EX-4.6
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
September 18, 2001 by and between Elgrande, Inc., a Nevada corporation, (the
"Company"), and IFG Private Equity, LLC, a Georgia limited liability company
("IFG")
WHEREAS:
A. In connection with the Common Stock Purchase Agreement by and between
the parties hereto of even date herewith (the "Purchase Agreement"), the Company
has agreed, upon the terms and subject to the conditions contained therein, to
issue and sell to IFG, from time to time, (i) up to $5,000,000 of its Common
Stock, par value $0.001 per share (the "Draw Down Shares") and (ii) warrants
(the " Commitment Warrants") to acquire up to 100,000 shares of Common Stock,
par value $0.001 per share (the "Common Stock"), upon the terms and conditions
and subject to the limitations and conditions set forth in the Purchase
Agreement; and
B. To induce IFG to execute and deliver the 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, or any similar
successor statute (collectively, the "Securities Act"), and applicable state
securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and IFG hereby agree
as follows:
1. DEFINITIONS.
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As used in this Agreement, the following terms shall have the following
meanings:
a. "IFG" means IFG Private Equity, LLC and any transferee or assignee
who agrees to become bound by the provisions of this Agreement in accordance
with Section 9 hereof.
b. "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
c. "Registrable Securities" shall mean the Draw Down Shares, the
Commitment Warrant Shares (as defined in the Purchase Agreement) and any other
shares of capital stock issued or issuable as a dividend on or in exchange for
or otherwise with respect to the Draw Down Shares and the Warrant Shares until
(i) the Registration Statement has been declared effective by the SEC and all
such shares have been disposed of pursuant to the Registration Statement, (ii)
all such shares have been sold under circumstances under which all of the
applicable conditions of Rule 144 promulgated under the Securities Act (or any
similar provision then in force) ("Rule 144") are met, (iii) all such shares
have been otherwise transferred to holders who may trade such shares without
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restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend, (iv) such time as, in the opinion of counsel to IFG, all
such shares may be sold without any time, volume or manner limitations pursuant
to Rule 144(k) (or any similar provision then in effect) under the Securities
Act or (v) any combination of the foregoing relating to all such shares.
d. "Registration Statement(s)" shall mean a registration statement on
Form S-3 (if use of such form is then available to the Company pursuant to the
rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement and the Purchase Agreement, and in accordance with the intended method
of distribution of such securities), for the registration of the resale by IFG
of the Registrable Securities under the Securities Act.
To the extent not otherwise defined herein, the definitions set forth in the
Purchase Agreement shall apply for purposes of this Agreement.
2. REGISTRATION.
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a. Mandatory Registration. The Company shall prepare, and on or prior
to the date (the "Filing Date") which is no later than ninety (90) days after
the Closing Date (as defined in the Purchase Agreement), file with the SEC a
Registration Statement covering the resale of the Registrable Securities, which
Registration Statement, to the extent allowable under the Securities Act and the
rules and regulations promulgated thereunder (including Rule 416), shall state
that such Registration Statement also covers such indeterminate number of
additional shares of Common Stock as may become issuable (i) with respect to the
Draw Down Shares and Warrant Shares and (ii) upon exercise of or otherwise
pursuant to the Warrants to prevent dilution resulting from stock splits, stock
dividends or similar transactions. The number of shares of Common Stock
initially included in such Registration Statement shall be no less than the sum
of (x) 50,000,000 Draw Down Shares issuable pursuant to the Purchase Agreement
and (y) one hundred percent (100%) of the aggregate number of Warrant Shares
that are issuable upon the exercise of or otherwise pursuant to the Warrants,
without regard to any limitation on the Company's ability to effect Draw Downs
under the Purchase Agreement or on IFG's ability to exercise the Warrants. The
Company acknowledges that the number of shares initially included in the
Registration Statement represents a good faith estimate of the maximum number of
shares issuable under the Purchase Agreement and upon exercise of or otherwise
pursuant to the Warrants. The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided to and subject to the review of IFG and its counsel prior to
its filing or other submission. The Company shall provide IFG and its counsel
with a copy of the Registration Statement not less than five (5) days prior to
the intended filing date and any pre- or post-effective amendment thereto not
less than three (3) business days prior to the intended filing date and shall
provide copies of any supplements not less than two (2) business days prior to
the intended filing date.
b. Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, IFG
shall have the right to select one legal counsel and an investment banker or
bankers and manager or managers to administer the offering, which investment
banker or bankers or manager or managers shall be reasonably satisfactory to the
Company.
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c. Payments by the Company. The Company shall use its best efforts to
obtain effectiveness of the Registration Statement as soon as practicable. If
(i) after the Registration Statement(s) covering the Registrable Securities
required to be filed by the Company pursuant to Section 2(a) hereof is declared
effective by the SEC, a minimum of $1 Million is not drawn down within 12 months
following the Effective Date(i) that sales of all of the Registrable Securities
cannot be made pursuant to the Registration Statement after the Registration
Statement has been declared effective (including, without limitation, when sales
cannot be made by reason of the Company's failure to properly supplement or
amend the prospectus, within ten (10) days of an event requiring supplement or
amendment, included therein in accordance with the terms of this Agreement
(including Section 3(b) hereof or otherwise), but excluding any days during an
Allowed Delay (as defined in Section 3(h)); and (ii) that the Common Stock is
not listed or included for quotation on a Principal Market or that trading
thereon is halted (clauses (i) and (ii) are each referred to herein as an
"Ineffective Period"). Such payments pursuant hereto shall be made within five
(5) Trading Days after the earliest to occur of (i) the expiration of the
Commitment Period, (ii) the expiration of an Ineffective Period (or if an
Ineffective Period shall last more than thirty (30) calendar days, the
expiration of each thirty (30) calendar days of an Ineffective Period).
3. OBLIGATIONS OF THE COMPANY.
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In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC as soon as
practicable after the Closing Date (but in no event later than the Filing Date),
a Registration Statement with respect to the number of Registrable Securities
provided in Section 2(a), and thereafter use its best efforts to cause such
Registration Statement relating to Registrable Securities to become effective as
soon as possible after such filing, and keep the Registration Statement
effective pursuant to Rule 415 at all times until such date as such shares are
no longer considered Registrable Securities pursuant to the definition of such
term set forth in Section 1(c) hereof (such period being referred to as the
"Registration Period"), which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
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 not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) to the Registration Statements and
supplements to the prospectus used in connection with the Registration
Statements as may be necessary to keep the Registration Statements effective at
all times during the Registration Period, and, during such period, comply with
the provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statements
until such time as all of such Registrable Securities have been disposed of by
the seller or sellers thereof as set forth in the Registration Statements. In
the event that on any Trading Day the number of shares available under a
Registration Statement filed pursuant to this Agreement is insufficient to cover
all of the Registrable Securities issued or issuable under the Purchase
Agreement and upon exercise of or otherwise pursuant to the Warrants, without
giving effect to any limitations on the Company's ability to effect Draw Downs
under the Purchase Agreement or on IFG's ability to exercise the Warrants (the
"Registration Trigger Date"), the Company shall amend the Registration
Statement, or file a new Registration Statement (on the short form available
therefore, if applicable), or both, so as to cover all of the Registrable
Securities so issued or issuable (without giving effect to any limitations on
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Draw Downs under the Purchase Agreement or on exercise contained in the
Warrants, as applicable) as of the Registration Trigger Date, in each case, as
soon as practicable, but in any event within twenty (20) business days after the
necessity therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to rely). The
Company shall use its best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. The provisions of Section 2(c) above shall be applicable with
respect to the Company's obligations under this Section 3(b).
c. If deemed necessary by counsel for both parties, on or before each
Draw Down Date, the Company shall prepare and file with the SEC a supplement to
the prospectus contained in the Registration Statement, in form and substance
agreed upon by the parties, regarding the Draw Down including the Draw Down
Date, the Investment Amount, the number of shares sold to IFG in connection with
all previous Draw Downs, if not previously disclosed in an SEC Document, and any
additional information required by SEC rules and regulations, including Item 507
of Regulation S-K.
d. The Company shall furnish to IFG and its legal counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one copy of each Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other
than any portion of any thereof which contains information for which the Company
has sought confidential treatment), and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as IFG may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by IFG.
The Company will immediately notify IFG by facsimile of the effectiveness of
each Registration Statement or any post-effective amendment. The Company will
promptly respond to any and all comments received from the SEC, with a view
towards causing each Registration Statement or any amendment thereto to be
declared effective by the SEC as soon as practicable and shall file an
acceleration request as soon as practicable following the resolution or
clearance of all SEC comments or, if applicable, following notification by the
SEC that any such Registration Statement or any amendment thereto will not be
subject to review.
e. The Company shall use reasonable efforts to (i) register and qualify
the Registrable Securities covered by the Registration Statements under such
other securities or "blue sky" laws of such jurisdictions in the United States
as IFG reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(e), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
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f. In the event IFG selects underwriters for the offering, the Company
shall enter into and perform its obligations under an underwriting agreement, in
usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering.
g. The Company will immediately notify IFG upon the occurrence of any
of the following events in respect of the Registration Statement or related
prospectus in respect of the resale of the Registrable Securities: (i) receipt
of any request for additional information from the SEC or any other federal or
state governmental authority during the period of effectiveness of the
Registration Statement, the response to which would require any amendments or
supplements to the Registration Statement or related prospectus; (ii) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and (iv) the
happening of any event that makes any statement made in the Registration
Statement or related prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, 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 not misleading, and that in the case of the related prospectus, 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 the light of the circumstances under which they were made, not
misleading; provided, however that prior to the disclosure by the Company of any
material non-public information to IFG or its advisors or representatives
pursuant to this Section 3(g) or any other provisions of this Agreement, the
Company shall identify such information as being material non-public information
and shall provide IFG with the opportunity to accept or refuse to accept such
material non-public information.
h. As promptly as practicable after becoming aware of an event
specified in Section 3(g)(iv) of this Agreement, the Company shall use its best
efforts promptly to prepare a supplement or amendment to any Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to IFG as IFG may reasonably request;
provided that, for not more than twenty (20) consecutive Trading Days (or a
total of not more than sixty (60) Trading Days in any twelve (12) month period),
the Company may delay the disclosure of material non-public information
concerning the Company (as well as prospectus or Registration Statement
updating) the disclosure of which at the time is not, in the good faith opinion
of the Company, in the best interests of the Company (an "Allowed Delay");
provided, further, that the Company shall promptly (i) notify IFG in writing of
the existence of (but in no event, without the prior written consent of IFG,
shall the Company disclose to IFG any of the facts or circumstances regarding)
material non-public information giving rise to an Allowed Delay and (ii) advise
IFG in writing to cease all sales under such Registration Statement until the
end of the Allowed Delay. Upon expiration of the Allowed Delay, the Company
shall again be bound by Section 3(g) and the first sentence of this Section 3(h)
with respect to the information giving rise thereto. In the event that IFG
consents to receipt of material non-public information pursuant to the second
proviso contained in the first sentence of this Section 3(h), IFG hereby agrees
to keep such information confidential until the earlier of (i) the date when
such information is publicly disclosed by the Company and (ii) the date which is
twenty-one (21) Trading Days after the beginning of the period constituting such
Allowed Delay.
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i. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of any Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest possible moment and to notify IFG (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
j. The Company shall permit a single firm of counsel designated by IFG
to review such Registration Statement and all amendments and supplements thereto
(as well as all requests for acceleration or effectiveness thereof and any
correspondence between the Company and the SEC relating to the Registration
Statement) a reasonable period of time (as specified in Section 2(c) above)
prior to their filing with the SEC, and not file any document (nor send any
correspondence) in a form to which such counsel reasonably objects and will not
request acceleration of such Registration Statement without prior notice to such
counsel. The sections of such Registration Statement covering information with
respect to IFG, IFG's beneficial ownership of securities of the Company or IFG's
intended method of disposition of Registrable Securities shall conform to the
information provided to the Company by IFG.
k. The Company shall make generally available to its security holders
as soon as practicable, but not later than ninety (90) days after the close of
the period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
l. On the date that Registrable Securities are delivered to an
underwriter, if any, for sale in connection with any Registration Statement or,
if such securities are not being sold by an underwriter, on the date of
effectiveness thereof, the Company shall have caused to be delivered to IFG (and
to each underwriter, if any) a Comfort Letter or Bring Down Comfort Letter, as
applicable, as required pursuant to the terms of the Purchase Agreement,
addressed to the underwriters, if any, and IFG.
m. Subject to the provisions of the Purchase Agreement, the Company
shall make available for inspection by (i) IFG, (ii) any underwriter
participating in any disposition pursuant to a Registration Statement, (iii) one
firm of attorneys and one firm of accountants or other agents retained by IFG,
and (iv) one firm of attorneys retained by all such underwriters (collectively,
the "Inspectors") all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the "Records"),
as shall be reasonably deemed necessary by each Inspector to enable each
Inspector to exercise its due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information which any Inspector
may reasonably request for purposes of such due diligence; provided, however,
that, subject to the provisions of the Purchase Agreement, each Inspector shall
hold in confidence and shall not make any disclosure (except to IFG) of any
Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the release of such Records is ordered pursuant to a subpoena or other order
from a court or government body of competent jurisdiction or (b) the information
in such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement. Nothing herein (or in
any other confidentiality agreement between the Company and IFG) shall be deemed
to limit IFG's ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations.
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n. The Company shall hold in confidence and not make any disclosure of
information concerning IFG provided to the Company unless (i) the disclosure of
such information is necessary to comply with federal or state securities laws,
(ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees that it shall,
upon learning that disclosure of such information concerning IFG is sought in or
by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to IFG prior to making such disclosure, and allow IFG,
at its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.
o. The Company shall (i) cause all the Registrable Securities covered
by the Registration Statement to be listed on each Principal Market on which
securities of the same class or series issued by the Company are then listed, if
any, if the listing of such Registrable Securities is then permitted under the
rules of such exchange, and, without limiting the generality of the foregoing,
to arrange for at least two market makers to register with the National
Association of Securities Dealers, Inc. ("NASD") as such with respect to such
Registrable Securities.
p. The Company shall provide a transfer agent and registrar, which may
be a single entity, for the Registrable Securities not later than the effective
date of the Registration Statement.
q. The Company shall cooperate with IFG and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to such Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or IFG may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
IFG may request, and, within three (3) business days after a Registration
Statement which includes Registrable Securities is ordered effective by the SEC,
the Company shall deliver to the transfer agent for the Registrable Securities
(with copies to IFG) instructions for 6ther issuance for such Registrable
Securities.
r. At the request of the holders of a majority-in-interest of the
Registrable Securities, the Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and any prospectus used in connection with the
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.
s. The Company shall not, and shall not agree to, allow the holders of
any securities of the Company to include any of their securities in any
Registration Statement under Section 2(a) hereof or any amendment or supplement
thereto under Section 3(b) hereof without the consent of the holders of a
majority-in-interest of the Registrable Securities. In addition, the Company
shall not offer any securities for its own account or the account of others in
any Registration Statement under Section 2(a) hereof or any amendment or
supplement thereto under Section 3(b) hereof without the consent of the holders
of a majority-in-interest of the Registrable Securities.
t. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by IFG of Registrable Securities pursuant to
a Registration Statement.
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u. The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including without limitation the Securities Act and the Exchange Act and the
rules and regulations promulgated by the SEC).
4. OBLIGATIONS OF IFG.
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In connection with the registration of the Registrable Securities, IFG
shall have the following obligations:
a. It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities that IFG shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of the Registrable Securities held by it as shall reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least seven (7) business days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
IFG of the information the Company requires from IFG.
b. IFG, by its acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of the Registration Statement hereunder, unless
IFG has notified the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement.
c. In the event IFG determines to engage the services of an
underwriter, IFG agrees to enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities.
d. IFG agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Sections 3(g) or 3(i), IFG will
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until IFG's receipt
of the copies of the supplemented or amended prospectus contemplated by Sections
3(g) or 3(i) and, if so directed by the Company, IFG shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in IFG's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
e. IFG may not participate in any underwritten registration hereunder
unless IFG (i) agrees to sell its Registrable Securities on the basis provided
in any underwriting arrangements in usual and customary form entered into by the
Company, (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (iii) agrees to pay its
pro rata share of all underwriting discounts and commissions and any expenses in
excess of those payable by the Company pursuant to Section 5 below.
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5. EXPENSES OF REGISTRATION.
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All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualification fees, printers and accounting fees, the fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
counsel selected by IFG pursuant to Sections 2(b) and 3(j) hereof shall be borne
by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) IFG, (ii) the directors, officers, partners, owners,
employees, agents and each person who controls IFG within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), if any, (iii) any underwriter (as defined in the Securities Act) for IFG,
and (iv) the directors, officers, partners, employees and each person who
controls any such underwriter within the meaning of the Securities Act or the
Exchange Act, if any (each, an "Indemnified Person"), against any joint or
several losses, claims, damages, liabilities or expenses (collectively, together
with actions, proceedings or inquiries by any regulatory or self-regulatory
organization, whether commenced or threatened, in respect thereof, "Claims") to
which any of them may become subject insofar as such Claims arise out of or are
based upon: (i) any untrue statement or alleged untrue statement of a material
fact in a Registration Statement or the omission or alleged omission to state
therein a material fact required to be stated or necessary to make the
statements therein not misleading; (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to the restrictions set forth in Section 6(c) with respect to the number of
legal counsel, the Company shall reimburse the Indemnified Person, promptly as
such expenses are incurred and are due and payable, for any reasonable legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person or underwriter for
such Indemnified Person expressly for use in connection with the preparation of
such Registration Statement or any such amendment thereof or supplement thereto;
(ii) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld; and (iii) with respect to any
preliminary prospectus, shall not inure to the benefit of any Indemnified Person
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
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then amended or supplemented, such corrected prospectus was timely made
available by the Company pursuant to Section 3(d) hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus prior
to the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by IFG pursuant to Section 9.
b. In connection with any Registration Statement in which IFG is
participating, IFG agrees to indemnify, hold harmless and defend, to the same
extent and in the same manner set forth in Section 6(a), the Company, each of
its directors, each of its officers who signs the Registration Statement, each
person, if any, who controls the Company within the meaning of the Securities
Act or the Exchange Act, any underwriter and any other stockholder selling
securities pursuant to the Registration Statement or any of its directors or
officers or any person who controls such stockholder or underwriter within the
meaning of the Securities Act or the Exchange Act (collectively and together
with an Indemnified Person, an "Indemnified Party"), against any Claim to which
any of them may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation by
IFG, in each case to the extent (and only to the extent) that such Violation
occurs in reliance upon and in conformity with written information furnished to
the Company by IFG expressly for use in connection with such Registration
Statement; and subject to Section 6(c), IFG will reimburse any legal or other
expenses (promptly as such expenses are incurred and are due and payable)
reasonably incurred by it in connection with investigating or defending any such
Claim; provided, however, that the indemnity agreement contained in this Section
6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of IFG, which consent
shall not be unreasonably withheld; provided, further, however, that IFG shall
be liable under this Agreement (including this Section 6(b) and Section 7) for
only that amount as does not exceed the net proceeds to IFG 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 such Indemnified Party and shall survive the transfer of
the Registrable Securities by IFG pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal
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counsel for the Indemnified Persons or the Indemnified Parties, as applicable,
and such legal counsel shall be selected by IFG, if IFG is entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation, and (iii) contribution
(together with any indemnification or other obligations under this Agreement) by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. REPORTS UNDER THE EXCHANGE ACT.
----------------------------------
With a view to making available to IFG the benefits of Rule 144 or any
other similar rule or regulation of the SEC that may at any time permit IFG to
sell securities of the Company to the public without registration, the Company
agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 5.3 of the
Purchase Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and
c. furnish to IFG so long as IFG owns Registrable Securities, promptly
upon request, (i) a written statement by the Company that it has complied with
the reporting requirements of Rule 144, the Securities Act and the Exchange Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested to permit IFG to sell such securities
pursuant to Rule 144 without registration.
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9. ASSIGNMENT OF REGISTRATION RIGHTS.
------------------------------------
The rights under this Agreement with respect to the Registrable Securities
issued pursuant to the Commitment Warrants shall be automatically assignable by
IFG to any transferee of all or any portion of Registrable Securities issuable
pursuant to the Commitment Warrants if: (i) IFG agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (iii) following such transfer or assignment,
the further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, (iv)
at or before the time the Company receives the written notice contemplated by
clause (ii) of this sentence, the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein, (v) such
transfer shall have been made in accordance with the applicable requirements of
the Purchase Agreement,and (vi) such transferee shall be an "accredited
investor" as that term defined in Rule 501 of Regulation D promulgated under the
Securities Act.
The rights under this Agreement with respect to the Registrable Securities
issued with respect to the Purchase Agreement shall not be assignable.
10. AMENDMENT OF REGISTRATION RIGHTS.
-----------------------------------
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company and IFG. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon IFG and the Company.
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms hereof
shall be sent by certified or registered mail (return receipt requested) or
delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed in
the mail, if mailed by regular United States mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service) or
by facsimile, in each case addressed to a party. The addresses for such
communications shall be:
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If to the Company:
Elgrande, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Tel:(▇▇▇) ▇▇▇-▇▇▇▇
Fax:(▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, CEO
If to IFG:
IFG Private Equity, LLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and construed in accordance with
the laws of the State of Nevada applicable to agreements made and to be
performed in the State of Nevada (without regard to principles of conflict of
laws). Both parties irrevocably consent to the exclusive jurisdiction of the
United States federal courts and the state courts located in Nevada with respect
to any suit or proceeding based on or arising under this Agreement, the
agreements entered into in connection herewith or the transactions contemplated
hereby or thereby and irrevocably agree that all claims in respect of such suit
or proceeding may be determined in such courts. Both parties irrevocably waive
the defense of an inconvenient forum to the maintenance of such suit or
proceeding. Both parties further agree that service of process upon a party
mailed by first class mail shall be deemed in every respect effective service of
process upon the party in any such suit or proceeding. Nothing herein shall
affect either party's right to serve process in any other manner permitted by
law. Both parties agree that a final non-appealable judgment in any such suit
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
e. This Agreement, the Purchase Agreement and the Warrants (including
all schedules and exhibits hereto or thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement, the Purchase
Agreement and the Warrants supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
g. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same agreement.
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i. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
j. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to IFG by vitiating the intent and purpose
of the transactions contemplated hereby. Accordingly, the Company acknowledges
that the remedy at law for breach of its obligations hereunder will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of any of the provisions hereunder, that IFG shall be entitled, in
addition to all other available remedies in law or in equity, to an injunction
or injunctions to prevent or cure breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof, without the
necessity of showing economic loss and without any bond or other security being
required.
k. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
l. In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any
provision hereof which may prove invalid or unenforceable under any law shall
not affect the validity or enforceability of any other provision hereof.
IN WITNESS WHEREOF, the Company and IFG have caused this Agreement to be
duly executed as of the date first above written.
▇▇▇▇▇▇▇▇.▇▇▇, INC. IFG PRIVATE EQUITY, LLC
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
By: _________________________ By: _________________________
Chief Executive Officer ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Manager
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