REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (this “Agreement”)
is
made and entered into effective as of December 18, 2007 (the “Effective
Date”)
between UFood Restaurant Group, Inc. (f/k/a UFood Franchise Company), a Nevada
corporation (the “Company”),
and
the persons who have executed the signature page(s) hereto (each, a
“Purchaser”
and
collectively, the “Purchasers”).
RECITALS:
WHEREAS,
the Company has entered into an Agreement and Plan of Merger and Reorganization
with KnowFat Franchise Company, Inc., a Delaware corporation (“KnowFat”),
pursuant to which a newly organized, wholly-owned subsidiary of the Company
has
merged with and into KnowFat, with KnowFat remaining as the surviving entity
and
a wholly-owned subsidiary of the Company (the “Merger”);
WHEREAS,
prior to the Merger, the Company issued Convertible Promissory Notes (the
“Notes
Offering”)
which,
upon the closing of the Merger and the PPO (as defined below), automatically
converted into Units (as defined below), consisting of shares (the “Bridge
Shares”)
of
Common Stock (as defined herein) and common stock purchase warrants (the
“Bridge
Warrants”)
to
purchase shares of Common Stock;
WHEREAS,
simultaneously with the Merger and to provide the capital required by the
Company for working capital and other purposes, the Company has offered in
compliance with Rule 506 of Regulation D and/or Regulation S of the Securities
Act (as defined herein), to investors in a private placement transaction
(the
“PPO”),
units
(“Units”)
of its
securities, each Unit consisting of one share of Common Stock (the “Investor
Shares”)
and a
common stock purchase warrant (the “Investor
Warrants”)
to
purchase one-half (50%) of a share of Common Stock;
WHEREAS,
the initial closing of the PPO and the closing of the Merger have taken place
on
the Effective Date; and
WHEREAS,
in connection with the Merger, the Notes Offering and the PPO, the Company
agrees to provide certain registration rights related to the Bridge Shares,
the
Investor Shares and the shares of Common Stock issuable upon exercise of
the
Bridge Warrants and the Investor Warrants, on the terms set forth
herein;
NOW,
THEREFORE,
in
consideration of the mutual promises, representations, warranties, covenants,
and conditions set forth herein, the parties mutually agree as follows:
1. Certain
Definitions.
As used
in this Agreement, the following terms shall have the following respective
meanings:
“Approved
Market”
means
the Over-the-Counter Bulletin Board, the Nasdaq Stock Market, the New York
Stock
Exchange or the American Stock Exchange.
“Blackout
Period”
means,
with respect to a registration, a period, in each case commencing on the
day
immediately after the Company notifies the Purchasers that they are required,
because of the occurrence of an event of the kind described in Section 4(f)
hereof, to suspend offers and sales of Registrable Securities during which
the
Company, in the good faith judgment of its board of directors, determines
(because of the existence of, or in anticipation of, any acquisition, financing
activity, or other transaction involving the Company, or the unavailability
for
reasons beyond the Company’s control of any required financial statements,
disclosure of information which is in its best interest not to publicly
disclose, or any other event or condition of similar significance to the
Company) that the registration and distribution of the Registrable Securities
to
be covered by such Registration Statement, if any, would be seriously
detrimental to the Company and its stockholders and ending on the earlier
of (1)
the date upon which the material non-public information commencing the Blackout
Period is disclosed to the public or ceases to be material and (2) such time
as
the Company notifies the selling Holders that the Company will no longer
delay
such filing of the Registration Statement, recommence taking steps to make
such
Registration Statement effective, or allow sales pursuant to such Registration
Statement to resume.
“Bridge
Shares”
has
the
meaning given it in the recitals of this Agreement.
“Bridge
Warrants”
has
the
meaning given it in the recitals of this Agreement.
“Business
Day”
means
any day of the year, other than a Saturday, Sunday, or other day on which
the
Commission is required or authorized to close.
“Commission”
means
the U. S. Securities and Exchange Commission or any other federal agency
at the
time administering the Securities Act.
“Common
Stock”
means
the common stock, par value $0.001 per share, of the Company and any and
all
shares of capital stock or other equity securities of: (i) the Company which
are
added to or exchanged or substituted for the Common Stock by reason of the
declaration of any stock dividend or stock split, the issuance of any
distribution or the reclassification, readjustment, recapitalization or other
such modification of the capital structure of the Company; and (ii) any other
corporation, now or hereafter organized under the laws of any state or other
governmental authority, with which the Company is merged, which results from
any
consolidation or reorganization to which the Company is a party, or to which
is
sold all or substantially all of the shares or assets of the Company, if
immediately after such merger, consolidation, reorganization or sale, the
Company or the stockholders of the Company own equity securities having in
the
aggregate more than 50% of the total voting power of such other
corporation.
“Effective
Date”
means
the later of (i) the date set forth in the preamble to this Agreement and
(ii)
the date of the final closing of the PPO.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
of the Commission promulgated thereunder.
“Family
Member”
means
(a) with respect to any individual, such individual’s spouse, any descendants
(whether natural or adopted), any trust all of the beneficial interests of
which
are owned by any of such individuals or by any of such individuals together
with
any organization described in Section 501(c)(3) of the Internal Revenue Code
of
1986, as amended, the estate of any such individual, and any corporation,
association, partnership or limited liability company all of the equity
interests of which are owned by those above described individuals, trusts
or
organizations and (b) with respect to any trust, the owners of the beneficial
interests of such trust.
2
“Holder”
means
each Purchaser or any of such Purchaser’s respective successors and Permitted
Assignees who acquire rights in accordance with this Agreement with respect
to
any Registrable Securities directly or indirectly from a Purchaser or from
any
Permitted Assignee.
“Investor
Shares”
has
the
meaning given it in the recitals of this Agreement.
“Investor
Warrants”
has
the
meaning given it in the recitals of this Agreement.
“Majority
Holders”
means
at any time Holders representing a majority of the Registrable
Securities.
“Permitted
Assignee”
means
(a) with respect to a partnership, its partners or former partners in accordance
with their partnership interests, (b) with respect to a corporation, its
stockholders in accordance with their interest in the corporation, (c) with
respect to a limited liability company, its members or former members in
accordance with their interest in the limited liability company, (d) with
respect to an individual party, any Family Member of such party, (e) an entity
that is controlled by, controls, or is under common control with a transferor,
or (f) a party to this Agreement.
“Piggyback
Registration”
means,
in any registration of Common Stock as set forth in Section 3(b), the ability
of
holders of Registrable Securities to include Registrable Securities in such
registration.
“Piggyback
Registration”
means,
in any registration of Common Stock referenced in Section 3(b), the right
of
each Holder to include the Registrable Securities of such Holder in such
registration.
The
terms
“register,”
“registered,”
and
“registration”
refer
to a registration effected by preparing and filing a registration statement
in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
“Registrable
Securities”
means
the Bridge Shares, the Investor Shares and the Registrable Warrant Shares
but
excluding (i) any Registrable Securities that have been publicly sold or
may be
sold immediately without registration under the Securities Act either pursuant
to Rule 144(k) of the Securities Act or otherwise; (ii) any Registrable
Securities sold by a person in a transaction pursuant to a registration
statement filed under the Securities Act, or (iii) any Registrable Securities
that are at the time subject to an effective registration statement under
the
Securities Act.
“Registrable
Warrant Shares”
means
the shares of Common Stock issued or issuable to each Purchaser upon exercise
of
the Bridge Warrants and the Investor Warrants.
3
“Registration
Default Date”
means
the date that is 90 days after the Registration Filing Date.
“Registration
Default Period”
means
the period following the Registration Default Date during which any Registration
Event occurs and is continuing.
“Registration
Event”
means
the occurrence of any of the following events:
(a) the
Company fails to file with the Commission the Registration Statement on or
before the Registration Filing Date;
(b) the
Registration Statement is not declared effective by the Commission on or
before
the Registration Default Date;
(c) after
the
SEC Effective Date, sales cannot be made pursuant to the Registration Statement
for any reason (including without limitation by reason of a stop order, or
the
Company’s failure to update the Registration Statement) except as excused
pursuant to Section 3(a); or
(d) the
Common Stock generally or the Registrable Securities specifically are not
listed
or included for quotation on an Approved Market, or trading of the Common
Stock
is suspended or halted on the Approved Market, which at the time constitutes
the
principal market for the Common Stock, for more than two full, consecutive
Trading Days; provided,
however,
a
Registration Event shall not be deemed to occur if all or substantially all
trading in equity securities (including the Common Stock) is suspended or
halted
on the Approved Market for any length of time.
“Registration
Filing Date”
means
the date that is 90 days after the Effective Date.
“Registration
Statement”
means
the registration statement that the Company is required to file pursuant
to this
Agreement to register the Registrable Securities.
“Rule
144”
means
Rule 144 promulgated by the Commission under the Securities Act.
“Rule
145”
means
Rule 145 promulgated by the Commission under the Securities Act.
“Securities
Act”
means
the Securities Act of 1933, as amended, or any similar federal statute
promulgated in replacement thereof, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the
time.
“SEC
Effective Date”
means
the date the Registration Statement is declared effective by the
Commission.
“Trading
Day”
means
any day on which the national securities exchange, the Nasdaq Stock Market,
the
NASD Over-the-Counter Bulletin Board or such other securities market or
quotation system, which at the time constitutes the principal securities
market
for the Common Stock, is open for general trading of securities.
4
2. Term.
This
Agreement shall continue in full force and effect for a period of two years
from
the Effective Date, unless terminated sooner hereunder.
3. Registration.
(a) Registration
on Form SB-2.
Not
later than the Registration Filing Date, the Company shall file with the
Commission a Registration Statement on Form SB-2, or other applicable form,
relating to the resale by the Holders of all of the Registrable Securities,
and
the Company shall use its commercially reasonably efforts to cause such
Registration Statement to be declared effective prior to the Registration
Default Date; provided,
that
the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section, or keep such registration
effective pursuant to the terms hereunder in any particular jurisdiction
in
which the Company would be required to qualify to do business as a foreign
corporation or as a dealer in securities under the securities laws of such
jurisdiction or to execute a general consent to service of process in effecting
such registration, qualification or compliance, in each case where it has
not
already done so.
(b) Piggyback
Registration.
If the
Company shall determine to register for sale for cash any of its Common Stock,
for its own account or for the account of others (other than the Holders),
other
than (i) a registration relating solely to employee benefit plans or securities
issued or issuable to employees, consultants (to the extent the securities
owned
or to be owned by such consultants could be registered on Form S-8) or any
of
their Family Members (including a registration on Form S-8) or (ii) a
registration relating solely to a Securities Act Rule 145 transaction or
a
registration on Form S-4 in connection with a merger, acquisition, divestiture,
reorganization or similar event, the Company shall promptly give to the Holders
written notice thereof (and in no event shall such notice be given less than
20
calendar days prior to the filing of such registration statement), and shall,
subject to Section 3(c), include as a Piggyback Registration all of the
Registrable Securities specified in a written request delivered by the Holder
thereof within 10 calendar days after receipt of such written notice from
the
Company. However, the Company may, without the consent of the Holders, withdraw
such registration statement prior to its becoming effective if the Company
or
such other stockholders have elected to abandon the proposal to register
the
securities proposed to be registered thereby.
(c) Underwriting.
If a
Piggyback Registration is for a registered public offering that is to be
made by
an underwriting, the Company shall so advise the Holders of the Registrable
Securities eligible for inclusion in such Registration Statement pursuant
to
Sections 3(b)(i) and (ii), respectively. In that event, the right of any
Holder
to Piggyback Registration shall be conditioned upon such Holder’s participation
in such underwriting and the inclusion of such Holder’s Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing
to sell
any of their Registrable Securities through such underwriting shall (together
with the Company and any other stockholders of the Company selling their
securities through such underwriting) enter into an underwriting agreement
in
customary form with the underwriter selected for such underwriting by the
Company or the selling stockholders, as applicable. Notwithstanding any other
provision of this Section, if the underwriter or the Company determines that
marketing factors require a limitation on the number of shares of Common
Stock
or the amount of other securities to be underwritten, the underwriter may
exclude some or all Registrable Securities from such registration and
underwriting. The Company shall so advise all Holders (except those Holders
who
failed to timely elect to include their Registrable Securities through such
underwriting or have indicated to the Company their decision not to do so),
and
indicate to each such Holder the number of shares of Registrable Securities
that
may be included in the registration and underwriting, if any. The number
of
shares of Registrable Securities to be included in such registration and
underwriting shall be allocated among such Holders as follows:
5
(i) If
the
Piggyback Registration was initiated by the Company, the number of shares
that
may be included in the registration and underwriting shall be allocated first
to
the Company and then, subject to obligations and commitments existing as
of the
date hereof, to all selling stockholders, including the Holders, who have
requested to sell in the registration on a pro rata basis according to the
number of shares requested to be included therein; and
(ii) If
the
Piggyback Registration was initiated by the exercise of demand registration
rights by a stockholder or stockholders of the Company (other than the Holders),
then the number of shares that may be included in the registration and
underwriting shall be allocated first to such selling stockholders who exercised
such demand and then, subject to obligations and commitments existing as
of the
date hereof, to all other selling stockholders, including the Holders, who
have
requested to sell in the registration on a pro rata basis according to the
number of shares requested to be included therein.
No
Registrable Securities excluded from the underwriting by reason of the
underwriter’s marketing limitation shall be included in such registration. If
any Holder disapproves of the terms of any such underwriting, such Holder
may
elect to withdraw such Holder’s Registrable Securities therefrom by delivering a
written notice to the Company and the underwriter. The Registrable Securities
so
withdrawn from such underwriting shall also be withdrawn from such registration;
provided,
however,
that,
if by the withdrawal of such Registrable Securities, a greater number of
Registrable Securities held by other Holders may be included in such
registration (up to the maximum of any limitation imposed by the underwriters),
then the Company shall offer to all Holders who have included Registrable
Securities in the registration the right to include additional Registrable
Securities pursuant to the terms and limitations set forth herein in the
same
proportion used above in determining the underwriter limitation.
(d) Other
Registrations.
Before
such date that is six months following the SEC Effective Date, the Company
will
not, without the prior written consent of the Majority Holders, file any
other
registration statement with the Commission or request the acceleration of
any
other registration statement filed with the Commission, and during any time
subsequent to the SEC Effective Date when the Registration Statement for
any
reason is not available for use by any Holder for the resale of any Registrable
Securities, the Company shall not, without the prior written consent of the
Majority Holders, file any other registration statement or any amendment
thereto
with the Commission under the Securities Act or request the acceleration
of the
effectiveness of any other registration statement previously filed with the
Commission, other than (i) any registration statement on Form S-8 or Form
S-4
and (ii) any registration statement or amendment which the Company is required
to file or as to which the Company is required to request acceleration pursuant
to any obligation in effect on the date of execution and delivery of this
Agreement.
6
(e) Occurrence
of Registration Event.
If a
Registration Event occurs, then the Company will make payments to each Holder
of
Investor Shares or Bridge Shares (a “Qualified
Purchaser”),
as
liquidated damages for the amount of damages to the Qualified Purchaser by
reason thereof, at a rate equal to 1.25% of the purchase price per share
paid by
such Holder in the PPO for the Registrable Securities then held by each
Qualified Purchaser for each full period of 30 days of the Registration Default
Period (which shall be pro rated for any period less than 30 days); provided,
however,
if a
Registration Event occurs (or is continuing) on a date more than one-year
after
the Qualified Purchaser acquired the Registrable Securities (and thus the
one-year holding period under Rule 144(d) has elapsed), liquidated damages
shall
be paid only with respect to that portion of the Qualified Purchaser’s
Registrable Securities that cannot then be immediately resold in reliance
on
Rule 144. Notwithstanding the foregoing, the maximum amount of liquidated
damages that may be paid to any Qualified Purchaser pursuant to this Section
3(e) shall be an amount equal to 15% of the purchase price per share paid
by
such Holder in the PPO for the Registrable Securities held by such Qualified
Purchaser at the time of the first occurrence of a Registration Event. Each
such
payment shall be due and payable within five days after the end of each full
30-day period of the Registration Default Period until the termination of
the
Registration Default Period and within five days after such termination.
Such
payments shall constitute the Qualified Purchaser’s exclusive remedy for such
events. If the Company fails to pay any partial liquidated damages or refund
pursuant to this Section in full within seven days after the date payable,
the
Company will pay interest thereon at a rate of 8% 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 partial liquidated damages are due until
such
amounts, plus all such interest thereon, are paid in full. The Registration
Default Period shall terminate upon (i) the filing of the Registration Statement
in the case of clause (a) of the definition of Registration Event, (ii) the
SEC
Effective Date in the case of clause (b) of the definition of Registration
Event, (iii) the ability of the Qualified Purchaser to effect sales pursuant
to
the Registration Statement in the case of clause (c) of the definition of
Registration Event, (iv) the listing or inclusion and/or trading of the Common
Stock on an Approved Market, as the case may be, in the case of clause (d)
of
the definition of Registration Event, and (v) in the case of the events
described in clauses (b) and (c) of the definition of Registration Event,
the
earlier termination of the Registration Default Period. The amounts payable
as
liquidated damages pursuant to this Section 3(e) shall be payable in lawful
money of the United States. Amounts payable as liquidated damages to each
Qualified Purchaser hereunder with respect to each share of Registrable
Securities shall cease when the Qualified Purchaser no longer holds such
Registrable Securities or all such Registrable Securities can be immediately
sold by the Qualified Purchaser in reliance on Rule 144(k).
(f) Notwithstanding
the provisions of Section 3(e) above,
(a)
if
the Commission does not declare the Registration Statement effective on or
before the Registration Default Date, or (b) if the Commission allows the
Registration Statement to be declared effective at any time before or after
the
Registration Default Date, subject to the withdrawal of certain Registrable
Securities from the Registration Statement, and the reason for (a) or (b)
is the
Commission’s determination that (x) the offering of any of the Registrable
Securities constitutes a primary offering of securities by the Company, (y)
Rule
415 may not be relied upon for the registration of the resale of any or all
of
the Registrable Securities, and/or (z) a Holder of any Registrable Securities
must be named as an underwriter, the Holders understand and agree that in
the
case of (b) the Company may reduce, on a pro
rata
basis,
the total number of Registrable Securities to be registered on behalf of
each
such Holder, and, in the case of (a) or (b), the overall limit of partial
liquidated damages that a Holder shall be entitled to with respect to the
Registrable Securities not registered for the reason set forth in (a), or
so
reduced on a pro
rata
basis as
set forth in (b) shall be an aggregate of 7% of the aggregate purchase price
paid by such Holder for such securities. In addition, any such affected Holder
shall have demand registration rights after the Registration Statement is
declared effective by the Commission until such time as: (AA) all Registrable
Securities have been registered pursuant to an effective Registration Statement,
(BB) the Registrable Securities may be resold without restriction pursuant
to
Rule 144 of the Securities Act, or (CC) the Holder agrees to be named as
an
underwriter in any such registration statement. The Holders acknowledge and
agree the provisions of this paragraph may apply to more than one Registration
Statement.
7
4. Registration
Procedures for Registrable Securities.
The
Company will keep each Holder reasonably advised as to the filing and
effectiveness of the Registration Statement. At its expense with respect
to the
Registration Statement, the Company will:
(a) prepare
and file with the Commission with respect to the Registrable Securities,
a
Registration Statement on Form SB-2, or any other form for which the Company
then qualifies or which counsel for the Company shall deem appropriate and
which
form shall be available for the sale of the Registrable Securities in accordance
with the intended methods of distribution thereof, and use its commercially
reasonable efforts to cause such Registration Statement to become effective
and
shall remain effective for a period of two years or for such shorter period
ending on the earlier to occur of (i) the sale of all Registrable Securities
and
(ii) the availability under Rule 144(k) for the Holder to sell the Registrable
Securities (the “Effectiveness
Period”);
(b) if
the
Registration Statement is subject to review by the Commission, promptly respond
to all comments and diligently pursue resolution of any comments to the
satisfaction of the Commission;
(c) prepare
and file with the Commission such amendments and supplements to such
Registration Statement as may be necessary to keep such Registration Statement
effective during the Effectiveness Period;
(d) furnish,
without charge, to each Holder of Registrable Securities covered by such
Registration Statement (i) a reasonable number of copies of such Registration
Statement (including any exhibits thereto other than exhibits incorporated
by
reference), each amendment and supplement thereto as such Holder may reasonably
request, (ii) such number of copies of the prospectus included in such
Registration Statement (including each preliminary prospectus and any other
prospectus filed under Rule 424 of the Securities Act) as such Holders may
reasonably request, in conformity with the requirements of the Securities
Act,
and (iii) such other documents as such Holder may require to consummate the
disposition of the Registrable Securities owned by such Holder, but only
during
the Effectiveness Period;
8
(e) use
its
commercially reasonable efforts to register or qualify such registration
under
such other applicable securities laws of such jurisdictions as any Holder
of
Registrable Securities covered by such Registration Statement reasonably
requests and as may be necessary for the marketability of the Registrable
Securities (such request to be made by the time the applicable Registration
Statement is deemed effective by the Commission) and do any and all other
acts
and things necessary to enable such Holder to consummate the disposition
in such
jurisdictions of the Registrable Securities owned by such Holder; provided,
that
the Company shall not be required to (i) qualify generally to do business
in any
jurisdiction where it would not otherwise be required to qualify but for
this
paragraph, (ii) subject itself to taxation in any such jurisdiction, or (iii)
consent to general service of process in any such jurisdiction.
(f) as
promptly as practicable after becoming aware of such event, notify each Holder
of Registrable Securities, the disposition of which requires delivery of
a
prospectus relating thereto under the Securities Act, of the happening of
any
event, which comes to the Company’s attention, that will after the occurrence of
such event cause the prospectus included in such Registration Statement,
if not
amended or supplemented, to contain an untrue statement of a material fact
or an
omission to state a material fact required to be stated therein or necessary
to
make the statements therein not misleading and the Company shall promptly
thereafter prepare and furnish to such Holder a supplement or amendment to
such
prospectus (or prepare and file appropriate reports under the Exchange Act)
so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus shall not contain an 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 not misleading, unless suspension of the use of such
prospectus otherwise is authorized herein or in the event of a Blackout Period,
in which case no supplement or amendment need be furnished (or Exchange Act
filing made) until the termination of such suspension or Blackout Period;
(g) comply,
and continue to comply during the Effectiveness Period, in all material respects
with the Securities Act and the Exchange Act and with all applicable rules
and
regulations of the Commission with respect to the disposition of all securities
covered by such Registration Statement;
(h) as
promptly as practicable after becoming aware of such event, notify each Holder
of Registrable Securities being offered or sold pursuant to the Registration
Statement of the issuance by the Commission of any stop order or other
suspension of effectiveness of the Registration Statement;
(i) use
its
commercially reasonable efforts to cause all the Registrable Securities covered
by the Registration Statement to be quoted on the NASD OTC Bulletin Board
or
such other principal securities market on which securities of the same class
or
series issued by the Company are then listed or traded;
(j) provide
a
transfer agent and registrar, which may be a single entity, for the shares
of
Common Stock at all times;
(k) If
requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
to
be delivered to a transferee pursuant to the Registration Statement, which
certificates shall be free, to the extent permitted by applicable law, 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;
9
(l) during
the Effectiveness Period, refrain from bidding for or purchasing any Common
Stock or any right to purchase Common Stock or attempting to induce any person
to purchase any such security or right if such bid, purchase or attempt would
in
any way limit the right of the Holders to sell Registrable Securities by
reason
of the limitations set forth in Regulation M of the Exchange Act;
and
(m) take
all
other reasonable actions necessary to expedite and facilitate the disposition
by
the Holders of the Registrable Securities pursuant to the Registration
Statement.
5. Suspension
of Offers and Sales.
Each
Holder agrees that, upon receipt of any notice from the Company of the happening
of any event of the kind described in Section 4(f) hereof or of the commencement
of a Blackout Period, such Holder shall discontinue the disposition of
Registrable Securities included in the Registration Statement until such
Holder’s receipt of the copies of the supplemented or amended prospectus
contemplated by Section 4(f) hereof or notice of the end of the Blackout
Period,
and, if so directed by the Company, such Holder shall deliver to the Company
(at
the Company’s expense) all copies (including, without limitation, any and all
drafts), other than permanent file copies, then in such Holder’s possession, of
the prospectus covering such Registrable Securities current at the time of
receipt of such notice.
6. Registration
Expenses.
The
Company shall pay all expenses in connection with any registration obligation
provided herein, including, without limitation, all registration, filing,
stock
exchange fees, printing expenses, all fees and expenses of complying with
applicable securities laws, and the fees and disbursements of counsel for
the
Company and of its independent accountants; provided,
that,
in any underwritten registration, each party shall pay for its own underwriting
discounts and commissions and transfer taxes. Except as provided in this
Section
and Section 9, the Company shall not be responsible for the expenses of any
attorney or other advisor employed by a Holder.
7. Assignment
of Rights.
No
Holder may assign its rights under this Agreement to any party without the
prior
written consent of the Company; provided,
however,
that
any Holder may assign its rights under this Agreement without such consent
to a
Permitted Assignee as long as (a) such transfer or assignment is effected
in
accordance with applicable securities laws; (b) such transferee or assignee
agrees in writing to become subject to the terms of this Agreement; and (c)
such
Holder notifies the Company in writing of such transfer or assignment, stating
the name and address of the transferee or assignee and identifying the
Registrable Securities with respect to which such rights are being transferred
or assigned.
8. Information
by Holder.
A
Holder with Registrable Securities included in any registration shall furnish
to
the Company such information regarding itself, the Registrable Securities
held
by it, and the intended method of disposition of such securities as shall
be
required in order to comply with any applicable law or regulation in connection
with the registration of such Holder’s Registrable Securities or any
qualification or compliance with respect to such Holder’s Registrable Securities
and referred to in this Agreement.
10
9. Indemnification.
(a) In
the
event of the offer and sale of Registrable Securities under the Securities
Act,
the Company shall, and hereby does, indemnify and hold harmless, to the fullest
extent permitted by law, each Holder, its directors, officers, partners,
each
other person who participates as an underwriter in the offering or sale of
such
securities, and each other person, if any, who controls or is under common
control with such Holder or any such underwriter within the meaning of Section
15 of the Securities Act, against any losses, claims, damages or liabilities,
joint or several, and expenses to which the Holder or any such director,
officer, partner or underwriter or controlling person may become subject
under
the Securities Act, the Exchange Act, or any other federal or state law,
insofar
as such losses, claims, damages, liabilities or expenses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of
or are based upon any untrue statement of any material fact contained in
any
registration statement prepared and filed by the Company under which Registrable
Securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment
or
supplement thereto, or any omission to state therein a material fact required
to
be stated or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, or any violation or
alleged violation of the Securities Act, the Exchange Act, any state securities
law or any rule or regulation promulgated under the Securities Act, the Exchange
Act or any state securities law in connection with this Agreement; and the
Company shall reimburse the Holder, and each such director, officer, partner,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating, defending or
settling any such loss, claim, damage, liability, action or proceeding;
provided,
that
such indemnity agreement found in this Section 9(a) shall in no event exceed
the
net proceeds from the Notes Offering or the PPO, as applicable, received
by the
Company; and provided
further,
that
the Company shall not be liable in any such case (i) to the extent that any
such
loss, claim, damage, liability (or action or proceeding in respect thereof)
or
expense arises out of or is based upon an untrue statement in or omission
from
such registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by the Holder specifically
for
use in the preparation thereof or (ii) if the person asserting any such loss,
claim, damage, liability (or action or proceeding in respect thereof) who
purchased the Registrable Securities that are the subject thereof did not
receive a copy of an amended preliminary prospectus or the final prospectus
(or
the final prospectus as amended or supplemented) at or prior to the written
confirmation of the sale of such Registrable Securities to such person because
of the failure of such Holder or underwriter to so provide such amended
preliminary or final prospectus and the untrue statement or omission of a
material fact made in such preliminary prospectus was corrected in the amended
preliminary or final prospectus (or the final prospectus as amended or
supplemented). Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Holders, or any such director,
officer, partner, underwriter or controlling person and shall survive the
transfer of such shares by the Holder.
11
(b) As
a
condition to including Registrable Securities in any registration statement
filed pursuant to this Agreement, each Holder agrees to be bound by the terms
of
this Section 9 and to indemnify and hold harmless, to the fullest extent
permitted by law, the Company, its directors and officers, and each other
person, if any, who controls the Company within the meaning of Section 15
of the
Securities Act, against any losses, claims, damages or liabilities, joint
or
several, to which the Company or any such director or officer or controlling
person may become subject under the Securities Act, the Exchange Act, or
any
other federal or state law, to the extent arising out of or based solely
upon:
(x) such Holder’s failure to comply with the prospectus delivery requirements of
the Securities Act or (y) any untrue or alleged untrue statement of a material
fact contained in any registration statement, any prospectus, or any form
of
prospectus, or in any amendment or supplement thereto or in any preliminary
prospectus, 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 not misleading (i) to the extent, but only to the extent,
that such untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company specifically for inclusion
in
the registration statement or such prospectus or (ii) to the extent that
(1)
such untrue statements or omissions are based solely upon information regarding
such Holder furnished in writing to the Company by such Holder expressly
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 expressly for use
in
the Registration Statement, such prospectus or such form of prospectus or
in any
amendment or supplement thereto or (2) in the case of an occurrence of an
event
of the type specified in Section 4(f) hereof, the use by such Holder of an
outdated or defective prospectus after the Company has notified such Holder
in
writing that the prospectus is outdated or defective and prior to the receipt
by
such Holder of the advice contemplated in Section 4(f). 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 giving rise to such indemnification
obligation.
(c) Promptly
after receipt by an indemnified party of notice of the commencement of any
action or proceeding involving a claim referred to in this Section (including
any governmental action), such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice
to the
indemnifying party of the commencement of such action; provided,
that
the failure of any indemnified party to give notice as provided herein shall
not
relieve the indemnifying party of its obligations under this Section, except
to
the extent that the indemnifying party is actually prejudiced by such failure
to
give notice. In case any such action is brought against an indemnified party,
unless in the reasonable judgment of counsel to such indemnified party a
conflict of interest between such indemnified and indemnifying parties may
exist
or the indemnified party may have defenses not available to the indemnifying
party in respect of such claim, the indemnifying party shall be entitled
to
participate in and to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party and, after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof, unless in such indemnified party’s
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties arises in respect of such claim after the assumption
of the
defenses thereof or the indemnifying party fails to defend such claim in
a
diligent manner, other than reasonable costs of investigation. Neither an
indemnified nor an indemnifying party shall be liable for any settlement
of any
action or proceeding effected without its consent. No indemnifying party
shall,
without the consent of the indemnified party, consent to entry of any judgment
or enter into any settlement, which does not include as an unconditional
term
thereof the giving by the claimant or plaintiff to such indemnified party
of a
release from all liability in respect of such claim or litigation.
Notwithstanding anything to the contrary set forth herein, and without limiting
any of the rights set forth above, in any event any party shall have the
right
to retain, at its own expense, counsel with respect to the defense of a
claim.
12
(d) If
an
indemnifying party does or is not permitted to assume the defense of an action
pursuant to Sections 9(c) or in the case of the expense reimbursement obligation
set forth in Sections 9(a) and (b), the indemnification required by Sections
9(a) and 9(b) shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills received or
expenses, losses, damages, or liabilities are incurred.
(e) If
the
indemnification provided for in Section 9(a) or 9(b) is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect
to
any loss, liability, claim, damage or expense referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall (i) contribute to the amount paid or payable by such indemnified party
as
a result of such loss, liability, claim, damage or expense as is appropriate
to
reflect the proportionate relative fault of the indemnifying party on the
one
hand and the indemnified party on the other (determined by reference to,
among
other things, whether the untrue or alleged untrue statement of a material
fact
or omission relates to information supplied by the indemnifying party or
the
indemnified party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission), or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, not only the proportionate relative
fault of the indemnifying party and the indemnified party, but also the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other, as well as any other relevant equitable considerations.
No
indemnified party guilty of fraudulent misrepresentation (within the meaning
of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any
indemnifying party who was not guilty of such fraudulent
misrepresentation.
(f) Other
Indemnification.
Indemnification similar to that specified in this Section (with appropriate
modifications) shall be given by the Company and each Holder of Registrable
Securities with respect to any required registration or other qualification
of
securities under any federal or state law or regulation or governmental
authority other than the Securities Act.
10. Rule
144.
For
a
period of at least twenty-four (24) months following the Effective
Date,
the
Company will use its commercially reasonable efforts to timely file all reports
required to be filed by the Company after the date hereof under the Securities
Act and the Exchange Act and the rules and regulations adopted by the Commission
thereunder, and if the Company is not required to file reports pursuant to
such
sections, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) such information as is required
for the
Purchasers to sell shares of Common Stock under Rule 144.
13
11. Corporate
Existence.
So long
as any Holder owns any Registrable Securities, the Company shall not directly
or
indirectly consummate any merger, reorganization, restructuring, reverse
stock
split, consolidation, sale of all or substantially all of the Company’s assets
or any similar transaction or related transactions (each such transaction,
an
“Organizational
Change”),
unless, prior to the consummation of an Organizational Change, the Company
obtains the written consent of the Majority Holders.
12. Independent
Nature of Each Purchaser’s Obligations and Rights.
The
obligations of each Purchaser under this Agreement are several and not joint
with the obligations of any other Purchaser, and each Purchaser shall not
be
responsible in any way for the performance of the obligations of any other
Purchaser under this Agreement. Nothing contained herein and no action taken
by
any Purchaser pursuant hereto, shall be deemed to constitute such Purchasers
as
a partnership, an association, a joint venture, or any other kind of entity,
or
create a presumption that the Purchasers are in any way acting in concert
or as
a group with respect to such obligations or the transactions contemplated
by
this Agreement. Each Purchaser shall be entitled to independently protect
and
enforce its rights, including without limitation the rights arising out of
this
Agreement, and it shall not be necessary for any other Purchaser to be joined
as
an additional party in any proceeding for such purpose.
13. Miscellaneous.
(a) Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws
of the
United States of America and the State of New York, both substantive and
remedial, without regard to New York conflicts of law principles. Any
judicial proceeding brought against either of the parties to this Agreement
or
any dispute arising out of this Agreement or any matter related hereto shall
be
brought in the courts of the State of New York, New York County, or in the
United States District Court for the Southern District of New York and, by
its
execution and delivery of this Agreement, each party to this Agreement accepts
the jurisdiction of such courts. The foregoing consent to jurisdiction shall
not
be deemed to confer rights on any person other than the parties to this
Agreement.
(b) Remedies.
In the
event of a breach by the Company or by a Holder of any of their respective
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, shall 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 not assert or shall
waive the defense that a remedy at law would be adequate.
(c) Successors
and Assigns.
Except
as otherwise provided herein, the provisions hereof shall inure to the benefit
of, and be binding upon, the successors, Permitted Assignees, executors and
administrators of the parties hereto.
14
(d) No
Inconsistent Agreements.
The
Company has not entered, as of the date hereof, and shall not enter, on or
after
the date of this Agreement, into any agreement with respect to its securities
that would have the effect of impairing the rights granted to the Holders
in
this Agreement or otherwise conflicts with the provisions hereof.
(e) Entire
Agreement.
This
Agreement constitutes the full and entire understanding and agreement between
the parties with regard to the subjects hereof.
(f) Notices,
etc.
All
notices or other communications which are required or permitted under this
Agreement shall be in writing and sufficient if delivered by hand, by facsimile
transmission, by registered or certified mail, postage pre-paid, by electronic
mail, or by courier or overnight carrier, to the persons at the addresses
set
forth below (or at such other address as may be provided hereunder), and
shall
be deemed to have been delivered as of the date so delivered:
If
to the
Company to:
000
Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx,
XX 00000
Attention:
Xxxxxx Xxxxxxx, Chief Executive Officer
Facsimile:
(000) 000-0000
with
copy
to:
Xxxxxxxx
& Xxxx LLP
000
Xxxx
Xxxx Xxxxxx
Xxxxxxxx,
XX 00000
Attention:
Xxxxxxx X. Xxxxxx, Esq.
Facsimile:
(000) 000-0000
If
to the
Purchasers:
To
each
Purchaser at the address set forth on the signature page hereto
or
at
such other address as any party shall have furnished to the other parties
in
writing.
(g) Delays
or Omissions.
No
delay or omission to exercise any right, power or remedy accruing to any
Holder,
upon any breach or default of the Company under this Agreement, shall impair
any
such right, power or remedy of such Holder nor shall it be construed to be
a
waiver of any such breach or default, or an acquiescence therein, or of any
similar breach or default thereunder occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval
of
any kind or character on the part of any Holder of any breach or default under
this Agreement, or any waiver on the part of any Holder of any provisions
or
conditions of this Agreement, must be in writing and shall be effective only
to
the extent specifically set forth in such writing. All remedies, either under
this Agreement, or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
15
(h) Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
enforceable against the parties actually executing such counterparts, and
all of
which together shall constitute one instrument. In the event that any signature
is delivered by facsimile transmission, such signature shall create a valid
and
binding obligation of the party executing (or on whose behalf such signature
is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
(i) Severability.
In the
case any provision of this Agreement shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall
not
in any way be affected or impaired thereby.
(j) Amendments.
The
provisions of this Agreement may be amended at any time and from time to
time,
and particular provisions of this Agreement may be waived, with and only
with an
agreement or consent in writing signed by the Company and the Majority Holders.
The Purchasers acknowledge that by the operation of this Section, the Majority
Holders may have the right and power to diminish or eliminate all rights
of the
Purchasers under this Agreement.
(k) Limitation
on Subsequent Registration Rights.
After
the date of this Agreement, the Company shall not, without the prior written
consent of the Majority Holders, enter into any agreement with any holder
or
prospective holder of any securities of the Company that would grant such
holder
registration rights senior or equal to those granted to the Holders
hereunder.
[SIGNATURE
PAGES FOLLOW]
16
This
Registration Rights Agreement is hereby executed as of the date first above
written.
|
COMPANY:
|
||
| |
|
|
| By: | ||
|
Name: Xxxxxx Xxxxxxx |
||
| Title: Chairman and Chief Executive Officer | ||
[SIGNATURE
PAGE OF PURCHASER FOLLOWS]
17
This
Registration Rights Agreement is hereby executed as of the date first above
written.
| PURCHASER (Individual) | ||
| |
|
|
| (Print Name) | ||
| PURCHASER (Entity) | ||
| |
|
|
| By: | ||
| (Print Name) | ||
| (Print Title) | ||
| Address for notices: | ||
| |
|
|
| City State Zip Code | ||
18
