Exhibit 10.3
DEBENTURE REGISTRATION RIGHTS AGREEMENT
DEBENTURE REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
September 30, 2005, by and between Securac Corp., a company organized under the
laws of state of Nevada,(the "Company"), and the undersigned Holder (the
"Holder").
WHEREAS, upon the terms and subject to the conditions of the Subscription
Agreement between the Holder and the Company (the "Subscription Agreement"), the
Company has agreed to issue and sell to the Holder convertible debentures of the
Company (the "Debentures"), which will be convertible into shares of the
Company's common stock, $.01 par value per share (the "Common Stock"), of the
Company.
WHEREAS, to induce the Holder to execute and deliver the Subscription
Agreement, Warrant Agreement, Security Agreement, Irrevocable Transfer Agent
Agreement and the Debenture Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws, with respect to the shares of
Common Stock issuable pursuant to the Subscription Agreement, Warrant Agreement
and Debenture Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained hereinafter and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Holder hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "Closing Date" shall mean the date in the preamble of this Agreement.
b. "Debenture" or "Debentures" mean the convertible debenture issued by the
Company to the Holder.
c. "Holder" shall mean Dutchess Private Equities Fund, II, LP
d. "Effective Date" shall mean the date the SEC has declared the Registration
Statement effective and the Company has filed all necessary amendments,
including the letter to request accelerated effectiveness and the following
Prospectus covering the resale of Shares.
e. "Face Amount" means five hundred thousand dollars ($500,000) to be invested
by The Holder.
f. "Filing Date" shall mean the date the Registration Statement has been filed
with the SEC and no stop order of acceptance has been issued by the SEC.
g. "Person" means a corporation, a limited liability company, an association,
a partnership, an organization, a business, an individual, a governmental or
political subdivision thereof or a governmental agency.
h. "Potential Material Event" means any of the following: (i) the possession by
the Company of material information not ripe for disclosure in a Registration
Statement, which shall be evidenced by determinations in good faith by the Board
of Directors of the Company that disclosure of such information in the
Registration Statement would be detrimental to the business and affairs of the
Company, or (ii) any material engagement or activity by the Company which would,
in the good faith determination of the Board of Directors of the Company, be
adversely affected by disclosure in a Registration Statement at such time, which
determination shall be accompanied by a good faith determination by the Board of
Directors of the Company that the Registration Statement would be materially
misleading absent the inclusion of such information.
i. "Principal Market" means either The American Stock Exchange, Inc., The New
York Stock Exchange, Inc., the Nasdaq National Market, The Nasdaq SmallCap
Market, the National Association of Securities Dealer's, Inc. OTC electronic
bulletin board, whichever is the principal market on which the Common Stock is
listed.
j. "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing with the United States Securities and Exchange
Commission (the "SEC") one or more Registration Statements in compliance with
the 1933 Act and pursuant to Rule 415 under the 1933 Act or any successor rule
providing for offering securities on a continuous basis ("Rule 415"), and
effectiveness of such Registration Statement(s).
k. "Registrable Securities" means the shares of Common Stock issued or issuable
(i) pursuant to the Subscription Agreement, (ii) any shares of capital stock
issued or issuable with respect to such shares of Common Stock and Warrants, if
any, as a result of any stock split, stock dividend, recapitalization, exchange
or similar event or otherwise, which have not been (x) included in a
Registration Statement that has been declared effective by the SEC, or (y) sold
under circumstances meeting all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the 0000 Xxx.
l. "Registration Statement" means a registration statement of the Company filed
under the 1933 Act.
All capitalized terms used in this Agreement and not otherwise defined
herein shall have the same meaning ascribed to them as in the Subscription
Agreement or Debenture Agreement.
2. REGISTRATION.
a. Mandatory Registration. Within thirty (30) days of the Closing Date ,
the Company shall prepare and file with the SEC a Registration Statement or
Registration Statements (as is necessary) on Form SB-2 (or, if such form is
unavailable for such a registration, on such other form as is available for such
a registration), covering the resale of all of the Registrable Securities, which
Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon stock splits, stock dividends or similar transactions. The Company shall
initially register for resale an amount of shares of Common Stock which would be
issuable on the date preceding the filing of the Registration Statement based on
the Fixed Conversion Price (as defined in the Debenture Agreement) of the
Company's Common Stock on such date and the amount reasonably calculated that
represents the number of shares issuable pursuant to the terms of the Offering,
including those Shares underlying the Warrant Agreement. The total amount of
Shares shall be both 1) the amount specified in the Warrant Agreement and 2) the
Face Amount of the Debenture divided by the Fixed Conversion Price. For
example, if the Fixed Conversion Price is fifty-five cents (.55) per share, the
amount of Shares to be registered will be nine hundred and nine thousand and
ninety shares (909,090) shares. (500,000/.55). In the event the Company cannot
register sufficient shares of Common Stock, due to the remaining number of
authorized shares of Common Stock being insufficient, the Company will use its
best efforts to register the maximum number of shares it can based on the
remaining balance of authorized shares and will use its best efforts to increase
the number of its authorized shares as soon as reasonably practicable.
b. The Company shall use its best efforts to have the Registration Statement
filed with the SEC within thirty (30) calendar days after the Closing Date. If
the Registration Statement covering the Registrable Securities required to be
filed by the Company pursuant to Section 2(a) hereof is not filed within thirty
(30) calendar days following the Closing Date, then the Company shall pay the
Holder the sum of two percent (2%) of the Face Amount of the Debentures,
outstanding as liquidated damages, and not as a penalty, for each thirty (30)
calendar day period, pro rata, compounded daily, following the thirty (30)
calendar day period until the Registration Statement is filed. In addition, for
each thirty (30) calendar period the Registration Statement goes without filing,
the Conversion Price of the Debentures will decrease by ten percent (10%). For
example, in the event that upon the thirty-first (31st) day following Closing,
the Registration Statement has not been filed with the SEC, the Conversion Price
shall decrease by five and one-half cents (.055) per share. (.55*10%=.055).
Notwithstanding the foregoing, the amounts payable by the Company pursuant
to this Section shall not be payable to the extent any delay in the filing of
the Registration Statement occurs because of an act of, or a failure to act or
to act timely by the Holder. The damages set forth in this Section shall
continue until the obligation is fulfilled and shall be paid within three (3)
business days after each thirty (30) day period, or portion thereof, until the
Registration Statement is filed. Failure of the Company to make payment within
said three (3) business days shall be considered a default.
The Company acknowledges that its failure to have the Registration
Statement filed within said thirty (30) calendar day period will cause the
Holder to suffer damages in an amount that will be difficult to ascertain.
Accordingly, the parties agree that it is appropriate to include in this
Agreement a provision for liquidated damages. The parties acknowledge and agree
that the liquidated damages provision set forth in this section represents the
parties' good faith effort to quantify such damages and, as such, agree that the
form and amount of such liquidated damages are reasonable and will not
constitute a penalty. The payment of liquidated damages shall not relieve the
Company from its obligations to register the Common Stock and deliver the Common
Stock pursuant to the terms of this Agreement, the Subscription Agreement and
the Debenture.
c. The Company shall use its best efforts to have the Registration Statement
declared effective by the SEC within ninety (90) calendar days after the Filing
Date. If the Registration Statement covering the Registrable Securities required
to be filed by the Company pursuant to Section 2(a) hereof has not become
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effective within ninety (90) calendar days following the Filing Date, then the
Company shall pay the Holder the sum of two percent (2%) of the Face Amount as
liquidated damages and not as a penalty for each thirty (30) calendar day
period, pro rata, compounded daily, following the one ninety (90) calendar day
period until the Registration Statement is declared effective.
If the Registration Statement covering the Registrable Securities required
to be filed by the Company pursuant to Section 2(a) hereof has become effective,
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but after the effective date the Holder's right to sell is suspended, then the
Company shall pay the Holder the sum of two percent (2%) of the Face Amount plus
interest and penalties due to the Holder for the Registrable Securities pursuant
to the Subscription Agreement for each thirty (30) calendar day period, pro
rata, compounded daily, following the suspension until such suspension ceases.
Notwithstanding the foregoing, the amounts payable by the Company pursuant
to this Section shall not be payable to the extent any delay in the
effectiveness of the Registration Statement occurs because of an act of, or a
failure to act or to act timely by the Holder. The damages set forth in this
Section shall continue until the obligation is fulfilled and shall be paid
within three (3) business days after each thirty (30) day period, or portion
thereof, until the Registration Statement is declared effective or such
suspension is released. Failure of the Company to make payment within said
three (3) business days shall be considered a default.
The Company acknowledges that its failure to have the Registration
Statement become effective within said ninety (90) calendar day period or to
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permit the suspension of the effectiveness of the Registration Statement, will
cause the Holder to suffer damages in an amount that will be difficult to
ascertain. Accordingly, the parties agree that it is appropriate to include in
this Agreement a provision for liquidated damages. The parties acknowledge and
agree that the liquidated damages provision set forth in this section represents
the parties' good faith effort to quantify such damages and, as such, agree that
the form and amount of such liquidated damages are reasonable and will not
constitute a penalty. The payment of liquidated damages shall not relieve the
Company from its obligations to register the Common Stock and deliver the Common
Stock pursuant to the terms of this Agreement, the Subscription Agreement and
the Debenture.
d. The Company agrees not to include any other securities, in this
Registration Statement without Holder prior written consent, unless for the
Holder. Furthermore, the Company agrees that it will not file any other
Registration Statement, including those on Form S-8, for other securities (other
than those for existing option holders, strategic partners or in connection with
a merger or acquisition), until three hundred and sixty (360) calendar days
after the Effective Date unless it has written approval from the Holder. Failure
to obtain written approval from the Holder will cause the Holder to suffer
damages that will be difficult to ascertain. Accordingly, the parties agree
that it is appropriate to include a provision for liquidated damages and the
Company agrees to pay, the Holder the sum of two percent (2%) of the Face Amount
as liquidated damages and not as a penalty for each thirty (30) calendar day
period, pro rata, compounded daily, until the unauthorized Registration
Statement is withdrawn.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to prepare and file a Registration
Statement with the SEC pursuant to Section 2(a), 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, with respect thereto, the
Company shall have the following obligations:
a. The Company shall use its best efforts to cause such Registration
Statement relating to the Registrable Securities to become effective within
ninety (90) calendar days after the date and shall keep such Registration
Statement effective pursuant to Rule 415 until the date on which (A) the Holder
shall have sold all the Registrable Securities and (B) the Holder has no right
to convert the Shares it owns into Common Stock under the Subscription
Agreement, Debenture Agreement or Warrant Agreement, respectively (the
"Registration Period"), which 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 light of the
circumstances in which they were made, not misleading. The Company shall respond
to any and all SEC comments or correspondence, whether written or oral, direct
or indirect, formal or informal ("Comments"), within seven (7) business days of
receipt by the Company of such Comments. If the Company fails to respond within
seven (7) business days of receipt of SEC Comments, the Company shall pay to the
Holder an amount equal to two percent (2%) per month, on a pro rata basis,
compounded daily, of the Face Amount as liquidated damages and not as a penalty;
provided that the seven (7) business day period provided herein shall be
extended as may be required by delays caused by Holder's counsel pursuant to
paragraph 3g below, and, provided further, that such seven (7) business day
period shall be extended two (2) business days for responses to SEC staff
accounting comments. The Company shall cause the Registration Statement
relating to the Registrable Securities to become effective no later than two (2)
business days after notice from the SEC that the Registration Statement has been
cleared of all comments. Failure to do so will result in the Face Amount on the
Debentures to be increased by five percent (5%) per calendar day the Company
does not request acceleration from the SEC, as liquidated damages.
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 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 Holder thereof
as set forth in such Registration Statement. In the event the number of shares
of Common Stock available under a Registration Statement filed pursuant to this
Agreement is at any time insufficient to cover all of the Registrable
Securities, the Company shall amend such Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable), or
both, so as to cover all of the Registrable Securities, in each case, as soon as
practicable, but in any event within thirty (30) calendar days after the
necessity therefor arises (based on the then Purchase Price of the Common Stock
and other relevant factors on which the Company reasonably elects to rely),
assuming the Company has sufficient authorized shares at that time, and if it
does not, within thirty (30) calendar days after such shares are authorized.
The Company shall use it best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof.
Prior to conversion of all the Shares, if at any time the conversion of all
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the Shares outstanding would result in an insufficient number of authorized
shares of Common Stock being available to cover all the conversions, or in the
event, that Holder deems that the Shares authorized will become insufficient,
then in such event, the Company will move to call and hold a shareholder's
meeting within thirty (30) calendar days of such event for the sole purpose of
authorizing additional shares of Common Stock to facilitate the conversions.
In such an event the Company shall recommend to all shareholders and management
of the Company to vote their shares in favor of increasing the authorized number
of shares of Common Stock. The Company represents and warrants that under no
circumstances will it deny or prevent Holder's right to convert the Shares as
permitted under the terms of this Subscription Agreement or this Registration
Rights Agreement. The Holder retains the right to request additional shares upon
the determination the company may not be able to facilitate conversions in the
future.
c The Company shall furnish to the Holder whose Registrable Securities are
included in any Registration Statement and its legal counsel 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 and
all exhibits, the prospectus included in such Registration Statement (including
each preliminary prospectus) and, with regards to such Registration
Statement(s), any correspondence by or on behalf of the Company to the SEC or
the staff of the SEC and any correspondence from the SEC or the staff of the SEC
to the Company or its representatives, (ii) upon the effectiveness of any
Registration Statement, a copy of the prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number of
copies as the Holder may reasonably request) and (iii) such other documents,
including copies of any preliminary or final prospectus, as the Holder may
reasonably request from time to time in order to facilitate the disposition of
the Registrable Securities. The Company filing the documents described in this
paragraph through XXXXX shall constitute delivery.
d. The Company shall use reasonable efforts to (i) register and qualify the
Registrable Securities covered by a Registration Statement under the applicable
securities or "blue sky" laws of such states of the United States as specified
by the Holder, (ii) prepare and file in those jurisdictions, such amendments
(including post-effective amendments) and supplements to such 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(d), (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 Holder 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.
e. As promptly as practicable after becoming aware of such event, the Company
shall notify Holder in writing of the happening of any 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 light of the circumstances under which they were made, not misleading,
("Registration Default") and use all diligent efforts to promptly prepare a
supplement or amendment to such Registration Statement and take any other
necessary steps to cure the Registration Default, (which, if such Registration
Statement is on Form S-3, may consist of a document to be filed by the Company
with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as
defined below) and to be incorporated by reference in the prospectus) to correct
such untrue statement or omission, and deliver ten (10) copies of such
supplement or amendment to Holder (or such other number of copies as Holder may
reasonably request). Failure to cure the Registration Default within five (5)
business days shall result in the Company paying liquidated damages of two
percent (2%) of the price paid to purchase the Shares then held by the Holder
for each thirty (30) calendar day period or portion thereof, beginning on the
date of suspension. The Company shall also promptly notify Holder 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
Holder by facsimile 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, (iii) of
the Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate, (iv) in the event the Registration
Statement is no longer effective or, (v) the Registration Statement is stale for
a period of more than five (5) Trading Days as a result of the Company's failure
to timely file its financials.
The Company acknowledges that its failure to cure the Registration Default
within three (3) business days will cause the Holder to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages
provision set forth in this section represents the parties' good faith effort to
quantify such damages and, as such, agree that the form and amount of such
liquidated damages are reasonable and will not constitute a penalty.
It is the intention of the parties that interest payable under any of the terms
of this Agreement shall not exceed the maximum amount permitted under any
applicable law. If a law, which applies to this Agreement which sets the maximum
interest amount, is finally interpreted so that the interest in connection with
this Agreement exceeds the permitted limits, then: (1) any such interest shall
be reduced by the amount necessary to reduce the interest to the permitted
limit; and (2) any sums already collected (if any) from the Company which exceed
the permitted limits will be refunded to the Company. The Holder may choose to
make this refund by reducing the amount that the Company owes under this
Agreement or by making a direct payment to the Company. If a refund reduces the
amount that the Company owes the Holder, the reduction will be treated as a
partial payment. In case any provision of this Agreement is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Agreement will not in any way
be affected or impaired thereby.
f. 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 Holder 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.
g. The Company shall permit Holder and a single firm of counsel, designated
as selling shareholders' counsel by the Holder who hold a majority of the
Registrable Securities being sold, to review and comment upon a Registration
Statement and all amendments and supplements thereto at least seven (7) business
days prior to their filing with the SEC, and not file any document in a form to
which such counsel reasonably objects. The Company shall not submit to the SEC
a request for acceleration of the effectiveness of a Registration Statement or
file with the SEC a Registration Statement or any amendment or supplement
thereto without the prior approval of such counsel, which approval shall not be
unreasonably withheld.
h. At the request of any Holder, the Company shall cause to be furnished to
Holder, on the date of the effectiveness of a Registration Statement, an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in the form of Exhibit D attached to the
Subscription Agreement.
i. The Company shall make available for inspection by (i) Holder and (ii)
one firm of attorneys and one firm of accountants or other agents retained by
the Holder (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 hold in strict confidence and shall not make any
disclosure (except to a Holder) or use of any Record or other information which
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 or any other agreement of which
the Inspector has knowledge. Holder 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.
j. The Company shall hold in confidence and not make any disclosure of
information concerning a Holder 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 other 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
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning a Holder is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to Holder and allow Holder, at the Holder'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 to secure designation and
quotation of all the Registrable Securities covered by any Registration
Statement on the Principal Market. If, despite the Company's best efforts, the
Company is unsuccessful in satisfying the preceding sentence, it shall use its
best efforts to cause all the Registrable Securities covered by any Registration
Statement to be listed on each other national securities exchange and automated
quotation system, if any, on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange or system. If,
despite the Company's best efforts, the Company is unsuccessful in satisfying
the two preceding sentences, it will use its best efforts to secure the
inclusion for quotation with Pink Sheets, LLC. 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 Holder to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
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 Holder may reasonably request and registered in such
names of the Persons who shall acquire such Registrable Securities from the
Holder, as the Holder may request.
m. The Company shall provide a transfer agent for all the Registrable
Securities not later than the Closing Date of the first Registration Statement
filed pursuant hereto.
n. If requested by the Holder holding a majority of the Registrable
Securities, the Company shall (i) as soon as reasonably practical incorporate in
a prospectus supplement or post-effective amendment such information as Holder
reasonably determines should be included therein relating to the sale and
distribution of Registrable Securities, including, without limitation,
information with respect to 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 as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) supplement or make amendments to any Registration Statement if reasonably
requested by Holder.
o. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable 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.
p. The Company shall make generally available to its security holders as
soon as reasonably practical, but not later than ninety (90) calendar days after
the close of the period covered thereby, an earnings statement (in form
complying with 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 any Registration Statement.
q. 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.
r. Within one (1) business day after the Registration Statement which
includes Registrable Securities is declared effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities, with copies to the Holder,
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A. Failure to do so will result in
the Face Amount on the Debentures to be increased by two percent (2%) per day,
as liquidated damages.
s. Subsequent to the SEC declared the Registration Statement cleared of all
comments and the Company's acceptance of the effectiveness of the Registration
Statement, the Company shall file a prospectus covering the resale of the Shares
("Prospectus") within two (2) trading days. In the event the Company does not
file the Prospectus within two (2) trading days of the Effective Date, then the
Company shall pay the Holder the sum of five percent (5%), per day, of the Face
Amount due to the Holder for each two (2) trading day period, pro rata,
compounded daily, following the two (2) trading day period until the Prospectus
is filed
t. The Company shall take all other reasonable actions necessary to expedite
and facilitate disposition by the Holder of Registrable Securities pursuant to a
Registration Statement.
4. OBLIGATIONS OF THE HOLDER.
a. At least five (5) calendar days prior to the first anticipated filing
date of a Registration Statement the Company shall notify Holder in writing of
the information the Company requires from Holder. It shall be a condition
precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to the Registrable Securities of the
Holder that Holder shall furnish in writing 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 reasonably be
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. The Holder covenants and agrees that, in connection with
any resale of Registrable Securities by it pursuant to a Registration Statement,
it shall comply with the "Plan of Distribution" section of the current
prospectus relating to such Registration Statement.
b. The Holder, by Holder'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.
x. Xxxxxx agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e), Holder will immediately discontinue disposition of Registrable
Securities pursuant to any Registration Statement(s) covering such Registrable
Securities until Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(f) or the first sentence of 3(e).
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printing and accounting fees, and fees and disbursements of
counsel for the Company shall be paid by the Company.
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 Holder who holds such Registrable
Securities, the directors, officers, partners, employees, agents,
representatives of, and each Person, if any, who controls Holder within the
meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act"), (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, 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
party 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 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, in light of the circumstances under which the statements therein were
made, not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact 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, or (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 (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Holder and each such controlling
person, promptly as such expenses are incurred and are due and payable, for any
reasonable 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 arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any 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 were timely made available by the Company pursuant to Section 3(c);
(ii) shall not be available to the extent such Claim is based on (a) a failure
of the Holder to deliver or to cause to be delivered the prospectus made
available by the Company or (b) the Indemnified Person's use of an incorrect
prospectus despite being promptly advised in advance by the Company in writing
not to use such incorrect prospectus; and (iii) 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. 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 resale of the Registrable Securities by the Holder pursuant to the
Registration Statement.
b. In connection with any Registration Statement in which Holder is
participating, Holder 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 its directors, each of its officers who
signs the Registration Statement, each Person, if any, who controls the Company
within the meaning of the 1933 Act or the 1934 Act (collectively and together
with an Indemnified Person, 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 Holder expressly for use in
connection with such Registration Statement; and, subject to Section 6(c),
Holder will reimburse any legal or other expenses reasonably incurred by them 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 Holder, which consent shall not be unreasonably withheld;
provided, further, however, that the Holder shall 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 Holder 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 resale of the Registrable Securities by
the Holder pursuant to the Registration Statement. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus were corrected on a timely basis in
the prospectus, as then amended or supplemented.
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 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. The indemnifying
party shall pay for only one separate legal counsel for the Indemnified Persons
or the Indemnified Parties, as applicable, and such counsel shall be selected by
Holder holding a majority-in-interest of the Registrable Securities included in
the Registration Statement to which the Claim relates, if the Holder is entitled
to indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The Indemnified Party or Indemnified
Person shall cooperate fully 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 appraised 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 written consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the 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. Following indemnification
as provided for hereunder, the indemnifying party shall be surrogated 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. The indemnification required by this Section 6 shall be made by
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.
e. 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 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 maker would not have
been liable for indemnification under the fault standards set forth in Section
6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE EXHANGE ACT.
With a view to making available to the Investors the benefits of Rule 144
promulgated under the Securities Act or any 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 Securities Act and the Exchange 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 the
Securities Purchase Agreement) and the filing of such reports and other
documents as are required by 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 that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange 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, 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. NO ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall not be assignable.
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 and either retroactively
or prospectively), only with the written consent of the Company and Holder of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon Holder and the Company. No such amendment
shall be effective to the extent that it applies to less than all of the Holder
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 also is offered to all of the
parties to this Agreement.
11. MISCELLANEOUS.
a. A Person is deemed to be a Holder of Registrable Securities whenever such
Person owns 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 registered 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 (provided a confirmation
of transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one (1) 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:
Xxxxx Xxxxx
Securac Corp
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxxxx XX 000000000, 000 0xx Xxx XX
Xxxxxxx, Xxxxxxx, XX X0X 0X0
Telephone: (000) 000-0000000-000-0000
Facsimile:
If to the Holder:
At the address listed in the Questionnaire.
Each party shall provide five (5) business days prior notice to the other
party of any change in address, phone number or facsimile number.
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 disputes arising under this agreement shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts,
without regard to principles of conflict of laws. The parties to this agreement
will submit all disputes arising under this agreement to arbitration in Boston,
Massachusetts before a single arbitrator of the American Arbitration Association
("AAA"). The arbitrator shall be selected by application of the rules of the
AAA, or by mutual agreement of the parties, except that such arbitrator shall be
an attorney admitted to practice law in the Commonwealth of Massachusetts. No
party to this agreement will challenge the jurisdiction or venue provisions as
provided in this section.
e. This Agreement and the Transaction Documents(as defined in the
=====================
Subscription Agreement) 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.
f. This Agreement and the Transaction Documents supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
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 two or more counterparts, all of which
taken together shall constitute one instrument. Execution and delivery of this
Agreement by exchange of facsimile copies bearing the facsimile signature of a
party shall constitute a valid and binding execution and delivery of this
Agreement by such party. Such facsimile copies shall constitute enforceable
original documents.
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 the other party may
reasonably request in order to 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 to be made by the Holder pursuant
to this Agreement shall be made, unless otherwise specified in this Agreement,
by Holder holding a majority of the Registrable Securities.
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.
12. Waiver
The Holder's delay or failure at any time or times hereafter to require strict
performance by Company of any undertakings, agreements or covenants shall not
waiver, affect, or diminish any right of the Holder under this Agreement to
demand strict compliance and performance herewith. Any waiver by the Holder of
any Event of Default shall not waive or affect any other Event of Default,
whether such Event of Default is prior or subsequent thereto and whether of the
same or a different type. None of the undertakings, agreements and covenants of
the Company contained in this Agreement, and no Event of Default, shall be
deemed to have been waived by the Holder, nor may this Agreement be amended,
changed or modified, unless such waiver, amendment, change or modification is
evidenced by an instrument in writing specifying such waiver, amendment, change
or modification and signed by the Holder.
13. Payment of Penalties
Any accrued penalties incurred herein by the Company for failure to act in a
timely manner, as described in this Agreement, shall be charged to the Face
Amount of the Debenture (as defined in the Debenture), unless specifically noted
otherwise.
14. Waiver of Jury Trial.
AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT, THE
PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
ASSOCIATED WITH THIS TRANSACTION.
* * *
IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to be duly executed as of the day and year first above written. Duly authorized
to sign on behalf of:
SECURAC CORP.
By: /s/Xxxxx X. Xxxxx
--------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Financial Officer
By: /s/Xxxx Xxxxx Xxxxxxx
Name: Xxxx Xxxxx Xxxxxxx
Title: Chief Financial Officer
DUTCHESS PRIVATE EQUITIES FUND, II, L.P.
BY ITS GENERAL PARTNER DUTCHESS
CAPITAL MANAGEMENT, LLC
By: /s/Xxxxxxx X. Xxxxxxxx
Name: Xxxxxxx X. Xxxxxxxx
Title: A Managing Member
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
Date: __________
[TRANSFER AGENT]
Re: Securac Corp.
--------------
Ladies and Gentlemen:
We are counsel to Securac Corp., a Nevada corporation (the "Company"), and
--------------
have represented the Company in connection with that certain Subscription
Agreement (the "Subscription Agreement") entered into by and among the Company
and _________________________ (the "Holder") pursuant to which the Company has
agreed to issue to the Holder shares of the Company's common stock, $.01 par
value per share (the "Common Stock") on the terms and conditions set forth in
the Subscription Agreement. Pursuant to the Subscription Agreement, the Company
also has entered into a Registration Rights Agreement with the Holder (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 issued or
issuable under the Subscription 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 ____________ ___, 2005, the Company filed
a Registration Statement on Form S- ___ (File No. 333-________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names the Holder as a
selling shareholder thereunder.
In connection with the foregoing, we advise you that [a member of the SEC's
=
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective] [the Registration Statement has become
=========================================
effective] under the 1933 Act at [enter the time of effectiveness] on [enter the
======= ------------------------------- ---------
date of effectiveness] and to the best of our knowledge, after telephonic
-----------------------
inquiry of a member of the SEC's staff, no stop order suspending its
------
effectiveness has been issued and no 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.
Very truly yours,
[Company Counsel]
By: ____________________
cc: [Holder]
