Exhibit 10.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made effective
as of the Effective Date, by and among the corporation identified under the
caption "PUBCO" on the signature page hereto (the "PUBCO"), and the investors
signatory hereto (each a "PURCHASER" and collectively, the "PURCHASERS").
RECITALS
A. Each Purchaser has executed and delivered to Bionovo, Inc., a
Delaware corporation ("BIONOVO"), a Subscription Agreement ("SUBSCRIPTION
AGREEMENT") to purchase the number of Units subscribed for therein, where each
Unit consists of 200,000 shares of Bionovo common stock ("COMMON STOCK") and
warrants ("WARRANTS") to purchase 25,000 shares of Common Stock for $0.75 per
share and 25,000 shares of Common Stock for $1.00 per share exercisable for a
period of five years;
B. Immediately following the closing (the "CLOSING") of the
purchase and sale of the Units contemplated by the Subscription Agreements,
Pubco acquired by merger the business of Bionovo ("REVERSE MERGER"), and in
connection with such merger, among other things, (i) each outstanding share of
Common Stock acquired pursuant to a Subscription Agreement ("SUBSCRIBED STOCK")
has been exchanged for the right to receive that number of shares of Pubco
common stock ("PUBCO STOCK") as determined pursuant to the Agreement and Plan of
Merger entered into by and among Pubco, a subsidiary of Pubco and Bionovo in
connection with the Reverse Merger ("MERGER AGREEMENT"), and (ii) the Warrants
have been replaced with comparable new warrants ("PUBCO WARRANTS") exercisable
for that number of shares of Pubco Stock ("WARRANT SHARES") as determined
pursuant to the Merger Agreement; and
C. As a condition of the Closing and the Reverse Merger, Pubco is
required to execute and deliver this Agreement to the Purchasers to provide for
certain registration rights with respect to Pubco Stock and Warrant Shares upon
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of these premises and the mutual
promises and covenants hereinafter set forth and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. DEFINITIONS. In addition to the terms defined elsewhere in
this Agreement, the following capitalized terms shall have the following
meanings:
"BUSINESS DAY" means any day other than a Saturday, Sunday or legal
holiday in the State of California.
"CLOSING DATE" means the date that the Closing occurs.
"EFFECTIVENESS DATE" means, with respect to the Registration Statement
required to be filed pursuant to SECTION 2(a), the earlier of (a) the 90th
calendar day from the Filing Date (or the 120th day if the Registration
Statement is reviewed by the SEC), and (b) the date on which the SEC declares
the Registration Statement effective.
"EFFECTIVENESS PERIOD" is defined in SECTION 2(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FILING DATE" means, with respect to the Registration Statement
required to be filed hereunder, the date ninety (90) calendar days from the
Closing Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may be,
from time to time of Registrable Securities (including any permitted assignee).
"HOLDERS' REPRESENTATIVE" means Xxxxxx Capital LLC, or any other person
that has been appointed by the Holders of a majority of the Registrable
Securities to act as representative of the Holders for purposes of this
Agreement.
"INDEMNIFIED PARTY" is defined in SECTION 5(c).
"INDEMNIFYING PARTY" is defined in SECTION 5(c).
"LOSSES" is defined in SECTION 5(a).
"PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"REGISTRABLE SECURITIES" means the shares of Pubco Stock issued or
issuable in respect of Subscribed Stock, Warrant Shares issuable upon any
exercise of Pubco Warrants, and any shares issued upon any stock split, dividend
or other distribution, recapitalization or similar event with respect to the
foregoing.
"REGISTRATION STATEMENT" means the registration statements required to
be filed hereunder, including (in each case) the Prospectus, amendments and
supplements to the registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in the registration
statement.
2
"RULE 144" means Rule 144 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
Rule or regulation hereafter adopted by the SEC having substantially the same
effect as such Rule.
"RULE 144(k)" means Rule 144(k) promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
Rule or regulation hereafter adopted by the SEC having substantially the same
effect as such Rule.
"RULE 415" means Rule 415 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
Rule or regulation hereafter adopted by the SEC having substantially the same
effect as such Rule.
"RULE 424" means Rule 424 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
Rule or regulation hereafter adopted by the SEC having substantially the same
effect as such Rule.
"SEC" means the U.S. Securities and Exchange Commission.
"SELLING SHAREHOLDER QUESTIONNAIRE" is defined in SECTION 2(f).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"TRADING DAY" means (i) a day on which Pubco Stock is traded or quoted
on a Trading Market, or (ii) if Pubco Stock is not traded or quoted on a Trading
Market, a day on which Pubco Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting price);
provided, that in the event that Pubco Stock is not traded or quoted as set
forth in (i), and (ii) hereof, that Trading Day shall mean a Business Day.
"TRADING MARKET" means the following markets or exchanges on which
Pubco Stock is listed or quoted for trading on the date in question: the NASDAQ
SmallCap Market, the American Stock Exchange, the New York Stock Exchange, the
NASDAQ National Market or the OTC Bulletin Board.
2. REGISTRATION.
(a) MANDATORY REGISTRATION. No later than the Filing
Date, Pubco shall prepare and file with the SEC the Registration Statement
covering the resale of all of the Registrable Securities which a Holder has
requested to be included in such Registration Statement and for which such
Holder has provided Pubco with a completed Selling Shareholder Questionnaire,
which offering shall be made on a continuous basis pursuant to Rule 415. The
Registration Statement required hereunder shall be on Form SB-2 (or other
applicable form at the discretion of Pubco). The Registration Statement required
hereunder shall contain (except if otherwise directed by the Holders) the "PLAN
OF DISTRIBUTION" substantially in the form attached hereto as ANNEX A (which may
be modified as required by the Securities Act and the rules and regulations
thereunder and to respond to comments, if any, received by the SEC). Pubco shall
use its commercially reasonable efforts to cause the Registration Statement to
be declared effective under the Securities Act as promptly as possible after the
filing thereof and shall use its
3
commercially reasonable efforts to keep the Registration Statement continuously
effective under the Securities Act until the date when all Registrable
Securities covered by the Registration Statement (a) have been sold pursuant to
the Registration Statement or an exemption from the registration requirements of
the Securities Act or (b) may be sold without any volume or other restrictions
pursuant to Rule 144(k) (the "EFFECTIVENESS PERIOD").
(b) FILING DEFAULT LIQUIDATION DAMAGES. If a Registration
Statement is not filed on or prior to the Filing Date, then Pubco shall pay to
each Holder an amount in cash until the earlier of the date a Registration
Statement is filed and the Registrable Securities may be sold pursuant to Rule
144(k), as liquidated damages and not as a penalty, equal to (i) one (1%)
percent of the aggregate purchase price paid by such Holder pursuant to a
Subscription Agreement for the first thirty (30) days (or part thereof)
following Pubco's failure to file, and (ii) an additional one (1%) percent of
the aggregate purchase paid by such Holder thereunder for each thirty (30) day
period subsequent thereto (or part thereof), such payment(s) to be made in
immediately available funds no later than five (5) Business Days after the first
date of each thirty (30) day period (or any part thereof), as the case may be,
during Pubco's failure to file.
(c) EFFECTIVENESS DEFAULT LIQUIDATION DAMAGES. In
addition to any liquidated damages paid, accrued and/or to be paid pursuant to
SECTION 2(b), if (1) a Registration Statement is not declared effective on or
prior to one hundred eighty (180) days from the Closing Date (or two hundred ten
(210) days if reviewed by the SEC), or (2) if a Registration Statement has been
declared effective and subsequent thereto is not effective for any period of
time until the Registrable Securities may be sold pursuant to Rule 144(k) (an
"EFFECTIVENESS DEFAULT"), then Pubco shall pay to each Holder an amount in cash
until the date a Registration Statement is declared effective (and permits the
resale of the Registrable Securities covered thereby)(or if previously declared
effective until the date the Registration Statement becomes effective (and
otherwise permits the resale of the Registrable Securities covered thereby)
again), as liquidated damages and not as a penalty, equal to (i) one (1%)
percent of the aggregate purchase price paid by such Holder pursuant to a
Subscription Agreement for the first thirty (30) days (or part thereof), and
(ii) an additional one percent (1%) of the aggregate purchase price paid by such
Holder thereunder for each thirty (30) day period subsequent thereto (or part
thereof) until the earlier of (a) such date the Registration Statement is
declared effective (or if previously declared effective until the date the
Registration Statement becomes effective (and otherwise permits the resale of
the Registrable Securities covered thereby) again), and (b) the Registrable
Securities may be sold pursuant to Rule 144(k); PROVIDED, HOWEVER, for purposes
of this SUBSECTION (c), it shall not be considered an Effectiveness Default
during any such period in which there is a Material Development Condition (as
defined below) which is permitted pursuant to SECTION 6(n). Any such payment(s)
shall be made in immediately available funds no later than five (5) Business
Days after the first day of each 30 day period of each such Effectiveness
Default.
(d) SUFFICIENT NUMBER OF SHARES REGISTERED. In the event
the number of shares of Pubco Stock covered under a Registration Statement filed
pursuant to SECTION 2(a) is insufficient to cover all of the Registrable
Securities which such Registration Statement is required to cover, Pubco shall
amend the Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover at least
100% of the Registrable Securities, in each case, as soon as practicable, but in
any event not later than ten (10) Business Days after the necessity therefor
arises. Pubco shall use its commercially
4
reasonable efforts to cause such amendment and/or new Registration Statement to
become effective as soon as practicable following the filing thereof.
(e) PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No
Holder may participate in any underwritten registration with respect to the
Registrable Securities unless such Holder completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements,
lock-up letters and other documents reasonably required under the terms of such
underwriting agreements.
(f) OTHER REQUIREMENTS. In connection with any
Registration Statement under SECTION 2(a), Holders whose Registrable Securities
are included therein shall provide such information and shall execute and
deliver to Pubco such documents, including, but not limited to, a selling
shareholder questionnaire in customary form and substance reasonably
satisfactory to Pubco ("SELLING SHAREHOLDER QUESTIONNAIRE"), as Pubco may
reasonably request in order to effect such registration pursuant to this
Agreement and in accordance with applicable securities laws.
3. REGISTRATION PROCEDURES. In connection with Pubco's
registration obligations hereunder, Pubco shall:
(a) Not less than three (3) Trading Days prior to the
filing of the Registration Statement or any related Prospectus or any amendment
or supplement thereto, (i) furnish to the Holders' Representative copies of all
such documents substantially in the form proposed to be filed (including
documents incorporated or deemed incorporated by reference to the extent
requested by such Person) which documents will be subject to the review of the
Holders' Representative, and (ii) subject, if appropriate, to the execution of
confidentiality agreements in form acceptable to Pubco, cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of respective
counsel to conduct a reasonable investigation within the meaning of the
Securities Act.
(b) (i) Prepare and file with the SEC such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
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, and as so
supplemented or amended to be filed pursuant to Rule 424; and (iii) respond as
promptly as reasonably practicable to any comments received from the SEC with
respect to the Registration Statement or any amendment thereto and, as promptly
as reasonably practicable, upon request, provide the Holders' Representative
true and complete copies of all correspondence from and to the SEC relating to
the Registration Statement (subject, if appropriate, to the execution of
confidentiality agreements in form acceptable to Pubco).
(c) Notify the Holders of Registrable Securities to be
sold as promptly as reasonably possible (and, in the case of (i)(A) below, not
less than three (3) Trading Days prior to such filing) and (if requested by any
such Person) confirm such notice in writing promptly following the day (i)(A)
when a Prospectus or any Prospectus supplement or post-effective amendment to
the Registration Statement is proposed to be filed; (B) when the SEC notifies
5
Pubco whether there will be a "review" of the Registration Statement and
whenever the SEC comments in writing on the Registration Statement (Pubco shall
upon request provide true and complete copies thereof and all written responses
thereto to the Holders' Representative, subject, if appropriate, to the
execution of confidentiality agreements in form acceptable to Pubco); and (C)
with respect to the 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 during the period of effectiveness of
the Registration Statement for amendments or supplements to the 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 Registration Statement covering any or all
of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) of the receipt by Pubco 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
Registration Statement ineligible for inclusion therein or any statement made in
the 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 Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(d) Use its commercially reasonable efforts to avoid the
issuance of, or, if issued, obtain the withdrawal of (i) any order suspending
the effectiveness of the Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.
(e) Promptly deliver to each Holder no later than five
(5) business days after the Effectiveness Date, without charge, two (2) copies
of the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto (and, upon the request of the Holder such
additional copies as such Persons may reasonably request in connection with
resales by the Holder of Registrable Securities). Pubco 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(c)(ii)-(v).
(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 such 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 the Registration
Statement; PROVIDED, HOWEVER, that Pubco shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified,
subject Pubco to any material tax in
6
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, 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 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(c)(v), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the 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 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.
(i) Use its reasonable commercial efforts to comply in
all material respects with all applicable rules and regulations of the SEC
relating to the registration of the Registrable Securities pursuant to the
Registration Statement or otherwise.
(j) Pubco shall not be required to include in any
Registration Statement the Registrable Securities of any Holder that does not
complete a Selling Shareholder Questionnaire.
(k) Pubco shall use its commercially reasonable efforts
to maintain at least two (2) market makers that are registered with the National
Association of Securities Dealers, Inc. as such with respect to the Registrable
Securities. Pubco shall pay all fees and expenses in connection with satisfying
its obligation under this SECTION 3(k).
(l) Pubco shall make all documents, files, books,
records, officers, directors and employees of Pubco reasonably available to the
Holders' Representative, one legal counsel to the Holders and one firm of
accountants retained by the Holders (collectively, the "INSPECTORS"), and make
such other accommodations as are reasonably necessary for the Inspectors, if
any, to perform a due diligence review of Pubco; PROVIDED, HOWEVER, that all
such information ("CONFIDENTIAL INFORMATION") will be kept confidential and not
utilized by the Inspectors except as contemplated herein and except as required
by law or court order. The term Confidential Information also includes any
information included in a draft Registration Statement or any related Prospectus
or any amendment or supplement thereto provided to a Holder pursuant to SECTION
3(a); for the avoidance of doubt, however, Pubco shall not furnish to Holders,
without their prior approval, any information that constitutes or might
constitute material, non-public information. The term Confidential Information
does not include information that (a) is already in possession of such other
party (other than that which is subject to another confidentiality agreement or
unless obtained from a third party where the receiving party knows that the
third party was subject to a confidentiality agreement), (b) becomes generally
available to the public other than by disclosure in violation of this Agreement
or any other agreement to which a Holder is a party, or (c) becomes available on
a non-confidential basis from a source other than Pubco unless obtained from a
third party where the receiving party
7
knows that the third party was subject to a confidentiality agreement. Each
Holder agrees that it shall, upon learning that disclosure of such Confidential
Information is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to Pubco and allow
Pubco, at its expense, to undertake appropriate action to prevent disclosure of,
or to obtain a protective order for, the information deemed confidential.
(m) Pubco shall hold in confidence and not make any
disclosure of information concerning any Holder provided to Pubco unless (a)
such information is already in possession of Pubco, (b) such information becomes
available to Pubco on a non-confidential basis from a person other than such
Holder who is not known by Pubco to be otherwise bound by a confidentiality or
comparable agreement with such Holder, (c) disclosure of such information is
necessary to comply with federal or state securities laws, (d) the disclosure of
such information is necessary to avoid or correct a misstatement or omission in
any Registration Statement or Prospectus, (e) the release of such information is
ordered pursuant to a subpoena or other final, non-appealable order from a court
or governmental body of competent jurisdiction, (f) such information has been
made generally available to the public other than by disclosure in violation of
this Agreement or any other agreement to which Pubco is a party, or (g) such
Holder consents to the form and content of any such disclosure (the Holders
shall be deemed to consent to the inclusion of any information provided in the
Selling Shareholder Questionnaire, in the Registration Statement, any Prospectus
related thereto, and any amendments or supplements thereto). Pubco agrees that
it shall, upon learning that disclosure of such information concerning any
Holder is sought in or by a court or governmental body of competent jurisdiction
or through other means, give prompt written notice to such Holder and allow such
Holder, at the Holder's expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
(n) Pubco covenants that it shall file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder so long as the Holder owns
any Registrable Securities, but in no event longer than two (2) years; PROVIDED,
HOWEVER, Pubco may delay any such filing but only pursuant to Rule 12b-25 under
the Exchange Act, and Pubco shall use commercially reasonable efforts to take
such further action as any Holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144 under the Securities
Act, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon
the request of any Holder of Registrable Securities, Pubco will deliver to such
Holder a written statement as to whether it has complied with such requirements.
4. REGISTRATION EXPENSES. All fees and expenses incident to the
performance of or compliance with this Agreement by Pubco (including, without
limitation, fees and expenses of one counsel for the Holders' Representative
with respect to the review of the Registration Statement, "HOLDERS'
REPRESENTATIVE COUNSEL") shall be borne by Pubco whether or not any Registrable
Securities are sold pursuant to the Registration Statement, other than fees and
expenses of counsel (other than the Holder's Representative Counsel referenced
above) or any other advisor retained by the Holders and discounts, fees and
commissions with respect to the sale of any Registrable Securities by the
Holders. The fees and expenses to referred to in the foregoing sentence to be
borne by Pubco shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (A) with respect
to filings required to
8
be made with the Trading Market on which Pubco Stock is then listed for trading,
and (B) to effect compliance with applicable state securities or Blue Sky laws),
(ii) printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing Prospectuses), (iii)
fees and disbursements of counsel for Pubco, (iv) Securities Act liability
insurance, if Pubco so desires such insurance, and (v) fees and expenses of all
other Persons retained by Pubco in connection with the consummation of the
transactions contemplated by this Agreement. In addition, Pubco shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit and the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange or other trading market as required
hereunder.
5. INDEMNIFICATION
(a) INDEMNIFICATION BY PUBCO. Pubco shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents and employees of each of them, each
Person who controls any such Holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the officers, directors,
agents and employees of each such controlling Person, to the fullest extent
permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable
attorneys' fees) and expenses (including the cost (including without limitation,
reasonable attorneys' fees) and expenses relating to an Indemnified Party's
actions to enforce the provisions of this SECTION 5) (collectively, "LOSSES"),
as incurred, to the extent arising out of or relating to 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 (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (1) such untrue (or alleged untrue) statements or omissions (or alleged
omissions) are based solely upon information regarding such Holder furnished (or
in the case of an omission, results from the failure of such Holder to fully or
accurately complete the Selling Shareholder Questionnaire) in writing to Pubco
by or on behalf of 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 which proposed method was reviewed by
such Holder expressly for use in the Registration Statement, such Prospectus or
such form of Prospectus or in any amendment or supplement thereto (it being
understood that the Holder has reviewed ANNEX A hereto for this purpose), (2) in
the case of an occurrence of an event of the type specified in SECTION
3(c)(ii)-(v), the use by such Holder of an outdated or defective Prospectus
after Pubco 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 6(c), or (3) the failure of the Holder to deliver a Prospectus as
amended or supplemented prior to the confirmation of a sale. Pubco shall notify
the Holders promptly of the institution, threat or assertion of any Proceeding
of which Pubco is aware in connection with the transactions contemplated by this
Agreement.
9
(b) INDEMNIFICATION BY HOLDERS. Each Holder shall,
severally and not jointly, indemnify and hold harmless Pubco, its directors,
officers, agents and employees, each Person who controls Pubco (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses, as
incurred, to the extent arising out of or based 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 (in the case of
the Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading (i) to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is contained in any information so furnished (or
in the case of an omission, results from the failure of such Holder to fully or
accurately complete the Selling Shareholder Questionnaire) in writing by or on
behalf of such Holder to Pubco 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 (or in the case of an omission, results from the failure of such
Holder to fully or accurately complete the Selling Shareholder Questionnaire) in
writing to Pubco by or on behalf of 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 which proposed
method was reviewed by such Holder expressly for use in the Registration
Statement (it being understood that the Holder has reviewed ANNEX A hereto for
this purpose), 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 3(c)(ii)-(v), the use by such Holder of an outdated or
defective Prospectus after Pubco 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 6(c), or (3) the failure of the Holder to
deliver a Prospectus as amended or supplemented prior to the confirmation of a
sale. In no event shall the liability of any selling Holder hereunder be greater
in amount than the gross proceeds received or to be received by the Holder with
respect to the sale of its Registrable Securities.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify
the Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing,
and the Indemnifying Party shall have the right to assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with
defense thereof; PROVIDED, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that
such failure shall have materially prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in (but not control) the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; (2) the Indemnifying
10
Party shall have failed to assume the defense of such Proceeding in a timely
manner and to employ counsel reasonably satisfactory to such Indemnified Party
in any such Proceeding; or (3) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by
counsel in writing that a conflict of interest would exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense thereof
and the reasonable fees and expenses of one separate counsel for all Indemnified
Parties in any matters related on a factual basis shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding affected without its written consent. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All reasonable fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within fifteen (15) Business Days of written notice thereof to the
Indemnifying Party; PROVIDED, that the Indemnified Party shall promptly
reimburse the Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is not entitled to
indemnification hereunder, determined based upon the relative faults of the
parties.
(d) CONTRIBUTION. If a claim for indemnification under
SECTION 5(a) or SECTION 5(b) is unavailable to an Indemnified Party (by reason
of public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such proportion
as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in SECTION 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
(e) The parties hereto agree that it would not be just
and equitable if contribution pursuant to SECTION 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in
11
SECTION 5(d). Notwithstanding the provisions of Section 5(d), no Holder shall be
required to indemnify or contribute, in the aggregate, pursuant to this ARTICLE
5, 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. The indemnity
and contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties. No
party guilty of fraudulent misrepresentation pursuant to Section 11(f) of the
Securities Act shall be entitled to contribution from any other party.
6. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by Pubco or by a
Holder of any of their obligations under this Agreement, each Holder or Pubco,
as the case may be, in addition to being entitled to exercise all rights granted
by law and under this Agreement will be entitled to specific performance of its
rights under this Agreement. Pubco and each Holder agree that monetary damages
would not provide adequate compensation for any losses incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in respect of
such breach, it shall waive the defense that a remedy at law would be adequate.
(b) COMPLIANCE. Each Holder covenants and agrees that it
will comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
(c) DISCONTINUED DISPOSITION. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice from
Pubco of the occurrence of any event of the kind described in SECTION
3(c)(ii)-(v), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement or until it is advised in writing (the "ADVICE") by Pubco that the use
of the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration Statement.
Pubco may provide appropriate stop orders to enforce the provisions of this
paragraph.
(d) AMENDMENTS AND WAIVERS. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in writing and
signed by Pubco and the Holders of at least sixty-six percent (66%) of the then
outstanding Registrable Securities (assuming the exercise of all Warrants,
whether exercised or not), whereupon such amendment, modification, supplement or
waiver shall be binding on all Holders; PROVIDED, HOWEVER, that no consideration
shall be offered or paid to any Holder to amend or consent to a waiver or
modification of any provision of this Agreement unless the same consideration
(on a pro-rata basis) is also offered to all of the Holders under this
Agreement.
(e) NOTICES. All notices that are required or may be
given pursuant to this Agreement must be in writing and delivered personally, by
a
12
recognized courier service, by a recognized overnight delivery service, or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other person or such other address as any
party may provide to the other parties by notice in accordance with this
section):
If to the Company:
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxx
Telephone: (000) 000-0000
With a copy to:
Xxxxxxxxx Xxxxxxx, LLP
Met Life Building
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx
Telephone: (000) 000-0000
If to a Purchaser:
At the address indicated on the signature page for
such Purchaser
Any such notice or other communication will be deemed to have
been given and received (whether actually received or not) on
the day it is personally delivered or delivered by courier or
overnight delivery service or, if mailed, when actually
received.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon each of the parties and their respective
successors and permitted assigns.
(g) EXECUTION AND COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and, all of which taken together shall constitute one
and the same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding obligation
of the party executing (or on whose behalf such signature is executed) the same
with the same force and effect as if such facsimile signature were the original
thereof.
(h) GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of California
without regard to the conflicts of laws principles thereof. The parties hereto
hereby irrevocably agree that any suit or proceeding arising directly and/or
indirectly pursuant to or under this Agreement, shall be brought solely in a
federal or state courts located in the State of California. By its execution
hereof, the parties hereby covenant and irrevocably submit to the IN PERSONAM
jurisdiction of the federal and state courts located in the State of California
and agree that any process in any such action may be served upon any of them
personally, or by certified mail or registered mail upon them or their agent,
return receipt requested, with the same full force and effect as if personally
served upon
13
them in California. The parties hereto waive any claim that any such
jurisdiction is not a convenient forum for any such suit or proceeding and any
defense or lack of IN PERSONAM jurisdiction with respect thereto.
(i) CUMULATIVE REMEDIES. Subject to the first sentence of
SECTION 6(a), the remedies provided herein are cumulative and not exclusive of
any remedies provided by law.
(j) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(k) INTERPRETATION. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof. References to Sections mean Sections of this Agreement unless
otherwise stated. Any term defined in this Agreement shall be deemed to include
derivations of such term (e.g., the term "Indemnified Party" shall include
"Indemnified Parties").
(l) INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND
RIGHTS. The obligations of each Purchaser hereunder is several and not joint
with the obligations of any other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the 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 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. EACH PURCHASER REPRESENTS
THAT IS HAS BEEN REPRESENTED BY ITS OWN SEPARATE LEGAL COUNSEL IN ITS REVIEW AND
NEGOTIATION OF THIS AGREEMENT. Pubco has elected to provide all Purchasers with
the same terms and documents for the convenience of Pubco and not because it was
required to do so by the Purchasers.
(m) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of any
Holder under this Agreement shall be automatically assignable by such Holder to
any transferee of all or any portion of Registrable Securities (other than
pursuant to a public sale or Rule 144) if: (1) such Holder agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to Pubco within a reasonable time after such assignment;
(2) Pubco is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee, and (ii) the securities with respect to which such registration rights
are being transferred or assigned; and (3) at or before the time Pubco
14
receives the written notice contemplated by clause (2) of this sentence the
transferee or assignee agrees in writing with Pubco to be bound by all of the
provisions contained herein.
(n) DEFERRAL PERIOD. With respect to any Registration
Statement filed or to be filed pursuant to SECTION 2, if Pubco determines that,
in its good faith judgment, it would (because of the existence of, or in
reasonable anticipation of, any acquisition or corporate reorganization or other
transaction, financing activity, stock repurchase or other material development
involving Pubco or any subsidiary, or the unavailability for reasons beyond
Pubco's control of any required financial statements or other material
information, or any other event or condition material to Pubco or any
subsidiary) be materially disadvantageous to Pubco to proceed with such
Registration Statement or that Pubco is required by applicable law, rules or
regulations not to proceed with the Registration Statement (a "MATERIAL
DEVELOPMENT CONDITION"), then Pubco shall, notwithstanding any other provisions
of this Agreement, be entitled, upon the giving of a written notice that a
Material Development Condition has occurred (a "DELAY NOTICE") from an officer
of Pubco to the Holders' Representative, as the representative of the
Purchasers, (i) to cause sales of Registrable Securities by the Purchasers
pursuant to such Registration Statement to cease, (ii) to cause such
Registration Statement to be withdrawn and the effectiveness of such
Registration Statement suspended, or (iii) in the event no such Registration
Statement has yet been filed or declared effective, to delay filing or
effectiveness of any such Registration Statement until, in the good faith
judgment of Pubco, such Material Development Condition shall be disclosed or no
longer exists (notice of which Pubco shall promptly deliver to the Holders'
Representative, as the representative of the Purchasers). Notwithstanding the
foregoing provisions of this SECTION 6(n), (1) in no event may such cessation or
delay be for a period of more than ninety (90) consecutive days from giving of
its Delay Notice to the Purchasers with respect to such Material Development
Condition, as above provided, or more than one hundred twenty (120) days in any
twelve (12) months; and (2) in the event a Registration Statement is filed and
subsequently withdrawn by reason of any existing or anticipated Material
Development Condition as provided above, Pubco shall cause a new Registration
Statement covering the Registrable Securities to be filed with the SEC as soon
as reasonably practicable after such Material Development Condition ceases to
exist or, if sooner, as soon as practicable after the expiration of such ninety
(90) day period.
(o) ENTIRE AGREEMENT. This Agreement, any annexes hereto
and any writings incorporated herein by reference set forth the entire
understanding of the parties hereto with respect to the subject matter hereof.
The recitals hereto are a material part of this Agreement and are incorporated
in this Agreement by reference as if fully set forth herein.
[Signatures follow]
15
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
PUBCO:
------------------------------------------------- ,
a corporation
-------------------------
By:
------------------------------------------------
Name:
Title:
(PURCHASERS SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT)
INDIVIDUALS:
Signature:
--------------------------------
Print Name:
-------------------------------
Signature:
--------------------------------
Print Name:
-------------------------------
ENTITY:
------------------------------------------
By:
---------------------------------------
Name:
Title:
ADDRESS:
------------------------------------------
------------------------------------------
------------------------------------------
Attention:
--------------------------------
Telephone:
--------------------------------
ANNEX A
PLAN OF DISTRIBUTION
The Selling Stockholders and any of their pledgees, donees, assignees
and successors-in-interest may, from time to time, sell any or all of their
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The Selling Stockholders may use any one or more of
the following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker/dealer solicits purchasers;
o block trades in which the broker/dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker/dealer as principal and resale by the
broker/dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o put or call options transactions;
o settlement of short sales;
o broker/dealers may agree with the Selling Stockholders to sell
a specified number of such shares at a stipulated price per
share;
o a combination of any such methods of sale; and
o any other method permitted by applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, if available, rather than under this prospectus.
Broker/dealers engaged by the Selling Stockholders may arrange for
other brokers/dealers to participate in sales. Broker/dealers may receive
commissions from the Selling Stockholders (or, if any broker/dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions to exceed
what is customary in the types of transactions involved.
The Selling Stockholders may from time to time pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance
of their secured obligations, the donees, pledgees or secured parties may offer
and sell the shares of common stock from time to time under this prospectus, or
under an amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act of 1933 amending the list of Selling
Stockholders to include the donee, pledgee, transferee or other successors in
interest as Selling Stockholders under this prospectus.
The Selling Stockholders and any broker/dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker/dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions under the Securities Act of 1933. The Selling Stockholders have
informed the Company that it does not have any agreement or understanding,
directly or indirectly, with any person to distribute common stock.
At the time a particular offering of securities is made, to the extent
required, a prospectus supplement will be distributed which will set forth the
number of securities being offered and the terms of the offering, including the
purchase price or the public offering price, the name or names of any
underwriters, dealers or agents, the purchase price paid by any underwriters for
securities purchased from the Selling Stockholders, any discounts, commissions
and other items constituting compensation from the selling security holders and
any discounts, commissions or concessions allowed or reallowed or paid to
dealers.
Pursuant to applicable rules and regulations under the Securities
Exchange Act of 1934, any person engaged in the distribution of the securities
offered under this prospectus may not simultaneously engage in market activities
for the shares of common stock for a period of five business days prior to the
commencement of such distribution. In addition, each Selling Stockholder and any
other person who participates in a distribution of the securities will be
subject to applicable provisions of the Securities Exchange Act of 1934 and the
rules and regulations thereunder, including Regulation M, which may limit the
timing of purchases and may affect the marketability of the securities and the
ability of any person to engage in market activities for the shares of common
stock.
Pubco is required to pay all fees and expenses incident to the
registration of the shares. Pubco has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act of 1933.
