INVESTOR REGISTRATION RIGHTS AGREEMENT
EHIBIT 9.2
THIS
REGISTRATION RIGHTS AGREEMENT
(this
“Agreement”),
dated
as of January 23, 2007, by and among SMARTIRE
SYSTEMS, INC.,
a
corporation organized and existing under the laws of British Columbia (the
“Company”),
and
the undersigned investors listed on Schedule I attached hereto (each, an
“Investor”
and
collectively, the “Investors”).
WHEREAS:
A. In
connection with the securities purchase agreement (the “Securities
Purchase Agreement”)
by and
among the parties hereto of even date herewith , the Company has agreed,
upon
the terms and subject to the conditions of the Securities Purchase Agreement,
to
issue and sell to the Investors secured convertible debentures (the
“Convertible
Debentures”)
which
shall be convertible into that number of shares (the “Conversion
Shares”)
of the
Company’s common stock, no par value per share (the “Common
Stock”),
pursuant to the terms of the Securities Purchase Agreement for an aggregate
purchase price of up to One Million Eight Hundred Thousand Dollars ($1,800,000).
Capitalized terms not defined herein shall have the meaning ascribed to them
in
the Securities Purchase Agreement.
B. To
induce
the 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 there under, or any similar successor
statute (collectively, the “Securities
Act”),
and
applicable state securities laws.
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 Investors hereby agree as
follows:
1. DEFINITIONS.
As
used
in this Agreement, the following terms shall have the following
meanings:
(a) “Person”
means
a
corporation, a limited liability company, an association, a partnership,
an
organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
(b) “Register,”
“registered,”
and
“registration”
refer
to a registration effected by preparing and filing one or more Registration
Statements (as defined below) 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 or delayed basis (“Rule
415”),
and
the declaration or ordering of effectiveness of such Registration Statement(s)
by the United States Securities and Exchange Commission (the “SEC”).
(c) “Registrable
Securities”
means
(i) 300% of the number of Conversion Shares issuable to the Investors upon
conversion in full (without taking into account any conversion limitations)
of
the Convertible Debentures which have been issued pursuant to the Securities
Purchase Agreement and remain outstanding, and (ii) all Conversion Shares
issued
to the Investors.
(d) “Registration
Statement”
means
a
registration statement under the Securities Act which covers the Registrable
Securities.
2. REGISTRATION.
(a) Subject
to the terms and conditions of this Agreement, the Company shall prepare
and
file, within thirty (30) days of demand by the Investors, but no sooner than
one
hundred eighty (180) days from the date hereof (the “Scheduled
Filing Deadline”)
and
provided that at least 30 days have passed since any registration statement
of
the Company’s being declared effective by the SEC, with the SEC a registration
statement on Form S-1 or SB-2 (or, if the Company is then eligible, on Form
S-3)
under the Securities Act (the “Initial
Registration Statement”)
for
the resale by the Investors of the Registrable Securities, which includes
all
the Registrable Securities as of the date immediately prior to such filing.
The
Company shall cause the Registration Statement to remain effective until
all of
the Registrable Securities have been sold. Prior to the filing of the
Registration Statement with the SEC, the Company shall furnish a copy of
the
Initial Registration Statement to the Investors for their review and comment.
The Investors shall furnish comments on the Initial Registration Statement
in
confidence to the Company within twenty-four (24) hours of the receipt thereof
from the Company.
(b) Effectiveness
of the Initial Registration Statement.
The
Company shall use its best efforts (i) to have the Initial Registration
Statement declared effective by the SEC no later than ninety (90) days from
the
date filed (the “Scheduled
Effective Deadline”)
and
(ii) to ensure that the Initial Registration Statement and any subsequent
Registration Statement remains in effect until all of the Registrable Securities
have been sold or are eligible for resale under Rule 144 (as that term is
defined in section 7 herein), subject to the terms and conditions of this
Agreement.
(c) Failure
to File or Obtain Effectiveness of the Registration Statement.
In the
event the Registration Statement is not filed by the Scheduled Filing Deadline
or is not declared effective by the SEC on or before the Scheduled Effective
Date, as the direct result of the Company’s failure to use its best efforts
under Section 2(b) above, or if after the Registration Statement has been
declared effective by the SEC, sales cannot be made pursuant to the Registration
Statement as the direct result of the Company’s failure to use its best efforts
under Section 2(b) above (whether because of a failure to keep the Registration
Statement effective, failure to disclose such information as is necessary
for
sales to be made pursuant to the Registration Statement or failure to register
the Registrable Securities) then as partial relief for the damages to any
holder
of Registrable Securities by reason of any such delay in or reduction of
its
ability to sell the underlying shares of Common Stock (which remedy shall
not be
exclusive of any other remedies at law or in equity), the Company will pay
as
liquidated damages (the “Liquidated
Damages”)
to the
holder, at the holder’s option, either a cash amount or shares of the Company’s
Common Stock within three (3) business days, after demand therefore, equal
to
two percent (2%) of the liquidated value of the Convertible Debentures held
by
the holder outstanding as Liquidated Damages for each thirty (30) day period
after the Scheduled Filing Deadline or the Scheduled Effective Date as the
case
may be. Notwithstanding anything herein to the contrary, in no event shall
Liquidated Damages exceed twenty percent (20%) of the aggregate Purchase
Price
for all Investors.
(d) Liquidated
Damages.
The
Company and the Investor hereto acknowledge and agree that the sums payable
under subsection 2(c) above shall constitute liquidated damages and not
penalties and are in addition to all other rights of the Investor, including
the
right to call a default. The parties further acknowledge that (i) the amount
of
loss or damages likely to be incurred is incapable or is difficult to precisely
estimate, (ii) the amounts specified in such subsections bear a reasonable
relationship to, and are not plainly or grossly disproportionate to, the
probable loss likely to be incurred in connection with any failure by the
Company to obtain or maintain the effectiveness of a Registration Statement,
(iii) one of the reasons for the Company and the Investor reaching an agreement
as to such amounts was the uncertainty and cost of litigation regarding the
question of actual damages, and (iv) the Company and the Investor are
sophisticated business parties and have been represented by sophisticated
and
able legal counsel and negotiated this Agreement at arm’s length.
(e) Additional
Registration Xxxxxxxxxx.Xx
the
extent that any Convertible Debentures are issued pursuant to the Securities
Purchase Agreement after the filing of the Initial Registration Statement,
the
Investors shall have the right to demand, with 30 days’ advance notice, the
Company to file additional Registration Statements to cover Registrable
Securities which are not subject to any prior Registration Statement.
3. RELATED
OBLIGATIONS.
(a) The
Company shall keep the Registration Statement effective pursuant to
Rule 415 at all times until the date on which the Investors shall have sold
all the Registrable Securities covered by such Registration Statement or
until
the Registrable Securities are eligible for resale under Rule 144(k) (the
“Registration
Period”),
which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained 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, in light of the circumstances in
which
they were made, not misleading.
(b) 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 such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the Securities Act,
as may
be necessary to keep such 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 such Registration Statement until such time as
all of
such Registrable Securities shall have been disposed of in accordance with
the
intended methods of disposition by the seller or sellers thereof as set forth
in
such Registration Statement. In the case of amendments and supplements to
a
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of the Company’s filing a
report on Form 10-KSB, Form 10-QSB or Form 8-K or any analogous report under
the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
the
Company shall incorporate such report by reference into the Registration
Statement, if applicable, or shall file such amendments or supplements with
the
SEC on the same day on which the Exchange Act report is filed which created
the
requirement for the Company to amend or supplement the Registration Statement.
(c) The
Company shall furnish to each Investor whose Registrable Securities are included
in any Registration Statement, without charge, (i) at least one (1) copy
of such
Registration Statement as declared effective by the SEC and any amendment(s)
thereto, including financial statements and schedules, all documents
incorporated therein by reference, all exhibits and each preliminary prospectus,
(ii) one (1) copy of the final prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number
of
copies as such Investor may reasonably request) and (iii) such other documents
as such Investor may reasonably request from time to time in order to facilitate
the disposition of the Registrable Securities owned by such
Investor.
(d) The
Company shall use its reasonable best efforts during the Registration Period
to
(i) register and qualify the Registrable Securities covered by a Registration
Statement under such other securities or “blue sky” laws of such jurisdictions
in the United States as any Investor 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 (w) make any change to its articles of incorporation or by-laws,
(x)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service
of
process in any such jurisdiction. The Company shall promptly notify each
Investor who holds Registrable Securities of the receipt by the Company of
any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or “blue sky”
laws of any jurisdiction in the United States or its receipt of actual notice
of
the initiation or threat of any proceeding for such purpose.
(e) As
promptly as practicable after becoming aware of such event or development,
the
Company shall notify each Investor in writing of the happening of any event
as a
result of which the prospectus included in a 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, in light of the circumstances under which they were made, not
misleading (provided that in no event shall such notice contain any material,
nonpublic information), and promptly prepare a supplement or amendment to
such
Registration Statement to correct such untrue statement or omission, and
deliver
one (1) copy of such supplement or amendment to each Investor. The Company
shall
also promptly notify each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when
a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each Investor by
facsimile on the same day of such effectiveness), (ii) of any request by
the SEC
for amendments or supplements to a Registration Statement or related prospectus
or related information, and (iii) of the Company’s reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.
(f) The
Company shall use its best efforts to prevent the issuance of any stop order
or
other suspension of effectiveness of a Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction within the United States of America and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension
at
the earliest possible moment and to notify each Investor who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
(g) The
Company shall make available for inspection by (i) any Investor and
(ii) one (1) firm of accountants or other agents retained by the Investors
(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, and cause the Company’s
officers, directors and employees to supply all information which any Inspector
may reasonably request; provided, however, that each Inspector shall agree,
and
each Investor hereby agrees, to hold in strict confidence and shall not make
any
disclosure (except to an Investor) or use 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 disclosure of
such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the Securities Act,
(b)
the release of such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent jurisdiction,
or
(c) the information in such Records has been made generally available to
the
public other than by disclosure in violation of this or any other agreement
of
which the Inspector and the Investor has knowledge. 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.
(h) 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 is necessary to comply with federal or state securities laws,
(ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release
of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available
to the
public other than by disclosure in violation of this Agreement or any other
agreement. 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
written notice to such Investor and allow such Investor, at the Investor’s
expense, to undertake appropriate action to prevent disclosure of, or to
obtain
a protective order for, such information.
(i) The
Company shall use its best efforts either to cause all the Registrable
Securities covered by a Registration Statement (i) 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 (ii) the
inclusion for quotation on the National Association of Securities Dealers,
Inc.
OTC Bulletin Board for such Registrable Securities. The Company shall pay
all
fees and expenses in connection with satisfying its obligation under this
Section 3(i).
(j) The
Company shall cooperate with the Investors who hold Registrable Securities
being
offered and, to the extent applicable, to facilitate the timely preparation
and
delivery of certificates (not bearing any restrictive legend) representing
the
Registrable Securities to be offered pursuant to a Registration Statement
and
enable such certificates to be in such denominations or amounts, as the case
may
be, as the Investors may reasonably request and registered in such names
as the
Investors may request.
(k) The
Company shall use its reasonable best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may
be
necessary to consummate the disposition of such Registrable
Securities.
(l) The
Company shall otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
(m) Within
two (2) business days after a Registration Statement which covers Registrable
Securities is declared effective by the SEC, the Company shall deliver, and
shall cause legal counsel for the Company to deliver, to the transfer agent
for
such Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that
such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit A.
(n) The
Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of Registrable Securities pursuant
to a
Registration Statement.
4. OBLIGATIONS
OF THE INVESTORS.
(a) 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 the first
sentence of 3(e), such Investor will immediately discontinue disposition
of
Registrable Securities pursuant to any Registration Statement(s) covering
such
Registrable Securities until such Investor’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or receipt
of
notice that no supplement or amendment is required. Notwithstanding anything
to
the contrary, the Company shall cause its transfer agent to deliver unlegended
certificates for shares of Common Stock to a transferee of an Investor in
accordance with the terms of the Securities Purchase Agreement in connection
with any sale of Registrable Securities with respect to which an Investor
has
entered into a contract for sale prior to the Investor’s receipt of a notice
from the Company of the happening of any event of the kind described in Section
3(f) or the first sentence of 3(e) and for which the Investor has not yet
settled. Each Investor agrees to sign and deliver to the Company, prior to
removal of any legend or the issuance of any share certificate without a
restrictive legend, an undertaking to sell the Registrable Securities only
in
accordance with the Plan of Distribution contained in the Registration
Statement.
(b) The
Investors acknowledge and agree that any material non-public information
provided to the Investors pursuant to Section 2(a), 3(e), or 3(g) of this
Agreement must be kept confidential by each Investor receiving such information
and the Investors covenant to maintain the confidentiality of any and all
such
information until the disclosure of such information or until such information
should cease to be material non-public information through no fault of the
Investor, provided, however, that notwithstanding
anything in this Agreement to the contrary, the Company agrees that
each
of the Investors may continue to (and nothing in this Agreement shall be
interpreted otherwise) engage in their normal and customary business operations,
provided that each of the Investors complies fully with all laws, regulations
and regulatory policies regarding xxxxxxx xxxxxxx applicable to the Investors.
5. EXPENSES
OF REGISTRATION.
All
expenses incurred in connection with registrations, filings or qualifications
pursuant to Sections 2 and 3, including, without limitation, all registration,
listing and qualifications fees, printers, legal and accounting fees shall
be
paid by the Company.
6. INDEMNIFICATION.
With
respect to Registrable Securities which are included in a Registration Statement
under this Agreement:
(a) To
the
fullest extent permitted by law, the Company will, and hereby does, indemnify,
hold harmless and defend each Investor, the directors, officers, partners,
employees, agents, representatives of, and each Person, if any, who controls
any
Investor within the meaning of the Securities Act or the Exchange Act (each,
an
“Indemnified
Person”),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
expenses, joint or several (collectively, “Claims”)
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by
or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto (“Indemnified
Damages”),
to
which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of
or are based upon: (i) any untrue statement or alleged untrue statement of
a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other “blue sky” laws of any jurisdiction in
which Registrable Securities are offered (“Blue
Sky Filing”),
or
the omission or alleged omission to state a material fact required to be
stated
therein or necessary to make the statements therein not misleading; (ii)
any
untrue statement or alleged untrue statement of a material fact contained
in any
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 there under
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the foregoing clauses (i) through
(iii)
being, collectively, “Violations”).
The
Company shall reimburse the Investors and each such controlling person promptly
as such expenses are incurred and are due and payable, for any legal fees
or
disbursements 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): (x) shall not apply to a Claim by an Indemnified Person 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
for use in connection with the preparation of the Registration Statement
or any
such amendment thereof or supplement thereto; (y) shall not be available
to the
extent such Claim is based on a failure of the Investor to deliver or to
cause
to be delivered the prospectus made available by the Company, if such prospectus
was timely made available by the Company pursuant to Section 3(c); and
(z) 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. 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.
(b) In
connection with a Registration Statement, each Investor agrees to severally
and
not jointly indemnify, hold harmless and defend, to the same extent and in
the
same manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers, employees, representatives, or agents and each Person,
if
any, who controls the Company within the meaning of the Securities Act or
the
Exchange Act (each an “Indemnified
Party”),
against any Claim or Indemnified Damages to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar
as
such Claim or Indemnified Damages arise 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 for use in connection with such Registration Statement;
and, subject to Section 6(d), such Investor will reimburse any legal or other
expenses 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) and the agreement with respect to contribution
contained in Section 7 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 or delayed; provided,
further, however, that the Investor shall be liable under this Section 6(b)
for
only that amount of a Claim or Indemnified Damages as does not exceed the
net
proceeds to 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. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section
6(b)
with respect to any prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
prospectus was corrected.
(c) Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section
6
of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person
or
Indemnified Party shall, if a Claim in respect thereof is to be made against
any
indemnifying party under this Section 6, deliver to the indemnifying party
a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party
so
desires, jointly with any other indemnifying party similarly noticed, to
assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as
the
case may be; provided, however, that an Indemnified Person or Indemnified
Party
shall have the right to retain its own counsel with the fees and expenses
of not
more than one (1) counsel for such Indemnified Person or Indemnified Party
to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of
the
Indemnified Person or Indemnified Party and the indemnifying party would
be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by
such
counsel in such proceeding. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to
the
Indemnified Party or Indemnified Person which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable
for any
settlement of any action, claim or proceeding effected without its prior
written
consent; provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the prior written consent of the Indemnified Party or Indemnified Person,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving
by
the claimant or plaintiff to such Indemnified Party or Indemnified Person
of a
release from all liability in respect to such claim or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter
for
which indemnification has been made. The failure to deliver written notice
to
the indemnifying party within a reasonable time of the commencement of any
such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend
such
action.
(d) The
indemnification required by this Section 6 shall be made by periodic payments
of
the amount thereof during the course of the investigation or defense, as
and
when bills are received or Indemnified Damages are incurred.
(e) The
indemnity agreements contained herein shall be in addition to (i) any cause
of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. 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 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) make
and
keep public information available, as those terms are understood and defined
in
Rule 144;
(b) file
with
the SEC in a timely manner all reports and other documents required of 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 of such reports and other documents as
are
required by the applicable provisions of Rule 144; and
(c) furnish
to each Investor so long as such Investor owns 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 pursuant to Rule 144 without registration.
8. AMENDMENT
OF REGISTRATION RIGHTS.
Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors
who
then hold at least two-thirds (2/3) of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 8 shall be binding upon
each Investor and the Company. No such amendment shall be effective to the
extent that it applies to fewer than all of the holders of the Registrable
Securities. No consideration shall be offered or paid to any Person to amend
or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.
9. MISCELLANEOUS.
(a) A
Person
is deemed to be a holder of Registrable Securities whenever such Person owns
or
is deemed to own of record such Registrable Securities or owns the right
to
receive the Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two (2) or more Persons 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, consents, waivers or other communications required or permitted
to be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending
party);
or (iii) one (1) business day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party
to
receive the same. The addresses and facsimile numbers for such communications
shall be:
|
If
to the Company, to:
|
|
|
Richmond
Corporate Centre
|
|
|
Suite
150-13151 Vanier Place
|
|
|
Richmond,
British Columbia
|
|
|
Canada
V6V 2J1
|
|
|
Attention: Xxxx
Xxxxxxxxxxx
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
|
|
|
With
Copy to:
|
Xxxxx
Xxxxxx
Xxxxx
Xxxxxx LLP
800
- 000 Xxxx Xxxxxxx Xxxxxx,
Xxxxxxxxx,
Xxxxxxx Xxxxxxxx X0X 0X0
|
|
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
|
|
If
to an
Investor, to its address and facsimile number on the Schedule of Investors
attached hereto, with copies to such Investor’s representatives as set forth on
the Schedule of Investors or to such other address and/or facsimile number
and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five (5) days prior
to the
effectiveness of such change. Written confirmation of receipt (A) given by
the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the
first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
(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) The
laws
of the State of New Jersey shall govern all issues concerning the relative
rights of the Company and the Investors as its stockholders. All other questions
concerning the construction, validity, enforcement and interpretation of
this
Agreement shall be governed by the internal laws of the State of New Jersey
and
the federal laws of the United States of America, if applicable, without
giving
effect to any choice of law or conflict of law provision or rule (whether
of the
State of New Jersey or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of New Jersey and the
federal laws of the United States of America, if applicable.
(e) Each
party hereby irrevocably submits to the non-exclusive jurisdiction of the
Superior Courts of the State of New Jersey, sitting in Xxxxxx County, New
Jersey
and federal courts for the District of New Jersey sitting Newark, New Jersey,
for the adjudication of any dispute hereunder or in connection herewith or
with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court,
that
such suit, action or proceeding is brought in an inconvenient forum or that
the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to
such
party at the address for such notices to it under this Agreement and agrees
that
such service shall constitute good and sufficient service of process and
notice
thereof. Nothing contained herein shall be deemed to limit in any way any
right
to serve process in any manner permitted by law. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
(f) This
Agreement, the Irrevocable Transfer Agent Instructions, the Securities Purchase
Agreement and related documents including the Convertible Debenture constitute
the entire agreement among the parties hereto with respect to the subject
matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein.
This
Agreement, the Irrevocable Transfer Agent Instructions, the Securities Purchase
Agreement and related documents including the Convertible Debenture, and
the
Security Agreement supersede all prior agreements and understandings among
the
parties hereto with respect to the subject matter hereof and
thereof.
(g) This
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
(h) The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
(i) This
Agreement may be executed in identical 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.
(j) 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.
The
language used in this Agreement will be deemed to be the language chosen
by the
parties to express their mutual intent and no rules of strict construction
will
be applied against any party.
(k) This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may
any
provision hereof be enforced by, any other Person.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
parties have caused this Investor Registration Rights Agreement to be duly
executed as of day and year first above written.
|
By: /s/
Xxxx Xxxxxxxxxxx
|
|
|
Name:
Xxxx Xxxxxxxxxxx
|
|
|
Title:
Chief Financial Officer
|
|
IN
WITNESS WHEREOF,
the
parties have caused this Investor Registration Rights Agreement to be duly
executed as of day and year first above written.
|
BUYER:
|
|
|
XENTENIAL
HOLDINGS LIMITED
|
|
|
By:
/s/ Xxxx Xxxxxx
|
|
|
Name:
Xxxx Xxxxxx
|
|
|
Title:
President and Portfolio Manager
|
SCHEDULE
I
SCHEDULE
OF INVESTORS
|
Investor
|
Address/Facsimile
Number
of Buyer
|
Address/Facsimile
Number
of Buyer’s Representative
|
|
Xentenial
Holdings Limited
|
Xentenial
Holdings Limited
|
000
Xxxxxx Xxxxxx - Xxxxx 0000
|
|
Athalassas,
47
|
Xxxxxx
Xxxx, XX 00000
|
|
|
2nd
Floor, Flat Office 202
|
Facsimile: (000)
000-0000
|
|
|
Xxxxxxxxx,
X.X. 0000, Xxxxxxx, Xxxxxx
|
Attention:
Xxxxx Xxxxxxxx, Esq.
|
|
|
Attention:
Xxxxx Xxxxxxx
|
||
|
Telephone:
x000-00000000
|
||
|
Facsimile:
x000-00000000
|
EXHIBIT
A
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
Attention:
|
Re:
|
Ladies
and Gentlemen:
We
are
counsel to Smartire Systems Inc., a corporation organized and existing under
the
laws of the Province of British Columbia (the “Company”),
and
have represented the Company in connection with that certain securities purchase
agreement (the “Securities
Purchase Agreement”)
entered into by and among the Company and the investors named therein
(collectively, the “Investors”)
pursuant to which the Company issued to the Investors debentures convertible
into shares of its common stock, no par value (the “Common
Stock”).
Pursuant to the Securities Purchase Agreement, the Company also has entered
into
a registration rights agreement (the “Investor
Registration Rights Agreement”)
with
the Investors pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement) under the Securities
Act of 1933,
as
amended (the “Securities
Act”).
In
connection with the Company’s obligations under the Registration Rights
Agreement, on ____________ ____, the Company filed a Registration Statement
on
Form ________ (File No. 333-_____________) (the “Registration
Statement”)
with
the Securities and Exchange Commission (the “SEC”)
relating to the Registrable Securities which names each of the Investors
as a
selling stockholder there under.
In
connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the Securities Act at _________________
(the “Time of Effectiveness”) on ______________________, 200__ and we have no
knowledge, after telephonic inquiry of a member of the SEC’s staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and the
Registrable Securities are available for resale under the Securities Act
pursuant to the Registration Statement.
Very
truly yours,
Xxxxx
Xxxxxx LLP
By:
cc: [LIST
NAMES OF INVESTORS]
