REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (“Agreement”) is entered into as of November
___, 2006, between Xcorporeal, Inc., a Delaware corporation (“Company”), and the person
named on the signature page to this Agreement (“Investor”).
WHEREAS, pursuant to a Stock Purchase Agreement of even date herewith, incorporated herein by
reference, Company is issuing to Investor shares of its Common Stock, par value $0.0001
(“Shares”); and
WHEREAS, the Shares are being issued in a private placement without registration under the
Securities Act of 1933, as amended (“Act”), in reliance on one or more exemptions from the
registration requirements under the Act;
NOW THEREFORE, in consideration of the foregoing recitals and the respective covenants and
representations contained herein, the parties hereto, intending to be legally bound, agree as
follows:
1. Demand Registration
(a) If Company receives written notice from Investor requesting that Company file a
registration statement under the Act covering the registration of all of the Shares then owned by
Investor, Company will, within thirty (30) days, prepare and file with the Securities and Exchange
Commission (“SEC”) a registration statement with respect to the Shares, and use its
commercially reasonable efforts to cause the registration statement to become effective, and
prepare and file with the SEC such amendments and supplements to the registration statement and the
prospectus contained therein as may be necessary to keep the registration statement effective and
the registration statement and prospectus accurate and complete, to the extent necessary to permit
the legally permissible sale or other disposition by Investor.
(b) If Investor intends to distribute the Shares covered by its request by means of an
underwriting, it will so advise Company as a part of the request made pursuant to this Section. In
such event, the right of Investor to include its Shares in the registration shall be conditioned
upon Investor’s participation in such underwriting and the inclusion of the Shares in the
underwriting. Company will enter into (together with Investor and the other shareholders
distributing their securities through the underwriting) an underwriting agreement with the
underwriter or underwriters selected by Company for the underwriting, provided that the
underwriting agreement is in customary form and is reasonably acceptable to Company.
(c) Notwithstanding the foregoing, if Company furnishes to Investor a certificate signed by
the President of Company stating that in the good faith judgment of the Board of Directors of
Company, it would be detrimental to Company and its shareholders for the registration statement to
be filed and it is therefore essential to defer the filing of the registration statement, Company
will have the right to defer the filing for a period of not more than ninety (90) days after
receipt of the request of investor; provided, however, that Company may not utilize this right more
than once in any twelve-month period.
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(d) Company will not be obligated to prepare, file or to take any action to effect any
registration pursuant to this Section after Company has effected a prior registration of all Shares
requested to be registered pursuant to Section 1(b) of this Agreement and such registration
has been declared or ordered effective.
(e) In the event the SEC requiring the Investors to be named as underwriters in the
registration statement, and the Investors do not agree to be named as underwriters, Company may
reduce, on a pro rata basis, the total number of Shares to be registered on behalf of each
Investor. In the event of such reduction, the Investor shall have an additional demand
registration right.
2. Piggyback Registration
(a) Unless a registration statement has already been filed and remains effective with respect
to the Shares, each time Company determines to file a registration statement under the Act (other
than on Form S-1 solely covering an employee benefit plan, S-4 or S-8) in connection with the
proposed offer and sale for money of any of its securities, either for its own account or on behalf
of any other security holder, Company will give written notice of its determination to Investor.
Upon the written request of Investor within thirty (30) days after the receipt of the written
notice, Company will cause all Shares of Investor to be included in the registration statement, to
the extent necessary to permit the legally permissible sale or other disposition by Investor.
(b) If the registration is for a public offering involving an underwriting, Company will so
advise Investor as a part of its written notice. In such event, the right of Investor to
registration pursuant to this Section is conditioned upon Investor’s participation in the
underwriting and the inclusion of Investor’s Shares in the underwriting to the extent provided
herein. Investor will enter into (together with Company and the other shareholders distributing
their securities through the underwriting) an underwriting agreement with the underwriter or
underwriters selected by Company for the underwriting, provided that the underwriting agreement is
in customary form and is reasonably acceptable to Investor.
(c) Notwithstanding any other provision of this Section, if the managing underwriter of an
underwritten distribution advises Company and Investor in writing that in its good faith judgment
the number of Shares and the other securities requested to be registered exceeds the number of
Shares and other securities which can be sold in the offering, then (i) the number of Shares and
other securities so requested to be included in the offering will be reduced to that number of
shares which in the good faith judgment of the managing underwriter can be sold in the offering
(except for shares to be issued by Company in an offering initiated by Company, which will have
priority over the Shares), and (ii) the reduced number of shares will be allocated among all
participating holders of Common Stock and investor in proportion, as nearly as practicable, to the
respective number of Shares and other securities held by Investor and other holders at the time of
filing the registration statement in relation to the total number of shares of Common Stock
outstanding on a fully diluted basis. All Shares and other securities which are excluded from the
underwriting by reason of the underwriter’s marketing limitation and all other Shares not
originally requested to be so included will not be included in the registration and will be
withheld from the market by Investor for a period, not to exceed one hundred eighty
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(180) days, which the managing underwriter reasonably determines is necessary to effect the
underwritten public offering.
3. Registration Procedures. If Company is required by the provisions of this Agreement to
effect the registration of Shares under the Act, Company, at its expense, will:
(a) In accordance with the Act and all applicable rules and regulations, prepare and file with
the SEC a registration statement with respect to the Shares, and use its commercially reasonable
efforts to cause the registration statement to become effective, and prepare and file with the SEC
such amendments and supplements to the registration statement and the prospectus contained therein
as may be necessary to keep the registration statement effective and the registration statement and
prospectus accurate and complete, to the extent necessary to permit the legally permissible sale or
other disposition by Investor;
(b) If the offering is to be underwritten in whole or in part, enter into a customary written
underwriting agreement in form and substance reasonably satisfactory to the managing underwriter of
the public offering, Investor and Company;
(c) Furnish to Investor and the underwriters of the Shares being registered such number of
copies of the registration statement and each amendment and supplement thereto, preliminary
prospectus, final prospectus and such other documents as the underwriters and Investor may
reasonably request in order to facilitate the public offering of the securities;
(d) Use its commercially reasonable efforts to register or qualify the securities covered by
the registration statement under such state securities or blue sky laws of such jurisdictions as
Investor and the underwriters may reasonably request within thirty (30) days prior to the original
filing of the registration statement, except that Company will not for any purpose be required to
execute a general consent to service of process or to qualify to do business as a foreign
corporation in any jurisdiction where it is not so qualified;
(e) Notify Investor, promptly after it receives notice thereof, of the date and time when the
registration statement and each post-effective amendment thereto has become effective or a
supplement to any prospectus forming a part of such registration statement has been filed;
(f) Notify Investor of any request by the SEC for the amending or supplementing of the
registration statement or prospectus or for additional information;
(g) Prepare and file with the SEC, upon the request of Investor, any amendments or supplements
to the registration statement or prospectus which, in the reasonable opinion of counsel for
Investor, is required under the Act or the rules and regulations of the SEC thereunder in
connection with Investor’s distribution of the Shares;
(h) Prepare and file with the SEC, and notify Investor of the filing of, such amendments or
supplements to the registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to the securities is required to
be delivered under the Act, any event has occurred as the result of which the prospectus or any
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other prospectus as then in effect would include 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
not misleading;
(i) In case Investor or any underwriter for Investor is required to deliver a prospectus at a
time when the prospectus then in circulation is not in compliance with the Act or the rules and
regulations of the SEC, prepare upon request such amendments or supplements to such registration
statement and such prospectus as may be necessary in order for the prospectus to comply with the
requirements of the Act and such rules and regulations;
(j) Advise Investor, after it receives notice or obtains knowledge thereof, of the issuance of
any stop order by the SEC suspending the effectiveness of the registration statement or the
initiation or threatening of any proceeding for that purpose and promptly use its commercially
reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if a stop
order should be issued;
(k) Not file any registration statement or prospectus or any amendment or supplement to a
registration statement or prospectus to which Investor has, at least five (5) business days prior
to filing, reasonably objected on the grounds that the registration statement or prospectus or
amendment or supplement thereto does not comply in all material respects with the requirements of
the Act or the rules and regulations thereunder. The failure of Investor or its counsel to review
or object to any registration statement or prospectus or any amendment or supplement to a
registration statement or prospectus will not affect the indemnification rights of Investor or its
respective officers, directors, partners, legal counsel, accountants or controlling persons or any
underwriter or any controlling person of such underwriter under Section 5 hereof;
(l) Make available for inspection upon request by Investor, a managing underwriter of a
distribution to be effected pursuant to a registration statement under this Agreement, and any
attorney, accountant or other agent retained by Investor or its underwriter, all pertinent
corporate, financial and other documents and records of Company, and cause Company’s officers,
directors and employees to supply all information reasonably requested by Investor, underwriter,
attorney, accountant or agent in connection with the registration statement; and
(m) At the request of Investor, furnish to Investor on the effective date of the registration
statement or, if the registration includes an underwritten public offering, at the closing provided
for in the underwriting agreement, (i) an opinion dated such date of the counsel representing
Company for the purposes of the registration, addressed to the underwriters, if any, and to
investor, covering such matters with respect to the registration statement, the prospectus and each
amendment or supplement thereto, proceedings under state and federal securities laws, other matters
relating to Company, the securities being registered and the offer and sale of such securities as
are customarily the subject of opinions of issuer’s counsel provided to underwriters in
underwritten public offerings, and such opinion of counsel will additionally cover such legal and
factual matters with respect to the registration as Investor may reasonably request, and (ii)
letters dated each of such effective date and such closing date, from the independent certified
public accountants of Company, addressed to the underwriters, if any, and to Investor, stating that
they are independent certified public accountants within the meaning of the Act and dealing
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with such matters as the underwriters may request, or, if the offering is not underwritten, that in
the opinion of such accountants the financial statements and other financial data of Company
included in the registration statement or the prospectus or any amendment or supplement thereto
comply in all material respects with the applicable accounting requirements of the Act, and
additionally covering such other accounting and financial matters, including information as to the
period ending not more than five (5) business days prior to the date of such letter with respect to
the registration statement and prospectus, as Investor may reasonably request.
4. Expenses
(a) With respect to each inclusion of Shares in a registration statement pursuant to this
Agreement, Company will bear all fees, costs and expenses of and incidental to the registration and
the public offering in connection therewith; provided, however, that Investor will bear its pro
rata share of the underwriting discount and commissions.
(b) The fees, costs and expenses of registration to be borne as provided in this Section,
include, without limitation, all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for Company, fees and disbursements of counsel for the
underwriter or underwriters of such securities (if Company and/or selling security shareholders are
otherwise required to bear such fees and disbursements), and all legal fees and disbursements and
other expenses of complying with state securities or blue sky laws of any jurisdictions in which
the securities to be offered are to be registered or qualified.
5. Indemnification
(a) Company will indemnify and hold harmless pursuant to the provisions of this Agreement
Investor and each of Investor’s officers, directors, partners, legal counsel and accountants, and
each person who controls Investor within the meaning of the Act and any underwriter (as defined in
the Act) for Investor, and any person who controls such underwriter within the meaning of the Act,
from and against, and to reimburse Investor, its officers, directors, partners, legal counsel,
accountants and controlling persons and each underwriter and controlling person of such underwriter
with respect to, any and all claims, actions (actual or threatened), demands, losses, damages,
liabilities, costs and expenses to which Investor, its officers, directors, partners, legal
counsel, accountants or controlling persons or any such underwriter or controlling person of such
underwriter may become subject under the Act or otherwise, insofar as such claims, actions,
demands, losses, damages, liabilities, costs or expenses arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, in light of the
circumstances in which they were made; provided, however, that Company will not be liable in any
such case to the extent that any claim, action, demand, loss, damage, liability, cost or expense is
caused by an untrue statement or alleged untrue statement or omission or alleged omission so made
in conformity with written information furnished by Investor, such underwriter or such controlling
person specifically for use in the preparation thereof.
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(b) Investor will indemnify and hold harmless Company, its officers, directors, legal counsel
and accountants, any underwriter and each person who controls Company or any underwriter within the
meaning of the Act, from and against, and agrees to reimburse Company, its officers, directors,
legal counsel, accountants and controlling persons, any underwriter with respect to, any and all
claims, actions, demands, losses, damages, liabilities, costs or expenses to which Company, its
officers, directors, legal counsel, accountants, such controlling persons, or any underwriter may
become subject under the Act or otherwise, insofar as such claims, actions, demands, losses,
damages, liabilities, costs or expenses are caused by any untrue or alleged untrue statement of any
material fact contained in such registration statement, any prospectus contained therein or any
amendment or supplement thereto, or are caused by the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading, in each case, to the extent,
but only to the extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was so made in reliance upon and in conformity with written information furnished
by Investor specifically for use in the preparation thereof. Notwithstanding the foregoing,
Investor will not be obligated hereunder to pay more than the net proceeds realized by it upon its
sale of Shares included in such registration statement.
(c) Promptly after receipt by a party indemnified pursuant to the provisions of this Section
of notice of the commencement of any action involving the subject matter of the foregoing indemnity
provisions, the indemnified party will, if a claim therefor is to be made against the indemnifying
party pursuant to the provisions of this Section, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve it from any
liability which it may have to an indemnified party otherwise than under this Section and will not
relieve the indemnifying party from liability under this Section unless the indemnifying party is
prejudiced by such omission. In case any action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly with any other
indemnifying parties similarly notified, to assume the defense thereof, with counsel satisfactory
to the indemnified party; provided, however, that if the defendants in any action include both the
indemnified party and the indemnifying party and the indemnified party reasonably concludes that
there may be legal defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the indemnified party or parties
will have the right to select separate counsel (in which case the indemnifying party will not have
the right to direct the defense of such action on behalf of the indemnified party or parties). Upon
the permitted assumption by the indemnifying party of the defense of an action, and approval by the
indemnified party of counsel, the indemnifying party will not be liable to the indemnified party
under this Section for any legal or other expenses subsequently incurred by the indemnified party
in connection with the defense thereof (other than reasonable costs of investigation) unless (i)
the indemnified party has employed separate counsel in connection with the assertion of legal
defenses in accordance with the proviso to the next preceding sentence, (ii) the indemnifying party
has employed counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time, (iii) the indemnifying party and its counsel fail actively and vigorously
to pursue the defense of the action or (iv) the indemnifying party authorizes the employment of
counsel for the indemnified party at the expense of the indemnifying party. No indemnifying party
will be liable to an
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indemnified party for any settlement of any action or claim without the consent of the indemnifying
party, and no indemnifying party may unreasonably withhold its consent to any such settlement. No
indemnifying party will 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 the
indemnified party of a release from all liability with respect to the claim or litigation.
(d) If the indemnification provided for in this Section is held by a court of competent
jurisdiction to be unavailable to a party to be indemnified with respect to any claims, actions,
demands, losses, damages, liabilities, costs or expenses referred to therein, then each
indemnifying party under any such section, in lieu of indemnifying the indemnified party
thereunder, agrees to contribute to the amount paid or payable by the indemnified party as a result
of the claims, actions, demands, losses, damages, liabilities, costs or expenses in such proportion
as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the statements or omissions which resulted in
the claims, actions, demands, losses, damages, liabilities, costs or expenses, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party and of the
indemnified party will be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission to state a material
fact relates to information supplied by the indemnifying party or by the indemnified party and the
parties’ relative intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding the foregoing, the amount Investor will be obligated to
contribute pursuant to this section will be limited to an amount equal to the per share public
offering price (less any underwriting discount and commissions) multiplied by the number of Shares
sold by Investor pursuant to the registration statement which gives rise to such obligation to
contribute (less the aggregate amount of any damages which Investor has otherwise been required to
pay in respect of such claim, action, demand, loss, damage, liability, cost or expense or any
substantially similar claim, action, demand, loss, damage, liability, cost or expense arising from
the sale of such Shares). No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) will be entitled to contribution hereunder from any person who was not
guilty of such fraudulent misrepresentation.
(e) In addition to its other obligations under this Section, Company agrees to reimburse any
underwriter and Investor pursuant to this Agreement (and each of the underwriter’s and Investor’s
controlling persons, officers, directors, parties, legal counsel, accountants and underwriters, and
controlling persons of the underwriters) on a monthly basis for all reasonable legal fees and other
expenses incurred in connection with investigating or defending any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any statement or omission, or any alleged
statement or admission, described in Section 5(a), notwithstanding the possibility that
such payments might later be held to be improper. To the extent that any payment is ultimately held
to be improper, each person receiving such payment will promptly refund it.
6. Restrictions. Shares will only be treated as registrable securities if and so long as
they have not been (a) sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, or (b) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Act under Section 4(1) thereof so that all
transfer
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restrictions and restrictive legends with respect to such Shares are removed upon the consummation
of such sale and the seller and Investor receive an opinion of counsel for Company, in form and
content reasonably satisfactory to the seller and buyer and their respective counsel, to the effect
that the Shares in the hands of investor are freely transferable without restriction or
registration under the Act in any public or private transaction.
7. Information. Investor will furnish Company with such information with respect to
Investor and the Shares as Company may from time to time reasonably request in writing and as may
be required by law or by the SEC.
8. Forms. All references in this Agreement to particular forms of registration statements
under the Act are intended to include, and will be deemed to include, references to all successor
forms which are intended to replace, or to apply to similar transactions as, the forms herein
referenced.
9. General
(a) Counterparts. This Agreement may be executed in counterparts, each of which will
be an original and all of which together will constitute one and the same instrument.
(b) Entire Agreement. This Agreement, together with the related written agreements
entered into on the same date, constitutes the entire agreement between the parties. No
representations, agreements or promises have been made except as expressly set forth herein. This
Agreement supersedes any prior negotiations, understandings or agreements, whether written or oral,
and any contemporaneous oral understandings or agreements.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth
above.
| Investor: | ||||||
By: |
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Its: |
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| Company: | ||||||
| XCORPOREAL, INC. | ||||||
| By: | ||||||
| Its Chairman | ||||||
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