REGISTRATION RIGHTS AGREEMENT
Exhibit
10.4
This
Registration Rights Agreement (this “Agreement”)
is
made and entered into as of December 21, 2007, by and among XA, Inc., a Nevada
corporation (the “Company”),
the
Holder of the Notes and Warrants issued by the Company pursuant to a Securities
Purchase Agreement, dated as of the date hereof, by and among the Investor
and
the Company (the “SPA”),
and
Mastodon Ventures, Inc., and its permitted assigns (“Mastodon”).
The
Underlying Shares held by the Investor (and any Holder that is a permitted
assignee of the Investor) shall have the registration rights as set forth
herein.
The
Company and the Investor hereby agree as follows (for the avoidance of doubt,
the Investors other than the Investor (each as defined herein) are subject
to
other Registration Rights Agreements):
1. Definitions. Capitalized
terms used and not otherwise defined herein that are defined in the SPA shall
have the meanings given such terms in the SPA. As used in this Agreement, the
following terms shall have the following meanings:
“Additional
Effectiveness
Date” shall
have the meaning
set forth in Section 2(b).
“Additional
Filing
Date” shall have the meaning set forth in Section 2(b).
“Additional
Notice” shall have the meaning set forth in Section 2(b).
“Additional
Registration
Statement” shall mean any Registration Statement necessary to
register shares of the Registrable Securities which at any time after the
Initial Effectiveness Date and for any reason are not covered by an effective
Registration Statement.
“Closing
Date”
shall mean December 21, 2007 (or such earlier date as the parties
may
agree).
“Commission”
means the United States Securities and Exchange Commission.
“Common
Stock”
means the Company’s common stock par value $0.001 per share.
“Conversion
Shares” means
all shares of
Common Stock issuable upon conversion of the Notes.
“Effectiveness
Period” shall mean from the date hereof until the earlier to occur
of the date when all Registrable Securities covered by a Registration Statement
either (a) have been sold pursuant to a Registration Statement or an exemption
from the registration requirements of the Securities Act, and (b) pursuant
to a
written opinion of Company counsel acceptable to the Company’s transfer agent
and the legal counsel for the Holders, may be sold pursuant to Rule
144(k).
“Exchange
Act”
means the Securities Exchange Act of 1934, as amended.
“Holder”
or
“Holders”
means
the holder or holders, as the case may be, from time to time of Registrable
Securities (including any permitted assignee).
“Indemnified
Party” shall have the meaning set forth in Section 5.
“Indemnifying
Party” shall have the meaning set forth in Section 5.
“Investor”
shall mean Sands Brothers Venture Capital III LLC.
“Investors”
shall
mean,
collectively, (i) the Investor, and (ii) the other investors in the offering
the
Notes and Warrants issued pursuant to the Purchase Agreements.
“Losses”
shall
have the meaning set forth in Section 5(a).
“Initial
Effectiveness
Date” means, with respect to the Initial Registration Statement
required to be filed pursuant to Section 2(a) of this
Agreement.
“Initial
Filing
Date” shall have the meaning set forth in Section 2(a).
“Initial
Registration
Date” shall mean the date that is one hundred and eighty (180)
days from the date hereof; provided that, in the event
that a Private Offering has been consummated during such 180 day period, such
date shall refer to the date of the closing of such Private
Offering.
“Initial
Registration
Statement” shall have the meaning set forth in Section 2(a).
“Notes”
means
all of the Senior Secured Convertible Promissory Notes issued pursuant the
Purchase Agreements between the Company and the applicable
Investors.
“Pari
Passu Registration
Rights Holders” shall have the meaning set forth in Section 2(f).
“Person”
shall
mean an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
“Prior
Closings” shall mean the August 8, 2006, September 26, 2006, and
October 23, 2006 closing of the sale of an aggregate of $2,700,000 in 11% Senior
Subordinated Secured Convertible Promissory Notes by the Company and the June
2007 closing of the sale of an aggregate of $450,000 in 11% Senior Subordinated
Secured Convertible Promissory Notes by the Company.
“Private
Offering” shall mean a private placement of the Company’s
securities in which the Company receives gross proceeds of no less than three
million dollars ($3,000,000).
“Private
Offering
Investors” shall mean each of the purchasers of securities of the
Company in a Private Offering.
“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
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“Prospectus”
means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by any prospectus supplement, with respect to the terms of the offering of
any
portion of the Conversion Registrable Securities or Exchange Registrable
Securities covered by the Registration Statement, and all other amendments
and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference
in
such Prospectus.
“Purchase
Agreements” shall mean those certain Securities Purchase
Agreements, dated on or around the date hereof (including the SPA).
“Registrable
Securities” means (i) the Underlying Shares, in each
case, held by the Investor (and any Holder that is a permitted assignee of
the Investor), and (ii) the shares of Common Stock underlying all of the
securities held by Mastodon.
“Registration
Statement” means any registration statement required to be filed
hereunder (which, at the Company’s option, may be an existing registration
statement of the Company previously filed with the Commission, but not declared
effective), including (in each case) the Prospectus, amendments and supplements
to the registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference
or
deemed to be incorporated by reference in the registration
statement.
“Rule
144”
means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such
Rule.
“Rule 415”
means Rule 415 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar
Rule or regulation hereafter adopted by the Commission having substantially
the same effect as such Rule.
“Rule 424”
means Rule 424 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar
Rule or regulation hereafter adopted by the Commission having substantially
the same effect as such Rule.
“Securities
Act” means the Securities Act of 1933, as amended.
“Trading
Day”
means (a) a day on which the Common Stock is traded on a Trading Market,
or
(b) if the Common Stock is not quoted on a Trading Market, a day on which
the Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding to its functions of reporting price); provided, that in the event
that the Common Stock is not listed or quoted as set forth in (a), and
(b) hereof, then Trading Day shall mean a Business Day;
“Trading
Market” means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the OTC
Bulletin Board, the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the Nasdaq SmallCap Market.
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“Underlying
Shares” means
collectively, all
Conversion Shares and the Warrant Shares.
“Warrant
Shares” means
all shares of
Common Stock issuable upon exercise of the Warrants.
“Warrants”
means the Common Stock purchase warrants issued pursuant to the Purchase
Agreements between the Company and the applicable Investors.
2. Registration.
(a) Initial
Registration. No later than forty-five (45) days from the
Initial Registration Date (the “Initial
Filing
Date”) the Company shall file with the Commission a Registration
Statement (the “Initial
Registration
Statement”), covering the resale of all of the Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Initial Registration Statement required hereunder shall be
on Form S-1, Form SB-2 or Form S-3 (except if the Company is not then eligible
to register for resale the Registrable Securities on Form S-1, Form SB-2 or
Form
S-3, in which case the Initial Registration Statement shall be on another
appropriate form in accordance herewith). The Initial Registration
Statement required hereunder shall contain the Plan of Distribution, attached
hereto as Annex
A (which may be modified to respond to comments, if any, received by
the
Commission). The Company shall cause the Initial Registration Statement to
become effective, no later than ninety (90) days after the Initial Filing Date
(the “Initial
Effectiveness
Date”) and remain effective as provided herein. The Company shall
use its best efforts to cause the Initial Registration Statement to be declared
effective under the Securities Act and shall use its best efforts to keep the
Initial Registration Statement continuously effective under the Securities
Act
until the expiration of the Effectiveness Period.
(b) Additional
Registration.
(i) If
at any time and for
any reason, an Additional Registration Statement is required to be filed because
at such time the actual number of shares of Registrable Securities exceeds
the number of shares of Registrable Securities remaining under the Initial
Registration Statement, the Company shall have thirty (30) days to file such
Additional Registration Statement, and the Company shall use its best efforts
to
cause such Additional Registration Statement to be declared effective by the
Commission as soon as possible, but in no event later than ninety (90) days
after filing (the “Additional
Effectiveness
Date”).
(ii) Notwithstanding
anything to the contrary set forth in this Section 2, in the
event that the Commission does not permit the Company to register all of the
Registrable Securities in the Initial Registration Statement because of the
Commission’s application of Rule 415, the Company shall use its best efforts to
file Additional Registration Statements to register the Registrable Securities
that were not registered in the Initial Registration Statement as promptly
as
possible and in a manner permitted by the Commission. For purposes of
this Section
2(b)(ii), “Additional
Filing
Date” means with respect to each Additional Registration Statement
filed pursuant hereto, the later of (i) sixty (60) days following the sale
of
substantially all of the Registrable Securities included in the Initial
Registration Statement or any Additional Registration Statement and (ii) six
(6)
months following the effective date of the Initial Registration Statement or
any
Additional Registration Statement, as applicable, or such earlier date as
permitted by the Commission.
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(iii) Each
Additional
Registration Statement required under this Section 2(b) shall
contain the Plan of Distribution, attached hereto as Annex A (which may
be
modified to respond to comments, if any, received by the
Commission). The Company shall keep the Additional Registration
Statement continuously effective under the Securities Act until the expiration
of the Effectiveness Period.
(c) Filing
Default
Damages. If an Initial Registration Statement or Additional
Registration Statement (as the case may be) is not filed on or prior to the
Additional Filing Date or Initial Filing Date (as the case may be), then the
Company shall pay to the Holders of the Registrable Securities, for each thirty
(30) day period (or pro rata portion thereof) of such failure and until the
date
an Initial Registration Statement or Additional Registration Statement (as
the
case may be) is filed and/or the Registrable Securities may be sold pursuant
to
Rule 144 or Rule 144(k), as the case may be, as partial liquidated damages
and
not as a penalty, an amount in cash equal to two (2%) percent of the aggregate
gross proceeds paid by the Holders for the Notes. If the Company
fails to pay any partial liquidated damages pursuant to this Section 2 in full
within five (5) days of the date payable, the Company shall pay interest thereon
at a rate of 18% per annum (or such lesser maximum amount that is permitted
to
be paid by applicable law) to the Holders, accruing daily from the date such
partial liquidated damages are due until such amounts, plus all such interest
thereon, are paid in full.
(d) Effectiveness,
Etc. Default
Damages. If an Initial Registration Statement or
Additional Registration Statement (as the case may be) is not declared effective
by the Commission on or prior to the Initial Effectiveness Date or the
Additional Effectiveness Date (as the case may be), or the Commission
declared any such Registration Statement effective, but the Holders of
Registrable Securities cannot sell such Registrable Securities thereunder,
for
any reason or no reason, then the Company shall pay to the Holder, for each
thirty (30) day period until the Registration Statement is declared effective
(or the Holders of Registrable Securities can sell thereunder, as the case
may
be), an amount in cash equal to two (2%) percent of the aggregate gross proceeds
paid by the Holders for the Notes in the Financing. Notwithstanding
anything to the contrary set forth herein, in the event the Commission does
not
permit all of the Registrable Securities to be included in the Initial
Registration Statement (or any subsequent Additional Registration Statements)
because of its application of Rule 415, no liquidated damages shall be payable
pursuant to this Section 2(d) shall be
payable by the Company to the extent that such delay shall be attributable
to
the Commission’s application of Rule 415.
(e) Piggyback
Registrations. If, at any time following the date hereof,
there is not an effective Registration Statement covering the Registrable
Securities and the Company shall determine to prepare and file with the
Commission 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 on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) 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, then the Company shall send to each Holder a written notice
of
such determination at least twenty (20) days prior to the filing of any such
registration statement and shall automatically include in such registration
statement all Registrable Securities; provided, however,
that (i) if,
at any time after giving written notice of is intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company determines for any reason
not
to proceed with such registration, the Company
will be relieved of its obligation to register any Registrable Securities in
connection with such registration, and (ii) in case of a determination by the
Company to delay registration of its securities, the Company will be permitted
to delay the registration of Registrable Securities for the same period as
the
delay in registering such other securities.
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(f) Ranking
of Registration
Rights. For the avoidance of doubt, the registration rights
relating to (i) the Underlying Shares and the Prior Underlying Shares, (ii)
those shares of Common Stock underlying the securities held by (x) the Private
Offering Investors (if any) and (y) Mastodon (collectively, the “Pari
Passu Registrable
Securities”), shall rank pari passu to
each
other, to the extent that the Company has granted registration rights applicable
to such securities (the holders of such securities, from time to time,
the “Pari
Passu Registration
Rights Holders”). In the event that the Commission does
not permit all of the Pari Passu Registrable Securities to be included in the
Initial Registration Statement or any subsequent Additional Registration
Statements because of its application of Rule 415, the Pari Passu Registration
Rights Holders shall allocate amongst themselves the shares of Common Stock
that
are permitted to be so registered, pro rata, in accordance with
the total number of Pari Passu Registrable Securities held by each such
holder, as a percentage of the aggregate shares held by all such holders.
However, neither the Company nor any of its other security holders (other
than the Pari Passu Registration Rights Holders) may include securities of
the
Company in the Initial Registration Statement or any Additional Registration
Statements, and the Company shall not after the date hereof enter into any
agreement providing such right to any of its security holders (except to the
Private Offering Investors), unless the right so granted is subject in all
respects to the prior rights in full of the Pari Passu Registration Rights
Holders set forth herein, and is not otherwise in conflict with such
rights.
3. Registration
Procedures. In connection
with the Company’s registration obligations hereunder, and during the
Effectiveness Period, the Company shall:
(a) Not
less than five (5) business days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto,
the
Company shall furnish to Holders, a draft of the Registration Statement, or
any
related Prospectus or any amendment or supplement thereto.
(b) (i)
Prepare and file with the Commission such amendments, including post-effective
amendments, to the Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement continuously
effective as to the applicable Registrable Securities for the Effectiveness
Period; (ii) cause the related Prospectus to be amended or supplemented by
any
required Prospectus supplement, and as so supplemented or amended to be filed
pursuant to Rule 424; and (iii) respond to any comments received from the
Commission with respect to the Registration Statement or any amendment
thereto.
(c) Notify
as promptly as reasonably possible, but no later than three (3) business days,
each Holder of Registrable Securities included in the Registration Statement:
(i) (A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement has been filed; (B) when the Commission
notifies the Company whether there will be a “review” of the Registration
Statement and whenever the Commission comments in writing on the Registration
Statement; and (C) when the Registration Statement or any post-effective
amendment has become effective; (ii) of any request by the Commission or any
other Federal or state governmental authority during the period of effectiveness
of the Registration Statement for amendments or supplements to the Registration
Statement or Prospectus or for additional information;
(iii) of the issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or
the
initiation of any Proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale
in
any jurisdiction, or the initiation of any Proceeding for such purpose; and
(v)
of the occurrence of any event or passage of time that makes the financial
statements included in the Registration Statement ineligible for inclusion
therein or any statement made in the Registration Statement or Prospectus or
any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires any revisions to the Registration
Statement, Prospectus or other documents so that, in the case of the
Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.
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(d) Use
its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
of (i) any order suspending the effectiveness of the Registration Statement,
or
(ii) any suspension of the qualification (or exemption from qualification)
of
any of the Registrable Securities for sale in any jurisdiction, at the earliest
practicable moment.
(e) Promptly
deliver to each Holder no later than three (3) business days after the
Effectiveness Date, without charge, two (2) copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto (and, upon the request of the Holder such additional copies
as such Persons may reasonably request in connection with resales by the Holder
of Registrable Securities). The Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by the Holder in connection
with the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto, except after the giving
of
any notice pursuant to Section 3.
(f) Prior
to any resale of Registrable Securities by a Holder, use its best efforts to
register or qualify or cooperate with the selling Holders in connection with
the
registration or qualification (or exemption from the registration or
qualification) of such Registrable Securities for the resale by the Holder
under
the securities or Blue Sky laws of such jurisdictions within the United States
as any Holder reasonably requests in writing, to keep such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things reasonably necessary to enable the
disposition in such jurisdictions of the Registrable Securities covered by
the
Registration Statement; provided, however,
that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified, subject the Company to any
material tax in any such jurisdiction where it is not then so subject or file
a
general consent to service of process in any such jurisdiction.
(g) Upon
the occurrence of any event contemplated by Section 3(c)(v),
as promptly as
reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to
the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an 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 under which they were made, not
misleading.
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(h) Use
its best efforts to comply with all applicable rules and regulations of the
Commission relating to the registration of the Registrable Securities pursuant
to the Registration Statement or otherwise.
(i) The
Company agrees that the Selling Shareholder Questionnaire attached hereto as
Exhibit
A
satisfies
all of the information required to be provided by each Holder in connection
with
the Registration Statement. The Company shall not be required to
include any Holder that does not complete, date and execute a Selling
Shareholder Questionnaire.
(j) The
Company shall either (a) cause all the Registrable Securities covered by a
Registration Statement to be listed on each 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 (b) secure designation and quotation of all the
Registrable Securities covered by the Registration Statement on the Nasdaq
National Market or the Nasdaq SmallCap Market, or, (c) if the Company is
unsuccessful in satisfying the preceding clauses (a) or (b), the Company
shall secure the inclusion for quotation all the Registrable Securities covered
by the Registration Statement on The American Stock Exchange, Inc. or if it
is unable to do so, on the NASD Bulletin Board and, without limiting the
generality of the foregoing, to arrange for at least two (2) market makers
to
register with the National Association of Securities Dealers, Inc. (“NASD”)
as such
with respect to such Registrable Securities. The Company shall pay all fees
and
expenses in connection with satisfying its obligation under this Section 3(j).
(k) The
Company covenants that it shall file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder so long as the Holder owns any Registrable
Securitiess; provided, however,
the Company
may delay any such filing but only pursuant to Rule 12b-25 under the
Exchange Act, and the Company shall take such further reasonable action as
the
Holder may reasonably request (including, without limitation, promptly obtaining
any required legal opinions from Company counsel necessary to effect the sale
of
Registrable Securities under Rule 144 and paying the related fees and
expenses of such counsel), all to the extent required from time to time to
enable such Holder to sell Registrable Securities without registration under
the
Securities Act within the limitation of the exemptions provided by
(a) Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any Holder of Registrable
Securities, the Company will deliver to such Holder a written statement as
to
whether it has complied with such requirements.
4. Registration
Expenses. All
fees and
expenses incident to the performance of or compliance with this Agreement by
the
Company shall be borne by the Company whether or not any Registrable Securities
are sold pursuant to the Registration Statement, other than fees and expenses
of
counsel or any other advisor retained by the Holders and discounts and
commissions with respect to the sale of any Registrable Securities by the
Holders. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required
to be
made with the Trading Market on which the Common Stock is then listed for
trading, and (B) in compliance with applicable state securities or Blue Sky
laws), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses
if
the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities
Act liability insurance, if the Company so desires such insurance, (vi) fees
and
disbursements in the amount of $20,000 to counsel to the Investor, Sadis &
Xxxxxxxx LLP; and (vii) fees and expenses of all other Persons retained by
the
Company in connection with the consummation of the transactions contemplated
by
this Agreement.
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5. Indemnification.
(a) Indemnification
by the
Company. The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless the Holder, the officers, directors,
agents and employees of it, each Person who controls the Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law, from
and
against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys’ fees) and expenses (including the cost
(including without limitation, reasonable attorneys’ fees) and expenses relating
to an Indemnified Party’s actions to enforce the provisions of this Section 5)
(collectively, “Losses”),
as
incurred, to the extent arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in the Registration Statement,
any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein
or
necessary to make the statements therein (in the case of any Prospectus or
form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (1) such untrue statements or omissions are based solely upon information
regarding such Holder furnished (or in the case of an omission, not furnished)
in writing to the Company by or on behalf of such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use
in
the Registration Statement, such Prospectus or such form of Prospectus or in
any
amendment or supplement thereto (it being understood that the Holder has
approved Annex A hereto for this purpose), (2) in the case of an occurrence
of an event of the type specified in Section 3(c)(ii)-(v),
the use by such Holder of an outdated or defective Prospectus after the Company
has notified such Holder in writing that the Prospectus is outdated or defective
and prior to the receipt by such Holder of notice that such event is no longer
applicable, or (3) the failure of the Holder to deliver a prospectus prior
to
the confirmation of a sale. The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which
the
Company is aware in connection with the transactions contemplated by this
Agreement.
(b) Indemnification
by
Holder. The Holder shall indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from
and
against all Losses, as incurred, to the extent arising out of or based upon:
(x)
the Holder’s failure to comply with the prospectus delivery requirements of the
Securities Act or (y) any untrue or alleged untrue statement of a material
fact
contained in any Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission
of
a material fact required to be stated therein or necessary to make the
statements
therein not misleading (i) to the extent, but only to the extent, that such
untrue statement or omission is contained in any information so furnished (or
in
the case of an omission, not furnished) in writing by or on behalf of such
Holder to the Company specifically for inclusion in the Registration Statement
or such Prospectus or (ii) to the extent that (1) such untrue statements or
omissions are based solely upon information regarding such Holder furnished
(or
in the case of an omission, not furnished) in writing to the Company by or
on
behalf of such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto, or (2) in the case of
an
occurrence of an event of the type specified in Section 3(c)(ii)-(v),
the use by such Holder of an outdated or defective Prospectus after the Company
has notified such Holder in writing that the Prospectus is outdated or defective
and prior to the receipt by such Holder of notice that such event is no longer
applicable, or (3) the failure of the Holder to deliver a Prospectus prior
to
the confirmation of a sale. In no event shall the liability of any selling
Holder hereunder be greater in amount than the dollar amount of the subscription
amount paid by the Holder in the SPA (or other purchase agreement to which
the
Holder acquired securities convertible or exercisable into the Registrable
Securities).
(c) Conduct
of Indemnification
Proceedings. If any Proceeding shall be brought or asserted against any
Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the “Indemnifying
Party”) in writing, and the Indemnifying Party shall have the
right to assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees
and
expenses incurred in connection with defense thereof; provided that the
failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that such failure shall have materially
prejudiced the Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to
such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified
Party
and the Indemnifying Party, and such Indemnified Party shall have been
advised by counsel that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party
(in
which case, if such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense
thereof and the reasonable fees and expenses of one separate counsel for all
Indemnified Parties in any matters related on a factual basis shall be at the
expense of the Indemnifying Party). The Indemnifying Party shall not be liable
for any settlement of any such Proceeding affected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter
of
such Proceeding.
9
All
reasonable fees and expenses of the Indemnified Party (including reasonable
fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
Trading Days of written notice thereof to the Indemnifying Party; provided that the
Indemnified Party shall promptly reimburse the Indemnifying Party for that
portion of such fees and expenses applicable to such actions for which such
Indemnified Party is not entitled to indemnification hereunder, determined
based
upon the relative faults of the parties.
(d) Contribution.
If a
claim for indemnification under Section 5(a) or
Section
5(b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as
a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission
of a
material fact, has been taken or made by, or relates to information supplied
by,
such Indemnifying Party or Indemnified Party, and the parties’’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 5(c),
any reasonable attorneys’ or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have
been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its
terms.
(e) Rule
144. As long as any Holder owns any Notes, Warrants or
Registrable Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period)
all
reports required to be filed by the Company after the date hereof pursuant
to
Section 13(a) or 15(d) of the Exchange Act. As long as any Holder
owns any Notes, Warrants or Registrable Securities, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of the Exchange
Act,
it will prepare and furnish to the Holders and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and analysis of
such
financial statements in form and substance substantially similar to those that
would otherwise be required to be included in reports required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been
made
under the Exchange Act. The Company further covenants that it will
take such further action as any Holder may reasonably request, all to the extent
required from time to time to enable such person to sell Conversion Shares
and
Warrant Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act, including providing any legal opinions relating to such sale
pursuant to Rule 144, if such person is deemed by the Company’s counsel to be in
compliance with the rules and regulations set forth in Rule 144. Upon
the request of any Holder, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
10
6. Miscellaneous.
(a) Compliance.
The
Holder covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement.
(b) Amendments and
Waivers. The provisions of this Agreement, including the provisions of
this sentence, may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless
the
same shall be in writing and signed by the Company and each Holder of the then
outstanding Registrable Securities. No consideration shall be offered
or paid to any Holders of the Registrable Securities to amend or consent to
a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents or Holders of the Registrable Securities, as the case
may
be. The Company has not, directly or indirectly, made any agreements
with any Investors relating to the terms or conditions of the transactions
contemplated by the Transaction Documents except as set forth in the Transaction
Documents. Without limiting the foregoing, the Company confirms that,
except as set forth in this Agreement, no Purchaser has made any commitment
or
promise or has any other obligation to provide any financing to the Company
or
otherwise.
(c) Notices.
Any and all
notices or other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the Trading Day following the date of delivery to the
courier service, if sent by nationally recognized overnight courier service,
(ii) the third Trading Day following the date of mailing, if sent by
first-class, registered or certified mail, postage prepaid, (iii) the Trading
Day following transmission by electronic mail with receipt confirmed or
acknowledged, or (iv) upon actual receipt by the party to whom such notice
is
required to be given. The address for such notices and communications
shall be delivered and addressed as set forth in the SPA (or other purchase
agreement to which the Holder acquired securities convertible or exercisable
into the Registrable Securities) or to such other address as shall be designated
in writing from time to time by a party hereto.
(d) Successors
and Assigns.
This
Agreement shall inure to the benefit of and be binding upon the successors
and
permitted assigns of each of the parties and shall inure to the benefit of
the
Holder.
(e) Execution
and
Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement.
In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or
on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(f) Governing
Law. This
Agreement shall be governed by and construed exclusively in accordance with
the
internal laws of the State of New York without regard to the conflicts of laws
principles thereof. The parties hereto hereby irrevocably agree that any suit
or
proceeding arising directly and/or indirectly pursuant to or under this
Agreement, shall be brought solely in a federal or state court located in the
City, County and State of New York. By its execution hereof, the parties hereby
covenant and irrevocably submit to the in personam jurisdiction
of the federal and state courts located in the City, County and State of New
York and agree that any process in any such
action may be served upon any of them personally, or by certified mail or
registered mail upon them or their agent, return receipt requested, with the
same full force and effect as if personally served upon them in New York City.
The parties hereto waive any claim that any such jurisdiction is not a
convenient forum for any such suit or proceeding and any defense or lack of
in personam
jurisdiction with respect thereto. In the event of any such action or
proceeding, the party prevailing therein shall be entitled to payment from
the
other party hereto of its reasonable counsel fees and
disbursements.
11
(g) Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be
hereafter declared invalid, illegal, void or unenforceable.
(h) Headings.
The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
(i) Independent
Nature of
Investors. The Company acknowledges that the obligations of each Investor
under the Transaction Documents are several and not joint with the obligations
of any other Investor, and no Investor shall be responsible in any way for
the
performance of the obligations of any other Investor under the Transaction
Documents. The Company acknowledges that the decision of each Investor to
purchase securities pursuant to the SPA (or other purchase agreement to which
the Holder acquired securities convertible or exercisable into the Registrable
Securities) has been made by such Investor independently of any other Investor
and independently of any information, materials, statements or opinions as
to
the business, affairs, operations, assets, properties, liabilities, results
of
operations, condition (financial or otherwise) or prospects of the Company
or of
its subsidiaries which may have made or given by any other Investor or by any
agent or employee of any other Investor, and no Investor or any of its agents
or
employees shall have any liability to any Investor (or any other person)
relating to or arising from any such information, materials, statements or
opinions. The Company acknowledges that nothing contained herein, or in any
Transaction Document, and no action taken by any Investor pursuant hereto or
thereto (including, but not limited to, the (i) inclusion of a Investor in
a
Registration Statement and (ii) review by, and consent to, such Registration
Statement by a Investor) shall be deemed to constitute the Investors as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Investors are in any way acting in concert or
as a
group with respect to such obligations or the transactions contemplated by
the
Transaction Documents. The Company acknowledges that each Investor shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Investor
to
be joined as an additional party in any proceeding for such purpose. The Company
acknowledges that for reasons of administrative convenience only, the
Transaction Documents have been prepared by counsel for one of the Investors
and
such counsel does not represent all of the Investors. The Company acknowledges
that it has elected to provide all Investors with the same terms and Transaction
Documents for the convenience of the Company and not because it was required
or
requested
to do so by the Investors. The Company acknowledges that such procedure with
respect to the Transaction Documents in no way creates a presumption that the
Investors are in any way acting in concert or as a group with respect to the
Transaction Documents or the transactions contemplated hereby or
thereby.
(j) This
Agreement Supersedes
All Prior Agreements Between Parties. Each of the Company and
the Investor agree that this Agreement supersedes in its entirety all of the
terms and provisions of any prior agreements between such parties concerning
the
registration rights and the like pertaining to the Underlying
Shares. Each of the Company and Mastodon agree that this Agreement
supersedes in its entirety all of the terms and provisions of any prior
agreements between such parties concerning the registration rights and the
like
pertaining to the shares of Common Stock underlying any securities currently
held by Mastodon.
[Remainder
of page intentionally
left blank]
12
IN
WITNESS WHEREOF, the
parties have executed this Registration Rights Agreement as of the date first
written above.
By:
/s/
Xxxxxx
Xxxxxx
Name: Xxxxxx
Xxxxxx
Title: President
|
|
Other
Signature Pages
Follow
|
13
OTHER
SIGNATURE PAGES TO
REGISTRATION RIGHTS AGREEMENT
|
Sands
Brothers Venture Capital
III LLC
By: /s/
Xxxxx
Xxxxx
Name:
Xxxxx
Xxxxx
Title:
COO
Address: 00
Xxxx Xxx. 00xx Xx, Xxx Xxxx, XX
00000
Facsimile
Number: 000-000-0000
|
14
ANNEX
A
Plan
of
Distribution
The
Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which
the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker/dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker/dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker/dealer as principal and resale by the broker/dealer for
its
account;
|
|
·
|
an
exchange distribution in accordance with the Rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
settlement
of short sales;
|
|
·
|
broker/dealers
may agree with the Selling Stockholders to sell a specified number
of such
shares at a stipulated price per share;
|
|
·
|
a
combination of any such methods of sale; and
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker/dealers
engaged by the Selling Stockholders may arrange for other brokers/dealers to
participate in sales. Broker/dealers may receive commissions from the Selling
Stockholders (or, if any broker/dealer acts as agent for the purchaser of
shares, from the purchaser) in amounts to be negotiated. The Selling
Stockholders do not expect these commissions to exceed what is customary in
the
types of transactions involved.
The
Selling Stockholders may from time to time pledge or grant a security interest
in some or all of the shares of common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock from time to time under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act of 1933 amending the list
of
Selling Stockholders to include the pledgee, transferee or other successors
in
interest as Selling Stockholders under this prospectus.
The
Selling Stockholders and any broker/dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker/dealers or agents
and any profit on the resale of the shares purchased by them may be deemed
to be
underwriting commissions under the Securities Act. The Selling Stockholders
have
informed the Company that it does not have any agreement or understanding,
directly or indirectly, with any person to distribute the Common
Stock.
The
Company is required to pay all fees and expenses incident to the registration
of
the shares. The Company has agreed to indemnify the Selling Stockholders against
certain losses, claims, damages and liabilities, including liabilities under
the
Securities Act.
15
EXHIBIT
A
SELLING
STOCKHOLDER
QUESTIONNAIRE
000
Xxxxx
Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxxx 00000
Ladies
and Gentlemen:
I
acknowledge that I am a holder of securities of XA, Inc. (the “Company”). I
understand that I will be named as a selling stockholder in the prospectus
that
forms a part of the registration statement on Form S-1 (or other applicable
form) that the Company will file with the Securities and Exchange Commission
to
register under the Securities Act of 1933, as amended, the securities I expect
to sell. The Company will use the information that I provide in this
Questionnaire to ensure the accuracy of the registration statement and the
prospectus.
|
Please
answer every
question.
If
the answer to any question
is “none”
or “not applicable,”
please so
state.
|
1.
Name. Type
or print your name exactly as it should appear in the Registration
Statement.
______________________________________________
2.
Manner
of
Ownership of Shares:
Individual
_______ Community Property
________ Tenants in Common _______
Joint
Tenants with Rights
of Survivorship ________ Corporate
________
Partnership
______ Trust
________ Other
___________________________
3.
Contact
Information. Provide
the address,
telephone number and fax number where you can be reached during business
hours.
Address:
Phone:
Fax:
4.
Relationship
with the
Company. Describe
the nature of
any position, office or other material relationship you have had with the
Company during the past three years.
5.
Organizational
Structure. Please
indicate
or (if applicable) describe how you are organized.
16
|
(a)
Are you a natural person?
(if
so, please xxxx the box and skip to
Question 5)
|
[
]Yes [ ]No
|
|
(b)
Are you a reporting company under the 1934 Act?
(if
so, please xxxx the box and skip to
Question 5)
|
[
]Yes [ ]No
|
|
(c)
Are you a majority-owned
subsidiary of a reporting company under the 1934 Act?
(if
so, please xxxx the box and skip to
Question 5)
|
[
]Yes [ ]No
|
|
(d)
Are you a registered investment fund under the 1940 Act?
(if
so, please xxxx the box and skip to
Question 5)
|
[
]Yes [ ]No
|
If
you
have answered ““no”” to all of the foregoing questions, please describe: (i) the
exact legal description of your entity (e.g., corporation, partnership, limited
liability company, etc.); (ii) whether the legal entity so described is managed
by another entity and the exact legal description of such entity (repeat this
step until the last entity described is managed by a person or persons, each
of
whom is described in any one of (a) through (d) above), (iii) the names of
each
person or persons having voting and investment control over the Company’’s
securities that the entity owns (e.g., director(s), general partner(s), managing
member(s), etc.).
Legal
Description of
Entity:
Name
of Entity(ies) Managing Such
Entity (if
any):
Name
of Entity(ies) Managing such
Entity(ies) (if
any):
· Name(s)
of Natural Persons Having Voting or Investment
Control
Over the Shares Held by such
Entity(ies):
6.
Ownership
of the Company’s
Securities. This question covers your beneficial
ownership of the Company’s securities. Please consult the Appendix A to this
Questionnaire for information as to the meaning of “beneficial
ownership.” State the number of shares of the Company’s common stock
that you beneficially owned as of the date this Questionnaire is
signed:
|
No.
of Shares of
Stock
|
7.
Acquisition
of
Shares. Please
describe
below the manner in which you acquired your shares of Common Stock of the
Company including, but not limited to, the date, the name and address of
the
seller(s), the purchase price and pursuant to which documents (the “Acquisition
Documents”). Please forward such documents used to
acquire your shares as provided below.
8.
Plan
of
Distribution. I have reviewed the proposed “Plan of
Distribution” attached to this Registration Rights Agreement as Annex
A, and
agree that the statements contained therein reflect my intended method(s)
of
distribution or, to the extent these statements are inaccurate or incomplete,
I
have communicated in writing to one of the parties listed above my signature
to
any changes to the proposed “Plan of Distribution” that are required to make
these statements accurate and complete. ¨(Please
check the box if you have
made any changes to Appendix B)
17
9.
Reliance
on
Responses. I acknowledge and agree that the Company and its legal
counsel shall be entitled to rely on my responses in this Questionnaire in
all
matters pertaining to the registration statement and the sale of any shares
of
common stock of the Company pursuant to the registration
statement.
10.
NASD. The
National Association of Securities Dealers, Inc. (“NASD”)
may
request, in connection with their review of the Registration Statement and
Prospectus under the Securities Act of 1933, as amended, that the Company
inform
them of the names of all persons who purchased securities from the Company,
together with any affiliations with the NASD of such purchasers. In order
to aid
the Company in responding to such request, the undersigned furnishes the
following information:
PART
A: DETERMINATION OF RESTRICTED
PERSON STATUS:
Please
check all appropriate
categories.
The
undersigned is:
___ (i) a
broker-dealer;
___
(ii)
an
officer, director, general partner, associated person1
or employee of a broker-dealer (other than a
limited business broker-dealer)2;
___
(iii)
an
agent
of a broker-dealer (other than a limited business broker-dealer) that is
engaged
in the investment banking or securities business;
___
(iv)an
immediate family member3
of a person described in (ii) or (iii) above.
Under certain circumstances, if the undersigned checks this category, he/she/it
may be able to participate in New Issue investments. The Company may
request additional information in order to determine the eligibility of the undersigned
under
this Restricted Person category;
___
(v) a
finder
or any person acting in a fiduciary capacity to a managing underwriter,
including, but not limited to, attorneys, accountants and financial
consultants;
___
(vi) a
person
who has authority to buy or sell securities for a bank, savings and loan
institution, insurance company, investment company, investment advisor or
collective investment account4
(including a private investment vehicle such
as a hedge fund or an offshore fund);
___
(vii)an
immediate family member of a person described in (v) or (vi) above who materially
supports5,
or receives material support from, the
undersigned;
2
A limited
business broker-dealer is any broker-dealer whose authorization to engage
in the
securities business is limited solely to the purchase and sale of investment
company/variable contracts securities and direct participation program
securities.
3 The
term "Immediate family" includes the investor’s: (i) parents, (ii) mother-in-law
or father-in-law. (iii) husband or wife, (iv) brother or sister, (v)
brother-in-law or sister-in-law, (vi) son-in-law or daughter-in-law, (vii)
children, and (viii) any other person who is supported, directly or indirectly,
to a material extent by an officer, director, general partner, employee,
agent
of a broker-dealer or person associated with a broker-dealer.
4 A
"collective investment account" is any hedge fund, investment corporation,
or
any other collective investment vehicle that is engaged primarily in the
purchase and/or sale of securities. investment clubs (groups of individuals
who
pool their money to invest in stock or other securities and who are collectively
responsible for making investment decisions) and family investment vehicles
(legal entities that are beneficially owned solely by immediate family members
(as defined above)) are not considered
collective investment accounts.
18
___
(viii)a
person
listed or required to be listed in Schedule A, B or C of a Form BD (other
than
with respect to a limited business broker-dealer), except persons whose listing
on Schedule A, B or C is related to a person identified by an ownership code
of
less than 10% on Schedule A;
___
(ix)a
person
that (A) directly or indirectly owns 10% or more of a public reporting company
listed, or required to be listed, in Schedule A of a Form BD or (B) directly
or
indirectly owns 25% or more of a public reporting company listed, or required
to
be listed in Schedule B of a Form BD, in each case (A) or (B), other than
a
reporting company that is listed on a national securities exchange or is
traded
on the Nasdaq National Market, or other than with respect to a limited business
broker/dealer;
___
(x)an
immediate family member of a person described in (viii) or (ix)
above. Under certain circumstances, if the undersigned places a check
next to this category, he/she/it may be able to participate in New
Issue investments. The Company may request additional information in
order to determine the eligibility of the undersigned under this Restricted
Person category;
___
(xi)any
entity (including a corporation, partnership, limited liability company,
trust
or other entity) in which any person or persons listed in (i)-(x) above has
a
beneficial interest6;
or
___None
of
the above categories apply and the undersigned is eligible to participate
in New
Issue securities.
PART
B: DETERMINATION OF
EXEMPTED ENTITY STATUS:
The
undersigned is:
____
(i) a
publicly-traded entity (other than a broker-dealer or an affiliate of a
broker-dealer, where such broker-dealer is authorized to engage in the public
offering of New Issues either as a selling group member or underwriter) that
is
listed on a national securities exchange or traded on the Nasdaq National
Market
or is a foreign issuer whose securities meet the quantitative designation
criteria for listing on a national securities exchange or trading on the
Nasdaq
National Market;
____
(ii)an
investment company registered under the Investment Company Act of 1940, as
amended;
____
(iii)a
corporation, partnership, limited liability company, trust or any other entity
(including a private investment vehicle such as a hedge fund or an offshore
fund, or a broker-dealer organized as an investment partnership)
and
|
|
(A)
|
the
beneficial interests of Restricted Persons do not exceed in the aggregate
10% of such entity; or
|
|
|
(B)
|
such
entity limits participation by Restricted Persons to not more than
10% of
the profits and losses of New
Issues;
|
____ (iv)
an
investment company organized under the laws of a foreign jurisdiction
and
5 The
term “material” support” means directly or indirectly providing more than 25% of
a person’s income in the prior calendar year or living in the same household
with a member of one’s Immediate family.
6The
term
‘beneficial interest” means any economic interest such as the right to share in
gains or losses. The receipt of a management or performance based fee for
operating a collective investment account, or other fee for acting in a
fiduciary capacity, is not considered
a
beneficial interest in the account; however, if such fee is subsequently
invested into the account (as a deferred fee arrangement or otherwise), it
is
considered a beneficial interest in that account.
19
(A) the
investment company is listed on a foreign exchange or authorized for sale to
the
public by a foreign regulatory authority; and
(B) no
person owning more than 5% of the shares of the investment company is a
Restricted Person;
____
(v)
(A)an
employee benefits plan under the U.S. Employee Retirement Income Security
Act of
1974, as amended, that is qualified under Section 401(a) of the Internal
Revenue
Code of 1986, as amended (the “Code”)
and
such plan is not sponsored solely by a broker-dealer, (B) a state or municipal
government benefits plan that is subject to state and/or municipal regulation
or
(C) a church plan under Section 414(e) of the Code;
____(vi)
a tax exempt charitable organization under Section 501(3) of the
Code;
____(vii)a
common
trust fund or similar fund as described in Section 3(a)(12)(A)(iii) of the
Securities Exchange Act of 1934, as amended, and the Company
(A) has
investments from 1,000 or more accounts, and
(B) does
not limit beneficial interests in the Company principally to trust accounts
of
Restricted Persons; or
____
(viii) an insurance company general, separate or investment account,
and
(A) the
account is funded by premiums from 1,000 or more policyholders, or, if a general
account, the insurance company has 1,000 or more policyholders, and
(B)
the
insurance company does not limit the policyholders whose premiums are used
to
fund the account principally to Restricted Persons, or, if a general account,
the insurance company does not limit its policyholders principally to Restricted
Persons.
Please
acknowledge that your answers to the foregoing questions are true and correct
to
the best of your information and belief by signing and dating this Questionnaire
where indicated below. Please return the completed executed
questionnaire via
fax to The
Loev Law Firm, PC at (713)
524-4122as
soon as
possible.
If
at any
time you discover that your answer to any question was inaccurate, or if any
event occurring after your completion hereof would require a change in your
answer to any questions, please immediately contact The Loev Law Firm, PC at
(000) 000-0000.
Date:
,
2007
(Print
name of selling
stockholder)
By:
(Signature)
Name:
(Print
name)
Title:
20
APPENDIX
A
|
1.
|
Definition
of “Beneficial
Ownership”
|
|
|
(a)
|
A
“Beneficial Owner” of a security includes any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship
or otherwise has or shares:
|
|
|
(1)
|
Voting
power which includes the power to vote, or to direct the voting of,
such
security; and/or
|
|
|
(2)
|
Investment
power which includes the power to dispose, or direct the disposition
of,
such security.
|
Please
note that either voting power
or investment
power, or both,
is sufficient for you to be considered the beneficial owner of
shares.
|
|
(b)
|
Any
person who, directly or indirectly, creates or uses a trust, proxy,
power
of attorney, pooling arrangement or any other contract, arrangement
or
device with the purpose or effect of divesting such person of beneficial
ownership of a security or preventing the vesting of such beneficial
ownership as part of a plan or scheme to evade the reporting requirements
of the federal securities acts shall be deemed to be the beneficial
owner
of such security.
|
|
(c)
|
Notwithstanding
the provisions of paragraph (a), a person is deemed to be the “beneficial
owner” of a security, if that person has the right to acquire beneficial
ownership of such security within 60 days, including but not limited
to
any right to acquire: (A) through the exercise of any
option, warrant or right; (B) through the conversion of a security;
(C) pursuant to the power to revoke a trust, discretionary account or
similar arrangement; or (D) pursuant to the automatic termination of
a trust, discretionary account or similar arrangement; provided,
however,
any person who acquires a security or power specified in paragraphs
(A),
(B) or (C) above, with the purpose or effect of changing or influencing
the control of the issuer, or in connection with or as a participant
in
any transaction having such purpose or effect, immediately upon such
acquisition shall be deemed to be the beneficial owner of the securities
which may be acquired through the exercise or conversion of such
security
or power.
|
21
