REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
February 9, 2007, by and among Ascendia Brands, Inc. (f/k/a Cenuco, Inc.), a
Delaware corporation, with headquarters located at 000 Xxxxxxxx Xxxxx Xxxxxxxxx,
Xxxxx 000, Xxxxxxxx, XX 00000 (the "COMPANY"), and the undersigned buyers (each,
a "BUYER", and collectively, the "BUYERS").
WHEREAS:
A. In connection with the Second Amended and Restated Securities
Purchase Agreement by and among the Company, Prencen Lending LLC, a Delaware
limited liability company ("PRENCEN LENDING"), and Prencen LLC, a Delaware
limited liability company (the "EQUITY INVESTOR", and together with Prencen
Lending, the "ORIGINAL BUYERS"), dated as of June 30, 2006 (as amended from time
to time in accordance with its terms, the "ORIGINAL AMENDED SECURITIES PURCHASE
AGREEMENT"), the Company issued and sold to (i) Prencen Lending, a senior
secured convertible note of the Company (as amended from time to time in
accordance with its terms, the "ORIGINAL NOTE") which, among other things, is
convertible into shares of the Company's common stock, par value $0.001 per
share (the "COMMON STOCK") (as converted, collectively, the "ORIGINAL CONVERSION
SHARES"), and (ii) the Equity Investor, two series of warrants (as amended from
time to time in accordance with their terms, the "WARRANTS") which are
exercisable to purchase shares of Common Stock (as exercised, collectively, the
"WARRANT SHARES").
B. Contemporaneously with the execution and delivery of the Original
Securities Purchase Agreement, Xxxxxx Xxxxxxxxx, Xxxx Xxxxxxxxx and the Equity
Investor executed and delivered that certain Securities Purchase Agreement,
dated as of June 30, 2006 (the "XXXXXXXXX AGREEMENT"), whereby the Equity
Investor acquired shares of Common Stock (the "ORIGINAL XXXXXXXXX SHARES" and
such number of Original Xxxxxxxxx Shares held by the Equity Investor or its
affiliates as of the Closing Date, the "XXXXXXXXX SHARES").
C. The Company and the Original Buyers entered into that certain
Amendment and Exchange Agreement, dated as of December 27, 2006 (as amended by
Amendment No. 1 to the Amendment and Exchange Agreement, dated as of December
29, 2006, by and among the Company and the Original Buyers, the "COMMON EXCHANGE
AGREEMENT"), pursuant to which the Equity Investor exchanged certain Common
Stock of the Company held by the Equity Investor for Series B Convertible
Preferred Stock of the Company and Series B-1 Convertible Preferred Stock of the
Company (collectively, the "PREFERRED SHARES") which are, among other things,
convertible into Common Stock (as converted, collectively, the "PREFERRED
CONVERSION SHARES").
D. Contemporaneously with the Common Exchange Agreement, the Company
and the Original Buyers executed and delivered the Second Amended and Restated
Registration Rights Agreement, dated as of December 27, 2006, (the "EXISTING
REGISTRATION RIGHTS AGREEMENT") which amended and restated that certain Amended
and Restated Registration Rights Agreement, dated as of August 2, 2006 (as
amended prior to the date of the Existing Registration Rights Agreement, the
"ORIGINAL AMENDED REGISTRATION RIGHTS
AGREEMENT"), by and among the Company and the Original Buyers, pursuant to which
the Company agreed to provide certain registration rights with respect to the
Registrable Securities (as defined in the Existing Registration Rights
Agreement) under the Securities Act of 1933, as amended (the "1933 ACT"), and
the rules and regulations promulgated thereunder, and applicable state
securities laws.
E. The Company and the Original Buyers entered into that certain
Amendment Agreement, dated as of December 30, 2006 (the "NOTE AMENDMENT
AGREEMENT"), whereby, among other things, the Company amended and restated the
Original Note and issued to Prencen Lending an Amended and Restated Senior
Secured Convertible Note (the "AMENDED NOTE").
F. The Company has authorized a new series of secured convertible
notes of the Company to be issued in accordance with each of the Securities
Purchase Agreements (as defined below).
G. Contemporaneously herewith, the Company and the Original Buyers
are entering into that certain Third Amended and Restated Securities Purchase
Agreement of even date herewith (the "PRENCEN SECURITIES PURCHASE Agreement"),
which will amend and restate the Second Amended and Restated Securities Purchase
Agreement, pursuant to which the Company will redeem a portion of the Amended
Note and the remaining $76,000,000 in principal amount of the Amended Note will
be surrendered and cancelled in exchange for the Company issuing to Prencen
Lending a new series of secured convertible notes of the Company (the "PRENCEN
NOTES") which, among other things, will be convertible into shares of Common
Stock in accordance with the terms of the Prencen Notes (as converted,
collectively, the "PRENCEN CONVERSION SHARES") and issued to Prencen Lending
under the terms and conditions of the Prencen Securities Purchase Agreement.
H. Contemporaneously herewith, the Company, Watershed Capital
Partners, L.P. ("WCP") and Watershed Capital Institutional Partners, L.P.
(together with WCP, "WATERSHED") are entering into that certain Securities
Purchase Agreement of even date herewith (the "WATERSHED SECURITIES PURCHASE
Agreement", and together with the Prencen Securities Purchase Agreement, the
"SECURITIES PURCHASE AGREEMENTS"), pursuant to which the Company will issue and
sell to Watershed, a new series of secured convertible notes of the Company (the
"WATERSHED NOTES", and together with the Prencen Notes, the "NOTES") which,
among other things, will be convertible into shares of Common Stock in
accordance with the terms of the Watershed Notes (as converted, collectively,
the "WATERSHED CONVERSION SHARES", and together with the Prencen Conversion
Shares, the "CONVERSION SHARES"). The terms and provisions of the Watershed
Notes and the Prencen Notes are substantially identical except for the right of
Special Redemption (as defined in the Prencen Notes) as set forth in Section
9(b) of the Prencen Notes.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Buyers hereby agree as follows:
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1. DEFINITIONS.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreements. As
used in this Agreement, the following terms shall have the following meanings:
a. "ADDITIONAL EFFECTIVE DATE" means the date the applicable
Additional Registration Statement is declared effective by the SEC.
b. "ADDITIONAL EFFECTIVENESS DEADLINE" means the date which is
60 days after the applicable Additional Filing Deadline for the applicable
Additional Registration Statement, or if there is a full review of such
Additional Registration Statement by the SEC, 90 days after the applicable
Additional Filing Deadline for such Additional Registration Statement.
c. "ADDITIONAL FILING DATE" means the date on which the
applicable Additional Registration Statement is filed with the SEC.
d. "ADDITIONAL FILING DEADLINE" means the earlier of (i) six
(6) months from the Effectiveness Date of the immediately preceding Registration
Statement filed hereunder and (ii) the first date on which the SEC shall permit,
or not object to, the filing of any Additional Registration Statement.
e. "ADDITIONAL REGISTRABLE SECURITIES" means (i) any Cutback
Shares not previously included on a Registration Statement hereunder and (ii)
any share capital of the Company issued or issuable with respect to the Cutback
Shares as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise, without regard to any limitations on
conversion of the Notes or Preferred Shares or exercise of the Warrants.
f. "ADDITIONAL REGISTRATION STATEMENT" means a registration
statement or registration statements of the Company filed under the 1933 Act
covering any Additional Registrable Securities.
g. "ADDITIONAL REQUIRED REGISTRATION AMOUNT" means all of the
Cutback Shares not previously included on a Registration Statement, subject to
adjustment as provided in Section 2.2(e), without regard to any limitations on
conversion of the Notes or Preferred Shares or exercise of the Warrants.
h. "BUSINESS DAY" means any day other than Saturday, Sunday or
any other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.
i. "CLOSING DATE" shall have the meaning set forth in the
Prencen Securities Purchase Agreement (which is identical to the Closing Date in
the Watershed Securities Purchase Agreement).
j. "CUTBACK SHARES" means any of the Initial Required
Registration Amount of Registrable Securities not included in all Registration
Statements previously declared
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effective hereunder as a result of a limitation on the maximum number of shares
of Common Stock of the Company permitted to be registered by the staff of the
SEC.
k. "DEMAND REGISTRATION" shall mean a registration required to
be effected by the Company pursuant to Section 2.1.
l. "DEMAND REGISTRATION STATEMENT" shall mean a registration
statement of the Company which covers the Registrable Securities requested to be
included therein pursuant to the provisions of Section 2.1 and all amendments
and supplements to such registration statement, including post-effective
amendments, in each case including the prospectus contained therein, all
exhibits thereto and all material incorporated by reference (or deemed to be
incorporated by reference) therein.
m. "EFFECTIVE DATE" means the Initial Effective Date or the
Additional Effective Date, as applicable.
n. "EFFECTIVENESS DEADLINE" means the Initial Effectiveness
Deadline or the Additional Effectiveness Deadline, as applicable.
o. "FILING DATE" means the Initial Filing Date or the
Additional Filing Date, as applicable.
p. "FILING DEADLINE" means the Initial Filing Deadline or the
Additional Filing Deadline, as applicable.
q. "HOLDER" means any holder of Registrable Securities.
r. "HOLDERS' COUNSEL" shall mean, in the case of a Demand
Registration, one firm of counsel (per registration) to the Holders of
Registrable Securities participating in such registration, which counsel shall
be selected by the Initiating Holders holding a majority of the Registrable
Securities for which registration was requested in the Request.
s. "INITIAL EFFECTIVE DATE" means the date that the Initial
Registration Statement has been declared effective by the SEC.
t. "INITIAL EFFECTIVENESS DEADLINE" means the date which is
(i) in the event the Registration Statement is not subject to a full review by
the SEC, 60 days after the Initial Filing Deadline or (ii) in the event the
Registration Statement is subject to a full review by the SEC, 90 days after the
Initial Filing Deadline.
u. "INITIAL FILING DATE" means the date on which the Initial
Registration Statement is filed with the SEC.
v. "INITIAL FILING DEADLINE" means June 30, 2007.
w. "INITIAL REGISTRABLE SECURITIES" means (i) the Conversion
Shares issued or issuable upon conversion of the Notes, (ii) the New Conversion
Shares, (iii) the Preferred Conversion Shares issued or issuable upon conversion
of the Preferred Shares, (iv) the
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Warrant Shares issued or issuable upon exercise of the Warrants, (v) the
Xxxxxxxxx Shares, (vi) any Common Stock currently held or subsequently acquired
by the Buyers, and (vii) any capital stock of the Company issued or issuable,
with respect to the Notes, the New Securities, the New Conversion Shares, the
Preferred Shares, the Conversion Shares, the Preferred Conversion Shares, the
Warrant Shares, the Xxxxxxxxx Shares or the Warrants as a result of any stock
split, stock dividend, recapitalization, exchange or similar event, without
regard to any limitations on conversion of the Notes or the Preferred Shares
and/or exercise of the Warrants, in each case other than Cutback Shares.
x. "INITIAL REGISTRATION STATEMENT" means a registration
statement or registration statements of the Company filed under the 1933 Act
covering the Initial Registrable Securities.
y. "INITIAL REQUIRED REGISTRATION AMOUNT" means 130% of the
sum of (i) the maximum number of Conversion Shares issued or issuable pursuant
to the Notes, as of the trading day immediately preceding the applicable date of
determination, (ii) the maximum number of Preferred Conversion Shares issued or
issuable pursuant to the Preferred Shares, as of the trading day immediately
preceding the applicable date of determination, (iii) the number of Xxxxxxxxx
Shares and (iv) the maximum number of Warrant Shares issued and issuable
pursuant to the Warrants as of the trading day immediately preceding the
applicable date of determination (subject to adjustment for stock splits and
stock dividends and without regard to any limitations on conversion of the Notes
or Preferred Shares or the exercise of the Warrants), all subject to adjustment
as provided in Section 2.2 (e), in each case other than Cutback Shares.
z. "INITIATING HOLDERS" shall mean, with respect to a
particular registration, the Holders who initiated the Request for such
registration.
aa. "INVESTOR" means a Buyer or any transferee or assignee of
the Notes, Preferred Shares, Xxxxxxxxx Shares or Warrants, as applicable, to
whom a Buyer assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9 and any
transferee or assignee thereof to whom a transferee or assignee of the Notes,
Preferred Shares, Xxxxxxxxx Shares or Warrants, as applicable, assigns its
rights under this Agreement and who agrees to become bound by the provisions of
this Agreement in accordance with Section 9.
bb. "NEW CONVERSION SHARES" means the shares of the Company's
Common Stock issued or issuable upon conversion of the New Securities.
cc. "NEW SECURITIES" shall have the meaning given to such term
in the Notes.
dd. "NOTEHOLDERS" means the holders of the Notes, the
Conversion Shares, the New Securities and/or the New Conversion Shares that are
party hereto or who have agreed to become bound by the provisions of this
Agreement in accordance with Section 9.
ee. "OTHER INVESTORS" shall have the meaning set forth in
section 2.2(c).
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ff. "OTHER INVESTOR PERCENTAGE" means the percentage
determined by dividing the number of Other Registrable Securities held by such
Other Investor (on an as converted, fully-diluted basis and without giving
effect to any exercise or conversion limitations contained in any such
convertible or exercisable securities held by such Other Investor) by the
aggregate of the number of Other Regstrable Securities and Registrable
Securities held by the Other Investors and the Investors (each on an as
converted, fully-diluted basis and without giving effect to any exercise or
conversion limitations contained in any such convertible or exercisable
securities held by any such party).
gg. "OTHER REGISTRABLE SECURITIES" shall have the meaning set
forth in Section 2.2(c).
hh. "PERSON" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and/or a government or any department or agency
thereof.
ii. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 and the
declaration of effectiveness of such Registration Statement(s) by the SEC.
jj. "REGISTRATION EXPENSES" shall mean any and all expenses
incident to performance of or compliance with this Agreement by the Company and
its subsidiaries, including, without limitation (i) all SEC, stock exchange,
NASD and other registration, listing and filing fees, (ii) all fees and expenses
incurred in connection with compliance with state securities or blue sky laws
and compliance with the rules of any stock exchange (including fees and
disbursements of counsel in connection with such compliance and the preparation
of a blue sky memorandum and legal investment survey), (iii) all expenses of any
Persons in preparing or assisting in preparing, word processing, printing,
distributing, mailing and delivering any Registration Statement, any prospectus,
any underwriting agreements, transmittal letters, securities sales agreements,
securities certificates and other documents relating to the performance of or
compliance with this Agreement, (iv) the fees and disbursements of counsel for
the Company, (v) the fees and disbursements of Holders' Counsel, (vi) the fees
and disbursements of all independent public accountants (including the expenses
of any audit and/or "cold comfort" letters) and the fees and expenses of other
Persons, including experts, retained by the Company, (vii) the expenses incurred
in connection with making road show presentations and holding meetings with
potential investors to facilitate the distribution and sale of Registrable
Securities which are customarily borne by the issuer, (viii) any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities, and (ix) premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Registrable Securities
being registered; PROVIDED, HOWEVER, Registration Expenses shall not include
discounts and commissions payable to underwriters, selling brokers, dealer
managers or other similar Persons engaged in the distribution of any of the
Registrable Securities; and PROVIDED FURTHER, that in any case where
Registration Expenses are not to be borne by the Company, such expenses shall
not include salaries of Company personnel or general overhead expenses of the
Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company or other expenses for the
preparation of
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financial statements or other data normally prepared by the Company in the
ordinary course of its business or which the Company would have incurred in any
event; and PROVIDED, FURTHER, that in the event the Company shall, in accordance
with Section 2.2 or Section 3(r) hereof, not register any securities with
respect to which it had given written notice of its intention to register to
Holders, notwithstanding anything to the contrary in the foregoing, all of the
costs incurred by such Holders in connection with such registration shall be
deemed to be Registration Expenses.
kk. "REGISTRABLE SECURITIES" means the Initial Registrable
Securities and the Additional Registrable Securities.
ll. "REGISTRATION STATEMENT" means a registration statement or
registration statements of the Company filed under the 1933 Act covering the
Registrable Securities.
mm. "REQUEST" shall have the meaning set forth in Section
2.1(a).
nn. "REQUIRED HOLDERS" means the holders of at least a
majority of the Registrable Securities.
oo. "REQUIRED HOLDERS OF THE REGISTRATION" shall mean, with
respect to a particular registration, one or more Holders of Registrable
Securities who would hold a majority of the Registrable Securities to be
included in such registration.
pp. "REQUIRED REGISTRATION AMOUNT" means either the Initial
Required Registration Amount or the Additional Required Registration Amount, as
applicable.
qq. "RULE 415" means Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous or delayed
basis.
rr. "SEC" means the United States Securities and Exchange
Commission.
ss. "UNDERWRITERS" shall mean the underwriters, if any, of the
offering being registered under the Securities Act.
tt. "UNDERWRITTEN OFFERING" shall mean a sale of securities of
the Company to an Underwriter or Underwriters for reoffering to the public.
uu. "WITHDRAWN DEMAND REGISTRATION" shall have the meaning set
forth in Section 2.1(a).
vv. "WITHDRAWN REQUEST" shall have the meaning set forth in
Section 2.1(a).
2. Registration.
2.1 DEMAND REGISTRATION
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a. RIGHT TO DEMAND REGISTRATION. (i) Subject to Section
2.1(c), at any time or from time to time after the date that is nine (9) months
after the Closing Date, the Required Holders shall have the right to request in
writing that the Company register all or part of such Required Holders'
Registrable Securities (a "REQUEST") by filing with the SEC a Demand
Registration Statement.
(1) Each Request shall specify the amount of Registrable
Securities intended to be disposed of by such Holders and the intended method of
disposition thereof.
(2) As promptly as practicable, but no later than 10
days after receipt of a Request, the Company shall give written notice of such
requested registration to all other Holders of Registrable Securities and the
Other Investors.
(3) Subject to Section 2.1(b), the Company shall include
in a Demand Registration (i) the Registrable Securities intended to be disposed
of by the Initiating Holders, (ii) the Registrable Securities intended to be
disposed of by any other Holder which shall have made a written request (which
request shall specify the amount of Registrable Securities to be registered and
the intended method of disposition thereof) to the Company for inclusion thereof
in such registration within ten (10) days after the receipt of such written
notice from the Company and (iii) the Other Registrable Securities intended to
be disposed of by any Other Investor which shall have made a written request
(which request shall specify the amount of Other Registrable Securities to be
registered and the intended method of disposition thereof) to the Company for
inclusion thereof in such registration within ten (10) days after the receipt of
such written notice from the Company.
(4) RIGHT TO DEMAND REGISTRATION. The Company, as
expeditiously as possible following a Request, shall use its best efforts to
cause to be filed with the SEC a Demand Registration Statement providing for the
registration under the 1933 Act of the Registrable Securities which the Company
has been so requested to register by all such Holders, to the extent necessary
to permit the disposition of such Registrable Securities so to be registered in
accordance with the intended methods of disposition thereof specified in such
Request or further requests.
(5) The Company shall use its best efforts to have such
Demand Registration Statement declared effective by the SEC as soon as
practicable thereafter and to keep such Demand Registration Statement
continuously effective until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the seller(s) thereof set forth in such Demand Registration Statement; PROVIDED,
such period need not extend beyond nine months after the effective date of the
Demand Registration Statement; and PROVIDED, FURTHER, that with respect to any
Demand Registration Statement, such period need not extend beyond the
Registration Period, and which period, in any event, shall terminate when all
Registrable Securities covered by such Demand Registration Statement have been
sold (but not before the expiration of the 90 day period referred to in
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Section 4(3) of the Securities Act and Rule 174 thereunder, if applicable) (the
"DEMAND REGISTRATION PERIOD").
(ii) A Request may be withdrawn prior to the filing of the Demand
Registration Statement by the Required Holders of the Registration (a "WITHDRAWN
REQUEST") and a Demand Registration Statement may be withdrawn prior to the
effectiveness thereof by the Required Holders of the Registration (a "WITHDRAWN
DEMAND REGISTRATION") and such withdrawals shall be treated as a Demand
Registration which shall have been effected pursuant to this Section 2.1, unless
the Required Holders of Registrable Securities to be included in such
Registration Statement reimburse the Company for its reasonable out-of-pocket
Registration Expenses relating to the preparation and filing of such Demand
Registration Statement (to the extent actually incurred); PROVIDED; HOWEVER,
that if a Withdrawn Request or Withdrawn Demand Registration is made because of
a material adverse change in the business or financial condition of the Company,
then such withdrawal shall not be treated as a Demand Registration effected
pursuant to this Section 2.1 (and shall not be counted toward the number of
Demand Registrations to which such Holders are entitled), and the Company shall
pay all Registration Expenses in connection therewith. Any Holder requesting
inclusion in a Demand Registration may, at any time prior to the effective date
of the Demand Registration Statement (and for any reason), revoke such request
by delivering written notice to the Company revoking such requested inclusion.
(iii) The registration rights granted pursuant to the provisions of
this Section 2.1 shall be in addition to the registration rights granted
pursuant to the other provisions of Section 2 hereof.
b. PRIORITY IN DEMAND REGISTRATIONS. If a Demand Registration
involves an Underwritten Offering, and the sole or lead managing Underwriter, as
the case may be, of such Underwritten Offering shall advise the Company in
writing (with a copy to each Holder requesting registration) on or before the
date five days prior to the date then scheduled for such offering that, in its
opinion, the amount of Registrable Securities and Other Registrable Securities,
if any, requested to be included in such Demand Registration exceeds the number
which can be sold in such offering within a price range acceptable to the
Required Holders of the Registration (such writing to state the basis of such
opinion and the approximate number of Registrable Securities and Other
Registrable Securities which may be included in such offering), the Company
shall include in such Demand Registration, to the extent of the number which the
Company is so advised may be included in such offering without such effect, the
Registrable Securities and Other Registrable Securities requested to be included
in the Demand Registration by the Holders and the Other Investors allocated (x)
first among the Noteholders and the Other Investors, (I) with the Other
Investors being entitled to the Other Investor Percentage of such Demand
Registration and (II) with the Noteholders dividing the remainder of such Demand
Registration pro rata based on the number of (i) Conversion Shares and New
Conversion Shares issued or issuable upon conversion of the Notes and the New
Securities, respectively, held by each Noteholder and (ii) shares of any capital
stock of the Company issued or issuable, with respect to Notes held by each
Noteholder (the "NOTE REGISTRABLE SECURITIES") as adjusted to be in proportion
to the number of Note Registrable Securities requested to be included in such
Demand Registration by each of them (on an as converted, fully-diluted basis and
without giving effect to any conversion limitations contained in the Notes held
by any such party) and (y)
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second, to the extent to which any shares remain after all of the Note
Registrable Securities requested to be included in such Demand Registration are
covered by such Registration Statement, pro rata among the Investors and the
Other Investors based on the number of Registrable Securities (other than Note
Registrable Securities) and Other Registrable Securities held by each Investor
and Other Investor (on an as converted, fully-diluted basis and without giving
effect to any exercise or conversion limitations contained in any such
convertible or exercisable securities held by any such party). In the event the
Company shall not, by virtue of this Section 2.1(b), include in any Demand
Registration all of the Registrable Securities of any Holder requesting to be
included in such Demand Registration, such Holder, upon written notice to the
Company given within five days of the time such Holder first is notified of such
matter, may reduce the amount of Registrable Securities it desires to have
included in such Demand Registration, whereupon only the Registrable Securities,
if any, it desires to have included will be so included and the Holders not so
reducing and the Other Investors shall be entitled to a corresponding increase
in the amount of Registrable Securities or Other Registrable Securities, as
applicable, to be included in such Demand Registration.
c. LIMITATIONS ON REGISTRATIONS. The rights of Holders of
Registrable Securities to request Demand Registrations pursuant to Section
2.1(a) are subject to the following limitations:
(1) in no event shall the Company be required to effect a
Demand Registration unless the reasonably anticipated aggregate offering price
to the public of all Registrable Securities for which registration has been
requested by Holders, together with any shares sold by the Company for its own
account, will be at least $5,000,000;
(2) in no event shall the Company be required to effect a
Demand Registration prior to 91 calendar days after a prior Demand Registration
Statement is declared effective by the SEC; and
(3) in no event shall the Company be required to effect a
Demand Registration at any time during the period commencing with the filing of
the Initial Registration Statement or the Additional Registration Statement with
the SEC and ending with the earlier of (x) the effectiveness of the Initial
Registration Statement or the Additional Registration Statement, as applicable,
and (y) the applicable Effectiveness Deadline.
(4) in no event shall the Company be required to effect, in
the aggregate, more than three Demand Registrations; PROVIDED, HOWEVER, that
such number shall be increased to the extent the Company does not include in
what would otherwise be the final registration the number of Registrable
Securities requested to be registered by the Holders by reason of SECTION
2.1(B).
d. UNDERWRITING.
(1) SELECTION OF UNDERWRITERS. Notwithstanding anything to the
contrary contained in Section 2.1(a), if the Initiating Holders holding a
majority of the Registrable Securities for which registration was requested in
the Request so elect, the offering of such Registrable Securities pursuant to
such Demand Registration shall be in the form of a
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firm commitment Underwritten Offering; and such Initiating Holders may require
that all Persons (including other Holders) participating in such registration
sell their Registrable Securities to the Underwriters at the same price and on
the same terms of underwriting applicable to the Initiating Holders. If any
Demand Registration involves an Underwritten Offering, the sole or managing
Underwriters and any additional investment bankers and managers to be used in
connection with such registration shall be selected by the Initiating Holders
holding a majority of the Registrable Securities (so long as such Underwriter is
not affiliated with any such majority holders) for which registration was
requested in the Request, subject to the approval of the Company (such approval
not to be unreasonably withheld or delayed).
(2) UNDERWRITING AGREEMENTS. If requested by the sole or lead
managing Underwriter for any Underwritten Offering effected pursuant to a Demand
Registration the Company shall enter into a customary underwriting agreement
with the Underwriters for such offering, such agreement to be reasonably
satisfactory in substance and form to the Required Holders of the Registration.
(3) HOLDERS OF REGISTRABLE SECURITIES TO BE PARTIES TO
UNDERWRITING AGREEMENT. The Holders of Registrable Securities to be distributed
by Underwriters in an Underwritten Offering contemplated by Section 2.1(a) shall
be parties to the underwriting agreement between the Company and such
Underwriters and may, at such Holders' option, require that any or all of the
conditions precedent to the obligations of such Underwriters under such
underwriting agreement be conditions precedent to the obligations of such
Holders of Registrable Securities. No Holder shall be required to make any
representations or warranties to, or agreements with, the Company or the
Underwriters other than representations, warranties or agreements regarding such
Holder, such Holder's Registrable Securities and such Holder's intended method
of disposition.
(4) PARTICIPATION IN UNDERWRITTEN REGISTRATION.
Notwithstanding anything herein to the contrary, no Person may participate in
any Underwritten Offering hereunder unless such Person (i) agrees to sell its
securities on the same terms and conditions provided in any underwritten
arrangements approved by the Persons entitled hereunder to approve such
arrangement and (ii) accurately completes and executes in a timely manner all
questionnaires, powers of attorney, indemnities, custody agreements,
underwriting agreements and other documents customary for such an offering and
reasonably required under the terms of such underwriting arrangements.
(5) In no event shall the Company be required to effect more
than three Underwritten Offerings.
e. REGISTRATION OF OTHER SECURITIES. Whenever the Company shall
effect a Demand Registration, no securities other than the Registrable
Securities and Other Registrable Securities shall be covered by such
registration unless (a) the Required Holders of the Registration shall have
consented in writing to the inclusion of such other securities and (b) no holder
of Registrable Securities is unable to include any of its Registrable Securities
requested for inclusion in such registration by reason of SECTION 2.1(B).
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f. EFFECTIVE REGISTRATION STATEMENT; SUSPENSION. A Demand
Registration Statement shall not be deemed to have become effective (and the
related registration will not be deemed to have been effected) (i) unless it has
been declared effective by the SEC and remains effective in compliance with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities covered by such Demand Registration Statement for the Demand
Registration Period, (ii) if the offering of any Registrable Securities pursuant
to such Demand Registration Statement is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, or (iii) if, in the case of an Underwritten Offering, the
conditions to closing specified in an underwriting agreement to which the
Company is a party are not satisfied other than by the sole reason of any breach
or failure by the Holders of Registrable Securities or are not otherwise waived.
g. OTHER REGISTRATIONS. During the period (i) beginning on the date
of a Request and (ii) ending on the date that is 90 days after the date that a
Demand Registration Statement filed pursuant to such Request has been declared
effective by the SEC or, if the Required Holders of the Registration shall
withdraw such Request or such Demand Registration Statement, on the date of such
Withdrawn Request or such Withdrawn Registration Statement, the Company shall
not, without the consent of the Required Holders of the Registration, file a
registration statement pertaining to any other securities of the Company (other
than a registration relating solely to the sale of securities to participants in
a Company employee stock or similar plan on Form S-8).
h. REGISTRATION STATEMENT FORM. Registrations under this Section 2.1
shall be on such appropriate registration form of the SEC (i) as shall be
selected by the Initiating Holders holding a majority of the Registrable
Securities for which registration was requested in the Request, and (ii) which
shall be available for the sale of Registrable Securities in accordance with the
intended method or methods of disposition specified in the requests for
registration. The Company agrees to include in any such Registration Statement
all information which any selling Investor Holder, upon advice of counsel, shall
reasonably request.
2.2 REQUIRED REGISTRATION.
a. INITIAL MANDATORY REGISTRATION. The Company shall prepare,
and, as soon as practicable, but in no event later than the Initial Filing
Deadline, file with the SEC the Initial Registration Statement on Form S-3
covering the resale of all of the Initial Registrable Securities. In the event
that Form S-3 is unavailable for such a registration, the Company shall use such
other form as is available for such a registration and reasonably acceptable to
the Required Holders, subject to the provisions of Section 2.2(e). The Initial
Registration Statement prepared pursuant hereto shall register for resale at
least the number of shares of Common Stock equal to the lesser of (x) the
Initial Required Registration Amount determined as of the date the Initial
Registration Statement is initially filed with the SEC and (y) the maximum
number of shares of Common Stock of the Company permitted to be registered
therein by the staff of the SEC. The Initial Registration Statement shall
contain (except if otherwise directed by the Required Holders) the "SELLING
STOCKHOLDERS" and "PLAN OF DISTRIBUTION" sections in substantially the form
attached hereto as EXHIBIT B. The Company shall use its best efforts to have the
Initial Registration Statement declared effective by the SEC as soon as
practicable, but in no event later than the Initial Effectiveness Deadline. By
9:30 a.m. on the Business Day following the Initial
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Effective Date, the Company shall file with the SEC in accordance with Rule 424
under the 1933 Act the final prospectus to be used in connection with sales
pursuant to such Initial Registration Statement.
b. ADDITIONAL MANDATORY REGISTRATIONS. To the extent that all
the Registrable Securities have not been previously registered on a Registration
Statement hereunder, the Company shall prepare, and, as soon as practicable but
in no event later than the Additional Filing Deadline, file with the SEC an
Additional Registration Statement on Form S-3 covering the resale of all of the
Additional Registrable Securities. In the event that Form S-3 is unavailable for
such a registration, the Company shall use such other form as is available for
such a registration and reasonably acceptable to the Required Holders, subject
to the provisions of Section 2.2(e). Each Additional Registration Statement
prepared pursuant hereto shall register for resale the lesser of (x) the
Additional Required Registration Amount determined as of the date the applicable
Additional Registration Statement is initially filed with the SEC and (y) the
maximum number of shares of Common Stock of the Company permitted to be
registered therein by the staff of the SEC. Each Additional Registration
Statement shall contain (except if otherwise directed by the Required Holders)
the "SELLING STOCKHOLDERS" and "PLAN OF DISTRIBUTION" sections in substantially
the form attached hereto as EXHIBIT B, provided that, subject to Section 3(c),
the information to be included in the Selling Stockholders section which relates
to a Holder shall be subject to the approval of such Holder, and the Company
shall make any changes to such section and the Plan of Distribution section that
are reasonably requested by such Holder. The Company shall use its best efforts
to have each Additional Registration Statement declared effective by the SEC as
soon as practicable, but in no event later than the Additional Effectiveness
Deadline for such Additional Registration Statement. By 9:30 a.m. on the
Business Day following each Additional Effective Date, the Company shall file
with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus
to be used in connection with sales pursuant to such Additional Registration
Statement. To the extent the staff of the SEC does not permit all previously
unregistered Additional Registrable Securities to be registered on any
Additional Registration Statement, the Company successively shall file
Additional Registration Statements in accordance with the terms of this Section
2.2(b) until such time as all Registrable Securities hereunder have been
registered with the SEC.
c. ALLOCATION OF REGISTRABLE SECURITIES. In no event shall the
Company include any securities other than Registrable Securities on any
Registration Statement without the prior written consent of the Required Holders
except for the securities required to be registered by the Company pursuant to
the Coty Registration Rights Agreement (as defined in the Securities Purchase
Agreement) (such additional securities required to be registered pursuant to the
Coty Registration Rights Agreement, the "OTHER REGISTRABLE SECURITIES", and the
registered holders of such Other Registrable Securities, the "OTHER INVESTORS").
The initial number of Registrable Securities and Other Registrable Securities
included in any Registration Statement and any increase in the number of
Registrable Securities or Other Registrable Securities included therein shall
first be allocated among the Other Investors and the Noteholders (x) with the
Other Investors being entitled to the Other Investor Percentage of such number
of Registrable Securities and Other Registrable Securities and (y) with the
Noteholders dividing the remainder of such number of Registrable Securities and
Other
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Registrable Securities pro rata based on the number of Note Registrable
Securities held by each Noteholder at the time the Registration Statement
covering such initial number of Registrable Securities and Other Registrable
Securities or increase thereof is declared effective by the SEC, and any of such
number of Registrable Securities and Other Registrable Securities included in
such Registration Statement and any increase in such number of Registrable
Securities or Other Registrable Securities included therein that remains after
all of the Note Registrable Securities are covered by such Registration
Statement shall then be allocated pro rata among the Investors and the Other
Investors based on the number of Registrable Securities (other than Note
Registrable Securities) and Other Registrable Securities held by each Investor
and Other Investor at the time such Registration Statement is declared effective
by the SEC. In the event that an Investor sells or otherwise transfers any of
such Investor's Registrable Securities, each transferee that becomes an Investor
shall be allocated a pro rata portion of the then remaining number of
Registrable Securities included in such Registration Statement for such
transferor. Any shares of Common Stock included in a Registration Statement and
which remain allocated to any Person which ceases to hold any Registrable
Securities or Other Registrable Securities covered by such Registration
Statement shall first be allocated to the remaining Noteholders, pro rata based
on the number of Note Registrable Securities then held by such Noteholders which
are covered by such Registration Statement, and any such shares of Common Stock
to be reallocated that remain after all of the Note Registrable Securities are
covered by such Registration Statement shall then be allocated to the remaining
Investors and Other Investors, pro rata based on the number of Registrable
Securities (other than Note Registrable Securities) and Other Registrable
Securities then held by such Investors and Other Investors which are covered by
such Registration Statement. If the SEC requires that the Company register less
than the amount of shares of Common Stock originally included on any
Registration Statement at the time it was filed, first the Registrable
Securities (other than Note Registrable Securities) on such registration
statement and any other securities allowed to be registered on such Registration
Statement (in accordance with this paragraph) shall be decreased on a pro rata
basis, and then if any additional shares of Common Stock need to be decreased,
the Note Registrable Securities shall be decreased on a pro rata basis.
d. LEGAL COUNSEL. Subject to Section 5 hereof, the Required
Holders shall have the right to select one legal counsel to review any
registration pursuant to this Section 2 ("LEGAL COUNSEL"), which shall be
Xxxxxxx Xxxx & Xxxxx LLP or such other counsel as thereafter designated by the
Required Holders. The Company and Legal Counsel shall reasonably cooperate with
each other in regards to the performance of the Company's obligations under this
Agreement.
e. INELIGIBILITY FOR FORM S-3. In the event that Form S-3 is
not available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form reasonably acceptable to the Required
Holders and (ii) undertake to register the Registrable Securities on Form S-3 as
soon as such form is available, provided that the Company shall maintain the
effectiveness of the Registration Statement then in effect until such time as a
Registration Statement on Form S-3 covering the Registrable Securities has been
declared effective by the SEC.
f. SUFFICIENT NUMBER OF SHARES REGISTERED. In the event the
number of shares available under a Registration Statement filed pursuant to
Section 2.2(a) or 2.2(b) is insufficient to cover all of the Registrable
Securities required to be covered by such Registration
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Statement or an Investor's allocated portion of the Registrable Securities
pursuant to Section 2.2(c), the Company shall amend the applicable Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover at least the Required
Registration Amount as of the trading day immediately preceding the date of the
filing of such amendment or new Registration Statement, in each case, as soon as
practicable, but in any event not later than fifteen (15) days after the
necessity therefor arises. The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof. For purposes of the foregoing
provision, the number of shares available under a Registration Statement shall
be deemed "insufficient to cover all of the Registrable Securities" if at any
time the number of shares of Common Stock available for resale under the
Registration Statement is less than the product determined by multiplying (i)
the Required Registration Amount as of such time by (ii) 0.90. The calculation
set forth in the foregoing sentence shall be made without regard to any
limitations on the conversion of the Notes or the Preferred Shares or the
exercise of the Warrants and such calculation shall assume that the Notes are
then convertible into shares of Common Stock at the then prevailing Conversion
Price (as defined in the Notes), that the Preferred Shares are then convertible
into shares of Common Stock at the then prevailing Conversion Rate (as defined
in the Certificates of Designations (as defined in the Common Exchange
Agreement)) and that the Warrants are then exercisable for shares of Common
Stock at the then prevailing Exercise Price (as defined in the applicable
Warrant).
g. EFFECT OF FAILURE TO FILE AND OBTAIN AND MAINTAIN
EFFECTIVENESS OF REGISTRATION STATEMENT. If (i) a Registration Statement
covering all of the Registrable Securities required to be covered thereby and
required to be filed by the Company pursuant to this Agreement is (A) not filed
with the SEC on or before the applicable Filing Deadline (a "FILING FAILURE") or
(B) filed with the SEC but not declared effective by the SEC on or before the
applicable Effectiveness Deadline (an "EFFECTIVENESS FAILURE") or (ii) on any
day after the applicable Effective Date, sales of all of the Registrable
Securities required to be included on such Registration Statement cannot be made
(other than during an Allowable Grace Period (as defined in Section 3(r))
pursuant to such Registration Statement (including, without limitation, because
of a failure to keep such Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to such Registration
Statement, a suspension or delisting of the Common Stock on its principal
trading market or exchange, or to register a sufficient number of shares of
Common Stock) (a "MAINTENANCE FAILURE") then, as partial relief for the damages
to any Investor by reason of any such delay in or reduction of its ability to
sell the underlying shares of Common Stock (which remedy shall not be exclusive
of any other remedies available at law or in equity), the Company shall pay to
each Investor which holds Notes an amount in cash equal to two percent (2.0%) of
the aggregate principal amount of the Notes held by such Investor immediately
following the Closing Date on each of the following dates: (i) the day of a
Filing Failure and on every thirtieth day (pro rated for periods totaling less
than thirty days) after a Filing Failure until such Filing Failure is cured;
(ii) the day of an Effectiveness Failure and on every thirtieth day (pro rated
for periods totaling less than thirty days) after an Effectiveness Failure until
such Effectiveness Failure is cured; and (iii) the initial day of a Maintenance
Failure and on every thirtieth day (pro rated for periods totaling less than
thirty days) after a Maintenance Failure until such Maintenance Failure is
cured. The payments to which an Investor shall be entitled pursuant to this
Section 2.2(g) are referred to herein as "REGISTRATION DELAY PAYMENTS." For the
avoidance of doubt, no Registration Delay Payments
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may be made unless specifically allowed by the Intercreditor Agreement.
Registration Delay Payments shall be paid on the day of the Filing Failure,
Effectiveness Failure and the initial day of a Maintenance Failure, as
applicable, and thereafter on the earlier of (I) the thirtieth day after the
event or failure giving rise to the Registration Delay Payments has occurred and
(II) the third Business Day after the event or failure giving rise to the
Registration Delay Payments is cured. In the event the Company fails to make
Registration Delay Payments in a timely manner, such Registration Delay Payments
shall bear interest at the rate of two percent (2.0%) per month (prorated for
partial months) until paid in full. Notwithstanding anything herein or in the
Securities Purchase Agreements to the contrary, (i) no Registration Delay
Payments shall be due and payable with respect to the Warrants or the Warrant
Shares and (ii) in no event shall the aggregate amount of Registration Delay
Payments (other than Registration Delay Payments payable pursuant to events that
are within the control of the Company) exceed, in the aggregate, 10% of the
aggregate principal amount of the Notes issued on the Closing Date pursuant to
the Securities Purchase Agreements.
2.3 PIGGYBACK REGISTRATION.
a. PIGGYBACK RIGHTS. If the Company proposes to file a
registration statement with the Commission with respect to an offering of equity
securities, or securities or other obligations exercisable or exchangeable for,
on convertible into, equity securities, for its own account or for the account
of any stockholder of the Company (other than a registration statement on Form
S-4 or Form S-8 or their successors or any other form for a limited similar
purpose or any registration statement covering only securities proposed to be
issued in exchange for securities or assets of another Person), the Company
shall, at least thirty days prior to such filing, give written notice to all
Holders of its intention to do so and, upon the written request of any Holder or
Holders given within twenty days of the receipt of such notice (which request
shall state the intended method of disposition of such Registrable Securities),
the Company shall use its best efforts to cause the Registrable Securities that
such Holder or Holders request the Company to register to be included in such
registration and shall use its reasonable best efforts to cause the managing
Underwriter or Underwriters (if any) of a proposed Underwritten Offering to
permit such Registrable Securities to be included in such registration on the
same terms and conditions as any similar securities of the Company, in each case
to the extent necessary to permit their sale or other disposition in accordance
with the intended methods of distribution specified in the request of the Holder
or Holders; PROVIDED that the Company shall have the right to postpone or
withdraw any registration effected pursuant to this Section 2.3 without
obligation to the Holders (any such registration statement which includes
Registrable Securities, a "PIGGY-BACK REGISTRATION STATEMENT").
b. UNDERWRITTEN OFFERINGS. In connection with any Underwritten
Offering under this Section 2.3 (but not including Underwritten Offerings under
Section 2.1), the notice to the Holders shall state whether such offering is an
Underwritten Offering and the Company shall not be required to include any
Registrable Securities in such Underwriting Offering unless the Holders
requesting inclusion of such Registrable Securities accept the terms of the
underwriting as reasonably agreed upon between the Company and the managing
Underwriter or Underwriters, selected by the Company. Each Holder that has
requested that Registrable Securities held by it be included in such
Registration Statement shall (together with the Company and the other Holders
distributing the securities through such underwriting) enter
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into such underwriting agreement as reasonably agreed upon between the Company
and the managing Underwriter or Underwriters. In connection with any
Underwritten Offering under this Section 2.3 (but not including Underwritten
Offerings under Section 2.1), if in the reasonable and good faith opinion of the
managing Underwriter or Underwriters, the registration of all, or part of, the
Registrable Securities requested to be included in such registration and any
other securities to be included in such registration jeopardize the success of
the offering by the Company or the holders of securities initiating such
registration (the "DEMANDING HOLDERS"), then: (i) in the case of an Underwritten
Offering by the Company, (A) the Company shall not be cutback and (B) the
Registrable Securities (other than Note Registrable Securities) and any amount
of Other Registrable Securities in excess of the Other Investor Percentage
requested for inclusion and any other securities requested for inclusion
pursuant to similar piggyback rights shall be reduced first pro rata (on an
as-converted, fully-diluted basis and without giving effect to any exercise or
conversion limitations contained in any such convertible or exercisable
securities held by any such party) in accordance with the number of securities
that each such Person has requested be included in the registration, regardless
of the number of securities held by each such Person, and to the extent all of
the Registrable Securities (other than Note Registrable Securities) and any
amount of Other Registrable Securities in excess of the Other Investor
Percentage requested for inclusion and any other securities requested for
inclusion pursuant to similar piggyback rights have been eliminated, then the
Note Registrable Securities and Other Registrable Securities shall be reduced
(x) with the Other Investors being entitled to Other Investor Percentage of such
remaining number of Registrable Securities and Other Registrable Securities and
(y) with the Noteholders dividing the remainder of such remaining number of
Registrable Securities and Other Registrable Securities pro rata (on an
as-converted, fully-diluted basis and without giving effect to any conversion
limitations contained in the Notes held by such Noteholder) in accordance with
the number of Note Registrable Securities that such Noteholder has requested be
included in the registration, regardless of the number of Note Registrable
Securities held by each Noteholder (ii) in the case of an Underwritten Offering
by a Demanding Holder, (A) the Demanding Holder (and other parties that are
subject to the same registration rights agreement with such Demanding Holder)
shall not be cutback and (B) the Registrable Securities (other than Note
Registrable Securities) and Other Registrable Securities in excess of the Other
Investor Percentage requested for inclusion and any other securities requested
for inclusion pursuant to similar piggyback rights shall be reduced first pro
rata (on an as-converted, fully-diluted basis and without giving effect to any
exercise or conversion limitations contained in any such convertible or
exercisable securities held by any such party) in accordance with the number of
securities that each such Person has requested be included in the registration,
regardless of the number of securities held by each such Person, and to the
extent all of the Registrable Securities (other than Note Registrable
Securities) and Other Registrable Securities in excess of the Other Investor
Percentage requested for inclusion and any other securities requested for
inclusion pursuant to similar piggyback rights have been eliminated, then the
Note Registrable Securities and Other Registrable Securities shall be reduced
(x) with regard to the Other Investors, based on the Other Investor Percentage
and (y) with regard to the Noteholders pro rata (on an as-converted,
fully-diluted basis and without giving effect to any conversion limitations
contained in the Notes held by such Noteholder) in accordance with the number of
Note Registrable Securities that such Noteholder has requested be included in
the registration, regardless of the number of Note Registrable Securities held
by each Noteholder. If any Holder
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disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company and the managing Underwriter.
3. Related Obligations.
At such time as the Company is obligated to file a Registration
Statement with the SEC pursuant to Section 2.1 or 2.2, the Company will use its
best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and, pursuant
thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the applicable Registrable Securities and
use its best efforts to cause such Registration Statement relating to the
Registrable Securities to become effective as soon as practicable after such
filing (but in no event later than the applicable Effectiveness Deadline).
Subject to Allowable Grace Periods (as defined below), the Company shall keep
each Registration Statement effective pursuant to Rule 415 at all times until
the earlier of (i) the date as of which all of the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or any successor thereto) promulgated under
the 1933 Act and (ii) the date on which the Investors shall have sold all of the
Registrable Securities covered by such Registration Statement (the "REGISTRATION
PERIOD"). The Company shall ensure that each Registration Statement (including
any amendments or supplements thereto and prospectuses contained therein) shall
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein, or necessary to make the statements therein
(in the case of prospectuses, in the light of the circumstances in which they
were made) not misleading. The Company shall submit to the SEC, within two (2)
Business Days after the later of the date that (i) the Company learns that no
review of a particular Registration Statement will be made by the staff of the
SEC or that the staff has no further comments on a particular Registration
Statement, as the case may be, and (ii) the approval of Legal Counsel pursuant
to Section 3(c) (which approval shall be sought within one day), a request for
acceleration of effectiveness of such Registration Statement to a time and date
not later than two (2) Business Days after the submission of such request.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company filing a report on Form 10-Q, or
Form 10-QSB, Form 10-K, or Form 10-KSB or any analogous report under the
Securities Exchange Act of 1934, as amended (the "1934 ACT"), the Company shall
have incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC on the
same day on
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which the 1934 Act report is filed which created the requirement for the Company
to amend or supplement such Registration Statement.
c. The Company shall (A) permit Legal Counsel and the
Investors to review and comment upon (i) a Registration Statement at least seven
(7) Business Days prior to its filing with the SEC and (ii) all amendments and
supplements to all Registration Statements (except for Annual Reports on Form
10-K or Form 10-KSB, Quarterly Reports on Form 10-Q or Form 10-QSB, Current
Reports on Form 8-K, and any similar or successor reports) within a reasonable
number of days prior to their filing with the SEC, and (B) incorporate any
reasonable comments (such comments to be reasonably drafted by Legal Counsel and
such Investors, as applicable) of Legal Counsel that are received by the Company
by no later than 5:00 p.m. New York City time, two (2) Business Days prior to
their filing with the SEC into any Registration Statement or amendment or
supplement thereto. In the event that Legal Counsel or such Investors do not
provide comments within the time provided, the Company shall not be obligated to
incorporate any such comments. The Company shall not submit a request for
acceleration of the effectiveness of a Registration Statement without the prior
approval of Legal Counsel, which consent shall not be unreasonably withheld and
shall be provided within two (2) Business Days of the Company's written request
for such approval; PROVIDED, THAT, if such approval is not provided within such
two (2) Business Day period, the Effectiveness Deadline shall be extended until
such time as such approval is provided by Legal Counsel. The Company shall
furnish to Legal Counsel and the Investors, without charge, (i) copies of any
correspondence from the SEC or the staff of the SEC to the Company or its
representatives relating to any Registration Statement, (ii) promptly after the
same is prepared and filed with the SEC, one copy of any Registration Statement
and any amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, if requested by an Investor, and
all exhibits and (iii) upon the effectiveness of any Registration Statement, one
copy of the prospectus included in such Registration Statement and all
amendments and supplements thereto. The Company shall reasonably cooperate with
Legal Counsel in performing the Company's obligations pursuant to this Section
3.
d. The Company shall furnish to each Investor whose
Registrable Securities are included in any Registration Statement, without
charge, (i) promptly after the same is prepared and filed with the SEC, at least
one copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, if requested by an Investor, all exhibits and each preliminary
prospectus, (ii) upon the effectiveness of any Registration Statement, ten (10)
copies of the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies as such
Investor may reasonably request) and (iii) such other documents, including
copies of any preliminary or final prospectus, as such Investor may reasonably
request from time to time and/or in order to facilitate the disposition of the
Registrable Securities owned by such Investor.
e. The Company shall use its best efforts to (i) register and
qualify, unless an exemption from registration and qualification applies, the
resale by Investors of the Registrable Securities covered by a Registration
Statement under such other securities or "blue sky" laws of all applicable
jurisdictions in the United States, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such
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registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (x) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(e), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify Legal Counsel and each Investor
who holds Registrable Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual notice of
the initiation or threatening of any proceeding for such purpose.
f. The Company shall notify Legal Counsel and each Investor in
writing of the happening of any event, as promptly as practicable after becoming
aware of such event, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (provided that in no event shall such
notice contain any material, nonpublic information), and, subject to Section
3(r), promptly prepare a supplement or amendment to such Registration Statement
to correct such untrue statement or omission and deliver ten (10) copies of such
supplement or amendment to Legal Counsel and each Investor (or such other number
of copies as Legal Counsel or such Investor may reasonably request). The Company
shall also promptly notify Legal Counsel and each Investor in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to Legal
Counsel and each Investor by facsimile or e-mail on the same day of such
effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement is appropriate.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify Legal Counsel and each Investor who
holds Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.
h. If any Investor may be required under applicable securities
law to be described in the Registration Statement as an underwriter, at the
reasonable request of such Investor, the Company shall furnish to such Investor,
on the date of the effectiveness of the Registration Statement and thereafter
from time to time on such dates as an Investor may reasonably request (i) a
letter, dated such date, from the Company's independent certified public
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accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to such Investor, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the Investors.
i. If any Investor may be required under applicable securities
law to be described in the Registration Statement as an underwriter, the Company
shall make available for inspection by (i) any such Investor, (ii) Legal Counsel
and/or other counsel to such Investor (if requested by such Investor and if
other than Legal Counsel at such Investor's expense) and (iii) one firm of
accountants or other agents retained by the Investors (collectively, the
"INSPECTORS"), all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the "Records"),
as shall be reasonably deemed necessary by each Inspector, and cause the
Company's officers, directors and employees to supply all information which any
Inspector may reasonably request; provided, however, that each Inspector shall
agree in writing to hold in strict confidence and not to make any disclosure
(except to such Investor) or use of any Record or other information that the
Company determines in good faith to be confidential, and of which determination
the Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (b) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this Agreement or any confidentiality agreement
entered into among the parties thereto. Each Investor agrees that it shall, upon
learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and any Investor) shall be deemed
to limit the Investors' ability to sell Registrable Securities in a manner which
is otherwise consistent with applicable laws and regulations.
j. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
Transaction Document. The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt written notice to such Investor and allow such Investor, at the
Investor's expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.
k. The Company shall use its best efforts either to (i) cause
all of the Registrable Securities covered by a Registration Statement to be
listed on each securities exchange on which securities of the same class or
series issued by the Company are then listed, if
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any, or (ii) if such listing is unavailable, secure designation and quotation of
all of the Registrable Securities covered by a Registration Statement on The
NASDAQ Global Market, or (iii) if, despite the Company's best efforts to satisfy
the preceding clauses (i) and (ii) the Company is unsuccessful in satisfying the
preceding clauses (i) and (ii), to secure the inclusion for quotation on The
NASDAQ Capital Market for such Registrable Securities and, without limiting the
generality of the foregoing, to use its best efforts to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. ("NASD") as such with respect to such Registrable Securities. The Company
shall pay all fees and expenses in connection with satisfying its obligation
under this Section 3(k).
l. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, facilitate
the timely preparation and delivery of certificates (not bearing any restrictive
legend after such time as a Registration Statement covering such Registrable
Securities is effective) representing the Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Investors may reasonably
request and registered in such names as the Investors may request.
m. If requested by an Investor, the Company shall as soon as
practicable (i) incorporate in a prospectus supplement or post-effective
amendment such information as an Investor reasonably requests to be included
therein relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the number of
Registrable Securities being offered or sold, the purchase price being paid
therefor and any other terms of the offering of the Registrable Securities to be
sold in such offering; (ii) make all required filings of such prospectus
supplement or post-effective amendment after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) supplement or make appropriate and reasonable amendments to any
Registration Statement if reasonably requested by an Investor holding any
Registrable Securities including without limitation those needed to correct any
misstatements or omissions therein.
n. The Company shall use its best efforts to cause the
Registrable Securities covered by a Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
o. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with, and in the manner provided by, the provisions of Rule 158 under the 0000
Xxx) covering a twelve-month period beginning not later than the first day of
the Company's fiscal quarter next following the Effective Date of the
Registration Statement.
p. The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.
q. Within two (2) Business Days after a Registration Statement
that covers Registrable Securities is declared effective by the SEC, the Company
shall deliver, and
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shall cause legal counsel for the Company to deliver, to the transfer agent for
such Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC substantially in
the form attached hereto as EXHIBIT A.
r. Notwithstanding anything to the contrary herein, at any
time after the Effective Date, the Company may delay the disclosure of material,
non-public information concerning the Company the disclosure of which at the
time is not, in the good faith opinion of the Board of Directors of the Company,
in the best interest of the Company and, in the opinion of counsel to the
Company, otherwise required (a "GRACE PERIOD"); provided, that the Company shall
promptly (i) notify the Investors in writing of the existence of material,
non-public information giving rise to a Grace Period (provided that in each
notice the Company will not disclose the content of such material, non-public
information to the Investors) and the date on which the Grace Period will begin,
and (ii) notify the Investors in writing of the date on which the Grace Period
ends; and, provided further, that no Grace Period shall exceed five (5)
consecutive Business Days and during any three hundred sixty five (365) day
period such Grace Periods shall not exceed an aggregate of twenty (20) Business
Days and the first day of any Grace Period must be at least five (5) trading
days after the last day of any prior Grace Period (each, an "ALLOWABLE GRACE
PERIOD"). For purposes of determining the length of a Grace Period above, the
Grace Period shall begin on and include the date the Investors receive the
notice referred to in clause (i) and shall end on and include the later of the
date the Investors receive the notice referred to in clause (ii) and the date
referred to in such notice. The provisions of Section 3(f) hereof shall not be
applicable during the period of any Allowable Grace Period. Upon expiration of
the Grace Period, the Company shall again be bound by the first sentence of
Section 3(f) with respect to the information giving rise thereto unless such
material, non-public information is no longer applicable. Notwithstanding
anything to the contrary, the Company shall cause its transfer agent to deliver
unlegended shares of Common Stock to a transferee of an Investor in accordance
with the terms of the Securities Purchase Agreements in connection with any sale
of Registrable Securities with respect to which an Investor has entered into a
contract for sale, and delivered a copy of the prospectus included as part of
the applicable Registration Statement (unless an exemption from such prospectus
delivery requirement exists), prior to the Investor's receipt of the notice of a
Grace Period and for which the Investor has not yet settled.
s. Notwithstanding anything to the contrary herein, if, at any
time or time after the Initial Effective Date, a Demand Registration Statement
is filed pursuant to Section 2.1(a) or a Piggy-Back Registration Statement is
filed pursuant to Section 2.3 and the Company is required by the SEC to withdraw
the Initial Registration Statement in order for such Demand Registration
Statement or Piggy-Back Registration Statement, as applicable, to be declared
effective by the SEC, the Company may withdraw the Initial Registration
Statement without penalty under any provision of this agreement, including,
without limitation, Section 2.2(g), provided that after the Effective Date of
such Demand Registration Statement or Piggy-Back Registration Statement, as
applicable, or if such Demand Registration becomes a Withdrawn Demand
Registration, the Piggy-Back Registration Statement is withdrawn, or the
Registrable Securities covered by such Piggy-Back Registration Statement are
withdrawn from such Piggy-Back Registration Statement, the Company shall file an
Additional Registration Statement in accordance with Section 2.2(b).
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4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) Business Days prior to the first
anticipated filing date of a Registration Statement, the Company shall notify
each Investor in writing of the information the Company requires from each such
Investor to comply with the registration requirements of the SEC and the 1933
Act if such Investor elects to have any of such Investor's Registrable
Securities included in such Registration Statement and such Investor shall
furnish such information by no later than 5:00 p.m. New York City time at least
three (3) Business Days prior to the intended filing date. It shall be a
condition precedent to the obligations of the Company to complete any
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it,
as shall be reasonably required to effect and maintain the effectiveness of any
registration of such Registrable Securities and shall execute such documents in
connection with such registration as are customary and that the Company may
reasonably request.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by the first sentence of
3(f) or receipt of notice that no supplement or amendment is required or the
event contemplated by SECTION 3(G) is no longer applicable. Notwithstanding
anything to the contrary, the Company shall cause its transfer agent to deliver
unlegended shares of Common Stock to a transferee of an Investor in accordance
with the terms of the Securities Purchase Agreements in connection with any sale
of Registrable Securities with respect to which an Investor has entered into a
contract for sale prior to the Investor's receipt of a notice from the Company
of the happening of any event of the kind described in Section 3(g) or the first
sentence of 3(f) and for which the Investor has not yet settled.
d. Each Investor covenants and agrees that it will comply with
the prospectus delivery requirements of the 1933 Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
5. EXPENSES OF REGISTRATION.
The Company shall pay all Registration Expenses in connection
with any Registration Statement hereunder, whether or not such registration
shall become effective or is withdrawn and whether or not any or all Registrable
Securities originally requested to be included in such registration are
withdrawn or otherwise ultimately not included in such
-24-
registration. In addition to the foregoing, the Company shall also reimburse the
Investors for the fees and disbursements of Legal Counsel in connection with the
registration, filing or qualification pursuant to Sections 2.2 and 3 of this
Agreement which amount shall be limited to $15,000 per Registration Statement.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Investor, the
directors, officers, members, partners, employees, agents, representatives of,
and each Person, if any, who controls, any such Person within the meaning of the
1933 Act or the 1934 Act (each, an "INDEMNIFIED PERSON"), against any losses,
claims, damages, liabilities, judgments, fines, penalties, charges, costs,
reasonable attorneys' fees, amounts paid in settlement or expenses, joint or
several, (collectively, "CLAIMS") incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an Indemnified Person is or may be a party thereto ("INDEMNIFIED
DAMAGES"), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of, are alleged to arise under or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
"blue sky" laws of any jurisdiction in which Registrable Securities are offered
("BLUE SKY FILING"), or the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, (iii) any violation or alleged violation by the Company of
the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement or
(iv) any violation of this Agreement (the matters in the foregoing clauses (i)
through (iv) being, collectively, "VIOLATIONS"). Subject to Section 6(c), the
Company shall reimburse the Indemnified Persons, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not apply to
a Claim by an Indemnified Person arising out of or based upon a Violation that
occurs in reliance upon and in conformity with information furnished in writing
to the Company by such Indemnified Person for such Indemnified Person expressly
for use in connection with the preparation of the Registration Statement or any
such amendment thereof or supplement thereto if such prospectus was timely made
available by the Company pursuant to section 3(d) and (ii)
-25-
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld or delayed. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of the Company's
directors, each of the Company's officers who signs the Registration Statement
and each Person, if any, who controls the Company within the meaning of the 1933
Act or the 1934 Act (each, an "INDEMNIFIED PARTY"), against any Claim or
Indemnified Damages to which any of them may become subject, under the 1933 Act,
the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise
out of or are based upon any Violation, in each case to the extent, and only to
the extent, that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor (and not for any
Violation by any other Person) expressly for use in connection with such
Registration Statement; and, subject to Section 6(c), such Investor will
reimburse any legal or other expenses reasonably incurred by an Indemnified
Party in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) and the
agreement with respect to contribution contained in Section 7 shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that the Investor
shall only be liable under this Section 6(b) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by such Investor pursuant to
Section 9.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors
-26-
holding at least a majority in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates. The Indemnified Party
or Indemnified Person shall cooperate reasonably with the indemnifying party in
connection with any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or Claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, Claim or
proceeding effected without its prior written consent, provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such Claim or litigation, and such settlement shall not include any
admission as to fault on the part of the Indemnified Party. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter for
which indemnification has been made. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.
d. No Person involved in the sale of Registrable Securities
who is guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) in connection with such sale shall be entitled to
indemnification from any Person involved in such sale of Registrable Securities
who is not guilty of fraudulent misrepresentation.
e. The indemnification required by this Section 6 shall be
made by prompt periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
f. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party
pursuant to Section 6 is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that: (i) no contribution shall be made under
circumstances where the indemnifying party would not have been liable for
indemnification under the fault standards set forth in Section 6 of this
Agreement, (ii) no Person involved in the sale of Registrable Securities that is
guilty of fraudulent misrepresentation (within the meaning
-27-
of Section 11(f) of the 0000 Xxx) in connection with such sale shall be entitled
to contribution from any Person involved in such sale of Registrable Securities
who was not guilty of fraudulent misrepresentation; and (iii) contribution by
any Investor that sells Registrable Securities shall be limited in amount to the
net amount of proceeds received by such Investor from the sale of such
Registrable Securities pursuant to such Registration Statement.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of
Rule 144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of each
of the Securities Purchase Agreements) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company, if true, that it has complied with the reporting requirements of Rule
144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company if such reports are not publicly available via XXXXX, and (iii) such
other information as may be reasonably requested to permit the Investors to sell
such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of such Investor's
Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned; (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act or applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company (and for the benefit of the other parties hereto) to be bound
by all of the provisions contained herein; and (v) such transfer shall have been
made in accordance with the applicable requirements of the Securities Purchase
Agreements.
-28-
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance but not
retroactively), only with the written consent of the Company and the Required
Holders; provided that no provision related to the allocation of shares of
Common Stock available under any Registration Statement or the priority such
holder has to include its Registrable Securities under any Registration
Statement shall be amended without the consent of all of the Holders. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor (and its successors and permitted assigns) and the Company
(and its successors or permitted assigns). No such amendment shall be effective
to the extent that it applies to less than all of the holders of the Registrable
Securities. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration is also paid pro rata all of the Investors, for
such amendment, consent, waiver or modification. The Company shall not be
permitted to assign its rights or obligations under this Agreement (except
pursuant to a Fundamental Transaction and so long as in connection therewith the
Company is in compliance with the applicable provisions governing Fundamental
Transactions set forth in the Notes and the Warrants).
11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the record owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile or email
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Ascendia Brands, Inc.
000 Xxxxxxxx Xxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Email: xxxxxxxxxx@xxxxxxxxxxxxxx.xxx
Attention: General Counsel
With a copy (for informational purposes only) to:
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Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Email: Xxxxxxxxx@xxxxxxxxxxx.xxx
Attention: Xxxxxx X. Xxxxxxxx, Esq.
If to the Transfer Agent:
American Stock Transfer & Trust Co.
0000 00xx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxx Xxxx, Vice President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Legal Counsel:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Email: xxx.xxxxx@xxx.xxx
Attention: Xxxxxxx X. Xxxxx, Esq.
If to a Buyer, to its address, facsimile number or email address set
forth on the Schedule of Buyers attached hereto (as updated from time to time),
with copies to such Buyer's representatives as set forth on the Schedule of
Buyers, or to such other address and/or facsimile number and/or to the attention
of such other Person as the recipient party has specified by written notice
given to each other party five (5) days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or confirmation of email delivery or (C) provided by a courier or
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the
-30-
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
e. This Agreement, the other Transaction Documents (as defined
in each of the Securities Purchase Agreements) and the instruments referenced
herein and therein constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement, the other Transaction Documents and the
instruments referenced herein and therein supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9 and the following
sentence, this Agreement shall inure to the benefit of and be binding upon the
permitted successors and assigns of each of the parties hereto. The Company
shall not be permitted to assign its rights or obligations under this Agreement.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents as any other
party may reasonably request in order to
-31-
carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
j. All consents and other determinations required to be made
by the Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by the Required Holders.
k. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any party.
l. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
m. The obligations of each Investor hereunder are several and
not joint with the obligations of any other Investor or any other Person, and no
provision of this Agreement is intended to impose any obligations on any
Investor with respect to any obligation of any other Investor or any other
Person. Nothing contained herein, and no action taken by any Investor pursuant
hereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated herein.
n. SUBORDINATION. THIS AGREEMENT IS SUBJECT TO THE TERMS AND
PROVISIONS OF THE INTERCREDITOR AGREEMENT DATED AS OF FEBRUARY 9, 2007 (AS
AMENDED, RESTATED, SUPPLEMENTED, OR OTHERWISE MODIFIED FROM TIME TO TIME, THE
"INTERCREDITOR AGREEMENT"), BY AND AMONG XXXXX FARGO FOOTHILL, INC., AS FIRST
LIEN AGENT, XXXXX FARGO FOOTHILL, INC., AS SECOND LIEN COLLATERAL AGENT,
WATERSHED ADMINISTRATIVE, LLC, AS SECOND LIEN ADMINISTRATIVE AGENT, XXXXX FARGO
FOOTHILL, INC., AS THIRD LIEN COLLATERAL AGENT, AND PRENCEN LENDING LLC,
WATERSHED CAPITAL PARTNERS, L.P., AND WATERSHED CAPITAL INSTITUTIONAL PARTNERS,
L.P., AS THIRD LIEN LENDERS, AND PRENCEN LLC. IN THE EVENT OF ANY CONFLICT
BETWEEN THE TERMS OF THE INTERCREDITOR AGREEMENT AND THIS AGREEMENT, THE TERMS
OF THE INTERCREDITOR AGREEMENT SHALL GOVERN AND CONTROL.
* * * * * *
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IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.
COMPANY:
ASCENDIA BRANDS, INC. (F/K/A CENUCO,
INC.)
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President and Chief Executive
Officer
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.
BUYERS:
PRENCEN LLC
By: Prentice Capital Management, LP,
as Manager
By: /s/ Xxxxxx Xxxxxxx
------------------------------
Name: Xxxxxx Xxxxxxx
Title: General Counsel
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.
BUYERS:
PRENCEN LENDING LLC,
By: Prentice Capital Management, LP,
as Manager
By: /s/ Xxxxxx Xxxxxxx
------------------------------
Name: Xxxxxx Xxxxxxx
Title: General Counsel
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.
BUYERS:
WATERSHED CAPITAL PARTNERS, L.P.,
By: WS Partners, L.L.C.,
as General Partner
By: /s/ Xxxxxxx X. Xxxxx
------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Senior Managing Member
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.
BUYERS:
WATERSHED CAPITAL INSTITUTIONAL PARTNERS,
L.P.,
By: WS Partners, L.L.C.,
as General Partner
By: /s/ Xxxxxxx X. Xxxxx
------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Senior Managing Member
SCHEDULE OF BUYERS
BUYER ADDRESS BUYER'S REPRESENTATIVE'S ADDRESS
BUYER AND FACSIMILE NUMBER AND FACSIMILE NUMBER
Xxxxxxx Xxxx & Xxxxx LLP
Prencen LLC c/o Prentice Capital Management, LP 000 Xxxxx Xxxxxx
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
32nd Floor Attention: Xxxxxxx Xxxxx, Esq.
Xxx Xxxx, XX 00000 Facsimile: (000) 000-0000
Facsimile: (000) 000-0000 Telephone: (000) 000-0000
Telephone: (000)-000-0000 Email: xxx.xxxxx@xxx.xxx
Attention: Xxxxxxx Xxxxx
Xxxxxx Xxxxxxx
Email: XxxxxxxX@xxxxxxxxxxxxxxx.xxx
Xxxxx@xxxxxxxxxxxxxxx.xxx
Xxxxxxx Xxxx & Xxxxx LLP
Prencen Lending LLC c/o Prentice Capital Management, LP 000 Xxxxx Xxxxxx
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
32nd Floor Attention: Xxxxxxx Xxxxx, Esq.
Xxx Xxxx, XX 00000 Facsimile: (000) 000-0000
Facsimile: (000) 000-0000 Telephone: (000) 000-0000
Telephone: (000) 000-0000 Email: xxx.xxxxx@xxx.xxx
Attention: Xxxxxxx Xxxxx
Xxxxxx Xxxxxxx
Email: XxxxxxxX@xxxxxxxxxxxxxxx.xxx
Xxxxx@xxxxxxxxxxxxxxx.xxx
Watershed Capital Partners, L.P.
c/o Watershed Administrative, LLC
Xxx Xxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 Xxxxxxxx Xxxxx & Xxxx LLP
Facsimile: (000) 000-0000 One World Financial Center
Telephone: (000) 000-0000 Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx Xxxxx Facsimile: (000) 000-0000
Xxxx Xxxx, Esq. Telephone: (000) 000-0000
Email: xxxxxx@xxxx.xxx Attention: Xxxxxxx Xxxx, Esq.
xxxxx@xxxx.xxx Email: xxxxx@xxxxxx.xxx
Watershed Capital Institutional
Partners, L.P. c/o Watershed Administrative, LLC
Xxx Xxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 Xxxxxxxx Xxxxx & Orbe LLP
Facsimile: (000) 000-0000 One World Financial Center
Telephone: (000) 000-0000 Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx Xxxxx Facsimile: (000) 000-0000
Xxxx Xxxx, Esq. Telephone: (000) 000-0000
Email: xxxxxx@xxxx.xxx Attention: Xxxxxxx Xxxx, Esq.
xxxxx@xxxx.xxx Email: xxxxx@xxxxxx.xxx
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
American Stock Transfer & Trust Company
0000 00xx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxx Xxxx, Vice President
Re: ASCENDIA BRANDS, INC.
Ladies and Gentlemen:
[We are][I am] counsel to Ascendia Brands, Inc., a Delaware
corporation (the "COMPANY"), and have represented the Company in connection with
(i) that certain Third Amended and Restated Securities Purchase Agreement, dated
February 9, 2007 (as amended from time to time, the "PRENCEN SECURITIES PURCHASE
AGREEMENT") entered into by and among the Company and the buyers named therein
(collectively, the "PRENCEN HOLDERS") pursuant to which the Company issued to
Prencen Lending LLC, a Prencen Holder, notes (the "PRENCEN NOTES") convertible
into shares of the Company's common stock, $0.001 par value (the "COMMON
STOCK"), (ii) that certain Securities Purchase Agreement (as amended from time
to time, the "WATERSHED SECURITIES PURCHASE AGREEMENT", and together with the
Prencen Securities Purchase Agreement, the "SECURITIES PURCHASE AGREEMENTS"),
dated February 9, 2007, entered into by and among the Company and the buyers
named therein (the "WATERSHED HOLDERS", and together with the Prencen Holders,
the "HOLDERS") pursuant to which the Company issued to the Watershed Holders
notes (the "WATERSHED NOTES" and together with the Prencen Notes, the "NOTES")
convertible into shares of Common Stock and (iii) that certain Amendment and
Exchange Agreement, dated December 27, 2006, as amended from time to time,
entered into by and among the Company and the Prencen Holders pursuant to which
the Company issued to Prencen LLC, a Prencen Holder, shares of Series B
Convertible Preferred Stock of the Company and shares of Series B-1 Convertible
Preferred Stock of the Company (collectively, the "PREFERRED SHARES")
convertible into shares of Common Stock. Pursuant to the Securities Purchase
Agreements, the Company also has entered into a Registration Rights Agreement,
dated February 9, 2007, as amended from time to time, with the Holders (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company agreed, among
other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon conversion of the Notes, the Xxxxxxxxx Shares (as defined in the
Registration Rights Agreement), the shares of Common Stock issuable upon
conversion of the Preferred Shares and the shares of Common Stock issuable upon
exercise of the Warrants (as defined in the Registration Rights Agreement),
under the Securities Act of 1933, as amended (the "1933 ACT"). In connection
with the Company's obligations under the Registration Rights Agreement, on
____________ ___, 200_, the Company filed a Registration Statement on Form S-3
(File No. 333-_____________) (the "REGISTRATION STATEMENT") with the Securities
and Exchange Commission (the "SEC") relating to the Registrable Securities which
names each of the Holders as a selling stockholder thereunder.
In connection with the foregoing, [we][I] advise you that a member
of the SEC's staff has advised [us][me] by telephone that the SEC has entered an
order declaring the Registration Statement effective under the 1933 Act at
[ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and [we][I] have
no knowledge, after telephonic inquiry of a member of the SEC's staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.
This letter shall serve as our standing instruction to you that the
shares of Common Stock are freely transferable by the Holders pursuant to the
Registration Statement. You need not require further letters from us to effect
any future legend-free issuance or reissuance of shares of Common Stock to the
Holders as contemplated by each of the Company's Irrevocable Transfer Agent
Instructions dated July 27, 2006, January 10, 2007 and February 9, 2007.
Very truly yours,
[ISSUER'S COUNSEL]
By:
---------------------------
CC: [LIST NAMES OF HOLDERS]
EXHIBIT B
SELLING STOCKHOLDERS
The shares of Common Stock being offered by the selling stockholders
are (i) issuable upon conversion of the Notes, conversion of the Preferred
Shares and upon exercise of the Warrants and (ii) shares of Common Stock. For
additional information regarding the issuance of the Notes, the Preferred Shares
and Warrants and shares of Common Stock, see "Private Placement of Notes,
Preferred Shares, Warrants and Common Stock" above. We are registering the
shares of Common Stock in order to permit the selling stockholders to offer the
shares for resale from time to time. Except for the ownership of the Notes,
Preferred Shares, Warrants and Common Stock issued pursuant to the Securities
Purchase Agreements and the Common Exchange Agreement and certain lending
agreements between the selling stockholders and the Company, the selling
stockholders have not had any material relationship with us within the past
three years.
The table below lists the selling stockholders and other information
regarding the beneficial ownership of the shares of Common Stock by each of the
selling stockholders. The second column lists the number of shares of Common
Stock beneficially owned by each selling stockholder, based on its ownership of
the Notes, Preferred Shares, Warrants and Common Stock currently held by the
selling stockholders, as of ________, 200_, assuming conversion of all the Notes
and Preferred Shares and exercise of the Warrants held by the selling
stockholders on that date, without regard to any limitations on conversions or
exercise.
The third column lists the shares of Common Stock being offered by
this prospectus by the selling stockholders.
In accordance with the terms of a registration rights agreement with
the selling stockholders, this prospectus generally covers the resale of at
least 130% of the sum of (i) the maximum number of shares of Common Stock
issuable upon conversion of the Notes as of the trading day immediately
preceding the date the registration statement is initially filed with the SEC,
(ii) the maximum number of shares of Common Stock issuable upon conversion of
the Preferred Shares as of the trading day immediately preceding the date the
registration statement is initially filed with the SEC, (iii) 1,122,482 shares
of Common Stock and (iv) the maximum number of shares of Common Stock issuable
upon exercise of the Warrants as of the trading day immediately preceding the
date the registration statement is initially filed with the SEC (subject to
adjustment for stock splits and stock dividends). Because the conversion price
of the Notes and the Preferred Shares and the exercise price of the Warrants may
be adjusted, the number of shares that will actually be issued may be more or
less than the number of shares being offered by this prospectus. The fourth
column assumes the sale of all of the shares offered by the selling stockholders
pursuant to this prospectus.
Under the terms of the Notes, the Preferred Shares and the Warrants,
a selling stockholder may not convert the Notes or the Preferred Shares or
exercise the Warrants to the extent such conversion or exercise would cause such
selling stockholder, together with its affiliates, to beneficially own a number
of shares of Common Stock which would exceed 9.99%
of our then outstanding shares of Common Stock following such conversion or
exercise, excluding for purposes of such determination shares of Common Stock
issuable upon conversion of the Notes or the Preferred Shares which have not
been converted and upon exercise of the Warrants which have not been exercised.
The number of shares in the second column does not reflect this limitation. The
selling stockholders may sell all, some or none of their shares in this
offering. See "Plan of Distribution."
NUMBER OF SHARES OF MAXIMUM NUMBER OF SHARES NUMBER OF SHARES OF
COMMON STOCK OWNED PRIOR OF COMMON STOCK TO BE COMMON STOCK OWNED
NAME OF SELLING STOCKHOLDER TO OFFERING SOLD PURSUANT TO THIS PROSPECTUS AFTER OFFERING
--------------------------- ------------------------ -------------------------------- -------------------
PRENCEN LLC (1) 0
PRENCEN LENDING LLC (2)
WATERSHED CAPITAL PARTNERS, L.P. (3)
WATERSHED CAPITAL INSTITUTIONAL
PARTNERS, L.P. (4)
(1) Prentice Capital Management, L.P. has investment and voting power with
respect to the securities held by Prencen LLC. Mr. Xxxxxxx Xxxxxxxxx controls
Prentice Capital Management, L.P. Each of Prentice Capital Management and Xx.
Xxxxxxxxx disclaim beneficial ownership of any of these securities.
(2) Prentice Capital Management, L.P. has investment and voting power with
respect to the securities held by Prencen Lending LLC. Mr. Xxxxxxx Xxxxxxxxx
controls Prentice Capital Management, L.P. Each of Prentice Capital Management
and Xx. Xxxxxxxxx disclaim beneficial ownership of any of these securities.
(3) WS Partners, L.L.C. ("WSP"), as the general partner to Watershed
Capital Partners, L.P. ("WCP"), and Watershed Asset Management, L.L.C. ("WAM"),
as the investment adviser to WCP, may, for purposes of Rule 13d-3 under the
Exchange Act, each be deemed to own beneficially the securities held by WCP. As
Senior Managing Member of each of WSP and WAM, Xxxxxxx X. Xxxxx may, for
purposes of Rule 13d-3 under the Exchange Act, be deemed to own beneficially the
securities owned by WCP. WSP, WAM and Xxxxxxx X. Xxxxx disclaim any beneficial
ownership of such securities. All of the above-mentioned entities and person
disclaim group attribution.
(4) WS Partners, L.L.C. ("WSP"), as the general partner to Watershed
Capital Institutional Partners, L.P. ("WCIP"), and Watershed Asset Management,
L.L.C. ("WAM"), as the investment adviser to WCIP, may, for purposes of Rule
13d-3 under the Exchange Act, each be deemed to own beneficially the securities
held by WCIP. As Senior Managing Member of each of WSP and WAM, Xxxxxxx X. Xxxxx
may, for purposes of Rule 13d-3 under the Exchange Act, be deemed to own
beneficially the securities owned by WCIP. WSP, WAM and Xxxxxxx X. Xxxxx
disclaim any beneficial ownership of such securities. All of the above-mentioned
entities and person disclaim group attribution.
PLAN OF DISTRIBUTION
We are registering the shares of Common Stock issuable upon
conversion of the Notes and Preferred Shares, upon exercise of the Warrants and
shares of Common Stock to permit the resale of these shares of Common Stock by
the holders of the Notes, Preferred Shares, Warrants and Common Stock from time
to time after the date of this prospectus. We will not receive any of the
proceeds from the sale by the selling stockholders of the shares of Common
Stock. We will bear all fees and expenses incident to our obligation to register
the shares of Common Stock.
The selling stockholders may sell all or a portion of the shares of
Common Stock beneficially owned by them and offered hereby from time to time
directly or through one or more underwriters, broker-dealers or agents. If the
shares of Common Stock are sold through underwriters or broker-dealers, the
selling stockholders will be responsible for underwriting discounts or
commissions or agent's commissions. The shares of Common Stock may be sold in
one or more transactions at fixed prices, at prevailing market prices at the
time of the sale, at varying prices determined at the time of sale, or at
negotiated prices. These sales may be effected in transactions, which may
involve crosses or block transactions,
o on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale;
o in the over-the-counter market;
o in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
o through the writing of options, whether such options are listed on an
options exchange or otherwise;
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales made after the date the Registration Statement is declared
effective by the SEC;
o sales pursuant to Rule 144;
o broker-dealers may agree with the selling securityholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
If the selling stockholders effect such transactions by selling
shares of Common Stock to or through underwriters, broker-dealers or agents,
such underwriters, broker-dealers or agents may receive commissions in the form
of discounts, concessions or commissions from the selling stockholders or
commissions from purchasers of the shares of Common Stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved). In connection
with sales of the shares of Common Stock or otherwise, the selling stockholders
may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the shares of Common Stock in the course of hedging in
positions they assume. The selling stockholders may also sell shares of Common
Stock short and deliver shares of Common Stock covered by this prospectus to
close out short positions and to return borrowed shares in connection with such
short sales. The selling stockholders may also loan or pledge shares of Common
Stock to broker-dealers that in turn may sell such shares.
The selling stockholders may pledge or grant a security interest in
some or all of the Notes, Preferred Shares, Warrants or shares of Common Stock
owned by them and, if they default in the performance of their secured
obligations, the pledgees or secured parties may offer and sell the shares of
Common Stock from time to time pursuant to this prospectus or any amendment to
this prospectus under Rule 424(b)(3) or other applicable provision of the
Securities Act of 1933, as amended (the "SECURITIES ACT"), amending, if
necessary, the list of selling stockholders to include the pledgee, transferee
or other successors in interest as selling stockholders under this prospectus.
The selling stockholders also may transfer and donate the shares of Common Stock
in other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The selling stockholders and any broker-dealer participating in the
distribution of the shares of Common Stock may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commission paid, or any
discounts or concessions allowed to, any such broker-dealer may be deemed to be
underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of Common Stock is made, a prospectus
supplement, if required, will be distributed which will set forth the aggregate
amount of shares of Common Stock being offered and the terms of the offering,
including the name or names of any broker-dealers or agents, any discounts,
commissions and other terms constituting compensation from the selling
stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to broker-dealers.
Under the securities laws of some states, the shares of Common Stock
may be sold in such states only through registered or licensed brokers or
dealers. In addition, in some states the shares of Common Stock may not be sold
unless such shares have been registered or qualified for sale in such state or
an exemption from registration or qualification is available and is complied
with.
There can be no assurance that any selling stockholder will sell any
or all of the shares of Common Stock registered pursuant to the registration
statement, of which this prospectus forms a part.
The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), and the rules and regulations
thereunder, including, without limitation, Regulation M of the Exchange Act,
which may limit the timing of purchases and sales of any of the shares of Common
Stock by the selling stockholders and any other participating person. Regulation
M may also restrict the ability of any person engaged in the distribution of the
shares of Common Stock to engage in market-making activities with respect to the
shares of Common Stock. All of the foregoing may affect the marketability of the
shares of Common Stock and the ability of any person or entity to engage in
market-making activities with respect to the shares of Common Stock.
We will pay all expenses of the registration of the shares of Common
Stock pursuant to the registration rights agreement, estimated to be $[ ] in
total, including, without limitation, Securities and Exchange Commission filing
fees and expenses of compliance with state securities or "blue sky" laws;
provided, however, that a selling stockholder will pay all underwriting
discounts and selling commissions, if any. We will indemnify the selling
stockholders against liabilities, including some liabilities under the
Securities Act, in accordance with the registration rights agreement, or the
selling stockholders will be entitled to contribution. We may be indemnified by
the selling stockholders against civil liabilities, including liabilities under
the Securities Act, that may arise from any written information furnished to us
by the selling stockholder specifically for use in this prospectus, in
accordance with the registration rights agreement, or we may be entitled to
contribution.
Once sold under the registration statement, of which this prospectus
forms a part, the shares of Common Stock will be freely tradable in the hands of
persons other than our affiliates.
