REGISTRATION RIGHTS AGREEMENT
This
REGISTRATION RIGHTS AGREEMENT (the “Agreement”)
is
made and entered into as of the 3rd
day of
December, 2007, by and among Capital Solutions I, Inc., a Delaware corporation
(the “Company”),
and
Xxxxxx Partners LP, a Delaware limited partnership (“Xxxxxx”),
and
any other investor who executes this Agreement (collectively,
the “Investors”
and
each, an “Investor”).
Unless
defined otherwise, capitalized terms herein shall have the identical meaning
as
in the Securities Purchase Agreement of even date herewith (the “Purchase
Agreement”),
by
and among the Company and the Investors.
PRELIMINARY
STATEMENT
WHEREAS,
pursuant to the Purchase Agreement, the Investors are purchasing Notes in the
principal amount of $3,400,000, which are convertible into shares of Series
A
Convertible Preferred Stock and Warrants, shares of Common Stock and Warrants
or
shares of Common Stock, all as set forth in the Notes, which entitle the
Investor to receive shares of Common Stock upon conversion or exercise thereof,
such shares being referred to as the “Shares”;
and
WHEREAS,
the
ability of the Investors to sell their Shares is subject to certain restrictions
under the 1933 Act; and
WHEREAS,
as a
condition to purchase of the Series A Preferred Stock and Warrants pursuant
to
the Purchase Agreement, the Company has agreed to provide the Investors with
a
mechanism that will permit the Investors to sell the Shares in the
future.
NOW,
THEREFORE,
in
consideration of the premises and of the mutual covenants and agreements, and
subject to the terms and conditions herein contained, the parties hereto hereby
agree as follows:
ARTICLE
I
INCORPORATION
BY REFERENCE
1.1. Incorporation
by Reference.
The
foregoing recitals and the Exhibits attached hereto and referred to herein,
are
hereby acknowledged to be true and accurate, and are incorporated herein by
this
reference.
1.2. Supersedes
Other Agreements.
This
Agreement, to the extent that it is inconsistent with any other instrument
or
understanding among the parties relating to the subject matter of this
Agreement, shall supersede such instrument or understanding to the fullest
extent permitted by law. A copy of this Agreement shall be filed at the
Company’s principal office.
1.3. Definitions.
All
terms defined in the Purchase Agreement and used in this Agreement shall have
the same meanings in this Agreement as in the Purchase Agreement. As used in
this Agreement the following terms shall have the meanings hereinafter set
forth.
(a)
“Excusable
Reason”
shall
have the meaning set forth in Section 2.6 of this Agreement.
(b)
“Filing
Date”
shall
mean, with respect to the Initial Registration Statement, the 60th
calendar
day following the date hereof and, with respect to any Subsequent Registration
Statements, the later of (a) ninety (90) days after the Company receives a
demand for registration of additional Registrable Securities or (b) the earliest
practical date on which the Company is permitted by SEC Guidance to file such
additional Registration Statement related to the Registrable Securities. If
any
Filing Date or Required Effectiveness Date occurs on a date which is either
(x)
a Saturday, Sunday or day on which banks in the State or New York are authorized
or required to be closed on all or part of the normal business day or (y) the
SEC is closed for all or a portion of the business day, the Filing Date or
Required Effective Date, as the case may be, shall the next day which is not
a
day described in clauses (x) or (y).
(c)
“Initial
Registration Statement”
shall
mean the Registration Statement filed pursuant to Section 2.2 of this
Agreement.
(d)
“Subsequent
Registration Statements”
shall
mean one or more Registration Statements filed pursuant to Section 2.3 of this
Agreement.
(e)
“Registrable
Securities”
shall
mean and include the Shares issuable upon conversion of the Notes or the Series
A Preferred Stock and upon exercise or conversion the Warrants issued pursuant
to the Purchase Agreement or the Notes. As to any particular Registrable
Securities, such securities will cease to be Registrable Securities when (a)
they have been effectively registered under the 1933 Act and disposed of in
accordance with the registration statement covering them, (b) they are or may
be
freely traded without registration pursuant to Rule 144, or (c) they have been
otherwise transferred and new certificates for them not bearing a restrictive
legend have been issued by the Company and the Company shall not have “stop
transfer” instructions against them.
(f)
“Registration
Expenses”
shall
mean all expenses incident to the Company’s performance of or compliance with
its obligations under this Agreement, including, without limitation, all
registration, filing, listing, stock exchange and NASD fees, all fees and
expenses of complying with state securities or blue sky laws (including fees,
disbursements and other charges of counsel for the underwriters only in
connection with blue sky filings), all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees, disbursements and other
charges of counsel for the Company and of its independent public accountants,
including the expenses incurred in connection with “cold comfort” letters
required by or incident to such performance and compliance, any fees and
disbursements of underwriters customarily paid by the issuer of securities,
but
excluding from the definition of Expenses underwriting and discounts and
brokerage commissions and applicable transfer taxes, if any, or legal and other
expenses incurred by any sellers, which discounts, commissions, transfer taxes
and legal and other expenses shall be borne by the seller or sellers of
Registrable Securities in all cases.
(g)
“Registration
Statement”
shall
mean the registration statement required to be filed pursuant to Section 2.2
of
this Agreement hereunder and any additional registration statements contemplated
by Section 2.3, including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
(h)
“Required
Effective Date”
shall
mean the first to occur of (i) 150 days following the Filing Date with respect
to the Registration Statement, (ii) ten (10) days following the receipt of
a “No
Review” or similar letter from the SEC or (iii) the third (3rd) business day
following the day the Company receives notice from the SEC that the SEC has
determined that the Registration Statement eligible to be declared effective
without further comments by the SEC; provided, however, that in no event shall
the Required Effective Date of a Subsequent Registration Statement be earlier
than the earliest date on which, based on SEC Guidance, the SEC will declare
effective such Additional Registration Statement.
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(i)
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended or interpreted from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.
(j)
“Rule
415”
means
Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended or interpreted from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.
(k)
“Rule
424”
means
Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended or interpreted from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.
(l)
“SEC
Guidance”
means
(i) any publicly-available written or oral guidance, comments, requirements
or
requests of the Commission staff and (ii) the Securities Act.
ARTICLE
II
REQUIRED
REGISTRATION OF REGISTRABLE SECURITIES
2.1. Registrable
Securities.
The
Company shall file one or more Registration Statements covering the Registrable
Securities as provided in Sections 2.2 and 2.3 of this Agreement.
2.2. Registration
of Registrable Securities.
The
Company shall prepare and file the Initial Registration Statement covering
the
sale of such number of shares of the Registrable Securities as the Investors
shall elect by written notice to the Company, and absent such election, covering
the sale of all of the Registrable Securities. The Company shall use its best
efforts to cause the Registration Statement to be declared effective by the
SEC
on the Required Effective Date. Subject to SEC Guidance on the number of Shares
which may be registered pursuant to Rule 415, nothing contained in this
Agreement shall be deemed to limit the number of Registrable Securities to
be
registered by the Company hereunder. As a result, should the Registration
Statement not relate to the maximum number of Registrable Securities acquired
by
(or potentially acquirable by) the holders of the Shares of the Company issued
to the Investor pursuant to the Purchase Agreement and the Warrants, other
than
as a result of the election by the holder thereof not to have Shares included
in
the Registration Statement (unless such election was made with a view to meeting
the SEC Guidance relating to Rule 415), the Company shall be required to
promptly file a separate registration statement (utilizing Rule 462 promulgated
under the 1933 Act, if applicable, to the extent that it may do so) relating
to
such Registrable Securities which then remain unregistered, subject to the
SEC
Guidance on the earliest day on which such Registration Statement may be filed.
The provisions of this Agreement shall relate to any such separate registration
statement as if it were an amendment to the Registration Statement. No shares
of
Common Stock or other securities shall be included in the Initial or any
Subsequent Registration Statement other than Shares issued or issuable to the
Investors and their transferees who hold Registrable Securities; it being
understood that the Initial and Subsequent Registration Statements shall relate
solely to Registrable Securities, and the Company shall not file any
registration statement with respect to other securities if the effect thereof
would be to impair the ability of the Investors to have registered the maximum
number of Registrable Securities which are permitted based on SEC Guidance.
The
Investors have advised the Company that, to the extent that all of the
Registrable Securities cannot be registered based on SEC Guidance relating
to
Rule 415, as long as the Investors shall be able so sell the shares of Common
Stock issuable upon conversion of the Series A Preferred Stock pursuant to
Rule
144(k), or subsequent similar rule, six months after the Closing Date, the
registration statement filed pursuant to this Section 2.1 shall only include
Registrable Securities issuable upon exercise of the Warrants.
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2.3. Subsequent
Registration.
Subject
to the limitations of Section 2.2, at any time and from time to time, the
Investors may request the registration under the 1933 Act on a Subsequent
Registration Statement of all or part of the Registrable Securities nor
previously sold or subject to an effective registration statement. Subject
to
the conditions of Section 2.6 of this Agreement, the Company shall use its
commercially reasonable best efforts to file such registration statement under
the 1933 Act by the Filing Date and have the Subsequent Registration Statement
declared effective by the Required Effective Date. The Company shall notify
the
Investor promptly when any such Registration Statement has been declared
effective. The parties intend that all Registrable Securities are to be
registered pursuant to this Section 2.2, and that this Section 2.3 is intended
to provide the Investors with registration rights in the event that all of
the
Registrable Securities are not included in the Registration Statement required
by Section 2.2, either because the number of Registrable Securities had to
be
reduced in order for the offering to be deemed a secondary offering under Rule
415 based on SEC Guidance or because the Investors believed that the SEC
Guidance would not permit the registration of all of the Registrable Securities.
If more than eighty percent (80%) of the Shares have been registered and sold
(either pursuant to the Registration Statement or Rule 144, the Company’s
obligations under this Article II shall terminate.
2.4. Registration
Statement Form.
Registrations under Section 2.2 and Section 2.3 shall be on the appropriate
registration form of the SEC as shall permit the disposition of such Registrable
Securities in accordance with the intended method or methods of disposition
specified in the Registration Statement; provided, however, such intended method
of disposition shall not include an underwritten offering of the Registrable
Securities.
2.5. Expenses.
The
Company will pay all Registration Expenses in connection with any Initial or
Subsequent Registration Statement or any registration statement in which
Registrable Securities are included pursuant to Article III of this Agreement.
2.6. Effective
Registration Statement.
An
Initial or Subsequent Registration Statement shall not be deemed to have been
effected, other than for an Excusable Reason, as hereinafter defined, (i) unless
a registration statement with respect thereto has become effective, provided
that a registration which does not become effective after the Company filed
a
registration statement with respect thereto solely by reason of the refusal
to
proceed of any holder of Registrable Securities (other than a refusal to proceed
based upon the advice of counsel in the form of a letter signed by such counsel
and provided to the Company relating to a disclosure matter unrelated to such
holder) shall be deemed to have been effected by the Company, (ii) if, after
it
has become effective, such registration statement becomes subject to any stop
order, injunction or other order or extraordinary requirement of the SEC or
other governmental agency or court for any reason and such stop order or other
action continues in effect for five trading days or (iii) if, after it has
become effective, such registration ceases to be effective other than for an
Excusable Reason. An “Excusable
Reason”
means
the occurrence of negotiations with respect to a material agreement prior to
either the announcement of the execution of the agreement or the termination
of
the negotiations with respect to such proposed agreement and other similar
material corporate events to which the Company is a party or expects to be
a
party if, in the reasonable judgment of the Company, disclosure of the
negotiations or other event would be adverse to the best interests of the
Company provided that the Company is continuing to treat such negotiations
as
confidential and provided further that the period during which the Company
is
precluded from filing the registration statement (or suspended the use of an
effective registration statement) as a result thereof has not exceeded twenty
(20) trading days in the aggregate, and provided further that the Company shall
not be permitted to avoid filing a registration statement (or to suspend the
use
of an effective registration statement) for an Excusable Reason more than twice
in any one-year period. An Excusable Reason shall also include acts of God
and
closure of the SEC.
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2.7. Plan
of
Distribution.
The
Company hereby agrees that the Registration Statement shall include a plan
of
distribution section reasonably acceptable to the Investors; provided, however,
such plan of distribution section shall be modified by the Company so as to
not
provide for the disposition of the Registrable Securities on the basis of an
underwritten offering.
2.8. Liquidated
Damages.
(i) In
the
event (a) the Registration Statement is not declared effective by the Required
Effectiveness Date, or (b) if the Registrable Securities are registered pursuant
to an effective Registration Statement and such Registration Statement or other
Registration Statement(s) demanded by Investor including the Registrable
Securities is not effective in the period from the Required Effective Date
through two years following the date hereof other than for an Excusable Reason,
the Company shall, for each such day (x) after the Required Effectiveness Date
that the Registration Statement shall not have been declared effective, or
(y)
during which the Registration Statement is not effective as required by clause
(c) of this Section 2.8(i), issue to the Investor, as liquidated damages and
not
as a penalty, 1,000 shares of Series A Preferred Stock for any such day (based
on a 365 day working calendar year), such issuance shall be made no later than
the tenth business day of the calendar month next succeeding the month in which
such day occurs; provided, however, that if the Registration Statement does
not
cover, or registration has not been requested for, whether as a result of SEC
Guidance with respect to Rule 415 or otherwise, the Registrable Securities
issuable upon conversion of all of the shares of Series A Preferred Stock that
were issued by the Company, the liquidated damages per day shall be the
percentage of 1,000 shares that the number of Registrable Securities then
subject to, or proposed to be include in, the Registration Statement bears
to
the total number Registrable Securities issued or issuable upon exercise of
all
of the Warrants that were initially issued to the Investors. However, in no
event shall the Company be required to pay any liquidated damages under this
Section 2.8 in an amount exceeding 370,000 shares of Series A Preferred Stock
in
the aggregate (as adjusted pursuant to the terms of the Certificate of
Designation). Any Registrable Securities which have been sold pursuant to a
Registration Statement shall not be deemed to be Shares covered by the
Registration Statement.
(ii) Notwithstanding
the provisions of Section 2.8(i):
(a)
No
fractional shares shall be issued. Any fractional shares which would otherwise
be issued on any date on which Preferred Stock is to be issued pursuant to
Section 2.8(i) of this Agreement, shall be carried forward; provided, however,
that if, at the expiration of the period during which liquidated damages is
payable there remains a fractional shall which has not been applied to
liquidated damages, the Company shall have no further obligation to issue such
fractional share.
(iii) In
no
event shall the Company be required to pay any liquidated damages in the event
that the failure of the registration statement to be declared effective on
the
Required Effective Date results in whole or in part from either (a) the failure
of any Investor to provide information relating to the Investor and its proposed
method of sale or any other information concerning the Investor that is required
to be included in the registration statement or (b) any delays resulting from
questions raised by the SEC or any other regulatory agency, market or exchange
concerning any Investor or the affiliates of any Investor, it being understood
that SEC comments relating to compliance with Rule 415 shall not be deemed
a
delay covered by this clause (b).
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(iv) The
parties hereto agree that the liquidated damages provided for in this Section
2.8 constitute a reasonable estimate of the damages that may be incurred by
the
Investor by reason of the failure of the Registration Statement(s) to be filed
or declared effective in accordance with the provisions hereof.
(v) The
obligation of the Company terminates when the Investor no longer holds more
than
five percent (5%) of the Registrable Securities, based on the number of
Registrable Securities initially issuable pursuant to the Purchase Agreement
and
any shares issued due to adjustments in these transaction documents and the
Warrants.
ARTICLE
III
INCIDENTAL
REGISTRATION RIGHTS
3.1. Right
To Include (“Piggy-Back”) Registrable Securities.
Provided that the Registrable Securities have not been registered, if at any
time after the date hereof but before the second anniversary of the date hereof,
the Company proposes to register any of its securities under the 1933 Act (other
than by a registration in connection with an acquisition in a manner which
would
not permit registration of Registrable Securities for sale to the public, on
Form S-8, or any successor form thereto, on Form S-4, or any successor form
thereto and other than pursuant to Section 2), on an underwritten basis (either
best-efforts or firm-commitment), then, the Company will each such time give
prompt written notice to all holders of Registrable Securities of its intention
to do so and of such holders of Registrable Securities’ rights under this
Section 3.1. Upon the written request of any such holders of Registrable
Securities made within ten (10) days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of
by
such holders of Registrable Securities and the intended method of disposition
thereof), the Company will, subject to the terms of this Agreement, use its
commercially reasonable best efforts to effect the registration under the 1933
Act of the Registrable Securities, to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid)
of
such Registrable Securities so to be registered, by inclusion of such
Registrable Securities in the registration statement which covers the securities
which the Company proposes to register, provided that if, at any time after
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason either not to register
or to delay registration of such securities, the Company may, at its election,
give written notice of such determination to each holders of Registrable
Securities and, thereupon, (i) in the case of a determination not to register,
shall be relieved of this obligation to register any Registrable Securities
in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith), without prejudice, however,
to
the rights of any holder or holders of Registrable Securities entitled to do
so
to request that such registration be effected as a registration under Section
2,
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities, for the same period as the
delay in registering such other securities. No registration effected under
this
Section 3.1 shall relieve the Company of its obligation under Section 2 of
this
Agreement other than with respect to Registrable Securities registered and
sold
pursuant to such registration statement. The Company will pay all Registration
Expenses in connection with each registration of Registrable Securities
requested pursuant to this Section 3.1.
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3.2. Priority
In Incidental Registrations.
If the
managing underwriter of the underwritten offering contemplated by this Section
3
shall inform the Company and holders of the Registrable Securities requesting
such registration by letter of its belief that the number of securities
requested to be included in such registration exceeds the number which can
be
sold in such offering, then the Company will include in such registration,
to
the extent of the number which the Company is so advised can be sold in such
offering, (i) first securities proposed by the Company to be sold for its own
account, and (ii) second to holders of securities having demand registration
rights and exercising such rights in connection with such registration
statement, (iii) third Registrable Securities, and for (iv) fourth to securities
of other selling security holders (including officers, directors and 5%
stockholders, subject to any lock-up agreements with such persons) who requested
to be included in such registration.
ARTICLE
IV
REGISTRATION
PROCEDURES
4.1. Registration
Procedures.
If and
whenever the Company is required to effect the registration of any Registrable
Securities under the 1933 Act as provided in Section 2.2 and, as applicable,
2.3, the Company shall, as expeditiously as possible:
(i) prepare
and file with the SEC the Registration Statement, or amendments thereto, to
effect such registration (including such audited financial statements as may
be
required by the 1933 Act or the rules and regulations promulgated thereunder)
and thereafter use its commercially reasonable best efforts to cause such
registration statement to be declared effective by the SEC, as soon as
practicable, but in any event no later than the Required Effectiveness Date
(with respect to a registration pursuant to Section 2.2); provided, however,
that before filing such registration statement or any amendments thereto, the
Company will furnish to the counsel selected by the holders of Registrable
Securities which are to be included in such registration, copies of all such
documents proposed to be filed;
(ii) with
respect to any Initial or Subsequent Registration Statement, prepare and file
with the SEC such amendments and supplements to such Registration Statement
and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the 1933
Act with respect to the disposition of all Registrable Securities covered by
such registration statement until the earlier to occur of thirty six (36) months
after the date of this Agreement (subject to the right of the Company to suspend
the effectiveness thereof for an Excusable Reason (each a “Black-Out
Period”))
or
such time as all of the securities which are the subject of such registration
statement cease to be Registrable Securities (such period, in each case, the
“Registration
Maintenance Period”).
The
Company shall notify the Investors within twenty four (24) hours prior to any
Black-Out Period;
(iii) furnish
to each holder of Registrable Securities covered by such registration statement
such number of conformed copies of such registration statement and of each
such
amendment and supplement thereto (in each case including all exhibits), such
number of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any
other
prospectus filed under Rule 424 under the 1933 Act, in conformity with the
requirements of the 1933 Act, and such other documents, as such holder of
Registrable Securities and underwriter, if any, may reasonably request in order
to facilitate the public sale or other disposition of the Registrable Securities
owned by such holder of Registrable Securities;
(iv) use
its
commercially reasonable best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement under
such other U.S. federal or state securities laws or U.S. state blue sky laws
as
any U.S. holder of Registrable Securities thereof shall reasonably request,
to
keep such registrations or qualifications in effect for so long as such
registration statement remains in effect, and take any other action which may
be
reasonably necessary to enable such holder of Registrable Securities to
consummate the disposition in such jurisdictions of the securities owned by
such
holder of Registrable Securities, except that the Company shall not for any
such
purpose be required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified or to consent to general
service of process in any such jurisdiction;
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(v) use
its
commercially reasonable best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the U.S.
holder of Registrable Securities thereof to consummate the disposition of such
Registrable Securities;
(vi) furnish
to each holder of Registrable Securities who requests, a signed counterpart,
addressed to such holder of Registrable Securities, and the underwriters, if
any, of an opinion of counsel for the Company, dated the effective date of
such
registration statement (or, if such registration includes an underwritten public
offering, an opinion dated the date of the closing under the underwriting
agreement), such opinion to be in the form filed as Exhibit 5 to the
registration statement, and
(vii) notify
the Investors and their counsel promptly and confirm such advice in writing
promptly after the Company has knowledge thereof:
(a)
when
the Registration Statement, the prospectus or any prospectus supplement related
thereto or post-effective amendment to the Registration Statement has been
filed, and, with respect to the Registration Statement or any post-effective
amendment thereto, when the same has become effective;
(b)
of
any request by the SEC for amendments or supplements to the Registration
Statement or the prospectus or for additional information;
(c)
of
the issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings by any Person for
that purpose; and
(d)
of
the receipt by the Company of any notification with respect to the suspension
of
the qualification of any Registrable Securities for sale under the securities
or
blue sky laws of any jurisdiction or the initiation or threat of any proceeding
for such purpose;
(viii) notify
each holder of Registrable Securities covered by such registration statement,
at
any time when a prospectus relating thereto is required to be delivered under
the 1933 Act, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration statement, as
then
in effect, includes an untrue statement of a material fact or omits to state
any
material facts required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and
at
the request of any such holder of Registrable Securities promptly prepare and
furnish to such holder of Registrable Securities a reasonable number of copies
of a supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit
to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
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(ix) use
its
commercially reasonable best efforts to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(x) otherwise
use its commercially reasonable best efforts to comply with all applicable
rules
and regulations of the SEC, and make available to its security holders, as
soon
as reasonably practicable, an earnings statement covering the period of at
least
twelve months, but not more than eighteen months, beginning with the first
full
calendar month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the 1933
Act
and Rule 158 thereunder;
(xi) enter
into such agreements and take such other actions as the Investors shall
reasonably request in writing (at the expense of the requesting or benefiting
Investors) in order to expedite or facilitate the disposition of such
Registrable Securities; and
(xii) use
its
commercially reasonable best efforts to list all Registrable Securities covered
by such registration statement on any securities exchange on which any of the
Registrable Securities are then listed.
(xiii) The
Company may require each holder of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such holder of Registrable Securities and the distribution of such securities
as
the Company may from time to time reasonably request in writing. In this
connection, the Investors shall:
(a)
furnish the information as to any shares of Common Stock or other securities
of
the Company owned by the holder, the holder’s proposed plan of distribution, any
relationship between the holder and the Company and any other information which
the Company reasonably requests in connection with the preparation of the
registration statement and update such information immediately upon the
occurrence of any events or condition which make the information concerning
the
Seller inaccurate in any material respect;
(b)
not
sell any Registrable Securities pursuant to the registration statement except
in
the manner set forth in the Registration Statement;
(c)
comply with the prospectus delivery requirements and the provisions of
Regulation M of the SEC pursuant to the 1933 Act to the extent that such
regulation is applicable to the holder;
(d)
not
sell
or otherwise transfer or distribute any Registrable Securities if the holder
possesses any material nonpublic information concerning the
Company.
4.2. The
Company will not file any registration statement pursuant to Section 2.2 or
Section 2.3, or amendment thereto or any prospectus or any supplement thereto
to
which the Investors shall reasonably object, provided that the Company may
file
such documents in a form required by law or upon the advice of its
counsel.
4.3. The
Company represents and warrants to each holder of Registrable Securities that
it
has obtained all necessary waivers, consents and authorizations necessary to
execute this Agreement and consummate the transactions contemplated hereby
other
than such waivers, consents and/or authorizations specifically contemplated
by
the Purchase Agreement.
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4.4. Each
holder of Registrable Securities agrees that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in subdivision
(viii) of Section 4.1, such Holder will forthwith discontinue such holder of
Registrable Securities’ disposition of Registrable Securities pursuant to the
Registration Statement relating to such Registrable Securities until such holder
of Registrable Securities’ receipt of the copies of the supplemented or amended
prospectus contemplated by subdivision (viii) of Section 4.1 and, if so directed
by the Company, will deliver to the Company (at the Company’s expense) all
copies, other than permanent file copies, then in such Holder’s possession of
the prospectus relating to such Registrable Securities current at the time
of
receipt of such notice.
ARTICLE
V
UNDERWRITTEN
OFFERINGS
5.1. Incidental
Underwritten Offerings.
If the
Company at any time proposes to register any of its securities under the 1933
Act as contemplated by Section 3.1 and such securities are to be distributed
by
or through one or more underwriters, the Company will, if requested by any
holder of Registrable Securities as provided in Section 3.1 and subject to
the
provisions of Section 3.2, use its commercially reasonable best efforts to
arrange for such underwriters to include all the Registrable Securities to
be
offered and sold by such holder among the securities to be distributed by such
underwriters. In no event shall any Investors be deemed an underwriter for
purposes of this Agreement. This Article V shall not apply to any Registrable
Securities theretofore registered pursuant to Article II of this
Agreement.
5.2. Participation
In Underwritten Offerings.
No
holder of Registrable Securities may participate in any underwritten offering
under Section 3.1 unless such holder of Registrable Securities (i) agrees to
sell such Person’s securities on the basis provided in any underwriting
arrangements approved, subject to the terms and conditions hereof, by the
holders of a majority of Registrable Securities to be included in such
underwritten offering and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents (other than powers
of
attorney) required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other agreement
in
connection with such offering) shall require any holder of Registrable
Securities to make a representation or warranty to or agreements with the
Company or the underwriters other than representations and warranties contained
in a writing furnished by such holder of Registrable Securities expressly for
use in the related registration statement or representations, warranties or
agreements regarding such holder of Registrable Securities, such holder’s
Registrable Securities and such holder’s intended method of distribution and any
other representation required by law.
5.3. Preparation;
Reasonable Investigation.
In
connection with the preparation and filing of each registration statement under
the 1933 Act pursuant to this Agreement, the Company will give the holders
of
Registrable Securities registered under such registration statement, and their
respective counsel and accountants, the opportunity to participate in the
preparation of such registration statement, each prospectus included therein
or
filed with the SEC, and each amendment thereof or supplement thereto, and will
give each of them such access to its books and records and such opportunities
to
discuss the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the reasonable opinion of such holders’ and such underwriters’ respective
counsel, to conduct a reasonable investigation within the meaning of the 1933
Act.
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ARTICLE
VI
INDEMNIFICATION
6.1. Indemnification
by the Company.
In the
event of any registration of any securities of the Company under the 1933 Act,
the Company will, and hereby does agree to indemnify and hold harmless the
holder of any Registrable Securities covered by such registration statement,
its
directors and officers, each other Person who participates as an underwriter
in
the offering or sale of such securities and each other Person, if any, who
controls such holder or any such underwriter within the meaning of the 1933
Act
against any losses, claims, damages or liabilities, joint or several, to which
such holder or any such director or officer or underwriter or controlling person
may become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced
or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
1933 Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission
or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and the Company
will
reimburse such holder and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably incurred
by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding, provided that the Company shall not be liable
in any such case 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 or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
holder or underwriter stating that it is for use in the preparation thereof
and,
provided further that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or to any other Person, if any, who controls such underwriter within the meaning
of the 1933 Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person’s failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, within the time required by the
1933 Act to the Person asserting the existence of an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus or an amendment
or
supplement thereto. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such holder or any
such
director, officer, underwriter or controlling person and shall survive the
transfer of such securities by such holder.
6.2. Indemnification
by the Investor.
The
Company may require, as a condition to including any Registrable Securities
in
any registration statement filed pursuant to this Agreement, that the Company
shall have received an undertaking satisfactory to it from the prospective
holder of such Registrable Securities, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 6.1) the Company,
each director of the Company, each officer of the Company and each other Person,
if any, who controls the Company within the meaning of the 1933 Act, with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged omission was
made
in reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such holder of Registrable
Securities specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Any 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 of such securities by the Investor. The indemnification by the
Investor
shall be
limited to Fifty Thousand ($50,000) Dollars.
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6.3. Notices
Of Claims, Etc.
Promptly after receipt by an indemnified party of notice of the commencement
of
any action or proceeding involving a claim referred to in Sections 6.1 and
Section 6.2, such indemnified party will, if claim in respect thereof is to
be
made against an indemnifying party, give written notice to the latter 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 Sections 6.1 and Section 6.2, 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 such
reasonable judgment of
counsel to the indemnified party, a
conflict of interest,
as
hereinafter defined,
between
such indemnified and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified,
to the extent that the indemnifying party may wish, 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 other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action 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, or a covenant not to xxx, in respect to such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
If the
defendants in any action covered by this Section 6.3 include both the
indemnified party and the indemnifying party and counsel for the indemnified
party shall have reasonably concluded that there may be reasonable defenses
available to it which are different from or additional to those available to
the
indemnifying party or if the interests of the indemnified party reasonably
may
be deemed to conflict with the interests of the indemnifying party
(collectively, a “conflict of interest”), the indemnified parties, as a group,
shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party. Such counsel
shall be selected by the holders of a majority of the shares of Common Stock
having an indemnity claim against the Company, whether pursuant to this
Agreement or any other agreements which provide such or similar
indemnity.
6.4. Other
Indemnification.
Indemnification similar to that specified in Sections 6.1 and Section 6.2 (with
appropriate modifications) shall be given by the Company and each holder of
Registrable Securities (but only if and to the extent required pursuant to
the
terms herein) with respect to any required registration or other qualification
of securities under any Federal or state law or regulation of any governmental
authority, other than the 1933 Act.
6.5. Indemnification
Payments.
The
indemnification required by Sections 6.1 and Section 6.2 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or expense, loss, damage or liability
is incurred.
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6.6. Contribution.
(i) If
the
indemnification provided for in Sections 6.1 and Section 6.2 is unavailable
to
an indemnified party in respect of any expense, loss, claim, damage or liability
referred to therein, then each indemnifying party, in lieu of indemnifying
such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such expense, loss, claim, damage or liability
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the holder of Registrable Securities
or underwriter, as the case may be, on the other from the distribution of the
Registrable Securities or (ii) if the allocation provided by clause (i) above
is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the holder of Registrable
Securities or underwriter, as the case may be, on the other in connection with
the statements or omissions which resulted in such expense, loss, damage or
liability, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the holder of Registrable
Securities or underwriter, as the case may be, on the other in connection with
the distribution of the Registrable Securities shall be deemed to be in the
same
proportion as the total net proceeds received by the Company from the initial
sale of the Registrable Securities by the Company to the purchasers bear to
the
gain, if any, realized by all selling holders participating in such offering
or
the underwriting discounts and commissions received by the underwriter, as
the
case may be. The relative fault of the Company on the one hand and of the holder
of Registrable Securities or underwriter, as the case may be, on the other
shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the holder of Registrable Securities
or by the underwriter and the parties’ relative intent, knowledge, access to
information supplied by the Company, by the holder of Registrable Securities
or
by the underwriter and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission,
provided that the foregoing contribution agreement shall not inure to the
benefit of any indemnified party if indemnification would be unavailable to
such
indemnified party by reason of the provisions contained herein, and in no event
shall the obligation of any indemnifying party to contribute under this Section
6.6 exceed the amount that such indemnifying party would have been obligated
to
pay by way of indemnification if the indemnification provided for hereunder
had
been available under the circumstances.
(ii) The
Company and the holders of Registrable Securities agree that it would not be
just and equitable if contribution pursuant to this Section 6.6 were determined
by pro rata allocation (even if the holders of Registrable Securities and any
underwriters were treated as one entity for such purpose) or by any other method
of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth herein, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
(iii) Notwithstanding
the provisions of this Section 6.6, no holder of Registrable Securities or
underwriter shall be required to contribute any amount in excess of the amount
by which (i) in the case of any such holder, the net proceeds received by such
holder from the sale of Registrable Securities in the applicable Registration
Statement or (ii) in the case of an underwriter, the total price at which the
Registrable Securities purchased by it and distributed to the public were
offered to the public exceeds, in any such case, the amount of any damages
that
such holder or underwriter has otherwise been required to pay by reason of
such
untrue or alleged untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall
be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
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ARTICLE
VII
RULE
144
7.1. Rule
144.
The
Company shall use its commercially reasonable efforts to file in a timely manner
the reports required to be filed by the Company under the 1933 Act and the
1934
Act (including but not limited to the reports under Sections 13 and 15(d) of
the
1934 Act referred to in subparagraph (c) of Rule 144) and the rules and
regulations adopted by the SEC thereunder (or, if the Company is not required
to
file such reports, will, upon the request of any holder of Registrable
Securities, make publicly available other information) and will take such
further action as any holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such holder to sell
Registrable Securities without registration under the 1933 Act within the
limitation of the exemptions provided by (a) Rule 144, or (b) any similar rule
or regulation hereafter adopted by the SEC. Upon the request of any holder
of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with the requirements of this Section
7.1.
ARTICLE
VIII
MISCELLANEOUS
8.1. Amendments
And Waivers.
This
Agreement may be amended and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of the holder or holders of fifty-one percent (51%) or more
of
the sum of the Shares issued at such time, plus Shares issuable upon conversion
of the Series A Preferred Stock or exercise of the Warrants (if such Securities
were not fully exercised or converted in full as of the date such consent if
sought without regard to the 4.9% Limitation, as defined in the Purchase
Agreement). Each holder of any Registrable Securities at the time or thereafter
outstanding shall be bound by any consent authorized by this Section 8.1,
whether or not such Registrable Securities shall have been marked to indicate
such consent.
8.2. Nominees
For Beneficial Owners.
In the
event that any Registrable Securities are held by a nominee for the beneficial
owner thereof, the beneficial owner thereof shall be treated as the holder
of
such Registrable Securities for purposes of any request or other action by
any
holder or holders of Registrable Securities pursuant to this Agreement or any
determination of any number of percentage of shares of Registrable Securities
held by a holder or holders of Registrable Securities contemplated by this
Agreement. The Company may require assurances reasonably satisfactory to it
of
such owner’s beneficial ownership or such Registrable Securities.
8.3. Notices.
Except
as
otherwise provided in this Agreement, all notices, requests and other
communications to any Person provided for hereunder shall be in writing and
shall be given to such Person (a) in the case of a party hereto other than
the
Company, addressed to such party in the manner set forth in the Purchase
Agreement or at such other address as such party shall have furnished to the
Company in writing, or (b) in the case of any other holder of Registrable
Securities, at the address that such holder shall have furnished to the Company
in writing, or, until any such other holder so furnishes to the Company an
address, then to and at the address of the last holder of such Registrable
Securities who has furnished an address to the Company, or (c) in the case
of
the Company, at the address set forth on the signature page hereto, to the
attention of its President, or at such other address, or to the attention of
such other officer, as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding. Each such notice, request or
other communication shall be effective (i) upon receipt after such communication
is deposited in the mail with first class postage prepaid, addressed as
aforesaid or (ii) if given by any other means (including, without limitation,
by
fax or air courier), when delivered at the address specified above, provided
that any such notice, request or communication shall not be effective until
received, and provided, further, that notice by fax shall not be deemed received
unless receipt is acknowledged.
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8.4. Assignment.
This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the parties hereto. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit
of
and enforceable by any subsequent holder of any Registrable Securities. Each
of
the Holders of the Registrable Securities agrees, by accepting any portion
of
the Registrable Securities after the date hereof, to the provisions of this
Agreement including, without limitation, appointment of a representative (the
“Investor’s Representative”) to act on behalf of such Holder pursuant to the
terms hereof which such actions shall be made in the good faith discretion
of
the Investor’s Representative and be binding on all persons for all
purposes.
8.5. Descriptive
Headings.
The
descriptive headings of the several sections and paragraphs of this Agreement
are inserted for reference only and shall not limit or otherwise affect the
meaning hereof.
8.6. Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of New York, without giving effect to applicable principles of
conflicts of law.
8.7. Jurisdiction.
If any
action is brought among the parties with respect to this Agreement or otherwise,
by way of a claim or counterclaim, the parties agree that in any such action,
and on all issues, the parties irrevocably waive their right to a trial by
jury.
Exclusive jurisdiction and venue for any such action shall be the State or
Federal Courts serving the City, County and State of New York. In the event
suit
or action is brought by any party under this Agreement to enforce any of its
terms, or in any appeal therefrom, it is agreed that the prevailing party shall
be entitled to reasonable attorneys fees to be fixed by the arbitrator, trial
court, and/or appellate court if such party prevails on substantially all
disputed matters.
8.8. Entire
Agreement.
This
Agreement, together with the Purchase Agreement, embodies the entire agreement
and understanding between the Company and each other party hereto relating
to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
8.9. Severability.
If any
provision of this Agreement, or the application of such provisions to any Person
or circumstance, shall be held invalid, the remainder of this Agreement, or
the
application of such provision to Persons or circumstances other than those
to
which it is held invalid, shall not be affected thereby.
-15-
8.10. Binding
Effect.
All the
terms and provisions of this Agreement whether so expressed or not, shall be
binding upon, inure to the benefit of, and be enforceable by the parties and
their respective administrators, executors, legal representatives, heirs,
successors and assignees.
8.11. Preparation
of Agreement.
This
Agreement shall not be construed more strongly against any party regardless
of
who is responsible for its preparation. The parties acknowledge each contributed
and is equally responsible for its preparation.
8.12. Failure
or Indulgence Not Waiver; Remedies Cumulative.
No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall nay single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights
and
remedies existing under this Agreement are cumulative to, and not exclusive
of,
any rights or remedies otherwise available.
8.13. Counterparts.
This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall
be
deemed to be an original, but all of which taken together shall constitute
one
and the same agreement. A facsimile transmission of this signed Agreement shall
be legal and binding on all parties hereto.
[SIGNATURES
ON FOLLOWING PAGE]
-16-
IN
WITNESS WHEREOF,
the
Investor and the Company have as of the date first written above executed this
Agreement.
| By: /s/ Xx Xxxxxx | |||
|
Xx
Xxxxxx
Chief
Executive Officer
|
|||
|
XXXXXX
PARTNERS LP
By:
Xxxxxx Capital Advisors, LLC, its General Partners
|
|||
| By: /s/ Xxxxxx Xxxxxx Xxxxxx | |||
|
Xxxxxx
Xxxxxx Xxxxxx
President
000
Xxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx XX 00000
|
|||
| EOS HOLDINGS | |||
| By: /s/ Xxx X. Xxxxxx | |||
|
Xxx
X.Xxxxxx, President
0000
Xxxxxxxx Xx.
Xxx
Xxxxx, XX 00000
|
|||
|
|
|||
| SILVER ROCK I, LTD. | |||
| By:/s/ Xxxx Xxxxx | |||
|
Xxxx
Xxxxx
0xx
Xxxxx, Xxxxx
Xxxxxxxx
Xxxx
Reef
P.O.
Box 765
Road
Town, Tortola ,
British
Virgin Islands
|
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