REGISTRATION RIGHTS AGREEMENT
Exhibit
10.4
REGISTRATION
RIGHTS AGREEMENT
(this
"Agreement"),
dated
as of February 12, 2007, by and among Composite Technology Corporation, a
Delaware corporation (the "Company"),
and
the undersigned buyers (each, a "Buyer",
and
collectively, the "Buyers").
WHEREAS:
A. In
connection with the Securities Purchase Agreement by and among the parties
hereto dated February 12, 2007 (the "Securities
Purchase Agreement"),
the
Company, has agreed, upon the terms and subject to the conditions set forth
in
the Securities Purchase Agreement, to issue and sell to each Buyer
(i) senior convertible debentures of the Company (the "Debentures"),
which
will, among other things, be convertible into shares of the Company's common
stock, $0.001 par value per share (the "Common
Stock")
(as
converted, the "Conversion
Shares")
in
accordance with the terms of the Debentures, and (ii) warrants (the
"Warrants"),
which
will be exercisable to purchase shares of Common Stock (as exercised
collectively, the "Warrant
Shares").
B. To
induce
the Buyers to execute and deliver the Securities Purchase Agreement, the Company
has agreed to provide certain registration rights under the Securities Act
of
1933, as amended, and the rules and regulations thereunder, or any similar
successor statute (collectively, the "1933
Act"),
and
applicable state securities laws.
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and each of the Buyers hereby agree as
follows:
1. Definitions.
Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
a. "Business
Day"
means
any day other than Saturday, Sunday or any other day on which commercial banks
in the City of New York are authorized or required by law to remain
closed.
b. "Closing
Date"
shall
have the meaning set forth in the Securities Purchase Agreement.
c. "Effective
Date"
means
the date the Registration Statement has been declared effective by the
SEC.
d. "Effectiveness
Deadline"
means,
with respect to the First Registration Statement, the date which is 90 days
after the Filing Deadline of the First Registration Statement, or if there
is a
review of such Registration Statement by the SEC, 120 days after the Filing
Deadline of the First Registration Statement; and, with respect to the Second
Registration Statement, the date which is 90 days after the Filing Deadline
of
the Second Registration Statement, or if there is a review of such Registration
Statement by the SEC, 120 days after the Filing Deadline of the Second
Registration Statement;
e. "Filing
Date"
means
the date the applicable Registration Statement has been filed with the SEC.
f. "Filing
Deadline"
means,
with respect to the First Registration Statement, 30 Business Days after the
date hereof; and with respect to the Second Registration Statement, no more
than
15 Business Days after the First Registration Statement has been declared
effective.
g. "Investor"
means a
Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights
under this Agreement and who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 and any transferee or assignee thereof
to
whom a transferee or assignee assigns its rights under this Agreement and who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9.
h. "Person"
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
i. "register,"
"registered,"
and
"registration"
refer
to a registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant
to
Rule 415 and the declaration or ordering of effectiveness of such Registration
Statement(s) by the SEC.
j. "Registrable
Securities"
means
(i) the Conversion Shares issued or issuable upon conversion of the
Debentures, (ii) the Warrant Shares issued or issuable upon exercise of the
Warrants, (iii) the Interest Shares (as defined in the Debenture) issued or
issuable upon payment of accrued interest in kind, and (iv) any shares of
capital stock of the Company issued or issuable with respect to the Conversion
Shares, the Interest Shares, the Debentures, the Warrant Shares and the Warrants
as a result of any stock split, stock dividend, recapitalization, exchange
or
similar event or otherwise, without regard to any limitations on conversions
of
the Debentures or exercises of the Warrants.
k. "Registration
Statement"
means a
registration statement or registration statements of the Company filed under
the
1933 Act covering the Registrable Securities.
l. "Required
Holders"
means
the holders of at least a majority of the Registrable Securities.
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m. "Required
Registration Amount"
for the
Registration Statement means the sum of (i) 100% of the number of Conversion
Shares issued and issuable pursuant to the Debentures as of the trading day
immediately preceding the applicable date of determination, and (ii) 100% the
number of Warrant Shares issued and issuable pursuant to the Warrants as of
the
trading day immediately preceding the applicable date of determination, all
subject to adjustment as provided in Section 2(b), without regard to any
limitations on conversions of the Debentures or exercise of the Warrants;
provided, however, that the 100% of the number of Warrant Shares shall be
reduced to the extent necessary in the event the SEC will not declare the
Registration Statement effective without such reduction.
n. "Rule
415"
means
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis.
o. "SEC"
means
the United States Securities and Exchange Commission.
2. Registration.
a. Mandatory
Registration.
(i)
First Registration Statement.
The
Company shall prepare, and, as soon as practicable but in no event later than
the Filing Deadline, file with the SEC a Registration Statement on Form S-1
or
Form S-3 covering the resale of at least 50% of the Registrable Securities, all
of which shall constitute Conversion Shares (“First
Registration Statement”).
In
the event that Form S-1 or Form S-3 is unavailable for such a registration,
the
Company shall use such other form as is available for such a registration on
another appropriate form reasonably acceptable to the Required Holders, subject
to the provisions of Section 2(d).
(ii)
Second
Registration Statement.
Promptly after the First Registration Statement has been declared effective
by
the Securities and Exchange Commission, the Company shall prepare, and, as
soon
as practicable but in no event later than the Filing Deadline, file with the
SEC
the Registration Statement on Form S-1 or Form S-3 covering the resale of the
balance of the Required Registration Amount. In the event that Form S-1 or
Form
S-3 is unavailable for such a registration, the Company shall use such other
form as is available for such a registration on another appropriate form
reasonably acceptable to the Required Holders, subject to the provisions of
Section 2(d).
(iii)
Both Registration Statements shall contain (except if otherwise directed by
the
Required Holders) the “Plan
of Distribution”
section
in substantially the form attached hereto as Exhibit
A.
The
Company shall use its best efforts to have the Registration Statement declared
effective by the SEC as soon as practicable, but in no event later than sooner
of the Effectiveness Deadline or within three (3) Business Days of receipt
by
the Company of a written or oral communication from the SEC that the
Registration Statement will not be reviewed or that the SEC has no further
comments. The Company shall cause such Registration Statements to remain
effective during the Registration Period.
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b. Sufficient
Number of Shares Registered.
In the
event the number of shares available under a Registration Statement filed
pursuant to Section 2(a) is insufficient to cover all of the Registrable
Securities required under Section 2(a)(ii) to be covered by such Registration
Statement, the Company shall amend the applicable Registration Statement, or
file a new Registration Statement, or both, so as to cover at least the Required
Registration Amount as of the trading day immediately preceding the date of
the
filing of such amendment or new Registration Statement, in each case, as soon
as
practicable, but in any event not later than thirty (30) days after the
necessity therefor arises. The Company shall use its best efforts to cause
such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof, but no later than three (3) Business
Days of receipt by the Company of a written or oral communication from the
SEC
that such Registration Statement will not be reviewed or that the SEC has no
further comments. For purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed “insufficient to cover
all of the Registrable Securities” if at any time the number of shares of Common
Stock available for resale under the Registration Statement is less than the
Required Registration Amount.
c. Effect
of Failure to File and Obtain and Maintain Effectiveness of Registration
Statement.
If (i)
a Registration Statement covering all of the Registrable Securities required
to
be covered thereby (as determined on the date of this Agreement) and required
to
be filed by the Company pursuant to Section 2(a) or (b) of this Agreement is
(A)
not filed with the SEC on or before the Filing Deadline (a "Filing
Failure")
or (B)
not declared effective by the SEC on or before the earlier of (x) the
Effectiveness Deadline or (y) three (3) Business Days of receipt by the Company
of a written or oral communication from the SEC that the Registration Statement
will not be reviewed or that the SEC has no further comments (an "Effectiveness
Failure")
or (C)
the Company does not file a request for acceleration of effectiveness of such
Registration Statement to a time and date not later than 48 hours after the
submission of such request within two (2) Business Days after the Company learns
that no review of a particular Registration Statement will be made by the staff
of the SEC or that the staff has no further comments on a particular
Registration Statement and the National Association of Securities Dealers,
Inc.
(the “NASD”)
shall
have cleared such Registration Statement pursuant to the Rule 2710 of the NASD,
(ii) on any day after the Effective Date and before the Termination Date, sales
of all of the Registrable Securities required to be included on such
Registration Statement cannot be made (other than during a Grace Period (as
defined in Section 3(l)) pursuant to such Registration Statement (including,
without limitation, because of a failure to keep such Registration Statement
effective, to disclose such information as is necessary for sales to be made
pursuant to such Registration Statement or to register a sufficient number
of
shares of Common Stock) (a "Maintenance
Failure")
then,
as partial relief for the damages to any holder by reason of any such delay
in
or reduction of its ability to sell the underlying shares of Common Stock (which
remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each holder of Registrable Securities relating
to such Registration Statement an amount in cash equal to one percent (1.0%)
of
the principal amount of such Investor's Debentures (“Principal Amount”), the
Registrable Securities attributable to which are required to be included in
such
Registration Statement on each of the following dates: (i) the day of a Filing
Failure and on every thirtieth day after a Filing Failure until such Filing
Failure is cured; (ii) the day of an Effectiveness Failure and on every
thirtieth day after an Effectiveness Failure until such Effectiveness Failure
is
cured; and (iii) the initial day of a Maintenance Failure and on every thirtieth
day (or partial period) after a Maintenance Failure until such Maintenance
Failure is cured; provided,
however,
the
aggregate amount of Registration Delay Payments shall not exceed twenty-four
percent (24%) of such Principal Amount; provided,
further,
that
amounts payable as Registration Delay Payments shall cease when the Investor
no
longer holds any Debentures, Warrants and Conversion Shares or in the event
the
Investor’s Conversion Shares or Warrant Shares can be immediately sold by the
Investor in reliance on Rule 144(k) without any volume restrictions and the
Company has removed legends restricting resale from the Warrant Shares and
the
Conversion Shares.
The
payments to which a holder shall be entitled pursuant to this Section 2(c)
are
referred to herein as "Registration
Delay Payments."
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d. Piggyback
Registration.
After
the date hereof, if the Company proposes to register (including for this purpose
a registration statement effected by the Company for stockholders ) any of
its
stock or other securities under the 1933 Act (other than a registration relating
solely to the sale of securities to participants in a Company employee stock
or
similar plan on Form S-8 and an exchange registration on Form S-4), the Company
shall, at such time, promptly give each holder of Registrable Securities written
notice of such registration. Upon the written request of each holder of
Registrable Securities given within twenty (20) days after mailing of such
notice by the Company, the Company shall, cause in such registration to be
registered under the 1933 Act all of the Registrable Securities that each such
holder has requested to be registered.
3. Related
Obligations.
At
such
time as the Company is obligated to file a Registration Statement with the
SEC
pursuant to Section 2(a), the Company will use its best efforts to effect the
registration of the Registrable Securities in accordance with the intended
method of disposition thereof and, pursuant thereto, the Company shall have
the
following obligations:
a. The
Company shall submit to the SEC, within two (2) Business Days after the Company
learns that no review of a particular Registration Statement will be made by
the
staff of the SEC or that the staff has no further comments on a particular
Registration Statement, as the case may be, a request for acceleration of
effectiveness of such Registration Statement to a time and date not later than
48 hours after the submission of such request. The Company shall keep each
Registration Statement effective pursuant to Rule 415 at all times until the
earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or any successor thereto) promulgated
under
the 1933 Act or (ii) the date on which the Investors shall have sold all of
the
Registrable Securities covered by such Registration Statement (the "Registration
Period").
The
Company shall ensure that each Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain
any
untrue statement of a material fact or omit to state a material fact required
to
be stated therein, or necessary to make the statements therein (in the case
of
prospectuses, in the light of the circumstances in which they were made) not
misleading.
b. The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and
the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
be
necessary to keep such Registration Statement effective at all times during
the
Registration Period, and, during such period, comply with the provisions of
the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth
in
such Registration Statement.
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c. Provide
copies to and permit counsel designated by the Investors to review each
Registration Statement and all amendments and supplements thereto prior to
their
filing with the SEC and not file any document to which such counsel reasonably
objects.
d. Upon
reasonable request, the Company shall furnish to the Investors and their legal
counsel, without charge, (i) copies of any correspondence from the SEC or the
staff of the SEC to the Company or its representatives relating to any
Registration Statement, (ii) promptly after the same is prepared and filed
with
the SEC, one copy of any Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference, if requested by an Investor, and all exhibits and (iii) upon
the
effectiveness of any Registration Statement, one copy of the prospectus included
in such Registration Statement and all amendments and supplements thereto.
e. Upon
request, the Company shall furnish to each Investor whose Registrable Securities
are included in any Registration Statement, without charge, (i) promptly after
the same is prepared and filed with the SEC, at least one copy of such
Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference,
if
requested by an Investor, all exhibits and each preliminary prospectus, (ii)
upon the effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including copies of any
preliminary or final prospectus, as such Investor may reasonably request from
time to time in order to facilitate the disposition of the Registrable
Securities owned by such Investor.
f. The
Company shall notify each Investor in writing of the happening of any event,
as
promptly as practicable after becoming aware of such event, as a result of
which
the prospectus included in a Registration Statement, as then in effect, includes
an untrue statement of a material fact or omission 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
(provided that in no event shall such notice contain any material, nonpublic
information), and, promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission.
g. The
Company shall use its best efforts to prevent the issuance of any stop order
or
other suspension of effectiveness of a Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible moment and
to
notify each Investor who holds Registrable Securities being sold of the issuance
of such order and the resolution thereof or its receipt of actual notice of
the
initiation or threat of any proceeding for such purpose.
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h. The
Company shall use its best efforts to maintain the authorization for quotation
of the Company's Common Stock on the Principal Market or any Eligible Market
(as
defined in the Debenture).
i. The
Company shall cooperate with the Investors who hold Registrable Securities
being
offered and, to the extent applicable, facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing
the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case
may
be, as the Investors may reasonably request and registered in such names as
the
Investors may request.
j. The
Company shall use its best efforts to cause the Registrable Securities covered
by a Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to consummate the
disposition of such Registrable Securities.
k. The
Company shall otherwise use its best efforts to comply with all applicable
rules
and regulations of the SEC in connection with any registration
hereunder.
l. Notwithstanding
anything to the contrary herein, at any time after the Effective Date, for
not
more than twenty (20) consecutive days or for a total of not more than
forty-five (45) days in any twelve (12) month period, the Company may delay
the
disclosure of material, non-public information concerning the Company (A) the
disclosure of which at the time is not, in the good faith opinion of the Board
of Directors of the Company and its outside legal counsel, in the best interest
of the Company and, in the opinion of counsel to the Company, otherwise required
or (B) to the extent the Company is required to file a post-effective amendment
to the Registration Statement (a "Grace
Period");
provided, that the Company shall promptly (a) notify the Investors in writing
of
the existence of (but in no event, without the prior written consent of a
Investor, shall the Company disclose to such Investor any of the facts or
circumstances regarding) material non-public information giving rise to a Grace
Period, (b) advise the Investors in writing to cease all sales under the
Registration Statement until the end of the Grace Period and (c) use
commercially reasonable efforts to terminate a Grace Period as promptly as
practicable.
4. Obligations
of the Investors.
a. At
least
four (4) Business Days prior to the first anticipated filing date of a
Registration Statement, the Company shall notify each Investor in writing of
the
information the Company requires from each such Investor if such Investor elects
to have any of such Investor's Registrable Securities included in such
Registration Statement. It shall be a condition precedent to the obligations
of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the
effectiveness of the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company
may
reasonably request.
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b. Each
Investor, by such Investor's acceptance of the Registrable Securities, agrees
to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of any Registration Statement hereunder, unless
such Investor has notified the Company in writing of such Investor's election
to
exclude all of such Investor's Registrable Securities from such Registration
Statement.
c. Each
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(f) or 3(g), such
Investor will immediately discontinue disposition of Registrable Securities
pursuant to any Registration Statement(s) covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus or receipt of notice that no supplement or amendment is required.
d. Each
Investor covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act as applicable to it or an exemption therefrom
in
connection with sales of Registrable
Securities pursuant to the Registration Statement.
5. Expenses
of Registration.
All
reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, (i) all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements
of
legal counsel for the Company, and (ii) the fees and disbursements up to but
not
in excess of $5,000, of one legal counsel for the Investors, shall be paid
by
the Company.
6. Indemnification.
In
the
event any Registrable Securities are included in a Registration Statement under
this Agreement:
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a. To
the
fullest extent permitted by law, the Company will, and hereby does, indemnify,
hold harmless and defend each Investor, the directors, officers, members,
partners, employees, agents, representatives of, and each Person, if any, who
controls any Investor within the meaning of the 1933 Act or the 1934 Act (each,
an "Indemnified
Person"),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, reasonable attorneys' fees, amounts paid in settlement or
expenses, joint or several, (collectively, "Claims")
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("Indemnified
Damages"),
to
which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of
or are based upon: (i) any untrue statement or alleged untrue statement of
a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any jurisdiction
in
which Registrable Securities are offered ("Blue
Sky Filing"),
or
the omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact contained in
any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented,
if
the Company files any amendment thereof or supplement thereto with the SEC)
or
the omission or alleged omission to state therein any material fact necessary
to
make the statements made therein, in the light of the circumstances under which
the statements therein were made, not misleading, (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any violation of this
Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, "Violations").
Subject to Section 6(c), the Company shall reimburse the Indemnified Persons,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by such Indemnified Person
for such Indemnified Person expressly for use in connection with the preparation
of the Registration Statement or any such amendment thereof or supplement
thereto, if such prospectus was timely made available by the Company pursuant
to
Section 3(e) and (ii) shall not apply to amounts paid in settlement of any
Claim
if such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld or delayed. Such indemnity
shall remain in full force and effect regardless of any investigation made
by or
on behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
b. In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement and each Person, if any, who controls
the
Company within the meaning of the 1933 Act or the 1934 Act (each, an
"Indemnified
Party"),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
or
Indemnified Damages arise out of or are based upon any Violation, in each case
to the extent, and only to the extent, that such Violation occurs in reliance
upon and in conformity with written information furnished to the Company by
such
Investor expressly for use in connection with such Registration Statement;
and,
subject to Section 6(c), such Investor will reimburse any legal or other
expenses reasonably incurred by an Indemnified Party in connection with
investigating or defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 6(b) and the agreement with respect to
contribution contained in Section 7 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld
or
delayed; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim or Indemnified Damages as
does
not exceed the gross proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made
by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or
supplemented.
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c. Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section
6
of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person
or
Indemnified Party shall, if a Claim in respect thereof is to be made against
any
indemnifying party under this Section 6, deliver to the indemnifying party
a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party
so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as
the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own legal counsel at the expense of such
Indemnified Person or Indemnified Party. The Indemnified Party or Indemnified
Person shall cooperate fully with the indemnifying party in connection with
any
negotiation or defense of any such action or Claim by the indemnifying party
and
shall furnish to the indemnifying party all information reasonably available
to
the Indemnified Party or Indemnified Person which relates to such action or
Claim. The indemnifying party shall keep the Indemnified Party or Indemnified
Person reasonably apprised at all times as to the status of the defense or
any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying
party
shall, without the prior written consent of the Indemnified Party or Indemnified
Person, consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving
by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of
a
release from all liability in respect to such Claim or litigation, and such
settlement shall not include any admission as to fault on the part of the
Indemnified Party. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party
or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure
to
deliver written notice to the indemnifying party within a reasonable time of
the
commencement of any such action shall not relieve such indemnifying party of
any
liability to the Indemnified Person or Indemnified Party under this Section
6,
except to the extent that the indemnifying party is prejudiced in its ability
to
defend such action.
d. The
indemnification required by this Section 6 shall be made by periodic payments
of
the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Damages are incurred.
10
e. The
indemnity agreements contained herein shall be in addition to (i) any cause
of
action or similar right of the Indemnified Party or Indemnified Person against
the indemnifying party or others, and (ii) any liabilities the indemnifying
party may be subject to pursuant to the law.
7. Contribution.
To
the
extent any indemnification by an indemnifying party is prohibited or limited
by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however, that: (i) no Person involved
in the sale of Registrable Securities which Person is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) in
connection with such sale shall be entitled to contribution from any Person
involved in such sale of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities pursuant to such Registration
Statement.
8. Reports
Under the 1934 Act.
With
a
view to making available to the Investors the benefits of Rule 144 promulgated
under the 1933 Act or any other similar rule or regulation of the SEC that
may
at any time permit the Investors to sell securities of the Company to the public
without registration ("Rule
144"),
the
Company agrees to:
a. make
and
keep public information available, as those terms are understood and defined
in
Rule 144;
b. file
with
the SEC all reports and other documents required of the Company under the 1933
Act and the 1934 Act so long as the Company remains subject to such requirements
and the filing of such reports and other documents is required for the
applicable provisions of Rule 144; and
c. furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company, if true, that it has
complied with the reporting requirements of Rule 144, the 1933 Act and the
1934
Act, (ii) a copy of the most recent annual report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
11
9. Assignment
of Registration Rights.
Prior
to
the initial declaration by the SEC of the effectiveness of the applicable
Registration Statement, the rights under this Agreement shall be automatically
assignable by the Investors to any transferee of all or any portion of such
Investor's Registrable Securities if: (i) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment;
(ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee
or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned; (iii) immediately following such transfer
or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act or applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein; and
(v)
such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement. After the initial declaration
by the SEC of the effectiveness of the Registration Statement that registers
such Registrable Securities, this Agreement shall not be assignable by the
Investors.
10. Amendment
of Registration Rights.
Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Required
Holders (as defined in the Debentures) provided that no Holder may be
disproportionately adversely affected by such amendment or waiver without such
Holder’s consent, except as a result of Holder holding a greater percentage of
Registrable Securities. Any amendment or waiver effected in accordance with
this
Section 10 shall be binding upon each Investor and the Company. No such
amendment shall be effective to the extent that it applies to less than all
of
the holders of the Registrable Securities.
11. Miscellaneous.
a. A
Person
is deemed to be a holder of Registrable Securities whenever such Person owns
or
is deemed to own of record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more Persons with
respect to the same Registrable Securities, the Company shall act upon the
basis
of instructions, notice or election received from the such record owner of
such
Registrable Securities.
b. Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall as
set
forth in Section 9(f) of the Securities Purchase Agreement.
12
If
to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers
attached hereto, with copies to such Buyer's representatives as set forth on
the
Schedule of Buyers, or to such other address and/or facsimile number and/or
to
the attention of such other Person as the recipient party has specified by
written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by
the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
c. Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as
a
waiver thereof.
d. This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York located in New York County
and the United States District Court for the Southern District of New York
for
the purpose of any suit, action, proceeding or judgment relating to or arising
out of this Agreement and the transactions contemplated hereby. Service of
process in connection with any such suit, action or proceeding may be served
on
each party hereto anywhere in the world by the same methods as are specified
for
the giving of notices under this Agreement. Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. Each party hereto
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in such courts and irrevocably waives any claim that
any
such suit, action or proceeding brought in any such court has been brought
in an
inconvenient forum. EACH
OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.
e. This
Agreement, the other Transaction Documents (as defined in the Securities
Purchase Agreement) and the instruments referenced herein and therein constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein.
This
Agreement, the other Transaction Documents and the instruments referenced herein
and therein supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
f. Subject
to the requirements of Section 9, this Agreement shall inure to the benefit
of
and be binding upon the permitted successors and assigns of each of the parties
hereto.
13
g. The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
h. This
Agreement may be executed in identical counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same agreement.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
i. Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
j. All
consents and other determinations required to be made by the Investors pursuant
to this Agreement shall be made, unless otherwise specified in this Agreement,
by the Required Holders.
k. The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent and no rules of strict construction
will
be applied against any party.
l. This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
m. The
obligations of each Buyer hereunder are several and not joint with the
obligations of any other Buyer, and no provision of this Agreement is intended
to confer any obligations on any Buyer vis-à-vis any other Buyer. Nothing
contained herein, and no action taken by any Buyer pursuant hereto, shall be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers
are
in any way acting in concert or as a group with respect to such obligations
or
the transactions contemplated herein.
*
* * * *
*
14
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Registration Rights Agreement to be duly executed as of the date first written
above.
|
COMPANY:
|
||
|
COMPOSITE
TECHNOLOGY CORPORATION
|
||
| |
|
|
| By: | /s/ Xxxxxx X Xxxxxxxx | |
|
Xxxxxx X Xxxxxxxx |
||
|
Chief
Executive Officer
|
||
15
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Registration Rights Agreement to be duly executed as of the date first written
above.
|
BUYERS:
|
|
________________________________________
Buyer
____/s/__________________________________
Signature
________________________________________
Authorized
Representative
________________________________________
Title
|
16
EXHIBIT
A
PLAN
OF DISTRIBUTION
We
are
registering the shares of Common Stock issuable upon conversion of the
Debentures, payment of interest on the Debentures and upon exercise of the
Warrants to permit the resale of these shares of Common Stock by the holders
of
the Debentures and warrants from time to time after the date of this prospectus.
We will not receive any of the proceeds from the sale by the selling
stockholders of the shares of Common Stock. We will bear all fees and expenses
incident to our obligation to register the shares of Common Stock.
The
selling stockholders may sell all or a portion of the shares of Common Stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the shares of
Common Stock are sold through underwriters or broker-dealers, the selling
stockholders will be responsible for underwriting discounts or commissions
or
agent’s commissions. The shares of Common Stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions,
| · |
on
any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of
sale;
|
| · |
in
the over-the-counter market;
|
| · |
in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
|
| · |
through
the writing of options, whether such options are listed on an options
exchange or otherwise;
|
| · |
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;
|
17
| · |
short
sales;
|
| · |
sales
pursuant to Rule 144;
|
| · |
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.
|
If
the
selling stockholders effect such transactions by selling shares of Common Stock
to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of Common Stock for whom they may act as agent or
to
whom they may sell as principal (which discounts, concessions or commissions
as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales
of
the shares of Common Stock or otherwise, the selling stockholders may enter
into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the shares of Common Stock in the course of hedging in positions they
assume. The selling stockholders may also sell shares of Common Stock short
and
deliver shares of Common Stock covered by this prospectus to close out short
positions and to return borrowed shares in connection with such short sales.
The
selling stockholders may also loan or pledge shares of Common Stock to
broker-dealers that in turn may sell such shares. The selling stockholders
may
also enter into option or other transactions with broker-dealers or other
financial institutions or the creation of one or more derivative securities
which require the delivery to such broker-dealer or other financial institution
of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented
or
amended to reflect such transaction).
The
selling stockholders may pledge or grant a security interest in some or all
of
the Debentures or Warrants or 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 pursuant
to this prospectus or any amendment to this prospectus under Rule 424(b)(3)
or
other applicable provision of the Securities Act of 1933, as amended, amending,
if necessary, the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this
prospectus. The selling stockholders also may transfer and donate the shares
of
Common Stock in other circumstances in which case the transferees, donees,
pledgees or other successors in interest will be the selling beneficial owners
for purposes of this prospectus.
The
selling stockholders and any broker-dealer participating in the distribution
of
the shares of Common Stock may be deemed to be “underwriters” within the meaning
of the Securities Act, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act. At the time a particular offering of
the
shares of Common Stock is made, a prospectus supplement, if required, will
be
distributed which will set forth the aggregate amount of shares of Common Stock
being offered and the terms of the offering, including the name or names of
any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to
broker-dealers.
18
Under
the
securities laws of some states, the shares of Common Stock may be sold in such
states only through registered or licensed brokers or dealers. In addition,
in
some states the shares of Common Stock may not be sold unless such shares have
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
There
can
be no assurance that any selling stockholder will sell any or all of the shares
of Common Stock registered pursuant to the shelf registration statement, of
which this prospectus forms a part.
The
selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of
1934,
as amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of Common Stock by the selling
stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of Common
Stock to engage in market-making activities with respect to the shares of Common
Stock. All of the foregoing may affect the marketability of the shares of Common
Stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of Common Stock.
We
will
pay all expenses of the registration of the shares of Common Stock pursuant
to
the registration rights agreement, estimated to be
$[ ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with
state securities or “blue sky” laws; provided, however, that a selling
stockholder will pay all underwriting discounts and selling commissions, if
any.
We will indemnify the selling stockholders against liabilities, including some
liabilities under the Securities Act, in accordance with the registration rights
agreements, or the selling stockholders will be entitled to contribution. We
may
be indemnified by the selling stockholders against civil liabilities, including
liabilities under the Securities Act, that may arise from any written
information furnished to us by the selling stockholder specifically for use
in
this prospectus, in accordance with the related registration rights agreements,
or we may be entitled to contribution.
Once
sold
under the shelf registration statement, of which this prospectus forms a part,
the shares of Common Stock will be freely tradable in the hands of persons
other
than our affiliates.
19
