REGISTRATION RIGHTS AGREEMENT
Exhibit
10.7
This
Registration Rights Agreement (this “Agreement”) is made and entered into
as of this 30th day of March, 2007 by and among Baywood International, Inc.,
a
Nevada corporation (the “Company”), O. Xxx Xxxxx, III (“Xxxxx”)
and Xxxx Xxxxx (“Xxxxx”), individuals who were issued warrants to
purchase Common Shares (as defined below) (the “Xxxxx/Xxxxx Warrants”) in
connection with the Company’s 10% Notes in an aggregate principal amount not
less than $1,000,000 or more than $3,000,000 (the “10% Notes), JSH
Partners (“JSH Partners”), an entity who was issued a warrant (the
“JSH Partners Warrant”) to purchase Common Shares in connection with the
Company’s 12% 2007 Bridge Note in an aggregate principal amount not to exceed
$2,000,000 (the “12% 2007 Bridge Note”) and Northeast Securities, Inc.,
as Attorney-in-Fact for the investors set forth on Schedule A attached hereto,
who have executed a Subscription Agreement with the Company (the
“Subscription Agreement”) in connection with the offer and sale of Units
consisting of (i) 5,000 shares of Convertible Preferred Stock and
(ii) a warrant to purchase 250,000 Common Shares (the “Investor
Warrant”).
The
parties hereby agree as follows:
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1.
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Certain
Definitions.
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As
used
in this Agreement, the following terms shall have the following
meanings:
“Affiliate”
means, with respect to any person, any other person which directly or indirectly
controls, is controlled by, or is under common control with, such
person.
“Business
Day” means a day, other than a Saturday or Sunday, on which banks in New
York City are open for the general transaction of business.
“Common
Shares” means shares of the Company’s common stock, par value $0.001, and
any securities into which such shares may hereinafter be
reclassified.
“Convertible
Preferred Stock” means shares of the Series I 8% Cumulative Convertible
Preferred Stock, par value $0.001 per share, of the Company.
“Investors”
means collectively, Tawes, Talty, JSH Partners and the investors set forth
on
Schedule 1 attached hereto and made a part hereof or a permitted transferee
of
Tawes, Talty, JSH Partners or of any investor set forth on Schedule I attached
hereto and made a part hereof who is a subsequent holder of any Registrable
Securities. The Investors are individually referred to herein as an
“Investor”.
“Prospectus”
means the prospectus included in any Registration Statement, as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated
by
reference or deemed to be incorporated by reference in such prospectus which
is
permitted to be so incorporated by reference in accordance with the rules
and
regulations of the SEC.
“Register,”
“registered” and “registration” refer to a registration made by
preparing and filing a Registration Statement or similar document in compliance
with the 1933 Act (as defined below), and the declaration or ordering of
effectiveness of such Registration Statement or document.
“Registrable
Securities” means (i) the shares of Convertible Preferred Stock issued to
the Investors (excluding Xxxxx, Xxxxx and JSH Partners), (ii) the Investor
Warrants; (iii) the Common Shares issuable upon any conversion of the
Convertible Preferred Stock or any exercise of the Investor Warrants; (iv)
the
Xxxxx/Xxxxx Warrants; (v) the Common Shares issuable upon exercise of the
Xxxxx/Xxxxx Warrants; (vi) the JSH Partners Warrant; (vii) the Common Shares
issuable upon exercise of the JSH Partners Warrant; (viii) any other securities
issued or issuable with respect to or in exchange for Registrable Securities;
and (ix) any securities issued or issuable with respect to such securities
by
way of a stock dividend or stock split or in connection with a combination
of
shares, recapitalization, merger, consolidation or other reorganization with
respect to any of the securities referenced above; provided, that, a security
shall cease to be a Registrable Security upon (A) a sale pursuant to a
Registration Statement; or (B) such security becoming eligible for sale by
an
Investor pursuant to Rule 144(k) under the 1933 Act.
“Registration
Statement” means any registration statement of the Company filed under the
1933 Act that covers the resale of any of the Registrable Securities pursuant
to
the provisions of this Agreement, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits
and
all material incorporated by reference or deemed to be incorporated by reference
in such Registration Statement.
“Required
Investors” means the Investors holding a majority of the Registrable
Securities.
“SEC”
means the U.S. Securities and Exchange Commission.
“Warrants”
means together, the Xxxxx/Xxxxx Warrants, the JSH Partners Warrant and the
Investor Warrants.
“Warrant
Shares” means the Common Shares issuable upon exercise of the
Warrants.
“1933
Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
“1934
Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
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2.
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Registration.
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(a) Registration
Statements. The Company shall prepare and file a registration
statement with respect to the resale of the Registrable Securities with the
SEC
within 60 days after the original issuance of the Convertible Preferred Stock
and Warrants. Such Registration Statement shall include the plan of
distribution attached hereto as Exhibit
A. Such Registration Statement also shall cover, to the
extent allowable under the 1933 Act and the rules promulgated thereunder
(including Rule 416), such indeterminate number of additional Registrable
Securities resulting from share splits, share dividends or similar transactions
with respect to the Registrable Securities. The Registration
Statement (and each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided in accordance with
Section 3(c) to each Investor and its counsel prior to its filing or
other submission.
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(b) Expenses. The
Company will pay all expenses associated with such registration, including
filing and printing fees, the Company’s counsel and accounting fees and
expenses, costs associated with clearing the Registrable Securities for sale
under applicable state securities laws, listing fees, blue sky fees, fees
and
expenses of one counsel to the Investors designated by the Required Investors
and the Investors’ reasonable expenses in connection with the registration and
the expenses of any special audits incident to or required by any such
registration, but excluding stock transfer taxes, discounts, commissions
or fees
of underwriters, selling brokers, dealer managers or similar securities industry
professionals with respect to the Registrable Securities being
sold.
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(c)
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Effectiveness.
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(i) The
Company shall use reasonable best efforts to have the Registration Statement
declared effective within 150 days after the original issuance of the
Convertible Preferred Stock and Warrants. The Company shall notify
the Investors by facsimile or e-mail as promptly as practicable (with a copy
provided to the Investors by U.S. mail), or by issuing a press release to
Reuters Economic Services and Bloomberg Business News with one copy e-mailed
to
Investors and a second copy provided by US Mail, and in any event, within
twenty-four (24) hours, after any Registration Statement is declared effective
and as soon as reasonably practicable shall provide the Investor with copies
of
any related Prospectus to be used in connection with the sale or other
disposition of the securities covered thereby.
(ii) Notwithstanding
anything to contrary, for not more than twenty (20) consecutive days or for
a
total of not more than forty-five (45) days in any twelve (12) month period
(provided, however, that no such delay, suspension or withdrawal shall be
permitted for consecutive twenty-day periods arising out of the same set
of
facts, circumstances or transactions), the Company may delay, suspend the
use
of, or withdraw any Registration Statement or qualification of Registrable
Securities if the Company in good faith determines that any such Registration
Statement, or the use thereof, would materially and adversely affect any
material corporate event or would otherwise require disclosure of nonpublic
information which the Company determines, in its reasonable judgment, is
not in
the best interests of the Company at such time (an “Allowed Delay”);
provided, that the Company shall promptly (a) notify the Investors in writing
of
the existence of (but in no event, without the prior written consent of the
Investors, shall the Company disclose to the Investors any of the facts or
circumstances regarding) the event giving rise to an Allowed Delay;
provided, however, that the Company shall not be required to
disclose material nonpublic information to the Investors; (b) advise the
Investors in writing to cease all sales under the Registration Statement
until
the end of the Allowed Delay; and (c) use reasonable best efforts to terminate
an Allowed Delay as promptly as practicable. Without the express
written consent of the Investors, if required to permit the continued sale
of
Registrable Securities by the Investors, a post-effective amendment or
supplement to the Registration Statement or the Prospectus constituting a
part
thereof must be filed no later than the 21st day following commencement of
an
Allowed Delay.
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(d) In
the event that the Registration Statement should not be filed with the SEC
within 60 days after the original issuance of the Convertible Preferred Stock
and Warrants or be declared effective under the Securities Act within 150
days
after the original issuance of the Convertible Preferred Stock and Warrants,
the
Company shall pay to each Investor, as liquidated damages and not as a penalty,
an aggregate amount in cash equal to (i) in the case of each Investor other
than
Xxxxx, Xxxxx and JSH Partners, 0.5% of the purchase price paid by such Investor
for the Convertible Preferred Stock and Investor Warrants for each month
(or
partial month) during which the Registration Statement has not been filed
or
declared effective as required by this Agreement, and (ii) in the case of
Xxxxx,
Xxxxx and JSH Partners, 0.5% of the original principal amount of the 10%
Notes
or the 12% 2007 Bridge Note, as applicable, for each such month; provided
that
the aggregate payments shall not exceed 5.0% of the aggregate purchase price
paid by (x) such Investor for such Convertible Preferred Stock and Investor
Warrants, (y) Xxxxx and Xxxxx for the 10% Notes and (z) JSH Partners for
the 12%
2007 Bridge Note (the “Liquidated Damages”). The payment of
Liquidated Damages shall be made within 30 days following the monthly period
during which such Liquidated Damages were incurred. For
clarification, the Liquidated Damages shall be in addition to any other rights
and remedies that the Investor may have available under this letter agreement,
law or equity.
(e) In
the event the Company is required by the SEC to reduce the number of Registrable
Securities being registered for resale on the Registration Statement filed
with
the SEC pursuant to Section 2(a) hereof, the Registrable Securities sought
to be
registered by each Investor shall be so reduced on a pro rata basis in
accordance with the total number of Registrable Securities sought to be
registered by the Investors. The Company shall notify the Investors
in the event of any such reduction. In the event of such reduction,
the payment of Liquidated Damages by the Company to Investors described in
Section 2(d) shall not be applicable to the extent the Company is in breach
of
the time periods set forth in Section 2(d) with respect to Registrable
Securities excluded from the Registration Statement as a result of the reduction
described in this Section 2(e) (the “Excluded Registrable
Securities”). The Company shall prepare and file a registration
statement (the “Excluded Registration Statement”) with respect to the
resale of the Excluded Registrable Securities with the SEC as promptly as
practicable following the effectiveness of the Registration Statement, and
the
provisions of this Agreement shall be applicable to such Excluded Registration
Statement mutatis mutandis on the same basis as the Registration
Statement, including without limitation the provisions of Section
2(d).
3. Company
Obligations. The Company will use reasonable best efforts to
effect the registration of the Registrable Securities in accordance with
the
terms hereof, and pursuant thereto the Company will, as expeditiously as
possible:
(a) use
reasonable best efforts to cause such Registration Statement to become effective
and to remain continuously effective for a period that will terminate upon
the
earliest of (i) the date on which all Registrable Securities covered by such
Registration Statement as amended from time to time, have been sold, and
(ii)
the date on which all Registrable Securities covered by such Registration
Statement may be sold pursuant to Rule 144(k) under the 1933 Act (the
“Effectiveness Period”);
(b) prepare
and file with the SEC such amendments, prospectus supplements or post-effective
amendments to the Registration Statement and the Prospectus as may be necessary
to keep the Registration Statement effective for the period specified in
Section 3(a) and to comply with the provisions of the 1933 Act and the
1934 Act with respect to the distribution of all of the Registrable Securities
covered thereby;
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(c) provide
copies to and permit counsel designated by the Investors to review each
Registration Statement and all amendments and supplements thereto no fewer
than
ten (10) days prior to their filing with the SEC and not file any document
to
which such counsel reasonably objects based upon such counsel’s belief that such
Registration Statement is not in compliance with applicable laws, rules or
regulations or contains a material misstatement or omission;
(d) furnish
to the Investors and their legal counsel (i) promptly after the same is prepared
and publicly distributed, filed with the SEC, or received by the Company
(but
not later than two (2) Business Days after the filing date, receipt date
or
sending date, as the case may be) one (1) copy of any Registration Statement
and
any amendment thereto, each preliminary prospectus and Prospectus and each
amendment or supplement thereto, and 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 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 the Investors may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investors that are covered by the related Registration
Statement;
(e) use
reasonable best efforts to (i) prevent the issuance of any stop order or
other
suspension of effectiveness and, (ii) if such order is issued, obtain the
withdrawal of any such order at the earliest possible moment;
(f) use
reasonable best efforts to cause all Registrable Securities covered by a
Registration Statement to be listed on each securities exchange, interdealer
quotation system or other market on which similar securities issued by the
Company are then listed;
(g) promptly
notify the Investors upon the occurrence of any of the following events in
respect of the Registration Statement or the Prospectus forming a part thereof:
(i) receipt of any request for additional information from the SEC or any
other
federal or state governmental authority during the Effectiveness Period,
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 Registrable Securities for sale in any jurisdiction or the initiation
or
threatening of any proceeding for such purpose; or (iv) the effectiveness
of the
Registration Statement within twenty four (24) hours of such Registration
Statement being declared effective;
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(h) immediately
notify the Investors, at any time when a Prospectus relating to Registrable
Securities is required to be delivered under the 1933 Act, upon discovery
that,
or upon the happening of any event or the passage of time as a result of
which,
the Prospectus included in a Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not
misleading in light of the circumstances then existing, and at the request
of
any such holder, promptly prepare and furnish to such holder a reasonable
number
of copies of a supplement to or an amendment of such Prospectus or the
Registration Statement as may be necessary so that, as thereafter delivered
to
the purchasers of such Registrable 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 light of the circumstances then existing;
(i) otherwise
use reasonable best efforts to comply with all applicable rules and regulations
of the SEC under the 1933 Act and the 1934 Act, take such other actions as
may
be reasonably necessary to facilitate the registration of the Registrable
Securities hereunder;
(j) with
a view to making available to the Investors the benefits of Rule 144 (or
its
successor rule) and any other rule or regulation of the SEC that may at any
time
permit the Investor to sell Common Shares to the public without registration,
the Company covenants and agrees to: (i) make and keep public
information available, as those terms are understood and defined in Rule
144,
until the earlier of (A) six months after such date as all of the Registrable
Securities may be resold pursuant to Rule 144(k) or any other rule of similar
effect or (B) such date as all of the Registrable Securities shall have been
resold; (ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1934 Act; and (iii) furnish to
each
Investor upon request, as long as such Investor owns any Registrable Securities,
(A) a written statement by the Company that it has complied with the reporting
requirements of the 1934 Act, and (B) such other information as may be
reasonably requested in order to avail such Investor of any rule or regulation
of the SEC that permits the selling of any such Registrable Securities without
registration;
(k) if
requested by the Required Investors, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
information as the Company reasonably agrees should be included therein and
(ii)
make all required filings of such Prospectus supplement or such post-effective
amendment as soon as practicable after the Company has received notification
of
the matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(l) cooperate
with the Investors to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold pursuant to a
Registration Statement, which certificates shall, if required under the terms
of
this Agreement, be free of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such
names
as the Investors may request within the applicable time periods prescribed
for
the issuance of shares upon conversion of the Convertible Preferred Stock
or
exercise of Warrants; and
(m) prior
to any public offering of Registrable Securities, register or qualify (unless
an
exemption from such registration of qualification is available) the Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as the Investor requests in writing,
keep
each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of
the
Registrable Securities covered by a Registration Statement; provided,
however, that the Company shall not be required to qualify generally
to
do business in any jurisdiction where it is not then so qualified or to take
any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so
subject.
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4. Due
Diligence Review; Information. The Company shall make available,
during normal business hours, upon reasonable request, for inspection and
review
by the Investors, advisors to and representatives of the Investors (who may
or
may not be affiliated with the Investors and who are reasonably acceptable
to
the Company), all financial and other records, all filings with the SEC,
and all
other documents respecting the Company, its assets, its properties or its
business (including without limitation minute books, corporate records,
financial statements, contracts, permits, licenses, approvals, technical
or
engineering reports, and any title opinions or valuations which the Company
has
obtained) as may be reasonably necessary for the purpose of such review,
and
cause the Company’s officers, directors and employees, within a reasonable time
period, to supply all such information reasonably requested by the Investors
or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them)
to
the extent not publicly available on XXXXX or the Company’s website, prior to
and from time to time after the filing and effectiveness of the Registration
Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants
and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of such Registration Statement.
Notwithstanding
any of the foregoing, nothing herein shall obligate the Company to provide
to
the Investor, or any advisors or representatives or underwriters, any material
nonpublic information. The Company shall not disclose material
nonpublic information to the Investor, or to advisors to or representatives
of
the Investor, unless prior to disclosure of such information the Company
identifies such information as being material nonpublic information and provides
the Investor, such advisors and representatives with the opportunity to accept
or refuse to accept such material nonpublic information for review and the
Investors wishing to obtain such information enters into an appropriate
confidentiality agreement with the Company with respect thereto.
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5.
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Obligations
of the Investors.
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(a) Each
Investor shall furnish in writing 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 be 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 fifteen (15) Business Days prior to the
first anticipated filing date of any Registration Statement, the Company
shall
notify each Investor of the information the Company requires from the Investor
if the Investor elects to have any of the Registrable Securities included
in the
Registration Statement. The Investor shall provide such information
to the Company at least two (2) Business Days prior to the first anticipated
filing date of such Registration Statement if such Investor elects to have
any
of the Registrable Securities included in the Registration
Statement. The Company shall not be required to include the
Registrable Securities of an Investor in a Registration Statement and shall
not
be required to pay any damages to any person who fails to furnish to the
Company
such information at least two (2) Business Days prior to such filing
date.
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(b) The
Investors, by their acceptance of the Registrable Securities, agree to cooperate
with the Company as reasonably requested by the Company in connection with
the
preparation and filing of a Registration Statement hereunder, unless any
such
Investor (i) has notified the Company in writing of its election to exclude
all
of its Registrable Securities from such Registration Statement; or (ii) has
not
provided a timely response to the request by the Company for information
from
such Investor set forth in Section 5(a) hereof.
(c) Each
Investor agrees that, upon receipt of any notice (which may be oral as long
as
written notice is provided by the next day) from the Company of the commencement
of an Allowed Delay pursuant to Section 2(c)(ii), the Investor will
immediately discontinue disposition of Registrable Securities pursuant to
the
Registration Statement covering such Registrable Securities, until otherwise
notified in writing by the Company or until the Investor’s receipt of the copies
of the supplemented or amended Prospectus filed with the SEC and until any
related post-effective amendment is declared effective and, if so directed
by
the Company and the Investor 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 the Investor’s possession of the Prospectus covering the
Registrable Securities current at the time of receipt of such
notice.
(d) The
Investors acknowledge and agree that, to the extent described in Schedule
5(d) hereto, other security holders of the Company have the right to include
such securities, in addition to the Registrable Securities, in any Registration
Statement filed or maintained by the Company pursuant to this Agreement or
the
Transaction Documents.
(e) Each
Investor covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act as applicable to it in connection with sales
of
Registrable Securities pursuant to the Registration Statement.
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6.
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Indemnification.
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(a) Indemnification
by the Company. The Company will indemnify and hold harmless each
Investor, and each of its officers, directors, members, employees and agents,
successors and assigns, and each other person, if any, who controls such
Investor within the meaning of the 1933 Act, against any losses, claims,
damages, liabilities and expense (including reasonable attorney fees), joint
or
several, to which they may become subject under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof; (ii) any application or other document or
communication (in this paragraph (a), referred to collectively as an
“application”) executed by, or on behalf of, the Company or based upon written
information furnished by, or on behalf of, the Company filed in any jurisdiction
in order to register or qualify any of the Registrable Securities under the
securities or “blue sky” laws thereof or filed with any securities exchange;
(iii) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
(iv) any violation by the Company or its agents of any rule or regulation
promulgated under the 1933 Act applicable to the Company or its agents and
relating to action or inaction required of the Company in connection with
such
registration; (v) any failure to register or qualify the Registrable Securities
included in any such Registration Statement in any state where the Company
or
its agents has affirmatively undertaken or agreed in writing that the Company
will undertake such registration or qualification on the Investor’s behalf; or
(vi) any breach of any representation, warranty, covenant, or agreement of
the
Company contained in this Agreement and will reimburse such Investor, and
each
such officer, director or member and each such controlling person for any
legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case if
and to
the extent that any such loss, claim, damage or liability arises out of or
is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by the
Investor in writing specifically for use in such Registration Statement or
Prospectus, or to the extent that such information relates to the Investor
or
the Investor’s proposed method of distribution of Registrable Securities and was
reviewed and approved by the Investor for use in the Registration Statement,
such Prospectus or such form of Prospectus or in any amendment or supplement
thereto (it being understood that the Investors have approved Exhibit A
hereto for this purpose), or in the case of an occurrence of an Allowed Delay
or
of an event of the type specified in Section 3(g), the use by the
Investor of an outdated or defective Prospectus after the Company has notified
the Investor in writing that the Prospectus is outdated or defective and
prior
to the receipt by the Investor of an amended or supplemented Prospectus,
but
only if and to the extent that following the receipt of such amended or
supplemented Prospectus the misstatement or omission giving rise to such
liability would have been corrected.
(b) Indemnification
by the Investor. Each Investor agrees, severally but not jointly,
to indemnify and hold harmless, to the fullest extent permitted by law, the
Company, its directors, officers, employees, shareholders and each person
who
controls the Company (within the meaning of the 0000 Xxx) against any losses,
claims, damages, liabilities and expense (including reasonable attorney fees)
resulting from any untrue statement of a material fact or any omission of
a
material fact required to be stated in the Registration Statement or Prospectus
or preliminary prospectus or amendment or supplement thereto or necessary
to
make the statements therein not misleading, to the extent that such untrue
statement or omission is contained in any information furnished in writing
by
the Investor to the Company specifically for inclusion in such Registration
Statement or Prospectus or amendment or supplement thereto, or to the extent
that such information relates to such Investor’s proposed method of distribution
of Registrable Securities and was reviewed and approved by the Investor for
use
in the Registration Statement (it being understood that the Investor has
approved Exhibit A hereto for this purpose), such Prospectus or such form
of Prospectus or in any amendment or supplement thereto, or in the case of
an
occurrence of an Allowed Delay or an event of the type specified in Section
3(g), the use by the Investor of an outdated or defective Prospectus after
the Company has notified the Investor in writing that the Prospectus is outdated
or defective and prior to the receipt by the Investor of an amended or
supplemented Prospectus, but only if and to the extent that following the
receipt of the amended or supplemented Prospectus the misstatement or omission
giving rise to such liability would have been corrected. In no event
shall the liability of the Investor be greater in amount than the dollar
amount
of the proceeds (net of any damages the Investor has otherwise been required
to
pay by reason of such untrue statement or omission by the Company) received
by
the Investor upon the sale of the Registrable Securities included in the
Registration Statement giving rise to such indemnification
obligation.
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(c) Conduct
of Indemnification Proceedings. Any person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying
party
of any claim with respect to which it seeks indemnification; and (ii) permit
such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party; provided that any
person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the
fees
and expenses of such counsel shall be at the expense of such person unless
(a)
the indemnifying party has agreed to pay such fees or expenses; or (b) the
indemnifying party shall have failed to assume the defense of such claim
and
employ counsel reasonably satisfactory to such person; or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party
with
respect to such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have
the
right to assume the defense of such claim on behalf of such person); or (d)
the
indemnified party shall have reasonably concluded, with the advice of counsel,
that there may be one or more legal defenses available to it or them or to
other
indemnified parties which are different from, or in addition to, those available
to the indemnifying party; and provided, further, that the failure
of any indemnified party to give notice as provided herein shall not relieve
the
indemnifying party of its obligations hereunder, except to the extent that
such
failure to give notice shall materially adversely affect the indemnifying
party
in the defense of any such claim or litigation. It is understood that
the indemnifying party shall not, in connection with any proceeding in the
same
jurisdiction, be liable for fees or expenses of more than one separate firm
of
attorneys at any time for all such indemnified parties. No
indemnifying party will, except with the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect of such
claim or litigation. The Company agrees promptly to notify the
Investors of the commencement of any litigation or proceedings against the
Company or any of its officers or directors in connection with the sale of
any
Registrable Securities or any preliminary prospectus, prospectus, registration
statement, or amendment or supplement thereto, or any application relating
to
any sale of any Registrable Securities.
(d) Contribution. If
for any reason the indemnification provided for in the preceding paragraphs
(a)
and (b) is unavailable to an indemnified party or insufficient to hold it
harmless, other than as expressly specified therein, then the indemnifying
party
shall contribute to the amount paid or payable by the indemnified party as
a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable
considerations. The relative fault, in the case of an untrue
statement, alleged untrue statement, omission, or alleged omission, shall
be
determined by, among other things, whether such statement, alleged statement,
omission, or alleged omission relates to information supplied by the Company
or
by the Investor, and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement, alleged
statement, omission, or alleged omission. The parties agree that it
would be unjust and inequitable if the respective obligations of the Company
and
the Investor for contribution were determined by pro rata or per capita
allocation of the aggregate losses, liabilities, claims, damages, and expenses
or by any other method of allocation that does not reflect the equitable
considerations referred to in this paragraph (d). No person guilty of
fraudulent misrepresentation within the meaning of Section 11(f) of the 1933
Act
shall be entitled to contribution from any person not guilty of such fraudulent
misrepresentation. In no event shall the contribution obligation of a
holder of Registrable Securities be greater in amount than the dollar amount
of
the proceeds (net of all expenses paid by such holder in connection with
any
claim relating to this Section 6 and the amount of any damages such
holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission) received by it upon the
sale
of the Registrable Securities giving rise to such contribution
obligation. Anything in this paragraph 6(d) to the contrary
notwithstanding, no party shall be liable for contribution with respect to
the
settlement of any claim or action effected without its written
consent. This paragraph 6(d) is not intended to supersede any right
to contribution under the 1933 Act, the 1934 Act, or otherwise.
10
|
|
7.
|
Miscellaneous.
|
(a) Amendments
and Waivers. This Agreement may be amended only by an instrument
in writing signed by the Company and the Required Investors, provided that
no
amendment to this Agreement that is adverse to any Investor shall be made
without such Investor’s written consent. 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 waiver
or
consent to such amendment, action or omission to act, of the Required Investors,
provided that no such action or omission that is adverse to any Investor
shall
occur without such Investor’s written consent.
(b) Notices. All
notices that are required or permitted hereunder shall be in writing and
shall
be sufficient if personally delivered, sent by facsimile in the case of notice
to the Company only, or sent by registered or certified mail or Federal Express
or other nationally recognized overnight delivery service. Any
notices shall be deemed given upon the earlier of the date when received
at, the
day when delivered via facsimile or the third day after the date when sent
by
registered or certified mail or the day after the date when sent by Federal
Express to, the address set forth below, unless such address is changed by
notice to the other party hereto:
To
the
Company:
Baywood
International, Inc.
00000
Xxxxx 00xx
Xxxxx
Xxxxx
0
Xxxxxxxxxx,
Xxxxxxx 00000
Attn:
Chief Executive Officer
Facsimile:
(000) 000-0000
11
With
a
copy to:
Meltzer,
Lippe, Xxxxxxxxx & Breitstone, LLP
000
Xxxxxx Xxxxxx
Xxxxxxx,
Xxx Xxxx 00000
Attention:
Xxxxx X. Xxxxxxxx, Esq.
Facsimile:
747-0653
To
the
Investor: As set forth on Schedule 1 to this Agreement.
With
a
copy to:
Northeast
Securities, Inc.
000
Xxxx
Xxxxxx, 0xx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxx Xxxxxx, Senior Vice President
Facsimile: (000)
000-0000
To
Xxxxx:
O.
Xxx
Xxxxx, III
c/o
Northeast Securities, Inc.
000
Xxxx
Xxxxxx, 0xx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxx Xxxxxx, Senior Vice President
Facsimile: (000)
000-0000
With
a
copy to:
Hand
Baldachin & Xxxxxxxx LLP
0000
Xxxxxxxx, Xxxxx 0000
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxx X. Xxxxxxxx, Esq.
Facsimile:
(000) 000-0000
To
Xxxxx:
Xxxx
Xxxxx
c/o
Seix
Advisors
00
Xxxxxxxxxxxx Xxxx
Xxxxx
Xxxxxx Xxxxx, XX 00000
Attention:
Xxxx Xxxxx
Facsimile:
(000) 000-0000
12
To
JSH
Partners:
JSH
Partners
c/o
Northeast Securities, Inc.
000
Xxxx
Xxxxxx, 0xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention: Xxxx
Xxxxxx, Managing Director
Facsimile:
(000) 000-0000
(c) Assignments
and Transfers by Investors. The provisions of this Agreement
shall be binding upon and inure to the benefit of the Investors and their
successors and assigns. An Investor may transfer or assign, in whole
or from time to time in part, to one or more persons, which shall be an
“accredited investor” as defined in Rule 501(a) of Regulation D, as amended
under the 1933 Act, and which shall agree in writing to be bound by the terms
and conditions of this Agreement, an executed counterpart of which shall
be
furnished to the Company, its rights hereunder in connection with the transfer
of Registrable Securities by such Investor to such person, provided that
the
Investor complies with all laws applicable thereto and provides written notice
of assignment to the Company promptly after such assignment is
effected.
(d) Assignments
and Transfers by the Company. This Agreement may not be assigned
by the Company (whether by operation of law or otherwise) without the prior
written consent of the Required Investors, provided, however, that the Company
may assign its rights and delegate its duties hereunder to any surviving
or
successor corporation in connection with a merger or consolidation of the
Company with another corporation, or a sale, transfer or other disposition
of
all or substantially all of the Company’s assets to another corporation, without
the prior written consent of the Required Investors, after notice duly given
by
the Company to the Investors.
(e) Benefits
of the Agreement. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective permitted
successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except
as
expressly provided in this Agreement.
(f) Counterparts;
Faxes. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement
may also be executed via facsimile, which shall be deemed an
original.
(g) Titles
and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing
or
interpreting this Agreement.
13
(h) Severability. Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to
be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate
or
render unenforceable such provision in any other jurisdiction. To the
extent permitted by applicable law, the parties hereby waive any provision
of
law which renders any provisions hereof prohibited or unenforceable in any
respect.
(i) Further
Assurances. The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby
and to
evidence the fulfillment of the agreements herein contained.
(j) Entire
Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of
the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
(k) Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York and the United
States District Court for the Southern District of New York, in each case
located in the City of New York, Borough of Manhattan, for the purpose of
any
suit, action, proceeding or judgment relating to or arising out of this
Agreement and the transactions contemplated hereby. Service of
process in connection with any such suit, action or proceeding may be served
on
each party hereto anywhere in the world by the same methods as are specified
for
the giving of notices under this Agreement. Each of the parties
hereto irrevocably consents to the jurisdiction of any such court in any
such
suit, action or proceeding and to the laying of venue in such
court. Each party hereto irrevocably waives any objection to the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY
JURY
IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL
HAS
BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
14
[Company
Signature Page]
IN
WITNESS WHEREOF, the parties have
executed this Agreement or caused their duly authorized officers to execute
this
Agreement as of the date first above written.
|
BAYWOOD
INTERNATIONAL, INC.
|
||
|
00000
Xxxxx 00xx
Xxxxx
|
||
|
Xxxxxxxxxx,
Xxxxxxx 00000
|
||
|
By:
|
/s/
Xxxx Xxxxxxxxxx
|
|
|
Name:
Xxxx Xxxxxxxxxx
|
||
|
Title:
President & CEO
|
||
15
[Investor
Signature Page]
IN
WITNESS WHEREOF, the parties have executed this Agreement or caused their
duly
authorized officers or attorney-in-fact to execute this Agreement as of the
date
first above written.
|
Name
of Investor:
|
|
By:
|
NORTHEAST
SECURITIES, INC.
|
|
|
Attorney-in-Fact
|
|
By:
|
Xxxxx
Xxxxxx
|
|
|
Name:
Xxxxx Xxxxxx
|
||
|
Title:
Senior Vice
President
|
16
[Xxxxx
Signature Page]
IN
WITNESS WHEREOF, the parties have
executed this Agreement or caused their duly authorized officers or
attorney-in-fact to execute this Agreement as of the date first above
written.
|
/s/
O. Xxx Xxxxx, III
|
|
|
O.
Xxx Xxxxx, III
|
17
[Xxxxx
Signature Page]
IN
WITNESS WHEREOF, the parties have
executed this Agreement or caused their duly authorized officers or
attorney-in-fact to execute this Agreement as of the date first above
written.
|
/s/
Xxxx Xxxxx
|
|
|
Xxxx
Xxxxx
|
18
[JSH
Partners Signature Page]
IN
WITNESS WHEREOF, the parties have executed this Agreement or caused their
duly
authorized officers or attorney-in-fact to execute this Agreement as of the
date
first above written.
|
JSH
PARTNERS
|
||
|
By:
|
/s/
Xxxx Xxxxxx
|
|
|
Name:
Xxxx Xxxxxx
|
||
|
Title:
Managing Director
|
||
19
Schedule
1
Investors
|
Investor
Name
|
Investor
Contact Details
|
20
Schedule
5(d)
Other
Securities to be Registered
21
Exhibit
A
Plan
of Distribution
The
selling shareholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling common shares or interests
in common shares received after the date of this prospectus from a selling
shareholder as a gift, pledge, partnership distribution or other transfer,
may,
from time to time, sell, transfer or otherwise dispose of any or all of their
common shares or interests in common shares on any stock exchange, market
or
trading facility on which the common shares are traded or in private
transactions. These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale,
or at
negotiated prices.
The
selling shareholders may use any one or more of the following methods when
disposing of common shares or interests therein:
-
ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
-
block
trades in which the broker-dealer will attempt to sell the common shares
as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction;
-
purchases by a broker-dealer as principal and resale by the broker-dealer
for
its account;
-
an
exchange distribution in accordance with the rules of the applicable
exchange;
-
privately negotiated transactions;
-
short
sales effected after the date of this prospectus;
-
through
the writing or settlement of options or other hedging transactions, whether
through an options exchange or otherwise;
-
broker-dealers may agree with the selling shareholders to sell a specified
number of such common shares at a stipulated price per common
share;
-
a
combination of any such methods of sale; and
-
any
other method permitted pursuant to applicable law.
The
selling shareholders may, from time to time, pledge or grant a security interest
in some or all of the common shares owned by them and, if they default in
the
performance of their secured obligations, the pledgees or secured parties
may
offer and sell the common shares, from time to time, under this prospectus,
or
under an amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act of 1933 (the “1933 Act”) amending the list of
selling shareholders to include the pledgee, transferee or other successors
in
interest as selling shareholders under this prospectus. The selling
shareholders also may transfer the common shares in other circumstances,
in
which case the transferees, pledgees or other successors in interest will
be the
selling beneficial owners for purposes of this prospectus.
22
In
connection with the sale of our common shares or interests therein, the selling
shareholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
shares in the course of hedging the positions they assume. The
selling shareholders may also sell our common shares short and deliver these
securities to close out their short positions, or loan or pledge the common
shares to broker-dealers that in turn may sell these securities. The
selling shareholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or
more
derivative securities which require the delivery to such broker-dealer or
other
financial institution of shares offered by this prospectus, which shares
such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
aggregate proceeds to the selling shareholders from the sale of the common
shares offered by them will be the purchase price of the common shares less
discounts or commissions, if any. Each of the selling shareholders
reserves the right to accept and, together with their agents from time to
time,
to reject, in whole or in part, any proposed purchase of common shares to
be
made directly or through agents. We will not receive any of the
proceeds from this offering.
The
selling shareholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act of
1933,
provided that they meet the criteria and conform to the requirements of that
rule.
The
selling shareholders and any underwriters, broker-dealers or agents that
participate in the sale of the common shares or interests therein may be
"underwriters" within the meaning of Section 2(11) of the 1933
Act. Any discounts, commissions, concessions or profit they earn on
any resale of the shares may be underwriting discounts and commissions under
the
1933 Act. Selling shareholders who are "underwriters" within the
meaning of Section 2(11) of the 1933 Act will be subject to the prospectus
delivery requirements of the 1933 Act.
To
the
extent required, our common shares to be sold, the names of the selling
shareholders, the respective purchase prices and public offering prices,
the
names of any agents, dealer or underwriter, any applicable commissions or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this
prospectus.
In
order
to comply with the securities laws of some states, if applicable, the common
shares may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the common shares may
not be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.
23
We
have
advised the selling shareholders that the anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of shares in the market and to
the
activities of the selling shareholders and their affiliates. In
addition, we will make copies of this prospectus (as it may be supplemented
or
amended from time to time) available to the selling shareholders for the
purpose
of satisfying the prospectus delivery requirements of the 1933
Act. The selling shareholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the 1933 Act.
We
have
agreed to indemnify the selling shareholders against liabilities, including
liabilities under the 1933 Act and state securities laws, relating to the
registration of the shares offered by this prospectus.
We
have
agreed with the selling shareholders to keep the registration statement of
which
this prospectus constitutes a part effective until the earlier of (1) such
time
as all of the shares covered by this prospectus have been disposed of pursuant
to and in accordance with the registration statement, (2) the date on which
the
shares may be sold pursuant to Rule 144 under the 1933 Act, and (3) the date
on
which the shares (other than shares held by our Affiliates) may be sold pursuant
to Rule 144(k) of the 1933 Act.
24
