EXHIBIT 2.5
EXECUTION VERSION
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of March 29, 2004 (this
"Agreement"), by and between Commonwealth Energy Corporation, a California
corporation (the "Company") and each of Xxxxx Xxxxxxx, Xxxx Xxxxxx, Xxxx Xxxx
and Xxxxx Xxxxxxxxxx (collectively, the "Designated Holders," and each a
"Designated Holder") and is made with reference to that certain Agreement and
Plan of Merger dated as of March 29, 2004 (the "Merger Agreement") by and among
the Company, Skipping Stone Acquisition Corporation, a Delaware corporation and
wholly owned subsidiary of the Company, Skipping Stone Inc., a Delaware
corporation, and the Designated Holders.
WHEREAS, the Designated Holders will receive certain shares of
common stock of the Company pursuant to the terms of the Merger Agreement; and
WHEREAS, the Company has agreed to grant to the Designated Holders
the registration rights contained herein as a condition to the closing of the
transactions contemplated by the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
1. Definitions. As used in this Agreement, the following terms have the
meanings indicated:
"Affiliate" shall mean any Person who is an "affiliate" as defined in Rule
12b-2 of the General Rules and Regulations under the Exchange Act. In addition,
any limited partner or member, as the case may be, of a Designated Holder shall
be deemed to be an Affiliate of such Designated Holder.
"Agreement" has the meaning set forth in the preamble of this Agreement.
"Common Stock" means the Company's common stock or any other capital stock
of the Company into which such stock is reclassified, reconstituted or
converted.
"Company" has the meaning set forth in the first paragraph this Agreement.
"Designated Holders" has the meaning set forth in the preamble of this
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC thereunder.
"Incidental Registration" has the meaning set forth in Section 3(a) of
this Agreement.
"Indemnified Party" has the meaning set forth in Section 4(c) of this
Agreement.
"Indemnifying Party" has the meaning set forth in Section 4(c) of this
Agreement.
"Liability" has the meaning set forth in Section 4(a) of this Agreement.
"Merger Agreement" has the meaning set forth in the preamble of this
Agreement.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, limited liability company, government (or an
agency or political subdivision thereof) or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity.
"Registrable Securities" means the shares of Common Stock received by the
Designated Holders in connection with the Company's acquisition of Skipping
Stone, Inc., and any shares of Common Stock issued or issuable to any of the
Designated Holders with respect to the Registrable Securities by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"Registration Expenses" means all expenses incurred by the Company, other
than Selling Expenses, in complying with this Agreement, including without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel to the Company, listing fees and expenses on a national
securities exchange, and blue sky fees and expenses.
"Registration Statement" means a Registration Statement filed pursuant to
the Securities Act.
"SEC" means the Securities and Exchange Commission or any similar agency
then having jurisdiction to enforce the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
"Underwriter" has the meaning set forth in Section 3(a).
2. General; Securities Subject to this Agreement.
(a) Grant of Rights. The Company hereby grants certain incidental
registration rights to the Designated Holders upon the terms and conditions set
forth in this Agreement.
(b) Registrable Securities. For the purposes of this Agreement,
Registrable Securities will cease to be Registrable Securities, when (i) a
Registration
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Statement covering such Registrable Securities has been declared effective under
the Securities Act by the SEC and such Registrable Securities have been disposed
of pursuant to such effective Registration Statement, (ii) the entire amount of
the Registrable Securities may be sold in a single sale, in the opinion of
counsel to the Company, without any limitation as to volume pursuant to Rule 144
(or any successor provision then in effect) under the Securities Act, or (iii)
the Registrable Securities are sold or distributed by a Person not entitled to
the registration rights granted by this Agreement.
3. Incidental or "Piggy-Back" Registration.
(a) Request for Incidental Registration. If the Company proposes to
file a Registration Statement under the Securities Act with respect to an
offering by the Company for its own account (other than a Registration Statement
on Form S-4 or S-8 or any successor thereto) or for the account of any
stockholder of the Company, then the Company shall give written notice of such
proposed filing to each of the Designated Holders at least twenty (20) days
before the anticipated filing date, and such notice shall describe the proposed
registration and distribution and offer each such Designated Holder the
opportunity to register the number of Registrable Securities as such Designated
Holder may request (an "Incidental Registration"). The Company shall use its
reasonable best efforts (within ten (10) days of the notice provided for in the
preceding sentence) to cause the managing underwriter or underwriters (the
"Underwriter"), in the case of a proposed underwritten offering, to permit each
Designated Holder who has requested in writing to participate in the Incidental
Registration to include his Registrable Securities in such offering on the same
terms and conditions as the securities of the Company or the account of such
other stockholder, as the case may be, included therein. In connection with any
Incidental Registration under this Section 3(a) involving an underwritten
offering, the Company shall not be required to include any Registrable
Securities in such underwritten offering unless the Designated Holder thereof
accepts the terms of the underwritten offering as agreed upon between the
Company, such other stockholders, if any, and the Underwriter, and then only in
such quantity as the Underwriter believes will not jeopardize the success of the
offering by the Company as set forth in the next sentence. If the Underwriter
determines that the registration of all or part of the Registrable Securities
which the Designated Holder have requested to be included would materially
adversely affect the success of such offering, then the Company shall be
required to include in such Incidental Registration, to the extent of the amount
that the Underwriter believes may be sold without causing such adverse effect,
first, all of the securities to be offered for the account of the Company or the
account of any other stockholder at the request of which the Company intends to
file a Registration Statement, as the case may be; second, securities to be
offered for the account of other third parties (who are not officers of the
Company or its Affiliates) with contractual registration rights from the Company
received in connection with an equity financing of the Company or in connection
with a strategic alliance or similar transaction; and third, the Registrable
Securities to be offered for the account of the Designated Holders pursuant to
this Section 3, pro rata based on the number of Registrable Securities owned by
each such Designated Holder.
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(b) Expenses. The Company shall bear all Registration Expenses in
connection with any Incidental Registration pursuant to this Section 3, whether
or not such Incidental Registration becomes effective.
4. Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees to indemnify
and hold harmless each Designated Holder from and against any and all losses,
claims, damages, liabilities and expenses (including reasonable costs of
investigation and attorney fees) (collectively, "Liabilities"), arising out of
or based upon any untrue, or allegedly untrue, statement of a material fact
contained in any Registration Statement in which such Designated Holder is
participating, or a related, prospectus or preliminary prospectus or
notification or offering circular (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading under the circumstances such statements were made, or any violation
by the Company of the Securities Act, any rule or regulation thereunder and
relating to action or inaction required of the Company in connection with any
such registration, qualification or compliance, except insofar as such Liability
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission contained in such Registration Statement,
preliminary prospectus or final prospectus in reliance upon information
concerning such Designated Holder furnished in writing to the Company by such
Designated Holder expressly for use therein and except insofar as such Liability
arises out of such indemnified person's failure to send or give a copy of the
final prospectus, as the same may be then supplemented or amended, to the person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such person if such statement or omission was corrected in such
final prospectus so long as such final prospectus, and any amendments or
supplements thereto, have been furnished to such indemnified person.
(b) Indemnification by Designated Holders. In connection with any
Registration Statement in which a Designated Holder is participating, each such
Designated Holder shall promptly furnish to the Company in writing such
information with respect to such Designated Holder as the Company may reasonably
request or as may be required by law for use in connection with any such
Registration Statement or prospectus and all information required to be
disclosed in order to make the information previously furnished to the Company
by such Designated Holder not materially misleading or necessary to cause such
Registration Statement not to omit a material fact with respect to such
Designated Holder necessary in order to make the statements therein not
misleading. Each Designated Holder, severally, and not jointly, to the extent
its Registrable Securities are included in a registration,agrees to indemnify
and hold harmless the Company, any underwriter retained by the Company and each
Person who controls the Company or such underwriter (within the meaning of
Section 15 of the Securities Act) to the same extent as the foregoing indemnity
from the Company to the Designated Holders, but only with respect to any such
information with respect to such
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Designated Holder furnished in writing to the Company by such Designated Holder
expressly for use in such registration statement or prospectus, including,
without limitation, the information furnished to the Company pursuant to this
Section 4(b), provided, however, that no such holder shall be liable in the
aggregate for any amounts exceeding the product of the sale price per
Registrable Security and the number of Registrable Securities being sold
pursuant to such Registration Statement or disclosure documents by such holder.
(c) Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder (the "Indemnified Party") agrees to give prompt
written notice to the indemnifying party (the "Indemnifying Party") after the
receipt by the Indemnified Party of any written notice of the commencement of
any action, suit, proceeding or investigation or threat thereof made in writing
for which the Indemnified Party intends to claim indemnification or contribution
pursuant to this Agreement; provided, however, that the failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of any Liability
that it may have to the Indemnified Party hereunder (except to the extent that
the Indemnifying Party is actually materially prejudiced or otherwise forfeits
substantive rights or defenses by reason of such failure to its material
detriment). If notice of commencement of any such action is given to the
Indemnifying Party as above provided, the Indemnifying Party shall be entitled
to participate in and, to the extent it may wish, jointly with any other
Indemnifying Party similarly notified, to assume the defense of such action at
its own expense, with counsel chosen by it and reasonably satisfactory to such
Indemnified Party. The Indemnified Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be paid by the Indemnified Party unless (i)
the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party fails
to assume the defense of such action with counsel reasonably satisfactory to the
Indemnified Party or (iii) the named parties to any such action (including any
impleaded parties) include both the Indemnifying Party and the Indemnified Party
and such parties have been advised by such counsel that either (i)
representation of such Indemnified Party and the Indemnifying Party by the same
counsel would be inappropriate under applicable standards of professional
conduct or (ii) there may be one or more legal defenses available to the
Indemnified Party which are different from or additional to those available to
the Indemnifying Party. In any of such cases, the Indemnifying Party shall not
have the right to assume the defense of such action on behalf of such
Indemnified Party, it being understood, however, that the Indemnifying Party
shall not be liable for the fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) for all Indemnified Parties. No
Indemnifying Party shall be liable for any settlement entered into without its
written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the consent of such Indemnified Party, effect
any settlement of any pending or threatened proceeding in respect of which such
Indemnified Party is a party and indemnity has been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability for claims that are the subject matter
of such proceeding.
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(d) Contribution. If the indemnification provided for in this
Section 4 from the Indemnifying Party is unavailable to an Indemnified Party
hereunder in respect of any Liabilities referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Liabilities in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the holders of the
Registrable Securities included in the offering on the other hand, from the
offering of the Registrable Securities and any other securities included in such
offering. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then contribution shall be based
upon the relative fault of the Indemnifying Party and Indemnified Party in
connection with the actions which resulted in such Liabilities, as well as any
other relevant equitable considerations. The relative benefits received by the
Company, on the one hand, and the holders of the Registrable Securities on the
other, with respect to such offering shall be deemed to be in the same
proportion as the sum of the total purchase price paid to the Company in respect
of the Registrable Securities plus the total net proceeds from the offering of
any securities included in such offering (before deducting expenses) received by
the Company bears to the amount by which the total net proceeds from the
offering of Registrable Securities (before deducting expenses) received by the
holders of the Registrable Securities with respect to such offering exceeds the
purchase price paid to the Company in respect of the Registrable Securities, and
in each case the net proceeds received from such offerings shall be determined
as set forth in the disclosure documents. The relative faults of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the Liabilities
referred to above shall be deemed to include, subject to the limitations set
forth in Sections 4(a), 4(b) and 4(c), any legal or other fees, charges or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
5. Rule 144. The Company covenants that it shall (i) file any reports in a
timely manner required to be filed by it under the Exchange Act and (ii) take
such further action as each Designated Holder of Registrable Securities may
reasonably request (including providing any information necessary to comply with
Rule 144 under the Securities Act), all to the extent required from time to time
to enable such Designated Holder to sell Registrable Securities without
registration under the Securities Act within
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the limitation of the exemptions provided by (i) Rule 144 under the Securities
Act, as such rule may be amended from time to time, or Regulation S under the
Securities Act or (ii) any similar rules or regulations hereafter adopted by the
SEC. The Company shall, upon the request of any Designated Holder of Registrable
Securities, deliver to such Designated Holder a written statement as to whether
it has complied with such requirements.
6. Registration Procedures.
(a) Obligations of the Company. Whenever registration of Registrable
Securities has been requested pursuant to this Agreement, the Company shall:
(i) furnish to each seller of Registrable Securities, prior to
filing a Registration Statement, at least one copy of such Registration
Statement as is proposed to be filed, and thereafter such number of copies of
such Registration Statement, each amendment and supplement thereto (in each case
including all exhibits thereto), and the prospectus included in such
Registration Statement (including each preliminary prospectus) as each such
seller may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(ii) notify each seller of Registrable Securities at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such Registration Statement contains
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading and the
Company shall promptly prepare a supplement or amendment to such prospectus and
furnish to each seller of Registrable Securities a reasonable number of copies
of such supplement to or an amendment of such prospectus as may be necessary so
that, after delivery to the purchasers of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) Seller Information. The Company may require each seller of
Registrable Securities as to which any registration is being effected to
furnish, and such seller shall furnish, to the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing. The Company's obligation to
register a seller's Registrable Securities shall be conditioned on the Company's
receipt of such information.
(c) Notice to Discontinue. Each Designated Holder of Registrable
Securities agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 6(a)(ii), such
Designated Holder shall forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Designated Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 6(a)(ii)
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and, if so directed by the Company, such Designated Holder shall deliver to the
Company all copies, other than permanent file copies then in such Designated
Holder's possession, of the prospectus covering such Registrable Securities
which is current at the time of receipt of such notice.
7. Market Stand-Off Agreement. In connection with any underwritten public
offering, each Designated Holder agrees that such Designated Holder shall not
sell, transfer, make any short sale of, grant any option for the purchase of, or
enter into any hedging or similar transaction with the same economic effect as a
sale, any shares of Common Stock held by such Designated Holder (other than
those included in the registration) for a period specified by representatives of
the underwriters of Common Stock (or other securities) of the Company not to
exceed one hundred and eighty (180) days following the effective date of a
Registration Statement for an underwritten public offering; provided that each
executive officer and director enters into a similar agreement.
8. Miscellaneous.
(a) Recapitalizations, Exchanges, etc. The provisions of this
Agreement shall apply to the full extent set forth herein with respect to (i)
the shares of Common Stock, (ii) any and all shares of voting common stock of
the Company into which the shares of Common Stock are converted, exchanged or
substituted in any recapitalization or other capital reorganization by the
Company and (iii) any and all equity securities of the Company or any successor
or assign of the Company (whether by merger, consolidation, sale of assets or
otherwise) which may be issued in respect of, in conversion of, in exchange for
or in substitution of, the shares of Common Stock and shall be appropriately
adjusted for any stock dividends, splits, reverse splits, combinations,
recapitalizations and the like occurring after the date hereof. Upon request of
the Designated Holders, the Company shall cause any successor or assign (whether
by merger, consolidation, sale of assets or otherwise) to enter into a new
registration rights agreement with the Designated Holders on terms substantially
the same as this Agreement.
(b) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
unless consented to in writing by (i) the Company and (ii) the Designated
Holders holding Registrable Securities representing (after giving effect to any
adjustments) at least two-thirds (2/3) of the aggregate number of Registrable
Securities owned by all of the Designated Holders, provided that any amendment,
supplement, modification or waiver that materially and adversely affects a
Designated Holder shall require the consent of such Designated Holder. Any such
written consent shall be binding upon the Company and all of the Designated
Holders.
(c) Notices. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be made by
registered or
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certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:
if to the Company:
Xx. Xxx X. Xxxxxx
Chairman of the Board and Chief Executive Officer
Commonwealth Energy Corporation
00000 Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to (which copy shall not constitute notice):
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
Attn: Xxxx X. Xxxxx Xxxxxx, Esq.
000 Xxxx Xxxxxx Xxxxx
Xxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
if to a Designated Holder:
to his most recent address as reflected on the books and records of
the Company
with a copy to (which shall not constitute notice):
Stroock & Stroock & Xxxxx LLP
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
All such notices, demands and other communications shall be deemed to have been
duly given when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial courier service; five (5) business days
after being deposited in the mail, postage prepaid, if mailed; and when receipt
is mechanically acknowledged, if telecopied.
(d) Successors and Assigns; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the heirs, legatees,
legal representatives and successors of each of the parties hereto. The
foregoing
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notwithstanding, no Designated Holder may assign his rights under this Agreement
to any other Person other than through the death of such Designated Holder and
inheritance. The incidental or "piggy-back" registration rights of the
Designated Holders and the other rights of each of the Designated Holders with
respect thereto shall not be transferred to any Person who is the transferee of
any of such Designated Holder's Registrable Securities, other than to such
Person's immediate family, which shall include his or her spouse, siblings,
children or grandchildren ("Family Members") or to a trust, corporation,
partnership or limited liability company, all of the beneficial interests of
which are held by such Person or one or more of such Person's Family Members. No
Person other than the parties hereto and their heirs, legatees, legal
representatives and successors is intended to be a beneficiary of any of the
rights granted hereunder.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW OF ANY JURISDICTION.
(h) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, it being intended that all
of the rights and privileges of the Designated Holders shall be enforceable to
the fullest extent permitted by law.
(i) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein.
This Agreement supersedes all prior agreements and understandings with respect
to such subject matter.
(j) Further Assurances. Each of the parties shall execute such
documents and perform such further acts as may be reasonably required or
necessary to carry out or to perform the provisions of this Agreement.
(k) Other Agreements. Nothing contained in this Agreement shall be
deemed to be a waiver of, or release from, any obligations any party hereto may
have under, or any restrictions on the transfer of Registrable Securities or
other securities of the Company imposed by, any other agreement.
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IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Registration Rights Agreement on the date first written above.
COMMONWEALTH ENERGY CORPORATION
By: /s/ Xxx X. Xxxxxx
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Name: Xxx X. Xxxxxx
Title: Chairman and Chief Executive
Officer
XXXXX XXXXXXX
By: /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
XXXX XXXXXX
By: /s/ Xxxx Xxxxxx
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Xxxx Xxxxxx
XXXX XXXX
By: /s/ Xxxx Xxxx
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Xxxx Xxxx
XXXXX XXXXXXXXXX
By: /s/ Xxxxx Xxxxxxxxxx
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Xxxxx Xxxxxxxxxx
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