Exhibit 10.5
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
April 30, 2007, by and among Ecology Coatings, Inc., a Nevada corporation (the
"Company"), and, as set forth on Exhibit A, the principal shareholders of the
Company (collectively referred to as the "Holders").
WHEREAS, the Company entered into that certain Agreement and Plan of
Merger, dated April 30, 2007, with OCIS-EC, Inc., a Nevada corporation and a
wholly-owned subsidiary of the Company, Ecology Coatings, Inc., a California
corporation ("Ecology") and certain shareholders of Ecology ("Merger
Agreement");
WHEREAS, the Company issued to the Holders certain shares of its restricted
Common Stock (the "Restricted Stock");
WHEREAS, Ecology sold shares of its common stock (the "Shares") in a
private placement (the "Private Placement") and, pursuant to such Private
Placement, committed to file a resale registration statement under the
Securities Act of 1933 (the "Act") to register the Shares within one year of the
termination of the Private Placement;
WHEREAS, in connection with the merger of Ecology and the Company under the
Merger Agreement, the holders of the Shares exchanged their Shares for shares of
common stock of the Company (the "Company Shares") and have the right to cause
the Company to register the Company Shares for resale under the Act;
WHEREAS, in order to induce the Holders to approve the Merger Agreement,
the Company has entered into this Agreement to register the Restricted Stock of
the Holders in accordance with the provisions of this Agreement; and
WHEREAS, the Restricted Stock is referred to in this Agreement as the
"Registrable Securities."
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
I. PIGGYBACK REGISTRATION.
1.1 Right To Piggyback. During the period beginning on the effective date
of the Merger Agreement through the second anniversary of the termination of the
Private Placement, whenever the Company proposes to register any of its
securities under the Act (other than a registration on Form S-4 or S-8 or any
similar successor form) and the registration form to be used may be used for the
registration of the Shares (a "Piggyback Registration"), the Company will give
prompt written notice to the Holders of its intention to effect such a
registration and will include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within twenty (20) days after the Holders' receipt of the Company's
notice;
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provided, that (i) if, at any time after giving written notice of its intention
to register any securities but prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason to terminate or withdraw such registration, the Company
shall give written notice of such determination to the Holders and the Company
shall not be relieved of its obligation to register such Registrable Securities
pursuant to this Section 1 and (ii) if such registration involves an
underwritten offering, the Holders must sell their Registrable Securities to the
underwriters of such offering on the same terms and conditions as apply to the
Company or other holders of Registrable Securities for whose account securities
are to be sold, as the case may be. If a registration requested pursuant to this
Section involves an underwritten public offering, the Holders may elect in
writing, not later than three (3) days prior to the effectiveness of the
registration statement filed in connection with such registration, not to sell
the Registrable Securities in connection with such registration. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration. The Company will keep the registration statement filed under
this Agreement continuously effective for one (1) year following the effective
date of the registration.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act, and the declaration or ordering of the effectiveness of
such registration statement.
1.2 Piggyback Expenses. The Registration Expenses (as defined in Section 2)
of the Piggyback Registrations and all Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Agreement shall be paid by the Company.
1.3 Priority in Piggyback Registrations. If (i) a Piggyback Registration
pursuant to this Section 1 involves an underwritten offering of the securities
so being registered, whether or not for sale for the account of the Company, to
be distributed (on a firm commitment basis) by or through one or more
underwriters of recognized standing under underwriting terms appropriate for
such a transaction and (ii) the managing underwriter of such underwritten
offering informs the Company and the Holders of the Registrable Securities
requesting such registration by letter of opinion that the number of securities
requested to be included in such registration exceeds the number which can be
supported by market factors, the Company will include in such registration
securities in the following order of priority:
1.3.1 first, all the securities the Company proposes to sell for its
own account; and
1.3.2 second, to the extent that the number of securities which the
Company proposes to include is less than the number of securities
which the Company has been advised can be supported by market
factors in such offering, the number of such Registrable
Securities requested to be included in such Piggyback
Registration by the Holders and any other holders of Registrable
Securities shall be allocated pro rata among all such holders on
the basis of the relative number of Registrable Securities each
such holder has requested to be included in such Piggyback
Registration.
1.4. Company Obligations. In the case of each registration, qualification
or compliance
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effected by the Company pursuant to this Agreement, the Company will keep each
Holder advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof. At its expense,
the Company will furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request.
2. REGISTRATION EXPENSES.
2.1 All expenses incident to the Company's performance of or compliance
with this Agreement, including, without limitation, all registration,
qualification and filing fees, fees and expenses of compliance with securities
or blue sky laws, printing expenses, escrow fees, messenger and delivery
expenses, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons, as defined in Section 2(2) of the Act (a
"Person"), retained by the Company (all such expenses being herein called
"Registration Expenses"), will be borne as provided in this Agreement, except
that the Company will, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance and the expenses and
fees for listing the securities to be registered on each securities exchange or
quotation system on which similar securities issued by the Company are then
listed or quoted.
2.2 The Company will bear the Registration Expenses allocable to the
registration of the Registrable Securities. If the Holders choose to be
represented by separate counsel in connection with the registration of the
Registrable Securities, then the Holders will bear the cost of such separate
legal counsel.
3. INDEMNIFICATION.
3.1 The Company agrees to indemnify, to the extent permitted by law, each
Holder and such Holder's legal counsel and accountants, and each person
controlling such Holder within the meaning of the Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, against all losses, claims, damages, liabilities and expenses (or
actions in respect thereof), including any of the foregoing incurred in
settlement of litigation, commenced or threatened, arising out of or based on
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement, prospectus, offering circular, preliminary
prospectus or other document, or any amendment thereof or supplement thereto,
incident to any such registration, qualification or compliance, or based on any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by the
Company of any rule or regulation promulgated under the Act or any state
securities laws applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse each Holder and such Holder's legal counsel
and accountants, and each person controlling such Holder within the meaning of
the Act, for any legal and any other expenses reasonably incurred in connection
with investigation, preparing or defending any such claim, loss, damage, action
or liability, except insofar as the same arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by an
instrument duly
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executed by such Holder and stated to be specifically for use therein or by such
Holder's failure to deliver a copy of the registration statement or prospectus
or any amendments or supplements thereto at or prior to the written confirmation
of the sale of such securities to such person in any case where such delivery of
the prospectus or registration statement (as amended or supplemented) is
required by the Act after the Company has furnished the Holder with a sufficient
number of copies of the same. In connection with an underwritten offering, the
Company will indemnify such underwriters, their officers and directors and each
Person who controls such underwriters (within the meaning of the Act) to the
same extent as provided above with respect to the indemnification of the Holders
above.
3.2 In connection with any registration statement in which the Holders are
participating, the Holders will furnish to the Company in writing such
information and affidavits as the Company reasonably requests for use in
connection with any such registration statement or prospectus and, to the extent
permitted by law, will indemnify the Company, its directors and officers, its
legal counsel and independent accountants, and each Person who controls the
Company (within the meaning of the Act) with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement,
against all losses, claims, damages, liabilities and expenses (or actions in
respect thereof), including any of the foregoing incurred in settlement of
litigation, commenced or threatened, arising out of or based on any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement, prospectus, offering circular, preliminary prospectus or
other document, or any amendment thereof or supplement thereto, incident to any
such registration, qualification or compliance, or based on any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, and will reimburse the Company, its
directors and officers and controlling Persons, for any legal and any other
expenses reasonably incurred in connection with investigation, preparing or
defending any such claim, loss, damage, action or liability, except insofar as
the same arises out of or is based on any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by an instrument duly executed
by such Holder and stated to be specifically for use therein; provided that the
obligation to indemnify will be several, not joint and several, among the
Holders and the liability of each of the Holders will be in proportion to and
limited to the net amount received by such Holder from the sale the Restricted
Shares pursuant to such registration statement.
3.3 Any Person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party after such indemnified party has actual
knowledge of any claims as to which indemnity may be sought and (ii) unless in
such indemnified party's reasonable judgment and based on advice of its legal
counsel, a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, shall permit such indemnifying
party to assume the defense of such claim or litigation with counsel reasonably
satisfactory to the indemnified party and the indemnified party may participate
in such defense at such party's own expense, and provided further that the
failure of any indemnified party to give notice as provided herein shall not
relive the indemnifying party of its obligations under this Agreement, except to
the extent, but only to the extent, that the indemnifying party's ability to
defend against such claim or litigation is impaired as a result of such failure
to give notice. If such defense is assumed, the indemnifying party will not be
subject to any liability for any settlement or entry of any judgment
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made or consented to by the indemnified party without its consent (but such
consent will not be unreasonably withheld) and which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release of all liability in respect to such claim or
litigation. An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and expenses
of more than one counsel for all parties indemnified by such indemnifying party
with respect to such claim, unless in such indemnified party's reasonable
judgment and based on advice of its legal counsel, a conflict of interest
between such indemnified and indemnifying parties may exist with respect to such
claim.
3.4 The indemnification provided for under this Agreement will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive the transfer and registration of securities.
The Company also agrees to make such provisions as are reasonably requested by
any indemnified party for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
4. PARTICIPATION IN UNDERWRITTEN REGISTRATION. No Holder may participate in any
registration hereunder which is underwritten unless such Holder (i) agrees to
sell such Holder's Registrable Securities on the basis provided in any
underwriting arrangements approved by the other Holders entitled hereunder to
approve such arrangements and (ii) together with the Company and the other
shareholders participating in the underwritten offering completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
5. RULE 144 AND 144A. In order to permit the Holders to sell the Registrable
Securities, if they so desire, pursuant to Rule 144 or Rule 144A promulgated by
the Securities and Exchange Commission (the "SEC") (or any successors to such
rules), the Company will use best efforts to comply with all rules and
regulations of the SEC applicable in connection with the use of each of Rule 144
and Rule 144A (or any successors thereto), including the timely filing of all
reports with the SEC and the provision of any information regarding the Company
in order to enable the Holders, if they so elect, to utilize Rule 144 or Rule
144A, and the Company will cause any restrictive legends to be removed and any
transfer restrictions to be rescinded with respect to any sale of the
Registrable Securities that is exempt from registration under the Act pursuant
to Rule 144 or Rule 144A. Upon the request of a Holder, the Company will deliver
to such Holder a written statement verifying that it has complied with such
requirements.
6. TRANSFER OF REGISTRATION RIGHTS. Each Holder may transfer the right to
register the Shares under this Agreement to any ancestor, descendant or any
custodian or trustee for his or her own account to whom the Holder has
transferred any of the Shares, including, but not limited to, any transfer by
the Holder to any of the foregoing parties or other entities for estate planning
purposes.
7. LISTING OF SECURITIES TO BE REGISTERED. In connection with any registration
hereunder, the Company will use its best efforts to list all Registrable
Securities covered by such registration statement on any securities exchange or
quotation system on which any of the securities
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of the same class as the Registrable Securities are then listed or quoted.
8. REPRESENTATIONS AND WARRANTIES OF COMPANY. The Company makes the following
representations and warranties in connection with the this Agreement:
8.1 The Company is a corporation duly organized and existing in good
standing under the laws of the State of California. The Company has full
corporate power and authority to carry on its business as now conducted and to
own or lease and operate the properties and assets now owned or leased and
operated by it. The Company is duly qualified to transact business in the State
of California and all states and jurisdictions in which the business or
ownership of its property makes it necessary to so qualify, except for
jurisdictions in which the nature of the property owned or business conducted,
when considered in relation to the absence of serious penalties, renders
qualification as a foreign corporation unnecessary as a practical matter.
8.2 The transactions contemplated by this Agreement have been duly approved
by the Board of Directors of the Company.
8.3 The Agreement is valid and binding upon the Company and neither the
execution nor delivery of the Agreement by the Company nor the performance by
the Company of any of its covenants or obligations under the Agreement will
constitute a default under any contract, agreement or obligation to which the
Company is bound. The Agreement is enforceable against the Company in accordance
with their respective terms, subject to bankruptcy, reorganization, insolvency,
fraudulent conveyance, moratorium, receivership or similar laws relating to or
affecting creditors' rights generally. The party executing the Agreement on
behalf of the Company has full power and authority to do so and to bind the
Company under the Agreement.
8.4 The Restricted Shares, when issued, shall be duly authorized, validly
issued, fully paid and non-assessable.
8.5 The Company has no obligations to pay any fees, commissions or other
compensation in connection with the transactions contemplated in the Agreement.
9. MISCELLANEOUS.
9.1 Cessation of Status as Registrable Securities. As to any particular
Registrable Securities, such securities will cease to be Registrable Securities
when they have (i) been effectively registered under the Act and disposed of in
accordance with the registration statement covering them, (ii) become eligible
for sale pursuant to, and have actually been sold to the public in compliance
with, Rule 144(k) (or any similar provision then in force) under the Act, or
(iii) been otherwise transferred and new certificates for them not bearing any
restrictive legends have been delivered by the Company.
9.2 No Inconsistent Agreements. The Company will not hereafter enter into,
or permit to exist, any agreement with respect to its securities which is
inconsistent with the rights granted to the Holders in this Agreement, without
their prior unanimous written consent.
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9.3 Remedies. Any Holder having rights under any provision of this
Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
9.4 Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended and the Company may take any action
herein prohibited or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of all of the Holders.
9.5 Successors and Assigns. All covenants and agreements in this Agreement
by or on behalf of any of the parties hereto will bind and inure to the benefit
of the respective successors and assigns of the parties hereto whether so
expressed or not.
9.6 Governing Law and Jurisdiction. This Agreement shall be governed and
construed in accordance with the laws of the State of Nevada. Each party to this
Agreement hereby irrevocably agrees that any legal action or proceeding arising
out of or relating to this Agreement or any agreements or transactions
contemplated hereby may be brought in the courts of the State of Nevada or of
the United States of America for the District of Nevada and hereby expressly
submits to the personal jurisdiction and venue of such courts for the purposes
thereof and expressly waives any claim of improper venue and any claim that such
courts are an inconvenient forum. Each party hereby irrevocably consents to the
service of process of any of the aforementioned courts in any such suit, action
or proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the address set forth in Section 9.10 "Notices," such
service to become effective ten (10) days after such mailing.
9.7 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof.
9.8 Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to the Holders, upon any breach or default of the Company
under this Agreement, shall impair any such right, power or remedy of the
Holders nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default thereunder
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of the
Holders of any breach or default under this Agreement or any waiver on the part
of the Holders of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, or by law or otherwise
afforded to the Holders, shall be cumulative and not alternative.
9.9 Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be enforceable against the parties actually
executing such counterparts and all of which together shall constitute one
instrument. Any telecopied signature of a party on this Agreement shall be
deemed an original signature of such party for all purposes.
9.10 Notices. All notices and other communications required or permitted
hereunder shall
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be in writing and shall be mailed by registered or certified mail, postage
prepaid or otherwise, delivered by hand or by messenger, or by facsimile,
addressed (i) if to a Holder, to such address as such Holder shall have
furnished to the Company in writing, or (ii) if to the Company, to its principal
executive offices and addressed to the attention of the Chief Executive Officer,
or to such other address as the Company shall have furnished to such Holder in
writing.
Each such notice or other communication for all purposes for this Agreement
shall be treated as effective, or having been given when delivered, if delivered
personally or by facsimile, or, if sent by mail, at the earlier of its receipt
or seventy-two (72) hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
ECOLOGY COATINGS, INC., a Nevada
corporation
By /s/ Xxxx X. Xxxxx, Esq.
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Xxxx X. Xxxxx, Esq.
Vice President, General
Counsel and Secretary
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EXHIBIT A
HOLDER SIGNATURE PAGE
/s/ Xxxx X. Xxxxxx
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Signature of Holder
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Number of Shares of Restricted Stock
Xxxx X. Xxxxxx
Name of Holder
/s/ R. Xxxx Xxxxxx
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Signature of Holder
----------------------------------------
Number of Shares of Restricted Stock
R. Xxxx Xxxxxx
Name of Holder
/s/ Xxxxx X. Xxxxxxxxxxx
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Signature of Holder
----------------------------------------
Number of Shares of Restricted Stock
Xxxxx X. Xxxxxxxxxxx
Name of Holder
