REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of May 1, 2006, by
and among Sorell Inc., a Nevada corporation, with headquarters located at Buk-ri
00, Xxxx-Xxxx, Xxxxxx Xxxx, Xxxxx Xxxxx (the "COMPANY"), and the undersigned
buyers (each, a "BUYER", and collectively, the "BUYERS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"), the
Company has agreed, upon the terms and subject to the conditions set forth in
the Securities Purchase Agreement, to issue and sell to each Buyer (i) 8% Senior
Convertible Notes of the Company (the "NOTES") which will, among other things,
be convertible into shares of the Company's common stock, par value $0.001 per
share (the "COMMON STOCK") (as converted, the "CONVERSION SHARES"), in
accordance with the terms of the Notes, and (ii) warrants (the "WARRANTS") which
will be exercisable to purchase shares of Common Stock (as exercised
collectively, the "WARRANT SHARES").
B. The Notes bear interest, which at the option of the Company, subject to
certain conditions, may be paid in shares of Common Stock (the "INTEREST
SHARES").
C. To induce the Buyers to execute and deliver the Securities Purchase
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.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the Buyers
hereby agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise defined
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herein shall have the respective meanings set forth in the Securities Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
a. "BUSINESS DAY" means any day other than Saturday, Sunday or any other day
on which commercial banks in The City of New York are authorized or required by
law to remain closed.
b. "CLOSING DATE" shall have the meaning set forth in the Securities
Purchase Agreement.
c. "EFFECTIVE DATE" means the date that the Registration Statement has been
declared effective by the SEC.
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d. "EFFECTIVENESS DEADLINE" means the date which is 120 days after the
Closing Date if the Registration Statement is not reviewed by the SEC or 150
days after the Closing Date if the Registration Statement is reviewed by the
SEC.
e. "FILING DEADLINE" means 30 days after the Closing Date.
f. "INVESTOR" means a Buyer or any transferee or assignee of the Notes or
Warrants, as applicable, to whom a Buyer assigns its rights under this Agreement
and who agrees to become bound by the provisions of this Agreement in accordance
with Section 9 and any transferee or assignee thereof to whom a transferee or
assignee of the Notes or Warrants, as applicable, assigns its rights under this
Agreement and who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 and, in each case, is identified in the register of
the Company.
g. "PERSON" means an individual, a limited liability company, a partnership,
a joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
h. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing one or more Registration Statements (as defined
below) in compliance with the 1933 Act and pursuant to Rule 415 and the
declaration of effectiveness of such Registration Statement(s) by the SEC.
i. "REGISTRABLE SECURITIES" means (i) the Conversion Shares issued or
issuable upon conversion of the Notes, (ii) the Warrant Shares issued or
issuable upon exercise of the Warrants, (iii) the Interest Shares issued or
issuable under the Notes and (iv) any share capital of the Company issued or
issuable, with respect to the Conversion Shares, the Interest Shares, the
Warrant Shares or the Warrants as a result of any share split, share dividend,
recapitalization, exchange or similar event or otherwise, without regard to any
limitations on conversions of the Notes or exercises of the Warrants.
j. "REGISTRATION STATEMENT" means a registration statement or registration
statements of the Company filed under the 1933 Act covering the Registrable
Securities.
k. "REQUIRED HOLDERS" means the holders of at least a majority of the
Registrable Securities.
l. "REQUIRED REGISTRATION AMOUNT" means 100% of the sum of (i) the maximum
number of Interest Shares issued and issuable pursuant to the terms of the Notes
calculated as if all such Interest Shares were to be issued as of the trading
date immediately preceding the applicable date of determination, (ii) the number
of Conversion Shares issued and issuable pursuant to the Notes as of the trading
day immediately preceding the applicable date of determination, and (iii) the
number of Warrant Shares issued and issuable pursuant to the Warrants as of the
trading day immediately preceding the applicable date of determination, all
subject to adjustment as provided in Section 2(c).
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m. "RULE 415" means Rule 415 under the 1933 Act or any successor rule
providing for offering securities on a continuous or delayed basis.
n. "SEC" means the United States Securities and Exchange Commission.
2. Registration.
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a. Mandatory Registration. The Company shall prepare, and, as soon as
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practicable, but in no event later than the Filing Deadline, file with the SEC
the Registration Statement on Form S-3 covering the resale of all of the
Registrable Securities. In the event that Form S-3 is unavailable for such a
registration, the Company shall use such other form as is available for such a
registration on another appropriate form reasonably acceptable to the Required
Holders. The Registration Statement prepared pursuant hereto shall register for
resale at least the number of shares of Common Stock equal to the Required
Registration Amount as of the date the Registration Statement is initially filed
with the SEC. The Company shall use its best efforts to have the Registration
Statement declared effective by the SEC as soon as practicable, but in no event
later than the Effectiveness Deadline.
b. Allocation of Registrable Securities. The initial number of Registrable
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Securities included in any Registration Statement and any increase in the number
of Registrable Securities included therein shall be allocated pro rata among the
Investors based on the number of Registrable Securities held by each Investor at
the time the Registration Statement covering such initial number of Registrable
Securities or increase thereof is declared effective by the SEC. In the event
that an Investor sells or otherwise transfers any of such Investor's Registrable
Securities, each transferee that becomes an Investor shall be allocated a pro
rata portion of the then remaining number of Registrable Securities included in
such Registration Statement for such transferor. Any Shares of Common Stock
included in a Registration Statement and which remain allocated to any Person
which ceases to hold any Registrable Securities covered by such Registration
Statement shall be allocated to the remaining Investors, pro rata based on the
number of Registrable Securities then held by such Investors which are covered
by such Registration Statement. In no event shall the Company include any
securities other than Registrable Securities on any Registration Statement
without the prior written consent of the Required Holders.
c. Sufficient Number of Shares Registered. In the event the number of
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shares available under a Registration Statement filed pursuant to Section 2(a)
is insufficient to cover all of the Registrable Securities required to be
covered by such Registration Statement or an Investor's allocated portion of the
Registrable Securities pursuant to Section 2(b), the Company shall amend the
applicable Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover at least
the Required Registration Amount as of the trading day immediately preceding the
date of the filing of such amendment or new Registration Statement, in each
case, as soon as practicable, but in any event not later than fifteen (15) days
after the necessity therefor arises. The Company shall use its best efforts to
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. For purposes of the foregoing
provision, the number of shares available under a Registration Statement shall
be deemed
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"insufficient to cover all of the Registrable Securities" if at any time the
number of shares of Common Stock available for resale under the Registration
Statement is less than the product determined by multiplying (i) the Required
Registration Amount as of such time by (ii) 0.90. The calculation set forth in
the foregoing sentence shall be made without regard to any limitations on the
conversion of the Notes or the exercise of the Warrants and such calculation
shall assume that the Notes are then convertible into Shares of Common Stock at
the then prevailing Conversion Rate (as defined in the Notes) and that the
Warrants are then exercisable for Shares of Common Stock at the then prevailing
Exercise Price (as defined in the Warrants).
d. Effect of Failure to File and Obtain and Maintain Effectiveness of
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Registration Statement. If (i) a Registration Statement covering all of the
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Registrable Securities required to be covered thereby and required to be filed
by the Company pursuant to this Agreement is (A) not filed with the SEC on or
before the respective Filing Deadline (a "FILING FAILURE") or (B) not declared
effective by the SEC on or before the respective Effectiveness Deadline (an
"EFFECTIVENESS FAILURE") or (ii) on any day after the Effective Date sales of
all of the Registrable Securities required to be included on such Registration
Statement cannot be made (other than during an Allowable Grace Period (as
defined in Section 3(m)) pursuant to such Registration Statement (including,
without limitation, because of a failure to keep such Registration Statement
effective, to disclose such information as is necessary for sales to be made
pursuant to such Registration Statement or to register a sufficient number of
Shares of Common Stock) (a "MAINTENANCE FAILURE") then, as partial relief for
the damages to any holder by reason of any such delay in or reduction of its
ability to sell the underlying Shares of Common Stock (which remedy shall be
exclusive of any other remedies available at law or in equity, the Company shall
pay to each holder of Registrable Securities relating to such Registration
Statement an amount in cash equal to two percent (2.0%) of the aggregate
Purchase Price (as such term is defined in the Securities Purchase Agreement) of
such Investor's Registrable Securities included in such Registration Statement
on each of the following dates: (i) the day of a Filing Failure and on every
thirtieth day (pro rated for periods totaling less than thirty days) after a
Filing Failure until such Filing Failure is cured; (ii) the day of an
Effectiveness Failure and on every thirtieth day (pro rated for periods totaling
less than thirty days) after an Effectiveness Failure until such Effectiveness
Failure is cured; and (iii) the initial day of a Maintenance Failure and on
every thirtieth day (pro rated for periods totaling less than thirty days) after
a Maintenance Failure until such Maintenance Failure is cured. The payments to
which a holder shall be entitled pursuant to this Section 2(d) are referred to
herein as "REGISTRATION DELAY PAYMENTS." Registration Delay Payments shall be
paid on the day of the Filing Failure, Effectiveness Failure and the initial day
of a Maintenance Failure, as applicable, and thereafter on the earlier of (I)
the thirtieth day after the event or failure giving rise to the Registration
Delay Payments has occurred and (II) the third Business Day after the event or
failure giving rise to the Registration Delay Payments is cured.
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3. Related Obligations. At such time as the Company is obligated to file a
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Registration Statement with the SEC pursuant to Section 2(a) or 2(c), 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,
pursuant thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC a Registration
Statement with respect to the Registrable Securities and use its reasonable best
efforts to cause such Registration Statement relating to the Registrable
Securities to become effective as soon as practicable after such filing (but in
no event later than the Effectiveness Deadline). The Company shall keep each
Registration Statement effective pursuant to Rule 415 at all times until the
earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or any successor thereto) promulgated under
the 1933 Act or (ii) the date on which the Investors shall have sold all of the
Registrable Securities covered by such Registration Statement (the "REGISTRATION
PERIOD"). The Company shall ensure that each 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 the case of prospectuses, in the light of the circumstances in which they
were made) not misleading. The Company shall submit to the SEC, within three
(3) Business Days after the later of the date that the Company learns that no
review of a particular Registration Statement will be made by the staff of the
SEC or that the staff has no further comments on a particular Registration
Statement, as the case may be, a request for acceleration of effectiveness of
such Registration Statement to a time and date not later than 48 hours after the
submission of such request.
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 at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all 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 seller or
sellers thereof as set forth in such Registration Statement. In the case of
amendments and supplements to a Registration Statement which are required to be
filed pursuant to this Agreement (including pursuant to this Section 3(b)) by
reason of the Company filing a report on Form 10-Q, Form 10-K or any analogous
report under the Securities Exchange Act of 1934, as amended (the "1934 ACT"),
the Company shall have incorporated such report by reference into such
Registration Statement, if applicable, or shall file such amendments or
supplements with the SEC on the same day on which the 1934 Act report is filed
which created the requirement for the Company to amend or supplement such
Registration Statement.
c. The Company shall use its best efforts to (i) register and qualify,
unless an exemption from registration and qualification applies, the resale by
Investors of the Registrable Securities covered by a Registration Statement
under such other securities or "blue sky" laws of all applicable jurisdictions
in the United States, (ii) prepare and file in those
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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(c), (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 Investor 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.
d. The Company shall notify each Investor in writing of the happening of any
event, as promptly as practicable after becoming aware of such 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 the light of the circumstances under which they were made, not
misleading (provided that in no event shall such notice contain any material,
nonpublic information), and, subject to Section 3(m), promptly prepare a
supplement or amendment to such Registration Statement to correct such untrue
statement or omission. The Company shall also promptly notify each Investor 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, (ii) of any request by the SEC
for amendments or supplements to a Registration Statement or related prospectus
or related information, and (iii) of the Company's reasonable determination that
a post-effective amendment to a Registration Statement would be appropriate.
e. 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 Investor 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.
f. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor 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 an Investor is sought in or by a court or
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governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
g. The Company shall use its best efforts to cause all of the Registrable
Securities covered by a Registration Statement to be listed or quoted on each
securities exchange or securities association 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 association. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 3(g).
h. The Company shall cooperate with the Investors who hold Registrable
Securities being offered and, to the extent applicable, 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 Investors may reasonably request and registered in
such names as the Investors may request.
i. If requested by an Investor, the Company shall within five (5) business
days of receipt of notice from such Investor (i) incorporate in a prospectus
supplement or post-effective amendment such information as an Investor
reasonably requests to be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being offered or sold, the
purchase price being paid therefor and any other terms of 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 after being
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 an Investor holding any
Registrable Securities.
j. The Company shall use its best efforts to cause the Registrable
Securities covered by the 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.
k. The Company shall make generally available to its security holders as
soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with, and in
the manner provided by, the provisions of Rule 158 under the 0000 Xxx) covering
a twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration Statement.
l. 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.
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m. Notwithstanding anything to the contrary herein, at any time after the
Registration Statement has been declared effective by the SEC, the Company may
delay the disclosure of material, non-public information concerning the Company
the disclosure of which at the time is not, in the good faith opinion of the
Board of Directors of the Company and its counsel, in the best interest of the
Company and, in the opinion of counsel to the Company, otherwise required (a
"GRACE PERIOD"); provided, that the Company shall promptly (i) notify the
Investors in writing of the existence of material, non-public information giving
rise to a Grace Period (provided that in each notice the Company will not
disclose the content of such material, non-public information to the Investors)
and the date on which the Grace Period will begin, and (ii) notify the Investors
in writing of the date on which the Grace Period ends; and, provided further,
that no Grace Period shall exceed five (5) consecutive days and during any three
hundred sixty five (365) day period such Grace Periods shall not exceed an
aggregate of twenty (20) days and the first day of any Grace Period must be at
least two (2) trading days after the last day of any prior Grace Period (each,
an "ALLOWABLE GRACE PERIOD"). For purposes of determining the length of a Grace
Period above, the Grace Period shall begin on and include the date the Investors
receive the notice referred to in clause (i) and shall end on and include the
later of the date the Investors receive the notice referred to in clause (ii)
and the date referred to in such notice. The provisions of Section 3(e) hereof
shall not be applicable during the period of any Allowable Grace Period. Upon
expiration of the Grace Period, the Company shall again be bound by the first
sentence of Section 3(d) with respect to the information giving rise thereto
unless such material, non-public information is no longer applicable.
Notwithstanding anything to the contrary, the Company shall cause its transfer
agent to deliver unlegended Shares of Common Stock to a transferee of an
Investor in accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale, and delivered a copy of the
prospectus included as part of the applicable Registration Statement, prior to
the Investor's receipt of the notice of a Grace Period and for which the
Investor has not yet settled.
4. Obligations of the Investors.
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a. At least five (5) days prior to the first anticipated filing date of a
Registration Statement, the Company shall notify each Investor in writing of the
information the Company requires from each such Investor if such Investor elects
to have any of such Investor'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 Investor that such Investor shall
furnish 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 and maintain
the effectiveness of the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.
b. Each Investor, by such Investor'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 Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
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c. Each Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3(e) or the first
sentence of 3(d), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or the first
sentence of 3(d) or receipt of notice that no supplement or amendment is
required. Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to deliver unlegended Shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the Investor's receipt of
a notice from the Company of the happening of any event of the kind described in
Section 3(e) or the first sentence of 3(d) and for which the Investor has not
yet settled.
d. Each Investor covenants and agrees that it will comply with the
prospectus delivery requirements of the 1933 Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
5. Expenses of Registration. All reasonable expenses, other than
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underwriting discounts and commissions, incurred in connection with
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registrations, filings or qualifications pursuant to Sections 2 and 3,
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including, without limitation, all registration, listing and qualifications
--
fees, printers 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
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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 Investor, the directors,
officers, members, partners, employees, agents, representatives of, and each
Person, if any, who controls any Investor within the meaning of the 1933 Act or
the 1934 Act (each, an "INDEMNIFIED PERSON"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, reasonable
attorneys' fees, amounts paid in settlement or expenses, joint or several,
(collectively, "CLAIMS") incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or the 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 not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged
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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, (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 or (iv) any violation of this Agreement (the matters in
the foregoing clauses (i) through (iv) being, collectively, "VIOLATIONS").
Subject to Section 6(c), the Company shall reimburse the Indemnified Persons,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by such Indemnified Person
for such Indemnified Person expressly for use in connection with the preparation
of the Registration Statement or any such amendment thereof or supplement
thereto; (ii) shall not be available to the extent such Claim is based on a
failure of the Investor to deliver or to cause to be delivered the prospectus
made available by the Company, including a corrected prospectus; and (iii) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld or delayed. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an Investor is
participating, each such Investor 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 and each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each, 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 Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(c), such Investor will
reimburse any legal or other expenses reasonably incurred by an Indemnified
Party in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 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 Investor, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that the Investor
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 Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9. 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
10
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
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 of not more than one counsel for all such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least a majority in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate reasonably 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 apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying
party shall, without the prior written consent of the Indemnified Party or
Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such Claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 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.
11
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 Person involved in the sale of Registrable Securities
which Person is guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 0000 Xxx) in connection with such sale shall be entitled to
contribution from any Person involved in such sale of Registrable Securities who
was not guilty of fraudulent misrepresentation; and (ii) 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
pursuant to such Registration Statement.
8. Reports Under the 1934 Act. With a view to making available to the
------------------------------
Investors 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 Investors
to sell securities of the Company to the public without registration ("RULE
144"), the Company agrees until four years from Closing 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 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) 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 (ii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. Assignment of Registration Rights. The rights under this Agreement shall
---------------------------------
be automatically assignable by the Investors to any transferee of all or any
portion of such Investor's Registrable Securities if: (i) the Investor agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment; (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such securities
by the transferee or assignee is restricted under the 1933 Act and
12
applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein; and (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement.
10. Amendment of Registration Rights. Provisions of this Agreement may be
----------------------------------
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Required Holders. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company. No such amendment shall be effective to the extent
that it applies to less than all of the holders of the Registrable Securities.
No consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.
11. Miscellaneous.
-------------
a. A Person is deemed to be a holder of Registrable Securities whenever such
Person owns or is deemed to own of record such Registrable Securities. If the
Company receives conflicting instructions, notices or elections from two or more
Persons with respect to the same Registrable Securities, the Company shall act
upon the basis of instructions, notice or election received from the record
owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with 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:
Sorell Inc.
Buk-ri 00
Xxxx-Xxxx
Xxxxxx Xxxx, Xxxxx Xxxxx
Telephone: x00000000000
Facsimile: x00000000000
Attention: Bon Xxxx Xx, Chief Executive Officer
13
With a copy (for informational purposes only) to:
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
1065 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxx, Esq.
And to:
Xxxxxx Law Group
0000 Xxxx Xxxxxxxxx Xx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: M. Xxxxxxx Xxxxxx, Esq.
If to a Buyer, to its address and facsimile number set forth on the
Schedule of Buyers attached hereto, with copies to such Buyer's representatives
as set forth on the Schedule of Buyers,
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by a courier or overnight courier service shall be rebuttable evidence
of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.
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.
d. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any 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
14
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.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
e. This Agreement, the other Transaction Documents (as defined in the
Securities Purchase Agreement) and the instruments referenced herein and therein
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the other Transaction Documents and the instruments
referenced herein and therein supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall inure to
the benefit of and be binding upon the permitted successors and assigns of each
of the parties hereto.
g. The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in 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 any 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.
j. All consents and other determinations required to be made by the
Investors pursuant to this Agreement shall be made, unless otherwise specified
in this Agreement, by the Required Holders.
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, determined as if all of the
Notes held by Investors then outstanding have been converted into Registrable
Securities and all Warrants then outstanding have been exercised for Registrable
Securities without regard to any limitations on conversion of the Notes or on
exercises of the Warrants.
l. This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person.
m. Unless otherwise indicated, all dollar amounts referred to in this
Agreement are in United States Dollars ("US DOLLARS"). All amounts owing under
this Agreement or any Transaction Document shall be paid in US Dollars. All
amounts denominated in other currencies shall be converted in the US Dollar
equivalent amount in accordance with the Exchange Rate on the date of
calculation. "EXCHANGE RATE" means, in relation to any amount of currency to be
converted into US Dollars pursuant to this Agreement, the US Dollar exchange
rate as published in the Wall Street Journal on the relevant date of
calculation.
n. (i) If for the purpose of obtaining or enforcing judgment against the
Company or any Subsidiary, in any court in any jurisdiction it becomes necessary
to convert into any other currency (such other currency being hereinafter in
this Section 11(n) referred to as the "JUDGMENT CURRENCY") an amount due in US
Dollars under this Agreement, the conversion shall be made at the Exchange Rate
prevailing on the Business Day immediately preceding:
(A) the date of actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or
(B) the date on which the foreign court determines, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section 11(n) being hereinafter referred to
as the "JUDGMENT CONVERSION DATE").
(ii) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 11(n)(i)(B) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US Dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
Any amount due from the Company or any Subsidiary, under this provision shall be
due as a separate debt and shall not be affected by judgment being obtained for
any other amounts due under or in respect of this Agreement.
o. The obligations of each Investor hereunder are several and not joint with
the obligations of any other Investor, and no provision of this Agreement is
intended to confer any obligations on any Investor vis- -vis any other Investor.
Nothing contained herein, and no action taken by any Investor pursuant hereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated herein.
[Signature Pages Follow]
15
19
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.
COMPANY:
SORELL INC.
By: /s/ X. X. Xxx
---------------
Name: Bon Xxxx Xxx
Title: Chief Executive Officer
16
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.
BUYERS:
MIDSOUTH INVESTOR FUND LP
By: /s/ Xxxxx X. Xxxxxxx
---------------------
Name: Xxxxx X. Xxxxxxx
Title: General Partner
17
19
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.
BUYERS:
SOVGEM LIMITED
By: /s/ Xxxxx X. Xxxxxxx
---------------------
Name: Xxxxx X. Xxxxxxx
Title: Director
18
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.
BUYERS:
ALPHA CAPITAL AG
By: /s/ Xxxxxx Xxxxxxxx
--------------------
Name: Xxxxxx Xxxxxxxx
Title: Director
19
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.
BUYERS: LAKE STREET FUND, L.P.
BY: LAKE STREET MANAGEMENT, LLC, GP
By: /s/ Xxxxx X. Xxxx/s/
------------------
Name: Xxxxx X. Xxxx
Title: Managing Director
20
SCHEDULE OF BUYERS
BUYER'S REPRESENTATIVE'S
BUYER ADDRESS, TELEPHONE ADDRESS, TELEPHONE
BUYER AND FACSIMILE NUMBER AND FACSIMILE NUMBER
MidSouth Investor Fund LP 0000 Xxxxxxxxx Xx. XX Xxxxxxx & Co., Inc.
Suite 412 North 000 0xx Xxx. Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
(Tel) 000-000-0000 (Tel) 000-000-0000
(Fax) 000-000-0000
SovGEM LIMITED 0 Xxxxxxxxx Xxxxx XXXX
Xxxx Xxxxxx,
Xx. Xxxxxx Xxxxxx
XX0 0XX
Tel: + 44 (1534) 837600
Fax: + 44 (1534) 837601
Contact liason: Xxxxx Xxxxxxx
Alpha Capital Prachfont 7 L.H. Financial
Furstentums 9490
Vaduz Liechtenstein
Lake Street Fund, L.P. 0000 Xxxx Xxxxx Xxxxxx, Xxxxx 000 Xxxxx X. Xxxx
Xxxxxxxx, Xxxxxxxxxx 00000 0000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
(000) 000-0000 Telephone Xxxxxxxx, Xxxxxxxxxx 00000
(000) 000-0000 Fax (000) 000-0000 Telephone
(000) 000-0000 Fax
