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Exhibit 2.5
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SENIOR DEBENTURE REGISTRATION RIGHTS AGREEMENT
THIS DEBENTURE REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated
as of November 1st, 2007, by and between Patient Portal Technologies, Inc., a
Delaware corporation ("Company"), and Dutchess Private Equities Fund, LTD, a
Cayman Islands exempted company ("Holder"). Company and Holder are hereinafter
sometimes collectively referred to as the "Parties" and each a "Party" to this
Agreement.
RECITALS:
WHEREAS, upon the terms and subject to the conditions of that certain
Subscription Agreement, of even date herewith, by and between Holder and Company
(the "Subscription Agreement"), Company has agreed to issue and sell to Holder
convertible debentures of Company, which will be convertible into shares of
common stock, $0.001 par value per share (the "Common Stock"), of Company; and
WHEREAS, to induce Holder to execute and deliver (i) the Subscription
Agreement, (ii) this Agreement, (iii) that certain Warrant, of even date
herewith, by and between Company and Holder (the "Warrant"), (iv) that certain
Security Agreement, of even date herewith, by and between Company and Holder
(the "Security Agreement"), (v) that certain Senior Debenture, of even date
herewith, by and between Company and Holder (the "Debenture"), and (vi) all
agreements referenced in the foregoing documents (collectively, the "Transaction
Documents"), Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended (the "Securities Act") and the rules and
regulations promulgated thereunder, and applicable state securities laws, with
respect to the shares of Common Stock issuable pursuant to the Transaction
Documents.
NOW, THEREFORE, for and in consideration of the foregoing premises, the
agreements and covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Company and Holder, intending to be legally bound, hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
a. "Closing Date" shall mean the date in the preamble of this
Agreement.
b. "Debentures" shall mean the senior debenture issued by Company
to Holder pursuant to the Debenture.
c. "Holder" shall mean Dutchess Private Equities Fund, Ltd.
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d. "Effective Date" shall mean the date the SEC declares the
Registration Statement effective and Company has filed all necessary amendments,
including the letter to request accelerated effectiveness and the Prospectus
covering the resale of Shares.
e. "Face Amount" means seven million U.S. dollars ($7,000,000) to
be invested by Holder.
f. "Filing Date" shall mean the date the Registration Statement
has been filed with the SEC (as determined by XXXXX) and no stop order of
acceptance has been issued by the SEC.
g. "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
h. "Potential Material Event" means any of the following: (i) the
possession by Company of material information not ripe for disclosure in a
Registration Statement, which shall be evidenced by determinations in good faith
by the Board of Directors of Company that disclosure of such information in the
Registration Statement would be detrimental to the business and affairs of
Company, or (ii) any event or activity concerning Company which would, based on
a good faith determination by Company's Board of Directors, adversely affect
Company or its shareholders if it were included in a Registration Statement or
other filing.
i. "Principal Market" means either The American Stock Exchange,
Inc., The New York Stock Exchange, Inc., the Nasdaq National Market, The Nasdaq
SmallCap Market or the National Association of Securities Dealer's, Inc. OTC
electronic bulletin board, whichever is the principal market on which the Common
Stock is listed.
j. "Register", "Registered" and "Registration" refer to a
registration effected by preparing and filing with the SEC one or more
Registration Statements in compliance with the Securities Act and pursuant to
Rule 415 under the Securities Act or any successor rule providing for offering
securities on a continuous basis ("Rule 415"), and effectiveness of such
Registration Statement(s).
k. "Registrable Securities" means the shares of Common Stock
issued or issuable (i) pursuant to the Subscription Agreement and the
Transaction Documents, and (ii) any shares of capital stock issued or issuable
with respect to such shares of Common Stock and Warrants, if any, as a result of
any stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, which have not been (x) included in a Registration Statement that has
been declared effective by the SEC, (y) sold under circumstances meeting all of
the applicable conditions of Rule 144, promulgated under the Securities Act or
(z) saleable without limitation as to time, manner and volume pursuant to Rule
144(k) (or any similar provision then in force) under the Securities Act.
l. "Registration Statement" means a registration statement of
Company filed under the Securities Act.
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m. "SEC" means the United States Securities and Exchange
Commission.
All capitalized terms used but not defined in this Agreement shall have
the meaning ascribed to them in the Transaction Documents.
For the purposes of determining dates for penalties or filing
deadlines, as outlined in this Agreement, both parties agree that the date given
by the SEC shall constitute the official date.
2. Registration.
a. Mandatory Registration. Within twenty-one (21) days of the
Closing Date, Company shall prepare and file with the SEC a Registration
Statement or Registration Statements (as is necessary) covering the resale of
all of the Registrable Securities, which Registration Statement(s) shall state
that, in accordance with Rule 415 promulgated under the Securities Act, such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon stock splits, stock dividends
or similar transactions. Company shall initially register for resale an amount
of shares of Common Stock which would be issuable on the date preceding the
filing of the Registration Statement based on the Conversion Price (as defined
in the Debenture) of the Debenture and the amount reasonably calculated that
represents the number of shares issuable pursuant to the terms of the Warrant,
which would collectively be an amount equal to the maximum amount allowed under
Rule 415 (a)(1)(i) as interpreted by the SEC. Company shall file any additional
Registration Statement(s), as permitted by Rule 415, until the Face Amount has
been paid off and the Warrants have been registered. In the event Company cannot
register sufficient shares of Common Stock, due to the remaining number of
authorized shares of Common Stock being insufficient or under Rule 415, Company
will use its best efforts to register the maximum number of shares it can based
on the remaining balance of authorized shares and will use its best efforts to
increase the number of its authorized shares as soon as reasonably practicable.
b. Company shall use its best efforts to have the Registration
Statement filed with the SEC within twenty-one (21) calendar days after the
Closing Date ("Filing Deadline"). If the Registration Statement covering the
Registrable Securities required to be filed by Company pursuant to Section 2(a)
hereof is not filed by the Filing Deadline, then Company shall pay Holder the
sum of two percent (2%) per month of the Face Amount of the Debentures
outstanding as liquidated damages, and not as a penalty. In addition, if Company
fails to file the Registration Statement by the Filing Deadline, and for each
twenty (20) day calendar period Company fails to file the Registration
Statement, the Conversion Price of the Debentures will decrease by ten percent
(10%) of the original Conversion Price. By way of illustration only and not in
limitation of the foregoing, in the event that upon the twenty-second (22nd) day
following Closing, the Registration Statement has not been filed with the SEC,
the Conversion Price shall decrease by four and sixth-tenths cents ($0.046) per
share (i.e., $.46 x 10% = $0.046). Holder shall have the right to lower the
Conversion Price as described herein, at the time of each conversion.
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Notwithstanding the foregoing, the amounts payable by Company pursuant
to this Section 2 shall not be payable to the extent any delay in the filing of
the Registration Statement occurs because of an act of, or a failure to act or
to act timely by Holder or is otherwise attributable to Holder.
The liquidated damages set forth in this Section 2 shall continue until
the obligation is fulfilled and shall be paid, at Holder's option in cash or
common stock priced at the Conversion Price, or portion thereof, until the
Registration Statement is filed. Failure of Company to make payment within said
three (3) business days shall be considered a breach of this Agreement, and
Holder may elect to pursue remedies as outlined in this Section 2.
Company acknowledges that its failure to have the Registration
Statement filed within said twenty-one (21) calendar day period will cause
Holder to suffer irreparable harm, and, that damages will be difficult to
ascertain. Accordingly, the Parties agree that it is appropriate to include in
this Agreement a provision for liquidated damages. The Parties acknowledge and
agree that the liquidated damages provision set forth in this section represents
the parties' good faith effort to quantify such damages and, as such, agree that
the form and amount of such liquidated damages are reasonable and will not
constitute a penalty. The payment of liquidated damages shall not relieve
Company from its obligations to register the Common Stock and deliver the Common
Stock pursuant to the terms of this Agreement, the Subscription Agreement and
the Debenture.
c. Company shall use its best efforts and take all available steps
to have the Registration Statement declared effective by the SEC within one
hundred (100) calendar days after the Closing Date. If the Registration
Statement covering the Registrable Securities required to be filed by Company
pursuant to Section 2(a) hereof has not become effective within said 100-day
period of time, then Company shall pay Holder the sum of two percent (2%) of the
Face Amount as liquidated damages, and not as a penalty, for each thirty (30)
calendar day period, pro rata, compounded daily, following the one hundred (100)
calendar day period until the Registration Statement becomes effective.
If the Registration Statement covering the Registrable Securities
required to be filed by Company pursuant to Section 2(a) hereof has become
effective, and, thereafter, Holder's right to sell is suspended, for any reason,
then Company shall pay Holder the sum of two percent (2%) of the Face Amount
plus interest and penalties due to Holder for the Registrable Securities
pursuant to the Subscription Agreement for each five (5) calendar day period,
pro rata, compounded daily, following the suspension, until such suspension
ceases.
Notwithstanding the foregoing, the amounts payable by Company pursuant
to this Section 2 shall not be payable to the extent any delay in the
effectiveness of the Registration Statement or any suspension of the
effectiveness occurs because of an act of, or a failure to act or to act timely
by Holder or is otherwise attributable to Holder.
The damages set forth in this Section 2 shall continue until the
obligation is fulfilled and shall be paid within three (3) business days after
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each ten (10) day period, or portion thereof, until the Registration Statement
is declared effective or such suspension is released. Failure of Company to make
payment within said three (3) business days shall be considered a default.
Company acknowledges that its failure to have the Registration
Statement become effective within said one hundred (100) calendar day period or
to permit the suspension of the effectiveness of the Registration Statement,
will cause Holder to suffer irreparable harm and, that damages will be difficult
to ascertain. Accordingly, the parties agree that it is appropriate to include
in this Agreement a provision for liquidated damages. The parties acknowledge
and agree that the liquidated damages provision set forth in this section
represents the parties' good faith effort to quantify such damages and, as such,
agree that the form and amount of such liquidated damages are reasonable and
will not constitute a penalty. The payment of liquidated damages shall not
relieve Company from its obligations to register the Common Stock and deliver
the Common Stock pursuant to the terms of this Agreement, the Subscription
Agreement and the Debenture.
d. Company agrees to only register such securities as are
necessary to meet its obligations to Holder and agrees not to register
additional securities without Holder's prior written consent to be agreed upon
in writing by Holder before the Filing Date, with the sole exception of those
shares due to Crusader Securities, LLC. Furthermore, Company agrees that it will
not file any other Registration Statement which includes any of the stock owned
by Xxxxx Xxxxx, Xxxxx Xxxx, Xxxxxx Xxxxx, Xxxxxx Xxxxxxx and Xxxxxxxx Xxxxx,
(held individually, jointly or through a corporation), including those on Form
S-8 or Form S-4, for other securities, until the earlier of i) three hundred and
sixty (360) calendar days after the Effective Date, or ii) the Face Amount of
the Debenture has been paid in full, unless such filing is in connection with
Company's employee stock option plan in the normal course of business and
provided that (i) the strike prices in grants thereunder are not less than the
market price at the time of each such grant, (ii) the vesting period for each
such option is not less than two (2) years, and (iii) permission for additional
registration statements was not reasonably withheld by Holder. Failure to obtain
prior written approval from Holder will cause Holder to suffer damages that will
be difficult to ascertain. Accordingly, the Parties agree that it is appropriate
to include a provision for liquidated damages and Company agrees to pay Holder
the sum of two percent (2%) of the Face Amount as liquidated damages and not as
a penalty for each thirty (30) calendar day period, pro rata, compounded daily,
until the unauthorized Registration Statement is withdrawn.
e. Company hereby unconditionally and irrevocably grants to Holder
a right of first refusal ("Right of First Refusal") to provide any additional
financing that Company may required during the Option Period (as hereinafter
defined), on the terms and subject to the conditions contained in this
provision. If during the Option Period, Company desires to secure any financing
from any third party ("Proposed Financing"), Company must first deliver a notice
of the Proposed Financing ("Proposed Financing Notice") to Holder no less than
thirty (30) days prior to the consummation of such Proposed Financing. Such
Proposed Financing Notice shall contain the material terms and conditions
(including price and form of consideration) of the Proposed Financing and the
identity of the prospective source of Proposed Financing. To exercise its Right
of First Refusal, Holder must deliver a notice to Company ("Company Notice")
within five (5) days after delivery of the Proposed Financing Notice. In the
event of a conflict between this Agreement and any other agreement that may have
been entered into by Company and Holder that contains a preexisting right of
first refusal, Company and Holder acknowledge and agree that the terms of this
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Agreement shall control and the preexisting right of first refusal shall be
deemed satisfied in full by compliance with this provision. In the event of a
conflict between this Agreement and the Company's Bylaws containing a
preexisting right of first refusal, the terms of the Bylaws will control and
compliance with the Bylaws shall be deemed full compliance with this provision.
For purposes hereof, the term "Option Period" shall mean that period of time
commencing on the Closing Date and terminating twenty-four (24) months
thereafter.
f. If at any time while the Debenture is outstanding, Company
issues or agrees to issue any Common Stock or securities convertible into or
exercisable for shares of Common Stock (or modify any of the foregoing which may
be outstanding prior to the execution of this Agreement) to any person or entity
at a price per share or conversion or exercise price per share less than the
Maximum Conversion Price (as such term is defined in the Debenture), with or
without the consent of Holder, the Maximum Conversion Price shall be reduced to
a price equal to ten percent (10%) less than the price of the new issuance.
Notwithstanding the foregoing, prior to the final determination of the Maximum
Conversion Price, Company shall not sell any Common Stock to any person or
entity at a share price less than $0.46 nor shall Company offer any registration
rights with respect to such shares.
3. Related Obligations.
At such time as Company is obligated to prepare and file a Registration
Statement with the SEC pursuant to Section 2(a) hereof, Company will use its
best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and, with respect
thereto, Company shall have the following obligations:
a. Company shall use its best efforts to cause such Registration
Statement relating to the Registrable Securities to become effective within one
hundred (100) calendar days after the Closing Date and shall keep such
Registration Statement effective pursuant to Rule 415 under the Securities Act
until the date on which (A) Holder shall have sold all the Registrable
Securities or the shares included therein otherwise cease to be Registrable
Securities, and (B) Holder has no right to convert the securities it owns into
Common Stock under the Subscription Agreement, Debenture or Warrant,
respectively (the "Registration Period"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall, as of the date thereof, 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 light of the circumstances in which
they were made, not misleading. Company shall respond to any and all SEC
comments or correspondence, whether written or oral, direct or indirect, formal
or informal ("Comments"), within seven (7) business days of receipt by Company
of such Comments. If Company fails to respond within seven (7) business days of
receipt of SEC Comments, Company shall pay to Holder an amount equal to two
percent (2%) per month, on a pro rata basis, compounded daily, of the Face
Amount as liquidated damages and not as a penalty; provided that the seven (7)
business day period provided herein shall be extended as may be required by
delays caused by Holder's counsel pursuant to Section 3(g) hereof, and, provided
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further, that such seven (7) business day period shall be extended two (2)
business days for responses to SEC staff accounting comments. Company shall
cause the Registration Statement relating to the Registrable Securities to
become effective no later than two (2) business days after notice from the SEC
that the Registration Statement has been cleared of all comments. Failure to do
so will result in the Face Amount of the Debentures to be increased, as
liquidated damages, by five percent (5%) per calendar day for each day that
Company does not request acceleration for effectiveness from the SEC.
b. 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 under the
Securities Act, as may be necessary to keep such Registration Statement
effective during the Registration Period, and, during such period, comply with
the provisions of the Securities Act with respect to the disposition of all
Registrable Securities of 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 Holder as set forth in
such Registration Statement. In the event the number of shares of Common Stock
available under a Registration Statement filed pursuant to this Agreement is at
any time insufficient to cover all of the Registrable Securities, Company shall
amend such Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover all of
the Registrable Securities, in each case, as soon as practicable, but in any
event within thirty (30) calendar days after the necessity therefor arises
(based on the then Purchase Price of the Common Stock and other relevant factors
on which Company reasonably elects to rely), assuming Company has sufficient
authorized shares at that time, and if it does not, within thirty (30) calendar
days after such shares are authorized. Company shall use it best efforts to
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof.
Prior to conversion of all the Shares (as defined in the Debenture) if
at any time the conversion of all the Shares outstanding would result in an
insufficient number of authorized shares of Common Stock being available to
cover all the conversions, or in the event that Holder deems that the Shares
authorized will become insufficient, Company will move to call and hold a
shareholder's meeting within thirty (30) calendar days for the sole purpose of
authorizing additional shares of Common Stock to facilitate the conversions. In
such an event Company shall recommend to all shareholders and management of
Company to vote their shares in favor of increasing the authorized number of
shares of Common Stock in sufficient number to fully cover Holder's conversion
rights. Company represents and warrants that under no circumstances will it deny
or prevent Holder's right to convert the Shares as permitted under the terms of
the Subscription Agreement, this Agreement or any of the other Transaction
Documents. Holder retains the right to request additional shares upon the
determination Company may not be able to facilitate conversions in the future.
c Company shall furnish to Holder whose Registrable Securities are
included in any Registration Statement and its legal counsel without charge and
upon request (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 and all exhibits, the prospectus included in such Registration
Statement (including each preliminary prospectus) and, with regards to such
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Registration Statement(s), any correspondence by or on behalf of Company to the
SEC or the staff of the SEC and any correspondence from the SEC or the staff of
the SEC to Company or its representatives, (ii) upon the effectiveness of any
Registration Statement, a copy of the prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number of
copies as Holder may reasonably request) and (iii) such other documents,
including copies of any preliminary or final prospectus, as Holder may
reasonably request from time to time in order to facilitate the disposition of
the Registrable Securities. Company filing the documents described in this
paragraph through XXXXX shall constitute delivery.
d. Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by a Registration Statement under the
applicable securities or "blue sky" laws of such states of the United States as
reasonably specified by Holder, (ii) prepare and file in those jurisdictions,
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that Company shall not be
required in connection therewith or as a condition thereto to (x) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. Company shall promptly notify Holder who holds Registrable
Securities of the receipt by Company of any notification with respect to the
suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or "blue sky" laws of any jurisdiction
in the United States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.
e. Company shall immediately notify Holder in writing of the
happening of any event as a result of which the prospectus included in a
Registration Statement, as then in effect, would then contain an untrue
statement of a material fact or omission to state a material fact, which would
otherwise be 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, as a result, is required to be supplemented or as a result of
which the Registration Statement is required to be amended ("Registration
Default") and use all diligent efforts to promptly prepare any necessary
supplement to such prospectus or amendment to such Registration Statement and
take any other necessary steps to cure the Registration Default, (which, if such
Registration Statement is on Form S-3, may consist of a document to be filed by
Company with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and to be
incorporated by reference in the prospectus) to correct such untrue statement or
omission, and deliver one (1) copy of such supplement or amendment to Holder (or
such other number of copies as Holder may reasonably request; delivery via XXXXX
shall constitute delivery). Failure to cure the Registration Default within five
(5) business days shall result in Company paying liquidated damages of two
percent (2%) of the then outstanding principal amount of the Debentures then
held by Holder for each thirty (30) calendar day period or portion thereof,
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beginning on the date of suspension. Company shall also promptly notify Holder
in writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a Registration Statement or any
post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Holder by facsimile on the same day of such
effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, (iii) of Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate, (iv)
in the event the Registration Statement is no longer effective or, (v) the
Registration Statement is stale for a period of more than five (5) Trading Days
as a result of Company's failure to timely file its financials with the SEC.
Company acknowledges that its failure to cure the Registration Default
within three (3) business days will cause Holder irreparable harm, and that
damages will be difficult to ascertain. Accordingly, the parties agree that it
is appropriate to include in this Agreement a provision for liquidated damages.
The parties acknowledge and agree that the liquidated damages provision set
forth in this section represents the parties' good faith effort to quantify such
damages and, as such, agree that the form and amount of such liquidated damages
are reasonable and will not constitute a penalty.
It is the intention of the parties that interest payable under any of
the terms of this Agreement shall not exceed the maximum amount permitted under
any applicable law. If a law, which applies to this Agreement which sets the
maximum interest amount, is finally interpreted so that the interest in
connection with this Agreement exceeds the permitted limits, then: (1) any such
interest shall be reduced by the amount necessary to reduce the interest to the
permitted limit; and (2) any sums already collected (if any) from Company which
exceed the permitted limits will be refunded to Company. Holder may choose to
make this refund by reducing the amount that Company owes under this Agreement
or by making a direct payment to Company. If a refund reduces the amount that
Company owes Holder, the reduction will be treated as a partial payment. In the
event that any provision of this Agreement is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and the validity and enforceability
of the remaining provisions of this Agreement will not in any way be affected or
impaired thereby.
f. 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 Holder of the issuance of such order and the resolution
thereof. Company will immediately notify Holder of a proceeding, or threat of
proceeding, the result of which could effect the effectiveness of the
registration statement.
g. Company shall permit Holder and its counsel, of Holder's
choosing, to review and comment upon all Registration Statements, amendments and
supplements, at least seven (7) days prior to filing. Company shall not file any
Registration Statement with which Holder or its counsel reasonably objects.
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h. At the request of Holder, Company shall cause to be furnished
to Holder, on the date of the effectiveness of a Registration Statement, an
opinion, dated as of such date, of counsel representing Company for purposes of
such Registration Statement, in the form of Exhibit D attached to the
Subscription Agreement.
i. Company shall make available for inspection by (i) Holder and
(ii) one firm of attorneys and one firm of accountants or other agents retained
by Holder (collectively, the "Inspectors") all pertinent financial and other
records, and pertinent corporate documents and properties of Company
(collectively, the "Records"), as shall be reasonably deemed necessary by each
Inspector, and cause Company's officers, directors and employees to supply all
information which any Inspector may reasonably request; provided, however, that
each Inspector shall hold in strict confidence and shall not make any disclosure
(except to Holder) or use of any Record or other information which Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the Securities Act, (b) the release of
such Records is ordered pursuant to a final, non-appealable subpoena or order
from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. Holder agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to Company and
allow Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential.
j. Company shall hold in confidence and not make any disclosure of
information concerning Holder unless (i) disclosure of such information is
necessary to comply with federal or state securities laws, (ii) the disclosure
of such information is necessary to avoid or correct a misstatement or omission
in any Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other final, non-appealable order from a court or
governmental body of competent jurisdiction, or (iv) such information has been
made generally available to the public other than by disclosure in violation of
this Agreement or any other agreement. Company agrees that it shall, upon
learning that disclosure of such information concerning a Holder is sought in or
by a court or governmental body of competent jurisdiction or through other
means, give prompt written notice to Holder and allow Holder, at Holder's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
k. Company shall use its best efforts to secure designation and
quotation of all the Registrable Securities covered by any Registration
Statement on the Principal Market. If, despite Company's best efforts, Company
is unsuccessful in satisfying this obligation, it shall use its best efforts to
cause all the Registrable Securities covered by any Registration Statement to be
listed on each other national securities exchange and automated quotation
system, if any, on which securities of the same class or series issued by
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Company are then listed, if any, if the listing of such Registrable Securities
is then permitted under the rules of such exchange or system. If, despite
Company's best efforts, Company is unsuccessful in satisfying its obligation in
this Section, it will use its best efforts to secure the inclusion for quotation
with Pink Sheets, LLC. Company shall pay all fees and expenses in connection
with satisfying its obligation under this Section 3(k).
l. Company shall cooperate with Holder to 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 Holder may reasonably request and registered in such
names of the persons who shall acquire such Registrable Securities from Holder,
as Holder may request.
m. Company shall provide a transfer agent for all the Registrable
Securities not later than the Closing Date of the first Registration Statement
filed pursuant hereto.
n. If requested by Holder, Company shall (i) as soon as reasonably
practical, incorporate in a prospectus supplement or post-effective amendment
such information as Holder reasonably determines should be included therein
relating to the sale and distribution of Registrable Securities, including,
without limitation, information with respect to the offering of the Registrable
Securities to be sold in such offering; (ii) make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) supplement or make amendments to any Registration Statement
if reasonably requested by Holder.
o. Company shall use its best efforts to cause the Registrable
Securities covered by the applicable 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.
p. Company shall make available to Holder as soon as reasonably
practical, but not later than ninety (90) calendar days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a 12-month period
beginning not later than the first day of Company's fiscal quarter next
following the effective date of any Registration Statement. Filing via XXXXX
shall constitute delivery.
q. Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
r. Within one (1) business day after the Registration Statement
which includes Registrable Securities is declared effective by the SEC, Company
shall deliver, and shall cause legal counsel for Company to deliver, to the
transfer agent for such Registrable Securities, with copies to Holder,
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A. Failure to do so will result in
the Face Amount on the Debentures to be increased by two percent (2%) per day,
as liquidated damages, and not as a penalty.
11
s. After the SEC declares the Registration Statement cleared of
all comments and Company's acceptance of the effectiveness of the Registration
Statement, Company shall file a prospectus covering the resale of the Shares
("Prospectus") within two (2) trading days. In the event Company does not file
the Prospectus within two (2) trading days of the Effective Date, then Company
shall pay Holder the sum of five percent (5%) of the Face Amount due to Holder
for each two (2) trading day period, pro-rata, compounded daily, following the
two (2) trading day period until the Prospectus is filed.
t. Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by Holder of the Registrable Securities
pursuant to a Registration Statement.
4. Obligations Of Holder.
a. At least five (5) calendar days prior to the first anticipated
filing date of a Registration Statement, Company shall notify Holder in writing
of the information Company requires from Holder. Holder covenants and agrees
that, in connection with any resale of Registrable Securities by it pursuant to
a Registration Statement, it shall comply with the "Plan of Distribution"
section of the current prospectus relating to such Registration Statement.
x. Xxxxxx, by Holder's acceptance of the Registrable Securities,
agrees to cooperate with Company as reasonably requested by Company in
connection with the preparation and filing of any Registration Statement
hereunder and in responding to SEC comments in connection therewith.
x. Xxxxxx agrees that, upon receipt of any notice from Company of
the happening of any event of the kind described in Section 3(f) hereof or the
first sentence of Section 3(e) hereof, Holder will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) hereof or the
first sentence of Section 3(e) hereof.
5. Expenses Of Registration.
All expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Section 2 and Section 3 hereof, including, without limitation, all registration,
listing and qualifications fees, printing and accounting fees, and reasonable
fees and disbursements of counsel for Company shall be paid by, and are the sole
obligation of, Company.
6. Indemnification.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
12
a. To the fullest extent permitted by law, Company will, and
hereby agrees to, indemnify, hold harmless and defend Holder who holds such
Registrable Securities, the directors, officers, partners, employees, agents,
representatives of, and each Person, if any, who controls Holder within the
meaning of the Securities Act or the Exchange Act) (each, an "Indemnified
Person" or "Indemnified Party"), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, 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, in light of the circumstances under which the statements therein were
made, not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in the final prospectus (as amended or supplemented, if
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 light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by Company of the Securities Act, the Exchange 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 (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) hereof with respect to the number of
legal counsel, Company shall reimburse Holder and each such controlling person,
promptly as such expenses are incurred and are due and payable, for any
reasonable 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 arising out of or
based upon a Violation committed by any Indemnified Person or which occurs in
reliance upon and in conformity with information furnished in writing to Company
by any 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 were timely made available by Company pursuant to
Section 3(c) hereof; (ii) shall not be available to the extent such Claim is
based on (a) a failure of Holder to deliver or to cause to be delivered the
prospectus made available by Company or (b) the Indemnified Person's use of an
incorrect prospectus despite being promptly advised in advance by Company in
writing not to use such incorrect prospectus; and (iii) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the resale of the Registrable Securities by Holder pursuant to the Registration
Statement.
13
b. 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
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The indemnifying
party shall pay for only one separate legal counsel for the Indemnified Persons
or the Indemnified Parties, as applicable, and such counsel shall be selected by
Holder, if Holder is entitled to indemnification hereunder, or Company, if
Company is entitled to indemnification hereunder, as applicable. 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 fully 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 written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the 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.
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 actually prejudiced in its ability to
defend such action.
c. 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.
14
d. 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 hereof to the fullest extent permitted by law; provided,
however, that: (i) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6 hereof; (ii) no seller of Registrable Securities guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of fraudulent misrepresentation; and (iii)
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.
8. Reports Under The Exchange Act.
With a view to making available to Holders the benefits of Rule 144
under the Securities Act or any similar rule or regulation of the SEC that may
at any time permit the investors to sell securities of Company to the public
without registration ("Rule 144") 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 in a timely manner all reports and other
documents required of Company under the Securities Act and the Exchange Act so
long as Company remains subject to such requirements and the filing of such
reports and other documents as are required by the applicable provisions of Rule
144; and
c. furnish to Holder so long as Holder owns Registrable
Securities, promptly upon request, (i) a written statement by Company that it
has complied with the reporting requirements of Rule 144, the Securities Act and
the Exchange Act, (ii) a copy of the most recent annual or quarterly report of
Company and such other reports and documents so filed by 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.
9. No Assignment Of Registration Rights.
The registration rights and obligations under this Agreement shall not
be assignable.
15
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 both Company
and Holder of the Registrable Securities. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon Holder and Company. No
such amendment shall be effective to the extent that it applies to less than all
of Holders of the Registrable Securities. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of this Agreement unless the same consideration also is offered
to all of the parties to this Agreement.
11. Miscellaneous.
a. 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 a confirmation
of transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one (1) 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 be:
If to Company: Attn: Xxxxx Xxxxx
Patient Portal Technologies, Inc.
0000 Xxxxxxx Xxxxx, Xxx. 000
Xxxx Xxxxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
If to Holder: Dutchess Capital Management, LLC
00 Xxxxxxxxxxxx Xxx, Xxxxx 0
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Each party shall provide five (5) business days prior notice to the
other party of any change in address, phone number or facsimile number.
b. 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.
c. This Agreement and all related instruments and documents and
the rights and obligations of the parties hereunder and thereunder shall, in all
respects, be governed by, and construed in accordance with, the internal laws of
the Commonwealth of Massachusetts, without regard to conflicts of law
principles.
16
d. The parties to this Agreement will submit all disputes arising
under it to arbitration in Boston, Massachusetts before a single arbitrator of
the American Arbitration Association ("AAA"). The arbitrator shall be selected
by application of the rules of the AAA, or by mutual agreement of the parties,
except that such arbitrator shall be an attorney admitted to practice law in the
Commonwealth of Massachusetts. No party to this agreement will challenge the
jurisdiction or venue provisions as provided in this section. Nothing in this
section shall limit Holder's right to obtain an injunction for a breach of this
Agreement from a court of law.
e. This Agreement and the Transaction Documents constitute the
entire set of agreements 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 in the Transaction
Documents.
f. This Agreement and the Transaction Documents supersede all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
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 two or more counterparts, all
of which taken together shall constitute one instrument. Execution and delivery
of this Agreement by exchange of facsimile copies bearing the facsimile
signature of a party shall constitute a valid and binding execution and delivery
of this Agreement by such party. Such facsimile copies shall constitute
enforceable original documents.
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 the 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 to be made by Holder
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by Holder holding a majority of the Registrable Securities.
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. Company hereby represent and warrants to Holder that: (i) it
has voluntarily entered into this Agreement of its own freewill, (ii) it is not
entering into this Agreement under economic duress, (iii) the terms of this
Agreement are reasonable and fair to Company, and (iv) Company has had
independent legal counsel of its own choosing review this Agreement, advise
Company with respect to this Agreement, and represent Company in connection with
its entering into this Agreement.
17
m. Notwithstanding anything in this Agreement to the contrary, the
parties hereto hereby acknowledge and agree to the following: (i) Holder makes
no representations or covenants that it will not engage in trading in the
securities of Company; (ii) Company shall, by 8:30 a.m. Boston time on the
trading day following the date hereof, file a current report on Form 8-K
disclosing the material terms of the transactions contemplated hereby and in the
other Transaction Documents; (iii) Company has not and shall not provide
material non-public information to Holder unless prior thereto Holder shall have
executed a written agreement regarding the confidentiality and use of such
information; and (iv) Company understands and confirms that Holder will be
relying on the acknowledgements set forth in clauses (i) through (iii) above if
Holder effects any transactions in the securities of Company.
12. Waiver.
Holder's delay or failure at any time or times hereafter to require
strict performance by Company of any undertakings, agreements or covenants shall
not waive, affect, or diminish any right of Holder under this Agreement to
demand strict compliance and performance herewith. Any waiver by Holder of any
Event of Default (as such term is defined in the Debenture) shall not waive or
affect any other Event of Default, whether such Event of Default is prior or
subsequent thereto and whether of the same or a different type. None of the
undertakings, agreements and covenants of Company contained in this Agreement,
and no Event of Default, shall be deemed to have been waived by Holder, nor may
this Agreement be amended, changed or modified, unless such waiver, amendment,
change or modification is evidenced by an instrument in writing specifying such
waiver, amendment, change or modification and signed by Holder.
13. Payment Of Liquidated Damages.
Any liquidated damages or other fees incurred herein by Company for
failure to act in a timely manner shall be charged to the Face Amount of the
Debenture (as defined in the Debenture), unless specifically noted otherwise.
Holder reserves the rights to take payment of such amounts in cash or in Common
Stock priced at the Conversion Price (as defined in the Debenture).
14. Time. Time is of the essence of this Agreement.
[SIGNATURE PAGE FOLLOWS]
18
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned has executed this Debenture Registration Rights Agreement as of the
date first above written.
Patient Portal Technologies, Inc.
By:___________________________________
Name: Xxxxx Xxxxx, Chief Executive Officer
By:___________________________________
Xxxxxx Xxxxx, Secretary, Acting CFO and Director
By:___________________________________
Xxxxx Xxxx , Chief Operating Officer
DUTCHESS PRIVATE EQUITIES FUND, LTD,
By: __________________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: Director
19
EXHIBIT A
---------
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
Date: __________
[TRANSFER AGENT]
Re: Patient Portal Technologies, Inc.
---------------------------------
Ladies and Gentlemen:
We are counsel to Patient Portal Technologies, Inc., a Delaware
corporation ("Company"), and have represented Company in connection with that
certain Subscription Agreement (the "Subscription Agreement") entered into by
and among Company and Dutchess Private Equities Fund, LTD, a Cayman Islands
exempted company ("Holder") pursuant to which Company has agreed to issue to
Holder shares of Company's common stock, $0.001 par value per share (the "Common
Stock") on the terms and conditions set forth in the Subscription Agreement.
Pursuant to the Subscription Agreement, Company also has entered into a
Registration Rights Agreement with Holder (the "Registration Rights Agreement")
pursuant to which Company agreed, among other things, to register the
Registrable Securities (as defined in the Registration Rights Agreement),
including the shares of Common Stock issued or issuable under the Subscription
Agreement under the Securities Act of 1933, as amended (the "Securities Act").
In connection with Company's obligations under the Registration Rights
Agreement, on ____________ ___, 200__, Company filed a Registration Statement on
Form ________ (File No. 333-________) (the "Registration Statement") with the
United States Securities and Exchange Commission (the "SEC") relating to the
Registrable Securities which names Holder as a selling shareholder thereunder.
In connection with the foregoing, we advise you that the Registration
Statement has become effective under the Securities Act at [enter the time of
effectiveness] on [enter the date of effectiveness] and to the best of our
knowledge, after telephonic inquiry of a member of the SEC's staff, no stop
order suspending its effectiveness has been issued and no proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the Securities Act pursuant to the
Registration Statement.
Very truly yours,
[Company Counsel]
By:____________________
cc: Dutchess Private Equities Fund, LTD
20
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