REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (this “Agreement”)
is
made and entered into effective as of May 29, 2008 by and between Kentucky
USA
Energy, Inc., a Delaware corporation (the “Company”),
and
the persons who have executed the signature page(s) hereto (each, a
“Buyer”
and
collectively, the “Buyers”).
RECITALS:
WHEREAS,
in connection with that certain Securities Purchase Agreement by and among
the
parties hereto of even date herewith (the “Securities
Purchase Agreement”),
the
Company has agreed, upon the terms and subject to the conditions set forth
in
the Securities Purchase Agreement, to issue and sell to each Buyer (i)
senior convertible notes of the Company (the “Notes”)
which
will, among other things, be convertible into shares of the Company’s common
stock, par value $0.0001 per share (the “Common
Stock”)
(as
converted, the “Note
Conversion Shares”),
in
accordance with the terms of the Notes, and (ii) warrants (the “Warrants”)
which
will be exercisable to purchase a number of shares of Common Stock in accordance
with the terms of the Warrants (as exercised collectively, the “Warrant
Shares”).
WHEREAS, to
induce
the Buyers to execute and deliver the Securities Purchase Agreement, the Company
has agreed to provide certain registration rights under the Securities Act
of
1933, as amended, and the rules and regulations thereunder, and applicable
state
securities laws.
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 Buyers 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 Common Shares 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 Common Shares
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 sales pursuant to such
Registration Statement or a new or amended Registration Statement may
resume.
“Business
Day”
means
any day of the year, other than a Saturday, Sunday, or any 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 $0.0001 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.
“Conversion
Rate”
has
the
meaning given it in the Notes.
“Effective
Date”
means
the date of the closing of the sale of the Notes pursuant to the Securities
Purchase Agreement.
“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.
“Holder”
means
each Buyer or any of such Buyer’s respective successors and Permitted Assignees
who acquire rights with respect to any Registrable Securities directly or
indirectly from a Buyer or from any Permitted Assignee.
“Majority
Holders”
means
at any time Holders representing a majority of the Registrable Common
Shares.
“Note
Conversion Shares”
has
the
meaning given it in the recitals of this Agreement, with the number of Note
Conversion Shares calculated based on the Conversion Rate.
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“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.
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
Common Shares”
means
the Note Conversion Shares and the Warrant Shares, but excluding (i) any
Registrable Common Shares that have been publicly sold or may be sold
immediately without volume or manner of sale limitations and without
registration under the Securities Act either pursuant to Rule 144 of the
Securities Act or otherwise; (ii) any Registrable Common Shares sold by a person
in a transaction pursuant to a registration statement filed under the Securities
Act, or (iii) any Registrable Common Shares that are at the time subject to
an
effective registration statement under the Securities Act.
“Registrable
Securities”
means
the Note Conversion Shares together with the Warrant Shares.
“Registration
Statement”
means
the registration statement that the Company is required to file pursuant to
this
Agreement to register the Registrable Common Shares.
“Rule
145”
means
Rule 145 promulgated by the Commission under the Securities Act, as such rule
may be amended or supplemented from time to time, or any similar successor
rule
that may be promulgated by the Commission.
“Rule
144”
means
Rule 144 promulgated by the Commission under the Securities Act, as such rule
may be amended or supplemented from time to time, or any similar successor
rule
that may be promulgated by the Commission.
“Rule
415”
means
Rule 415 promulgated by the Commission under the Securities Act, as such rule
may be amended or supplemented from time to time, or any similar successor
rule
that may be promulgated by the Commission.
“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
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.
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“Warrant
Shares”
has
the
meaning given it in the recitals of this Agreement.
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 S-1.
The
Company shall file with the Commission a Registration Statement on Form S-1,
or
other applicable form, relating to the resale by the Holders of all of the
Registrable Common Shares, and the Company shall use its commercially reasonable
efforts to cause such Registration Statement to be declared effective;
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. Notwithstanding the foregoing, in the event that the Commission
limits the amount of Registrable Common Shares that may be sold, the Company
may
scale back from the Registration Statement such number of Registrable Common
Shares on behalf of all of the Buyers on a pro-rata basis. In such event, the
Company shall give the Buyers prompt notice of the number of Registrable Common
Shares excluded therein.
(b) 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
Common Shares, 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.
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 Common Shares,
a
Registration Statement on Form S-1, 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 Common Shares 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 one year or for such shorter period
ending on the earlier to occur of (i) the sale of all Registrable Common Shares
and (ii) the availability under Rule 144 for the Holder to sell the Registrable
Common Shares (the “Effectiveness
Period”);
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(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 Common Shares 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 Common Shares owned by such Holder, but only
during the Effectiveness Period;
(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 Common Shares covered by such Registration Statement reasonably
requests and as may be necessary for the marketability of the Registrable Common
Shares (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 Common Shares 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 Common Shares, 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 Common
Shares, 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;
5
(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 Common Shares 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 Common Shares
covered by the Registration Statement to be quoted on the 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) cooperate
with the Holders of Registrable Common Shares being offered pursuant to the
Registration Statement to issue and deliver, or cause its transfer agent to
issue and deliver, certificates representing Registrable Common Shares to be
offered pursuant to the Registration Statement within a reasonable time after
the delivery of certificates representing the Registrable Common Shares to
the
transfer agent or the Company, as applicable, and enable such certificates
to be
in such denominations or amounts as the Holders may reasonably request and
registered in such names as the Holders may request;
(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 Common Shares 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 Common Shares 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 Common Shares current at the time
of
receipt of such notice.
6
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.
Holders
included in any registration shall furnish to the Company such information
as
the Company may reasonably request in writing regarding such Holders and the
distribution proposed by such Holders.
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 or otherwise, 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, 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 sale of the Notes 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 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.
7
(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 or otherwise, insofar as
such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) that 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
by the Holder for use in the preparation thereof, and such Holder shall
reimburse the Company, and each such director, officer, and controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating, defending, or settling any such loss, claim, damage, liability,
action, or proceeding; provided,
however,
that
such indemnity agreement found in this Section 9(b) shall in no event exceed
the
net proceeds received by such Holder as a result of the sale of Registrable
Securities pursuant to such registration statement. Such indemnity shall remain
in full force and effect, regardless of any investigation made by or on behalf
of the Company or any such director, officer or controlling person and shall
survive the transfer by any Holder of such shares.
(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.
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(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.
9
10. Rule
144.
For
the
period of time following the Effective Date and extending through the life
of
the Notes,
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 Buyers and make publicly available
in accordance with Rule 144 such information as is required for the Buyers
to
sell shares of Common Stock under Rule 144.
11. Corporate
Existence.
So long
as any Holder owns any Registrable Securities, the Company shall not directly
or
indirectly consummate an Organizational Change, unless, prior to the
consummation of an Organizational Change, the Company obtains the written
consent of the Majority Holders. For purposes of this Agreement, “Organizational
Change”
means
(i) an acquisition by an individual or legal entity or “group” (as described in
Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control
(whether through legal or beneficial ownership of capital stock of the Company,
by contract or otherwise) of in excess of 50% of the voting securities of the
Company, or (ii) the Company merges into or consolidates with any other person,
or any person merges into or consolidates with the Company and, after giving
effect to such transaction, the stockholders of the Company immediately prior
to
such transaction own less than 50% of the aggregate voting power of the Company
or the successor entity of such transaction, or (iii) the Company sells or
transfers all or substantially all of its assets to another person and the
stockholders of the Company immediately prior to such transaction own less
than
50% of the aggregate voting power of the acquiring entity immediately after
the
transaction, or (iv) the execution by the Company of an agreement to which
the
Company is a party or by which it is bound, providing for any of the events
set
forth in clauses (i) through (iii) above.
12. Independent
Nature of Each Buyer’s Obligations and Rights.
The
obligations of each Buyer under this Agreement are several and not joint with
the obligations of any other Buyer, and each Buyer shall not be responsible
in
any way for the performance of the obligations of any other Buyer under this
Agreement. Nothing contained herein and no action taken by any Buyer pursuant
hereto shall be deemed to constitute such Buyers as a partnership, an
association, a joint venture, or any other kind of entity, or create a
presumption that the Buyers are in any way acting in concert or as a group
with
respect to such obligations or the transactions contemplated by this Agreement.
Each Buyer 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 Buyer 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.
10
(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.
(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
Xxxxxxxx Xxxx
Xxxxxxxxx,
XX 00000
Attention:
Xxxxxx X. Xxxxxxxx, Chief Executive Officer
Facsimile:
with
copy
to:
Gottbetter
& Partners, LLP
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxx X. Xxxxxxxxxx, Esq.
Facsimile:
(000) 000-0000
11
If
to the
Buyers:
To
each
Buyer 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.
(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 Buyers 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
Buyers under this Agreement.
[Remainder
of Page Intentionally Left Blank]
12
This
Registration Rights Agreement is hereby executed as of the date first above
written.
|
COMPANY:
|
|
|
By:
|
|
|
Name: Xxxxxx
X. Xxxxxxxx
|
|
|
Title:
Chief
Executive Officer
|
|
[SIGNATURE
PAGE OF PURCHASER FOLLOWS]
13
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
|
14
Annex A
Selling
Securityholder Notice and Questionnaire
The
undersigned beneficial owner of Registrable Securities of Kentucky USA Energy,
Inc., a Delaware corporation (the “Company”),
understands that the Company has filed or intends to file with the Securities
and Exchange Commission a registration statement (the “Registration
Statement”)
for
the registration and resale under Rule 415 of the Securities Act of 1933, as
amended, of the Registrable Securities, in accordance with the terms of the
Registration Rights Agreement (the “Registration
Rights Agreement”)
to
which this document is annexed. A copy of the Registration Rights Agreement
is
available from the Company upon request at the address set forth below. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.
Certain
legal consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus. Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Registration Statement and the related
prospectus.
NOTICE
The
undersigned beneficial owner (the “Selling
Securityholder”)
of
Registrable Securities hereby elects to include the Registrable Securities
owned
by it in the Registration Statement.
The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
QUESTIONNAIRE
1.
Name:
|
(a)
|
Full
Legal Name of Selling
Securityholder
|
|
(b)
|
Full
Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities are
held:
|
|
(c)
|
Full
Legal Name of Natural Control Person (which means a natural person
who
directly or indirectly alone or with others has power to vote or
dispose
of the securities covered by the
questionnaire):
|
2.
Address for Notices to Selling Securityholder:
|
Telephone:
|
Fax:
|
|||
|
Email:
|
||||
|
Contact Person:
|
||||
3.
Broker-Dealer Status:
|
(a)
|
Are
you a broker-dealer?
|
Yes o
No
o
|
(b)
|
If
“yes” to Section 3(a), did you receive your Registrable Securities as
compensation for investment banking services to the
Company?
|
Yes
o
No
o
|
Note:
|
If
no, the Commission’s staff has indicated that you should be identified as
an underwriter in the Registration
Statement.
|
|
(c)
|
Are
you an affiliate of a
broker-dealer?
|
Yes
o
No
o
|
(d)
|
If
you are an affiliate of a broker-dealer, do you certify that you
bought
the Registrable Securities in the ordinary course of business, and
at the
time of the purchase of the Registrable Securities to be resold,
you had
no agreements or understandings, directly or indirectly, with any
person
to distribute the Registrable
Securities?
|
Yes
o
No
o
|
Note:
|
If
no, the Commission’s staff has indicated that you should be identified as
an underwriter in the Registration
Statement.
|
4.
Beneficial Ownership of Securities of the Company Owned by the Selling
Securityholder:
Except
as set forth below in this Item 4, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the securities
issuable pursuant to the sale of the Notes.
|
(a)
|
Type
and Amount of other securities (other than the Registrable Securities)
beneficially owned by the Selling
Securityholder:
|
2
5.
Relationships with the Company:
Except
as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity
securities of the undersigned) has held any position or office or has had any
other material relationship with the Company (or its predecessors or affiliates)
during the past three years.
State
any
exceptions here:
The
undersigned agrees to promptly notify the Company of any inaccuracies or changes
in the information provided herein that may occur subsequent to the date hereof
at any time while the Registration Statement remains effective.
By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 5 and the inclusion of such
information in the Registration Statement and the related prospectus and any
amendments or supplements thereto. The undersigned understands that such
information will be relied upon by the Company in connection with the
preparation or amendment of the Registration Statement and the related
prospectus.
IN
WITNESS WHEREOF the undersigned, by authority duly given, has caused this
Selling Securityholder Notice and Questionnaire to be executed and delivered
either in person or by its duly authorized agent.
|
Beneficial Owner:
|
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
PLEASE
FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
THE ORIGINAL BY OVERNIGHT MAIL, TO:
Gottbetter
& Partners, LLP
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxx X. XxXxxxxx
Facsimile:
(000) 000-0000
3
