REGISTRATION RIGHTS AGREEMENT
Exhibit
10.3
This
REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of
September 19, 2007, among NEPHROS, INC., a Delaware corporation (the “Company”),
and holders of securities of the Company listed as Investors on Schedule
1 attached hereto (collectively, the “Holders”).
WHEREAS, the
Holders are the beneficial owners of certain securities issued by the Company;
and
WHEREAS,
the Company and the Holders deem it to be in their respective best interests
to
set forth the rights of the Holders in connection with Registrable Securities
(as defined below).
NOW,
THEREFORE, in consideration of the premises and mutual covenants and obligations
hereinafter set forth, the Company and the Holders, intending legally to be
bound, hereby agree as follows.
Section
1. Definitions. As
used in this Agreement, the following terms shall have the following
meanings:
“Affiliate”
of any person means any other person who either directly or indirectly is in
control of, is controlled by, or is under common control with such
person.
“Automatic
Conversion Date” shall mean the twenty-first (21st) day after
the
Company sends or gives its stockholders a definitive Schedule 14C information
statement.
“Business
Day” shall mean any Monday, Tuesday, Wednesday, Thursday or Friday that is not a
day on which banking institutions in The City of New York are authorized by
law,
regulation or executive order to close.
“Class
D
Warrants” shall mean the Class D Warrants for the purchase of shares of Common
Stock of the Company.
“Common
Stock” shall mean the common stock, par value $0.001 per share, of the
Company.
“Conversion
Amount” shall mean the principal amount of the Note and all accrued but unpaid
interest thereon as of the Automatic Conversion Date.
“Effectiveness
Date” shall mean, with respect to the Initial Resale Registration Statement, the
one hundred eightieth (180th) day following
the
Filing Date; provided that, if the Effectiveness Date falls
on a Saturday, Sunday or any other day which shall be a legal holiday or a
day
on which the SEC is authorized or required by law or other government actions
to
close, the Effectiveness Date shall be the following Business Day.
“Effectiveness
Period” shall have the meaning set forth in Section 3(a).
“Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended (or any similar
successor federal statute), and the rules and regulations thereunder, as the
same are in effect from time to time.
“Exchanged
Notes” shall mean 10% Secured Convertible Notes due 2008 convertible into shares
of Common Stock.
“Filing
Date” shall mean, subject to Section 3(b) hereof, the sixtieth (60th) day after
the
date the Company files a definitive Schedule 14C information statement with
the
SEC; provided that, if the Filing Date falls on a Saturday,
Sunday or any other day which shall be a legal holiday or a day on which the
SEC
is authorized or required by law or other government actions to close, the
Filing Date shall be the following Business Day.
“Holder”
shall have the meaning assigned to such term in the preamble
hereof.
“Initial
Resale Registration Statement” shall mean the Registration Statement referred to
in Section 3(a).
“Losses”
shall have the meaning set forth in Section 5(a).
“Notes”
shall mean the Exchanged Notes and the Purchased Notes.
“Person”
shall mean an individual, partnership, corporation, limited liability company,
joint venture, trust or unincorporated organization, a government or agency
or
political subdivision thereof or any other entity.
“Placement
Agent Warrants” shall mean, collectively, each Placement Agent Warrant for the
Purchase of Shares of Common Stock issued by the Company of even date with
the
Class D Warrants.
“Prospectus”
shall mean the prospectus included in any Registration Statement, as amended
or
supplemented by a prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated
by
reference in such prospectus.
“Purchased
Notes” shall mean the 10% Secured Convertible Notes due 2008 convertible into
shares of the Company’s Common Stock and Class D Warrants.
“Registrable
Securities” shall mean (i) shares of Common Stock issuable upon conversion of
the Notes or exercise of Class D Warrants, and (ii) any other securities issued
as a result of, or in connection with, any stock dividend, stock split or
reverse stock split, combination, recapitalization, reclassification, merger
or
consolidation, exchange or distribution in respect of the Common Stock referred
to above.
“Registration
Statement” shall mean any registration statement which covers any of the
Registrable Securities pursuant to the provisions of this Agreement, including
the Prospectus included therein, all amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration
Statement.
“Resale
Registration Statement” shall have the meaning set forth in Section 3(b)
hereof.
“Restricted
Securities” shall have the meaning set forth in Section 2 hereof.
“Rule
144” shall mean Rule 144 promulgated under the Securities Act, as amended from
time to time, or any similar successor rule thereto that may be promulgated
by
the SEC.
“Rule
415” shall mean Rule 415 promulgated under the Securities Act, as amended from
time to time, or any similar successor rule thereto that may be promulgated
by
the SEC.
“SEC”
shall mean the Securities and Exchange Commission, or any other federal agency
at the time administering the Securities Act.
“Securities
Act” shall mean the Securities Act of 1933, as amended (or any similar successor
federal statute), and the rules and regulations thereunder, as the same are
in
effect from time to time.
“Underwritten
Offering” shall mean a registered offering in which securities of the Company
are sold to an underwriter for reoffering to the public.
Section
2. Securities
Subject to this Agreement. The securities entitled to
the benefits of this Agreement are the Registrable Securities but, with respect
to any particular Registrable Security, only so long as such security continues
to be a Restricted Security. A Registrable Security that has ceased
to be a Restricted Security cannot thereafter become a Restricted
Security. As used herein, a Restricted Security shall cease to be a
Restricted Security, and will no longer be a Registrable Security hereunder,
when: (i) it has been registered under the Securities Act, the
registration statement in connection therewith has been declared effective
and
it has been disposed of pursuant to such effective registration statement;
(ii)
it is eligible to be sold or distributed pursuant to Rule 144 within any
consecutive three month period (including, without limitation, pursuant to
Rule
144(k)) without volume limitations; or (iii) it shall have ceased to be
outstanding.
Section
3. Required
Resale Registration
(a) On
or
prior to the Filing Date, the Company shall prepare and file with the SEC an
initial “resale” Registration Statement (once declared effective by the SEC, the
“Initial Resale Registration Statement”) providing for the resale of (i) all
Registrable Securities, and (ii) the other securities set forth in
Schedule 3(a) hereto (the “Other Registrable Securities”; provided, such
securities shall cease to be Other Registrable Securities if the warrants
pursuant to
which
such securities may be purchased expire without being exercised) for an offering
to be made on a continuous basis pursuant to Rule 415. The Initial
Resale 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 with the Securities Act and the rules promulgated
thereunder). Such Initial Resale Registration Statement shall cover,
to the extent allowable under the Securities Act and the rules promulgated
thereunder (including Rule 416), such indeterminate number of additional shares
of Common Stock resulting from stock splits, stock dividends or similar
transactions with respect to the Registrable Securities. The Company
shall use its commercially reasonable best efforts to cause the Initial Resale
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to the
Effectiveness Date, and to keep such Initial Resale Registration Statement
continuously effective under the Securities Act until all of the Registrable
Securities have ceased to be Restricted Securities (the “Effectiveness
Period”). The Company shall immediately notify the Holders via
facsimile or electronic mail of the effectiveness of the Initial Resale
Registration Statement on the same trading day that the Company telephonically
confirms effectiveness with the SEC, which date shall be the date effectiveness
of the Initial Resale Registration Statement is granted by the SEC.
(b) Notwithstanding
anything to the contrary set forth in this Section 3, in the event it is
determined that the Company is unable to register all of the Registrable
Securities and Other Registrable Securities in the Initial Resale Registration
Statement in order to comply with applicable securities rules and regulations,
including, without limitation, Rule 415, then the Company shall register in
the
Initial Resale Registration Statement such number of Registrable Securities
and
Other Registrable Securities determined on a pro rata basis
among the Holders thereof and the holders of Other Registrable
Securities. The Company will use its commercially reasonable best
efforts to register the remaining Registrable Securities and Other Registrable
Securities as soon as reasonably practicable on additional “resale” Registration
Statement(s) (each, an “Additional Resale Registration Statement” and together
with the Initial Resale Registration Statement, the “Resale Registration
Statement”) after such registration is permitted, in each case in accordance
with applicable securities rules and regulations and including such number
of
Registrable Securities and Other Registrable Securities determined on a
pro rata basis among the Holders of the Registrable
Securities and the holders of the Other Registrable Securities, until all
Registrable Securities and Other Registrable Securities have been
registered. The number of Registrable Securities to be included in
any Resale Registration Statement shall be equal to the total number of
securities that may be included in such Resale Registration Statement multiplied
by a fraction, the numerator of which is the total number of Registrable
Securities and the denominator of which is the sum of the total number of
Registrable Securities and the number of Other Registrable Securities, in each
case as of the filing of such Resale Registration Statement. The
actual Registrable Securities to be included in any Resale Registration
Statement shall be determined in the following order: (i) first, the shares
of
Common Stock issuable upon conversion of the Notes shall be registered on a
pro rata basis among the holders of the Notes, and (ii)
second, the shares of Common Stock issuable upon exercise of the Class D
Warrants shall be registered on a pro rata basis among the
holders of the Class D Warrants. The actual Other Registrable
Securities to be included in any Resale Registration Statement shall
be allocated among the holders of the Other Registrable Securities on a
pro rata basis. For purposes of this Section 3(b),
“Filing Date” means with respect to each
Additional
Resale Registration Statement filed pursuant hereto, the later of (i) sixty
(60)
days following the sale of substantially all of the Registrable Securities
included in the Initial Resale Registration Statement or any Additional Resale
Registration Statement and (ii) six (6) months following the effective date
of
the Initial Resale Registration Statement or any Additional Resale Registration
Statement, as applicable, or such earlier date as permitted by the
SEC. The Company shall immediately notify the Holders via facsimile
or electronic mail of the effectiveness of any Additional Resale Registration
Statement on the same trading day that the Company telephonically confirms
effectiveness with the SEC, which date shall be the date effectiveness of any
such Additional Resale Registration Statement is granted by the
SEC.
(c) The
Company and the Holders agree that the Holders will suffer damages if the
Initial Resale Registration Statement is not declared effective by the SEC
on or
prior to the Effectiveness Date. The Company and the Holders further
agree that it would not be feasible to ascertain the extent of such damages
with
precision. Accordingly, if the Initial Resale Registration Statement
is not declared effective by the SEC on or prior to the Effectiveness Date
and
to the extent that the Holders owning a majority of the outstanding Registrable
Securities have not waived the application of this Section 3(c), for each thirty
(30) day period after the Effectiveness Date or portion thereof during which
the
Initial Resale Registration Statement has not been declared effective, the
Company shall pay an amount as liquidated damages to each Holder, payable in
cash, equal to (i) one percent (1.0%) of the amount of such Holder’s Conversion
Amount for each of the first ten (10) 30-day periods after the Effectiveness
Date and two percent (2%) of the amount of such Holder’s Conversion Amount for
each 30-day period thereafter, until the Initial Resale Registration Statement
is declared effective by the SEC. Liquidated damages payable by the
Company pursuant to this Section 3(c) shall be payable on the first (1st) Business
Day of
each thirty (30) day period following the Effectiveness Date. If the
Company fails to pay any liquidated damages pursuant to this Section 3(c) in
full within ten (10) business days after the date payable, the Company will
pay
interest thereon at a rate of fifteen percent (15%) per annum (or such lesser
maximum amount that is permitted to be paid by applicable law) to the Holder,
accruing daily from the date such liquidated damages are due until such amounts,
plus all such interest thereon, are paid in full. In the event the
Initial Resale Registration Statement is not declared effective by the SEC
on or
prior to the Effectiveness Date, the Holders’ sole remedy shall be receipt of
the liquidated damages payable pursuant to this Section 3(c); provided,
nothing in this Section 3(c) shall limit the Holders’ right to specific
performance of the Company’s obligations under this Agreement. For
the avoidance of doubt: (x) if the Initial Resale Registration Statement is
declared effective on or before the Effectiveness Date, no liquidated damages
will be payable for any Holder’s Conversion Amount that corresponds to
Registrable Securities not permitted to be included in the Initial Resale
Registration Statement by applicable securities rules and regulations, and
(y)
otherwise, after the Initial Resale Registration Statement is declared effective
by the SEC no further liquidated damages will be payable for any Holder’s
Conversion Amount that corresponds to Registrable Securities not permitted
to be
included in the Initial Resale Registration Statement by applicable securities
rules and regulations.
(d) As
a
condition to the inclusion of its Registrable Securities in any Resale
Registration Statement, each Holder shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may request in
writing
or as shall be required in connection with any registration, qualification
or
compliance referred to in this Agreement.
(e) In
connection with the Company’s registration obligations hereunder, the Company
shall:
(A) Prepare
and file with the SEC such amendments, including post-effective amendments,
to
the Resale Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep such Resale Registration Statement
continuously effective as to the applicable Registrable Securities for the
Effectiveness Period; (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
of the Securities Act; (iii) respond as promptly as reasonably possible to
any
comments received from the SEC with respect to such Resale 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 such Resale
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 the Resale Registration Statement as so amended
or
in such Prospectus as so supplemented.
(B) 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 and (if requested by any such Holder) confirm
such notice in writing no later than one trading day following the day (i)(X)
when a Prospectus or any Prospectus supplement or post-effective amendment
to
the Resale Registration Statement is filed; and (Y) with respect to the Resale
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the SEC or any other Federal or state
governmental authority for amendments or supplements to the Resale Registration
Statement or Prospectus or for additional information; (iii) of the issuance
by
the SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Resale 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 or passage of time that makes the financial statements
included in the Resale Registration Statement ineligible for inclusion therein
or any statement made in the Resale Registration Statement or Prospectus or
any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires any revisions to the Resale
Registration Statement, Prospectus or other documents so that, in the case
of
the Resale 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;
provided that any and all of such information provided pursuant to clause
(v) above shall remain confidential to each Holder until such information
otherwise becomes public, unless disclosure by a Holder is required by law;
provided, further, notwithstanding each Holder’s agreement to keep
such information confidential, the Holders make no acknowledgement that any
such
information is material, non-public information.
(C) Use
its commercially reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness
of
the Resale 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.
(D) Furnish
to each Holder, upon written request of such Holder, without charge, at least
one conformed copy of the Resale 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 Holder, and all exhibits to the extent requested by such
Holder (including those previously furnished or incorporated by
reference).
(E) Promptly
deliver to each Holder, upon written request of such Holder, without charge,
as
many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Holders 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 of any notice pursuant to Section
3(e)(B).
(F) 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 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 Resale Registration Statement; provided that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or subject the Company to any
material tax in any such jurisdiction where it is not then so subject or file
a
general consent to service of process in any such jurisdiction.
(G) If
requested by the Holders, use its commercially reasonable best efforts to cause
its transfer agent to prepare and deliver certificates representing Registrable
Securities to a transferee pursuant to the Resale Registration Statement
within
three
(3)
trading days of delivery to the transfer agent of certificates bearing
restrictive legends, which certificates shall be free, to the extent permitted
by the Subscription Agreement, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such Holders may request.
(H) Upon
the occurrence of any event contemplated by Section 3(e)(B), 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 the Resale 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 the Resale 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(e)(B) 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 best 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(e)(H)
to
suspend the availability of the Resale Registration Statement and Prospectus
for
a period not to exceed 90 days (which need not be consecutive days) in any
365-day period.
(I) Comply
in all material respects with all applicable rules and regulations of the SEC
and the American Stock Exchange (or any successor entity or any other national
securities exchange or automated quotation system on which the Common Stock
is
then listed or quoted).
(J) If
requested by a Holder, the Company shall (i) as soon as reasonably practicable
incorporate in a prospectus supplement or post-effective amendment such
information as is reasonably required to be included therein relating to any
proposed sale and distribution of Registrable Securities by such Holder,
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, and (ii) as soon as reasonably practicable 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.
(K) Unless
waived by Holders owning a majority of the outstanding Registrable Securities,
include in such Resale Registration Statement, amendment thereto, or prospectus
or prospectus supplement all material non-public information made available
by
the Company to any Holder prior to the filing thereof, except for material
non-public information made available to a Holder to whom knowledge of a member
of the Board of Directors of the Company is attributable.
(f) Holder
hereby covenants with the Company (i) not to make any sale of the
Registrable Securities pursuant to a Resale Registration Statement without
effectively causing the prospectus delivery requirements under the Securities
Act to be satisfied, and (ii) if such Registrable Securities are to be sold
by any method or in any transaction other than on a national securities exchange
or in the over-the-counter market, in privately negotiated transactions, or
in a
combination of such methods, to notify the Company at least 5 Business Days
prior to the date on which the Holder first offers to sell any such Registrable
Securities.
(g) Holder
acknowledges and agrees that the Registrable Securities sold pursuant to the
Registration Statement described in this Agreement are not transferable on
the
books of the Company unless the stock certificate submitted to the Company’s
transfer agent evidencing such Registrable Securities is accompanied, if
requested by the transfer agent, by a certificate reasonably satisfactory to
the
transfer agent to the effect that (i) the Registrable Securities have been
sold in accordance with such Resale Registration Statement and (ii) the
requirement of delivering a current Prospectus has been satisfied.
(h) Holder
shall not take any action with respect to any distribution deemed to be made
pursuant to such Resale Registration Statement, which would constitute a
violation of Regulation M under the Exchange Act, or any other applicable rule,
regulation or law.
Section
4. Registration
Expenses. All expenses incident to the Company’s
performance of or compliance with this Agreement will be borne by the Company,
regardless of whether a Resale Registration Statement becomes effective,
including, without limitation: (i) all registration and filing fees;
(ii) all reasonable fees and expenses of compliance with federal securities
and state blue sky or securities laws; (iii) all reasonable expenses of printing
(including printing Prospectuses), messenger and delivery services and
telephone; (iv) all reasonable fees and disbursements of counsel for the
Company; (v) all applications and filing fees in connection with listing the
Registrable Securities on a national securities exchange or automated quotation
system pursuant to the requirements hereof; (vi) Securities Act liability
insurance, if the Company so desires such insurance and (vii) all reasonable
fees and disbursements of independent certified public accountants of the
Company (including the expenses of any special audit and comfort letters
required by or incident to such performance). Notwithstanding
anything in this Section 4 to the contrary, the Company shall not be
required to pay any underwriting discounts, commissions or transfer taxes,
if
any, relating to the sale or disposition of any Holder’s Restricted
Securities.
The
Company will, in any event, bear its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expenses of any annual audit and the fees
and
expenses of any person, including special experts, retained by the
Company.
Section
5. Indemnification.
(a) Indemnification
by the Company. To the fullest extent permitted by law, the Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder of the Registrable Securities (including, its officers, directors,
members, partners, agents, brokers, investment advisors and employees of each
of
them) and each person
controlling
such Holder within the meaning of Section 15 of the Securities Act (including
the officers, directors, members, partners, agent and employees of each such
controlling person), with respect to which any registration has been effected
pursuant to this Agreement, against all claims, losses, damages, liabilities,
judgments, fines, penalties, charges, costs (including, without limitation,
reasonable attorneys’ fees and disbursements) and expenses (collectively,
“Losses”), as incurred, including any Losses incurred in settlement of any
litigation, commenced or threatened (subject to Subsection 5(c) below), arising
out of or based on any untrue or alleged untrue statement of a material fact
contained in any Resale Registration Statement, Prospectus or offering circular,
or any amendment or supplement thereof, incident to any such registration,
or
based on any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in light of the circumstances in which they were made;
provided, that the Company shall not be liable in any such case to the
extent that any untrue or alleged untrue statement or omission or alleged
omission is made in reliance upon and in conformity with information furnished
to the Company by or on behalf of any Holder and stated to be specifically
for
use in preparation of such Resale Registration Statement, Prospectus or offering
circular; provided, further, that the Company shall not be liable
in any such case where the Losses arise out of, or are related to, the failure
of any Holder to comply with the covenants and agreements contained in this
Agreement. The Company will also indemnify underwriters participating
in the distribution, their officers, directors, employees, partners and agents,
and each Person who controls such underwriters (within the meaning of the
Securities Act), to the same extent as provided above with respect to the
indemnification of the Holders of Registrable Securities, if so
requested. The Company shall notify the Holders promptly of the
institution, threat or assertion of any legal proceeding arising from or in
connection with the transactions contemplated by this Agreement of which the
Company is aware.
(b) Indemnification
by Holders of Registrable Securities. In connection with any
Resale Registration Statement in which a Holder of Registrable Securities is
participating, each such Holder will furnish to the Company in writing such
information and affidavits as the Company reasonably requests for use in
connection with any such Resale Registration Statement or Prospectus. Each
Holder will severally and not jointly, if Registrable Securities held by such
Holder are included in the securities as to which such registration is being
effected, indemnify the Company, each of its directors and officers, each
underwriter of an underwritten offering of the Registrable Securities in which
such Holder participates, each other Holder whose Securities are included in
such Resale Registration Statement and each person who controls the Company
within the meaning of Section 15 of the Securities Act (collectively, “Holder
Indemnitees”), against all Losses, as incurred, including any Losses incurred in
settlement of any litigation, commenced or threatened (subject to Subsection
5(c) below), arising out of, or based on, any untrue or alleged untrue statement
of a material fact contained in any Resale Registration Statement, Prospectus
or
offering circular, or any amendment or supplement thereof, incident to any
such
registration, or based on any omission or alleged omission to state therein
a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances in which they were made,
in each case to the extent, but only to the extent, that such untrue or alleged
untrue statement or omission or alleged omission is made in reliance upon and
in
conformity with written information and/or affidavits furnished to the Company
by or on behalf of such Holder; provided, that the indemnity shall not
apply to the extent that such Losses result from the fact that a current copy
of
the Prospectus was not made
available
to the Holders and such current copy of the Prospectus would have cured the
defect giving rise to such Losses. In no event shall the liability of
any selling Holder hereunder be greater in amount than the dollar amount of
the
net proceeds received by such Holder upon the sale of the Registrable Securities
covered by such Resale Registration Statement giving rise to such
indemnification obligation. The Holder Indemnitees shall be entitled
to receive indemnities from underwriters participating in the distribution,
to
the same extent as provided above, with respect to information furnished in
writing by such underwriters specifically for inclusion in any Registration
Statement, Prospectus or offering circular.
(c) Conduct
of Indemnification Proceedings. Any Person entitled to
indemnification hereunder will (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit
such
indemnifying party to assume the defense of such claim with counsel of such
indemnifying party’s choice; provided, however, that any Person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (A) the indemnifying party shall have failed to assume the defense of
such claim and employ counsel reasonably satisfactory to the indemnified party
in a timely manner or (B) a written opinion of counsel reasonably acceptable
to
the indemnifying party, asserts that a conflict of interest exists between
such
person and the indemnifying party with respect to such claims (in which case,
if
the indemnified Person notifies the indemnifying party in writing that such
Person elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense
of
such claim on behalf of such Person). The indemnifying party will not
be subject to any liability for any settlement made without its
consent. No indemnified party will be required to consent to entry of
any judgment or enter into any settlement unless (x) such judgment or settlement
includes as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation, and (y) the only consequence to the indemnified
party under such judgment or settlement is the creation of an obligation to
pay
money damages, all of which are being satisfied by the indemnifying
party. An indemnifying party who is not entitled to, or elects not
to, assume the defense of the claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim.
(d) Contribution. If
for any reason the indemnification provided for in Subsection 5(a) or Subsection
5(b) is unavailable to an indemnified party or insufficient to hold it harmless
as contemplated by Subsection 5(a) and Subsection 5(b), then the indemnifying
party shall contribute to the amount paid or payable by the indemnified party
as
a result of such Losses in such proportion as is appropriate to reflect not
only
the relative benefits received by the indemnifying party and the indemnified
party, but also the relative fault of the indemnifying party and the indemnified
party, as well as any other relevant equitable considerations. 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
misrepresentations. Notwithstanding the provisions of this Section
5(d), no Holder shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the proceeds actually
received by such Holder from the sale of the Registrable Securities subject
to
the proceeding exceeds the amount of any damages that such Holder has otherwise
been
required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission, except in the case of fraud by such Holder.
Section
6. Participation
in Underwritten Registrations.
(a) One
or
more Holders may elect to retain an underwriter to conduct an Underwritten
Offering of all or a portion of the Registrable Securities held by such
Holders. In the event any Holders elect to conduct an Underwritten
Offering, each other Holder shall be entitled to participate in such
Underwritten Offering subject to Subsection 6(b) below.
(b) No
Person
may participate in any Underwritten Offering hereunder unless such Person (i)
agrees to sell such Person’s Registrable Securities on the basis provided in any
underwriting arrangements approved by the Holders of a majority of the
Registrable Securities included in such Underwritten Offering and (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements. Nothing in this Section 6 shall be construed to create
any additional rights regarding the registration of Registrable Securities
in
any Person otherwise than as set forth herein.
(c) Nothing
in this Section 6 (i) shall obligate the Company to pay any underwriting
discounts or commissions in connection with any underwritten offering of
Registrable Securities, or (ii) entitle the Holders to select the underwriter
of
any underwritten primary offering of securities by the Company.
Section
7. Rule
144. The Company agrees with each Holder, for so long as any
Restricted Securities remain outstanding and during any period in which the
Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to
make available, upon request of such Holder in connection with any sale thereof
and any prospective purchaser of such Restricted Securities designated by the
Holder, the information required by Rule 144A(d)(4) under the Securities Act
in
order to permit resales of such Restricted Securities pursuant to Rule 144A,
and
(ii) is subject to Section 13 or 15(d) of the Exchange Act, to use
reasonable efforts to make all filings required thereby in a timely manner
in
order to permit resales of such Restricted Securities pursuant to Rule
144.
Section
8. Legend. Each
Holder consents to the placing of the following legend on all certificates
representing shares of Registrable Securities and on any certificate issued
at
any time in exchange or substitution for any certificate bearing such legend,
for so long as the securities represented thereby are Registrable
Securities:
THIS
CERTIFICATE IS ISSUED SUBJECT TO THE PROVISIONS OF A REGISTRATION RIGHTS
AGREEMENT, AND ANY TRANSFEREE OF THIS CERTIFICATE OR OF THE SHARES REPRESENTED
BY IT SHALL BE BOUND BY THE PROVISIONS OF SAID AGREEMENT, A COPY OF WHICH IS
ON
FILE WITH, AND AVAILABLE FROM, THE SECRETARY OF NEPHROS, INC.
Section
9. Delay
Periods; Suspension of Sales. Each Holder shall suspend,
upon request of the Company, any disposition of Registrable Securities pursuant
to the Resale
Registration
Statement and Prospectus contemplated herein during (i) any period not to exceed
two 30-day periods within any one 12-month period the Company requires in
connection with a primary underwritten offering of equity securities and (ii)
any period, not to exceed one 45-day period per circumstance or development,
when the Company determines in good faith that offers and sales pursuant thereto
should not be made by reason of the presence of material undisclosed
circumstances or developments with respect to which the disclosure that would
be
required in such a prospectus is premature, would have an adverse effect on
the
Company or is otherwise inadvisable; provided, however, the
aggregate number of days that such suspensions may apply during any 365-day
period is 90 days. In the event of a delay period or suspension, the
Company will use its commercially reasonable best efforts to ensure that the
use
of the Prospectus may be resumed as promptly as is
practicable. Nothing in this Section 9 shall operate to extend the
Effectiveness Date.
Section
10. Miscellaneous.
(a) Amendments
and Waivers. The provisions of this Agreement may not be amended,
modified or supplemented, and waivers or consents to or departures from the
provisions hereof may not be given, without the written consent of the Company
and the Holders of a majority of the outstanding Registrable Securities;
provided, however, that no such amendment, modification,
supplement, waiver, consent or departure shall distinguish between Holders
or
groups of Holders unless any Holder adversely affected thereby shall have
consented thereto in writing.
(b) Notices. Except
where expressly stated otherwise herein, all notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail (registered, return receipt requested), or air courier
guaranteeing overnight delivery:
(i) if
to any
Holder, at the address for such Holder set forth on the records of the Company;
and
(ii) if
to the
Company,
Nephros,
Inc.
0000
Xxxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
President
With
a
copy to:
Xxxxxx
Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention: Xxxxxx
X. Xxxxxxxx, Esq.
All
such
notices and communications shall be deemed to have been duly given: at the
time
delivered by hand, if personally delivered; five Business Days after being
deposited in
the
mail,
postage prepaid, if mailed; and on the next Business Day, if timely delivered
to
an air courier guaranteeing overnight delivery.
The
address or person or entity to whose attention any notice or communication
shall
be given may be changed by notice to the other parties in accordance with the
provisions of this Section 10(b).
(c) Successors
and Assigns; Third Party Beneficiaries. This Agreement
shall inure to the benefit of and be binding upon the successors and assigns
of
each of the parties and shall inure to the benefit of each Holder, and it is
not
the intention of the parties to confer upon any other person or entity any
rights or remedies, except the rights, remedies, obligations and liabilities
of
Section 5 herein shall be conferred upon National Securities Corporation,
Dinosaur Securities, LLC, and registered persons of such entities that own
Placement Agent Warrants to the same extent as if they were Holders hereunder
and their shares issuable upon exercise of Placement Agent Warrants and included
in any Resale Registration Statement were Registrable Securities. The
Company may not assign its rights or obligations hereunder without the prior
written consent of the Holders of a majority of the outstanding Registrable
Securities. Each Holder may assign its respective rights hereunder to
any Person. If any transferee of a Holder shall acquire Registrable
Securities in any manner, whether by operation of law or otherwise, such
Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities such person
shall be conclusively deemed to have agreed to be bound by and to perform all
of
the terms and provisions of this Agreement, including the restrictions on resale
set forth in this Agreement and such person shall be entitled to receive the
benefits hereof.
(d) Counterparts. This
Agreement may be executed in any number of counterparts and by the parties
hereto in separate 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.
(e) Headings. The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
(f) Governing
Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF THE CONFLICT OF LAWS THEREOF.
(g) Severability. In
the event that any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(h) Jurisdiction;
Forum. Each party hereto consents and submits to the exclusive
jurisdiction of any state court sitting in the County of New York or federal
court sitting in the Southern District of the State of New York in connection
with any dispute arising out of or relating to this Agreement, and agrees that
all suits, actions and proceedings brought by such
party
hereunder shall be brought only in such jurisdictions. Each party
hereto waives any objection to the laying of venue in such courts and any claim
that any such action has been brought in an inconvenient forum. To
the extent permitted by law, any judgment in respect of a dispute arising out
of
or relating to this Agreement may be enforced in any other jurisdiction within
or outside the United States by suit on the judgment, a certified copy of such
judgment being conclusive evidence of the fact and amount of such
judgment. Each party hereto agrees that personal service of process
may be effected by any of the means specified in Section 10(b), addressed to
such party. The foregoing shall not limit the rights of any party to
serve process in any other manner permitted by law.
(i) Entire
Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto with respect
to registration rights granted with respect to Registrable
Securities. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with respect
to
the registration rights granted with respect to the Registrable
Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject
matter.
(j) 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.
(k) Attorneys’
Fees. In the event of any litigation or other proceeding
concerning this Agreement or the transactions contemplated hereby, including
any
such litigation or proceeding with respect to the enforcement of this Agreement
against any defaulting party, the prevailing party in such litigation or
proceeding shall be entitled to reimbursement from the party opposing such
prevailing party for all attorneys’ fees and costs incurred by such prevailing
party in such litigation or proceeding.
(l) Inclusion
of Placement Agent Shares. The parties hereto agree that the
shares of Common Stock issuable pursuant to the Placement Agent Warrants may
be
included in the Resale Registration Statements. For purposes of
making allocations pursuant to Section 3(b), such shares shall be treated as
“Registrable Securities” and as “shares of Common Stock issuable upon exercise
of the Class D Warrants” and the holders of such warrants shall be treated as
“holders of the Class D Warrants”.
[SIGNATURE
PAGE FOLLOWS IMMEDIATELY]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
NEPHROS,
INC.
By: /s/ Xxxxxx X. Xxxxx
Name:
Xxxxxx X. Xxxxx
Title:
President and Chief Executive Officer
INITIAL
HOLDER: Southpaw Credit Opportunity Master Fund
LP
By:
Southpaw GP
LLC
By:
/s/
Xxxxx
Xxxxx
Name:
Xxxxx
Xxxxx
Title:
Managing
Member
Address
for
Notices:
c/o
Southpaw Asset
Management LP
0
Xxxxxxxxx Xxxxxx Xxxx
(Xxxxxx
Xxxxxxx)
Xxxxxxxxx,
XX 00000
(City)
(State/Country) (Zip Code)
Attention:
Xxx
Xxxxxxxx
INITIAL
HOLDER: Lambda Investors LLC
By:
/s/
Xxxxxx
Xxxxx
Name:
Xxxxxx
Xxxxx
Title:
Vice
President
Address
for
Notices:
x/x
Xxxxxxx Xxxxxxx
XXX
000
Xxxx Xxxxxx
Avenue
(Street
Address)
Xxxxxxxxx,
XX 00000
(City) (State/Country) (Zip
Code)
Attention:
Xxxxxx
Xxxxx
INITIAL
HOLDER: GPC 76, LLC
By:
Southpaw Asset
Management LP
By:
/s/
Xxxxx
Xxxxx
Name:
Xxxxx
Xxxxx
Title:
Investment
Manager
Address
for
Notices:
c/o
Southpaw Asset
Management LP
0
Xxxxxxxxx Xxxxxx
Xxxx
(Xxxxxx Xxxxxxx)
Xxxxxxxxx,
XX
00000
(City)
(State/Country) (Zip Code)
Attention:
Xxx
Xxxxxxxx
INITIAL
HOLDER: 3V
Capital Master Fund Ltd.
By: 3V
Capital Management LLC
By:
/s/
Xxxxx X.
Xxxxx
Name:
Xxxxx X.
Xxxxx
Title:
Managing
Member
Address
for
Notices:
0
Xxxxxxxxx Xxxxxx
Xxxx
(Xxxxxx
Xxxxxxx)
Xxxxxxxxx,
XX
00000
(City) (State/Country) (Zip
Code)
Attention:
Xxxx
Xxxxx
INITIAL
HOLDER:
Distressed/High Yield Trading Opportunities, Ltd.
By: Eliteperformance
Fund, Ltd.
By:
/s/
Xxxxx X.
Xxxxx
Name:
Xxxxx X.
Xxxxx
Title:
Portfolio
Manager
Address
for
Notices:
0
Xxxxxxxxx Xxxxxx
Xxxx
(Xxxxxx
Xxxxxxx)
Xxxxxxxxx,
XX
00000
(City) (State/Country) (Zip
Code)
Attention:
Xxxx
Xxxxx
INITIAL
HOLDER: Xxxxx X. Xxxxxxxxx
By:
/s/
Xxxxx X.
Xxxxxxxxx
Name:
Xxxxx X.
Xxxxxxxxx
Title:
Address
for
Notices:
00
Xxxxxxx
Xxxx
(Xxxxxx
Xxxxxxx)
Xxx
Xxxx, XX
00000
(City) (State/Country) (Zip
Code)
Attention: Xxxxx X.
Xxxxxxxxx
INITIAL
HOLDER: Kudu Partners, LP
By:
/s/
Xxxxx X.
Xxxxxx
Name:
Xxxxx X.
Xxxxxx
Title:
Treasurer
Address
for
Notices:
0000 Xxxxxxx Xxxx
124
(Street
Address)
Hesperus,
CO
81326
(City) (State/Country) (Zip
Code)
Attention:
Xxxx
Xxxxxx
INITIAL
HOLDER: LJHS Company
By:
/s/
Xxxx X.
XxXxxx
Name:
Xxxx X.
XxXxxx
Title:
Agent
Address
for
Notices:
00
Xx. Xxxxxx Xx.,
Xxxxxxxx Xxx. 0000
(Street
Address)
Xxxx,
XX
00000-0000
(City) (State/Country) (Zip
Code)
Attention:
Xxxx
XxXxxx
INITIAL
HOLDER: Enso Global Equities Partnership LP
By:
/s/
Xxxxxx X.
Xxxx
Name: Xxxxxx X. Xxxx
Title: Director
of GP
Address
for
Notices:
000
Xxxxxxx
Xxxxxx, 00xx
Xxxxx
(Xxxxxx
Address)
Xxx
Xxxx, Xxx Xxxx
00000
(City) (State/Country) (Zip
Code)
Attention:
Salina
Love
SCHEDULE
1
|
Investor
|
Registrable
Securities
|
|
Lambda
Investors
Inc.
|
Common
Stock issuable upon exercise of $10,000,000 aggregate principal amount
of
Series A 10% Secured Convertible Notes due 2008 and Common Stock
issuable
upon exercise of Class D Warrants to purchase Common
Stock
|
|
Enso
Global Equities Partnership LP
|
Common
Stock issuable upon exercise of $2,400,000 aggregate principal amount
of
Series A 10% Secured Convertible Notes due 2008 and Common Stock
issuable
upon exercise of Class D Warrants to purchase Common
Stock
|
|
GPC
76, LLC
|
Common
Stock issuable upon exercise of $176,500 aggregate principal amount
of
Series A 10% Secured Convertible Notes due 2008 and Common Stock
issuable
upon exercise of Class D Warrants to purchase Common
Stock
|
|
Xxxxx
X. Xxxxxxxxx
|
Common
Stock issuable upon exercise of $100,000 aggregate principal amount
of
Series A 10% Secured Convertible Notes due 2008 and Common Stock
issuable
upon exercise of Class D Warrants to purchase Common
Stock
|
|
Southpaw
Credit Opportunity Master Fund L.P.
|
Common
Stock issuable upon exercise of $2,038,461.54 aggregate principal
amount
of Series B 10% Secured Convertible Notes due 2008
|
|
3V
Capital Master Fund Ltd.
|
Common
Stock issuable upon exercise of $1,528,846.15 aggregate principal
amount
of Series B 10% Secured Convertible Notes due 2008
|
|
Distressed/High
Yield Trading Opportunities Ltd.
|
Common
Stock issuable upon exercise of $1,528,846.15 aggregate principal
amount
of Series B 10% Secured Convertible Notes due 2008
|
|
Kudu
Partners
|
Common
Stock issuable upon exercise of $101,923.08 aggregate principal amount
of
Series B 10% Secured Convertible Notes due 2008
|
|
LJHS
Company
|
Common
Stock issuable upon exercise of $101,923.08 aggregate principal amount
of
Series B 10% Secured Convertible Notes due
2008
|
SCHEDULE
3(a)
Other
Registrable Securities
EXHIBIT
A
Form
of
Counterpart Signature Page
IN
WITNESS WHEREOF, the undersigned has caused this counterpart to the
Registration Rights Agreement among Nephros, Inc. and the Holders (as defined
therein), dated as of ______ __, 2007, as amended from time to time, to be
duly
executed and delivered as of _______ __, ____.
[__________________],
as an additional Holder
By: ________________________________________
Name:
Title:
Notice
Address:
____________________________
____________________________
____________________________
Attention:
Tel:(___)
___-___
Fax:(___)
___-___
Accepted
and agreed to as of the
__
day of
_________, ____:
NEPHROS,
INC.
By:
Name:
Title:
