REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT ("Agreement") between K.L.S. Enviro
Resources, Inc., a Nevada corporation (the "Company"), and SMD, L.L.C., a Utah
limited liability company ("Holder").
Recitals
A. The Company has executed and delivered to Holder a warrant
pursuant to which Holder may acquire up to 6,600,000 shares of the Company's
common stock, $.0001 par value, at an exercise price of $.40 per share.
B. Upon the issuance of any shares of the Company's common stock upon
exercise of the warrant, such shares will be unregistered and restricted.
X. Xxxxxx would not have agreed to accept the warrant unless the
Company had agreed to enter into this Agreement.
Agreement
In consideration of the promises contained in this Agreement and in the
warrant , and for other good and valuable consideration, the receipt and
sufficiency of which the parties acknowledge by their signatures below, the
Company and Holder agree as follows:
1. Piggyback Registrations. If the Company at any time proposes to
file a registration statement covering proposed sales by it or any of its
shareholders of shares of its capital stock in a manner which would permit
registration of shares of common stock for sale to the public (other than a
registration statement (i) covering only shares issuable upon the exercise of
employee stock options or pursuant to an employee stock purchase, dividend
reinvestment or similar plan, (ii) on Form S-4 or S-8 or any similar form)
under the U.S. Securities Act of 1933, as amended (the "Act"), (iii) in
connection with a registered public offering of the Company's capital stock,
or (iv) pursuant to Section 2 hereof, the Company will give prompt notice to
Holder of such proposed registration (which notice shall describe the proposed
filing date and the date by which the registration rights granted pursuant to
this Section 1 must be exercised, the nature and method of any such sale or
disposition of securities and shall include a listing of the jurisdictions, if
any, in which the Company proposes to register or qualify the securities under
the applicable state securities or "Blue Sky" laws of such jurisdictions). At
the request of Holder given within thirty (30) calendar days after the receipt
of such notice by Holder (which request shall specify the number of shares
Holder requests to be included in such registration), the Company will use its
best efforts to cause all shares as to which registration has been requested
by Holder to be included in such registration statement for sale or
disposition in accordance with the method described in the initial notice
given to Holder and subject to the same terms and conditions as the other
shares of capital stock being sold, and thereafter shall cause such
registration statement to be filed and become effective; provided, however,
that the Company shall be permitted to (A) withdraw the registration statement
for any reason in its sole and exclusive discretion and upon the written
notice of such decision to Holder shall be relieved of all of its obligations
under this Section 1 with respect to that particular registration; or (B)
exclude all or any portion of the shares sought to be registered by Holder
from such registration statement if the offering of the shares is an
underwritten offering and to the extent that, in the judgment of the managing
underwriter of the offering, the inclusion of such shares would be materially
detrimental to the offering of the remaining shares of capital stock, or such
delay is necessary in light of market conditions. Any shares sought to be
registered by Holder so excluded from a registration statement shall be
excluded pro rata based on the total number of shares of capital stock being
sold by all selling Holders (other than the Company).
2. Demand Registration. If at any time from and after the date of
this Agreement, the Company shall be requested in writing by Holder to effect
the registration under the Act of shares of the Company's common stock then
owned by Holder (which request shall specify the aggregate number of shares
intended to be offered and sold by Holder, shall describe the nature or method
of the proposed offer and sale thereof and shall contain an undertaking by
Holder to cooperate fully with the Company in order to permit the Company to
comply with all applicable requirements of the Act and the rules and
regulations thereunder and to obtain acceleration of the effective date of the
registration statement contemplated thereby), the Company shall effect the
registration of such securities on an appropriate form under the Act, provided
that (i) Holder may exercise the right to request registration pursuant to
this Section 2 only with respect to those shares that, at the time such
request for registration is delivered to the Company, may not be sold to the
public pursuant to Rule 144 under the Act or any similar or successor rule;
(ii) Holder's rights under this Section 2 shall be exercisable only if the
shares as to which Holder requests registration have an aggregate value of at
least $250,000 based on the average of the closing bid price for the Company's
common stock as listed on any exchange on which the Company's common stock
then may be traded for the thirty (30) trading-day period immediately
preceding the date of such request for registration; (iii) the Company shall
be entitled to postpone the filing of any registration statement otherwise
required to be prepared and filed by it pursuant to this Section 2, if at the
time it receives a request for such registration, the Company's underwriter
determines that such registration and offering would materially interfere with
any existing or then presently contemplated financing, acquisition, corporate
reorganization or other material transaction involving the Company, and the
Company promptly gives the Holder written notice of such determination,
provided, however, that such postponement shall not extend beyond the time
that such material interference continues to exist; and (iv) Holder shall have
no right to demand registration with respect to any shares within ninety (90)
calendar days after the effective date of any registration statement filed by
the Company.
3. Registration Procedures. If and whenever this Agreement
contemplates that the Company will effect the registration under the Act of
any shares held by the Holder, the Company shall:
3.1 prepare and file with the Securities and Exchange Commission
(the "SEC") a registration statement on the appropriate form with respect to
such shares and use its best efforts to cause such registration statement to
become effective;
3.2 prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith and to take such other action as may be necessary to keep
such registration statement effective until the earlier of (i) the completion
of the distribution of shares so registered, or (ii) expiration of the ninety
(90) day period following immediately the effective date of such registration
statement (at which time unsold shares may be deregistered), and otherwise
comply with applicable provisions of the Act and the rules and regulations
promulgated under the Act;
3.3 furnish to Holder and its counsel, and to each underwriter
of the shares to be sold by the Holder, without charge, such number of copies
of one or more preliminary prospectuses, any supplements thereto and a final
prospectus and any supplements thereto in conformity with the requirements of
the Act, and such other documents as the Holder or such underwriter may
reasonably request, in order to facilitate the public sale or other
disposition of such shares;
3.4 if, during any period in which, in the opinion of the
Company's counsel, a prospectus relating to the shares is required to be
delivered under the Act in connection with any offer or sale contemplated by
any registration statement, any event known to the Company occurs as a result
of which the prospectus would include an untrue statement of material fact or
omit to state any material fact necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading, or
if it is necessary at any time to amend or supplement the related prospectus
to comply with the Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or the respective rules and regulations thereunder, to notify
the Holder promptly and to prepare and file with the SEC an amendment or
supplement, whether by filing such documents pursuant to the Act or the
Exchange Act as may be necessary to correct such untrue statement or omission
or to make any registration statement or the related prospectus comply with
such requirements and to furnish to Holder and its counsel such amendment or
supplement to such registration statement or prospectus;
3.5 timely to file with the SEC (i) any amendment or supplement
to any registration statement or to any related prospectus that is required by
the Act or the Exchange Act or requested by the SEC, and (ii) all documents
(and any amendments to previously filed documents) required to be filed by the
Company pursuant to Section 13(a), 13(c), 14 and 15(d) of the Exchange Act;
3.6 within five days of filing with the SEC of (i) any amendment
or supplement to any registration statement, (ii) any amendment or supplement
to the related prospectus, or (iii) any document incorporated by reference in
any of the foregoing or any amendment of or supplement to any such incorporated
document, to furnish a copy thereof to Holder;
3.7 to advise Holder and its counsel promptly (i) when any
post-effective amendment to any registration statement becomes effective and
when any further amendment of or supplement to the prospectus shall be filed
with the SEC, (ii) of any request or proposed request by the SEC for an
amendment or supplement to any registration statement, to the related
prospectus, to any document incorporated by reference in any of the foregoing
or for any additional information, (iii) of the issuance by the SEC of any
stop order suspending the effectiveness of any registration statement or any
order directed to the related prospectus or any document incorporated therein
by reference or the initiation or threat of any stop order proceeding or of
any challenge to the accuracy or adequacy of any document incorporated by
reference in such prospectus, (iv) of receipt by the Company of any
notification with respect to the suspension of the qualification of the shares
for sale in any jurisdiction or the initiation or threat of any proceeding for
such purpose, and (v) of the happening of any event which makes untrue any
statement of a material fact made in any registration statement or the related
prospectus as amended or supplemented or which requires the making of a change
in such registration statement or such prospectus as amended or supplemented
in order to make any material statement therein not misleading;
3.8 use its reasonable best efforts to register or qualify the
shares covered by such registration statement under the securities or blue sky
laws of such jurisdictions as the Holder shall reasonably request considering
the nature and size of the offering and do such other acts and things as may
be reasonably necessary to enable the Holder to consummate the public sale or
other disposition in each such jurisdiction of such shares; provided, however,
that the Company shall not be obligated to qualify as a foreign corporation to
do business under the laws of any jurisdiction in which it has not been
qualified or to file any general consent to service of process; and
3.9 use its best efforts to cause all shares sold pursuant to
any registration statement to be listed on each national securities exchange,
if any, on which such shares are then listed.
4. Agreements of Holder. Holder (i) upon receipt of a notice from
the Company of the occurrence of any event of the kind described in Subsection
3.4 shall forthwith discontinue Holder's disposition of securities included in
the registration statement until Holder receives copies of the supplemented or
amended prospectus, and (ii) if so directed by the Company, shall deliver to
the Company, at the Company's expense, all copies (other than permanent file
copies) then in Holder's possession of the prospectus covering such securities
that was in effect at the time of receipt of such notice.
5. Withdrawal. If Holder disapproves of the terms of any offering,
the sole remedy of Holder shall be to withdraw Holder's securities therefrom
by giving written notice to the Company and any managing underwriter (if
any). Holder's securities of the Company so withdrawn from the offering also
shall be withdrawn from registration.
6. Participation in Underwritten Registrations. In the case of any
registration under Section 2, if Holder or the Company determines to enter
into an underwriting agreement in connection therewith, or in the case of a
registration under Section 1, if the Company determines to enter into an
underwriting agreement in connection therewith, (i) all shares of Holder's
securities to be included in such registration shall be subject to an
underwriting agreement, which shall be in customary form and contain such
terms as are customarily contained in such agreements, and (ii) no person may
participate in any such registration unless such person (A) agrees to sell
such person's securities on the basis provided in such underwriting
arrangement, and (B) completes and executes all questionnaires,
powers-of-attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
7. Registration Expenses. With respect to each registration effected
pursuant to Section 1 and Section 2 of this Agreement, the Company shall pay
the following fees, disbursements and expenses: all registration and filing
fees, printing expenses, auditors' fees, listing fees, registrar and transfer
agent's fees, fees and disbursements of counsel to the Company, expenses
(including reasonable fees and disbursements of counsel) of complying with
applicable securities or "Blue Sky" laws and the fees of any securities
exchange in connection with the review of such offering. The underwriting
discounts and commissions allocable to the shares included in any offering
shall be borne by the holders thereof.
8. Rule 144 Sales.
8.1 The Company covenants that it will file the reports required
to be filed by the Company under the Securities Act and the Exchange Act so as
to enable any Holder to sell Shares pursuant to Rule 144 under the Securities
Act.
8.2 In connection with any sale, transfer or other disposition
by any Holder of any shares pursuant to Section 4(1) of the Securities Act or
Rule 144 thereunder, the company shall cooperate with such Holder to
facilitate the timely preparation and delivery of certificates representing
shares to be sold and not bearing any Securities Act legend, and enable
certificates for such shares to be for such number of shares and registered in
such names as the selling Holders may reasonably request at least two business
days prior to any sale of shares.
9.Indemnification.
9.1 In each case of a registration of shares under the
Securities Act pursuant to this Agreement, the Company will indemnify and hold
harmless the Holder, its officers and directors, each underwriter (as defined
in the Act) and each other person, if any, who controls any of the Holder or
any such underwriter within the meaning of the Act or the Exchange Act from
and against any and all losses, claims, damages and liabilities (including the
fees and expenses of counsel in connection therewith in connection with any
governmental or regulatory investigation or proceeding), arising out of any
untrue statement or alleged untrue statement of a material fact contained in
any registration statement under which such shares were registered under the
Act, any prospectus or preliminary prospectus contained therein or any
amendment or supplement thereto (including, in each case, documents
incorporated by reference therein), or arising out of any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements made therein not misleading, except insofar
as such losses, claims, damages or liabilities arise out of any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any of the Holder, Holder's counsel or any underwriter
and furnished to the Company in writing by any of the Holder or such counsel
or underwriter; provided that the foregoing indemnification with respect to a
preliminary prospectus shall not inure to the benefit of any underwriter (or
the benefit of any person controlling such underwriter) from whom the person
asserting any such losses, claims, damages or liabilities purchased shares to
the extent such losses, claims, damages or liabilities result from the fact
that a copy of the final prospectus had not been sent or given to such person
at or prior to written confirmation of the sale of such shares to such person.
9.2 In each case of a registration of shares under the Act
pursuant to this Agreement, Holder will indemnify and hold harmless the
Company, its directors, its officers who sign the registration statement, its
attorneys, each underwriter and each person, if any, who controls the Company
or such underwriter within the meaning of the Act or the Exchange Act, to the
same extent as the foregoing indemnity from the Company to the Holder, but
only with reference to information provided to the Company in writing by the
Holder and furnished to the Company by the Holder expressly for use in the
registration statement, any publicly available report of the Holder published
within the time frame of the registration statement, any prospectus or
preliminary prospectus contained therein or any amendment or supplement
thereto.
9.3 In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 9, such person (the
"Indemnified Party") shall promptly notify the person against whom such
indemnity may be sought (the "Indemnifying Party") in writing and the
Indemnifying Party, upon request of the Indemnified Party, shall retain
counsel reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party and any others the Indemnifying Party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any Indemnified Party shall have the
right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (i) the Indemnifying
Party has agreed to the retention of such counsel at its expense, or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the Indemnifying Party and the Indemnified Party, the Indemnifying Party
proposes that the same counsel represent both the Indemnified Party and the
Indemnifying Party and representation of both parties by the counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood, where the expense of separate counsel shall be borne by the
Indemnifying Party pursuant to the foregoing sentence, that the Indemnifying
Party shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm qualified in such jurisdiction to act as counsel for such
Indemnified Party. The Indemnifying Party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff,
the Indemnifying Party agrees to indemnify the Indemnified Party from and
against any loss or liability by reason of such settlement or judgment.
9.4 The indemnification pursuant to this Section 8 shall be on
such other terms and conditions as are at the time customary and reasonably
required by underwriters in public offerings, including providing for
contribution in the event indemnification provided in this Section 9 is
unavailable or insufficient.
10. Holdback Agreement. Holder agrees not to effect any public sale
or distribution of the Company's shares of capital stock during the seven (7)
calendar days prior to and the ninety (90) calendar day period beginning on
the effective date of any underwritten registration statement effected
pursuant to this Agreement (except as part of such underwritten registration)
unless the managing underwriter or underwriters with respect to such offering
otherwise agree.
11. Selection of Underwriters. The Company will have the right to
select the investment banking firm(s) acting as managing underwriter in
connection with any underwritten public offering.
12. Termination. This Agreement and all rights and obligations of
the parties to this Agreement shall terminate four (4) years after the date of
this Agreement; provided, however, that the indemnification provisions of
Section 9 shall not terminate and shall survive forever.
13. General.
13.1 Assignment. Holder's rights under this Agreement shall not
be transferable without the written consent of the Company, which consent
shall not be unreasonably withheld.
13.2 Counterparts. This Agreement may be executed in one or
more counterparts, each of which when so signed shall be deemed to be an
original, and such counterparts together shall constitute one and the same
instrument.
13.3 Entire Agreement. This Agreement sets forth the entire
agreement between the parties as to the subject matter hereof, supersedes any
and all prior or contemporaneous agreements or understandings of the parties
relating to the subject matter of this Agreement, and may not be amended
except by an instrument in writing signed by all of the parties to this
Agreement.
13.4 Governing Law. The laws of the State of Utah (without
giving effect to the choice of law provisions thereof) shall govern the
interpretation and enforcement of this Agreement.
13.5 Headings. The headings of the sections and paragraphs of
this Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
13.6 Notices. All notices or other communications provided for
under this Agreement shall be in writing, and mailed, telecopied or delivered
by hand delivery or by overnight courier service, to the parties at their
respective addresses as indicated below or at such other address as the
parties may designate in writing:
If to the Company, to it at:
K.L.S. Enviro Resources, Inc.
0000 Xxxxx Xxxxxxx
Xxxx Xxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
If to Holder, to it at:
SMD, L.L.C.
0000 Xxxxx Xxxx Tower
00 Xxxx Xxxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx
All notices and communications shall be effective as follows: When mailed,
upon three (3) business days after deposit in the mail (postage prepaid); when
telecopied, upon confirmed transmission of the telecopied notice; when hand
delivered, upon delivery; and when sent by overnight courier, the next
business day after deposit of the notice with the overnight courier.
13.7 Remedies. Any person having rights under any provision of
this Agreement will be entitled to enforce such rights specifically, to
recover damages caused by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.
DATED: September 30, 1996.
K.L.S. ENVIRO RESOURCES, INC.,
a Nevada corporation
By _______________________________
Xxxxxxx X. Xxxxxx, President
SMD, L.L.C.,
a Utah limited liability company
By_______________________________
Xxxxxx X. Xxxxxxx, Manager
