REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (this “Agreement”) is made and
entered into effective as of October 26, 2010 (the “Effective Date”) between
InVivo Therapeutics Holdings Corp. (f/k/a Design Source, Inc.), a Nevada
corporation (the “Company”), and the persons who
have executed the signature page(s) hereto (each, a “Purchaser” and collectively,
the “Purchasers”).
RECITALS:
WHEREAS,
the Company has entered into an Agreement and Plan of Merger and Reorganization
with InVivo Therapeutics Corporation, a Delaware corporation (“InVivo”), pursuant to which a
newly organized, wholly-owned subsidiary of the Company has merged with and into
InVivo, with InVivo remaining as the surviving entity and a wholly-owned
subsidiary of the Company (the “Merger”);
WHEREAS,
prior to the Merger, InVivo issued (the “Notes Offering”) Convertible
Promissory Notes (the “Bridge
Notes”) and common stock purchase warrants (“Bridge
Warrants”). Upon the closing of the Merger and the PPO (as
defined below), the Bridge Notes automatically converted into Units (as defined
below) and the Bridge Warrants automatically converted into common stock
purchase warrants (the “Exchange Warrants”) to
purchase shares of Common Stock;
WHEREAS,
simultaneously with the Merger and to provide the capital required by the
Company for working capital and other purposes, the Company has offered in
compliance with Rule 506 of Regulation D and/or Regulation S of the Securities
Act (as defined herein), to investors in a private placement transaction (the
“PPO”), units (“Units”) of its securities,
each Unit consisting of one share of Common Stock (the “Investor Shares”) and a common
stock purchase warrant (the “Investor Warrants”) to
purchase one share of Common Stock;
WHEREAS,
the initial closing of the PPO and the closing of the Merger have taken place on
the Effective Date; and
WHEREAS,
in connection with the Merger, the Notes Offering and the PPO, the Company
agrees to provide certain registration rights related to the Investor Shares and
the shares of Common Stock issuable upon exercise of the Exchange Warrants and
the Investor Warrants, on the terms set forth herein;
NOW,
THEREFORE, in consideration of the mutual promises, representations, warranties,
covenants, and conditions set forth herein, the parties mutually agree as
follows:
1. Certain
Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
“Approved Market”
means the Over-the-Counter Bulletin Board, the Nasdaq Stock Market, the New York
Stock Exchange or the American Stock Exchange.
“Blackout Period”
means, with respect to a registration, a period, in each case commencing on the
day immediately after the Company notifies the Purchasers that they are
required, because of the occurrence of an event of the kind described in Section
4(f) hereof, to suspend offers and sales of Registrable Securities during which
the Company, in the good faith judgment of its board of directors, determines
(because of the existence of, or in anticipation of, any acquisition, financing
activity, or other transaction involving the Company, or the unavailability for
reasons beyond the Company’s control of any required financial statements,
disclosure of information which is in its best interest not to publicly
disclose, or any other event or condition of similar significance to the
Company) that the registration and distribution of the Registrable Securities to
be covered by such Registration Statement, if any, would be seriously
detrimental to the Company and its stockholders and ending on the earlier of (1)
the date upon which the material non-public information commencing the Blackout
Period is disclosed to the public or ceases to be material and (2) such time as
the Company notifies the selling Holders that the Company will no longer delay
such filing of the Registration Statement, recommence taking steps to make such
Registration Statement effective, or allow sales pursuant to such Registration
Statement to resume.
“Bridge Notes” has the
meaning given it in the recitals of this Agreement.
“Bridge Warrants” has
the meaning given it in the recitals of this Agreement.
“Business Day” means
any day of the year, other than a Saturday, Sunday, or other day on which the
Commission is required or authorized to close.
“Commission” means the
U. S. Securities and Exchange Commission or any other federal agency at the time
administering the Securities Act.
“Common Stock” means
the common stock, par value $0.00001 per share, of the Company and any and all
shares of capital stock or other equity securities of: (i) the Company which are
added to or exchanged or substituted for the Common Stock by reason of the
declaration of any stock dividend or stock split, the issuance of any
distribution or the reclassification, readjustment, recapitalization or other
such modification of the capital structure of the Company; and (ii) any other
corporation, now or hereafter organized under the laws of any state or other
governmental authority, with which the Company is merged, which results from any
consolidation or reorganization to which the Company is a party, or to which is
sold all or substantially all of the shares or assets of the Company, if
immediately after such merger, consolidation, reorganization or sale, the
Company or the stockholders of the Company own equity securities having in the
aggregate more than 50% of the total voting power of such other
corporation.
“Effective Date” means
the later of (i) the date set forth in the preamble to this Agreement and (ii)
the date of the final closing of the PPO.
“Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
of the Commission promulgated thereunder.
“Exchange Warrants”
has the meaning given it in the recitals of this Agreement.
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“Family Member” means
(a) with respect to any individual, such individual’s spouse, any descendants
(whether natural or adopted), any trust all of the beneficial interests of which
are owned by any of such individuals or by any of such individuals together with
any organization described in Section 501(c)(3) of the Internal Revenue Code of
1986, as amended, the estate of any such individual, and any corporation,
association, partnership or limited liability company all of the equity
interests of which are owned by those above described individuals, trusts or
organizations and (b) with respect to any trust, the owners of the beneficial
interests of such trust.
“Holder” means each
Purchaser or any of such Purchaser’s respective successors and Permitted
Assignees who acquire rights in accordance with this Agreement with respect to
any Registrable Securities directly or indirectly from a Purchaser or from any
Permitted Assignee.
“Initial Registration
Statement” means the initial Registration Statement filed pursuant to
this Agreement.
“Investor Shares” has
the meaning given it in the recitals of this Agreement.
“Investor Warrants”
has the meaning given it in the recitals of this Agreement.
“Majority Holders”
means at any time Holders representing a majority of the Registrable
Securities.
“Permitted Assignee”
means (a) with respect to a partnership, its partners or former partners in
accordance with their partnership interests, (b) with respect to a corporation,
its stockholders in accordance with their interest in the corporation, (c) with
respect to a limited liability company, its members or former members in
accordance with their interest in the limited liability company, (d) with
respect to an individual party, any Family Member of such party, (e) an entity
that is controlled by, controls, or is under common control with a transferor,
or (f) a party to this Agreement.
“Piggyback
Registration” means, in any registration of Common Stock as set forth in
Section 3(b), the ability of holders of Registrable Securities to include
Registrable Securities in such registration.
The terms
“register,”
“registered,”
and “registration” refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
“Registrable
Securities” means the Investor Shares and the Registrable Warrant Shares
but excluding (i) any Registrable Securities that have been publicly sold or may
be sold immediately without registration under the Securities Act either
pursuant to Rule 144(k) of the Securities Act or otherwise; (ii) any Registrable
Securities sold by a person in a transaction pursuant to a registration
statement filed under the Securities Act, or (iii) any Registrable Securities
that are at the time subject to an effective registration statement under the
Securities Act.
“Registrable Warrant
Shares” means the shares of Common Stock issued or issuable to each
Purchaser upon exercise of the Exchange Warrants and the Investor
Warrants.
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“Registration Default
Date” means the date that is 180 days after the date the Registration
Statement is actually filed with the Commission.
“Registration Default
Period” means the period following the Registration Default Date during
which any Registration Event occurs and is continuing.
“Registration Event”
means the occurrence of any of the following events:
(a) the
Company fails to file with the Commission the Registration Statement on or
before the Registration Filing Date;
(b) the
Registration Statement is not declared effective by the Commission on or before
the Registration Default Date;
(c) after
the SEC Effective Date, sales cannot be made pursuant to the Registration
Statement for any reason (including without limitation by reason of a stop
order, or the Company’s failure to update the Registration Statement) except as
excused pursuant to Section 3(e); or
(d) the
Common Stock generally or the Registrable Securities specifically are not listed
or included for quotation on an Approved Market, or trading of the Common Stock
is suspended or halted on the Approved Market, which at the time constitutes the
principal market for the Common Stock, for more than two full, consecutive
Trading Days; provided, however, a
Registration Event shall not be deemed to occur if all or substantially all
trading in equity securities (including the Common Stock) is suspended or halted
on the Approved Market for any length of time.
“Registration Filing
Date” means the date that is 90 days after date of the final closing of
the PPO.
“Registration
Statement” means the registration statement that the Company is required
to file pursuant to this Agreement to register the Registrable
Securities.
“Rule 144” means Rule
144 promulgated by the Commission under the Securities Act.
“Rule 145” means Rule
145 promulgated by the Commission under the Securities Act.
“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 SEC having substantially the same purpose and effect as
such Rule.
“Securities Act” means
the Securities Act of 1933, as amended, or any similar federal statute
promulgated in replacement thereof, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the
time.
“SEC Effective Date”
means the date the Registration Statement is declared effective by the
Commission.
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“Trading Day” means
(a) if the Common Stock is listed or quoted on an Approved Market, then any day
during which securities are generally eligible for trading on the Approved
Market, or (b) if the Common Stock is not then listed or quoted and traded on an
Approved Market, then any business day.
2. Term. This
Agreement shall continue in full force and effect for a period of one year from
the SEC Effective Date, unless terminated sooner hereunder.
3. Registration.
(a) Registration on Form
S-1. Not later than the Registration Filing Date, the Company
shall file with the Commission a Registration Statement on Form S-1, or other
applicable form, relating to the resale by the Holders of all of the Registrable
Securities, and the Company shall use its commercially reasonably efforts to
cause such Registration Statement to be declared effective prior to the
Registration Default Date.
(b) Piggyback
Registration. In addition to the Coampny agreement pursuant to
Section 3(a) above, if the Company shall determine to register for sale for cash
any of its Common Stock, for its own account or for the account of others (other
than the Holders), other than (i) a registration relating solely to employee
benefit plans or securities issued or issuable to employees, consultants (to the
extent the securities owned or to be owned by such consultants could be
registered on Form S-8) or any of their Family Members (including a registration
on Form S-8) or (ii) a registration relating solely to a Securities Act Rule 145
transaction or a registration on Form S-4 in connection with a merger,
acquisition, divestiture, reorganization or similar event, the Company shall
promptly give to the Holders written notice thereof (and in no event shall such
notice be given less than 20 calendar days prior to the filing of such
registration statement), and shall, subject to Section 3(c), include as a
Piggyback Registration all of the Registrable Securities specified in a written
request delivered by the Holder thereof within 10 calendar days after receipt of
such written notice from the Company. However, the Company may, without the
consent of the Holders, withdraw such registration statement prior to its
becoming effective if the Company or such other stockholders have elected to
abandon the proposal to register the securities proposed to be registered
thereby.
(c) Underwriting. If
a Piggyback Registration is for a registered public offering that is to be made
by an underwriting, the Company shall so advise the Holders of the Registrable
Securities eligible for inclusion in such Registration Statement pursuant to
Sections 3(b)(i) and (ii), respectively. In that event, the right of
any Holder to Piggyback Registration shall be conditioned upon such Holder’s
participation in such underwriting and the inclusion of such Holder’s
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to sell any of their Registrable Securities through such
underwriting shall (together with the Company and any other stockholders of the
Company selling their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter selected for such
underwriting by the Company or the selling stockholders, as
applicable. Notwithstanding any other provision of this Section, if
the underwriter or the Company determines that marketing factors require a
limitation on the number of shares of Common Stock or the amount of other
securities to be underwritten, the underwriter may exclude some or all
Registrable Securities from such registration and underwriting. The
Company shall so advise all Holders (except those Holders who failed to timely
elect to include their Registrable Securities through such underwriting or have
indicated to the Company their decision not to do so), and indicate to each such
Holder the number of shares of Registrable Securities that may be included in
the registration and underwriting, if any. The number of shares of Registrable
Securities to be included in such registration and underwriting shall be
allocated among such Holders as follows:
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(i) If
the Piggyback Registration was initiated by the Company, the number of shares
that may be included in the registration and underwriting shall be allocated
first to the Company and then, subject to obligations and commitments existing
as of the date hereof, to all selling stockholders, including the Holders, who
have requested to sell in the registration on a pro rata basis according to the
number of shares requested to be included therein; and
(ii) If
the Piggyback Registration was initiated by the exercise of demand registration
rights by a stockholder or stockholders of the Company (other than the Holders),
then the number of shares that may be included in the registration and
underwriting shall be allocated first to such selling stockholders who exercised
such demand and then, subject to obligations and commitments existing as of the
date hereof, to all other selling stockholders, including the Holders, who have
requested to sell in the registration on a pro rata basis according to the
number of shares requested to be included therein.
No
Registrable Securities excluded from the underwriting by reason of the
underwriter’s marketing limitation shall be included in such registration. If
any Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw such Holder’s Registrable Securities therefrom by delivering a
written notice to the Company and the underwriter. The Registrable
Securities so withdrawn from such underwriting shall also be withdrawn from such
registration; provided, however, that, if by
the withdrawal of such Registrable Securities, a greater number of Registrable
Securities held by other Holders may be included in such registration (up to the
maximum of any limitation imposed by the underwriters), then the Company shall
offer to all Holders who have included Registrable Securities in the
registration the right to include additional Registrable Securities pursuant to
the terms and limitations set forth herein in the same proportion used above in
determining the underwriter limitation.
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(d) Occurrence of Registration
Event. If a Registration Event occurs, then the Company will
make payments to each Holder of Registrable Securities (a “Qualified Purchaser”), as
liquidated damages for the amount of damages to the Qualified Purchaser by
reason thereof, at a rate equal to 0.50% of the purchase price per Unit paid by
such Holder in the PPO (including, without limitation, Bridge Note conversion
amounts) for the Registrable Securities then held by each Qualified Purchaser
for each full period of 30 days of the Registration Default Period (which shall
be pro rated for any period less than 30 days); provided, however, if a
Registration Event occurs (or is continuing) on a date more than one-year after
the Company filed a Current Report on Form 8-K relating to the Merger and the
PPO and providing Form 10 information with respect thereto, liquidated damages
shall be paid only with respect to that portion of the Qualified Purchaser’s
Registrable Securities that cannot then be immediately resold in reliance on
Rule 144. Notwithstanding the foregoing, the maximum amount of
liquidated damages that may be paid to any Qualified Purchaser pursuant to this
Section 3(d) shall be an amount equal to 9% of the purchase price per Unit paid
by such Holder in the PPO for the Registrable Securities held by such Qualified
Purchaser at the time of the first occurrence of a Registration
Event. Each such payment shall be due and payable within five days
after the end of each full 30-day period of the Registration Default Period
until the termination of the Registration Default Period and within five days
after such termination. Such payments shall constitute the Qualified
Purchaser’s exclusive remedy for such events. If the Company fails to
pay any partial liquidated damages or refund pursuant to this Section in full
within seven days after the date payable, the Company will pay interest thereon
at a rate of 8% per annum (or such lesser maximum amount that is permitted to be
paid by applicable law) to the Holder, accruing daily from the date such partial
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full. The Registration Default Period shall terminate
upon (i) the filing of the Registration Statement in the case of clause (a) of
the definition of Registration Event, (ii) the SEC Effective Date in the case of
clause (b) of the definition of Registration Event, (iii) the ability of the
Qualified Purchaser to effect sales pursuant to the Registration Statement in
the case of clause (c) of the definition of Registration Event, (iv) the listing
or inclusion and/or trading of the Common Stock on an Approved Market, as the
case may be, in the case of clause (d) of the definition of Registration Event,
and (v) in the case of the events described in clauses (b) and (c) of the
definition of Registration Event, the earlier termination of the Registration
Default Period. The amounts payable as liquidated damages pursuant to
this Section 3(d) shall be payable in lawful money of the United
States.
(e) Notwithstanding
the provisions of Section 3(d) above, (a) if the
Commission does not declare the Registration Statement effective on or before
the Registration Default Date, or (b) if the Commission allows the Registration
Statement to be declared effective at any time before or after the Registration
Default Date, subject to the withdrawal of certain Registrable Securities from
the Registration Statement, and the reason for (a) or (b) is the Commission’s
determination that (x) the offering of any of the Registrable Securities
constitutes a primary offering of securities by the Company, (y) Rule 415 may
not be relied upon for the registration of the resale of any or all of the
Registrable Securities, and/or (z) a Holder of any Registrable Securities must
be named as an underwriter, the Holders understand and agree that in the case of
(b) the Company may reduce, on a pro rata basis, the total
number of Registrable Securities to be registered on behalf of each such Holder,
and, in the case of (a) or (b), and that a Holder shall not be entitled to any
liquidated damages with respect to the Registrable Securities not registered for
the reason set forth in (a), or so reduced on a pro rata basis as set forth
in (b). In any such pro reduction, the number of
Registrable Securities to be registered on such Registration Statement will
first be reduced by the Registrable Securities represented by the Registrable
Warrant Shares (applied, in the case that some Registrable Warrant Shares may be
registered, to the Holders on a pro rata basis based on the total number of
unregistered Registrable Warrant Shares held by such Holders on a fully diluted
basis), and second by Registrable Securities represented by Investor Shares
(applied, in the case that some Investor Shares may be registered, to the
Holders on a pro rata basis based on the total number of unregistered Investor
Shares held by such Holders). In addition, any
such affected Holder shall be entitled to Piggyback Registration rights after
the Registration Statement is declared effective by the Commission until such
time as: (AA) all Registrable Securities have been registered pursuant to an
effective Registration Statement, (BB) the Registrable Securities may be resold
without restriction pursuant to Rule 144 of the Securities Act, or (CC) the
Holder agrees to be named as an underwriter in any such registration statement.
The Holders acknowledge and agree the provisions of this paragraph may apply to
more than one Registration Statement.
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4. Registration Procedures for
Registrable Securities. The Company will keep each Holder
reasonably advised as to the filing and effectiveness of the Registration
Statement. At its expense with respect to the Registration Statement, the
Company will:
(a) prepare
and file with the Commission with respect to the Registrable Securities, a
Registration Statement on Form S-1, or any other form for which the Company then
qualifies or which counsel for the Company shall deem appropriate and which form
shall be available for the sale of the Registrable Securities in accordance with
the intended methods of distribution thereof, and use its commercially
reasonable efforts to cause such Registration Statement to become effective and
shall remain effective for a period of one year or for such shorter period
ending on the earlier to occur of (i) the date as of which all of the Holders as
selling stockholders thereunder may sell all of the Registrable Securities
registered for resale thereon without restriction pursuant to Rule 144 (or any
successor rule thereto) promulgated under the Securities Act or (ii) the date
when all of the Registrable Securities registered thereunder shall have been
sold (the “Effectiveness
Period”). Thereafter, the Company shall be entitled to
withdraw such Registration Statement and the Investors shall have no further
right to offer or sell any of the Registrable Securities registered for resale
thereon pursuant to the respective Registration Statement (or any prospectus
relating thereto);
(b) if
the Registration Statement is subject to review by the Commission, promptly
respond to all comments and diligently pursue resolution of any comments to the
satisfaction of the Commission;
(c) prepare
and file with the Commission such amendments and supplements to such
Registration Statement as may be necessary to keep such Registration Statement
effective during the Effectiveness Period;
(d) furnish,
without charge, to each Holder of Registrable Securities covered by such
Registration Statement (i) a reasonable number of copies of such Registration
Statement (including any exhibits thereto other than exhibits incorporated by
reference), each amendment and supplement thereto as such Holder may reasonably
request, (ii) such number of copies of the prospectus included in such
Registration Statement (including each preliminary prospectus and any other
prospectus filed under Rule 424 of the Securities Act) as such Holders may
reasonably request, in conformity with the requirements of the Securities Act,
and (iii) such other documents as such Holder may require to consummate the
disposition of the Registrable Securities owned by such Holder, but only during
the Effectiveness Period;
(e) use
its commercially reasonable efforts to register or qualify such registration
under such other applicable securities laws of such jurisdictions as any Holder
of Registrable Securities covered by such Registration Statement reasonably
requests and as may be necessary for the marketability of the Registrable
Securities (such request to be made by the time the applicable Registration
Statement is deemed effective by the Commission) and do any and all other acts
and things necessary to enable such Holder to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such Holder; provided, that the
Company shall not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph, (ii) subject itself to taxation in any such jurisdiction, or (iii)
consent to general service of process in any such jurisdiction.
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(f) notify
each Holder of Registrable Securities, the disposition of which requires
delivery of a prospectus relating thereto under the Securities Act, of the
happening of any event (as promptly as practicable after becoming aware of such
event), which comes to the Company’s attention, that will after the occurrence
of such event cause the prospectus included in such Registration Statement, if
not amended or supplemented, to contain an untrue statement of a material fact
or an omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and the Company shall
promptly thereafter prepare and furnish to such Holder a supplement or amendment
to such prospectus (or prepare and file appropriate reports under the Exchange
Act) so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, unless suspension of
the use of such prospectus otherwise is authorized herein or in the event of a
Blackout Period, in which case no supplement or amendment need be furnished (or
Exchange Act filing made) until the termination of such suspension or Blackout
Period;
(g) comply,
and continue to comply during the Effectiveness Period, in all material respects
with the Securities Act and the Exchange Act and with all applicable rules and
regulations of the Commission with respect to the disposition of all securities
covered by such Registration Statement;
(h) as
promptly as practicable after becoming aware of such event, notify each Holder
of Registrable Securities being offered or sold pursuant to the Registration
Statement of the issuance by the Commission of any stop order or other
suspension of effectiveness of the Registration Statement;
(i) use
its commercially reasonable efforts to cause all the Registrable Securities
covered by the Registration Statement to be quoted on the OTC Bulletin Board or
such other principal securities market on which securities of the same class or
series issued by the Company are then listed or traded;
(j) provide
a transfer agent and registrar, which may be a single entity, for the shares of
Common Stock at all times;
(k) If
requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to the Registration Statement, which
certificates shall be free, to the extent permitted by applicable law, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holders may
request;
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(l) during
the Effectiveness Period, refrain from bidding for or purchasing any Common
Stock or any right to purchase Common Stock or attempting to induce any person
to purchase any such security or right if such bid, purchase or attempt would in
any way limit the right of the Holders to sell Registrable Securities by reason
of the limitations set forth in Regulation M of the Exchange Act;
and
(m) take
all other reasonable actions necessary to expedite and facilitate the
disposition by the Holders of the Registrable Securities pursuant to the
Registration Statement.
5. Suspension of Offers and
Sales. Each Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
4(f) hereof or of the commencement of a Blackout Period, such Holder shall
discontinue the disposition of Registrable Securities included in the
Registration Statement until such Holder’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 4(f) hereof or notice
of the end of the Blackout Period, and, if so directed by the Company, such
Holder shall deliver to the Company (at the Company’s expense) all copies
(including, without limitation, any and all drafts), other than permanent file
copies, then in such Holder’s possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such
notice.
6. Registration
Expenses. The Company shall pay all expenses in connection
with any registration obligation provided herein, including, without limitation,
all registration, filing, stock exchange fees, printing expenses, all fees and
expenses of complying with applicable securities laws, and the fees and
disbursements of counsel for the Company and of its independent accountants;
provided, that,
in any registration, each party shall pay for its own underwriting discounts and
commissions and transfer taxes. Except as provided in this Section and Section
9, the Company shall not be responsible for the expenses of any attorney or
other advisor employed by a Holder.
7. Assignment of
Rights. No Holder may assign its rights under this Agreement
to any party without the prior written consent of the Company; provided, however, that any
Holder may assign its rights under this Agreement without such consent to a
Permitted Assignee as long as (a) such transfer or assignment is effected in
accordance with applicable securities laws; (b) such transferee or assignee
agrees in writing to become subject to the terms of this Agreement; and (c) such
Holder notifies the Company in writing of such transfer or assignment, stating
the name and address of the transferee or assignee and identifying the
Registrable Securities with respect to which such rights are being transferred
or assigned.
8. Information by
Holder. A Holder with Registrable Securities included in any
registration shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required in order to comply with any applicable law
or regulation in connection with the registration of such Holder’s Registrable
Securities or any qualification or compliance with respect to such Holder’s
Registrable Securities and referred to in this Agreement.
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9. Indemnification.
(a) In
the event of the offer and sale of Registrable Securities under the Securities
Act, the Company shall, and hereby does, indemnify and hold harmless, to the
fullest extent permitted by law, each Holder, its directors, officers, partners,
each other person who participates as an underwriter in the offering or sale of
such securities, and each other person, if any, who controls or is under common
control with such Holder or any such underwriter within the meaning of Section
15 of the Securities Act, against any losses, claims, damages or liabilities,
joint or several, and expenses to which the Holder or any such director,
officer, partner or underwriter or controlling person may become subject under
the Securities Act, the Exchange Act, or any other federal or state law, insofar
as such losses, claims, damages, liabilities or expenses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement of any material fact contained in any
registration statement prepared and filed by the Company under which Registrable
Securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission to state therein a material fact required to
be stated or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, or any violation or
alleged violation of the Securities Act, the Exchange Act, any state securities
law or any rule or regulation promulgated under the Securities Act, the Exchange
Act or any state securities law in connection with this Agreement; and the
Company shall reimburse the Holder, and each such director, officer, partner,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating, defending or
settling any such loss, claim, damage, liability, action or proceeding; provided, that such
indemnity agreement found in this Section 9(a) shall in no event exceed the net
proceeds from the Notes Offering or the PPO, as applicable, received by the
Company; and provided
further, that the Company shall not be liable in any such case (i) to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
in or omission from such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by the Holder specifically for use in the preparation thereof or (ii) if
the person asserting any such loss, claim, damage, liability (or action or
proceeding in respect thereof) who purchased the Registrable Securities that are
the subject thereof did not receive a copy of an amended preliminary prospectus
or the final prospectus (or the final prospectus as amended or supplemented) at
or prior to the written confirmation of the sale of such Registrable Securities
to such person because of the failure of such Holder or underwriter to so
provide such amended preliminary or final prospectus and the untrue statement or
omission of a material fact made in such preliminary prospectus was corrected in
the amended preliminary or final prospectus (or the final prospectus as amended
or supplemented). Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Holders, or any such
director, officer, partner, underwriter or controlling person and shall survive
the transfer of such shares by the Holder.
11
(b) As
a condition to including Registrable Securities in any registration statement
filed pursuant to this Agreement, each Holder agrees to be bound by the terms of
this Section 9 and to indemnify and hold harmless, to the fullest extent
permitted by law, the Company, its directors and officers, and each other
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which the Company or any such director or officer or controlling
person may become subject under the Securities Act, the Exchange Act, or any
other federal or state law, to the extent arising out of or based solely upon:
(x) such 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 in writing by 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 in writing to the Company by 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 or (2) in the case of an occurrence of an event
of the type specified in Section 4(f) hereof, 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 the advice contemplated in Section 4(f). In no event
shall the liability of any selling Holder hereunder be greater in amount than
the dollar amount of the net proceeds received by such Holder upon the sale of
the Registrable Securities giving rise to such indemnification
obligation.
(c) Promptly
after receipt by an indemnified party of notice of the commencement of any
action or proceeding involving a claim referred to in this Section (including
any governmental action), such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
indemnifying party of the commencement of such action; provided, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under this Section, except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an
indemnified party, unless in the reasonable judgment of counsel to such
indemnified party a conflict of interest between such indemnified and
indemnifying parties may exist or the indemnified party may have defenses not
available to the indemnifying party in respect of such claim, the indemnifying
party shall be entitled to participate in and to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party and, after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof, unless in such indemnified
party’s reasonable judgment a conflict of interest between such indemnified and
indemnifying parties arises in respect of such claim after the assumption of the
defenses thereof or the indemnifying party fails to defend such claim in a
diligent manner, other than reasonable costs of
investigation. Neither an indemnified nor an indemnifying party shall
be liable for any settlement of any action or proceeding effected without its
consent. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement, which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation. Notwithstanding
anything to the contrary set forth herein, and without limiting any of the
rights set forth above, in any event any party shall have the right to retain,
at its own expense, counsel with respect to the defense of a claim.
12
(d) If
an indemnifying party does or is not permitted to assume the defense of an
action pursuant to Sections 9(c) or in the case of the expense reimbursement
obligation set forth in Sections 9(a) and (b), the indemnification required by
Sections 9(a) and 9(b) shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills received or
expenses, losses, damages, or liabilities are incurred.
(e) If
the indemnification provided for in Section 9(a) or 9(b) is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect to
any loss, liability, claim, damage or expense referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall (i) contribute to the amount paid or payable by such indemnified party as
a result of such loss, liability, claim, damage or expense as is appropriate to
reflect the proportionate relative fault of the indemnifying party on the one
hand and the indemnified party on the other (determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission relates to information supplied by the indemnifying party or the
indemnified party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission), or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, not only the proportionate relative
fault of the indemnifying party and the indemnified party, but also the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other, as well as any other relevant equitable considerations. No
indemnified party guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
indemnifying party who was not guilty of such fraudulent
misrepresentation.
(f) Other
Indemnification. Indemnification similar to that specified in
this Section (with appropriate modifications) shall be given by the Company and
each Holder of Registrable Securities with respect to any required registration
or other qualification of securities under any federal or state law or
regulation or governmental authority other than the Securities Act.
10. Rule
144. With a view to making available to the Holders the
benefits of Rule 144 and any other rule or regulation of the Commission that may
at any time permit the Holders to sell the Registrable Securities to the public
without registration, the Company agrees: (i) to make and keep public
information available as those terms are understood in Rule 144, (ii) to file
with the Commission in a timely manner all reports and other documents required
to be filed by an issuer of securities registered under the Securities Act or
the Exchange Act pursuant to Rule 144, (iii) as long as any Holder owns any
Registrable Securities, to furnish in writing upon such Holder’s request a
written statement by the Company that it has complied with the reporting
requirements of Rule 144 and of the Securities Act and the Exchange Act, and to
furnish to such Holder a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents so filed by the Company as may
be reasonably requested in availing such Holder of any rule or regulation of the
Commission permitting the selling of any such Registrable Securities without
registration and (iv) undertake any additional actions commercially reasonably
necessary to maintain the availability of the use of Rule 144.
13
11. Corporate
Existence. So long as any Holder owns any Registrable
Securities, the Company shall not directly or indirectly consummate any merger,
reorganization, restructuring, reverse stock split, consolidation, sale of all
or substantially all of the Company’s assets or any similar transaction or
related transactions (each such transaction, an “Organizational Change”),
unless, prior to the consummation of an Organizational Change, the Company
obtains the written consent of the Majority Holders.
12. Independent Nature of Each
Purchaser’s Obligations and Rights. The obligations of each
Purchaser under this Agreement are several and not joint with the obligations of
any other Purchaser, and each Purchaser shall not be responsible in any way for
the performance of the obligations of any other Purchaser under this Agreement.
Nothing contained herein and no action taken by any Purchaser pursuant hereto,
shall be deemed to constitute such Purchasers as a partnership, an association,
a joint venture, or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by this Agreement. Each Purchaser
shall be entitled to independently protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.
13. Other Registration
Rights. The Company shall not grant any registration rights
without the Consent of the Majority Holders prior to the effectiveness of the
Registration Statement.
14. Miscellaneous.
(a) Governing Law. This
Agreement shall be governed by and construed in accordance with the laws of the
United States of America and the State of New York, both substantive and
remedial, without regard to New York conflicts of law principles. Any judicial
proceeding brought against either of the parties to this Agreement or any
dispute arising out of this Agreement or any matter related hereto shall be
brought in the courts of the State of New York, New York County, or in the
United States District Court for the Southern District of New York and, by its
execution and delivery of this Agreement, each party to this Agreement accepts
the jurisdiction of such courts. The foregoing consent to jurisdiction shall not
be deemed to confer rights on any person other than the parties to this
Agreement.
(b) Remedies. In
the event of a breach by the Company or by a Holder of any of their respective
obligations under this Agreement, each Holder or the Company, as the case may
be, in addition to being entitled to exercise all rights granted by law and
under this Agreement, including recovery of damages, shall be entitled to
specific performance of its rights under this Agreement. The Company
and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall not assert
or shall waive the defense that a remedy at law would be adequate.
14
(c) Successors and
Assigns. Except as otherwise provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
Permitted Assignees, executors and administrators of the parties
hereto.
(d) No Inconsistent
Agreements. The Company has not entered, as of the date
hereof, and shall not enter, on or after the date of this Agreement, into any
agreement with respect to its securities that would have the effect of impairing
the rights granted to the Holders in this Agreement or otherwise conflicts with
the provisions hereof.
(e) Entire
Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof.
(f) Notices, etc. All
notices or other communications which are required or permitted under this
Agreement shall be in writing and sufficient if delivered by hand, by facsimile
transmission, by registered or certified mail, postage pre-paid, by electronic
mail, or by courier or overnight carrier, to the persons at the addresses set
forth below (or at such other address as may be provided hereunder), and shall
be deemed to have been delivered as of the date so delivered:
If to the
Company to:
Xxx
Xxxxxxxx, 00xx
Xxxxx
Xxxxxxxxx,
XX 00000
Attention: Xxxxx
X. Xxxxxxxx, Chief Executive Officer
Facsimile: (000)
000-0000
with copy to:
Xxxxxxx
Xxxxxx & Fein LLP
Two Grand
Central Tower, 19th
Floor
000 Xxxx
00xx
Xxxxxx
Xxx Xxxx,
XX 00000
Attention: Xxxxxxxx
X. Xxxxxxx, Esq.
Facsimile: (000)
000-0000
If to the
Purchasers:
To each
Purchaser at the address set forth on the signature page hereto
or at
such other address as any party shall have furnished to the other parties in
writing.
(g) Delays or
Omissions. No delay or omission to exercise any right, power
or remedy accruing to any Holder, upon any breach or default of the Company
under this Agreement, shall impair any such right, power or remedy of such
Holder nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of any similar breach or default thereunder
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
Holder of any breach or default under this Agreement, or any waiver on the part
of any Holder of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
15
(h) Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
enforceable against the parties actually executing such counterparts, and all of
which together shall constitute one instrument. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile
signature page were an original thereof.
(i) Severability. In the
case any provision of this Agreement shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
(j) Amendments. The
provisions of this Agreement may be amended at any time and from time to time,
and particular provisions of this Agreement may be waived, with and only with an
agreement or consent in writing signed by the Company and the Majority Holders.
The Purchasers acknowledge that by the operation of this Section, the Majority
Holders may have the right and power to diminish or eliminate all rights of the
Purchasers under this Agreement.
(k) Limitation on Subsequent
Registration Rights. After the date of this Agreement, the
Company shall not, without the prior written consent of the Majority Holders,
enter into any agreement with any holder or prospective holder of any securities
of the Company that would grant such holder registration rights senior or equal
to those granted to the Holders hereunder.
[SIGNATURE
PAGES FOLLOW]
16
This
Registration Rights Agreement is hereby executed as of the date first above
written.
|
COMPANY:
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||
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By:
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||
|
Name:
|
Xxxxx
X. Xxxxxxxx
|
|
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Title:
|
Chief
Executive Officer
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THE
PURCHASER’S SIGNATURE TO THE SUBSCRIPTION AGREEMENT DATED OF EVEN DATE HEREWITH
SHALL CONSTITUTE THE PURCHASER’S SIGNATURE TO THIS REGISTRATION RIGHTS
AGREEMENT.
17
