EXHIBIT 10.3
CONFORMED COPY
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made as of
December 21, 2004, by and among (i) Kahiki Foods, Inc., an Ohio corporation
company (the "COMPANY") and (ii) Townsends, Inc., a Delaware corporation
("TOWNSENDS").
RECITALS:
A. The Company and Townsends are parties to a Note Purchase
Agreement dated the date hereof (the "PURCHASE AGREEMENT") pursuant to which
Townsends acquired convertible promissory Notes (the "NOTES"), convertible into
either the Company's Series A Convertible Preferred Shares (the "PREFERRED
STOCK") or the Company's Common Shares (the "COMMON STOCK"). In order to induce
Townsends to enter into the Purchase Agreement, the Company agreed to provide
the registration rights set forth in this Agreement.
B. Unless otherwise provided in this Agreement, capitalized terms
used herein shall have the meanings set forth in Section 9 below.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
promises contained herein, the parties agree as follows:
1. DEMAND REGISTRATIONS.
(A) REQUESTS FOR REGISTRATION. At any time after the first
anniversary of the date hereof and before the fourth anniversary of the date the
Notes convert into either Preferred Stock or Common Stock, the holders of a
majority of the Investor Registrable Securities may request registration under
the Securities Act of all or any portion of their Registrable Securities on Form
X-0, XX-0 or any similar long-form registration ("LONG-FORM REGISTRATIONS") in
the manner provided in Section 1(b);
(B) DEMAND REGISTRATIONS. The Initiating Holders shall be
entitled to request (i) one (1) Long-Form Registration in which the Company
shall pay all Registration Expenses ("COMPANY-PAID LONG-FORM REGISTRATIONS"). A
registration shall not count as the permitted Company-paid Long-Form
Registrations until it has become effective and the holders requesting
registration are able to register at least seventy-five percent (75%) of the
Registrable Securities requested to be included in such registration; provided
that in any event the Company shall pay all Registration Expenses in connection
with any registration initiated as a Company-paid Long-Form Registration whether
or not it has become effective and whether or not such registration is counted
as one of the permitted Company-paid Long-Form Registrations. Notwithstanding
the foregoing, and subject to Section 1(f) below, if any registration initiated
by the Initiating Holders as a Company-paid Long-Form Registration is
voluntarily withdrawn by the Initiating Holders, such
holders shall either (i) pay all Registration Expenses in connection with such
registration in which case such registration shall not be deemed a Company-paid
Long-Form Registration or (ii) cause the Company to pay such expenses provided
that such registration shall count as the permitted Company-paid Long-Form
Registrations.
(c) SHORT-FORM REGISTRATIONS. Any registration requested
pursuant to Sections l(b) is referred to herein as a "DEMAND REGISTRATION." A
Demand Registration shall be on Form S-3, SB equivalent or any successor
short-form registration ("SHORT-FORM REGISTRATION") whenever the Company is
permitted to use Form S-3 or any successor short-form registration. A request
for a Demand Registration shall specify the approximate number of Registrable
Securities requested to be registered. Within five (5) days after receipt of any
such request from the Initiating Holders, the Company shall give written notice
of such requested registration to all other holders of Investor Registrable
Securities (if any) and, except as provided in Section 1(d) below, shall use its
commercially reasonable efforts include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within ten (10) days after the receipt of the Company's
notice.
(d) PRIORITY ON DEMAND REGISTRATIONS. If a Demand Registration
is an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the Initiating Holders, the Company
shall include in such registration: (i) first, the Investor Registrable
Securities requested to be included in such registration, pro rata among the
holders of such Investor Registrable Securities on the basis of the number of
shares owned by such holders; (ii) second, securities the Company proposes to
sell; and (iii) third, other securities which are not Registrable Securities
requested to be included in such registration pursuant to contractual
registration rights ("OTHER REGISTRABLE SECURITIES"), pro rata among the holders
thereof on the basis of the number of their securities requested to be included
therein.
(e) RESTRICTIONS ON DEMAND REGISTRATIONS. If, at the time of a
request for a Demand Registration the Company reasonably expects to file a
registration statement for its securities within 90 days of such request, the
Company may postpone for up to 180 days from the effectiveness of such
contemplated registration statement the filing of the registration statement for
such requested Demand Registration. The Company shall not be obligated to effect
any Demand Registration within 90 days after (i) the effective date of a
previous Long-Form Registration or (ii) a previous registration in which the
holders of Registrable Securities were given piggyback rights pursuant to
Section 2 and in which there was not more than a 50% reduction in the number of
Registrable Securities requested to be included. The Company may postpone for up
to 90 days the filing or the effectiveness of a registration statement for a
Demand Registration if in the good faith judgment of the Board such Demand
Registration would reasonably be expected to be materially detrimental to the
Company, provided that in such event, the Initiating Holders shall be entitled
to withdraw such request and, if such request is withdrawn, such Demand
Registration shall not count as one of the permitted Company-paid Long Form
Registrations hereunder and the Company shall pay all Registration Expenses in
connection with such registration. The Company may delay a
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Demand Registration pursuant to the immediately preceding sentence only once in
any 12-month period.
(f) SELECTION OF UNDERWRITERS. The Initiating Holders
participating in a Demand Registration shall have the right to select the
investment banker(s) and manager(s) to administer the offering with the consent
of the Company, and such consent shall not be unreasonably withheld.
(g) OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement and so long as Townsends holds more than the Minimum Ownership, the
Company shall not enter into any agreement with any Person to grant such Person
the right to request the Company to register any equity securities of the
Company, or any securities convertible or exchangeable into or exercisable for
such securities on terms that are equal to or more favorable than the
registration rights granted to the holders of Registrable Securities hereunder.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes (but
without any obligation to do so) to register any of its securities under the
Securities Act (other than (i) pursuant to a Demand Registration for which
Section 1 is applicable, or (ii) in connection with registrations on Form X-0,
X-0 or any successor or similar forms) and the registration form to be used may
be used for the registration of Registrable Securities (a "PIGGYBACK
REGISTRATION"), the Company shall give prompt written notice (in any event
within five (5) business days after its receipt of notice of any exercise of
demand registration rights other than under this Agreement) to all holders of
Registrable Securities of its intention to effect such a registration and shall
use its best efforts to include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within ten (10) days after the receipt of the Company's notice.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the
holders of Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company that in their opinion the
number of securities requested to be included in such registration exceeds the
number which in their sole discretion is compatible with the success of the
offering, the Company shall include in such registration (i) first, the
securities the Company proposes to sell; (ii) second, the Investor Registrable
Securities and Other Registrable Securities with piggyback registration rights
pari passu with the Investor Registrable Securities requested to be included in
such registration, pro rata among the holders of such Investor Registrable
Securities and Other Registrable Securities, if applicable, on the basis of the
number of shares owned by such holders; and (iii) third, Other Registrable
Securities requested to be included in such registration, pro rata among the
holders thereof on the basis of the number of other Registrable Securities
requested to be included therein.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is
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an underwritten secondary registration on behalf of holders of Other Registrable
Securities, if the managing underwriters advise the Company that in their
opinion the number of securities requested to be included in such registration
exceeds the number which, in their sole discretion, is compatible with the
success of the offering within a price range acceptable to the holders of a
majority of the Other Registrable Securities to be included in such
registration, the Company shall include in such registration (i) first, the
securities requested to be included therein by the holders of Other Registrable
Securities requesting such registration, (ii) second, the Investor Registrable
Securities and any Other Registrable Securities with piggyback registration
rights pari passu with the Investor Registrable Securities requested to be
included in such registration, pro rata among the holders of such Investor
Registrable Securities and other Registrable Securities on the basis of the
number of shares owned by such holders; and (iii) third, any non-requesting
Other Registrable Securities requested to be included in such registration, pro
rata among the holders thereof on the basis of the number of their securities
requested to be included therein.
(e) SELECTION OF UNDERWRITERS. If any Piggyback Registration
is an underwritten offering, the selection of investment banker(s) and
manager(s) for the offering shall be made by the Company. With respect to each
holder of Registrable Securities, in order for such holder's Registrable
Securities to be included in a Piggyback Registration under this Section 2, such
holder of Registrable Securities must be required to be bound by the terms of
the underwriting agreement between the Company and the underwriters selected by
the Company for such Piggyback Registration.
3. HOLDBACK AGREEMENTS.
(a) HOLDERS OF REGISTRABLE SECURITIES. Each holder of
Registrable Securities shall not effect any public sale or distribution
(including sales pursuant to Rule 144) of equity securities of the Company, or
any securities convertible into or exchangeable or exercisable for such
securities, during the period beginning on, in the case of a Demand
Registration, the date of notice to the Company by the Initiating Holders of a
Demand Registration and ending on the 90th day after the effective date of any
underwritten Demand Registration or in the case of any underwritten Piggyback
Registration in which Registrable Securities included, the period beginning on
the date the Company provides notification to the holders of Registrable
Securities of such offering and ending on the 90th day after the effective date
of any such registration, unless the underwriters managing the Demand
Registration or Piggyback Registration otherwise agree. In order to enforce the
foregoing covenants, the Company may impose stop-transfer instructions with
respect to the securities of each holder of Registrable Securities (and the
securities of all other Persons subject to the restrictions in Section 3(a).
Each holder of Registrable Securities agrees that it will not transfer
securities of the Company unless each transferee agrees in writing to be bound
by all the provisions of this Section 3.
(b) THE COMPANY. The Company shall not effect any public sale
or distribution of any of its equity securities, or any securities convertible
into or exchangeable or exercisable for such securities, during the customary
hold-back period agreed upon with the underwriters managing the registered
public offering, if any.
4. REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities
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have requested that any Registrable Securities be registered pursuant to this
Agreement, the Company shall use its best efforts to effect the registration and
the sale of such Registrable Securities in accordance with the intended method
of disposition thereof, and pursuant thereto the Company shall as expeditiously
as reasonably possible:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable Securities
and use its best efforts to cause such registration statement to become
effective; provided that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company shall furnish to the counsel
selected by the holders of a majority of the Registrable Securities included in
such registration statement copies of all such documents proposed to be filed,
which documents shall be subject to the review and comment of such counsel.
(b) notify each holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the Securities and Exchange Commission 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 for a period
of 120 days or until the distribution described in such registration statement
has been completed, whichever occurs first, and comply with the provisions of
the Securities Act with respect to the disposition of all securities covered by
such registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement; provided, however, that if the Company is eligible to use Form S-3,
the holders of Registrable Securities may require the Company to keep such
registration effective as a "shelf registration" for a period of up to two
years;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and use its reasonable efforts
to enable such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller; provided that the Company shall not
be required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction, or (iii) consent to general
service of process in any such jurisdiction;
(e) promptly notify each seller and the managing underwriter,
if any: (i) when such registration statement, any pre-effective amendment, 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, when the same has become
effective, (ii) of the issuance by the Securities and Exchange Commission of any
stop order suspending the effectiveness of the registration statement or the
initiation or threat of any proceedings for that purpose, (iii) of the receipt
by the Company of any notification with respect to
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the suspension of the qualification of any Registrable Securities for sale under
the securities or blue sky laws of any jurisdiction or the initiation of any
proceeding for such purpose, (iv) of the existence of any fact of which the
Company becomes aware or the happening of any event which results in (A) the
registration statement containing an untrue statement of a material fact or
omitting to state a material fact required to be stated therein or necessary to
make any statements therein not misleading, or (B) the prospectus included in
such registration statement containing an untrue statement of a material fact or
omitting to state a material fact required to be stated therein or necessary to
make any statements therein, in light of the circumstances under which they were
made, not misleading, and (v) of the Company's reasonable determination that a
post-effective amendment to a registration statement would be appropriate or
that there exists circumstances not yet disclosed to the public which make
further sales under such amendment; and, if the notification relates to an event
described in any of the clauses (ii) through (v) of this Section 4(e), the
Company shall promptly prepare a supplement or post-effective amendment to such
registration statement or related prospectus or any document incorporated
therein by reference or file any other required document so that (A) such
registration statement shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (B) as thereafter delivered to
the purchasers of the Registrable Securities being sold thereunder, 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 in the light of the circumstances under which they were made
not misleading (and shall furnish to each such holder and each underwriter, if
any, a reasonable number of copies of such prospectus so supplemented or
amended); and if the notification relates to an event described in clause (iii)
of this Section 4(e), the Company shall take all reasonable action required to
prevent the entry of such stop order or to remove it if entered;
(f) Use its best efforts to cause all such Registrable
Securities to be listed on each securities exchange on which similar securities
issued by the Company are then listed and, if not so listed, on the NASD
automated quotation system and, if listed on the NASD automated quotation
system, use its best efforts to secure designation of all such Registrable
Securities covered by such registration statement as a Nasdaq "national market
system security" within the meaning of Rule 11Aa2-1 of the Securities and
Exchange Commission or, failing that, to secure Nasdaq authorization for such
Registrable Securities and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register as such with respect to such
Registrable Securities with the NASD;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other reasonable
actions (including hold-backs) as the underwriters, if any, reasonably request
in order to expedite or facilitate the disposition of such Registrable
Securities;
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(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, Managers, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least 12 months beginning with the
first day of the Company's first full calendar quarter after the effective date
of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any holder of Registrable Securities, which holder,
in the Company's sole and exclusive judgment, might be deemed to be an
underwriter or a controlling Person of the Company, to participate in the
preparation of such registration or comparable statement and to require the
insertion therein of material furnished to the Company in writing, which in the
reasonable judgment of such holder and its counsel is required to be included in
accordance with the Securities Act or the Exchange Act;
(l) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any equity securities included in such registration statement for sale in any
jurisdiction, the Company shall use its commercially reasonable efforts promptly
to obtain the withdrawal of such order;
(m) use its best efforts to furnish on the date that
Registrable Securities are delivered to the underwriters for sale pursuant to
such registration, a letter from the Company's independent public accountants
addressed to the underwriters, in form and substance as is customarily given by
independent public accountants to underwriters in an underwritten public
offering; and
(n) if the offering is underwritten and at the request of any
seller of Registrable Securities, furnish on the date that Registrable
Securities are delivered to the underwriters for sale pursuant to such
registration an opinion dated such date of counsel representing the Company for
the purposes of such registration in form and substance as is customarily given
to underwriters in an underwritten public offering, addressed to the
underwriters and to such seller.
5. FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Agreement with respect to the
Registrable Securities of any selling holder that such holder shall furnish to
the Company such reasonable information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as
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shall be required to effect the registration of such holder's Registrable
Securities. If any registration statement or comparable statement under "blue
sky" laws refers to any holder by name or otherwise as the holder of any
Registrable Securities, then such holder shall promptly (i) notify the Company
of the existence of any fact of which such holder becomes aware and the
happening of any event which relates to holder or the distribution of the
securities owned by such holder which results in the registration statement
containing an untrue statement of material fact or omitting to state a material
fact required to be stated therein or necessary to make any statements therein
not misleading, or the prospectus included in such registration statement
containing an untrue statement of material fact or omitting to state a material
fact required to be stated therein or necessary to make any statements therein,
in light of the circumstances under which they were made, not misleading and
(ii) provide to the Company such information as shall be necessary to enable the
Company to prepare a supplement or post-effective amendment to such registration
statement or related prospectus or any document incorporated thereunder by
reference o file any other documents required so that such registration
statement will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and 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 in light of the
circumstances under which they were made not misleading.
(b) NOTICE OF DISCONTINUE. Each holder of Registrable
Securities agrees by acquisition of such Registrable Securities that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 4(e)(ii) through (v), such Holder shall forthwith
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such holder's receipt of
the copies of the supplemented or amended prospectus contemplated by Section
4(e) and, if so directed by the Company, such holder shall 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 covering such Registrable
Securities which is current at the time of receipt of such notice. If the
Company shall give any such notice, the Company shall extend the period during
which such registration statement shall be maintained effective pursuant to this
Agreement by the number of days in excess of ten (10) business days during the
period from and including the date of the giving of such notice pursuant to
Section 4(e) to and including the date when the holder shall have received the
copies of the supplemented or amended prospectus contemplated by and meeting the
requirements of Section 4(e).
6. REGISTRATION EXPENSES.
(a) PAYMENT OF REGISTRATION EXPENSES. All expenses incident to
the Company's performance of or compliance with this Agreement, including
without limitation all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws, printing expenses, messenger and
delivery expenses, fees and disbursements of custodians, and fees and
disbursements of counsel for the Company and the Company's independent certified
public accountants, underwriters (excluding underwriting discounts and
commissions incurred in connection with regulatory filing or qualifications) and
other Persons retained by the Company (all such expenses being herein called
"REGISTRATION EXPENSES"), shall be borne as provided in this Agreement, except
that the Company shall, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or
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accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed or on, the NASD automated
quotation system.
(b) REIMBURSEMENT OF REGISTRATION EXPENSES. In connection with
each Demand Registration and each Piggyback Registration, the Company shall
reimburse the holders of Registrable Securities included in such registration
for the reasonable fees and disbursements of one counsel chosen by the holders
of a majority of the Investor Registrable Securities included in such
registration and for the reasonable fees and disbursements of each additional
counsel retained by any holder of Registrable Securities for the purpose of
rendering a legal opinion on behalf of such holder in connection with any
underwritten Demand Registration or Piggyback Registration.
(c) PAYMENT OF REGISTRATION EXPENSES BY HOLDERS OF REGISTRABLE
SECURITIES. To the extent Registration Expenses are not required to be paid by
the Company, each holder of securities included in any registration hereunder
shall pay its proportionate share of all Registration Expenses based upon the
ratio of the aggregate selling price of each holder's securities included
therein to the aggregate selling price of all securities to be so registered.
7. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify, to the extent permitted by law, each holder of Registrable
Securities, its officers and Managers and each Person who controls such holder
(within the meaning of the Securities Act) against all losses, claims, damages,
liabilities and expenses to which such holder may become subject under the
Securities Act, the Securities Exchange Act, or other federal or state
securities law, insofar as such losses, claims, damages, liabilities and
expenses arise out of or are based upon any untrue or alleged untrue statement
of material fact contained in any registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, and, with respect to
any prospectus or preliminary prospectus, in light of the circumstances in which
they were made, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by or on behalf of such holder
expressly for use therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such holder with a sufficient number of copies
of the same. In connection with an underwritten offering, the Company shall
indemnify such underwriters, their officers and Managers and each Person who
controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the holders
of Registrable Securities.
(b) INDEMNIFICATION BY THE HOLDERS OF REGISTRABLE SECURITIES.
In connection with any registration statement in which a holder of Registrable
Securities is participating, each such holder shall furnish to the Company in
writing such information and affidavits as the Company reasonably requests for
use in connection with any such registration statement or prospectus and, to the
extent permitted by law, shall indemnify the Company, its Managers and officers
and each Person who controls the Company (within the meaning of the
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Securities Act) against any losses, claims, damages, liabilities and expenses to
which such holder may become subject under the Securities Act, the Securities
Exchange Act, or other federal or state law, insofar as such losses, claims,
damages or liabilities arise out of or are based upon from any untrue or alleged
untrue statement of material fact contained in the registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, and,
with respect to any prospectus or preliminary prospectus, in light of the
circumstances in which they were made, but only to the extent that such untrue
statement or omission is contained in any information or affidavit so furnished
in writing by such holder; provided that the obligation to indemnify shall be
individual, not joint and several, for each holder and shall be limited to the
net amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement, except in the case of gross
negligence or willful misconduct by such holder.
(c) PROCEDURE FOR INDEMNIFICATION. Any Person entitled to
indemnification hereunder shall (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
(provided that the failure to give prompt notice shall not impair any Person's
right to indemnification hereunder to the extent such failure has not prejudiced
the indemnifying party) and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties actually exists with respect to such claim, permit such indemnifying
party to assume the defense of such claim with counsel reasonably satisfactory
to the indemnified party. If such defense is assumed, the indemnifying party
shall not be subject to any liability for any settlement made by the indemnified
party without its consent (but such consent shall not be unreasonably withheld).
An indemnifying party who is not entitled to, or elects not to, assume the
defense of a claim shall not be obligated to pay the fees and expenses of more
than one (1) counsel for all parties indemnified by such indemnifying party with
respect to such claim, unless in the reasonable judgment of any indemnified
party a conflict of interest actually exists between such indemnified party and
any other of such indemnified parties with respect to such claim.
(d) SURVIVAL. The indemnification provided for under this
Agreement shall remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director or
controlling Person of such indemnified party and shall survive the transfer of
securities. The Company also agrees to make such provisions, as are reasonably
requested by any indemnified party, for contribution to such party in the event
the Company's indemnification is unavailable for any reason.
8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder unless such Person:
(a) in the case of a registration which is underwritten,
agrees to sell such Person's securities on the basis provided in the applicable
underwriting arrangement; provided, however, that no holder of less than eight
percent (10%) of all Registrable Securities included in any underwritten
registration (other than an executive officer or director of the Company) shall
be required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder,
such holder's ownership of stock and such
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holder's intended method of distribution) or to undertake any indemnification
obligations to the Company or the underwriters with respect thereto, except as
otherwise provided in Section 7;
(b) as expeditiously as possible, notifies the Company, at any
time when a prospectus relating to such Person's Registrable Securities is
required to be delivered under the Securities Act, of the happening of any event
as a result of which such prospectus contains an untrue statement of a material
fact or omits any fact necessary to make the statements therein not misleading;
(c) complies with all reasonable requests made by the Company
or its counsel with respect to the registration of such Person's Registrable
Securities, including, without limitation, providing access to all relevant
books and records; and
(d) completes, executes and delivers all questionnaires,
powers of attorney, indemnities, underwriting agreements and other usual and
customary documents necessary or appropriate with respect to the offering of
such Person's Registrable Securities, and in the case of a registration which is
underwritten, necessary or appropriate under the terms of such underwriting
arrangements (subject to the provision in Section 8(a)).
9. DEFINITIONS. Unless otherwise stated, capitalized terms contained
herein and not otherwise defined herein, have the meanings set forth in the
Purchase Agreement.
"AFFILIATE" as applied to any Person, shall mean (a) any officer,
director, manager, trustee or controlling equity owner of such Person, (b) any
Person directly or indirectly controlling, controlled by, or under common
control with, such Person, and (c) any officer, director, trustee, manager or
controlling equity owner of any Person described in (b) above. For purposes of
this definition, "control" (including correlative meanings, the terms
"controlling", "controlled by" and "under common control with") shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"BOARD" means the Board of Directors of the Company.
"COMPANY" has the meaning specified in the preamble of this
Agreement.
"COMPANY-PAID LONG-FORM REGISTRATION" has the meaning specified in
Section 1(b).
"DEMAND REGISTRATIONS" has the meaning specified in Section 1(c).
"INITIATING HOLDERS" means the holders of a majority of the
outstanding Investor Registrable Securities.
"INVESTOR REGISTRABLE SECURITIES" means all Registrable Securities
(i) initially issued by the Company to Townsends and (ii) all other Registrable
Securities subsequently acquired by Townsends. Investor Registrable Securities
will continue to be Investor Registrable Securities if held or acquired by any
holder of Registrable Securities that is a permitted transferee.
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"LONG-FORM REGISTRATIONS" has the meaning specified in Section 1(a).
"OTHER REGISTRABLE SECURITIES" has the meaning specified in Section
1(d) above.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust or
unincorporated organization.
"PIGGYBACK REGISTRATION" has the meaning specified in Section 2(a).
"PURCHASE AGREEMENT" has the meaning specified in Recital A.
"REGISTRABLE SECURITIES" means (i) any common equity securities of
the Company issued upon conversion of the Company's Notes or convertible
preferred stock, other than equity securities for which registration rights have
been terminated pursuant to Section 10(l) hereof and (ii) common equity
securities of the Company issued or issuable with respect to the securities
referred to in clause (i) by way of stock dividend, stock distribution, stock
split or combination of stock, or any recapitalization, merger, consolidation or
other reorganization. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act or sold to the public through a broker, dealer, or market maker
in compliance with Rule 144 under the Securities Act (or any similar rule then
in force or sold by a Person in a private transaction in which his rights under
this Agreement are not assigned). For purposes of this Agreement, a Person shall
be deemed to be a holder of Registrable Securities whenever such Person has the
right to acquire such Registrable Securities (upon conversion of any equity
securities or upon exercise of any options or warrants or in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected.
"REGISTRATION EXPENSES" has the meanings specified in Section 6(a).
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
applicable rules and regulations thereunder, and any successor to such statute,
rules, or regulations. Any reference herein to a specific section, rule, or
regulation of the Securities Act shall be deemed to include any corresponding
provisions of future law.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended, and applicable rules and regulations thereunder, and any successor
to such statute, rules, or regulations. Any reference herein to a specific
section, rule, or regulation of the Securities Exchange Act shall be deemed to
include any corresponding provisions of future law.
"SHORT-FORM REGISTRATIONS" has the meaning specified in Section
1(c).
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10. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company will not hereafter
enter into any agreement with respect to its equity securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement; provided, however, that nothing contained herein
shall prevent the Company from granting registration rights to other holders of
its securities that are consistent with the terms and conditions of this
Agreement including but not limited to Section 1(g).
(b) REMEDIES. Any Person having rights under any provision of
this Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(c) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, any provision of this Agreement may be amended or waived only upon the
prior written consent of the Company, as the case may be, and a majority of the
Investor Registerable Securities.
(d) SUCCESSORS AND ASSIGNS. Except as otherwise provided for
herein, all covenants and agreements in this Agreement by or on behalf of any of
the parties hereto shall bind and inure to the benefit of the respective
successors and permitted assigns of the parties hereto whether so expressed or
not. In addition, whether or not any express assignment has been made, the
provisions of this Agreement which are for the benefit of purchasers or holders
of Registrable Securities are also for the benefit of, and enforceable by, any
subsequent holder of Registrable Securities who is a permitted assign.
(e) SEVERABILITY. If any one or more of the provisions
contained in this Agreement or the application thereof in any circumstance is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired,
unless the provisions held invalid, illegal or unenforceable shall substantially
impair the benefits of the remaining provisions of this Agreement. The parties
hereto further agree to replace such invalid, illegal or unenforceable provision
of this Agreement with a valid, legal and enforceable provision that will
achieve, to the extent possible, the economic, business or other purposes of
such invalid, illegal or unenforceable provision.
- 13 -
(f) COUNTERPARTS; FACSIMILE TRANSMISSION. Telefacsimile
transmissions of any executed original document and/or retransmission of any
executed telefacsimile transmission shall be deemed to be the same as the
delivery of any executed original. At the request of any party hereto, the other
parties hereto shall confirm telefacsimile transmissions by executing duplicate
original documents and delivering the same to the requesting party or parties.
This Agreement may be executed each of which, when so executed shall be deemed
to be an original and in any number of counterparts, and by the parties hereto
in separate counterparts, all of which taken together shall constitute one and
the same agreement.
(g) DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a substantive
part of this Agreement. Reference to any agreement, document, or instrument
means such agreement, document, or instrument as amended or otherwise modified
from time to time in accordance with the terms thereof, and if applicable
hereof.
(h) GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement and the relative rights of the
Company shall be governed by and construed in accordance with the domestic laws
of the State of Delaware.
(i) NOTICES. All notices, demands or other communications
provided for or permitted herein shall be made in writing and shall be by
telecopier (with receipt confirmed telephonically), by reputable overnight
courier service or personal delivery. Such notices, demands and other
communications shall be sent (i) to Townsends, at the addresses indicated on the
Schedule of Securityholders attached hereto as Exhibit A and (ii) to the
Company, at the address of its corporate headquarters or to such other address
or to the attention of such other Person as the recipient party has specified by
prior written notice to the sending party. All such notices and communications
shall be deemed to have been duly given: when delivered by hand, if personally
delivered; when delivered by courier, if delivered by commercial overnight
courier service; or if telecopied, when receipt is acknowledged.
(j) TERMINATION OF AGREEMENT. All registration rights granted
hereunder will expire and this Agreement will be terminated at such time as (i)
seventy-five percent (75%) of the Registrable Securities issued by the Company
to Townsends have been sold to the public (either in an offering registered
under the Securities Act or pursuant to Rule 144 promulgated under the
Securities Act), and (ii) the average daily trading volume of the Company's
common stock over the six (6) month period immediately preceding the termination
is at least one-quarter of one percent (.0025%) of the Company's outstanding
common stock.
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(k) TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to
cause the Company to register Registrable Securities granted to a holder by the
Company under this Agreement may be transferred or assigned (but only with all
related obligations) by a holder to a transferee or assignee that (i) is an
Affiliate of such holder or (ii) acquires ownership of at least twenty-five
percent 25% of the Registrable Securities purchased under the Purchase
Agreement, provided that the Company is given written notice at the time of or
within a reasonable time after said transfer or assignment, stating the name and
address of the transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned, and
provided, further, that the transferee or assignee of such rights assumes in
writing (pursuant to an instrument reasonably acceptable to the Company) the
obligations of such holder under this Agreement.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the undersigned have executed this Registration Rights
Agreement as of the date first written above.
THE COMPANY
KAHIKI FOODS, INC.
By: /S/ Xxxxxxx Xxxx
------------------------
Xxxxxxx Xxxx
Chief Executive Officer
TOWNSENDS
TOWNSENDS, INC.
By: /S/ Xxxxx Xxxxxx
------------------------
Xxxxx Xxxxxx
Vice President
EXHIBIT A
EFFECTIVE AS OF DECEMBER 17,2004
SCHEDULE OF SECURITYHOLDERS
TOWNSENDS:
Townsends, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
