REGISTRATION RIGHTS AGREEMENT
Exhibit
10.3
This Registration Rights Agreement (the
“Agreement”) is made as of this 20th day of March, 2008 by and among Chapeau,
Inc., a Utah corporation (“Chapeau”), and TEFCO, LLC, a Virginia limited
liability company (“Shareholder”).
RECITALS
A. Chapeau and Shareholder entered into
that certain Turnkey Project Acquisition, Loan and Security Agreement dated as
of an even date herewith (the “Acquisition Agreement”), pursuant to which
Shareholder (i) received the Note, Option and Warrant and (ii) will receive
Interest Shares.
B Chapeau has agreed to grant to
Shareholder the registration rights described in this Agreement with respect to
the Registrable Securities, as defined below.
C. Capitalized terms not otherwise
defined herein shall have the meaning therefor, as set forth in the Acquisition
Agreement.
AGREEMENT
NOW, THEREFORE, Chapeau and the
Shareholders hereby covenant and agree as follows:
1. Definitions. As
used in this Agreement, the following terms shall have the following respective
meanings:
“Affiliate” shall have the meaning
therefor, as set forth in the Exchange Act.
“Anti-Dilution Event” shall mean any
issuance of Additional Stock without consideration or for consideration per
share less than the Purchase Price of any Registrable Securities then held by a
Holder.
“Commission” shall mean the United
States Securities and Exchange Commission, or any other federal agency at the
time administering the Securities Act.
“Exchange Act” shall mean the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the
time.
“Holder” shall mean the Shareholder and
any Affiliate thereof, including without limitation, any member of
Shareholder.
“Purchase Price” shall collectively
mean the Exercise Price of the shares of Common Stock underlying each of the
Option and the Warrant.
“Register,” “registered” and
“registration” each shall refer to a registration effected by preparing and
filing a registration statement or statements or similar documents in compliance
with the Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commission.
“Registrable Securities” shall mean (i)
the shares of Common Stock issuable (A) pursuant to the Option and the Warrant,
(B) in connection with the payment of interest due under the Note and (C) in
payment of the Facilities Fee, (ii) any and all Interest Shares
issuable pursuant to the terms of the Acquisition Agreement, (iii) any shares of
Common Stock held by any Holder, (iv) any additional shares of Common Stock
issued or issuable pursuant to any Anti-Dilution Event and (v) any security of
Chapeau exchangeable, convertible or exercisable into shares Common Stock issued
as a dividend or other distribution with respect to, in exchange for or in
replacement of such shares of Common Stock, including upon any stock split,
merger or similar transaction.
“Requisite Period” shall mean the
period commencing on the effective date of the registration statement and ending
on the earlier of (i) the date on which the sale of all Registrable Securities
covered thereby is completed and (ii) two (2) years after such effective
date.
“Rule 144” shall mean Rule 144 under
the Securities Act, or any similar or successor rules or regulations hereafter
adopted by the Commission.
“Rule 145” shall mean Rule 145 under
the Securities Act, or any similar or successor rules or regulations hereafter
adopted by the Commission.
“Securities
Act” shall mean the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the applicable time.
“Target Effective Date” shall mean the
date 180 days after the (i) Anticipated Filing Date and (ii) date that the
registration statement is actually filed with the Commission.
2. Registration. Chapeau
shall prepare and file a registration statement with the Commission with respect
to all Registrable Securities then held by Shareholder as soon as possible but
no later than one (1) year from the Closing Date (the “Anticipated Filing
Date”). Chapeau shall use its best efforts to have the registration statement
declared effective on or before the Target Effective Date and shall keep such
registration statement effective for the Requisite Period.
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3.
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Piggyback
Registration.
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(a) If
Chapeau at any time from the date of this Agreement through the fifth
anniversary of the Closing Date, proposes to register any of its securities
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with respect to
registration statements on Forms X-0, X-0 and any successor forms thereto as
well as registrations that do not permit secondary resales, a registration
relating to the offer and sale of debt securities, a registration relating to an
employee benefit plan, a registration relating to a corporation reorganization
or other Rule 145 transaction), each such time it will give written notice to
such effect to all holders of outstanding Registrable Securities at least thirty
(30) days prior to such filing. Upon the written request of any such
holder received by Chapeau within twenty (20) days after the provision of any
such notice by Chapeau to register any of its Registrable Securities, Chapeau
will cause the Registrable Securities as to which registration shall have been
so requested to be included in the securities to be covered by the registration
statement proposed to be filed by Chapeau, or to the extent required to permit
the sale or other disposition by the holder of such Registrable Securities so
registered (a "Piggyback Registration").
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(b) If
the registration of which Chapeau gives notice is for a registered public
offering involving a firm commitment underwriting, Chapeau shall so advise the
holders of Registrable Securities as a part of the written notice given pursuant
to Section 3(a). In such event, the right of any such holder to
registration pursuant to this Section 3 shall be conditioned upon such
holder’s participation in such underwriting and the inclusion of Registrable
Securities in the underwriting shall be limited to the extent provided
herein. All holders proposing to distribute their securities through
such underwriting shall (together with Chapeau and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by Chapeau.
(c) If
the underwriters advise Chapeau in writing that marketing factors require a
limitation of the number of shares to be underwritten, the underwriters may
exclude some or all of the Registrable Securities from such
registration statement in accordance with the following allocation: First, to
Chapeau for securities to be sold for its own account; second each Holder shall
have the right to include in such registration statement such number (but only
such number) of shares as shall bear the same relationship to the total number
of shares which the managing underwriter or underwriters will permit to be
included in such registration statement by any shareholder of Chapeau as the
number of shares owned by such Holder bears to the total number of shares owned
by all shareholders of Chapeau.
4. Registration
Procedures. In connection with the registration of any
Registrable Securities under the Securities Act, Chapeau will, as expeditiously
as possible:
(a) prepare
and file with the Commission a registration statement with respect to such
securities and use its best efforts to cause such registration statement to
become effective not later than the Target Effective Date and to remain
effective for the Requisite Period;
(b) prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for the Requisite Period
and comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such registration statement
in accordance with the intended method of disposition set forth in such
registration statement for such period;
(c) furnish
to each Holder and to each underwriter such number of copies of the registration
statement and the prospectus included therein (including each preliminary
prospectus) as such persons reasonably may request in order to facilitate the
intended disposition of the Registrable Securities covered by such registration
statement;
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(d) use
its best efforts (i) to register or qualify the Registrable Securities covered
by such registration statement under the securities or “blue sky” laws of such
jurisdictions as the Holders or, in the case of an underwritten public offering,
the managing underwriter, reasonably shall request, (ii) to prepare and file in
those jurisdictions such amendments (including post-effective amendments) and
supplements, and take such other actions, as may be necessary to maintain such
registration and qualification in effect at all times for the period of
distribution contemplated thereby and (iii) to take such further action as may
be necessary or advisable to enable the disposition of the Registrable
Securities in such jurisdictions, provided, that Chapeau shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) use
its best efforts to list the Registrable Securities covered by such registration
statement with any securities exchange on which the Common Stock of Chapeau is
then listed;
(f) immediately
notify each Holder and each underwriter under such registration statement, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event of which Chapeau has knowledge
as a result of which the prospectus contained in such registration statement, as
then in effect, includes any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing
and promptly amend or supplement such registration statement to correct any such
untrue statement or omission;
(g) notify
each Holder of the issuance by the Commission of any stop order suspending the
effectiveness of the registration statement or the initiation of any proceedings
for that purpose and make every reasonable effort to prevent the issuance of any
stop order and, if any stop order is issued, to obtain the lifting thereof at
the earliest possible time;
(h) if
the offering is an underwritten offering, enter into a written agreement with
the managing underwriter selected in the manner herein provided in such form and
containing such provisions as are usual and customary in the securities business
for such an arrangement between such underwriter and companies of Chapeau' size
and investment stature, including, without limitation, customary indemnification
and contribution provisions;
(i) if
the offering is an underwritten offering, at the request of any Holder, use its
best efforts to furnish to such Holder on the date that Registrable Securities
are delivered to the underwriters for sale pursuant to such registration: (i) a
copy of an opinion dated such date of counsel representing Chapeau for the
purposes of such registration, addressed to the underwriters, stating that such
registration statement has become effective under the Securities Act and that
(A) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Securities Act, (B) the
registration statement, the related prospectus and each amendment or supplement
thereof comply as to form in all material respects with the requirements of the
Securities Act (except that such counsel need not express any opinion as to
financial statements or other financial or statistical information contained
therein) and (C) to such other effects as reasonably may be requested by counsel
for the underwriters; and (ii) a copy of a letter dated such date from the
independent public accountants retained by Chapeau, addressed to the
underwriters, stating that they are independent public accountants within the
meaning of the Securities Act and that, in the opinion of such accountants, the
financial statements of Chapeau included in the registration statement or the
prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters
(including information as to the period ending no more than five business days
prior to the date of such letter) with respect to such registration as such
underwriters reasonably may request;
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(j) take
all actions reasonably necessary to facilitate the timely preparation and
delivery of certificates (not bearing any legend restricting the sale or
transfer of such securities) representing the Registrable Securities to be sold
pursuant to the registration statement and to enable such certificates to be in
such denominations and registered in such names as any Holder or underwriter may
reasonably request; and
(k) take
all other reasonable actions necessary to expedite and facilitate the
registration of the Registrable Securities pursuant to the registration
statement.
In
connection with each registration hereunder, the Holders of Registrable
Securities will furnish to Chapeau in writing such information with respect to
themselves and the proposed distribution by them as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.
5. Liquidated Damages.
If the registration statement is (a) not filed on or before the Anticipated
Filing Date and/or (b) not effective on or before the Target Effective Date then
Chapeau shall owe the Shareholder 0.5% of the value of the Registrable
Securities underlying such registration statement for each week, or portion
thereof, of delay in such filing and/or effectiveness, up to a maximum of 2% of
such value. Chapeau shall pay the liquidated damages noted above at the end of
each week during which such damages have accrued and, to the extent that such
damages are not paid when due, all unpaid amounts shall accrue dividends at a
rate equal to 8% per annum. Liquidated damages shall be paid to the Shareholder
by wire transfer of immediately available funds to the account designated
thereby. The parties hereto agree that the liquidated damages provided in this
Section 5 constitute a reasonable estimate as of the date hereof of the damages
that will be suffered by the Shareholder by reason of the registration statement
to be filed or to be declared effective, as the case may be, in accordance with
the terms of this Agreement. The right of Shareholder to receive liquidated
damages pursuant to this Section 5 is not intended to be and shall not be
construed to be an exclusive remedy and Shareholder shall have the right to
pursue any and all other available remedies at law or in equity for any breach
by Chapeau of any obligation under this Agreement. For purposes of this Section
5, the value of the Registrable Securities underlying a registration statement
shall be calculated based on the volume weighted average closing price per share
of Common Stock on the over the counter bulletin board, or such other exchange,
market or listing service on which shares of Common Stock trade subsequent to
the date of this Agreement, over the course of the thirty (30) day period prior
to the date of calculation of such liquidated damages.
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6.
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Expenses.
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All expenses incurred by Chapeau in
connection with the registration of Registrable Securities pursuant to this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for Chapeau, fees and expenses (including counsel fees) incurred in
connection with complying with state securities or “blue sky” laws, fees of the
National Association of Securities Dealers, Inc. (the “NASD”), and fees of
transfer agents and registrars and, in the event of a Piggyback Registration,
the reasonable fees and disbursements of one counsel for the Holders in an
aggregate amount not to exceed $25,000 (but excluding any Selling Expenses), are
called “Registration Expenses.” For purposes of this Agreement,
“Selling Expenses” include all underwriting discounts and selling commissions
applicable to the sale of Registrable Securities, as well as fees and
disbursements of counsel, if any, for the Holders. Chapeau will pay all
Registration Expenses in connection with any registration statement filed
hereunder, and the Selling Expenses in connection with each such registration
statement shall be borne by the participating Holders in proportion to the
number of Registrable Securities sold by each or as they may otherwise
agree.
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7.
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Indemnification and
Contribution.
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(a)
In the event of a registration of any of the Registrable Securities
under the Securities Act pursuant to the terms of this Agreement, Chapeau will
indemnify and hold harmless and pay and reimburse, each Holder thereunder, each
underwriter of such Registrable Securities thereunder and each other person, if
any, who controls such Holder or underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such Holder, underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Registrable Securities
were registered under the Securities Act pursuant hereto or any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation or alleged violation of
the Securities Act or any state securities or blue sky laws and will reimburse
each such Holder, each such underwriter and each such controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, that
Chapeau will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon Chapeau'
reliance on an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by any such
Holder, any such underwriter or any such controlling person in writing
specifically for use in such registration statement or prospectus, provided,
further, that the indemnity agreement contained in this Section 7(a)
shall not apply to amounts paid in settlement of any such loss, claims, damage,
liability or action if such settlement is effected without the
consent of Chapeau, which consent shall not be unreasonably withheld or
delayed. Furthermore, that Chapeau shall not be liable in any such
case to the extent that any such loss, claim, damage or liability (or action in
respect thereof) arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission in such registration statement,
which untrue statement or alleged untrue statement or omission or alleged
omission is completely corrected in an amendment or supplement to the
registration statement and the undersigned indemnitees thereafter fail to
deliver or cause to be delivered such registration statement as so amended or
supplemented prior to or currently with the sale of the Registrable Shares to
the person asserting such loss, claim, damage or liability (or actions in
respect thereof) or expense after Chapeau has timely furnished the undersigned
with the same.
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(b) In
the event of a registration of any of the Registrable Securities under the
Securities Act pursuant hereto each Holder thereunder, severally and not
jointly, will indemnify and hold harmless Chapeau, each person, if any, who
controls Chapeau within the meaning of the Securities Act, each officer of
Chapeau who signs the registration statement, each director of Chapeau, each
underwriter and each person who controls any underwriter within the meaning of
the Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which Chapeau or such officer, director, underwriter or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon reliance on any untrue statement or alleged untrue
statement of any material fact contained in the registration statement under
which such Registrable Securities were registered under the Securities Act
pursuant hereto or any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse Chapeau and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, that such Holder will be liable hereunder in any
such case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to such Holder, as such, furnished in
writing to Chapeau by such Holder specifically for use in such registration
statement or prospectus, and provided, that the liability of each Holder
hereunder shall be limited to the proceeds received by such Holder from the sale
of Registrable Securities covered by such registration statement.
Notwithstanding the foregoing, the indemnity provided in this Section 7(b) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of such
indemnified party, which consent shall not be unreasonably
withheld.
(c) Promptly
after receipt by an indemnified party hereunder of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party hereunder, notify the indemnifying party in
writing thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to such indemnified party other
than under this Section 7 and shall only relieve it from any liability which it
may have to such indemnified party under this Section 7 if and to the extent the
indemnifying party is materially prejudiced by such omission. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake 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 and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 7 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided that,
if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
based upon written advise of its counsel that there may be reasonable defenses
available to it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, then the
indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred.
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(d)
In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i) any
Holder exercising rights under this Agreement, or any controlling person of any
such Holder, makes a claim for indemnification pursuant to this Section 7 but it
is judicially determined (by the entry of a final judgment or decree by a court
of competent jurisdiction and the expiration of time to appeal or the denial of
the last right of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that this Section 7 provides for indemnification
in such case, or (ii) contribution under the Securities Act may be required on
the part of any such selling Holder or any such controlling person in
circumstances for which indemnification is provided under this Section 7; then,
and in each such case, Chapeau and such Holder will contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (after
contribution from others) in such proportion so that such Holder is responsible
for the portion represented by the percentage that the public offering price of
its Registrable Securities offered by the registration statement bears to the
public offering price of all securities offered by such registration statement,
and Chapeau is responsible for the remaining portion; provided that, in any such
case, (A) no such holder will be required to contribute any amount in excess of
the public offering price of all such Registrable Securities offered by it
pursuant to such registration statement and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation.
8. Changes in Capital
Stock. If, and as often as, there is any change in the
capital stock of Chapeau by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue as so changed.
9. Rule 144
Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, or
pursuant to a registration on Form S-3, at all times after ninety (90) days
after any registration statement covering a public offering or resale of
securities of Chapeau under the Securities Act shall have become effective,
Chapeau agrees to:
(a) make
and keep public information available, as those terms are understood and defined
in Rule 144 under the Securities Act;
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(b) file
with the Commission in a timely manner all reports and other documents required
of Chapeau under the Exchange Act; and
(c) furnish
to each holder of Registrable Securities forthwith upon request a written
statement by Chapeau as to its compliance with the reporting requirements of
such Rule 144 and of the Exchange Act, a copy of the most recent annual or
quarterly report of Chapeau, and such other reports and documents so filed by
Chapeau as such holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing such holder to sell any Registrable
Securities without registration.
10. Assignment of Registration
Rights. The rights to have Chapeau register Registrable
Securities pursuant to this Agreement may be assigned by the Shareholders to
transferees or assignees of such securities; provided that the transferees or
assignees have acquired at least 50,000 of the Registrable Securities from a
Shareholder in a transaction exempt from the registration requirements of
applicable federal and state securities laws, and Chapeau receives an opinion of
counsel reasonably satisfactory to Chapeau that such transaction is exempt from
such registration requirements; that Chapeau is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned and provided, further that the transferee
or assignee of such rights assumes in writing the obligations of such holder
under this Agreement. The term “Holder” as used in this Agreement shall include
such permitted assigns.
11. Anti-Dilution
Adjustments. Following an Anti-Dilution Event, the Purchase
Price for some or all of the Registrable Shares shall be subject to adjustment
from time to time as follows:
(a) Adjustment Formula. Whenever the
Purchase Price with respect to any Registrable Shares then held by a Holder is
adjusted pursuant to this Section 11, the new Purchase Price shall be determined
by multiplying such Purchase Price then in effect by a fraction, (x) the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance (the “Outstanding Common”)
plus the number of shares of Common Stock that the aggregate consideration
received by Chapeau for such issuance would purchase at such Purchase Price; and
(y) the denominator of which shall be the number of shares of Outstanding Common
plus the number of shares of such Additional Stock. For purposes of
the foregoing calculation, the term “Outstanding Common” shall include shares of
Common Stock deemed issued pursuant to Section 11(d) below.
(b) Definition of “Additional
Stock”. For purposes of
this Agreement, “Additional Stock”
shall mean any shares of Common Stock issued (or deemed to have been issued
pursuant to Section 11(d)) by Chapeau after the Closing Date) other
than
(i) Capital
stock (or options, warrants or rights therefor) issued pursuant to stock
dividends, stock splits or similar transactions;
(ii) Shares
of Common Stock issued or issuable to employees, consultants or directors of
Chapeau directly or pursuant to a stock option plan or restricted stock plan
approved by the Board of Directors of Chapeau;
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(iii) Shares
of Common Stock issuable upon conversion or exercise of convertible or
exercisable securities outstanding as of the Closing Date including, without
limitation, warrants, notes or options;
(iv) Capital
stock, or warrants, options or rights to purchase capital stock, issued in
connection with bona fide corporate partnering transactions, acquisitions,
mergers or similar transactions, the terms of which are approved by the Board of
Directors of Chapeau;
(v) Shares
of Common Stock issued or issuable upon exercise of the Option or the Warrant;
and
(vi) Shares
of capital stock issued to parties that are providing the Company with equipment
leases, real property leases, loans, credit lines, guaranties of indebtedness,
in each case which transactions are approved by the Board of Directors of
Chapeau, provided that, for purposes of this Section 11(b), the definition of
“Additional Stock” shall include issuances of the type and nature described in
this Section 11(b)(vi) on and after Chapeau has issued an aggregate of two
percent (2%) of its shares of capital stock then issued and outstanding pursuant
to the exception set forth herein.
(c) Determination of
Consideration. In the case of
the issuance of Common Stock for cash, the consideration shall be deemed to be
the amount of cash paid therefor before deducting any reasonable discounts,
commissions or other expenses allowed, paid or incurred by Chapeau for any
underwriting or otherwise in connection with the issuance and sale
thereof. In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
(d) Deemed Issuances of Common
Stock. In the case of
the issuance of securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly, additional shares of Common Stock
(the “Common Stock
Equivalents”), the following provisions shall apply for all purposes of
this Section 11:
(i) The
aggregate maximum number of shares of Common Stock deliverable upon conversion,
exchange or exercise (assuming the satisfaction of any conditions to
convertibility, exchangeability or exercisability, including, without
limitation, the passage of time, but without taking into account potential
anti-dilution adjustments) of any Common Stock Equivalents and subsequent
conversion, exchange or exercise thereof shall be deemed to have been issued at
the time such securities were issued or such Common Stock Equivalents were
issued and for a consideration equal to the consideration, if any, received by
Chapeau for any such securities and related Common Stock Equivalents (excluding
any cash received on account of accrued interest or accrued dividends), plus the
minimum additional consideration, if any, to be received by Chapeau (without
taking into account potential anti-dilution adjustments) upon the conversion,
exchange or exercise of any Common Stock Equivalents (the consideration in each
case to be determined in the manner provided in Section 11(c)).
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(ii) In
the event of any change in the number of shares of Common Stock deliverable or
in the consideration payable to Chapeau upon purchase, exchange or exercise of
any Common Stock Equivalents, other than a change resulting from the
anti-dilution provisions thereof, the relevant Purchase Price, to the extent in
any way affected by or computed using such Common Stock Equivalents, shall be
recomputed to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such consideration upon
the purchase, exchange or exercise of such Common Stock
Equivalents.
(iii) Upon
the termination or expiration of the convertibility, exchangeability or
exercisability of any Common Stock Equivalents, the Purchase Price, to the
extent in any way affected by or computed using such Common Stock Equivalents,
shall be recomputed to reflect the issuance of only the number of shares of
Common Stock (and Common Stock Equivalents that remain convertible, exchangeable
or exercisable) actually issued upon the conversion, exchange or exercise of
such Common Stock Equivalents.
(e) No Increased Purchase
Price. Notwithstanding
any other provisions of this Section 11, no adjustment of the Purchase Price
shall have the effect of increasing the Purchase Price above the Purchase Price
in effect immediately prior to such adjustment.
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14.
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Miscellaneous.
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(a) All
covenants and agreements contained in this Agreement by or on behalf of any of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto (including without limitation
transferees of any Registrable Securities), whether so expressed or
not.
(b) All
notices, requests, consents and other communications hereunder shall be in
writing and shall be delivered in person, mailed by certified or registered
mail, return receipt requested, or sent by telecopier, addressed (i) if to
Chapeau, at; (ii) if to any other party hereto, at the address of such party set
forth beneath such party's signature to this Agreement; and (iii) if to any
subsequent holder of Registrable Securities, to it at such address as may have
been furnished to Chapeau in writing by such holder; or, in any case, at such
other address or addresses as shall have been furnished in writing to Chapeau
(in the case of a holder of Registrable Securities) or to the holders of
Registrable Securities (in the case of Chapeau) in accordance with the
provisions of this paragraph.
(c) This
Agreement shall be governed by and construed in accordance with the laws of the
State of Virginia applicable to contracts entered into and to be performed
wholly within said State.
(d) All
disputes arising under or related to this Agreement shall be resolved via
arbitration in the manner set forth in Section 11.11 of the Acquisition
Agreement.
(e) This
Agreement may not be amended or modified without the written consent of Chapeau
and the holders of at least a majority of the Registrable
Securities.
(f) 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. No waiver shall be effective unless and until it is in writing
and signed by the party granting the waiver.
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(g) This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
(h) If
any provision of this Agreement shall be held to be illegal, invalid or
unenforceable, such illegality, invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render illegal, invalid
or unenforceable any other provision of this Agreement, and this Agreement shall
be carried out as if any such illegal, invalid or unenforceable provision were
not contained herein.
(i) The
obligations set forth in this Agreement shall terminate upon the earlier of (i)
the consummation of a Change in Control, as defined in the Acquisition
Agreement, (ii) the date that all Holders are eligible to sell all of
Registrable Securities under Rule 144 within any three month period and (iii)
the date that is six (6) years after the date of this Agreement.
IN WITNESS WHEREOF, the undersigned has
executed this Agreement as of the date first written above.
CHAPEAU,
INC.
By: /s/
Xxx X. Xxxxxxxx
Name: Xxx
X. Xxxxxxxx
Title: Chief
Executive Officer
SHAREHOLDER:
TEFCO,
LLC
By: /s/
Xxxx
Xxxxx
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Name:
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Xxxx
Xxxxx
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Title:
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Manager
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