EXHIBIT 10.39
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of September
30, 1998, by and among ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC., a
corporation organized under the laws of the State of Delaware, with headquarters
located at XX 0000, XX 00, Xxx 000, Xxxxxxxx, Xxxxx 00000 (the "Company"), and
the undersigned (together with affiliates, the "Initial Investors").
WHEREAS:
A. In connection with that certain Securities Purchase Agreement dated as
of the date hereof by and among the Company and the Initial Investors (the "Note
Purchase Agreement"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investors (i)
shares of its Series A Convertible Preferred Stock (the "Preferred Stock") that
are convertible into shares (the "Conversion Shares") of the Company's Class A
Common Stock, par value $.01 per share (the "Common Stock"), upon the terms and
subject to the limitations and conditions set forth in the Certificate of
Designations, Rights and Preferences with respect to such Preferred Stock (the
"Certificate of Designation") and (ii) Series X and Series Y warrants
(collectively, the "Investor Warrants") to acquire shares (the "Warrant Shares")
of Common Stock;
B. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws; and
C. The Company has agreed to issue to The Zanett Securities Corporation or
its assigns (the "Placement Agent") Series X and Series Y warrants
(collectively, the "Placement Warrants" and, together with the Investor
Warrants, the "Warrants") to purchase shares of Common Stock, pursuant to that
certain Placement Agency Agreement, dated as of even date herewith, by and
between the Company and the Placement Agent and has agreed to provide the
Placement Agent the rights set forth herein. For purposes of this Agreement, the
Placement Agent shall be deemed an AInitial Investor@ and the shares of Common
Stock issuable upon the exercise of, or otherwise pursuant to, the Placement
Agent Warrants shall be deemed "Warrant Shares."
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investors hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investors" means the Initial Investors and any
transferees or assignees who agree to become bound by the provisions of
this Agreement in accordance with Section 9 hereof.
(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
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 the declaration or
ordering of effectiveness of such Registration Statement by the United
States Securities and Exchange Commission (the "SEC").
(iii) "Registrable Securities" means the Conversion Shares and
the Warrant Shares (including any Conversion Shares issuable in redemption
of any Preferred Stock and any Warrant Shares issuable with respect to
Exercise Default Payments under the Warrants) issued or issuable with
respect to the Preferred Stock and the Warrants and any shares of capital
stock issued or issuable, from time to time (with any adjustments), as a
distribution on or in exchange for or otherwise with respect to any of the
foregoing.
(iv) "Registration Statement" means a registration statement
of the Company under the Securities Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare and, on or
before January 15, 1999 (the "Filing Date"), file with the SEC a
Registration Statement on Form S-3 (or, if Form S-3 is not then available,
on such form of Registration Statement as is then available to effect a
registration of all of the Registrable Securities, subject to the consent
of the Initial Investors (as determined pursuant to Section 11(j) hereof))
covering the resale of at least 5,970,000 Registrable Securities, which
Registration Statement, to the extent allowable under the Securities Act
and the Rules promulgated thereunder, shall state that such Registration
Statement also covers such indeterminate number of additional shares of
Common Stock as may become issuable upon conversion of the Preferred Stock
and exercise of the Warrants to prevent dilution resulting from stock
splits, stock dividends or similar transactions. The Registrable
Securities initially set forth in the Registration Statement shall be
allocated to the Investors as set forth in Section 11(k) hereof. The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided to
(and subject to the approval of) the Initial Investors and their counsel
prior to its filing or other submission.
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b. Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering, with the consent of the
Initial Investors, shall have the right to select one legal counsel to
represent the Investors and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company. In
the event that any Investors elect not to participate in such underwritten
offering, the Registration Statement covering all of the Registrable
Securities shall contain appropriate plans of distribution reasonably
satisfactory to the Investors participating in such underwritten offering
and the Investors electing not to participate in such underwritten
offering (including, without limitation, the ability of nonparticipating
Investors to sell from time to time and at any time during the
effectiveness of such Registration Statement).
c. Payments by the Company. The Company shall cause the Registration
Statement required to be filed pursuant to Section 2(a) hereof to become
effective as soon as practicable, but in no event later than March 17,
1999 (the "Registration Deadline"). If (i) the Registration Statement(s)
covering the Registrable Securities required to be filed by the Company
pursuant to Section 2(a) hereof is not filed with the SEC by the Filing
Date or is not declared effective by the SEC on or before the Registration
Deadline, or if, after the Registration Statement has been declared
effective by the SEC, sales of all of the Registrable Securities
(including any Registrable Securities required to be registered pursuant
to Section 3(b) hereof) cannot be made pursuant to the Registration
Statement (by reason of a stop order or the Company's failure to update
the Registration Statement or any other reason outside the control of the
Investors) or (ii) the Common Stock is not listed or included for
quotation on the Nasdaq SmallCap Market (the "SmallCap"), the Nasdaq
National Market (the "NNM"), the New York Stock Exchange (the "NYSE") or
the American Stock Exchange (the "AMEX") at any time after the
Registration Deadline, then the Company will make payments to the
Investors in such amounts and at such times as shall be determined
pursuant to this Section 2(c) as partial relief for the damages to the
Investors by reason of any such delay in or reduction of their ability to
sell the Registrable Securities (which remedy shall not be exclusive of
any other remedies available at law or in equity). The Company shall pay
to each Investor an amount equal to the product of (i) the aggregate
Purchase Price of the Preferred Stock and Warrants held by such Investor
(including, without limitation, Preferred Stock that has been converted
into Conversion Shares and Warrants that have been exercised for Warrant
Shares then held by such Investor) (the "Aggregate Share Price"),
multiplied by (ii) one hundredth (.01), for the first thirty (30) day
period (or portion thereof) (A) after the Filing Date and prior to the
date on which the Registration Statement required to be filed pursuant to
Section 2(a) hereof is filed with the SEC, (B) after the Registration
Deadline and prior to the date on which the Registration Statement
required to be filed pursuant to Section 2(a) hereof is declared effective
by the
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SEC, and (C) during which sales of any Registrable Securities cannot be
made pursuant to the Registration Statement after the Registration
Statement has been declared effective or the Common Stock is not listed or
included for quotation on the SmallCap, NNM, NYSE or AMEX. In addition,
the Company shall pay to each Investor an amount equal to the product of
(i) the Aggregate Share Price, multiplied by (ii) two hundredths (.02),
for each additional thirty (30) day period (or portion thereof) following
the initial thirty (30) day period referred to in the preceding sentence
(A) after the Filing Date and prior to the date on which the Registration
Statement required to be filed pursuant to Section 2(a) hereof is filed
with the SEC, (B) after the Registration Deadline and prior to the date on
which the Registration Statement required to be filed pursuant to Section
2(a) hereof is declared effective by the SEC, and (C) during which sales
of any Registrable Securities cannot be made pursuant to the Registration
Statement after the Registration Statement has been declared effective or
the Common Stock is not listed or included for quotation on the SmallCap,
NNM, NYSE or AMEX; provided, however, that there shall be excluded from
each such period any delays which are solely attributable to changes
(other than corrections of Company mistakes with respect to information
previously provided by the Investors) required by the Investors in the
Registration Statement with respect to information relating to the
Investors, including, without limitation, changes to the plan of
distribution. (For example, if the Registration Statement is not effective
by the Registration Deadline, the Company would pay $10,000 for the first
thirty (30) days and $20,000 for each thirty (30) day period thereafter
with respect to each $1,000,000 of Aggregate Share Price until the
Registration Statement becomes effective). Such amounts shall be paid in
cash. Payments of cash pursuant hereto shall be made within five (5) days
after the end of each period that gives rise to such obligation, provided
that, if any such period extends for more than thirty (30) days, interim
payments shall be made for each such thirty (30) day period.
d. Piggy-Back Registrations. If at any time prior to the expiration
of the Registration Period (as hereinafter defined) the Company shall file
with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the Securities Act of any of its
equity securities (other than (i) on Form S-4 or Form S-8 or their then
equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee
benefit plans or (ii) any amendment to that certain Registration Statement
on Form S-3, Registration No. 333-42555), the Company shall send to each
Investor who is entitled to registration rights under this Section 2(d)
written notice of such determination and, if within fifteen (15) days
after the date of such notice, such Investor shall so request in writing,
the Company shall include in such Registration Statement all or any part
of the Registrable Securities such Investor requests to be registered,
except that if, in connection with any underwritten public offering for
the account of the Company, the managing underwriter(s) thereof shall
impose a limitation on the number of shares of Common Stock which may be
included in the Registration Statement because, in such underwriter(s)'
judgment, marketing or other factors dictate such limitation is necessary
to facilitate public distribution, then the Company shall be obligated to
include in such Registration Statement only such limited portion of the
Registrable Securities with respect to which such Investor has requested
inclusion hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Investors seeking
to include Registrable Securities, in proportion to the number of
Registrable Securities sought to be included by such Investors; provided,
however, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the
holders of which are not entitled to inclusion of such securities in such
Registration Statement or are not entitled to pro rata inclusion with the
Registrable Securities; and provided, further, however, that, after giving
effect to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities having
the right to include such securities in the Registration Statement other
than holders of securities entitled to inclusion of their securities in
such Registration Statement by reason of demand registration rights. No
right to registration of Registrable Securities under this Section 2(d)
shall be construed to limit any registration required under Section 2(a)
hereof. If an offering in connection with which an Investor is entitled to
registration under this Section 2(d) is an underwritten offering, then
each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company,
offer and sell such Registrable Securities in an underwritten offering
using the
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same underwriter or underwriters and, subject to the provisions of this
Agreement (to the extent not inconsistent with the terms of such
underwritten offering), on the same terms and conditions as other shares
of Common Stock included in such underwritten offering.
e. Eligibility for Form S-3. The Company represents and warrants
that it meets the requirements for the use of Form S-3 for registration of
the sale by the Initial Investors and any other Investor of the
Registrable Securities and the Company shall file all reports required to
be filed by the Company with the SEC in a timely manner so as to maintain
such eligibility for the use of Form S-3.
x. Xxxxx Periods. If at any time prior to the expiration of the
Registration Period (as defined below), the Company has determined in good
faith that (i) the filing of a Registration Statement or compliance by the
Company with its disclosure obligations in connection with the
Registration Statement would require the disclosure of material
information which the Company has a bona fide business purpose for
preserving as confidential or (ii) the Company then is unable to comply
with its disclosure obligations or SEC requirements in connection with the
Registration Statement, then in either such case the Company may delay the
filing of the Registration Statement (if not then filed) and shall not be
required to maintain the effectiveness thereof or amend or supplement the
Registration Statement for a period (a "Delay Period") expiring upon the
earlier to occur of (A) the date on which such material information is
disclosed to the public or ceases to be material or the Company is able to
so comply with its disclosure obligations and SEC requirements or (B) 20
days after the Company makes such good faith determination. The Company
will give prompt written notice, in the manner prescribed by Section 11(b)
hereof, to the Investors of each Delay Period. Advance notice shall be
given to the extent practicable. Such notice shall state an estimate of
the duration of such Delay Period. Each Investor, by its acceptance of any
share of Common Stock, agrees that, upon receipt of such notice it will
forthwith discontinue disposition of the Common Stock pursuant to the
Registration Statement, and will not deliver any prospectus forming a part
thereof in connection with any sale of Common Stock, until the expiration
of such Delay Period. In addition, the provisions of Section 2(c) shall
not apply to the Delay Periods. Notwithstanding anything in this Section
2(f) to the contrary, there shall not be (i) more than two (2) Delay
Periods in any twelve (12) month period or (ii) more than an aggregate of
20 calendar days of Delay Period in any twelve (12) month period.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly and file with the SEC the
Registration Statement required by Section 2(a) as soon as practicable
after the date hereof (but in no event later than the Filing Date), and
cause such Registration Statement relating to Registrable Securities to
become effective as soon as practicable after such filing (but in no event
later than the Registration Deadline), and keep the Registration Statement
effective pursuant to Rule 415 at all times until such date as is the
earlier of (i) the date on which all of the Registrable Securities have
been sold and (ii) the date on which all of the Registrable Securities (in
the reasonable opinion of counsel to the Initial Investors) may be
immediately sold to the public without registration or restriction
pursuant to Rule 144(k) under the
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Securities Act or any successor provision (the "Registration Period"),
which Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein and all documents incorporated
by reference therein) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration
Statement as may be necessary to keep the Registration Statement effective
at all times 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 the Company covered by the
Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof as set forth in the
Registration Statement. In the event the number of shares available under
a Registration Statement filed pursuant to this Agreement is, for any
three (3) consecutive trading days (the last of such three (3) trading
days being the "Registration Trigger Date"), insufficient to cover one
hundred thirty-five percent (135%) of the Registrable Securities issued or
issuable upon conversion (without giving effect to any limitations on
conversion contained in Article IV.C of the Certificate of Designation) of
the Preferred Stock and exercise of the Warrants (without giving effect to
any limitations on exercise contained in Section 7 of the Warrants), the
Company shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefor, if applicable), or both,
so as to cover two hundred percent (200%) of the Registrable Securities
issued or issuable (without giving effect to any limitations on conversion
or exercise contained in the Certificate of Designation or the Warrants)
as of the Registration Trigger Date, in each case, as soon as practicable,
but in any event within fifteen (15) days after the Registration Trigger
Date (based on the market price then in effect of the Common Stock and
other relevant factors on which the Company reasonably elects to rely).
The Company shall cause such amendment(s) and/or new Registration
Statement to become effective as soon as practicable following the filing
thereof. The Company shall cause such amendment and/or new Registration
Statement to become effective as soon as practicable following the filing
thereof. In the event the Company fails to obtain the effectiveness of any
such Registration Statement within sixty (60) days after a Registration
Trigger Date, each Investor shall thereafter be entitled to the remedies
provided for in Section 2(c) above.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal
counsel (i) promptly after the same is prepared and publicly distributed,
filed with the SEC, or received by the Company, one copy of the
Registration Statement and any amendment thereto, each preliminary
prospectus and prospectus and each amendment or supplement thereto, and,
in the case of the Registration Statement referred to in Section 2(a),
each letter written by or on behalf of the Company to the SEC or the staff
of the SEC (including, without limitation, any request to accelerate the
effectiveness of any Registration Statement or amendment thereto), and
each item of correspondence from the SEC or the staff of the SEC, in each
case relating to such Registration Statement (other than any portion, if
any, thereof which contains information for which the Company has sought
confidential treatment), (ii) on the date of effectiveness of the
Registration Statement or any amendment thereto, a notice stating that the
Registration Statement or amendment has been declared effective, and (iii)
such number of copies of a prospectus, including
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a preliminary prospectus, and all amendments and supplements thereto and
such other documents as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Investor.
d. The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement
under such other securities or "blue sky" laws of such jurisdictions in
the United States as each Investor who holds Registrable Securities being
offered reasonably requests, (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 the Company shall not be required in connection therewith or
as a condition thereto to (a) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section
3(d), (b) subject itself to general taxation in any such jurisdiction, (c)
file a general consent to service of process in any such jurisdiction, (d)
provide any undertakings that cause the Company undue expense or burden,
or (e) make any change in its charter or bylaws, which in each case the
Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
e. In the event the Investors who hold a majority in interest of the
Registrable Securities being offered in an offering select underwriters
for the offering, the Company shall enter into and perform its obligations
under an underwriting agreement, in usual and customary form, including,
without limitation, customary indemnification and contribution
obligations, with the underwriters of such offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus
included in the Registration Statement, as then in effect, includes an
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement to correct such untrue
statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration
Statement, and, if such an order is issued, to obtain the withdrawal of
such order at the earliest practicable moment (including in each case by
amending or supplementing such Registration Statement) and to notify each
Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance of
such order and the resolution thereof (and if such Registration Statement
is supplemented or amended, deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request).
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h. The Company shall permit a single firm of counsel designated by
the Initial Investors to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time prior to
their filing with the SEC, and not file any document in a form to which
such counsel reasonably objects.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) 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 twelve-month period beginning not later than the first day of
the Company's fiscal quarter next following the effective date of the
Registration Statement.
j. At the request of any Investor, the Company shall furnish, on the
date of effectiveness of the Registration Statement (i) an opinion, dated
as of such date, from counsel representing the Company addressed to the
Investors and in form, scope and substance as is customarily given in an
underwritten public offering and (ii) in the case of an underwriting, a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and the Investors.
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant
to the Registration Statement, (iii) one firm of attorneys and one firm of
accountants or other agents retained by the Investors, and (iv) one firm
of attorneys retained by all such underwriters (collectively, the
"Inspectors") all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the
"Records"), as shall be reasonably deemed necessary by each Inspector to
enable each Inspector to exercise its due diligence responsibility, and
cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of
such due diligence; provided, however, that each Inspector shall hold in
confidence and shall not make any disclosure (except to an Investor) or
use of any Record or other information which the Company determines in
good faith to be confidential, and of which determination the Inspectors
are so notified, unless (a) the release of such Records is ordered
pursuant to a subpoena or other order from a court or government body of
competent jurisdiction or (b) 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. The Company shall not be
required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the
Company) with the Company with respect thereto, substantially in the form
of this Section 3(k). Each Investor 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 the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein shall be deemed
to limit the Investors' ability to sell Registrable Securities in a manner
which is otherwise consistent with applicable laws and regulations.
l. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information
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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 order from
a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement, or (v) such
Investor consents to the form and content of any such disclosure. The
Company agrees that it shall, upon learning that disclosure of such
information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give
prompt notice to such Investor prior to making such disclosure, and allow
the Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
m. The Company shall use its best efforts to promptly either (i)
cause all the Registrable Securities covered by the Registration Statement
to be listed on the NYSE or the AMEX or another national securities
exchange and on each additional national securities exchange on which
securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) secure the designation
and quotation of all of the Registrable Securities covered by the
Registration Statement on the NNM or the SmallCap and, without limiting
the generality of the foregoing, to arrange for or maintain at least two
market makers to register with the National Association of Securities
Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
n. The Company shall provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to the Registration
Statement and enable such certificates to be in such denominations or
amounts, as the case may be, as the managing underwriter or underwriters,
if any, or the Investors may reasonably request and registered in such
names as the managing underwriter or underwriters, if any, or the
Investors may request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an opinion of such
counsel in the form attached hereto as Exhibit 1.
p. At the request of any Investor, the Company shall prepare and
file with the SEC such amendments (including post-effective amendments)
and supplements to a Registration Statement and the prospectus used in
connection with the Registration Statement as may be necessary in order to
change the plan of distribution set forth in such Registration Statement.
q. The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all
applicable rules and regulations of governmental
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authorities in connection therewith (including, without limitation, the
Securities Act and the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC.)
r. The Company shall take all such other actions as any Investor or
the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of the Registrable Securities.
s. From and after the date of this Agreement, the Company shall not,
and shall not agree to, allow the holders of any securities of the Company
to include any of their securities in any Registration Statement under
Section 2(a) hereof or any amendment or supplement thereto under Section
3(b) hereof without the consent of the holders of a majority in interest
of the Registrable Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Investor that such
Investor shall furnish to the Company such information regarding itself,
the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be
reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least five (5)
business days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested
by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement.
c. In the event Investors holding a majority in interest of the
Registrable Securities being offered determine to engage the services of
an underwriter, each Investor agrees to enter into and perform such
Investor's obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification
and contribution obligations, with the managing underwriter of such
offering and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of the Registrable Securities,
unless such Investor has notified the Company in writing of such
Investor's election not to participate in such underwritten distribution.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
3(f) or 3(g), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering
such
10
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or 3(g)
and, if so directed by the Company, such Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in such Investor's
possession, of the prospectus covering such Registrable Securities current
at the time of receipt of such notice.
e. No Investor may participate in any underwritten distribution
hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting
arrangements in usual and customary form entered into by the Company, (ii)
completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, and (iii)
agrees to pay its pro rata share of all underwriting discounts and
commissions and any expenses in excess of those payable by the Company
pursuant to Section 5 below.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, the fees and disbursements
contemplated by Section 3(k) hereof, and the reasonable fees and disbursements
of one counsel selected by the Investors pursuant to Section 2(b) hereof shall
be borne by the Company. In addition, the Company shall pay all of the
Investors' costs and expenses (including legal fees) incurred in connection with
the enforcement of the rights of the Investors hereunder.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
11
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable
Securities, and (ii) the directors, officers, partners, members,
employees, agents and each person who controls any Investor within the
meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), if any,
(each, an "Indemnified Person"), against any joint or several losses,
claims, damages, liabilities or expenses (collectively, together with
actions, proceedings or inquiries by any regulatory or self-regulatory
organization, whether commenced or threatened, in respect thereof,
"Claims") to which any of them may become subject insofar as such Claims
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated
or necessary to make the statements therein not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact contained
in any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein
any material fact necessary to make the statements made therein, in light
of the circumstances under which the statements therein were made, not
misleading, or (iii) any violation or alleged violation by the 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 (the matters
in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(c) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each other Indemnified 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 which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person expressly
for use in the Registration Statement or any such amendment thereof or
supplement thereto; (ii) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent
of the Company, which consent shall not be unreasonably withheld; and
(iii) with respect to any preliminary prospectus, shall not inure to the
benefit of any Indemnified Person if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected on a
timely basis in the prospectus, as then amended or supplemented, if such
corrected prospectus was timely made available by the Company pursuant to
Section 3(c) hereof, and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise
to a Violation and such Indemnified Person, notwithstanding such advice,
used it. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and
shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9 hereof.
12
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not
jointly to indemnify, hold harmless and defend, to the same extent and in
the same manner set forth in Section 6(a), the Company, each of its
directors, each of its officers who signs the Registration Statement, its
employees, agents and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person
who controls such stockholder within the meaning of the Securities Act or
the Exchange Act (collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar
as such Claim arises out of or is based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such
Registration Statement; and subject to Section 6(c) such Investor will
reimburse any legal or other expenses (promptly as such expenses are
incurred and are due and payable) reasonably incurred by them in
connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent
shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Agreement (including this Section 6(b)
and Section 7) for only that amount as does not exceed the net proceeds
actually received by such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9 hereof.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to
any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented, and the Indemnified Party
failed to utilize such corrected prospectus.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is 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 such
indemnifying party shall not be entitled to assume such defense and 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 conflicts of interest between
such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding or the actual or potential
defendants in, or targets of, any such action include both the Indemnified
Person or the Indemnified Party and the indemnifying party and any such
Indemnified Person or Indemnified Party
13
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are different from or in
addition to those available to such indemnifying party. The indemnifying
party shall pay for only one separate legal counsel for the Indemnified
Persons or the Indemnified Parties, as applicable, and such legal counsel
shall be selected by Investors holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to which the
Claim relates (with the approval of the Initial Investors if they hold
Registrable Securities included in such Registration Statement), if the
Investors are entitled to indemnification hereunder, or by the Company, if
the Company is entitled to indemnification hereunder, as applicable. 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. 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 such expense, loss, damage or liability is
incurred and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no 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, (ii) no person 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
such fraudulent misrepresentation, and (iii) contribution (together with any
indemnification or other obligations under this Agreement) 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 the Investors the benefits of Rule 144
promulgated under the Securities Act or any other similar rule or regulation of
the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
a. File with the SEC in a timely manner and make and keep available
all reports and other documents required of the Company under the
Securities Act and the Exchange Act so long as the Company remains subject
to such requirements (it being understood that nothing herein shall limit
the Company's obligations under Section 4(c) of the Securities Purchase
Agreement) and the filing and availability of such reports and other
documents is required for the applicable provisions of Rule 144; and
14
b. Furnish to each Investor so long as such Investor owns shares of
Preferred Stock, Warrants or Registrable Securities, promptly upon
request, (i) a written statement by the 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
the Company and such other reports and documents so filed by the Company,
and (iii) such other information as may be reasonably requested to permit
the Investors to sell such securities under Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assignable by each Investor to any transferee of all or any
portion of the shares of Preferred Stock, the Warrants or the Registrable
Securities if: (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company after such assignment, (ii) the Company is furnished with written notice
of (a) the name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being transferred
or assigned, (iii) following such transfer or assignment, the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act and applicable state securities laws, (iv) the transferee or
assignee agrees in writing for the benefit of the Company to be bound by all of
the provisions contained herein, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement.
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 written consent of the Company and Investors who
hold a majority in interest of the Registrable Securities; provided, however,
that no amendment hereto which restricts the ability of an Investor to elect not
to participate in an underwritten offering shall be effective against any
Investor which does not consent in writing to such amendment. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of
such Registrable Securities.
b. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five (5) days after being placed in the
mail, if mailed, or upon receipt or refusal of receipt, if delivered
personally or by courier or confirmed telecopy, in each case addressed to
a party. The addresses for such communications shall be:
15
If to the Company:
Advanced Environmental Recycling
Technologies, Inc.
XX 0000
XX 00, Xxx 000
Xxxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
With a copy to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
0000 XxxxxxxXxxx Xxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxx Xxxx, Esq.
and if to any Investor, at such address as such Investor shall have
provided in writing to the Company, or at such other address as each such
party furnishes by notice given in accordance with this Section 11(b).
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware applicable to contracts made and to
be performed in the State of Delaware. The Company irrevocably consents to
the jurisdiction of the United States federal courts and the state courts
located in the City of New York in the State of New York in any suit or
proceeding based on or arising under this Agreement and irrevocably agrees
that all claims in respect of such suit or proceeding may be determined in
such courts. The Company irrevocably waives the defense of an inconvenient
forum to the maintenance of such suit or proceeding. The Company further
agrees that service of process upon the Company, mailed by first class
mail shall be deemed in every respect effective service of process upon
the Company in any such suit or proceeding. Nothing herein shall affect
the Investors' right to serve process in any other manner permitted by
law. The Company agrees that a final non-appealable judgment in any such
suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
e. This Agreement, the Securities Purchase Agreement (including all
schedules and exhibits thereto) and the Warrants constitute the entire
agreement among the parties hereto with respect to the subject matter
hereof and thereof. This Agreement, the Securities Purchase Agreement and
the Warrants supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.
16
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
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, each
of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as 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, approvals and other determinations to be made by
the Investors or the Initial Investors pursuant to this Agreement shall be
made by the Investors or the Initial Investors holding a majority in
interest of the Registrable Securities (determined as if all shares of
Preferred Stock and Warrants then outstanding had been converted into or
exercised for Registrable Securities) held by all Investors or Initial
Investors, as the case may be.
k. The initial number of Registrable Securities included on any
Registration Statement and each increase (if any) to the number of
Registrable Securities included thereon shall be allocated pro rata among
the Investors based on the number of Registrable Securities held by each
Investor at the time of such establishment or increase, as the case may
be. In the event an Investor shall sell or otherwise transfer any of such
holder=s Registrable Securities, each transferee shall be allocated a pro
rata portion of the number of Registrable Securities included on a
Registration Statement for such transferor. Any shares of Common Stock
included on a Registration Statement and which remain allocated to any
person or entity which does not hold any Registrable Securities shall be
allocated to the remaining Investors, pro rata based on the number of
shares of Registrable Securities then held by such Investors.
l. For purposes of this Agreement, the term "business day" means any
day other than a Saturday or Sunday or a day on which banking institutions
in the State of New York are authorized or obligated by law, regulation or
executive order to close.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.
By:/s/ Xxx X. Xxxxxx
-------------------------------------
Name: Xxx X. Xxxxxx
Title: President
By:/s/ Xxxxx Xxxxxx
-------------------------------------
Name: Xxxxx Xxxxxx
Title: Chief Executive Officer
INITIAL INVESTORS:
ZANETT LOMBARDIER, LTD. HARLOW ENTERPRISES, INC.
By:/s/ Gianluca Cicognia By:/s/ Xxxxxx Xxxxxx
-------------------------- ------------------------------
Name: Gianluca Cicognia Name: Xxxxxx Xxxxxx
------------------------ ----------------------------
Title: Director Title: Authorized Representative
----------------------- ---------------------------
PARKLAND LIMITED THE ZANETT SECURITIES CORPORATION
By:/s/ Xxxxxxx X'Xxxxxx By:/s/ Xxxxx XxXxxxxx
-------------------------- ------------------------------
Name: Xxxxxxx X'Xxxxxx Name: Xxxxx XxXxxxxx
------------------------ ----------------------------
Title: Director Title: Managing Director
----------------------- ---------------------------
(SIGNATURES CONTINUED ON NEXT PAGE)
(SIGNATURES CONTINUED FROM PRIOR PAGE)
XXXXXXX XXXXX PERFORMANCE XXXXXXX SACHS PERFORMANCE
PARTNERS (OFFSHORE), L.P. PARTNERS, L.P.
By: Comodities Corporation LLC, By: Commodities Corporation LLC,
its general partner its general partner
By: /s/ Xxxxx X. Judge By:/s/ Xxxxx X. Judge
-------------------------- ------------------------------
Name: Xxxxx X. Judge Name: Xxxxx X. Judge
------------------------ ----------------------------
Title: Vice President Title: Vice President
----------------------- ---------------------------
/s/ Xxxxxx X. Xxxxxxx /s/ Xxxxx Xxxxxxxx
----------------------------- ---------------------------------
XXXXXX X. XXXXXXX XXXXX XXXXXXXX
/s/ Xxxxx XxXxxxxx /s/ Xxxxxxx Xxxxxxxx
----------------------------- ---------------------------------
XXXXX XxXXXXXX XXXXXXX XXXXXXXX
EXHIBIT 1
to
Registration
Rights
Agreement
[Date]
[Name and address
of transfer agent]
RE: Advanced Environmental Recycling Technologies, Inc.
Ladies and Gentlemen:
We are counsel to Advanced Environmental Recycling Technologies, Inc., a
corporation organized under the laws of the State of Delaware (the "Company"),
and we understand that [Name of Investor] (the "Holder") has purchased from the
Company (i) shares of the Company's Series A Convertible Preferred Stock (the
"Preferred Stock") that are convertible into shares of the Company's Class A
Common Stock, par value $.01 per share (the "Common Stock"), and (ii) Series X
and Series Y warrants (the "Warrants") to acquire shares of Common Stock.
Pursuant to a Registration Rights Agreement, dated as of September 30, 1998, by
and among the Company, the Holder and the other signatories thereto (the
"Registration Rights Agreement"), the Company agreed with the Holder, among
other things, to register the Registrable Securities (as that term is defined in
the Registration Rights Agreement) under the Securities Act of 1933, as amended
(the "Securities Act"), upon the terms provided in the Registration Rights
Agreement. In connection with the Company's obligations under the Registration
Rights Agreement, on _____ __, 1998, the Company filed a Registration Statement
on Form S-___ (File No. 333- _____________) (the "Registration Statement") with
the Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities, which names the Holder as a selling stockholder thereunder. The
Registration Statement was declared effective by the SEC on _________________,
1998.
[Other customary introductory and scope of examination language to be
inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
[Other customary language to be included.]
Very truly yours,
cc: [Name of Investor]
