REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
August 9, 2005, by and between Vital Products, Inc. a company organized
under the laws of State of Delaware, with its principal executive office at
00 Xxxxxx Xxxxx Xxxxxxx, XX, X0X 0X0, Xxxxxx (the "Company"), and
Dutchess Private Equities Fund, II, L.P. (the "Investor").
WHEREAS, in connection with the Investment Agreement by and between
the Company and the Investor of even date herewith (the "Investment
Agreement"), the Company has agreed to issue and sell to the Investor (i)
40,000,000 shares of the Company's common stock, .0001 par
value per share (the "Common Stock"), to be purchased pursuant to the terms
and subject to the conditions set forth in the Investment Agreement; and
WHEREAS, to induce the Investor to execute and deliver the Investment
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"),
and applicable state securities laws, with respect to the shares of Common
Stock issuable pursuant to the Investment Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained hereinafter and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Company and the Investor hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "Execution Date" means the date this Agreement and the Investment Agreement
are signed by the Company and the Investor.
b. "Holder" means Dutchess Private Equities Fund, II, L.P., a Delaware limited
partnership.
c. "Person" means a corporation, a limited liability company, an association,
a partnership, an organization, a business, an individual, a governmental or
political subdivision thereof or a governmental agency.
d. "Potential Material Event" means any of the following: (i) the possession
by the Company of material information not ripe for disclosure in a
Registration Statement, which shall be evidenced by determinations in good
faith by the Board of Directors of the Company that disclosure of such
information in the Registration Statement would be detrimental to the business
and affairs of the Company, or (ii) any material engagement or activity by
the Company which would, in the good faith determination of the Board of
Directors of the Company, be adversely affected by disclosure in a Registration
Statement at such time, which determination shall be accompanied by a good
faith determination by the Board of Directors of the Company that the
Registration Statement would be materially misleading absent the inclusion
of such information.
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e. "Principal Market" shall mean The American Stock Exchange, National
Association of Securities Dealer's, Inc., Pink Sheets, OTC electronic bulletin
board, the Nasdaq National Market or The Nasdaq SmallCap Market whichever is
the principal market on which the Common Stock is listed.
f. "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing one or more Registration Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or
any successor rule providing for offering securities on a continuous basis
("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement(s) by the United States Securities and Exchange
Commission (the "SEC").
g. "Registrable Securities" means (i) the shares of Common Stock issued or
issuable pursuant to the Investment Agreement, and (ii) any shares of capital
stock issued or issuable with respect to such shares of Common Stock, if any,
as a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise, which have not been (x) included in a Registration
Statement that has been declared effective by the SEC or (y) sold under
circumstances meeting all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the 1933 Act.
h. "Registration Statement" means a registration statement of the Company
filed under the 1933 Act.
All capitalized terms used in this Agreement and not otherwise defined herein
shall have the same meaning ascribed to them as in the Investment Agreement.
2. REGISTRATION.
a. Mandatory Registration. On or before the execution of this Agreement,
the Company shall have a draft of the Registration Statement covering the
underlying shares of the Company's stock of the equity line investment and
Commitment Shares. The Company shall, as soon as practicable file, but not later
than fifteen (15) calendar days following the Execution Date, with the SEC a
Registration Statement or Registration Statements (as is necessary) on Form SB-2
(or, if such form is unavailable for such a registration, on such other form as
is available for such a registration), covering the resale of all of the
Registrable Securities, which Registration Statement(s) shall state that, in
accordance with Rule 416 promulgated under the 1933 Act, such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon stock splits, stock dividends or similar
transactions. The Company shall initially register for resale 40,000,000 shares
of Common Stock which would be issuable on the date preceding the filing of the
Registration Statement based on the closing bid price of the Company's Common
Stock on such date and the amount reasonably calculated that represents Common
Stock issuable to other parties as set forth in the Investment Agreement except
to the extent that the SEC requires the share amount to be reduced as a
condition to effectiveness.
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b. The Company shall use its best efforts to have the Registration
Statement(s) declared effective by the SEC within ninety (90) calendar days
after the Execution Date.
c. Counsel. Subject to Section 5 hereof, in connection with any offering
of the Registrable Securities pursuant to this Section 2, the Holder shall have
the right to select legal counsel to administer its interests in the offering.
The Company shall reasonably cooperate with any such counsel.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to prepare and file a
Registration Statement with the SEC pursuant to Section 2(a), the Company will
use its best efforts to effect the registration of the Registrable Securities
in accordance with the intended method of disposition thereof and, with respect
thereto, the Company shall have the following obligations:
a. The Company shall use its best efforts to cause such Registration
Statement relating to the Registrable Securities to become effective within
ninety (90) days after the Execution Date and shall keep such Registration
Statement effective until the earlier to occur of (i) the date as of which
the Holders may sell all of the Registrable Securities without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto)
or (ii) the date on which (A) the Holders shall have sold all the Registrable
Securities and (B) the Investor has no right to acquire any additional shares
of Common Stock under the Investment Agreement respectively (the "Registration
Period"), which Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading. The Company shall
respond to all SEC comments within seven (7) business days from receipt of
such comments by the Company. The Company shall cause the Registration
Statement relating to the Registrable Securities to become effective no later
than three (3) business days after notice from the SEC that the Registration
Statement may be declared effective. In order to achieve the foregoing
objectives, the Holder agrees to provide all information necessary to complete
the registration statement, including the intended method of disposition of
the Registrable Securities, and the Company's obligations set forth above
shall be conditioned on the receipt of such information.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective during the Registration Period, and, during such period, comply
with the provisions of the 1933 Act with respect to the disposition of all
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Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been
disposed of in accordance with the intended methods of disposition by the
Investor thereof as set forth in such Registration Statement. In the event
the number of shares of Common Stock available under a Registration Statement
filed pursuant to this Agreement is at any time insufficient to cover all of
the Registrable Securities, the Company shall amend such Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover all of the Registrable
Securities, in each case, as soon as practicable, but in any event within
thirty (30) calendar days after the necessity therefor arises (based on the
then Purchase Price of the Common Stock and other relevant factors on which
the Company reasonably elects to rely), assuming the Company has sufficient
authorized shares at that time, and if it does not, within thirty (30)
calendar days after such shares are authorized. The Company shall use it
best efforts to cause such amendment and/or new Registration Statement to
become effective as soon as practicable following the filing thereof.
c The Company shall make available to the Holders whose Registrable
Securities are included in any Registration Statement and its legal counsel
without charge (i) promptly after the same is prepared and filed with the SEC
at least one copy of such Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated
therein by reference and all exhibits, the prospectus included in such
Registration Statement (including each preliminary prospectus) and, with
regards to such Registration Statement(s), any correspondence by or on
behalf of the Company to the SEC or the staff of the SEC and any
correspondence from the SEC or the staff of the SEC to the Company or
its representatives, (ii) upon the effectiveness of any Registration
Statement, the Company shall make available copies of the prospectus included
in such Registration Statement and all amendments and supplements thereto and
(iii) such other documents, including copies of any preliminary or final
prospectus, as the Holders may reasonably request from time to time in order
to facilitate the disposition of the Registrable Securities.
d. The Company shall use reasonable efforts to (i) register and qualify
the Registrable Securities covered by a Registration Statement under such
other securities or "blue sky" laws of such states in the United States as
any Holder reasonably requests, (ii) prepare and file in those jurisdictions,
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications
in effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not
be required in connection therewith or as a condition thereto to (x) qualify
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (y) subject itself to general taxation in
any such jurisdiction, or (z) file a general consent to service of process in
any such jurisdiction. The Company shall promptly notify each Holder who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
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e. As promptly as practicable after becoming aware of such event, the Company
shall notify each Holder in writing of the happening of any event as a result
of which the prospectus included in a Registration Statement, as then in
effect, includes an untrue statement of a material fact or omission to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, ("Registration Default") and use all diligent efforts to
promptly prepare a supplement or amendment to such Registration Statement and
take any other necessary steps to cure the Registration Default, (which may
consist of a document to be filed by the Company with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as defined below) and to
be incorporated by reference in the prospectus) to correct such untrue
statement or omission, and make available copies of such supplement or
amendment to each Holder (or such other number of copies as such Holder may
reasonably request). Failure to cure the Registration Default within ten (10)
business days shall result in the Company paying liquidated damages of 2.0% of
the cost of all Common Stock then held by the Holders for each thirty (30)
calendar day period or portion thereof, beginning on the date of suspension.
The Company shall also promptly notify each Holder in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (the Company will prepare a notification of such
effectiveness shall be delivered to each Holder by facsimile on the same
day of such effectiveness and by overnight mail), additionally the Company
will provide a copy of the effectiveness order prepared by the EC when received
by the Company (ii) of any request by the SEC for amendments or supplements
to a Registration Statement or related prospectus or related information,
(iii) of the Company's reasonable determination that a post-effective
amendment to a Registration Statement would be appropriate, (iv) in the event
the Registration Statement is no longer effective or, (v) the Registration
Statement is stale for a period of more than five (5) Trading Days as a
result of the Company's failure to timely file its financials.
The Company acknowledges that its failure to cure the Registration Default
within ten (10) business days will cause the Investor to suffer damages in
an amount that will be difficult to ascertain. Accordingly, the parties agree
that it is appropriate to include a provision for liquidated damages. The
parties acknowledge and agree that the liquidated damages provision set forth
in this section represents the parties' good faith effort to quantify such
damages and, as such, agree that the form and amount of such liquidated damages
are reasonable and will not constitute a penalty.
It is the intention of the parties that interest payable under any of the terms
of this Agreement shall not exceed the maximum amount permitted under any
applicable law. If a law, which applies to this Agreement which sets the
maximum interest amount, is finally interpreted so that the interest in
connection with this Agreement exceeds the permitted limits, then: (1) any
such interest shall be reduced by the amount necessary to reduce the interest
to the permitted limit; and (2) any sums already collected (if any) from the
Company which exceed the permitted limits will be refunded to the Company.
The Investor may choose to make this refund by reducing the amount that the
Company owes under this Agreement or by making a direct payment to the Company.
If a refund reduces the amount that the Company owes the Investor, the
reduction will be treated as a partial payment. In case any provision of
this Agreement is held by a court of competent jurisdiction to be excessive
in scope or otherwise invalid or unenforceable, such provision shall be
adjusted rather than voided, if possible, so that it is enforceable to the
maximum extent possible, and the validity and enforceability of the remaining
provisions of this Agreement will not in any way be affected or impaired
thereby.
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f. The Company shall use its best efforts to prevent the issuance of any stop
order or other suspension of effectiveness of a Registration Statement, or
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify each Holder who holds Registrable Securities being sold
of the issuance of such order and the resolution thereof or its receipt of
actual notice of the initiation or threat of any proceeding for such purpose.
g. The Company shall permit each Holder and counsel, if the Holder so
desires, designated by the Holder, to review and comment upon a draft
Registration Statement and all amendments and supplements thereto at least
seven (7) business days prior to their filing with the SEC, and not file any
document in a form to which such counsel reasonably objects. To the extent
that a draft registration statement contains material non-public information,
the Holder will keep the information and not trade on the information. The
Company shall not submit to the SEC a request for acceleration of the
effectiveness of a Registration Statement or file with the SEC a Registration
Statement or any amendment or supplement thereto without the prior approval of
such counsel or the Holder, which approval shall not be unreasonably withheld.
h. At the request of any Holder, the Company shall cause to be furnished
to such Holder, on the date of the effectiveness of a Registration Statement,
an opinion, dated as of such date, of counsel representing the Company for
purposes of such Registration Statement.
i. The Company shall make available for inspection by (i) any Holder and
(ii) one firm of attorneys and one firm of accountants or other agents retained
by the Holders (collectively, the "Inspectors") all pertinent financial and
other records, and pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed necessary by
each Inspector, and cause the Company's officers, directors and employees
to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall hold in strict confidence and
shall not make any disclosure (except to a Holder) or use of any Record or
other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified,
unless (a) the disclosure of such Records is necessary to avoid or correct
a misstatement or omission in any Registration Statement or is otherwise
required under the 1933 Act, (b) the release of such Records is ordered
pursuant to a final, non-appealable subpoena or order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the Inspector
has knowledge. Each Holder agrees that it shall, upon learning that disclosure
of such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and
allow the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential.
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j. The Company shall hold in confidence and not make any disclosure of
information concerning a Holder provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct
a misstatement or omission in any Registration Statement, (iii) the release
of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to
the public other than by disclosure in violation of this Agreement or any
other agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning a Holder is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to such Holder and allow such Holder, at the Holder's expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, such information.
k. The Company shall use its best efforts to secure designation and
quotation of all the Registrable Securities covered by any Registration
Statement on the Principal Market. If, despite the Company's best efforts,
the Company is unsuccessful in satisfying the preceding sentence, it shall
use its best efforts to cause all the Registrable Securities covered by any
Registration Statement to be listed on each other national securities exchange
and automated quotation system, if any, on which securities of the same class
or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange
or system. If, despite the Company's best efforts, the Company is unsuccessful
in satisfying the two preceding sentences, it will use its best efforts to
secure the inclusion for quotation on the Nasdaq SmallCap Market for such
Registrable Securities if the Company meets the listing requirements and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. as such with respect to such Registrable Securities. The Company shall
pay all fees and expenses in connection with satisfying its obligation under
this Section 3(k).
l. The Company shall cooperate with the Investor to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the Holders may reasonably request.
m. The Company shall provide a transfer agent for all the Registrable
Securities not later than the effective date of the first Registration
Statement filed pursuant hereto.
n. If requested by the Holders, the Company shall (i) as soon as
reasonably practical incorporate in a prospectus supplement or post-effective
amendment such information as such Holders reasonably determine should be
included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the
offering of the Registrable Securities to be sold in such offering;
(ii) make all required filings of such prospectus supplement or post-effective
amendment as soon as notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) supplement or
make amendments to any Registration Statement if reasonably requested by such
Holders.
o. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
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p. The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
q. Within one (1) business day after the Registration Statement which
includes Registrable Securities is declared effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities, with copies to the Investor,
confirmation that such Registration Statement has been declared effective by
the SEC in the form attached hereto as Exhibit A.
r. At or prior to the date of the first Put Notice (as that term is
defined in the Investment Agreement) and at such other times as the Holders
may reasonably request, the Company shall cause to be delivered, letters
from the Company's independent certified public accountants (i) addressed
to the Holders that such accountants are independent public accountants
within the meaning of the 1933 Act and the applicable published rules and
regulations thereunder, and (ii) in customary form and covering such
financial and accounting matters as are customarily covered by letters of
independent certified public accountants delivered to underwriters in
connection with public offerings.
s. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Holders of Registrable Securities
pursuant to a Registration Statement.
4. OBLIGATIONS OF THE HOLDERS.
a. At least five (5) calendar days prior to the first anticipated filing
date of a Registration Statement the Company shall notify each Holder of the
information the Company requires from each such Holder if such Holder elects
to have any of such Holder's Registrable Securities included in such
Registration Statement. It shall be a condition precedent to the obligations
of the Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Holder that such Holder
shall furnish in writing to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of
the Registrable Securities held by it as shall reasonably be required to effect
the registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may reasonably
request. Each Holder covenants and agrees that, in connection with any sale
of Registrable Securities by it pursuant to a Registration Statement, it shall
comply with the "Plan of Distribution" section of the current prospectus
relating to such Registration Statement.
b. Each Holder, by such Holder's acceptance of the Registrable Securities,
agrees to cooperate with the Company as reasonably requested by the Company
in connection with the preparation and filing of any Registration Statement
hereunder, unless such Holder has notified the Company in writing of such
Holder's election to exclude all of such Holder's Registrable Securities from
such Registration Statement.
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c. Each Holder agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e), such Holder will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering
such Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or the first
sentence of 3(e).
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions and fees of the Holder's counsel other than as set forth in the
Investment Agreement, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation,
all registration, listing and qualifications fees, printing and accounting
fees, and fees and disbursements of counsel for the Company shall be paid
by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and hereby
does, indemnify, hold harmless and defend each Holder who holds such
Registrable Securities, the directors, officers, partners, employees, counsel,
agents, representatives of, and each Person, if any, who controls, any Holder
within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as
amended (the "1934 Act"), (each, an "Indemnified Person"), against any losses,
claims, damages, liabilities, judgments, fines, penalties, charges, costs,
attorneys' fees, amounts paid in settlement or expenses, joint or several
(collectively, "Claims"), incurred in investigating, preparing or defending
any action, claim, suit, inquiry, proceeding, investigation or appeal taken
from the foregoing by or before any court or governmental, administrative or
other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto ("Indemnified
Damages"), to which any of them may become subject insofar as such Claims
(or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or any
post-effective amendment thereto or in any filing made in connection with
the qualification of the offering under the securities or other "blue sky"
laws of any jurisdiction in which Registrable Securities are offered
("Blue Sky Filing"), or the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which the statements therein were
made, not misleading, (ii) any untrue statement or alleged untrue statement of
a material fact contained in the final prospectus (as amended or supplemented,
if the Company files any amendment thereof or supplement thereto with the SEC)
or the omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in light of the circumstances
under which the statements therein were made, not misleading, or (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act,
any other law, including, without limitation, any state securities law, or any
rule or regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Holders and each such controlling
person, promptly as such expenses are incurred and are due and payable, for
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any reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim 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 any 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 were timely made available by the Company pursuant to Section
3(c); (ii) shall not be available to the extent such Claim is based on
(a) a failure of the Holder to deliver or to cause to be delivered the
prospectus made available by the Company or (b) the Indemnified Person's
use of an incorrect prospectus despite being promptly advised in advance by
the Company in writing not to use such incorrect prospectus; (iii) any
claims based on the manner of sale of the Registrable Securities by the
Holder; (iv) any omission of the Holder to notify the Company of any material
fact that should be stated in the Registration Statement or prospectus
relating to the Holder or the manner of sale; or (v) 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. 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 resale of the Registrable Securities by the
Holders pursuant to the Registration Statement.
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 6(a), the Company, each of its directors,
each of its officers who signs the Registration Statement, each Person, if
any, who controls the Company within the meaning of the 1933 Act or the 1934
Act and the Company's agents (collectively and together with an Indemnified
Person, an "Indemnified Party"), against any Claim or Indemnified Damages to
which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim or Indemnified Damages arise out of or are
based upon any Violation, in each case to the extent, and only to the extent,
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Holder expressly for use in
connection with such Registration Statement; and, subject to Section 6(c),
such Holder will reimburse any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section
6(b) and the agreement with respect to contribution contained in Section 7
shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of such Holder, which consent
shall not be unreasonably withheld; provided, further, however, that the
Holder shall be liable under this Section 6(b) for only that amount of a
Claim or Indemnified Damages as does not exceed the net proceeds to such
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 resale of the Registrable Securities by the Holders
pursuant to the Registration Statement. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to
the benefit of any Indemnified Party if the untrue statement or omission of
material fact contained in the preliminary prospectus were corrected on a
timely basis in the prospectus, as then amended or supplemented. This
indemnification provision shall apply separately to each Investor and
liability hereunder shall not be joint and several.
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c. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof
is to be made against any indemnifying party under this Section 6, deliver
to the indemnifying party a written notice of the commencement thereof, and
the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses 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. The
indemnifying party shall pay for only one separate legal counsel for the
Indemnified Persons or the Indemnified Parties, as applicable, and such counsel
shall be selected by the Holders, if the Holders are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. 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 fully appraised 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 written consent,
provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall,
without the 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. Following indemnification
as provided for hereunder, the indemnifying party shall be surrogated to all
rights of the Indemnified Party or Indemnified Person with respect to all
third parties, firms or corporations relating to the matter for which
indemnification has been made. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend
such action.
d. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
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e. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that: (i) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (ii) no seller of
Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution
from any seller of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received
by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Holders the benefits of
Rule 144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit the Holders to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees
to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements (it being understood
that nothing herein shall limit the Company's obligations under Section 5(c)
of the Investment Agreement) and the filing of such reports and other documents
is required for the applicable provisions of Rule 144; and
c. furnish to the Investor, promptly upon request, (i) a written statement
by the Company that it has complied with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so
filed by the Company, and (iii) such other information as may be reasonably
requested to permit the Investor to sell such securities pursuant to Rule 144
without registration.
9. NO ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall not be assignable.
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10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended only with the written
consent of the Company and Holders. No such amendment shall be effective to the
extent that it applies to less than all of the Holders of the Registrable
Securities.
11. MISCELLANEOUS.
a. A Person is deemed to be a Holder of Registrable Securities whenever
such Person owns 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
registered owner of such Registrable Securities.
b. Any notices 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 a confirmation of transmission is mechanically
or electronically generated and kept on file by the sending party); or (iii)
one (1) day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same.
The addresses and facsimile numbers for such communications shall be:
If to the Company:
Vital Products, Inc.
Xxxxxxx Xxxxxx
00 Xxxxxx Xxxxx
Xxxxxxx, XX, X0X 0X0
Canda
Tel: 000 000 0000
Fax: 000 000 0000
If to the Investor:
Dutchess Private Equities Fund, II, LP
000 Xxxxxx Xx, Xxxxx Xxxxx
Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Each party shall provide five (5) business days prior notice to the
other party of any change in address, phone number or facsimile number.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
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d. The laws of the State of Massachusetts shall govern all issues
arising from or related to this Agreement without regard to the principles
of conflict of laws. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the
City of Boston, County of Suffolk, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not
to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue
of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted
by law. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. This Agreement and the 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.
f. This Agreement and the Transaction Documents supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof. Whenever
required by the context of this Agreement, the singular shall include the
plural and masculine shall include the feminine. This Agreement shall not
be construed as if it had been prepared by one of the parties, but rather
as if all the parties had prepared the same.
h. This Agreement may be executed in two or more identical counterparts,
each of which shall be deemed an original but all of which shall constitute
one and the same agreement. This Agreement, once executed by a party, may
be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.
k. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent and no rules of strict
construction will be applied against any party.
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IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to be duly executed as of the day and year first above written.
Vital Products, Inc.
/s/ Xxxxxxx Xxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxx
Title: CEO
DUTCHESS PRIVATE EQUITIES FUND, II, L.P.
BY ITS GENERAL PARTNER DUTCHESS
CAPITAL MANAGEMENT, LLC
/s/Xxxxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: A Managing Member
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EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
Date: __________
[TRANSFER AGENT]
Re: Vital Products, Inc.
Ladies and Gentlemen:
We are counsel to Vital Products, Inc., a Delaware corporation
(the "Company"), and have represented the Company in connection with that
certain Investment Agreement (the "Investment Agreement") entered into by
and among the Company and _________________________ (the "Investor") pursuant
to which the Company has agreed to issue to the Investor shares of the
Company's common stock, .0001 par value per share (the "Common Stock") on the
terms and conditions set forth in the Investment Agreement. Pursuant to the
Investment Agreement, the Company also has entered into a Registration Rights
Agreement with the Investor (the "Registration Rights Agreement") pursuant to
which the Company agreed, among other things, to register the Registrable
Securities (as defined in the Registration Rights Agreement), including the
shares of Common Stock issued or issuable under the Investment Agreement,
under the Securities Act of 1933, as amended (the "1933 Act"). In connection
with the Company's obligations under the Registration Rights Agreement,
on ____________ ___, 2005, the Company filed a Registration Statement on
Form SB ___ (File No. 333-________) (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities which names the Investor as a selling shareholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at
[enter the time of effectiveness] on [enter the date of effectiveness] and
to the best of our knowledge, , no stop order suspending its effectiveness
has been issued and no proceedings for that purpose are pending before, or
threatened by, the SEC and the Registrable Securities are available for
resale under the 1933 Act pursuant to the Registration Statement.
Very truly yours,
[Company Counsel]
By:____________________
cc: [Investor]
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