REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (the “Agreement”)
is
made and entered into as of this 7th
day of
September, 2006 by and between Baywood International, Inc., a Nevada corporation
(the “Company”),
and
the undersigned investor who has executed a Subscription Agreement dated the
date hereof with the Company.
The
parties hereby agree as follows:
1. Certain
Definitions.
As
used
in this Agreement, the following terms shall have the following
meanings:
“Affiliate”
means,
with respect to any person, any other person which directly or indirectly
controls, is controlled by, or is under common control with, such
person.
“Bridge
Investors”
means
the Investor and those other purchasers of the Senior Convertible Notes and
the
Warrants pursuant to the Subscription Agreements.
“Business
Day”
means
a
day, other than a Saturday or Sunday, on which banks in New York City are open
for the general transaction of business.
“Common
Shares”
means
shares of the Company’s common stock, par value $0.001, and any securities into
which such shares may hereinafter be reclassified.
“Investor”
means
the undersigned investor or permitted transferee of such Investor who is a
subsequent holder of any Registrable Securities.
“Prospectus”
means
the prospectus included in any Registration Statement, as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated
by
reference or deemed to be incorporated by reference in such prospectus which
is
permitted to be so incorporated by reference in accordance with the rules and
regulations of the SEC.
“Qualified
Placement”
means
a
debt or equity financing or series of debt or equity financings in which the
Company receives at least $7,000,000 of gross proceeds. In the event the Company
completes a Qualified Placement, each subsequent financing or series of
financings that would otherwise be considered a Qualified Placement based on
this definition shall not be considered a Qualified Placement for purposes
of
this Agreement.
“Register,”
“registered”
and
“registration”
refer
to a registration made by preparing and filing a Registration Statement or
similar document in compliance with the 1933 Act (as defined below), and the
declaration or ordering of effectiveness of such Registration Statement or
document.
“Registrable
Securities”
means
(i) the Common Shares issuable upon any exercise of the Warrants; (ii) any
other
securities issued or issuable with respect to or in exchange for Registrable
Securities; and (iii) any securities issued or issuable with respect to such
securities by way of a stock dividend or stock split or in connection with
a
combination of shares, recapitalization, merger, consolidation or other
reorganization with respect to any of the securities referenced above; provided,
that, a security shall cease to be a Registrable Security upon (A) sale pursuant
to a Registration Statement or Rule 144 under the 1933 Act; or (B) such security
becoming eligible for sale by the Investor pursuant to Rule
144(k).
“Registration
Statement”
means
any registration statement of the Company filed under the 1933 Act that covers
the resale of any of the Registrable Securities pursuant to the provisions
of
this Agreement, including pre- and post-effective amendments and supplements
to
such Registration Statement and all exhibits and all material incorporated
by
reference or deemed to be incorporated by reference in such Registration
Statement which is permitted to be so incorporated by reference in accordance
with the rules and regulations of the SEC. For clarification, a Demand
Registration Statement (as defined in Section 2(a)(i)) and a Piggy-Back
Registration Statement (as defined in Section 2(a)(ii)) shall each be considered
a Registration Statement under this definition.
“Required
Investors”
means
the investors (including the Investor) holding a majority of the Registrable
Securities.
“SEC”
means
the U.S. Securities and Exchange Commission.
“Senior
Convertible Notes”
means
the Senior Convertible Notes issued pursuant to the Subscription
Agreements.
“Subscription
Agreements”
means
those certain agreements dated as of the date of this Agreement by and between
Baywood International, Inc. and the Bridge Investors.
“Warrants”
means
the Warrants issued pursuant to the Subscription Agreements which are
exercisable into Common Shares.
“1933
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“1934
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
2. Registration.
(a) Registration
Statements.
(i) Demand
Registration.
In the
event that (1) a Qualified Placement in which the Company agrees to register
with the SEC one or more securities issued in such Qualified Placement does
not
occur on or prior to the date that is one-hundred and eighty (180) days after
the date of this Agreement, (2) the Company does not satisfy in a timely manner
its obligations to investors in a Qualified Placement to register with the
SEC
all securities issued to investors in such Qualified Placement, including
without limitation its obligations to file a registration statement with the
SEC
and to cause it to be declared effective, (3) the Company does not satisfy
its
obligations under Section 2(a)(ii) below, or (4) the Investor is not able to
sell all of its Registrable Securities because of an underwriter cutback
described in Section 2(a)(iv) below (each such event being a “Demand
Triggering Event”),
as
soon as practicable (but in any case within sixty (60) days of the first
occurrence of a Demand Triggering Event) (the “Filing
Deadline”),
the
Company shall prepare and file with the SEC a Registration Statement covering
the resale of the Registrable Securities in an amount at least equal to the
number of Registrable Securities (the “Demand
Registration”).
Such
Registration Statement (the “Demand Registration Statement”) shall include the
plan of distribution attached hereto as Exhibit
A.
The
Demand Registration Statement also shall cover, to the extent allowable under
the 1933 Act, such indeterminate number of additional Common Shares resulting
from share splits, share dividends or similar transactions with respect to
the
Registrable Securities. The Demand Registration Statement (and each amendment
or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided in accordance with Section 3(c) to the Investor and its
counsel prior to its filing or other submission. Notwithstanding the foregoing,
the Company shall not be required to (A) file the Demand Registration Statement
if the Company had completed the registration of securities in connection with
an underwritten public offering that the Investor could have joined in
accordance with Section 2(a)(ii) below within the prior one-hundred and eighty
(180) days or (B) file more than one Registration Statement under this Section
2(a)(i) unless the Investor is not able to dispose of all of its shares because
of the provisions set forth in Section 2(a)(iii) below.
-
2
-
(ii) Piggyback
Registration.
If the
Company proposes to register with the SEC any of its stock or other securities
under the 1933 Act (other than a registration pursuant to a Registration
Statement on Form S-8) (a “Piggy-Back
Registration”),
it
will give written notice to Investor and each of the other Bridge Investors
at
least twenty (20) days before the initial filing with the SEC of the related
Registration Statement (a “Piggy-Back
Registration Statement”).
The
notice shall offer to include in such filing the aggregate number of shares
of
Registrable Securities as the Investor and such other Bridge Investors may
request. The Investor and each of the other Bridge Investors desiring to have
Registrable Securities registered under this Section 2(a)(ii) shall advise
the
Company in writing within ten (10) days after the date of receipt of such offer
from the Company, setting forth the amount of such Registrable Securities for
which registration is requested. The Company shall thereupon include in such
filing the number or amount of Registrable Securities for which registration
is
so requested, and shall use its reasonable best efforts to effect registration
of such Registrable Securities under the 1933 Act. The Piggy-Back Registration
Statement shall include the plan of distribution attached hereto as Exhibit
A.
The
Piggy-Back Registration Statement also shall cover, to the extent allowable
under the 1933 Act, such indeterminate number of additional Common Shares
resulting from share splits, share dividends or similar transactions with
respect to the Registrable Securities. The Piggy-Back Registration Statement
(and each amendment or supplement thereto, and each request for acceleration
of
effectiveness thereof) shall be provided in accordance with Section 3(c) to
the
Investor and its counsel prior to its filing or other submission. The Company
will not hereafter enter into any agreement that is inconsistent with the rights
of Investor under this Agreement, including without limitation any agreement
that is inconsistent with the provisions of this Section 2(a)(ii).
(iii) Underwriter
Cutback—Demand Registration.
In
connection with the Demand Registration, if the Required Investors request
that
the sale of their Registrable Securities be effected through an underwritten
public offering with a managing underwriter approved by the Required Investors
and such managing underwriter advises the Company in writing that, in its
opinion, the number of securities to be included in such offering is greater
than the total number of securities which can be sold therein without having
a
material adverse effect on the distribution of such securities or otherwise
having a material adverse effect on the marketability thereof (the “Maximum
Number of Securities”),
then
the Company shall include in such Demand Registration the Registrable Securities
that those investors participating in such offering (the “Participating Demand
Holders”) have requested to be registered thereunder only to the extent the
number of such Registrable Securities does not exceed the Maximum Number of
Securities. If such amount exceeds the Maximum Number of Securities, the number
of Registrable Securities included in such Demand Registration shall be
allocated among all the Participating Demand Holders on a pro
rata
basis
(based on the number of Registrable Securities held by each Participating Demand
Holder).
-
3
-
(iv) Underwriter
Cutback—Piggy-Back Registration.
If a
Piggy-Back Registration relates to an underwritten public offering and the
managing underwriter of such proposed public offering advises the Company in
writing that, in its opinion, the amount of Registrable Securities requested
to
be included in the Piggy-Back Registration in addition to the other securities
being registered by the Company would be greater than the Maximum
Number of Securities then:
(A)
in the event Company initiated the Piggy-Back Registration, the Company shall
include in such Piggy-Back Registration first,
the
securities the Company proposes to register and second,
the
securities of all other selling security holders (including the Investor) to
be
included in such Piggy-Back Registration in an amount which together with the
securities the Company proposes to register, shall not exceed the Maximum Number
of Securities, such amount to be allocated among such selling security holders
on a pro
rata
basis
(based on the number of securities of the Company proposed to be sold in the
Piggy-Back Registration by each such selling security holder); and (B) in the
event any holder of securities of the Company initiated the Piggy-Back
Registration, the Company shall include in such Piggy-Back Registration
first,
the
securities such initiating security holder proposes to register, second,
the
securities of any other selling security holders (including the Investor),
in an
amount which together with the securities the initiating security holder
proposes to register, shall not exceed the Maximum Number of Securities, such
amount to be allocated among such other selling security holders on a
pro
rata
basis
(based on the number of securities of the Company proposed to be sold in the
Piggy-Back Registration by each such other selling security holder) and
third,
any
securities the Company proposes to register, in an amount which together with
the securities the initiating security holder and the other selling security
holders propose to register, shall not exceed the Maximum Number of Securities.
(b) Expenses.
The
Company will pay all expenses associated with each registration, including
filing and printing fees, the Company’s counsel and accounting fees and
expenses, costs associated with clearing the Registrable Securities for sale
under applicable state securities laws, listing fees, fees and expenses of
one
counsel to the Required Investors and the Investor’s reasonable expenses in
connection with the registration, but excluding discounts, commissions or fees
of underwriters, selling brokers, dealer managers or similar securities industry
professionals with respect to the Registrable Securities being sold but only
to
the extent that the Required Investors approve any managing underwriter for
the
sale of its Registrable Securities.
(c) Effectiveness.
-
4 -
(i) The
Company shall use reasonable best efforts to have the Registration Statement
declared effective as soon as practicable, and in any case no later than sixty
(60) days following its filing with the SEC. The Company shall notify the
Investor by facsimile or e-mail as promptly as practicable (with a copy provided
to the Investor by U.S. mail), and in any event, within twenty-four (24) hours,
after any Registration Statement is declared effective and shall as soon as
reasonably practicable provide the Investor with copies of any related
Prospectus to be used in connection with the sale or other disposition of the
securities covered thereby.
(ii) Notwithstanding
anything to contrary, for not more than sixty (60) consecutive days or for
a
total of not more than ninety (90) days in any twelve (12) month period
(provided, however, the no such delay, suspension or withdrawal shall be
permitted for consecutive sixty-day periods arising out of the same set of
facts, circumstances or transactions), the Company may delay, suspend the use
of, or withdraw any Registration Statement or qualification of Registrable
Securities if the Company in good faith determines that any such Registration
Statement, or the use thereof, would materially and adversely affect any
material corporate event or would otherwise require disclosure of nonpublic
information which the Company determines, in its reasonable judgment, is not
in
the best interests of the Company at such time (an “Allowed
Delay”);
provided, that the Company shall promptly (a) notify the Investor in writing
of
the existence of (but in no event, without the prior written consent of the
Investor, shall the Company disclose to the Investor any of the facts or
circumstances regarding) the event giving rise to an Allowed Delay, provided
that the Company shall not be required to disclose material nonpublic
information to the Investor; (b) advise the Investors in writing to cease all
sales under the Registration Statement until the end of the Allowed Delay;
and
(c) use reasonable best efforts to terminate an Allowed Delay as promptly as
practicable.
3. Company
Obligations.
The
Company will use reasonable best efforts to effect the registration of the
Registrable Securities in accordance with the terms hereof, and pursuant thereto
the Company will, as expeditiously as possible:
(a) use
reasonable best efforts to cause such Registration Statement to become effective
and to remain continuously effective for a period that will terminate upon
the
earlier of (i) the date on which all Registrable Securities covered by such
Registration Statement as amended from time to time, have been sold, and (ii)
the date on which all Registrable Securities covered by such Registration
Statement may be sold pursuant to Rule 144(k) (the “Effectiveness
Period”);
(b) prepare
and file with the SEC such amendments, prospectus supplements or post-effective
amendments to the Registration Statement and the Prospectus as may be necessary
to keep the Registration Statement effective for the period specified in
Section
3(a)
and to
comply with the provisions of the 1933 Act and the 1934 Act with respect to
the
distribution of all of the Registrable Securities covered thereby;
(c) provide
copies to and permit counsel designated by the Required Investors to review
each
Registration Statement and all amendments and supplements thereto no fewer
than
ten (10) days prior to their filing with the SEC and not file any document
to
which such counsel reasonably objects based upon such counsel’s belief that such
Registration Statement is not in compliance with applicable laws, rules or
regulations or contains a material misstatement or omission;
-
5
-
(d) furnish
to the Investor and any legal counsel designated by the Required Investors
(i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company (but not later than two (2) Business Days after
the filing date, receipt date or sending date, as the case may be) one (1)
copy
of any Registration Statement and any amendment thereto, each preliminary
prospectus and Prospectus and each amendment or supplement thereto, and each
letter written by or on behalf of the Company to the SEC or the staff of the
SEC, and each item of correspondence from the SEC or the staff of the SEC,
in
each case relating to such Registration Statement (other than any portion of
any
such Registration Statement which contains information for which the Company
has
sought confidential treatment), and (ii) such number of copies of a Prospectus,
including a preliminary prospectus, and all amendments and supplements thereto
and such other documents as the Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Investor
that are covered by the related Registration Statement;
(e) use
reasonable best efforts to (i) prevent the issuance of any stop order or other
suspension of effectiveness and, (ii) if such order is issued, obtain the
withdrawal of any such order at the earliest possible moment;
(f) use
reasonable best efforts to cause all Registrable Securities covered by a
Registration Statement to be listed on each securities exchange, interdealer
quotation system or other market on which similar securities issued by the
Company are then listed;
(g) immediately
notify the Investor, at any time when a Prospectus relating to Registrable
Securities is required to be delivered under the 1933 Act, upon discovery that,
or upon the happening of any event or the passage of time 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 omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and at the request
of
any such holder, promptly prepare and furnish to such holder a reasonable number
of copies of a supplement to or an amendment of such Prospectus or the
Registration Statement as may be necessary so that, as thereafter delivered
to
the purchasers of such Registrable Securities, such Prospectus shall not include
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing;
(h) otherwise
use reasonable best efforts to comply with all applicable rules and regulations
of the SEC under the 1933 Act and the 1934 Act, take such other actions as
may
be reasonably necessary to facilitate the registration of the Registrable
Securities hereunder;
(i) with
a
view to making available to the Investor the benefits of Rule 144 (or its
successor rule) and any other rule or regulation of the SEC that may at any
time
permit the Investor to sell Common Shares to the public without registration,
the Company covenants and agrees to: (i) make and keep public information
available, as those terms are understood and defined in Rule 144, until the
earlier of (A) six months after such date as all of the Registrable Securities
may be resold pursuant to Rule 144(k) or any other rule of similar effect or
(B)
such date as all of the Registrable Securities shall have been resold; (ii)
file
with the SEC in a timely manner all reports and other documents required of
the
Company under the 1934 Act; and (iii) furnish to the Investor upon request,
as
long as such Investor owns any Registrable Securities, (A) a written statement
by the Company that it has complied with the reporting requirements of the
1934
Act, and (B) such other information as may be reasonably requested in order
to
avail such Investor of any rule or regulation of the SEC that permits the
selling of any such Registrable Securities without registration;
-
6
-
(j) if
requested by the Required Investors, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
information as the Company reasonably agrees should be included therein and
(ii)
make all required filings of such Prospectus supplement or such post-effective
amendment as soon as practicable after the Company has received notification
of
the matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(k) cooperate
with the Investor to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold pursuant to a
Registration Statement, which certificates shall, if required under the terms
of
this Agreement, be free of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as the Investor may request; and
(l) prior
to
any public offering of Registrable Securities, use its best efforts to register
or qualify or cooperate with the Investor in connection with the registration
or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky
laws
of such jurisdictions within the United States as the Investor requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all
other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to
take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so
subject.
4. Due
Diligence Review; Information.
The
Company shall make available, during normal business hours, upon reasonable
request, for inspection and review by the Investor, advisors to and
representatives of the Investor (who may or may not be affiliated with the
Investor and who are reasonably acceptable to the Company), all financial and
other records, all filings with the SEC, and all other documents respecting
the
Company, its assets, its properties or its business (including without
limitation minute books, corporate records, financial statements, contracts,
permits, licenses, approvals, technical or engineering reports, and any title
opinions or valuations which the Company has obtained) as may be reasonably
necessary for the purpose of such review, and cause the Company’s officers,
directors and employees, within a reasonable time period, to supply all such
information reasonably requested by the Investor or any such representative,
advisor or underwriter in connection with such Registration Statement
(including, without limitation, in response to all questions and other inquiries
reasonably made or submitted by any of them) to the extent not publicly
available on XXXXX or the Company’s website, prior to and from time to time
after the filing and effectiveness of the Registration Statement for the sole
purpose of enabling the Investor and such representatives, advisors and
underwriters and their respective accountants and attorneys to conduct initial
and ongoing due diligence with respect to the Company and the accuracy of such
Registration Statement.
-
7
-
Notwithstanding
any of the foregoing, nothing herein shall obligate the Company to provide
to
the Investor, or any advisors or representatives or underwriters, any material
nonpublic information. The Company shall not disclose material nonpublic
information to the Investor, or to advisors to or representatives of the
Investor, unless prior to disclosure of such information the Company identifies
such information as being material nonpublic information and provides the
Investor, such advisors and representatives with the opportunity to accept
or
refuse to accept such material nonpublic information for review and the Investor
wishing to obtain such information enters into an appropriate confidentiality
agreement with the Company with respect thereto.
5. Obligations
of the Investor.
(a) The
Investor 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 be reasonably
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. At least fifteen (10) Business Days prior to the first
anticipated filing date of any Registration Statement, the Company shall notify
the Investor of the information the Company requires from the Investor if the
Investor elects to have any of the Registrable Securities included in the
Registration Statement. The Investor shall provide such information to the
Company at least two (2) Business Days prior to the first anticipated filing
date of such Registration Statement if such Investor elects to have any of
the
Registrable Securities included in the Registration Statement.
(b) The
Investor, by its 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 a Registration Statement hereunder, unless such
Investor has notified the Company in writing of its election to exclude all
of
its Registrable Securities from such Registration Statement.
(c) The
Investor agrees that, upon receipt of any notice (which may be oral as long
as
written notice is provided by the next day) from the Company of the commencement
of an Allowed Delay pursuant to Section 2(c)(ii), the Investor will immediately
discontinue disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities, until otherwise notified in
writing by the Company or until the Investor’s receipt of the copies of the
supplemented or amended prospectus filed with the SEC and until any related
post-effective amendment is declared effective and, if so directed by the
Company and the Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in the Investor’s possession of the Prospectus covering the
Registrable Securities current at the time of receipt of such
notice.
-
8
-
(d) The
Investor may not use any confidential information received by it pursuant to
this Agreement or its Subscription Agreement in violation of the 1934 Act or
other applicable state or federal securities law or reproduce, disclose, or
disseminate such information to any other person (other than his or her
attorneys, agents and representatives having a need to know, and then only
if
they expressly agree to be bound hereby), unless such information has been
made
available to the public generally (other than by such recipient in violation
hereof) or such recipient is required to disclose such information by a
governmental body or regulatory agency or by law in connection with a
transaction that is not otherwise prohibited hereby, and then only after
reasonable notice to the Company and it has been provided a reasonable
opportunity to object to such disclosure, with the reasonable cooperation and
assistance of such Investor.
6. Indemnification.
(a) Indemnification
by the Company.
The
Company will indemnify and hold harmless the Investor, and each of their
respective officers, directors, members, employees and agents, successors and
assigns, and each other person, if any, who controls such Investor within the
meaning of the 1933 Act, against any losses, claims, damages or liabilities,
joint or several, to which they may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in
respect thereof) arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement, any preliminary prospectus or final prospectus contained therein,
or
any amendment or supplement thereof; (ii) the omission or alleged omission
to
state therein a material fact required to be stated therein or necessary to
make
the statements therein not misleading; (iii) any violation by the Company or
its
agents of any rule or regulation promulgated under the 1933 Act applicable
to
the Company or its agents and relating to action or inaction required of the
Company in connection with such registration; or (iv) any failure to register
or
qualify the Registrable Securities included in any such Registration Statement
in any state where the Company or its agents has affirmatively undertaken or
agreed in writing that the Company will undertake such registration or
qualification on the Investor’s behalf and will reimburse such Investor, and
each such officer, director or member and each such controlling person for
any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided,
however,
that
the Company will not be liable in any such case if and to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made
in
conformity with information furnished by the Investor in writing specifically
for use in such Registration Statement or Prospectus, or to the extent that
such
information relates to the Investor or the Investor’s proposed method of
distribution of Registrable Securities and was reviewed and approved by the
Investor in writing for use in the Registration Statement, such Prospectus
or
such form of Prospectus or in any amendment or supplement thereto (it being
understood that the Investor has approved Exhibit
A
hereto
for this purpose), or in the case of an occurrence of an Allowed Delay or of
an
event of the type specified in Section 3(g), the use by the Investor of an
outdated or defective Prospectus after the Company has notified the Investor
in
writing that the Prospectus is outdated or defective and prior to the receipt
by
the Investor of an amended or supplemented Prospectus, but only if and to the
extent that following the receipt of such amended or supplemented Prospectus
the
misstatement or omission giving rise to such liability would have been
corrected.
-
9
-
(b) Indemnification
by the Investor.
The
Investor agrees to indemnify and hold harmless, to the fullest extent permitted
by law, the Company, its directors, officers, employees, shareholders and each
person who controls the Company (within the meaning of the 0000 Xxx) against
any
losses, claims, damages, liabilities and expense (including reasonable attorney
fees) resulting from any untrue statement of a material fact or any omission
of
a material fact required to be stated in the Registration Statement or
Prospectus or preliminary prospectus or amendment or supplement thereto or
necessary to make the statements therein not misleading, to the extent that
such
untrue statement or omission is contained in any information furnished in
writing by the Investor to the Company specifically for inclusion in such
Registration Statement or Prospectus or amendment or supplement thereto, or
to
the extent that such information relates to such Investor’s proposed method of
distribution of Registrable Securities and was reviewed and approved by the
Investor in writing for use in the Registration Statement (it being understood
that the Investor has approved Exhibit
A
hereto
for this purpose), such Prospectus or such form of Prospectus or in any
amendment or supplement thereto, or in the case of an occurrence of an Allowed
Delay or an event of the type specified in Section 3(g), the use by the Investor
of an outdated or defective Prospectus after the Company has notified the
Investor in writing that the Prospectus is outdated or defective and prior
to
the receipt by the Investor of an amended or supplemented Prospectus, but only
if and to the extent that following the receipt of the amended or supplemented
Prospectus the misstatement or omission giving rise to such liability would
have
been corrected. In no event shall the liability of the Investor be greater
in
amount than the dollar amount of the proceeds received by the Investor upon
the
sale of the Registrable Securities included in the Registration Statement giving
rise to such indemnification obligation.
(c) Conduct
of Indemnification Proceedings.
Any
person entitled to indemnification hereunder shall (i) give prompt notice to
the
indemnifying party of any claim with respect to which it seeks indemnification;
and (ii) permit such indemnifying party to assume the defense of such claim
with
counsel reasonably satisfactory to the indemnified party; provided
that any
person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such person unless
(a)
the indemnifying party has agreed to pay such fees or expenses; or (b) the
indemnifying party shall have failed to assume the defense of such claim and/or
employ counsel reasonably satisfactory to such person; or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party
with
respect to such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such person); and
provided,
further,
that
the failure of any indemnified party to give notice as provided herein shall
not
relieve the indemnifying party of its obligations hereunder, except to the
extent that such failure to give notice shall materially adversely affect the
indemnifying party in the defense of any such claim or litigation. It is
understood that the indemnifying party shall not, in connection with any
proceeding in the same jurisdiction, be liable for fees or expenses of more
than
one separate firm of attorneys at any time for all such indemnified parties.
No
indemnifying party will, except with the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect of such
claim or litigation.
-
10
-
(d) Contribution.
If for
any reason the indemnification provided for in the preceding paragraphs (a)
and
(b) is unavailable to an indemnified party or insufficient to hold it harmless,
other than as expressly specified therein, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result
of
such loss, claim, damage or liability in such proportion as is appropriate
to
reflect the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations. The relative fault,
in
the case of an untrue statement, alleged untrue statement, omission, or alleged
omission, shall be determined by, among other things, whether such statement,
alleged statement, omission, or alleged omission relates to information supplied
by the Company or by the Investor, and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such statement,
alleged statement, omission, or alleged omission. The parties agree that it
would be unjust and inequitable if the respective obligations of the Company
and
the Investor for contribution were determined by pro rata or per capita
allocation of the aggregate losses, liabilities, claims, damages, and expenses
or by any other method of allocation that does not reflect the equitable
considerations referred to in this paragraph (d). No person guilty of fraudulent
misrepresentation within the meaning of Section 11(f) of the 1933 Act shall
be
entitled to contribution from any person not guilty of such fraudulent
misrepresentation. In no event shall the contribution obligation of the Investor
be greater in amount than the dollar amount of the proceeds received by it
upon
the sale of the Registrable Securities giving rise to such contribution
obligation.
7. Miscellaneous.
(a) Other
Registration Rights.
The
Company acknowledges that, in the event that the Investor converts its Senior
Convertible Notes into other securities of the Company (the “Qualified
Placement Securities”)
pursuant to the terms of the Senior Convertible Notes, the Investor will receive
the benefits of any Registration Rights Agreement or similar agreements entered
into by the Company in connection with the placement of the Qualified Placement
Securities.
(b) Amendments
and Waivers.
This
Agreement may be amended only by a writing signed by the Company and the
Required Investors, provided that no amendment to this Agreement that is adverse
to the Investor shall be made without the Investor’s written consent. The
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written waiver or consent to such amendment, action or omission to act, of
the
Required Investors, provided that no such action or omission that is adverse
to
the Investor shall occur without the Investor’s written
consent.
-
11
-
(c) Notices.
All
notices that are required or permitted hereunder shall be in writing and shall
be sufficient if personally delivered, sent by facsimile in the case of notice
to the Company only, or sent by registered or certified mail or Federal Express
or other nationally recognized overnight delivery service. Any notices shall
be
deemed given upon the earlier of the date when received at, the day when
delivered via facsimile or the third day after the date when sent by registered
or certified mail or the day after the date when sent by Federal Express to,
the
address set forth below, unless such address is changed by notice to the other
party hereto:
To
the
Company:
Baywood
International, Inc.
00000
Xxxxx 00xx
Xxxxx
Xxxxx
0
Xxxxxxxxxx,
Xxxxxxx 00000
Attn:
Chief Executive Officer
Facsimile:
(000) 000-0000
To
the
Investor: As set forth on the signature page of its Subscription
Agreement.
(d) Assignments
and Transfers by Investor.
The
provisions of this Agreement shall be binding upon and inure to the benefit
of
the Investor and its successors and assigns. The Investor may transfer or
assign, in whole or from time to time in part, to one or more persons, which
shall be an “accredited investor” as defined in Rule 501(a) of Regulation D, as
amended under the 1933 Act, and which shall agree in writing to be bound by
the
terms and conditions of this Agreement, an executed counterpart of which shall
be furnished to the Company, its rights hereunder in connection with the
transfer of Registrable Securities by such Investor to such person, provided
that the Investor complies with all laws applicable thereto and provides written
notice of assignment to the Company promptly after such assignment is
effected.
(e) Assignments
and Transfers by the Company.
This
Agreement may not be assigned by the Company (whether by operation of law or
otherwise) without the prior written consent of the Required Investors,
provided, however, that the Company may assign its rights and delegate its
duties hereunder to any surviving or successor corporation in connection with
a
merger or consolidation of the Company with another corporation, or a sale,
transfer or other disposition of all or substantially all of the Company’s
assets to another corporation, without the prior written consent of the Required
Investors, after notice duly given by the Company to the Investor if such
surviving, successor or other corporation is able to fulfill in a timely manner
the Company’s obligations under this Agreement.
(f) Benefits
of the Agreement.
The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective permitted successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
-
12
-
(g) Counterparts;
Faxes.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. This Agreement may also be executed via facsimile, which shall
be
deemed an original.
(h) Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
(i) Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law
which
renders any provisions hereof prohibited or unenforceable in any
respect.
(j) Further
Assurances.
The
parties shall execute and deliver all such further instruments and documents
and
take all such other actions as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained.
(k) Entire
Agreement.
This
Agreement is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
(l) Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York and the United States
District Court for the Southern District of New York, in each case located
in
the City of New York, Borough of Manhattan, for the purpose of any suit, action,
proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. Service of process in connection with any
such
suit, action or proceeding may be served on each party hereto anywhere in the
world by the same methods as are specified for the giving of notices under
this
Agreement. Each of the parties hereto irrevocably consents to the jurisdiction
of any such court in any such suit, action or proceeding and to the laying
of
venue in such court. Each party hereto irrevocably waives any objection to
the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
EACH
OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.
-
13
-
[Company
Signature Page]
IN
WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
authorized officers to execute this Agreement as of the date first above
written.
|
BAYWOOD
INTERNATIONAL, INC.
|
|||
|
By:
|
|
||
|
Name:
|
|||
|
Title:
|
|||
-
14
-
[Investor
Signature Page]
IN
WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
authorized officers to execute this Agreement as of the date first above
written.
|
Name
of Investor:
|
|
|
||
|
Signature
of Investor (if individual):
|
||||
|
|
||||
|
Signature
of Investor (if an entity):
|
||||
|
By:
|
|
|||
|
Name:
|
||||
|
Title:
|
||||
-
15
-
Exhibit
A
Plan
of Distribution
The
selling shareholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling common shares or interests
in common shares received after the date of this prospectus from a selling
shareholder as a gift, pledge, partnership distribution or other transfer,
may,
from time to time, sell, transfer or otherwise dispose of any or all of their
common shares or interests in common shares on any stock exchange, market or
trading facility on which the common shares are traded or in private
transactions. These dispositions may be at fixed prices, at prevailing market
prices at the time of sale, at prices related to the prevailing market price,
at
varying prices determined at the time of sale, or at negotiated
prices.
The
selling shareholders may use any one or more of the following methods when
disposing of common shares or interests therein:
-
ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
-
block
trades in which the broker-dealer will attempt to sell the common 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 effected after the date of this prospectus;
-
through
the writing or settlement of options or other hedging transactions, whether
through an options exchange or otherwise;
-
broker-dealers may agree with the selling shareholders to sell a specified
number of such common shares at a stipulated price per common
share;
-
a
combination of any such methods of sale; and
-
any
other method permitted pursuant to applicable law.
The
selling shareholders may, from time to time, pledge or grant a security interest
in some or all of the common shares owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the common shares, from time to time, under this prospectus,
or
under an amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the 1933 Act amending the list of selling shareholders to include
the pledgee, transferee or other successors in interest as selling shareholders
under this prospectus. The selling shareholders also may transfer the common
shares in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
-
16
-
In
connection with the sale of our common shares or interests therein, the selling
shareholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
shares in the course of hedging the positions they assume. The selling
shareholders may also sell our common shares short and deliver these securities
to close out their short positions, or loan or pledge the common shares to
broker-dealers that in turn may sell these securities. The selling shareholders
may also enter into option or other transactions with broker-dealers or other
financial institutions or the creation of one or more derivative securities
which require the delivery to such broker-dealer or other financial institution
of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented
or
amended to reflect such transaction).
The
aggregate proceeds to the selling shareholders from the sale of the common
shares offered by them will be the purchase price of the common shares less
discounts or commissions, if any. Each of the selling shareholders reserves
the
right to accept and, together with their agents from time to time, to reject,
in
whole or in part, any proposed purchase of common shares to be made directly
or
through agents. We will not receive any of the proceeds from this offering.
The
selling shareholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the 1933 Act, provided
that
they meet the criteria and conform to the requirements of that
rule.
The
selling shareholders and any underwriters, broker-dealers or agents that
participate in the sale of the common shares or interests therein may be
"underwriters" within the meaning of Section 2(11) of the 1933 Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the 1933 Act. Selling
shareholders who are "underwriters" within the meaning of Section 2(11) of
the
1933 Act will be subject to the prospectus delivery requirements of the 1933
Act.
To
the
extent required, our common shares to be sold, the names of the selling
shareholders, the respective purchase prices and public offering prices, the
names of any agents, dealer or underwriter, any applicable commissions or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this
prospectus.
In
order
to comply with the securities laws of some states, if applicable, the common
shares may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the common shares may not be
sold unless it has been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied
with.
-
17
-
We
have
advised the selling shareholders that the anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of shares in the market and to
the
activities of the selling shareholders and their affiliates. In addition, we
will make copies of this prospectus (as it may be supplemented or amended from
time to time) available to the selling shareholders for the purpose of
satisfying the prospectus delivery requirements of the 1933 Act. The selling
shareholders may indemnify any broker-dealer that participates in transactions
involving the sale of the shares against certain liabilities, including
liabilities arising under the 1933 Act.
We
have
agreed to indemnify the selling shareholders against liabilities, including
liabilities under the 1933 Act and state securities laws, relating to the
registration of the shares offered by this prospectus.
We
have
agreed with the selling shareholders to keep the registration statement of
which
this prospectus constitutes a part effective until the earlier of (1) such
time
as all of the shares covered by this prospectus have been disposed of pursuant
to and in accordance with the registration statement and (2) the date on which
the shares (other than shares held by our Affiliates) may be sold pursuant
to
Rule 144(k) of the 1933 Act.
- 18 -
