fees, printers’
and accounting fees, the fees and disbursements of counsel for the Company,
and
the fees and disbursements incurred in connection with the opinion and letter
described in Section
3(g)
hereof,
shall be borne by the Company. Except as otherwise agreed to by such Holder,
the
Company shall maintain in strict confidence, all information with respect to
such Holder.
(b) Amendment;
Waiver.
Except
as expressly provided herein, neither this Agreement nor any term hereof may
be
amended or waived except pursuant to a written instrument executed by the
Company and the Holders of at least two-thirds (2/3) of the Registrable
Securities into which all of the Note and Warrants then outstanding are
convertible or exercisable (without regard to any limitation on such conversion
or exercise). Any amendment or waiver effected in accordance with this
Section
7(b)
shall be
binding upon each Holder, each future Holder and the Company. The failure of
any
party to exercise any right or remedy under this Agreement or otherwise, or
the
delay by any party in exercising such right or remedy, shall not operate as
a
waiver thereof.
(c) Notices.
Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with an overnight courier service,
in
each case properly addressed to the party to receive the same. The addresses
and
facsimile numbers for such communications shall be:
if
to the
Company:
000
Xxxxxx Xxxxxx
Xxxxxxxx
0, Xxxxx 000
Xxxxxxxxxxx,
XX 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxx
Xxxxxxx, Ph.D.
-11-
with
a
copy (for informational purposes only) to:
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
00
Xxxxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxxxxx
X. Xxxxxxx
with
a
copy (for informational purposes only) to:
Xxxxx
Xxxxxx Xxxxxxxx Xxxx & Xxxxxx, P.A.
00
Xxxx
Xxx Xxxxxx
Xxx
Xxxx,
XX 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxxxxx
X. Xxxxxxx
and
if to
the Holder, to the address and facsimile number as to which the Holder has
notified the Company in writing.
Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated
by
the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided
by an
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.
(d) Assignment.
Upon
the transfer of any Note, Warrant or Registrable Securities by a Holder, the
rights of such Holder hereunder with respect to such securities so transferred
shall be assigned automatically to the transferee thereof, and such transferee
shall thereupon be deemed to be a “Holder” for purposes of this Agreement, as
long as: (i) the Company is, within a reasonable period of time following such
transfer, furnished with written notice of the name and address of such
transferee, (ii) the transferee agrees in writing with the Company to be bound
by all of the provisions hereof, and (iii) such transfer is made in accordance
with the applicable requirements of the Securities Purchase Agreement, the
Notes
or the Warrants, as applicable.
(e) Counterparts.
This
Agreement may be executed in counterparts, each of which shall be deemed an
original, and all of which together shall be deemed one and the same instrument.
This Agreement, once executed by a party, may be delivered to any other party
hereto by facsimile transmission.
(f) Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York applicable to contracts made and to be performed entirely
within the State of New York.
-12-
(g) Holder
of Record.
A
person is deemed to be a Holder whenever such person owns or is deemed to own
of
record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons with respect to
the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the record owner of such
Registrable Securities.
(h) Entire
Agreement.
This
Agreement and the other Transaction Documents constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement and the other
Transaction Documents supersede all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof and
thereof.
(i) Headings.
The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
(j) Third
Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
[Signature
Pages to Follow]
-13-
IN
WITNESS WHEREOF, the undersigned has executed this Agreement as of the date
first-above written.
|
COMPANY:
|
||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
-14-
IN
WITNESS WHEREOF, the undersigned has executed this Agreement as of the date
first-above written.
| PURCHASER: | ||
| Name of Purchaser: | ||
|
|
||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
-15-
EXHIBIT
A
PLAN
OF DISTRIBUTION
We
are
registering the shares of common stock issuable upon conversion of the
convertible notes and upon exercise of the warrants to permit the resale of
these shares of common stock by the holders of the convertible notes and
warrants from time to time after the date of this prospectus. We will not
receive any of the proceeds from the sale by the selling stockholders of the
shares of common stock. We will bear all fees and expenses incident to our
obligation to register the shares of common stock.
The
selling stockholders may sell all or a portion of the shares of common stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the shares of
common stock are sold through underwriters or broker-dealers, the selling
stockholders will be responsible for underwriting discounts or commissions
or
agent's commissions. The shares of common stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions,
| · |
on
any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of
sale;
|
| · |
in
the over-the-counter market;
|
| · |
in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
|
| · |
through
the writing of options, whether such options are listed on an options
exchange or otherwise;
|
| · |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
| · |
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
| · |
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
| · |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| · |
privately
negotiated transactions;
|
| · |
short
sales;
|
| · |
sales
pursuant to Rule 144;
|
| · |
broker-dealers
may agree with the selling securityholders to sell a specified number
of
such shares at a stipulated price per
share;
|
| · |
a
combination of any such methods of sale;
and
|
| · |
any
other method permitted pursuant to applicable
law.
|
If
the
selling stockholders effect such transactions by selling shares of common stock
to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of common stock for whom they may act as agent or
to
whom they may sell as principal (which discounts, concessions or commissions
as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales
of
the shares of common stock or otherwise, the selling stockholders may enter
into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the shares of common stock in the course of hedging in positions they
assume. The selling stockholders may also sell shares of common stock short
and
deliver shares of common stock covered by this prospectus to close out short
positions and to return borrowed shares in connection with such short sales.
The
selling stockholders may also loan or pledge shares of common stock to
broker-dealers that in turn may sell such shares.
-16-
The
selling stockholders may pledge or grant a security interest in some or all
of
the shares of common stock, convertible notes or warrants and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock from time to time pursuant to
this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act, amending, if necessary, the list
of
selling stockholders to include the pledgee, transferee or other successors
in
interest as selling stockholders under this prospectus. The selling stockholders
also may transfer and donate the shares of common stock in other circumstances
in which case the transferees, donees, pledgees or other successors in interest
will be the selling beneficial owners for purposes of this
prospectus.
The
selling stockholders and any broker-dealer participating in the distribution
of
the shares of common stock may be deemed to be "underwriters" within the meaning
of the Securities Act, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act. At the time a particular offering of
the
shares of common stock is made, a prospectus supplement, if required, will
be
distributed which will set forth the aggregate amount of shares of common stock
being offered and the terms of the offering, including the name or names of
any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to
broker-dealers.
Under
the
securities laws of some states, the shares of common stock may be sold in such
states only through registered or licensed brokers or dealers. In addition,
in
some states the shares of common stock may not be sold unless such shares have
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
There
can
be no assurance that any selling stockholder will sell any or all of the shares
of common stock registered pursuant to the registration statement, of which
this
prospectus forms a part.
The
selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Exchange Act, and the rules
and
regulations thereunder, including, without limitation, Regulation M of the
Exchange Act, which may limit the timing of purchases and sales of any of the
shares of common stock by the selling stockholders and any other participating
person. Regulation M may also restrict the ability of any person engaged in
the
distribution of the shares of common stock to engage in market-making activities
with respect to the shares of common stock. All of the foregoing may affect
the
marketability of the shares of common stock and the ability of any person or
entity to engage in market-making activities with respect to the shares of
common stock.
-17-
We
will
pay all expenses of the registration of the shares of common stock pursuant
to
the registration rights agreement, including, without limitation, Securities
and
Exchange Commission filing fees and expenses of compliance with state securities
or "blue sky" laws; provided, however, that a selling stockholder will pay
all
underwriting discounts and selling commissions, if any. We will indemnify the
selling stockholders against liabilities, including some liabilities under
the
Securities Act, in accordance with the registration rights agreements, or the
selling stockholders will be entitled to contribution. We may be indemnified
by
the selling stockholders against civil liabilities, including liabilities under
the Securities Act, that may arise from any written information furnished to
us
by the selling stockholder specifically for use in this prospectus, in
accordance with the related registration rights agreement, or we may be entitled
to contribution.
Once
sold
under the registration statement, of which this prospectus forms a part, the
shares of common stock will be freely tradable in the hands of persons other
than our affiliates.
-18-
EXHIBIT
B
SELLING
SHAREHOLDER QUESTIONNAIRE
The
undersigned beneficial owner of common stock, $______ par value per share (the
“Common
Stock”),
of
VeruTEK Technologies, Inc. (the “Company”),
(the
“Registrable
Securities”)
understands that the Company has filed or intends to file with the Securities
and Exchange Commission (the “Commission”)
a
registration statement (the “Registration
Statement”)
for
the registration and resale under the Securities Act of 1933, as amended (the
“Securities
Act”),
of
the Registrable Securities, in accordance with the terms of the Registration
Rights Agreement, dated as of ____, 2007 (the “Registration
Rights Agreement”),
among
the Company and the Purchasers named therein. The purpose of this Questionnaire
is to facilitate the filing of the Registration Statement under the Securities
Act that will permit you to resell the Registrable Securities in the future.
The
information supplied by you will be used in preparing the Registration
Statement. A copy of the Registration Rights Agreement is available from the
Company upon request as follows: VeruTEK Technologies, Inc., 000 Xxxxxx Xxxxxx,
Xxxxxxxx 0, Xxxxx 000, Xxxxxxxxxxx, XX 00000, Telephone: (000) 000-0000,
Attention: Xxxx Xxxxxxx, Ph.D.. All capitalized terms not otherwise defined
herein shall have the meanings ascribed thereto in the Registration Rights
Agreement.
Certain
legal consequences arise from being named as a selling shareholder in the
Registration Statement and the related prospectus. Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling shareholder in the Registration Statement and the related
prospectus.
NOTICE
The
undersigned beneficial owner (the “Selling
Shareholder”)
of
Registrable Securities hereby elects to include the Registrable Securities
owned
by it and listed below in Item 3 (unless otherwise specified under such Item
3)
in the Registration Statement.
QUESTIONNAIRE
| 1. |
Name.
|
|
(a)
|
Full
Legal Name of Selling Shareholder:
|
|
(b)
|
Full
Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities Listed in Item 3 below are
held:
|
-19-
|
(c)
|
Full
Legal Name of Natural Control Person (which means a natural person
who
directly or indirectly alone or with others has power to vote or
dispose
of the securities covered by the
questionnaire):
|
| 2. |
Address
for Notices to Selling
Shareholder:
|
|
Telephone:
|
|
Fax:
|
|
Contact
Person:
|
|
E-mail
address of Contact Person:
|
|
|
|
3.
|
Beneficial
Ownership of Registrable Securities Issuable Pursuant to the Securities
Purchase Agreement:
|
|
(a)
|
Type
and Number of Registrable Securities beneficially owned and issued
pursuant to the Securities Purchase
Agreement:
|
| 4. |
Broker-Dealer
Status:
|
|
(a)
|
Are
you a broker-dealer?
|
Yes
o No
o
| (b) |
If
“yes” to Section 4(a), did you receive your Registrable Securities as
compensation for investment
banking services to the Company?
|
Yes
o No
o
|
Note:
|
If
no, the Commission’s staff has indicated that you should be identified as
an underwriter in the Registration
Statement.
|
|
(c)
|
Are
you an affiliate of a
broker-dealer?
|
Yes
o No
o
|
Note:
|
If
yes, provide a narrative explanation
below:
|
-20-
|
(c)
|
If
you are an affiliate of a broker-dealer, do you certify that you
bought
the Registrable Securities in the ordinary course of business, and
at the
time of the purchase of the Registrable Securities to be resold,
you had
no agreements or understandings, directly or indirectly, with any
person
to distribute the Registrable
Securities?
|
Yes
o No
o
|
Note:
|
If
no, the Commission’s staff has indicated that you should be identified as
an underwriter in the Registration
Statement.
|
| 5. |
Beneficial
Ownership of Other Securities of the Company Owned by the Selling
Shareholder.
|
Except
as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the securities
issuable pursuant to the Securities Purchase Agreement.
|
(a)
|
Type
and Amount of other securities beneficially owned by the selling
shareholder:
|
| 6. |
Relationships
with the Company:
|
Except
as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity
securities of the undersigned) has held any position or office or has had any
other material relationship with the Company (or its predecessors or affiliates)
during the past three years.
State
any
exceptions here:
|
7.
|
Plan
of Distribution:
|
The
undersigned has reviewed the form of Plan of Distribution attached as Exhibit
A
to the Registration Rights Agreement, and hereby confirms that, except as set
forth below, the information contained therein regarding the undersigned and
its
plan of distribution is correct and complete.
State
any
exceptions here:
***********
-21-
The
undersigned agrees to promptly notify the Company of any inaccuracies or changes
in the information provided herein that may occur subsequent to the date hereof
and prior to the effective date of any applicable Registration Statement filed
pursuant to the Registration Rights Agreement.
By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 7 and the inclusion of such
information in each Registration Statement filed pursuant to the Registration
Rights Agreement and each related prospectus. The undersigned understands that
such information will be relied upon by the Company in connection with the
preparation or amendment of any such Registration Statement and the related
prospectus.
By
signing below, the undersigned acknowledges that it understands its obligation
to comply, and agrees that it will comply, with the provisions of the Exchange
Act and the rules and regulations thereunder, particularly Regulation M. The
undersigned also acknowledges that it understands that the answers to this
Questionnaire are furnished for use in connection with Registration Statements
filed pursuant to the Registration Rights Agreement and any amendments or
supplements thereto filed with the Commission pursuant to the Securities
Act.
The
undersigned hereby acknowledges and is advised of the following Interpretation
A.65 of the July 1997 SEC Manual of Publicly Available Telephone Interpretations
regarding short selling:
“An
Issuer filed a Form S-3 registration statement for a secondary offering of
common stock which is not yet effective. One of the selling shareholders wanted
to do a short sale of common stock “against the box” and cover the short sale
with registered shares after the effective date. The issuer was advised that
the
short sale could not be made before the registration statement become effective,
because the shares underlying the short sale are deemed to be sold at the time
such sale is made. There would, therefore, be a violation of Section 5 if the
shares were effectively sold prior to the effective date.”
By
returning this Questionnaire, the undersigned will be deemed to be aware of
the
foregoing interpretation.
I
confirm
that, to the best of my knowledge and belief, the foregoing statements
(including without limitation the answers to this Questionnaire) are
correct.
IN
WITNESS WHEREOF the undersigned, by authority duly given, has caused this
Questionnaire to be executed and delivered either in person or by its duly
authorized agent.
| Dated: ________________________ | Beneficial Owner: ________________________ | |
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
-22-
