EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of August 19,
2004, by and among Galaxy Energy Corporation, a Colorado corporation, with
headquarters located at 0000-00xx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000 (the
"COMPANY"), and the undersigned buyers (each, a "BUYER" and collectively, the
"BUYERS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell at the Initial Closing (as
defined in the Securities Purchase Agreement) to the Buyers (i) convertible
notes of the Company (including accrued and unpaid interest thereon, the
"INITIAL NOTES"), which will be convertible into shares of the Company's common
stock, $0.001 par value per share (the "COMMON STOCK") in accordance with the
terms of the Initial Notes (the shares of Common Stock issuable upon conversion
of the Initial Notes being referred to as the "INITIAL CONVERSION SHARES"), and
(ii) warrants to purchase shares of Common Stock (the "INITIAL WARRANTS"; and
the shares of Common Stock issuable upon exercise of the Initial Warrants being
referred to herein as the "INITIAL WARRANT SHARES");
B. In connection with the Securities Purchase Agreement, the Company
has agreed, upon the terms and subject to the conditions of the Securities
Purchase Agreement, to issue and sell at the Conditional Closing (as defined in
the Securities Purchase Agreement) to the Buyers (i) convertible notes of the
Company (including accrued and unpaid interest thereon, the "CONDITIONAL NOTES"
and collectively with the Initial Notes, the "Notes"), which will be convertible
into shares of Common Stock in accordance with the terms of the Conditional
Notes (the shares of Common Stock issuable upon conversion of the Conditional
Notes being referred to as the "CONDITIONAL CONVERSION SHARES");
C. In connection with the transactions contemplated by the Securities
Purchase Agreement, the Company has agreed to issue to the Buyers additional
warrants to purchase shares of Common Stock upon the terms and subject to the
conditions in the Transaction Documents (any such additional warrants, the
"REPLACEMENT WARRANTS"; and the shares of Common Stock issuable upon exercise of
the Replacement Warrants being referred to herein as "REPLACEMENT WARRANT
SHARES); and
D. To induce the Buyers to execute and deliver the Securities Purchase
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.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the Buyers
hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "CONDITIONAL REGISTRABLE SECURITIES" means (i) the Conditional
Conversion Shares issued or issuable upon conversion of the Conditional Notes
(including any principal thereof or interest thereon), and (ii) any shares of
capital stock issued or issuable with respect to the Conditional Conversion
Shares or the Conditional Notes as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, without regard to any
limitations on conversions of Conditional Notes; provided, however, that any
such Conditional Registrable Securities shall cease to be Conditional
Registrable Securities when a Registration Statement with respect to the sale of
such securities becomes effective under the 1933 Act and such securities are
disposed of in accordance with such Registration Statement, (b) such securities
are sold in accordance with Rule 144 or (c) such securities become transferable
without any restrictions in accordance with Rule 144(k) (or any successor
provision).
b. "CONDITIONAL REGISTRATION STATEMENT" means a registration
statement or registration statements of the Company filed under the 1933 Act
covering the Conditional Registrable Securities.
c. "CONVERSION SHARES" means the Initial Conversion Shares and
the Conditional Conversion Shares.
d. "EFFECTIVENESS DEADLINE" means the Initial Effectiveness
Deadline, the Conditional Effectiveness Deadline, a Replacement Warrant
Effectiveness Deadline, an Additional Effectiveness Deadline, an Additional
Conditional Effectiveness Deadline or an Additional Replacement Warrant
Effectiveness Deadline (each as defined below), as applicable.
e. "FILING DEADLINE" means the Initial Filing Deadline, the
Conditional Filing Deadline, a Replacement Warrant Filing Deadline, an
Additional Filing Deadline, an Additional Conditional Filing Deadline or an
Additional Replacement Warrant Filing Deadline (each as defined below), as
applicable.
f. "INITIAL REGISTRABLE SECURITIES" means (i) the Initial
Conversion Shares issued or issuable upon conversion of the Initial Notes
(including any principal thereof or interest thereon), (ii) the Initial Warrant
Shares issued or issuable upon exercise of the Initial Warrants and (iii) any
shares of capital stock issued or issuable with respect to the Initial
Conversion Shares, the Initial Notes, the Initial Warrant Shares and the Initial
Warrants as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise, without regard to any limitations on
conversions of Initial Notes or exercises of Initial Warrants; provided,
however, that any such Initial Registrable Securities shall cease to be Initial
Registrable Securities when a Registration Statement with respect to the sale of
such securities becomes effective under the 1933 Act and such securities are
disposed of in accordance with such Registration Statement, (b) such securities
are sold in accordance with Rule 144 or (c) such securities become transferable
without any restrictions in accordance with Rule 144(k) (or any successor
provision).
2
g. "INITIAL REGISTRATION STATEMENT" means a registration
statement or registration statements of the Company filed under the 1933 Act
covering the Initial Registrable Securities.
h. "INVESTOR" means a Buyer, any transferee or assignee thereof
to whom a Buyer assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9 and any
transferee or assignee thereof to whom a transferee or assignee assigns its
rights under this Agreement and who agrees to become bound by the provisions of
this Agreement in accordance with Section 9.
i. "PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a governmental or any department or agency thereof.
j. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) 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 or delayed 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").
k. "REGISTRABLE SECURITIES" means the Initial Registrable
Securities, the Conditional Registrable Securities and the Replacement Warrant
Registrable Securities, as applicable.
l. "REGISTRATION STATEMENT" means the Initial Registration
Statement, the Conditional Registration Statement and any Replacement Warrant
Registration Statement, as applicable.
m. "REPLACEMENT WARRANT REGISTRABLE SECURITIES" means all
Replacement Warrant Shares issued or issuable upon exercise of any Replacement
Warrants and (ii) any shares of capital stock issued or issuable with respect to
the Replacement Warrant Shares and the Replacement Warrants as a result of any
stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, without regard to any limitations on the exercises of Replacement
Warrants; provided, however, that any such Replacement Warrant Registrable
Securities shall cease to be Replacement Warrant Registrable Securities when a
Registration Statement with respect to the sale of such securities becomes
effective under the 1933 Act and such securities are disposed of in accordance
with such Registration Statement, (b) such securities are sold in accordance
with Rule 144 (as defined in Section 8) or (c) such securities become
transferable without any restrictions in accordance with Rule 144(k) (or any
successor provision).
n. "REPLACEMENT WARRANT REGISTRATION STATEMENT" means a
registration statement or registration statements of the Company filed under the
1933 Act covering Replacement Warrant Registrable Securities.
o. "TRADING DAY" means any day on which the Common Stock is
traded on the principal securities exchange or securities market on which the
Common Stock is then
3
traded; provided that "Trading Day" shall not include any day on which the
Common Stock is scheduled to trade, or actually trades, on such exchange or
market for less than 4.5 hours.
p. "WARRANTS" means the Initial Warrants and any Replacement
Warrants.
q. "WARRANT SHARES" means the Initial Warrant Shares and any
Replacement Warrant Shares.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. i. Initial Mandatory Registration. The Company shall
prepare, and, as soon as practicable but in no event later than thirty (30) days
after the Initial Closing Date (the "INITIAL FILING DEADLINE"), file with the
SEC a Registration Statement on Form SB-2 (or on Form S-3, if Form S-3 is then
available for the registration of the resale of the Registrable Securities
hereunder), covering the resale of all of the Initial Registrable Securities.
The Initial Registration Statement prepared pursuant hereto shall register for
resale at least that number of shares of Common Stock equal to the sum of (x)
110% of the number of Initial Warrant Shares issuable upon exercise of all the
outstanding Initial Warrants as of the second Trading Day immediately preceding
the date the Initial Registration Statement is initially filed with the SEC and
(y) 175% of the greater of (A) $15,000,000 divided by the arithmetic average of
the Weighted Average Price (as defined in the Notes) of the Common Stock on each
of the five (5) consecutive Trading Days ending on the second Trading Day
immediately preceding the date the Initial Registration Statement is initially
filed with the SEC and (B) the number of Initial Conversion Shares issuable upon
conversion of all the outstanding Initial Notes as of the second Trading Day
immediately preceding the date the Initial Registration Statement is initially
filed with the SEC, subject to adjustment as provided in Section 2(e). The
calculations set forth in this paragraph shall be made without regard to any
limitations on the conversion of the Notes or exercise of the Warrants, and such
calculations shall assume that the Notes and Warrants are then convertible and
exercisable, respectively, into shares of Common Stock at the then prevailing
Conversion Rate (as defined in the Notes), except as provided above, and Warrant
Exercise Price (as defined in the Warrants), respectively. The Company shall use
its best efforts to have the Initial Registration Statement declared effective
by the SEC as soon as practicable, but in no event later than the date which is
one hundred twenty (120) days after the Initial Closing Date (the "INITIAL
EFFECTIVENESS DEADLINE").
ii. Conditional Mandatory Registration. The Company shall
prepare, and, as soon as practicable but in no event later than ten (10) days
after the Conditional Closing Date (the "CONDITIONAL FILING DEADLINE"), file
with the SEC a Registration Statement on Form SB-2 (or on Form S-3, if Form S-3
is then available for the registration of the resale of the Registrable
Securities hereunder), covering the resale of all of the Conditional Registrable
Securities. The Conditional Registration Statement prepared pursuant hereto
shall register for resale at least that number of shares of Common Stock equal
to 175% of the greater of (A) $5,000,000 divided by the arithmetic average of
the Weighted Average Price of the Common Stock on each of the five (5)
consecutive Trading Days ending on the second Trading Day
4
immediately preceding the date the Conditional Registration Statement is
initially filed with the SEC and (B) the number of Conditional Conversion Shares
issuable upon conversion of all the outstanding Conditional Notes as of the
second Trading Day immediately preceding the date the Conditional Registration
Statement is initially filed with the SEC, subject to adjustment as provided in
Section 2(e). The calculations set forth in this paragraph shall be made without
regard to any limitations on the conversion of the Notes, and such calculations
shall assume that the Notes are then convertible into shares of Common Stock at
the then prevailing Conversion Rate, except as provided above. The Company shall
use its best efforts to have the Conditional Registration Statement declared
effective by the SEC as soon as practicable, but in no event later than the date
which is seventy-five (75) days after the Conditional Closing Date (the
"CONDITIONAL EFFECTIVENESS DEADLINE").
iii. Replacement Warrant Mandatory Registration. The Company
shall prepare, and, as soon as practicable but in no event later than ten (10)
days after the issuance of each Replacement Warrant (each, a "REPLACEMENT
WARRANT FILING DEADLINE"), file with the SEC a Registration Statement on Form
SB-2 (or on Form S-3, if Form S-3 is then available for the registration of the
resale of the Registrable Securities hereunder), covering the resale of all of
the Replacement Warrant Registrable Securities. Each Replacement Warrant
Registration Statement prepared pursuant hereto shall register for resale at
least that number of shares of Common Stock equal to 110% of the number of
Replacement Warrant Shares issuable upon the exercise of such Replacement
Warrant as of the second Trading Day immediately proceeding the date the
Replacement Warrant Registration Statement is initially filed with the SEC,
subject to adjustment as provided in Section 2(e). The calculation set forth in
this paragraph shall be made without regard to any limitations on the exercise
of the Warrants, and such calculation shall assume that the Warrants are then
exercisable into shares of Common Stock at the then prevailing Warrant Exercise
Price. The Company shall use its best efforts to have such Replacement Warrant
Registration Statement declared effective by the SEC as soon as practicable, but
in no event later than the date which is seventy-five (75) days after the
issuance of such Replacement Warrant (each, a "REPLACEMENT WARRANT EFFECTIVENESS
DEADLINE").
b. Allocation of Registrable Securities. The initial number of
Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of such Registrable Securities held
by each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such
Investor's Registrable Securities, each transferee shall be allocated a pro rata
portion of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities covered by such Registration Statement
shall be allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement. For purposes hereof, the number of Registrable
Securities held by an Investor includes all Registrable Securities issuable upon
the conversion of Notes and the exercise of Warrants held by such Investor,
without regard to any limitations on conversion of the Notes or exercise of the
Warrants.
5
c. Legal Counsel. Subject to Section 5 hereof, the Buyers holding
securities representing at least two-thirds (2/3) of the Registrable Securities
shall have the right to select one legal counsel to review and oversee any
offering pursuant to this Section 2 ("LEGAL COUNSEL"), which shall be Xxxxxx
Xxxxxx Xxxxx Xxxxxxxx or such other counsel as thereafter designated by the
holders of securities representing at least two-thirds (2/3) of the Registrable
Securities. The Company shall reasonably cooperate with Legal Counsel in
performing the Company's obligations under this Agreement.
d. Ineligibility for Form S-3. In the event that Form S-3 is not
available for the registration of the resale of Registrable Securities
hereunder, the Company shall undertake to register the Registrable Securities on
Form S-3 as soon as such form is available, provided that the Company shall
maintain the effectiveness of the Registration Statement then in effect until
such time as a Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the SEC.
e. Sufficient Number of Shares Registered.
i. In the event the number of shares available under the
Initial Registration Statement filed pursuant to Section 2(a)(i) is insufficient
to cover all of the Initial Registrable Securities required to be covered by the
Initial Registration Statement or an Investor's allocated portion of such
Initial Registrable Securities pursuant to Section 2(b), the Company shall, as
soon as practicable, but in any event not later than fifteen (15) days after the
necessity therefor arises (the "ADDITIONAL FILING DEADLINE"), amend the Initial
Registration Statement, or file a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to register for resale at
least that number of shares of Common Stock equal to the sum of (x) 110% of the
number of Initial Warrant Shares issuable upon exercise of all the outstanding
Initial Warrants as of the second Trading Day immediately preceding the date of
the filing of such amendment or new Registration Statement with the SEC and (y)
175% of the greater of (A) the principal amount of the Initial Notes then
outstanding divided by the arithmetic average of the Weighted Average Price of
the Common Stock on each of the five (5) consecutive Trading Days immediately
preceding the date of the filing of such amendment or new Registration Statement
with the SEC and (B) the number of Initial Conversion Shares issuable upon
conversion of all the outstanding Initial Notes, as of the Trading Day
immediately preceding the date of the filing of such amendment or new
Registration Statement with the SEC. The Company shall use its best efforts to
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof, but in any event not later
than seventy-five (75) days following the filing thereof (the "ADDITIONAL
EFFECTIVENESS DEADLINE"). For purposes of the foregoing provision, the number of
shares available under the Initial Registration Statement shall be deemed
"insufficient to cover all of the Initial Registrable Securities" if as of any
date of determination the number of shares of Common Stock equal to the sum of
(x) 100% of the number of Initial Warrant Shares issuable as of such time upon
exercise of all the outstanding Initial Warrants and (y) 125% of the greater of
(A) the principal amount of the Initial Notes then outstanding divided by the
arithmetic average of the Weighted Average Price of the Common Stock on each of
the ten (10) consecutive Trading Days immediately preceding such date of
determination and (B) the number of Initial Conversion Shares issuable upon
conversion of all the outstanding Initial Notes as of the Trading Day
immediately preceding such date of determination is greater than the number of
shares of
6
Common Stock available for resale under such Registration Statement. The
calculations set forth in this paragraph shall be made without regard to any
limitations on the conversion of the Notes or exercise of the Warrants, and such
calculations shall assume that the Notes and the Warrants are then convertible
and exercisable, respectively, into shares of Common Stock at the then
prevailing Conversion Rate and Warrant Exercise Price, respectively.
ii. In the event the number of shares available under the
Conditional Registration Statement filed pursuant to Section 2(a)(ii) is
insufficient to cover all of the Conditional Registrable Securities required to
be covered by the Conditional Registration Statement or an Investor's allocated
portion of such Conditional Registrable Securities pursuant to Section 2(b), the
Company shall, as soon as practicable, but in any event not later than fifteen
(15) days after the necessity therefor arises (the "ADDITIONAL CONDITIONAL
FILING DEADLINE"), amend the Conditional Registration Statement or file a new
Registration Statement (on the short form available therefor, if applicable), or
both, so as to register for resale at least that number of shares of Common
Stock equal to 175% of the greater of (A) the principal amount of the
Conditional Notes then outstanding divided by the arithmetic average of the
Weighted Average Price of the Common Stock on each of the five (5) consecutive
Trading Days immediately preceding the date of the filing of such amendment or
new Registration Statement with the SEC and (B) the number of Conditional
Conversion Shares issuable upon conversion of all the outstanding Conditional
Notes, as of the Trading Day immediately preceding the date of the filing of
such amendment or new Registration Statement with the SEC. The Company shall use
its best efforts to cause such amendment and/or new Registration Statement to
become effective as soon as practicable following the filing thereof, but in any
event not later than seventy-five (75) days following the filing thereof (the
"ADDITIONAL CONDITIONAL EFFECTIVENESS DEADLINE"). For purposes of the foregoing
provision, the number of shares available under the Conditional Registration
Statement shall be deemed "insufficient to cover all of the Conditional
Registrable Securities" if as of any date of determination the number of shares
of Common Stock equal to 125% of the greater of (A) the principal amount of the
Conditional Notes then outstanding divided by the arithmetic average of the
Weighted Average Price of the Common Stock on each of the ten (10) consecutive
Trading Days immediately preceding such date of determination and (B) the number
of Conditional Conversion Shares issuable upon conversion of all the outstanding
Conditional Notes as of the Trading Day immediately preceding such date of
determination is greater than the number of shares of Common Stock available for
resale under such Registration Statement. The calculations set forth in this
paragraph shall be made without regard to any limitations on the conversion of
the Notes, and such calculations shall assume that the Notes are then
convertible into shares of Common Stock at the then prevailing Conversion Rate.
iii. In the event the number of shares available under an
Replacement Warrant Registration Statement filed pursuant to Section 2(a)(iii)
is insufficient to cover all of the Replacement Warrant Registrable Securities
required to be covered by the Replacement Warrant Registration Statement or an
Investor's allocated portion of such Replacement Warrant Registrable Securities
pursuant to Section 2(b), the Company shall, as soon as practicable, but in any
event not later than fifteen (15) days after the necessity therefor arises (an
"ADDITIONAL REPLACEMENT WARRANT FILING DEADLINE"), amend the Replacement Warrant
Registration Statement, or file a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to register for resale at
least that number of shares of Common Stock
7
equal to 110% of the number of Replacement Warrant Shares issuable upon exercise
of all the outstanding Replacement Warrants to which the Replacement Warrant
Registration Statement relates as of the second Trading Day immediately
preceding the date of the filing of such amendment or new Registration Statement
with the SEC. The Company shall use its best efforts to cause such amendment
and/or new Registration Statement to become effective as soon as practicable
following the filing thereof, but in any event not later than seventy-five (75)
days following the filing thereof (an "ADDITIONAL REPLACEMENT WARRANT
EFFECTIVENESS DEADLINE"). For purposes of the foregoing provision, the number of
shares available under an Replacement Warrant Registration Statement shall be
deemed "insufficient to cover all of the Replacement Warrant Registrable
Securities" if as of any date of determination the number of shares of Common
Stock equal to 100% of the number of Replacement Warrant Shares issuable as of
such date of determination upon exercise of all the outstanding Replacement
Warrants to which the Replacement Warrant Registration Statement relates is
greater than the number of shares of Common Stock available for resale under
such Registration Statement. The calculations set forth in this paragraph shall
be made without regard to any limitations on the exercise of the Warrants, and
such calculations shall assume that the Warrants are then exercisable into
shares of Common Stock at the then prevailing Warrant Exercise Price.
f. Effect of Failure to File and Obtain and Maintain
Effectiveness of Registration Statement.
i. If (i) a Registration Statement covering Initial
Registrable Securities and required to be filed by the Company pursuant to
Section 2(a)(i) or Section 2(e)(i) of this Agreement is not (A) filed with the
SEC on or before the applicable Filing Deadline or (B) declared effective by the
SEC on or before the applicable Effectiveness Deadline or (ii) on any day after
a Registration Statement has been declared effective by the SEC sales of all the
Initial Registrable Securities required to be included on such Registration
Statement cannot be made (other than during an Allowable Grace Period (as
defined in Section 3(t))) pursuant to such Registration Statement (including
because of a failure to keep the such Registration Statement effective, to
disclose such information as is necessary for sales to be made pursuant to such
Registration Statement or to register sufficient shares of Common Stock), then,
as partial relief for the damages to any holder of Initial Notes or Initial
Warrants by reason of any such delay in or reduction of its ability to sell the
underlying shares of Common Stock (which remedy shall not be exclusive of any
other remedies available at law or in equity), the Company shall pay to such
holder an amount in cash equal to the product of (i) the sum of (A) the
principal amount of the Initial Notes held by such holder and (B) the total
Aggregate Exercise Price (as defined in the Initial Warrants) of all Initial
Warrants held by such holder and to which such Registration Statement relates,
multiplied by (ii) the sum of (A) 0.02, if such Registration Statement is not
filed by the applicable Filing Deadline, plus (B) 0.02, if such Registration
Statement is not declared effective by the applicable Effectiveness Deadline,
plus (C) the product of (I) 0.000667 multiplied by (II) the sum (without
duplication) of (x) the number of days after the applicable Filing Deadline that
such Registration Statement is not filed with the SEC, plus (y) the number of
days after the applicable Effectiveness Deadline that such Registration
Statement is not declared effective by the SEC, plus (z) the number of days
after such Registration Statement has been declared effective by the SEC that
such Registration Statement is not available (other than during an Allowable
Grace Period) for the sale of at least all the Initial Registrable Securities
required to be included on such Registration Statement pursuant to Section
2(e)(i).
8
ii. If (i) a Registration Statement covering Conditional
Registrable Securities and required to be filed by the Company pursuant to
Section 2(a)(ii) or Section 2(e)(ii) of this Agreement is not (A) filed with the
SEC on or before the applicable Filing Deadline or (B) declared effective by the
SEC on or before the applicable Effectiveness Deadline or (ii) on any day after
such Registration Statement has been declared effective by the SEC sales of all
the Conditional Registrable Securities required to be included on such
Registration Statement cannot be made (other than during an Allowable Grace
Period) pursuant to such Registration Statement (including because of a failure
to keep such Registration Statement effective, to disclose such information as
is necessary for sales to be made pursuant to such Registration Statement or to
register sufficient shares of Common Stock), then, as partial relief for the
damages to any holder of Conditional Notes by reason of any such delay in or
reduction of its ability to sell the underlying shares of Common Stock (which
remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to such holder an amount in cash equal to the
product of (i) the principal amount of the Conditional Notes held by such
holder, multiplied by (ii) the sum of (A) 0.02, if such Registration Statement
is not filed by the applicable Filing Deadline, plus (B) 0.02, if such
Registration Statement is not declared effective by the applicable Effectiveness
Deadline, plus (C) the product of (I) 0.000667 multiplied by (II) the sum
(without duplication) of (x) the number of days after the applicable Filing
Deadline that such Registration Statement is not filed with the SEC, plus (y)
the number of days after the applicable Effectiveness Deadline that such
Registration Statement is not declared effective by the SEC, plus (z) the number
of days after such Registration Statement has been declared effective by the SEC
that such Registration Statement is not available (other than during an
Allowable Grace Period) for the sale of at least all the Conditional Registrable
Securities required to be included on such Registration Statement pursuant to
Section 2(e)(ii).
iii. If (i) a Registration Statement covering all the
Replacement Warrant Registrable Securities and required to be filed by the
Company pursuant to Section 2(a)(iii) or Section 2(e)(iii) of this Agreement is
not (A) filed with the SEC on or before the applicable Filing Deadline or (B)
declared effective by the SEC on or before the applicable Effectiveness Deadline
or (ii) on any day after such Registration Statement has been declared effective
by the SEC sales of all the Replacement Warrant Registrable Securities required
to be included on such Registration Statement cannot be made (other than during
an Allowable Grace Period) pursuant to such Registration Statement (including
because of a failure to keep such Registration Statement effective, to disclose
such information as is necessary for sales to be made pursuant to such
Registration Statement or to register sufficient shares of Common Stock), then,
as partial relief for the damages to any holder of Replacement Warrants by
reason of any such delay in or reduction of its ability to sell the underlying
shares of Common Stock (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Company shall pay to such holder an
amount in cash equal to the product of (i) the total Aggregate Exercise Price of
all Replacement Warrants held by such holder and to which such Registration
Statement relates, multiplied by (ii) the sum of (A) 0.02, if such Registration
Statement is not filed by the applicable Filing Deadline, plus (B) 0.02, if such
Registration Statement is not declared effective by the applicable Effectiveness
Deadline, plus (C) the product of (I) 0.000667 multiplied by (II) the sum
(without duplication) of (x) the number of days after the applicable Filing
Deadline that such Registration Statement is not filed with the SEC, plus (y)
the number of days after the applicable Effectiveness Deadline that such
Registration Statement is not declared effective by the SEC, plus (z) the number
of days after such Registration Statement has
9
been declared effective by the SEC that such Registration Statement is not
available (other than during an Allowable Grace Period) for the sale of at least
all the Replacement Warrant Registrable Securities required to be included on
such Registration Statement pursuant to Section 2(e)(iii).
iv. The payments to which a holder shall be entitled
pursuant to this Section 2(f) are referred to herein as "REGISTRATION DELAY
PAYMENTS." Registration Delay Payments shall be paid on the earlier of (I) the
last day of the calendar month during which such Registration Delay Payments are
incurred and (II) the third Business Day after the event or failure giving rise
to the Registration Delay Payments is cured. In the event the Company fails to
make Registration Delay Payments in a timely manner, such Registration Delay
Payments shall bear interest at the rate of the lesser of 2.0% per month
(prorated for partial months) or the highest lawful maximum interest rate, in
each case, until paid in full.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to file a Registration
Statement with the SEC pursuant to Section 2(a) or 2(e), the Company will use
its best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and, pursuant
thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the applicable Registrable Securities
(but in no event later than the applicable Filing Deadline) and use its best
efforts to cause such Registration Statement relating to the Registrable
Securities to become effective as soon as practicable after such filing (but in
no event later than the applicable Effectiveness Deadline). The Company shall
keep each Registration Statement effective pursuant to Rule 415 at all times
until the earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or successor thereto) promulgated under the
1933 Act or (ii) the date on which the Investors shall have sold all the
Registrable Securities covered by such Registration Statement (the "REGISTRATION
PERIOD"). Such 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 term "best efforts"
shall mean, among other things, that the Company shall submit to the SEC, within
two (2) Business Days after the Company learns that no review of a particular
Registration Statement will be made by the staff of the SEC or that the staff
has no further comments on the Registration Statement, as the case may be, a
request for acceleration of effectiveness of such Registration Statement to a
time and date not later than 48 hours after the submission of such request.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all
10
Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such Registration Statement. In the case of
amendments and supplements to a Registration Statement which are required to be
filed pursuant to this Agreement (including pursuant to this Section 3(b)) by
reason of the Company filing a report on Form 10-KSB, Form 10-K, Form 10-QSB,
Form 10-Q or Form 8-K or any analogous report under the Securities Exchange Act
of 1934, as amended (the "1934 ACT"), the Company shall have incorporated such
report by reference into the Registration Statement, if applicable, or shall
file such amendments or supplements with the SEC on the same day on which the
1934 Act report is filed which created the requirement for the Company to amend
or supplement the Registration Statement.
c. The Company shall (A) permit Legal Counsel to review and
comment upon (i) the Initial Registration Statement and the Conditional
Registration Statement at least five (5) Business Days prior to its filing with
the SEC, and (ii) all other Registration Statements and all amendments and
supplements to all Registration Statements (except for Annual Reports on Form
10-K or Form 10-KSB, Quarterly Reports on Form 10-Q or 10-QSB and Current
Reports on Form 8-K and any similar or successor reports) within a reasonable
number of days prior to their filing with the SEC, and (B) not file any
document, registration statement, amendment or supplement described in the
foregoing clause (A) in a form to which Legal Counsel reasonably objects. The
Company shall not submit a request for acceleration of the effectiveness of a
Registration Statement or any amendment or supplement thereto without providing
prior notice thereof to Legal Counsel and each Investor. The Company shall
furnish to Legal Counsel, without charge, (i) promptly after the same is
prepared and filed with the SEC, one copy of any Registration Statement and any
amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, and all exhibits and (ii) upon the
effectiveness of any Registration Statement, one copy of the prospectus included
in such Registration Statement and all amendments and supplements thereto. The
Company shall reasonably cooperate with Legal Counsel in performing the
Company's obligations pursuant to this Section 3.
d. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement, without charge, (i)
promptly after the same is prepared and filed with the SEC, at least one copy of
such Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, all
exhibits and each preliminary prospectus, (ii) upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus, as such
Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Investor.
e. The Company shall use its best efforts to (i) register and
qualify, unless an exemption from registration and qualification applies, the
resale by the Investors of the Registrable Securities covered by a Registration
Statement under the securities or "blue sky" laws of all the states of the
United States, (ii) prepare and file in those jurisdictions, such amendments
(including post-effective amendments) and supplements to such registrations and
11
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(e) or (y) subject itself to general taxation in any such jurisdiction.
The Company shall promptly notify Legal Counsel and each Investor who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
f. The Company shall notify Legal Counsel and each Investor in
writing of the happening of any event, as promptly as practicable after becoming
aware of such event, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (provided that in no event shall such
notice contain any material, nonpublic information), and promptly prepare a
supplement or amendment to such Registration Statement to correct such untrue
statement or omission, and deliver ten (10) copies of such supplement or
amendment to Legal Counsel and each Investor (or such other number of copies as
Legal Counsel or such Investor may reasonably request). The Company shall also
promptly notify Legal Counsel and each Investor in writing (i) when a prospectus
or any prospectus supplement or post-effective amendment has been filed, and
when a Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to Legal
Counsel and each Investor by facsimile on the same day of such effectiveness and
by overnight mail), (ii) of any request by the SEC for amendments or supplements
to a Registration Statement or related prospectus or related information, and
(iii) of the Company's reasonable determination that a post-effective amendment
to a Registration Statement would be appropriate.
g. The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a Registration
Statement, or the suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction and, if such an order or suspension is
issued, to obtain the withdrawal of such order or suspension at the earliest
possible moment and to notify Legal Counsel and each Investor who holds
Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.
h. At the reasonable request (in the context of the securities
laws) of any Investor, the Company shall furnish to such Investor, on the date
of the effectiveness of the Registration Statement and thereafter from time to
time on such dates as an Investor may reasonably request (i) a letter, dated
such date, from the Company's independent certified public accountants in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
Investors, and (ii) an opinion, dated as of such date, of counsel representing
the Company for purposes of such
12
Registration Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the Investors.
i. At the reasonable request (in the context of the securities
laws) of any Investor, the Company shall make available for inspection during
regular business hours by (i) any Investor, (ii) Legal Counsel and (iii) one
firm of accountants or other agents retained by the Investors (collectively, the
"INSPECTORS"), all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the "RECORDS"),
as shall be reasonably deemed necessary by each Inspector, and cause the
Company's officers, directors and employees to supply all information which any
Inspector may reasonably request; provided, however, that each Inspector shall
agree to hold in strict confidence and shall not make any disclosure (except to
an Investor) 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. Each Investor agrees that it shall, upon learning that disclosure
of such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Each Inspector which exercises its rights under this Section 3(i)
shall be obligated to execute a non-disclosure agreement containing such
reasonable terms as the Company may request. The fees and expenses of the
Inspectors shall be borne by the applicable Investor.
j. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or 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 an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
k. The Company shall use its best efforts to (i) remain eligible
for quotation of its securities on The NASDAQ Stock Market's OTC Bulletin Board
and to cause all of the Registrable Securities covered by a Registration
Statement to be quoted thereon, so long as such Registrable Securities are not
listed on a registered national securities exchange, the NASDAQ National Market
or the NASDAQ SmallCap Market, (ii) cause all the Registrable Securities covered
by a Registration Statement to be listed on each securities exchange or trading
market on which securities of the same class or series issued by the Company are
listed, if any, and
13
(iii) without limiting the generality of the foregoing, arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. ("NASD") as such with respect to such Registrable Securities. The Company
shall pay all fees and expenses in connection with satisfying its obligation
under this Section 3(k).
l. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, facilitate
the timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the Investors may reasonably request and
registered in such names as the Investors may request.
m. The Company shall provide a transfer agent and registrar of
all such Registrable Securities not later than the effective date of the
applicable Registration Statement.
n. If requested by an Investor, the Company shall (i) as soon as
practicable incorporate in a prospectus supplement or post-effective amendment
such information as an Investor requests to be included therein relating to the
sale and distribution of Registrable Securities, including information with
respect to the number of Registrable Securities being offered or sold, the
purchase price being paid therefor and any other terms of the offering of the
Registrable Securities to be sold in such offering; (ii) as soon as practicable
make all required filings of such prospectus supplement or post-effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) as soon as
practicable, supplement or make amendments to any Registration Statement if
reasonably requested by an Investor of such Registrable Securities.
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
in the United States 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 practical, but not later than ninety (90) 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 a 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 two (2) Business Days after a Registration Statement
which covers applicable Registrable Securities is ordered 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 Investors whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the SEC in substantially the form attached hereto as Exhibit A,
provided that if the
14
Company changes its transfer agent, it shall immediately deliver any previously
delivered notices under this Section 3(r) and any subsequent notices to such new
transfer agent.
s. The Company shall take all other reasonable actions necessary
to expedite and facilitate disposition by Investors of Registrable Securities
pursuant to a Registration Statement.
t. Notwithstanding anything to the contrary in Section 3(f), at
any time after the applicable Registration Statement has been declared effective
by the SEC, the Company may delay the disclosure of material non-public
information concerning the Company the disclosure of which at the time is not,
in the good faith opinion of the Board of Directors of the Company and its
counsel, in the best interest of the Company and, in the opinion of counsel to
the Company, otherwise required (a "GRACE PERIOD"); provided, that the Company
shall promptly (i) notify the Investors in writing of the existence of material
non-public information giving rise to a Grace Period (provided that in each
notice the Company shall not disclose the content of such material non-public
information to the Investors) and the date on which the Grace Period will begin,
and (ii) notify the Investors in writing of the date on which the Grace Period
ends; and, provided further, that no Grace Period shall exceed fifteen (15)
consecutive days and during any 365 day period such Grace Periods shall not
exceed an aggregate of thirty (30) days and the first day of any Grace Period
must be at least two (2) Trading Days after the last day of any prior Grace
Period (an "ALLOWABLE GRACE PERIOD"). For purposes of determining the length of
a Grace Period above, the Grace Period shall begin on and include the date the
holders receive the notice referred to in clause (i) and shall end on and
include the later of the date the holders receive the notice referred to in
clause (ii) and the date referred to in such notice. The provisions of Section
3(g) hereof shall not be applicable during the period of any Allowable Grace
Period. Upon expiration of the Grace Period, the Company shall again be bound by
the first sentence of Section 3(f) with respect to the information giving rise
thereto unless such material non-public information is no longer applicable.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) Business Days prior to the first
anticipated filing date of a Registration Statement and at lease five (5)
Business Days prior to the filing of any amendment or supplement to a
Registration Statement, the Company shall notify each Investor in writing of the
information, if any, the Company requires from each such Investor if such
Investor elects to have any of such Investor's Registrable Securities included
in such Registration Statement or, with respect to an amendment or a supplement,
if such Investor's Registrable Securities are included in such Registration
Statement (each an "INFORMATION REQUEST"). Provided that the Company shall have
complied with its obligations set forth in the preceding sentence, 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 Investor that such Investor shall furnish to the
Company, in response to an Information Request, such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.
15
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g) or
the first sentence of 3(f) or written notice from the Company of a Grace Period,
such Investor will immediately discontinue disposition of Registrable Securities
pursuant to any Registration Statement(s) covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(g) or the first sentence of 3(f) or receipt
of notice that no supplement or amendment is required or that the Grace Period
has ended. Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to deliver unlegended shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the Investor's receipt of
a notice from the Company of the happening of any event of the kind described in
Section 3(g) or the first sentence of 3(f) and for which the Investor has not
yet settled.
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 all registration, listing
and qualifications fees, printers and accounting fees, and fees and
disbursements of counsel for the Company shall be paid by the Company. The
Company shall also reimburse the Investors for the reasonable fees and
disbursements of Legal Counsel in connection with registration, filing or
qualification pursuant to Sections 2 and 3 of this Agreement.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor, the directors,
officers, partners, employees, agents, representatives of, and each Person, if
any, who controls any Investor within the meaning of the 1933 Act or the 1934
Act (each, an "INDEMNIFIED PERSON"), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys'
fees, amounts paid in settlement or expenses, joint or several, (collectively,
"CLAIMS") incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
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
16
untrue statement of a material fact in a Registration Statement or any
post-effective amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other "blue sky" laws of
any jurisdiction in which Registrable Securities are offered ("BLUE SKY
FILING"), or the omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the effective date of
such Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading,
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any material violation
of this Agreement by the Company (the matters in the foregoing clauses (i)
through (iv) being, collectively, "VIOLATIONS"). Subject to Section 6(c), the
Company shall reimburse the Indemnified Persons, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not apply to
a Claim by an Indemnified Person arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished in writing
to the Company by such Indemnified Person for such Indemnified Person expressly
for use in connection with the preparation of the Registration Statement or any
such amendment thereof or supplement thereto if such prospectus was timely made
available by the Company pursuant to Section 3(d); (ii) with respect to any
preliminary prospectus, shall not inure to the benefit of any such person from
whom the person asserting any such Claim purchased the Registrable Securities
that are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(d), and the Indemnified Person was promptly advised in
writing not to use the incorrect preliminary prospectus prior to the use giving
rise to a violation and such Indemnified Person, notwithstanding such advice,
used it; (iii) shall not be available to the extent such Claim is based on a
failure of the Investor to deliver or to cause to be delivered the prospectus
made available by the Company, if such prospectus was timely made available by
the Company pursuant to Section 3(d); and (iv) 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 transfer of the Registrable Securities by the Investors pursuant to Section
9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, and each Person, if any,
who controls the Company within the meaning of the 1933 Act or the 1934 Act
(each an "INDEMNIFIED PARTY"), against any Claim or Indemnified Damages to which
any of them may
17
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim or Indemnified Damages arise out of or are based upon any Violation, in
each case to the extent, and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and, subject to Section 6(c), such Investor will reimburse any legal
or other expenses reasonably incurred by an Indemnified Party in connection with
investigating or defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 6(b) and the agreement with respect to
contribution contained in Section 7 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld;
provided, further, however, that the aggregate liability of the Investor in
connection with any Violation shall not exceed the net proceeds to such Investor
as a result of the sale of Registrable Securities pursuant to the Registration
Statement giving rise to such Claim. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9. 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 was 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. In any such proceeding, any
Indemnified Person or Indemnified Party may retain its own counsel, but, except
as provided in the following sentence, the fees and expenses of that counsel
will be at the expense of that Indemnified Person or Indemnified Party, as the
case may be, unless (i) the indemnifying party and the Indemnified Person or
Indemnified Party, as applicable, shall have mutually agreed to the retention of
that counsel, (ii) the indemnifying party does not assume the defense of such
proceeding in a timely manner or (iii) in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel for 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 Company shall pay reasonable fees for up to one
separate legal counsel for the Investors, and such legal counsel shall be
selected by the Investors holding at least two-thirds (2/3) in interest of the
Registrable Securities included in the Registration Statement to which the Claim
relates. 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
18
Indemnified Person fully apprised at all times as to the status of the defense
or any settlement negotiations with respect thereto. No indemnifying party shall
be liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the prior written consent of the Indemnified Party or Indemnified
Person, consent to entry of any judgment or enter into any settlement or other
compromise with respect to any pending or threatened action or claim in respect
of which indemnification or contribution may be or has been sought hereunder
(whether or not the Indemnified Party or Indemnified Person is an actual or
potential party to such action or claim) which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such Claim or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
d. 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 Person involved in the sale of Registrable Securities which Person is
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 0000 Xxx) in connection with such sale, shall be entitled to contribution
from any Person involved in such sale of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (ii) contribution by any seller of
Registrable Securities shall be limited to an amount equal to the net amount of
proceeds received by such seller from the sale of such Registrable Securities
pursuant to the Registration Statement giving rise to such action or claim for
indemnification less the amount of any damages that such seller has otherwise
been required to pay in connection with such sale.
19
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of
Rule 144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company 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 investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of Registrable Securities
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such transfer or assignment; (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (a) the name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being transferred
or assigned; (iii) immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is restricted under
the 1933 Act and applicable state securities laws; (iv) at or before the time
the Company receives the written notice contemplated by clause (ii) of this
sentence, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein; and (v) such transfer shall
have been made in accordance with the applicable requirements of the Securities
Purchase Agreement.
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 Investors who then hold at least two-thirds (2/3) of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Registrable Securities.
20
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 or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the 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
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
Galaxy Energy Corporation
0000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Chief Executive Officer
With a copy to:
Xxxx Xxxx Xxxx Xxxxxxxxxx & Xxxxxxxxx, P.C.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxx Xxxxxxxxx, Esq.
If to Legal Counsel:
Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Telephone: 000-000-0000
Facsimile: 312-902-1061
Attention: Xxxx X. Xxxx, Esq.
21
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached hereto, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers, or, in the case of a Buyer or other party named
above, to such other address and/or facsimile number and/or to the attention of
such other person as the recipient party has specified by written notice given
to each other party at least five (5) days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a courier or overnight courier service shall be
rebuttable evidence of personal service, receipt by facsimile or deposit with a
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively. Notwithstanding the foregoing, the Company or
its counsel may transmit versions of any Registration Statement (or any
amendments or supplements thereto) to Legal Counsel in satisfaction of its
obligations under Section 3(c) to permit Legal Counsel to review such
registration statement prior to filing (and solely for such purpose) by email to
xxxx.xxxx@xxxx.xxx and xxxx.xxxxxx@xxxx.xxx, provided that delivery and receipt
of such transmission shall be confirmed by electronic, telephonic or other
means.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting
the City of New York, borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
22
e. This Agreement and the other 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. This
Agreement and the other Transaction Documents supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.
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 identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to each other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
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
Investors pursuant to this Agreement shall be made, unless otherwise specified
in this Agreement, by Investors holding at least two-thirds (2/3) of the
Registrable Securities, determined as if all of the Notes and the Warrants then
outstanding have been converted into or exercised for Registrable Securities
without regard to any limitations on conversion of the Notes or the exercise of
the Warrants. Any consent or other determination approved by Investors as
provided in the immediately preceding sentence shall be binding on all
Investors.
k. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.
l. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns and, to the extent
provided in Sections 6(a) and 6(b) hereof, each Investor, the directors,
officers, partners, employees, agents, representatives of, and each Person, if
any, who controls any Investor within the meaning of the 1933 Act and the 1934
Act and each of the Company's directors, each of the Company's officers who
signs the Registration Statement, and each Person, if any, who controls the
Company within the meaning of the 1933 Act and the 1934 Act, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
23
m. Unless the context otherwise requires, (a) all references to
Sections, Schedules or Exhibits are to Sections, Schedules or Exhibits contained
in or attached to this Agreement, (b) each accounting term not otherwise defined
in this Agreement has the meaning assigned to it in accordance with GAAP, (c)
words in the singular or plural include the singular and plural and pronouns
stated in either the masculine, the feminine or neuter gender shall include the
masculine, feminine and neuter and (d) the use of the word "including" in this
Agreement shall be by way of example rather than limitation.
* * * * * *
24
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
GALAXY ENERGY CORPORATION HFTP INVESTMENT L.L.C.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By: /s/ Xxxx X. Xxxxxx
------------------------------
Name: Xxxx X. Xxxxxx
Title: Chief Executive Officer
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Authorized Signatory
XXXXXXXXXX X. XXXXXX GAIA OFFSHORE MASTER FUND, LTD.
MY COMMISSION # DD 127394 By: Promethean Asset Management L.L.C.
EXPIRES: June 20, 2008 Its: Investment Manager
Bonded Thru Notary Public Underwriters
/s/ Xxxxxxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------- ------------------------------
August 19, 2004 Name: Xxxxxx X. Xxxxxxxx
Title: Authorized Signatory
CAERUS FUND LTD.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Authorized Signatory
AG DOMESTIC CONVERTIBLES, L.P
By: AG Domestic Convertibles, GP, L.L.C.
Its: General Partner
By: Xxxxxx, Xxxxxx & Co., L.P.
Managing Member
By: /s/ Xxxxxx X. Xxxxxxxxxxx
-----------------------------------
Name: XXXXXX X. XXXXXXXXXXX
Title: CHIEF FINANCIAL OFFICER
AG OFFSHORE CONVERTIBLES, LTD.
By: Xxxxxx, Xxxxxx & Co., L.P.
Its: Director
By: /s/ Xxxxxx X. Xxxxxxxxxxx
-----------------------------------
Name: XXXXXX X. XXXXXXXXXXX
Title: CHIEF FINANCIAL OFFICER
SCHEDULE OF BUYERS
INVESTOR ADDRESS INVESTOR'S LEGAL REPRESENTATIVE'S
INVESTOR'S NAME AND FACSIMILE NUMBER ADDRESS AND FACSIMILE NUMBER
HFTP Investment L.L.C. c/o Promethean Asset Management L.L.C. Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
000 Xxxxxxxxx Xxxxxx, 00xx Floor 000 X. Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxx Attention: Xxxx X. Xxxx, Esq.
Telephone: 000-000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Gaia Offshore Master Fund, Ltd. c/o Promethean Asset Management L.L.C. Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
000 Xxxxxxxxx Xxxxxx, 00xx Floor 000 X. Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxx Attention: Xxxx X. Xxxx, Esq.
Telephone: 000-000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Caerus Fund Ltd. c/o Promethean Asset Management L.L.C. Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
000 Xxxxxxxxx Xxxxxx, 00xx Floor 000 X. Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxx Attention: Xxxx X. Xxxx, Esq.
Telephone: 000-000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
AG Domestic Convertibles, L.P c/o Xxxxxx, Xxxxxx & Co. Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
000 Xxxx Xxxxxx XXX
Xxx Xxxx, Xxx Xxxx 00000 1285 Avenue of the Americas
Attention: Xxxx X. Xxxx Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000 Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000 Telephone: (000) 000-0000
Residence: Delaware Facsimile: (000) 000-0000
AG Offshore Convertibles, Ltd. x/x Xxxxxx, Xxxxxx & Xx. Xxxx, Xxxxx, Xxxxxxx, Xxxxxxx & Xxxxxxxx
000 Xxxx Xxxxxx XXX
Xxx Xxxx, Xxx Xxxx 00000 1285 Avenue of the Americas
Attention: Xxxx X. Xxxx Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000 Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000 Telephone: (000) 000-0000
Residence: British Virgin Islands Facsimile: (000) 000-0000
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
ATTN:
RE: GALAXY ENERGY CORPORATION
Ladies and Gentlemen:
We are counsel to Galaxy Energy Corporation, a Colorado corporation (the
"COMPANY"), and have represented the Company in connection with that certain
Securities Purchase Agreement (the "PURCHASE AGREEMENT") entered into by and
among the Company and the buyers named therein (collectively, the "HOLDERS")
pursuant to which the Company issued to the Holders convertible notes (the
"NOTES"), convertible into shares of the Company's common stock, $0.001 par
value per share (the "COMMON STOCK"), and warrants to purchase shares of Common
Stock, subject to adjustment (the "WARRANTS"). Pursuant to the Purchase
Agreement, the Company also has entered into a Registration Rights Agreement
with the Holders (the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the
Company agreed, among other things, to register the Registrable Securities (as
defined in the Registration Rights Agreement), including the shares of Common
Stock issuable upon conversion of the Notes and exercise of the Warrants, under
the Securities Act of 1933, as amended (the "1933 ACT"). In connection with the
Company's obligations under the Registration Rights Agreement, on ____________
___, 200_, the Company filed a Registration Statement on Form [S-__] (File No.
333-_____________) (the "REGISTRATION STATEMENT") with the Securities and
Exchange Commission (the "SEC") relating to the Registrable Securities which
names each of the Holders as a selling stockholder thereunder.
In connection with the foregoing, we 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 TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:_____________________________
cc: [LIST NAMES OF HOLDERS]
