REGISTRATION RIGHTS AGREEMENT
Exhibit
4.2
This
Registration Rights Agreement (this “Agreement”) is
made and entered into as of May __, 2005
(the “Effective
Date”), by
and between Fellows Energy Ltd., a Nevada corporation (the “Company”), and
those investors who are a party hereto and listed on Exhibit
A (each an
“Investor” and
collectively, the “Investors”).
RECITALS
WHEREAS,
in connection with the terms of the Company’s recent offering
of a minimum of $900,000 and a maximum of $10,500,000 of Units, at a price of
$1.95 per Unit (each a “Unit” and
collectively the “Units”), under
Regulation D of the Securities Act of 1933, as amended (the “Securities
Act”), the
Company has agreed to grant the Investors registration rights as set forth
herein. Each Unit consists of (i) 3.55 shares of common stock, $0.001 par value
per share, of the Company (the “Common
Stock”) and
(ii) one and one-half Series A warrants (each a “Warrant,”
collectively the “Warrants” and
together with the Units and the Common Stock, the “Securities”) to
purchase Fellow’s Common Stock. Each whole Warrant will entitle the holder to
exercise such Warrant to purchase one share of Common Stock for a price of $1.00
per share for three years from the date of purchase of such Unit.
NOW,
THEREFORE, in consideration of the aforesaid, the mutual promises hereinafter
made and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE
I
Definitions
Section
1.1. Definitions. The
following terms, as used herein, shall have the following meanings:
“Advice” has the
meaning set forth in Section 2.2(o).
“Affiliate” means,
with respect to any specified entity, any other entity directly or indirectly
controlling, controlled by or under direct or indirect common control with such
specified entity. For the purposes of this definition, “control” when
used with respect to any specified entity means the power to direct the
management and policies of such entity, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
“controlling” and
“controlled” have
meanings correlative to the foregoing. For purposes of this definition, entity
may include a corporation, partnership, limited partnership, limited liability
company, association, joint stock company, trust or joint venture, but not an
individual human being.
“Agreement” has the
meaning set forth in the preamble to this Agreement.
“Amendment
Filing Date” has the
meaning set forth in Section 2.1(a).
“Business
Day” means
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York, New York are authorized or obligated by law or
executive order to close.
“Buy-In” has the
meaning set forth in Section 2.7(d).
“Commission” means
the Securities and Exchange Commission or any other Federal agency from time to
time administering the Securities Act or the Exchange Act.
“Common
Stock” has the
meaning set forth in the Recitals to this Agreement.
“Company” has the
meaning set forth in the preamble to this Agreement.
“DTC” has the
meaning set forth in Section 2.7(b).
“Effective
Date” has the
meaning set forth in the preamble to this Agreement.
“Effective
Period” has the
meaning set forth in Section 2.1(b).
“Exchange
Act” means
the Securities Exchange Act of 1934, as amended.
“Event” has the
meaning set forth in Section 2.1(c).
“Event
Date” has the
meaning set forth in Section 2.1(c).
“Filing
Date” has the
meaning set forth in Section 2.1(a).
“Investor” has the
meaning set forth in the preamble to this Agreement.
“Investor
Holders” has the
meaning set forth in Section 2.1(a).
“Person” means
any individual, corporation, limited liability company, firm, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
any other entity or organization, including a government, a governmental body, a
political subdivision or an agency or instrumentality thereof.
“Registration
Statement” shall
mean any registration statement of the Company under the Securities Act that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the related prospectus, all 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.
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“Registrable
Securities” means
(i) any shares of Common Stock issued to the Investors as part of the Units and
owned by any Investor Holder, (ii) any shares of Common Stock issued or issuable
upon exercise of the Warrants, if any, and (iiii) any shares of Common Stock
which may be issued or distributed or be issuable in respect of such shares of
Common Stock by way of concession, stock dividend or stock split or other
distribution, recapitalization or reclassification or similar transaction, but
with respect to such shares of Common Stock, only so long as such shares are
“Restricted
Securities”. A
share of Common Stock shall be deemed to be a “Restricted
Security” until
such time as such share (i) has been effectively registered under the Securities
Act pursuant to a Registration Statement with respect to the sale of such share
and disposed of pursuant to such Registration Statement, (ii) has been
distributed to the public pursuant to Rule 144 (or any similar provision then in
force) under the Securities Act, (iii) has been otherwise transferred, new
certificates for it not bearing a legend restricting further transfer having
been delivered by the Company and may be publicly sold (without volume or manner
of sale restrictions) without registration under the Securities Act or any state
securities or blue sky law then in force or (iv) has ceased to be outstanding.
“Securities” has the
meaning set forth in the Recitals to this Agreement.
“Securities
Act” has the
meaning set forth in the Recitals to this Agreement.
“Unit(s)” has the
meaning set forth in the Recitals to this Agreement.
“Unlegended
Shares Delivery Date” has the
meaning set forth in Section 2.7(a).
“Unlegended
Shares” has the
meaning set forth in Section 2.7(a).
“Warrant(s)” has the
meaning set forth in the Recitals to this Agreement.
ARTICLE
II
Registration
and Related Rights
Section
2.1 Registration
of Resales.
(a) Within
the time period ending on the date thirty (30) days following the Effective Date
(the “Filing
Date”), the
Company shall file with the Commission a Registration Statement to register
under the Securities Act the Registrable Securities. The Company shall use
commercially reasonable efforts to cause the Registration Statement to be
declared effective by the Commission as promptly as practicable, but in no event
(i) more than ninety (90) days after the Effective Date or (ii) one hundred
twenty (120) days after the Effective Date in the case of a review of the
Registration Statement by the Commission. The Company will notify all Investors,
and any successor, assign or transferee of the Investors then owning Registrable
Securities (collectively, the “Investor
Holders”) in the
same manner when such Registration Statement becomes effective. Failure to so
notify the Investor Holders within two (2) Business Days of such notification
shall be deemed an Event under Section
2.1(c). With
respect to any Securities issued by the Company to any Investor Holder following
the Filing Date which become Registrable Securities, within the time period
ending on the date sixty (60) days following such issuance (the “Amendment
Filing Date”), the
Company shall file with the Commission an amendment to the Registration
Statement, a prospectus supplement to the Registration Statement or a new
Registration Statement, as applicable, to register under the Securities Act such
additional Registrable Securities. The Company shall use commercially reasonable
efforts to cause any such amendment, prospectus supplement or new Registration
Statement, as applicable, to be declared effective by the Commission as promptly
as practicable, but in no event (i) more than ninety (90) days after such
issuance or (ii) one hundred twenty (120) days after such issuance in the case
of a review of such Registration Statement by the Commission. The Company will
notify all Investors Holders in the same manner when such amendment, prospectus
supplement or new Registration Statement becomes effective. Failure to so notify
the Investor Holders within two (2) Business Days of such notification shall be
deemed an Event under Section
2.1(c).
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(b) The
Company agrees to use commercially reasonable efforts to keep the Registration
Statement (including the preparation and filing of any amendments and
supplements necessary for that purpose) continuously effective until the earlier
of (i) the date that Registrable Securities issuable upon exercise of the
Warrants may no longer be issued pursuant to the terms of such Warrants, (ii)
the date that all of the Registrable Securities have been sold pursuant to such
Registration Statement, (iii) the date the Investor Holders receive an opinion
of counsel to the Company, which counsel shall be reasonably acceptable to the
Investor Holders, that the Registrable Securities may be sold under the
provisions of Rule 144 without limitation as to volume, (iv) all Registrable
Securities have been otherwise transferred to persons who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend, or (v) three years from the effective date of the
Registration Statement (such period, the “Effective
Period”). If
the Registration Statement ceases to be effective for any reason or at any time
during the Effective Period (other than because of the sale of all the
securities registered thereunder), the Company shall use commercially reasonable
efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof.
(c) If: (i) a
Registration Statement is not filed on or prior to the Filing Date or the
Amendment Filing Date, or (ii) the Company fails to file with the
Commission a request for acceleration in accordance with Rule 461 promulgated
under the Securities Act, within five (5) Business Days of the date that the
Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be “reviewed,” or not subject
to further review, or (iii) prior to the date that a Registration Statement is
declared effective, the Company fails to file a pre-effective amendment and
otherwise respond in writing to comments made by the Commission in respect of
such Registration Statement within fifteen (15) Business Days after the receipt
of comments by or notice from the Commission that such amendment or response is
required in order for a Registration Statement to be declared effective, or (iv)
a Registration Statement filed or required to be filed hereunder is not declared
effective by the Commission by the ninetieth (90th) day (or
one hundred twentieth (120th) day in
the case of a review of the Registration Statement by the Commission) following
the Effective Date as a result of an act or omission by the Company, or (v)
after a Registration Statement is declared effective by the Commission, but
prior to the time the Registrable Securities are eligible for sale pursuant to
Rule 144(k) (or any successor provision which permits the resale of the
Registrable Securities without registration under the Securities Act without
regard to volume or other restrictions other than restrictions similar to those
set forth in Rule 144(k)) promulgated under the Securities Act, a Registration
Statement ceases for any reason to remain continuously effective as to all
Registrable Securities for which it is required to be effective, or the Investor
Holders are not permitted to utilize the Prospectus therein to resell such
Registrable Securities for ten (10) consecutive days or an aggregate of
twenty-five (25) days during any twelve (12)-month period (which need not be
consecutive days) as a result of an act or omission by the Company (any such
failure or breach being referred to as an “Event”, and
for purposes of clause (i) or (iv) the date on which such Event occurs, or for
purposes of clause (ii) the date on which such five (5) Business Day period is
exceeded, or for purposes of clause (iii) the date which such fifteen (15)
Business Day period is exceeded, or for purposes of clause (v) the date on which
such ten (10) or twenty-five (25) day period, as applicable, is exceeded being
referred to as “Event
Date”), then,
on each such Event Date and every monthly anniversary thereof until the
applicable Event is cured, the Company shall pay, at the Company’s election, to
each Holder an amount in cash or Common Stock (at a per share price equivalent
of 95% of the VWAP of Common Stock for any applicable consecutive 10 day period,
as liquidated damages and not as a penalty) equal to two percent (2%) per 30
days, calculated on a daily basis, of the purchase price of each Unit ($2.10
with the entire amount being allocated entirely to the shares of Common Stock in
such Unit and not to the Warrants) of the Registrable Securities then held by
such Investor Holder. If the Company fails to pay any liquidated damages
pursuant to this Section in full within seven (7) days after the applicable
Event Date, the Company will pay additional interest thereon at a rate of
eighteen percent (18%) per annum (or such lesser maximum amount that is
permitted to be paid by applicable law) to the Investor Holder, accruing daily
from the date such liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full. The liquidated damages pursuant to the terms
hereof shall apply on a pro-rata basis for any portion of a month prior to the
cure of an Event.
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Section
2.2 Registration
Procedures. It
shall be a condition precedent to the obligations of the Company to take any
action pursuant to this Article II that the Investor Holders furnish to the
Company such information regarding them, the Registrable Securities held by
them, the intended method of disposition of such Registrable Securities, and
such agreements regarding indemnification, disposition of such securities and
the other matters referred to in this Article II as requested by the Company in
the attached Selling Shareholder Questionnaire attached hereto as Exhibit
B.
The
Company agrees that the Selling Shareholder Questionnaire attached hereto as
Exhibit
B,
satisfies all of the information required to be provided by each Investor Holder
in connection with the Registration Statement. The Company shall not be required
to include any Investor Holder’s Registrable Securities in any Registration
Statement that does not complete, date and execute a Selling Shareholder
Questionnaire.
Additionally, the Registration Statement required hereunder shall contain the
Plan of Distribution, attached hereto as Exhibit
C (which
may be modified to respond to comments, if any, received by the Commission. With
respect to any Registration Statement which includes Registrable Securities held
by an Investor Holder, the Company shall, subject to Sections 2.1;
(a) Prepare
and file with the Commission a Registration Statement on the appropriate form
prescribed by the Commission in accordance with Section 2.1; provided,
however, that at
least five (5) Business Days prior to filing a Registration Statement and at
least three (3) Business Days prior to the filing of a prospectus or any
amendments or supplements to a Registration Statement or a prospectus, including
documents incorporated by reference after the initial filing of the Registration
Statement, the Company shall furnish to the holders of the Registrable
Securities covered by such Registration Statement copies of or drafts of all
such documents proposed to be filed, which documents shall be subject to the
reasonable review of such Investor Holders;
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(b) Prepare
and file with the Commission such amendments and post-effective amendments to
such Registration Statement and any documents required to be incorporated by
reference therein as may be necessary to keep the Registration Statement
effective for the Effective Period; cause the prospectus to be supplemented by
any required prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 under the Securities Act (or any successor rule); and comply with
the provisions of the Securities Act applicable to it with respect to the
disposition of all Registrable Securities covered by such Registration Statement
during the Effective Period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement or
supplement to the prospectus;
(c) Furnish
to each such Investor Holder, without charge, at least one conformed copy of the
Registration Statement and any post-effective amendment thereto, upon request,
and such number of copies of the prospectus (including each preliminary
prospectus) and any amendments or supplements thereto, and any exhibits or
documents incorporated by reference therein as any such Investor Holder may
request in order to facilitate the disposition of the securities being sold by
any such Investor Holder (it being understood that the Company consents to the
use of the prospectus and any amendment or supplement thereto by any such
Investor Holder covered by the Registration Statement in connection with the
offering and sale of the securities covered by the prospectus or any amendments
or supplements thereto);
(d) Notify
each such Investor Holder, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, within two (2) hours after
the Company becomes aware of the occurrence of any event as a result of which
the prospectus included in such Registration Statement (as then in effect)
contains any untrue statement of material fact or omits to state a material fact
necessary to make the statements therein (in the case of the prospectus or any
preliminary prospectus, in light of the circumstances under which they were
made) not misleading and, as promptly as practicable thereafter, prepare and
file with the Commission and furnish a supplement or amendment to such
prospectus so that, as thereafter delivered to the Investor Holders (a
reasonable number of such amended and supplemented prospectuses having been
delivered to the Investor Holders), such prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading;
(e) Use its
reasonable best efforts to cause all securities included in such Registration
Statement to be listed, by the date of the first sale of securities pursuant to
such Registration Statement, on each national securities exchange or market on
which the Common Stock is then listed or quoted;
(f) Notify each
Investor Holder within two (2) hours after the Company becomes aware:
(i) of the issuance by the Commission or any other federal or state governmental
authority of any stop order suspending the effectiveness of the Registration
Statement covering any or all of the Registrable Securities or the initiation of
any Proceedings for that purpose; (ii) of the receipt by the Company 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;
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(g) Make
every reasonable effort to obtain the withdrawal of any stop order suspending
the effectiveness of the Registration Statement or other order suspending the
use of any preliminary or final prospectus at the earliest possible moment;
(h) Subject
to the time limitations specified in Section 2.2(b), if requested by any such
Investor Holder, promptly incorporate in a prospectus supplement or
post-effective amendment such information with respect to the offering as such
Investor Holder reasonably requests to be included therein, including, without
limitation, with respect to the number of shares being sold by such Investor
Holder, and make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable after being notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment;
(i) As
promptly as practicable after the filing with the Commission of any document
which is incorporated by reference into a Registration Statement, deliver a
reasonable number of copies of such document to each such Investor Holder;
(j) Prior to
the date on which the Registration Statement is declared effective, use its
reasonable best efforts to register or qualify, and cooperate with such Investor
Holders, and their counsel in connection with the registration or qualification
of, the securities covered by the Registration Statement for offer and sale
under the securities or blue sky laws of each state and other jurisdiction of
the United States as such Investor Holders, requests in writing, use its
reasonable best efforts to keep each such registration or qualification
effective, including through new filings, or amendments or renewals, during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things necessary or advisable to enable the disposition in
all such jurisdictions of the Registrable Securities covered by the applicable
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 which would
subject it to general service of process in any such jurisdiction where it is
not then so subject;
(k) Enter
into such customary agreements and take such other actions customarily taken by
registrants, if any, as the Investor Holders may reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities;
(l) Make
available for inspection by any Investor Holder holding Registrable Securities
covered by such Registration Statement, by any attorney, accountant or other
agent retained by any such Investor Holder, all pertinent financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company’s officers, directors, employees and independent public accountants
to make themselves available to discuss the business of the Company and to
supply all information reasonably requested by any such Investor Holder,
attorney, accountant or agent in connection with such Registration Statement;
(m) Cooperate
with such Investor Holders to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing securities to be
sold under the Registration Statement, and enable such securities to be in such
denominations and registered in such names as the Investor Holders may request;
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(n) Use its
reasonable best efforts to cause the securities covered by the Registration
Statement to be registered with or approved by such other governmental agencies
or authorities within the United States, including, without limitation, the
National Association of Securities Dealers, Inc., as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such Registrable
Securities; and
(o) The
Investor Holders, upon receipt of any notice from the Company of the happening
of any event of the kind described in Section 2.2(d), shall forthwith
discontinue disposition of the securities until the Investor Holders’ receipt of
the copies of the supplemented or amended prospectus contemplated by Section
2.2(d) or until they are advised in writing (the “Advice”) by the
Company that the use of the prospectus may be resumed, and have received copies
of any additional or supplemental filings which are incorporated by reference in
the prospectus, and, if so directed by the Company, each Investor Holder shall
deliver to the Company (at the Company’s expense) all copies, other than
permanent file copies then in such Investor Holder’s possession, of the
prospectus covering such securities which is no longer current at the time of
receipt of such notice.
Section
2.3 Registration
Expenses. With
respect to any Registration Statement, the Company shall bear all of the costs
and expenses (including, without limitation, the expenses of preparing any
Registration Statement, Commission and state “blue sky” filings, registration
and qualification fees and printing costs); provided,
however, that
the Company shall not be responsible for registration or qualification fees or
underwriter’s discounts or commissions that are attributable to the Registrable
Securities of an Investor Holder or their legal counsel. In connection with any
Registration Statement, the Company shall be required to obtain independent
outside counsel that is sophisticated in securities law matters.
Section
2.4 Indemnification
and Contribution.
(a) Indemnification
by the Company. The
Company agrees to indemnify and hold harmless each Investor Holder, its
officers, directors, advisors and agents and each Person who controls (within
the meaning of the Securities Act or the Exchange Act) such Person from and
against all losses, claims, damages, liabilities (or actions or proceedings in
respect thereof, whether or not such Person is a party thereto) and expenses
(including but not limited to cost of investigation and legal expenses) arising
out of or based upon any untrue or allegedly untrue statement of a material fact
contained in any Registration Statement, prospectus or preliminary prospectus in
which such Investor Holder is participating or in any document incorporated by
reference therein or any omission or alleged omission to state therein a
material fact necessary to make the statements therein (in the case of the
prospectus or any preliminary prospectus, in light of the circumstances under
which they were made) not misleading, except insofar as the same are caused by,
based upon or contained in any information with respect to such Investor Holder
furnished in writing to the Company by such Investor Holder expressly for use
therein; provided,
however, that
the foregoing indemnity agreement with respect to any preliminary prospectus
shall not inure to the benefit of any Investor Holder from whom the Person
asserting such loss, claim, damage or liability purchased shares of Common Stock
if it is determined that it was the responsibility of such Investor Holder to
provide such Person with a current copy of the prospectus and such current copy
of the prospectus would have cured such loss, claim, damage or liability. The
Company shall also indemnify, if applicable and if requested, underwriters (as
such term is defined in the Securities Act), their officers and directors and
each Person who controls such Persons (within the meaning of the Securities Act
and the Exchange Act) to the same extent as provided above with respect to the
indemnification of the Investor Holders.
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(b) Indemnification
by the Investors. In
connection with any Registration in which a the Investor Holder is
participating, such Investor Holder shall furnish to the Company in writing such
information required in the Selling Shareholder Questionnaire attached hereto as
Exhibit
B and
affidavits with respect to such Investor Holder as the Company may reasonably
request for use in connection with any Registration Statement or prospectus and
the Investors agree to indemnify and hold harmless the Company, its directors,
officers and agents and each Person who controls (within the meaning of the
Securities Act and the Exchange Act) the Company from and against any losses,
claims, damages, liabilities (or actions or proceedings in respect thereof,
whether or not the Company is a party thereto) and expenses (including
reasonable cost of investigation and legal expense) arising out of or based upon
any untrue statement of a material fact or any omission to state a material fact
necessary to make the statements in the Registration Statement or prospectus or
preliminary prospectus (in the case of the prospectus or preliminary prospectus,
in light of the circumstances under which they were made) not misleading, to the
extent, but only to the extent, that such untrue statement or omission is
contained in a completed Selling Shareholder Questionnaire or affidavit with
respect to such Investor Holder furnished in writing to the Company by such
Investor Holder expressly for use therein; provided,
however, that
the indemnity agreement contained in this Section 2.4(b) shall not apply to
amounts paid in settlement of any loss, claim, damage, liability or action
arising pursuant to a Registration if such settlement is effected without the
consent of such Investor Holder (which consent shall not be unreasonably
withheld). Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any of the prospective
sellers, or any of their respective Affiliates, directors, officers or
controlling Persons and shall survive the transfer of such securities by such
seller. The Company acknowledges and agrees that any indemnification rights
granted by Investor to the Company pursuant to this Agreement shall not be
jointly and severally made with other investors in the offering and Investor
shall not be held jointly liable for any liability arising under this Agreement.
Any indemnification granted by Investor shall be limited to the amount of net
proceeds received by Investor from the sale of Registrable Securities (as
defined in the Registration Rights Agreement between Investor and the Company of
even date herewith (the "Registration Rights Agreement")) in connection with any
applicable Registration Statement (as defined in the Registration Rights
Agreement).
(c) Conduct
of Indemnification Proceedings. Any
Person entitled to indemnification hereunder shall (x) give prompt written
notice to the indemnifying party of any claim with respect to which it seeks
indemnification and (y) unless in such indemnified party’s reasonable judgment a
conflict of interest may exist between such indemnified and indemnifying party,
permit the indemnifying party to assume the defense of such claim, with counsel
reasonably satisfactory to the indemnified party. The failure to so notify the
indemnifying party shall relieve the indemnifying party from any liability
hereunder with respect to the action to the extent that such failure materially
prejudices the indemnifying party. Whether or not such defense is assumed by the
indemnifying party, the indemnifying party shall not be subject to any liability
for any settlement made without its consent (which consent shall not be
unreasonably withheld). No indemnifying party shall consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such claim or litigation. 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
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 may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the reasonable fees and expenses of
such additional counsel or counsels.
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(d) Contribution. If
for any reason the indemnification provided for in the preceding Sections 2.4(a)
and 2.4(b) is unavailable to an indemnified party as contemplated by the
preceding Sections 2.4(a) and 2.4(b) for any reason, 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 not only the relative benefits received by the
indemnified party and the indemnifying party, but also the relative fault of the
indemnified party and the indemnifying party, as well as any other relevant
equitable considerations. Notwithstanding the foregoing, if the indemnifying
party is any Investor Holder pursuant to Section 2.4(b), any contribution
pursuant to this Section 2.4(d) shall be several and not joint, and shall be
limited to the amount of net proceeds received by such Investor Holder from the
sale of Registrable Securities in connection with the applicable Registration
Statement.
(e) Other
Indemnification. Indemnification
similar to that set forth in the preceding subdivisions of this Section 2.4
(with appropriate modifications and subject to the same limitations set forth in
Section 2.4(d)) shall be given by the Company and the Investors with respect to
any required registration or other qualification of securities under any Federal
or state law or regulation or governmental authority other than the Securities
Act.
Section
2.5 Piggyback
Rights. It
is expressly understood and agreed that the Company and any of its existing
security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statement. Further, if at
any time during the Effective Period there is not an effective Registration
Statement covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Investor Holder written notice of such determination and, if
within fifteen (15) days after receipt of such notice, any such Investor Holder
shall so request in writing, the Company shall include in such registration
statement all or any part of such Registrable Securities such Investor Holder
requests to be registered; provided, that,
the Company shall not be required to register any Registrable Securities
pursuant to this Section 2.5 that are eligible for resale pursuant to Rule
144(k) promulgated under the Securities Act or that are the subject of a then
effective Registration Statement.
10
Section
2.6 Exchange
Act Reports. The
Company agrees that it will use its reasonable best efforts to file in a timely
manner all reports required to be filed by it pursuant to the Exchange Act to
the extent the Company is required to file such reports. Upon the reasonable
request of the Investors, the Company will furnish the Investors with such
information as may be necessary to enable the Investors to effect sales pursuant
to Rule 144.
Section
2.7Delivery
of Unlegended Shares of Common Stock.
With respect to the delivery of unlegended shares of the Common
Stock:
(a)
Within
three (3) Business Days (such third (3rd) Business Day being the “Unlegended
Shares Delivery Date”) after
the business day on which the Company has received form an Investor (i) a notice
that Registrable Securities have been sold either pursuant to a Registration
Statement or Rule 144 under the Securities Act, (ii) a representation that the
prospectus delivery requirements, or the requirements of Rule 144, as
applicable, have been satisfied, (iii) the original share certificates
representing the shares of Common Stock that have been sold, and (iv) in the
case of sales under Rule 144, customary representation letters by the Investor
and the Investor’s broker regarding compliance with the requirements of Rule
144, the Company at its expense, (x) shall deliver, and shall cause legal
counsel selected by the Company to deliver, to its transfer agent (with copies
to the Investor or its representative) an appropriate instruction and opinion of
such counsel, directing the delivery of shares of Common Stock without any
legends issuable pursuant to any effective and current registration statement in
accordance with the terms and conditions of this Agreement or pursuant to Rule
144 under the Securities Act (the “Unlegended
Shares”); and
(y) cause the transmission of the certificates representing the Unlegended
Shares together with a legended certificate representing the balance of the
unsold shares of Common Stock, if any, to the Investor at the address specified
in the notice of sale, via express courier, by electronic transfer or otherwise
on or before the Unlegended Shares Delivery Date. Transfer fees shall be the
responsibility of the Investor.
(b)
In lieu
of delivering physical certificates representing the Unlegended Shares, if the
Company’s transfer agent is participating in the Depository Trust Company
(“DTC”) Fast
Automated Securities Transfer program, upon the Investor’s request, so long as
the certificates therefor do not bear a legend and the Investor is not obligated
to return such certificate for the placement of a legend thereon, the Company
shall cause its transfer agent to electronically transmit the Unlegended Shares
by crediting the account of the Investor’s prime broker with DTC through its
Deposit Withdrawal Agent Commission system. Such delivery must be made on or
before the Unlegended Shares Delivery Date.
(c)
The
Company understands that a delay in the delivery of the Unlegended Shares later
than two (2) Business Days after the Unlegended Shares Delivery Date could
result in economic loss to the Investor. As compensation to the Investor for
such loss, the Company agrees to pay late payment fees (as liquidated damages
and not as a penalty) to the Investor for late delivery of Unlegended Shares in
the amount of $100 per Business Day after the Unlegended Shares Delivery Date
for each $10,000 of purchase price of the Unlegended Shares subject to the
delivery default. If during any 360 day period, the Company fails to deliver
Unlegended Shares as required by this Agreement for an aggregate of forty-five
(45) days, then the Investor or its affiliates holding Registrable Securities
subject to such default may, at its option, require the Company to redeem all or
any portion of the Registrable Securities subject to such default at a price per
share equal to 120% of the purchase price of such Registrable Securities (with
the entire amount of such purchase price being allocated entirely to the shares
of Common Stock in such Unit and not to any warrants). The Company shall pay any
payments incurred under this Section in immediately available funds upon
demand.
11
(d)
In
addition to any other rights available to the Investor, if the Company fails to
deliver to the Investor Unlegended Shares as required hereunder, within seven
(7) Business Days after the Unlegended Shares Delivery Date and the Investor
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Investor of the shares of Common Stock
which the Investor was entitled to receive from the Company (a “Buy-In”), then
the Company shall pay the Investor in cash (in addition to any remedies
available to or elected by the Investor) the amount by which (A) the Investor’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (B) the aggregate purchase price of the shares
of Common Stock delivered to the Company for reissuance as Unlegended Shares,
together with interest thereon at a rate of 15% per annum, accruing until such
amount and any accrued interest thereon is paid in full (which amount shall be
paid as liquidated damages and not as a penalty). For example, if the Investor
purchase shares of Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to $10,000 of purchase price of shares of Common
Stock delivered to the Company for reissuance as Unlegended Shares, the Company
shall be required to pay the Investor $1,000, plus interest. The Investor shall
provide the Company written notice and reasonable evidence of accounting
indicating the amounts that are payable to the Investor in respect of the
Buy-In.
Section
2.8 Remedies. The
Investors shall have the right and remedy to have the provisions of Sections 2.1
and 2.2 specifically enforced by any court having jurisdiction in the event that
the Company breaches such provisions, and the Company shall reimburse the
Investors for the reasonable costs of the expenses for counsel for the Investors
incurred in connection with such proceeding.
ARTICLE
III
Miscellaneous
Section
3.1. Notices. All
notices or other communications required or permitted to be given hereunder
shall be in writing and shall be delivered by hand or sent by prepaid telex,
cable or telecopy or sent, postage prepaid, by registered, certified or express
mail or reputable overnight courier service and shall be deemed given when so
delivered by hand, telexed, cabled or facsimile, or if mailed, three days after
mailing (one business day in the case of express mail or overnight courier
service), as follows:
12
If to the
Company, to:
Fellows
Energy, Ltd.
000
Xxxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx,
Xxxxxxxx 00000
Phone: (000)
000-0000
Fax:
(000) 000-0000
Attention: Xxxxxx
X. Xxxxx
with a
copy to:
Xxxxx
& Xxxxxxx L.L.P.
One Xxxxx
Center, Suite 1500
0000
Xxxxxxxxxxx Xxxxxx
Xxxxxx,
Xxxxxxxx 00000
Phone:
(000) 000-0000
Fax: (000)
000-0000
Attention: Xxxx
Xxxxxx, Esq.
If to
the
Investors, to the
address or fax number provided by each Investor on the counterpart signature
page hereto, as may be updated from time to time in writing to the
Company.
Section
3.2. Binding
Effect; Benefits. This
Agreement shall be binding upon and inure to the benefit of the parties to this
Agreement and their respective successors, transferees and assigns. Nothing in
this Agreement, express or implied, is intended or shall be construed to give
any Person other than the parties to this Agreement, the other Investor Holders,
if any, and their respective successors or assigns any legal or equitable right,
remedy or claim under or in respect of any agreement or any provision contained
herein. This Agreement constitutes the entire agreement and understanding, and
supersedes and terminates all prior agreements and understandings, both oral and
written, between the parties hereto relating to the subject matter hereof.
Section
3.3. Waiver. Any
party hereto may, by written notice to any other party (i) extend the time for
the performance of any of the obligations or other actions of such other party
under this Agreement to the extent that such obligations or other actions are
due to the party giving notice; (ii) waive compliance with any of the conditions
or covenants of such other party contained in this Agreement to the extent that
such conditions or covenants relate to the party giving notice; and (iii) waive
or modify performance of any of the obligations of such other party under this
Agreement to the extent that such obligations are due to the party giving
notice. Except as provided in the preceding sentence, no action taken pursuant
to this Agreement, including, without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representation, warranty, covenant or
agreement contained herein. Neither the waiver by any party hereto of a breach
of any provision hereof or any preceding or succeeding breach nor the failure by
any party to exercise any right or privilege hereunder shall be deemed a waiver
of such party’s rights or privileges hereunder nor shall it be deemed a waiver
of such party’s rights to exercise the same at any subsequent time or times
hereunder.
13
Section
3.4. Amendments. No
amendment or modification in respect of this Agreement shall be effective unless
it shall be in writing and signed by the Company and the holders of two-thirds
of the Registrable Securities. Any such amendment or modification in respect of
this Agreement executed by or on behalf of the Investor Holders shall bind each
other Investor Holder, if any, to the terms and conditions thereof. The Company
agrees that all holders of Registrable Securities shall be notified by the
Company in advance of any proposed amendment or modification of this Agreement,
but failure to give such notice shall not in any way affect the validity of any
such amendment or modification. In addition, promptly after obtaining the
written consent of the Investor Holders as herein provided, the Company shall
transmit a copy of any amendment or modification which has been adopted to all
holders of Registrable Securities then outstanding, but failure to transmit
copies shall not in any way affect the validity of any such amendment or
modification.
Section
3.5. Assignability. Neither
this Agreement nor any right, remedy, obligation or liability arising hereunder
or by reason hereof shall be assignable by either the Company or the Investors
(other than by the Investors in connection with, and in compliance with the
terms and conditions of, a transfer, in whole or in part, of the Registrable
Securities), or any transferee of the foregoing. Any assignment in violation of
this Section 3.5 shall be void and of no force or effect.
Section
3.6. Governing
Law. This
Agreement, and any dispute arising out of, relating to or in connection with
this Agreement, shall be governed by and construed in accordance with the
internal laws of the State of New York applicable to agreements made and to be
performed entirely within such State.
To the
fullest extent permitted by applicable law, each party hereto (i) agrees that
any claim, action or proceeding by such party seeking any relief whatsoever
arising out of, relating to or in connection with, this Agreement or the
transactions contemplated hereby shall be brought only in the United States
District Court for the Southern District of New York and in any New York State
court located in the Borough of Manhattan and not in any other State or Federal
court in the United States of America or any other court in any other country,
(ii) agrees to submit to the exclusive jurisdiction of such courts located in
the State of New York for purposes of all legal proceedings arising out of, in
relation to or in connection with, this Agreement or the transactions
contemplated hereby and (iii) irrevocably waives any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
Section
3.7. Attorney
Fees. Subject
to Section 2.4(b) a party in breach of this Agreement shall, on demand,
indemnify and hold harmless the other parties hereto from and against all
reasonable out-of-pocket expenses, including legal fees, incurred by such other
parties by reason of the enforcement and protection of their rights under this
Agreement. The payment of such expenses is in addition to any other relief to
which such other parties may be entitled.
Section
3.8. Section
and Other Headings. The
section and other headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
14
Section
3.9. Counterparts. This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one or
more such counterparts have been signed by each of the parties and delivered to
the other parties.
[Signature
Page to Follow]
15
IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as
of the date first written above.
THE
COMPANY:
|
By:
_________________________________
Name:
Title: |
INVESTOR:
|
|
|
By:
_________________________________
Name:
Title: |
Address:
_______________________________________
_______________________________________________
_______________________________________________
_______________________________________________
Fax:
(_______) __________________________________
Exhibit
A
List
of Investors
A-1
Exhibit
B
Selling
Shareholder Questionnaire
[Attached
hereto.]
B-1
Exhibit
C
Plan
of Distribution
The
Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
· ordinary
brokerage transactions and transactions in which the broker/dealer solicits
purchasers;
· block
trades in which the broker/dealer will attempt to sell the 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;
· settlement
of short sales;
· broker/dealers
may agree with the Selling Stockholders to sell a specified number of such
shares at a stipulated price per share;
· a
combination of any such methods of sale; and
· any other
method permitted pursuant to applicable law.
The
Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker/dealers
engaged by the Selling Stockholders may arrange for other brokers/dealers to
participate in sales. Broker/dealers may receive commissions from the Selling
Stockholders (or, if any broker/dealer acts as agent for the purchaser of
shares, from the purchaser) in amounts to be negotiated. The Selling
Stockholders do not expect these commissions to exceed what is customary in the
types of transactions involved.
The
Selling Stockholders may from time to time pledge or grant a security interest
in some or all of the shares of common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock 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 amending the list of
Selling Stockholders to include the pledgee, transferee or other successors in
interest as Selling Stockholders under this prospectus.
C-1
The
Selling Stockholders and any broker/dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker/dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions under the
Securities Act. The Selling Stockholders have informed the Company that it does
not have any agreement or understanding, directly or indirectly, with any person
to distribute the Common Stock.
The
Company is required to pay all fees and expenses incident to the registration of
the shares. The Company has agreed to indemnify the Selling Stockholders against
certain losses, claims, damages and liabilities, including liabilities under the
Securities Act.
C-2
