Exhibit 10.53
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of July 29,
2003, by and between Ventures National Incorporated, a company organized under
the laws of State of Utah, with its principal executive office at 00000 Xxx Xxxx
Xxxxxxx Xxxx, Xxxxxxx, XX 00000, (the "Company"), and Dutchess Private Equities
Fund, L.P. (the "Investor").
WHEREAS, in connection with the Investment Agreement by and between the
Company and the Investor of even date herewith (the "Investment Agreement"), the
Company has agreed to issue and sell to the Investor an indeterminate number of
shares of the Company's common stock, $.001 par value per share (the "Common
Stock"), to be purchased pursuant to the terms and subject to the conditions set
forth in the Investment Agreement; and
WHEREAS, to induce the Investor to execute and deliver the Investment
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 Investment 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 Investor hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "Execution Date" means the date this Agreement and the Investment Agreement
are signed by the Company and the Investor.
b. "Holder" means Dutchess Private Equities Fund, L.P., a Delaware limited
partnership.
c. "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.
d. "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.
e. "Principal Market" shall mean The American Stock Exchange, National
Association of Securities Dealer's, Inc. OTC electronic bulletin board, the
Nasdaq National Market or The Nasdaq SmallCap Market, whichever is the principal
market on which the Common Stock is listed.
f. "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 under the 1933 Act or any successor rule
providing for offering securities on a continuous basis ("Rule 415"), and the
declaration or ordering of effectiveness of such Registration Statement(s) by
the United States Securities and Exchange Commission (the "SEC").
g. "Registrable Securities" means (i) the shares of Common Stock issued or
issuable pursuant to the Investment Agreement, and (ii) any shares of capital
stock issued or issuable with respect to such shares of Common Stock, 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 1933 Act.
h. "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 Investment
Agreement.
2. REGISTRATION.
a. Mandatory Registration. On or before the execution of this Agreement, the
Company shall have a draft of the Registration Statement covering the
Registrable Securities. The Company shall, as soon as practicable file, but not
later than fifteen (15) calendar days following the Execution Date, 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 1,000,000 shares
of Common Stock which would be issuable on the date preceding the filing of the
Registration Statement based on the closing bid price of the Company's Common
Stock on such date.
b. The Company shall use its best efforts to have the Registration Statement(s)
declared effective by the SEC within ninety (90) calendar days after the
Execution Date.
c. The Company agrees not to include any other securities in this Registration
Statement without Investor's prior written consent. Furthermore, the Company
agrees that it will not file any other Registration Statement for other
securities, until thirty (30) calendar days after the Registration Statement for
the Registrable Securities is declared effective.
d. Counsel. Subject to Section 5 hereof, in connection with any offering of the
Registrable Securities pursuant to this Section 2, the Holder shall have the
right to select one legal counsel to administer its interests in the offering.
The Company shall reasonably cooperate with any such counsel.
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)
days after the Execution Date and shall keep such Registration Statement
effective until the earlier to occur of (i) the date as of which the Holder may
sell all of the Registrable Securities without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor thereto) or (ii) the date on
which (A) the Holder shall have sold all the Registrable Securities and (B) the
Investor has no right to acquire any additional shares of Common Stock under the
Investment 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 use its best efforts to
respond to all SEC comments within seven (7) business days from receipt of such
comments by the Company. The Company shall use its best efforts to cause the
Registration Statement relating to the Registrable Securities to become
effective no later than three (3) business days after notice from the SEC that
the Registration Statement may be declared effective. In order to achieve the
foregoing objectives, the Holder agrees to provide all information necessary to
complete the registration statement, including the intended method of
disposition of the Registrable Securities, and the Company's obligations set
forth above shall be conditioned on the receipt of such information.
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 Investor 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.
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, ten (10) copies 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.
d. The Company shall use reasonable efforts to (i) register and qualify the
Registrable Securities covered by a Registration Statement under such other
securities or "blue sky" laws of such states in the United States as the Holder
reasonably requests, (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 the 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 the 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 (each, a "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 a 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 the Holder (or such
other number of copies as the Holder may reasonably request). Failure to cure a
Registration Default within ten (10) business days shall result in the Company
paying liquidated damages of 2.0% of the cost of all Common Stock 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 the
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 the 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 a Registration
Default within ten (10) business days will cause the Investor to suffer damages
in an amount that will be difficult to ascertain. Accordingly, the parties agree
that it is appropriate to include 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 Investor
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 Investor, 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 the 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 the Holder and a single firm of counsel, designated
by the Holder, 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 the Holder, the Company shall cause to be furnished to the
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.
i. The Company shall make available for inspection by (i) the 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 the 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. The 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 the 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 the Holder is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to the
Holder and allow the 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 on the Nasdaq SmallCap Market for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. 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 Investor 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.
m. The Company shall provide a transfer agent for all the Registrable Securities
not later than the effective date of the first Registration Statement filed
pursuant hereto.
n. If requested by the Holder, the Company shall (i) as soon as reasonably
practical incorporate in a prospectus supplement or post-effective amendment
such information as the Holder reasonably determine 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 the 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 otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
q. 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 Investor,
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A.
r. At or prior to the date of the first Put Notice (as that term is defined in
the Investment Agreement) and at such other times as the Holder may reasonably
request, the Company shall cause to be delivered, letters from the Company's
independent certified public accountants (i) addressed to the Holder that such
accountants are independent public accountants within the meaning of the 1933
Act and the applicable published rules and regulations thereunder, and (ii) in
customary form and covering such financial and accounting matters as are
customarily covered by letters of independent certified public accountants
delivered to underwriters in connection with public offerings.
s. 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 the Holder in writing of the
information the Company requires from the Holder if the Holder elects to have
any of the Holder's Registrable Securities included in such Registration
Statement. 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 a particular Holder that the 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 sale 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 the 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, unless the Holder has notified the Company in writing of the Holder's
election to exclude all of the Holder's Registrable Securities from such
Registration Statement.
c. The Holder 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), the Holder will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until the 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 and fees of the Holder's counsel other than as set forth in the
Investment Agreement, 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 the Holder who holds such Registrable
Securities, the directors, officers, partners, employees, counsel, agents,
representatives of, and each Person, if any, who controls, the 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, 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 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; (iii) any claims based on the manner of
sale of the Registrable Securities by the Holder; (iv) any omission of the
Holder to notify the Company of any material fact that should be stated in the
Registration Statement or prospectus relating to the Holder or the manner of
sale; or (v) 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 the Holder is
participating, each the Holder agrees to 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 and the Company's agents (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 the Holder expressly for use in
connection with such Registration Statement; and, subject to Section 6(c), the
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 the 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 the 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. This indemnification provision
shall apply separately to each Investor and liability hereunder shall not be
joint and several.
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
the Holder, 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 1934 ACT.
With a view to making available to the Holder 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 Holder 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 5(c) of the Investment
Agreement) and the filing of such reports and other documents is required for
the applicable provisions of Rule 144; and
c. furnish to the Investor, promptly upon request, (i) a written statement by
the Company 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, and (iii) such other information as may be reasonably requested to
permit the Investor 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 only with the written
consent of the Company and the Holder. No such amendment shall be effective to
the extent that it applies to less than all of the Holder of the Registrable
Securities.
11. MISCELLANEOUS.
a. Any notices 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:
Ventures National Incorporated
Xxxxxx Xxxxxxx, President
00000 Xxx Xxxx Xxxxxxx Xxxx
Xxxxxxx, XX 00000
Tel: (000) 000-0000
Fax:
If to the Investor:
Dutchess Private Equities Fund, LP
000 Xxxxxx Xx.
Xxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
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. The laws of the State of Massachusetts shall govern all issues arising from
or related to this Agreement without regard to the principles of conflict of
laws. Each party hereby irrevocably submits to the non-exclusive jurisdiction of
the state and federal courts sitting in the
City of Boston, County of Suffolk, 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.
e. This Agreement and the Transaction Documents 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. Whenever required by the
context of this Agreement, the singular shall include the plural and masculine
shall include the feminine. This Agreement shall not be construed as if it had
been prepared by one of the parties, but rather as if all the parties had
prepared the same.
h. This Agreement may be executed in two or more identical 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 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.
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.
IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to be duly executed as of the day and year first above written.
Ventures National Incorporated
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
DUTCHESS PRIVATE EQUITIES FUND, 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: Ventures National Incorporated
Ladies and Gentlemen:
We are counsel to Ventures National Incorporated, a Utah corporation
(the "Company"), and have represented the Company in connection with that
certain Investment Agreement (the "Investment Agreement") entered into by and
among the Company and _________________________ (the "Investor") pursuant to
which the Company has agreed to issue to the Investor shares of the Company's
common stock, $.001 par value per share (the "Common Stock") on the terms and
conditions set forth in the Investment Agreement. Pursuant to the Investment
Agreement, the Company also has entered into a Registration Rights Agreement
with the Investor (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 Investment 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 ____________ ___, 2003,
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
Investor 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 under the 1933 Act at [enter the
time of effectiveness] on [enter the date of effectiveness] and to the best of
our knowledge, , 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: [Investor]
