EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of June ___, 2006, by and among Innuity, Inc., a Utah
corporation (the "Company"), and the purchasers signatory hereto (each such
purchaser is a "Purchaser" and collectively, the "Purchasers").
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:
"Advice" shall have the meaning set forth in Section 6(c).
"Effectiveness Period" shall have the meaning set forth in
Section 2.
"Filing Date" means, with (i) respect to the initial Registration
Statement required hereunder, the 60th calendar day following the date
hereof, and (ii) with respect to any additional Registration Statements
which may be required pursuant to Section 3(b), the 45th day following the
date on which the Company first knows, or reasonably should have known
that such additional Registration Statement is required hereunder.
"Holder" or "Holders" means the holder or holders, as the case may
be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
5(c).
"Indemnifying Party" shall have the meaning set forth in Section
5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Plan of Distribution" shall have the meaning set forth in
Section 2.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in a Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of
the Registrable Securities covered by a Registration Statement, and all
other amendments and
supplements to the Prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
"Registrable Securities" means all of the Conversion Shares and
Warrant Shares issuable, and (ii) the shares of Common Stock issued or
issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing.
"Registration Statement" means the registration statements required
to be filed hereunder and any additional registration statements
contemplated by Section 3(b), including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and
all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
"Selling Shareholder Questionnaire" shall have the meaning set forth
in Section 3(a).
2. Shelf Registration. On or prior to each Filing Date, the Company shall
prepare and file with the Commission a Registration Statement covering the
resale of the Registrable Securities as would permit or facilitate the resale
and distribution of all the Registrable Securities in the manner reasonably
requested by the Holders. The Registration Statement shall be on Form SB-2
(except if the Company is not then eligible to register for resale the
Registrable Securities on Form SB-2, in which case such registration shall be on
another appropriate form in accordance herewith) and shall contain (unless
otherwise directed by the Holders) substantially the "Plan of Distribution"
attached hereto as Annex A. Subject to the terms of this Agreement, the Company
shall use its commercially reasonable efforts to cause a Registration Statement
to be declared effective under the Securities Act as promptly as possible after
the filing thereof, and shall use its commercially reasonable to keep such
Registration Statement continuously effective under the Securities Act until the
earliest of: (x) the date when all Registrable Securities covered by such
Registration Statement have been sold; (y) the date on which the Registrable
Securities may be sold without any restriction pursuant to Rule 144, as
determined by the counsel to the Company, or (z) the first (1st) anniversary of
the Closing Date (the "Effectiveness Period"). The Company shall telephonically
request effectiveness of a Registration Statement as of 5:00 pm Eastern Time on
a Trading Day. The Company shall promptly notify the Holders via facsimile or
via electronic mail of the effectiveness of a Registration Statement on the same
Trading Day that the Company telephonically confirms effectiveness with the
Commission.
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3. Registration Procedures
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prior to the filing of the initial Registration Statement, or
prior to the filing of any related Prospectus or any amendment or material
supplement thereto (but not including any document that would be
incorporated or deemed to be incorporated therein by reference), furnish
to each Holder copies of all such documents proposed to be filed, which
documents will be subject to the review of such Holders. The Company shall
not file a Registration Statement or any such Prospectus or any amendments
or supplements thereto to which the Holders of a majority of the
Registrable Securities shall reasonably object in good faith, provided
that, the Company is notified of such objection in writing no later than
one (1) Trading Day after the Holders have been so furnished copies of
such documents. Each Holder agrees to furnish to the Company a completed
Questionnaire in the form attached to this Agreement as Annex B (a
"Selling Shareholder Questionnaire") not less than thirty (30) days prior
to the Filing Date with respect to the initial Registration Statement
required hereunder, and an additional Selling Shareholder Questionnaire
not less than two (2) Trading Days prior to the Filing Date or by the end
of the second (2nd) Trading Day following the date on which such Holder
receives draft materials in accordance with this Section with respect to
any additional Registration Statements required hereunder.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to a Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep a
Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file
with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement (subject to the terms
of this Agreement), and as so supplemented or amended to be filed pursuant
to Rule 424; (iii) respond as promptly as reasonably possible to any
comments received from the Commission with respect to a Registration
Statement or any amendment thereto; and (iv) comply in all material
respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by a
Registration Statement during the applicable period in accordance (subject
to the terms of this Agreement) with the intended methods of disposition
by the Holders thereof set forth in such Registration Statement as so
amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold (which
notice shall, pursuant to clauses (ii) through (v) hereof, be accompanied
by an instruction to suspend the use of the Prospectus until the requisite
changes have been made) as promptly as reasonably possible (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to a
Registration Statement is proposed to be filed; (B) when the Commission
notifies the Company whether there will be a "review" of such Registration
Statement; and (C) with respect to a Registration Statement or any
post-effective
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amendment, when the same has become effective; (ii) of any request by the
Commission or any other Federal or state governmental authority for
amendments or supplements to a Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission or any
other federal or state governmental authority of any stop order suspending
the effectiveness of a Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event that makes the financial
statements included in a Registration Statement ineligible for inclusion
therein or any statement made in a Registration Statement or Prospectus or
any document incorporated or deemed to be incorporated therein by
reference that requires any revisions to a Registration Statement,
Prospectus or other documents so that, in the case of a Registration
Statement or the Prospectus, as the case may be, it will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(d) Use commercially reasonable efforts to avoid the issuance of,
or, if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of a Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable
moment.
(e) Furnish to each Holder upon request, without charge, at least
one conformed copy of each such Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference to the
extent requested by such Person, and all exhibits to the extent requested
by such Person (including those previously furnished or incorporated by
reference) promptly after the filing of such documents with the
Commission.
(f) Furnish to each Holder upon request, without charge, as many
copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request in connection with resales by the Holder of Registrable
Securities. Subject to the terms of this Agreement, the Company hereby
consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders in connection with the offering and
sale of the Registrable Securities covered by such Prospectus and any
amendment or supplement thereto, except after the giving on any notice
pursuant to Section 3(c).
(g) Prior to any resale of Registrable Securities by a Holder, use
its commercially reasonable efforts to register or qualify or cooperate
with the selling Holders in connection with the registration or
qualification (or exemption from the Registration or qualification) of
such Registrable Securities for the resale by the Holder under the
securities or Blue Sky laws of such jurisdictions within the United States
as any
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Holder reasonably requests in writing, to keep each registration or
qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things reasonably necessary to
enable the disposition in such jurisdictions of the Registrable Securities
covered by each Registration Statement; provided, however, the Company
shall in no event be required to (x) qualify to do business in any state
where it is not then qualified or (y) take any action that would subject
it to tax or to the general service of process in any such state where it
is not then subject, or (z) comply with state securities or "blue sky"
laws of any state for which registration by coordination is unavailable to
the Company.
(h) Upon the occurrence of any event contemplated by this Section 3,
as promptly as reasonably possible under the circumstances taking into
account the Company's good faith assessment of any adverse consequences to
the Company and its shareholders of the premature disclosure of such
event, prepare a supplement or amendment, including a post-effective
amendment, to a Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither a Registration Statement nor such Prospectus
will contain 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, in light of the circumstances under which they were
made, not misleading. If the Company notifies the Holders in accordance
with clauses (ii) through (v) of Section 3(c) above to suspend the use of
any Prospectus until the requisite changes to such Prospectus have been
made, then the Holders shall suspend use of such Prospectus. The Company
will use its commercially reasonable efforts to ensure that the use of the
Prospectus may be resumed as promptly as is practicable. The Company shall
be entitled to exercise its right under this Section 3(h) to suspend the
availability of a Registration Statement and Prospectus for a period not
to exceed ninety (90) days (which need not be consecutive days) in any 12
month period.
(i) Comply with all applicable rules and regulations of the
Commission.
(j) The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Holder and, if required by the Commission, the
person thereof that has voting and dispositive control over the Shares.
4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as reasonably requested by the Holders),
(ii) printing expenses (including,
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without limitation, expenses of printing certificates for Registrable Securities
and of printing prospectuses if the printing of prospectuses is reasonably
requested by the Holders of a majority of the Registrable Securities included in
a Registration Statement), (iii) messenger, telephone and delivery expenses
incurred by the Company, (iv) fees and disbursements of counsel for the Company,
(v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Holders.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless the Holder, its permitted assignees, officers, directors, agents,
brokers (including brokers who offer and sell Registrable Securities as
principal as a result of a pledge or any failure to perform under a margin
call of Common Stock), investment advisors and employees, each Person who
controls any such Holder or permitted assignee (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and
the officers, directors, agents and employees of each such controlling
Person, and the respective successors, assigns, estate and personal
representatives of each of the foregoing, to the fullest extent permitted
by applicable law, from and against any and all claims, losses, damages,
liabilities, penalties, judgments, costs (including, without limitation,
costs of investigation) and expenses (including, without limitation,
reasonable attorneys' fees and expenses) (collectively, "Losses"), arising
out of or relating to any untrue or alleged untrue statement of a material
fact contained in the Registration Statement, any Prospectus, as
supplemented or amended, if applicable, or arising out of or relating to
any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of
the circumstances under which they were made) not misleading, except (i)
to the extent, but only to the extent, that such untrue statements or
omissions are based upon information regarding the Holder furnished in
writing to the Company by the Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment
or supplement thereto, which information was reasonably relied on by the
Company for use therein or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing
by such Holder or (ii) as a result of the failure of the Holder to deliver
a Prospectus, as amended or supplemented, to a purchaser in connection
with an offer or sale. The Company shall notify the Holder promptly of the
institution, threat or assertion of any Proceeding of which the Company is
aware in connection with the transactions contemplated by this Agreement.
Such indemnity shall remain in full force and effect regardless of any
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investigation made by or on behalf of an Indemnified Party (as defined in
Section 5(c) hereof) and shall survive the transfer of the Registrable
Securities by the Holder.
(b) Indemnification by Holders. Each Holder and its permitted
assignees shall, severally and not jointly, indemnify and hold harmless
the Company, its directors, officers, agents and employees, each Person
who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, and the
respective successors, assigns, estate and personal representatives of
each of the foregoing, to the fullest extent permitted by applicable law,
from and against all Losses, as incurred, arising out of or relating to
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus, as supplemented or amended, if
applicable, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or supplement
thereto, in the light of the circumstances under which they were made) not
misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in or omitted from any information so
furnished in writing by the Holder to the Company specifically for
inclusion in the Registration Statement or such Prospectus and that such
information was reasonably relied upon by the Company for use in the
Registration Statement, such Prospectus or to the extent that such
information relates to the Holder or the Holder's proposed method of
distribution of Registrable Securities and was furnished in writing by the
Holder expressly for use in the Registration Statement, such Prospectus or
such Prospectus Supplement. Notwithstanding anything to the contrary
contained herein, the Holders shall be liable under this Section 5(b) for
only that amount as does not exceed the net proceeds to such Holder as a
result of the sale of Registrable Securities pursuant to such Registration
Statement.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "Indemnifying Party) in writing,
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent
that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
in writing to pay such fees and expenses; or (2) the Indemnifying Party
shall have failed promptly to assume the defense of such Proceeding and to
employ counsel reasonably satisfactory to such Indemnified Party in any
such
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Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by
counsel (which shall be reasonably acceptable to the Indemnifying Party)
that a conflict of interest is likely to exist if the same counsel were to
represent such Indemnified Party and the Indemnifying Party (in which
case, the Indemnifying Party shall be responsible for reasonable fees and
expenses of no more than one counsel for Indemnified Parties. The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not
be unreasonably withheld or delayed. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement
of any pending Proceeding in respect of which any Indemnified Party is a
party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter
of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating
or preparing to defend such Proceeding in a manner not inconsistent with
this Section) shall be paid to the Indemnified Party, as incurred, within
ten (10) Trading Days of written notice thereof to the Indemnifying Party
(regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally
judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then
each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Losses, in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party and Indemnified Party
in connection with the actions, statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material
fact or omission or alleged omission of a material fact, has been taken or
made by, or relates to information supplied by, such Indemnifying, Party
or Indemnified Party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set
forth in Section 5(c), any reasonable attorneys' or other reasonable fees
or expenses incurred by such party in connection with any Proceeding to
the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available
to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other
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method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph. No
Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to
the Indemnified Parties. Notwithstanding anything to the contrary
contained herein, the Holders shall be liable under this Section 5(d) for
only that amount as does not exceed the net proceeds to such Holder as a
result of the sale of Registrable Securities pursuant to such Registration
Statement.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or
the Company, as the case may be, in addition to being entitled to exercise
all rights granted by law and under this Agreement, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would
not provide adequate compensation for any losses incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy at law
would be adequate.
(b) Compliance. Each Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities
pursuant to a Registration Statement.
(c) Discontinued Disposition. Each Holder agrees by its acquisition
of such Registrable Securities that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Section
3(c), such Holder will forthwith discontinue disposition of such
Registrable Securities under a Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement or until it is advised in writing (the "Advice") by
the Company that the use of the applicable Prospectus may be resumed, and,
in either case, has received copies of any additional or supplemental
filings that are incorporated or deemed to be incorporated by reference in
such Prospectus or Registration Statement. The Company will use its
commercially reasonable to ensure that the use of the Prospectus may be
resumed as promptly as it practicable.
(d) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the same shall be in writing and signed by
the Company and Holders of a majority of the then outstanding Registrable
Securities. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates
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exclusively to the rights of Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of
all of the Registrable Securities to which such waiver or consent relates;
provided, however, that in the event the Company shall deliver written
notice to a Holder with respect to a requested waiver or amendment, such
Holder shall be deemed to have consented and agreed to such amendment or
waiver if such Holder does not provide written notice to the Company
indicating such Holder's non-consent within ten (10) days of delivery by
the Company of such written notice; provided, further, that the provisions
of this sentence may not be amended, modified, or supplemented except in
accordance with the provisions of the immediately preceding sentence.
(e) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be
delivered as set forth in the Purchase Agreement.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder. The
Company may not assign its rights or obligations hereunder without the
prior written consent of all of the Holders of the then-outstanding
Registrable Securities. Each Holder may assign their respective rights
hereunder in the manner and to the Persons as permitted under the Purchase
Agreement.
(g) Execution and Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed
to be an original and, all of which taken together shall constitute one
and the same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.
(h) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be
determined with the provisions of the Purchase Agreement.
(i) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(j) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
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(k) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(l) Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be
responsible in any way for the performance of the obligations of any other
Holder hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Holder
pursuant hereto or thereto, shall be deemed to constitute the Holders as a
partnership, an association, a joint venture or any other kind of entity,
or create a presumption that the Holders are in any way acting in concert
with respect to such obligations or the transactions contemplated by this
Agreement. Each Holder shall be entitled to protect and enforce its
rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Holder to be joined
as an additional party in any proceeding for such purpose.
*************************
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
INNUITY, INC.
By: _____________________________________
Name: _____________________________
Title: ____________________________
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
[SIGNATURE PAGE OF HOLDERS TO INNUITY, INC. RRA]
Name of Holder: __________________________
Signature of Authorized Signatory of Holder: __________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
ANNEX A
Plan of Distribution
Selling Shareholders (the "Selling Shareholders") of the common stock (the
"Common Stock") of Innuity, Inc., a Utah corporation ("we", "our" or the
"Company") and any pledgees, donees, transferees or other successors-in-interest
selling shares received from a named Selling Shareholder as a gift, partnership
distribution or other non-sale-related transfer, may, from time to time, sell
any or all of their shares of Common Stock on the Trading Market or any other
stock exchange, market or trading facility on which the shares are traded or in
private transactions. Selling Shareholders may sell the shares from time to time
and may also decide not to sell all the shares of Common Stock they are allowed
to sell under this prospectus. Selling Shareholders will act independently of us
in making decisions with respect to the timing, manner and size of each sale.
The sales may be made on one or more exchanges or in the over-the-counter market
or otherwise and in one or more transactions. The shares may be sold by one or
more of the following methods:
- a block trade in which the broker-dealer so engaged will attempt to sell
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- on the OTC Bulletin Board or on such other markets on which our common
stock may from time to time be trading;
- in privately-negotiated transactions;
- through the writing of options on the shares of common stock, short sales
or any combination the two; or
- any combination of the foregoing, or any other available means allowable
under law.
Selling Shareholders may sell at market prices at the time of sale, at
prices related to the market price or at negotiated prices. It is possible that
the Selling Shareholders will attempt to sell shares of common stock in block
transactions to market makers or other purchasers at a price per share which may
be below the then current market price. The Selling Shareholders may also resell
all or a portion of their shares in open market transactions in reliance upon
available exemptions under the Securities Act, such as Rule 144, provided they
meet the requirements of these exemptions. Some or all of the shares of common
stock issuable upon exercise of warrants may not be issued to, or sold by, the
Selling Shareholders.
Alternatively, the Selling Shareholders may from time to time offer shares
through brokers, dealers or agents. Brokers, dealers, agents or underwriters
participating in transactions may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders (and, if it acts as
agent for the purchaser of the shares, from that purchaser). The discounts,
concessions or commissions might be in excess of those customary in the type of
transaction involved.
The shares may be sold by Selling Shareholders only through registered or
licensed brokers or dealers if required under applicable state securities laws.
In addition, in certain states the shares may not be sold unless the shares have
been registered or qualified for sale in that state or an exemption from
registration or qualification is available and is complied with.
We have agreed to pay the costs and expenses of registering the shares
under the Securities Act, including registration and filing fees, printing
expenses, administrative expenses, legal fees and accounting fees. If the shares
are sold through underwriters or broker-dealers, the Selling Shareholders will
be responsible for underwriting discounts, underwriting commissions and agent
commissions.
We have agreed to indemnify certain of the Selling Shareholders against
liabilities they may incur because of an untrue or alleged untrue statement of a
material fact contained in this prospectus or the omission or alleged omission
to state in the prospectus a material fact required to be contained in the
prospectus, or necessary to make the statements in this prospectus not
misleading. However, we shall not be required to indemnify the Selling
Shareholders for liabilities that we incur based on our reliance on written
information that the Selling Shareholders have furnished to us expressly for use
in this prospectus. Likewise, certain of the Selling Shareholders have agreed to
indemnify us against liabilities that we incur as a result of any statement or
omission made in this prospectus based on written information that the Selling
Shareholders have provided to us expressly for use in this prospectus. No
Selling Shareholder, however, will be liable to us for amounts in excess of the
net proceeds that such Selling Shareholder receives from the sale of its shares
pursuant to this prospectus.
The Selling Shareholders and any brokers, dealers or agents, upon
effecting the sale of any of the shares of common stock, may be deemed to be
"underwriters" as that term is defined under the Securities Act or the Exchange
Act. In addition, the Selling Shareholders and any other persons participating
in the sale or distribution of the shares of common stock will be subject to
applicable provisions of the Exchange Act. These provisions may limit the timing
of purchases and sales of any of common stock by the Selling Shareholders or any
other such person. The foregoing may affect the marketability of the shares of
our common stock. Any profits on the sale of the common stock by the Selling
Shareholders and any discounts, commissions or concessions received by any such
broker-dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act. The Exchange Act rules include, without
limitation, Regulation M, which may limit the timing of purchases and sales of
any of the common stock by the Selling Shareholders and any other such person.
In addition, Regulation M may restrict the ability of any person engaged in the
distribution of the common stock to engage in market-making activities with
respect to our common stock for a period of up to five business days prior to
the commencement of distribution. This may affect the marketability of the
common stock and the ability of any person or entity to engage in market-making
activities with respect to the common stock. Because Selling Shareholders may be
deemed to be "underwriters" within the meaning of the Securities Act, the
Selling Shareholders will be subject to the prospectus delivery requirements of
the Securities Act.
We have agreed to keep the registration statement, of which this
prospectus constitutes a part, effective until the earliest of (i) the date when
the Selling Shareholders have resold all of the shares, (ii) the date on which
the Selling Shareholders may sell all of the
shares pursuant to Rule 144(k) of the Securities Act, or (iii) the first
anniversary of the issuance of the shares of Common Stock.
We may suspend the use of this prospectus if we learn of any event that
causes this prospectus to include an untrue statement of material fact or omit
to state a material fact required to be stated in the prospectus or necessary to
make the statements in the prospectus not misleading in light of the
circumstances then existing. If this type of event occurs, a prospectus
supplement or post-effective amendment, if required, will be distributed to the
Selling Shareholders.
ANNEX B
INNUITY, INC.
SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE
The undersigned beneficial owner of Registrable Securities of Innuity,
Inc., a Utah corporation (the "Company"), understands that the Company has filed
or intends to file with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (the "Registration
Statement") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "Securities Act"), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement, dated as of June
___, 2006 (the "Registration Rights Agreement"), among the Company and the
Holders named therein. A copy of the Registration Rights Agreement is available
from the Company upon request at the address set forth below. All capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in
the Registration Rights Agreement.
Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.
NOTICE
The undersigned beneficial owner (the "Selling Securityholder") of
Registrable Securities hereby elects to include the Registrable Securities owned
by it and listed below in Item 3 (unless otherwise specified under such Item 3)
in the Registration Statement.
The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
QUESTIONNAIRE
1. NAME.
(a) Full Legal Name of Selling Securityholder:
____________________________________________________________________
(b) Full Legal Name of Registered Holder (if not the same as (a) above)
through which Registrable Securities Listed in Item 3 below are
held:
____________________________________________________________________
(c) Full Legal Name of Natural Control Person (which means a natural
person who directly or indirectly alone or with others has power to
vote or dispose of the securities covered by the questionnaire):
____________________________________________________________________
2. ADDRESS FOR NOTICES TO SELLING SECURITYHOLDER:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Telephone: _____________________________________________________________________
Fax: ___________________________________________________________________________
Contact Person: ________________________________________________________________
3. BENEFICIAL OWNERSHIP OF REGISTRABLE SECURITIES:
(a) Type and Number of Registrable Securities beneficially owned:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
4. BROKER-DEALER STATUS:
(a) Are you a broker-dealer?
Yes No
(b) If "yes" to Section 4(a), did you receive your Registrable
Securities as compensation for investment banking services to the
Company?
Yes No
Note: If no, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
(c) Are you an affiliate of a broker-dealer? If yes, please explain the
nature of your affiliation in the space provided below.
Yes No
____________________________________________________________________
____________________________________________________________________
(d) If you are an affiliate of a broker-dealer, do you certify that you
bought the Registrable Securities in the ordinary course of
business, and at the time of the purchase of the Registrable
Securities to be resold, you had no agreements or understandings,
directly or indirectly, with any person to distribute the
Registrable Securities?
Yes No
Note: If no, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
5. BENEFICIAL OWNERSHIP OF OTHER SECURITIES OF THE COMPANY OWNED BY THE SELLING
SECURITYHOLDER.
Except as set forth below in this Item 5, the undersigned is not the
beneficial or registered owner of any securities of the Company other than
the Registrable Securities listed above in Item 3.
(a) Type and Amount of Other Securities beneficially owned by the
Selling Securityholder:
_____________________________________________________________________
_____________________________________________________________________
6. RELATIONSHIPS WITH THE COMPANY:
Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (owners of 5%
of more of the equity securities of the undersigned) has held any position
or office or has had any other material relationship with the Company (or
its predecessors or affiliates) during the past three years.
State any exceptions here:
__________________________________________________________________________
__________________________________________________________________________
The undersigned agrees to promptly notify the Company of any inaccuracies
or changes in the information provided herein that may occur subsequent to the
date hereof at any time while the Registration Statement remains effective.
By signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items 1 through 6 and the
inclusion of such information in the Registration Statement and the related
prospectus and any amendments or supplements thereto. The undersigned
understands that such information will be relied upon by the Company in
connection with the preparation or amendment of the Registration Statement and
the related prospectus.
IN WITNESS WHEREOF the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.
Dated: ________________________ Beneficial Owner: _____________________________
By: ___________________________________________
Name:
Title:
PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:
DLA Xxxxx Xxxxxxx Xxxx Xxxx US LLP
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxxx
(000) 000-0000
(000) 000-0000 (Facsimile)
