Exhibit 10.2
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
July 28, 2008, by and among Raptor Networks Technology, Inc., a Colorado
corporation, with headquarters located at 0000 Xxxx Xxxx, Xxxxx 000, Xxxxx Xxx,
Xxxxxxxxxx 00000 (the "COMPANY"), and the undersigned investors (each, an
"INVESTOR", and collectively, the "INVESTORS").
WHEREAS:
A. In connection with the Securities Purchase Agreement, dated
as of the date hereof, by and among the Company and the Investors (the
"SECURITIES PURCHASE AGREEMENT"), the Company has agreed, upon the terms and
subject to the conditions set forth in the Securities Purchase Agreement, to
issue and sell to each Investor (i) senior secured convertible notes of the
Company (the "NOTES"), which will, among other things, be convertible into
shares of the Company's common stock, $0.001 par value per share (the "COMMON
STOCK", as converted, the "CONVERSION SHARES") in accordance with the terms of
the Notes, (ii) warrants (the "WARRANTS"), which will be exercisable to purchase
shares of Common Stock (as exercised collectively, the "WARRANT SHARES") and
(iii) shares of Common Stock (the "COMMON SHARES").
B. In accordance with the terms of 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 Investors hereby agree as follows:
1. DEFINITIONS.
Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
a. "2007 REGISTRATION RIGHTS AGREEMENT" means that
certain Registration Rights Agreement, dated as of July 31, 2007, by and among
the Company and the investors listed on the signature pages thereto.
b. "2008 REGISTRATION RIGHTS AGREEMENT" means that
certain Registration Rights Agreement, dated as of March 31, 2008, by and among
the Company and the investors listed on the signature pages thereto.
c. "ADDITIONAL EFFECTIVE DATE" means the date that
the applicable Additional Registration Statement is declared effective by the
SEC.
d. "ADDITIONAL EFFECTIVENESS DEADLINE" means the date
which is (i) in the event that an Additional Registration Statement is not
subject to a review by the SEC, 30 calendar days after the earlier of the
Additional Filing Deadline and the Additional Filing Date or (ii) in the event
that an Additional Registration Statement is subject to a review by the SEC, 60
calendar days after the earlier of the Additional Filing Deadline and the
Additional Filing Date.
e. "ADDITIONAL FILING DATE" means the date that the
applicable Additional Registration Statement is filed with the SEC.
f. "ADDITIONAL FILING DEADLINE" means 30 calendar
days from the date of the applicable Investor Demand; PROVIDED HOWEVER, that if
such date would otherwise fall between February 11 and April 14 of a particular
year and the Company's most recent 1934 Act (as defined below) reports do not
include financial statements less than 135 days old, such date shall be extended
for that particular Additional Registration Statement to April 15 of such year.
g. "ADDITIONAL REGISTRABLE SECURITIES" means (i) the
Conversion Shares issued or issuable upon conversion of the Notes then
outstanding and not previously registered on a Registration Statement, (ii) the
Warrant Shares issuable upon the exercise of any Warrants then outstanding and
not previously registered on a Registration Statement, (iii) the Common Shares
outstanding and not previously registered on a Registration Statement, and (iv)
any capital stock of the Company issued or issuable with respect to the
Conversion Shares, the Notes, the Warrant Shares, the Warrants or the Common
Shares as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise, without regard to any limitations on
conversions of the Notes or exercises of the Warrants.
h. "ADDITIONAL REGISTRATION STATEMENT" a registration
statement or registration statements of the Company filed under the 1933 Act
covering any Additional Registrable Securities.
i. "ADDITIONAL REQUIRED REGISTRATION AMOUNT" means
the Maximum Allowable Amount of the remaining sum of (i) the number of
previously unregistered Conversion Shares issued and issuable pursuant to the
Notes as of the Trading Day immediately preceding the applicable date of
determination, (ii) the number of previously unregistered Warrant Shares issued
and issuable pursuant to the Warrants as of the Trading Day immediately
preceding the applicable date of determination and (iii) the number of
previously unregistered Common Shares as of the Trading Day immediately
preceding the applicable date of determination, all subject to adjustment as
provided in Section 2(f) (without regard to any limitations on conversion of the
Notes or exercise of the Warrants). Unless a different priority is specified in
writing to the Company by an Investor as to such Investor's Registrable
Securities at least five (5) Business Days prior to the applicable Additional
Filing Deadline, the Company shall first register (x) all Common Shares, then
(y) all Warrant Shares, then (z) all Conversion Shares.
j. "AMENDED AND RESTATED REGISTRATION RIGHTS
AGREEMENT" means that certain Amended and Restatement Registration Rights
Agreement, dated as of January 18, 2007, by and among the Company and the
investors listed on the signature pages thereto.
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k. "BUSINESS DAY" means any day other than Saturday,
Sunday or any other day on which commercial banks in the City
of New York are authorized or required by law to remain
closed.
l. "CLOSING DATE" shall have the meaning set forth in
the Securities Purchase Agreement.
m. "EFFECTIVE DATE" means the Initial Effective Date
or an Additional Effective Date, as applicable.
n. "EFFECTIVENESS DEADLINE" means the Initial
Effectiveness Deadline or an Additional Effectiveness
Deadline, as applicable.
o. "EXISTING REGISTRABLE SECURITIES" means
Registrable Securities as defined in the Amended and Restated
Registration Rights Agreement, the 2007 Registration Rights
Agreement and the 2008 Registration Rights Agreement.
p. "EXISTING REGISTRATION RIGHTS AGREEMENT" means the
Amended and Restated Registration Rights Agreement, the 2007
Registration Rights Agreement and/or 2008 Registration Rights
Agreement, as applicable.
q. "FILING DEADLINE" means the Initial Filing
Deadline or an Additional Filing Deadline, as applicable.
r. "HOLIDAY" means a day other than a Business Day or
on which trading does not take place on the Principal Market
(a "HOLIDAY"); to the extent any deadlines or dates of Company
obligations referenced herein fall on a Holiday, such
deadlines or dates shall be extended to the next date that is
not a Holiday.
s. "INITIAL EFFECTIVE DATE" means the date that the
Initial Registration Statement is declared effective by the
SEC.
t. "INITIAL FILING DEADLINE" means 30 calendar days
from the date of the applicable Investor Demand; PROVIDED
HOWEVER, that if such date would otherwise fall between
February 11 and April 14 of a particular year and the
Company's most recent 1934 Act (as defined below) reports do
not include financial statements less than 135 days old, such
date shall be extended to April 15 of such year.
u. "INITIAL FILING DATE" means the date that the
Initial Registration Statement is filed with the SEC.
v. "INITIAL EFFECTIVENESS DEADLINE" means the date
which is (i) in the event that the Initial Registration
Statement is not subject to a review by the SEC, 60 calendar
days after the earlier of the Initial Filing Deadline and the
Initial Filing Date or (ii) in the event that the Initial
Registration Statement is subject to a review by the SEC, 90
calendar days after the earlier of the Initial Filing Deadline
and the Initial Filing Date.
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w. "INITIAL REGISTRABLE SECURITIES" means (i) the
Conversion Shares issued or issuable upon conversion of the Notes, (ii) the
Warrant Shares issued or issuable upon exercise of the Warrants, (iii) the
Common Shares and (iv) any capital stock of the Company issued or issuable with
respect to the Conversion Shares, the Notes, the Warrant Shares, the Warrants or
the Common Shares as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, without regard to any
limitations on conversions of the Notes or exercises of the Warrants.
x. "INITIAL REGISTRATION STATEMENT" means a
registration statement or registration statements of the Company filed under the
1933 Act covering the Initial Required Registration Amount of Initial
Registrable Securities.
y. "INITIAL REQUIRED REGISTRATION AMOUNT" means the
Maximum Allowable Amount of the sum of (i) the number of Conversion Shares
issued and issuable pursuant to the Notes as of the Trading Day immediately
preceding the applicable date of determination and (ii) the number of Warrant
Shares issued and issuable pursuant to the Warrants as of the Trading Day
immediately preceding the applicable date of determination and (iii) the Common
Shares as of the Trading Day immediately preceding the applicable date of
determination, all subject to adjustment as provided in Section 2(f) (without
regard to any limitations on conversion of the Notes or exercise of the
Warrants). Unless a different priority is specified in writing to the Company by
an Investor at least five (5) Business Days prior to the Initial Filing
Deadline, the Company shall first register (x) all Common Shares, then (y) all
Warrant Shares, then (z) all Conversion Shares.
z. "INVESTOR" means an Investor or any transferee or
assignee thereof to whom an Investor 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.
aa. "INVESTOR DEMAND" means a written request by an
Investor to the Company that the Company prepare and file with the SEC the
Initial Registration Statement to register the Initial Registrable Securities or
an Additional Registration Statement to register Additional Registrable
Securities, as applicable.
bb. "MAXIMUM ALLOWABLE AMOUNT" means a number of
shares of Common Stock equal to 30% (or the greatest such other percentage as is
permitted by the SEC) of the issued and outstanding Common Stock of the Company
that is not beneficially owned by an affiliate of the Company.
cc. "MOST RECENT REGISTRATION STATEMENT" means the
most recent registration statement filed by the Company registering Existing
Registrable Securities.
dd. "PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
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ee. "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 and the declaration or ordering of effectiveness of such
Registration Statement(s) by the SEC.
ff. "REGISTRABLE SECURITIES" means the Initial
Registrable Securities and the Additional Registrable Securities.
gg. "REGISTRATION STATEMENT" means the Initial
Registration Statement or an Additional Registration Statement, as applicable.
hh. "REQUIRED HOLDERS" means the holders of at least
a majority of the Registrable Securities.
ii. "REQUIRED REGISTRATION AMOUNT" means with respect
to the Initial Registration Statement, the Initial Required Registration Amount
or with respect to an Additional Registration Statement, the Additional Required
Registration Amount, as applicable.
jj. "RULE 415" means Rule 415 under the 1933 Act or
any successor rule providing for offering securities on a continuous or delayed
basis.
kk. "SEC" means the United States Securities and
Exchange Commission.
ll. "TRADING DAY" means any day on which the Common
Stock is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities
exchange or securities market on which the Common Stock is then traded; provided
that "Trading Day" shall not include any day on which the Common Stock is
scheduled to trade on such exchange or market for less than 4.5 hours or any day
that the Common Stock is suspended from trading during the final hour of trading
on such exchange or market (or if such exchange or market does not designate in
advance the closing time of trading on such exchange or market, then during the
hour ending at 4:00:00 p.m., Eastern Standard Time).
2. REGISTRATION.
a. INITIAL MANDATORY REGISTRATION. In the event there is no
registration statement registering any of the Existing Registrable Securities,
an Investor may deliver to the Company an Investor Demand requesting that the
Company prepare and file with the SEC the Initial Registration Statement to
register the Initial Registrable Securities at any such time. In the event there
is a registration statement registering any of the Existing Registrable
Securities, the Required Holders may deliver to the Company a notice (the
"EXISTING REGISTRATION TERMINATION NOTICE"), a copy of which shall be delivered
to the Investors, requesting that the Company withdraw the effectiveness of the
Most Recent Registration Statement, and the Company shall on, but not prior to,
the fifth (5th) Business Day after delivery of the Existing Registration
Termination Notice (the "EXISTING REGISTRATION WITHDRAWAL DATE"), withdraw the
effectiveness of the Most Recent Registration Statement. The Required Holders
shall be permitted to revoke the Existing Registration Termination Notice at any
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time prior to the Existing Registration Withdrawal Date. Upon the withdrawal of
the Most Recent Registration Statement on the Existing Registration Withdrawal
Date, the Company shall be deemed to have satisfied its registration obligations
pursuant to Sections 2(a) and 2(b) of the Existing Registration Rights Agreement
as to the Existing Registrable Securities (as defined in the Existing
Registration Rights Agreement) and the Company's obligation to file an
Additional Registration Statement (as defined in the Existing Registration
Rights Agreement) shall be suspended until such time as the Company is permitted
to file an Additional Registration Statement (as defined in the Existing
Registration Rights Agreement) by the SEC without violating its registration
obligations pursuant to Sections 2(a) and 2(b) of this Agreement. After the
Existing Registration Termination Notice has been delivered to the Company, an
Investor may deliver to the Company an Investor Demand requesting that the
Company prepare and file with the SEC the Initial Registration Statement to
register the Initial Registrable Securities beginning on the date which is the
later of (i) five (5) months following the date the Most Recent Registration
Statement is declared effective by the SEC and (ii) thirty (30) days after the
earlier of (x) the date substantially all of the Existing Registrable Securities
covered by the Most Recent Registration Statement are sold and (y) the date the
withdrawal of effectiveness of the Most Recent Registration Statement becomes
effective with the SEC. Upon receipt of an Investor Demand in accordance with
the provisions set forth above, the Company shall prepare and as soon as
practicable but in no event later than the Initial Filing Deadline, file with
the SEC the Initial Registration Statement on Form SB-2 covering the resale of
the Maximum Allowable Amount of the Initial Registrable Securities. In the event
that Form SB-2 is unavailable for such a registration, the Company shall use
such other form as is available for such a registration on another appropriate
form reasonably acceptable to the Required Holders, subject to the provisions of
Section 2(e). The Initial Registration Statement prepared pursuant hereto shall
register for resale at least the number of shares of Common Stock equal to the
Initial Required Registration Amount determined as of date the Initial
Registration Statement is initially filed with the SEC. The Initial Registration
Statement shall contain (except if otherwise directed by the Required Holders)
the "SELLING STOCKHOLDERS" and "PLAN OF DISTRIBUTION" sections in substantially
the form attached hereto as EXHIBIT B. The Company shall use its best efforts to
have the Initial Registration Statement declared effective by the SEC as soon as
practicable, but in no event later than the Initial Effectiveness Deadline. By
9:30 am on the Business Day following the Initial Effective Date, the Company
shall file with the SEC in accordance with Rule 424 under the 1933 Act the final
prospectus to be used in connection with sales pursuant to the Initial
Registration Statement.
b. ADDITIONAL MANDATORY REGISTRATION. An Investor successively
may deliver to the Company an Investor Demand requesting that the Company
prepare and file with the SEC an Additional Registration Statement to register
any Additional Registrable Securities beginning on the date which is the later
of (i) five (5) months following the Initial Effective Date and (ii) the date
thirty (30) days after the date substantially all of the Registrable Securities
registered under the immediately preceding Registration Statement are sold and
thereafter on the date which is the later of (i) five (5) months following the
Additional Effective Date of the immediately preceding Additional Registration
Statement and (ii) the date thirty (30) days after the date substantially all of
the Registrable Securities registered under the immediately preceding
Registration Statement are sold until the earlier date of when (x) all
Additional Registrable Securities have been registered on Additional
Registration Statements and (y) all Additional Registrable Securities not
previously registered on an Additional Registration Statement may be sold by the
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Investors without restriction or limitation pursuant to Rule 144 and without the
requirement to be in compliance with Rule 144(c)(1) (or any successor thereto)
promulgated under the 1933 Act. Upon receipt of an Investor Demand, the Company
shall (x) promptly send a copy of such Investor Demand to all other Investors
and (y) prepare and as soon as practicable but in no event later than the
Additional Filing Deadline, file with the SEC such Additional Registration
Statement on Form SB-2 covering the resale of the Maximum Allowable Amount of
the Additional Registrable Securities set forth on an Investor Demand and in any
additional Investor Demand received at least five (5) Business Days prior to the
applicable Additional Filing Deadline. In the event that Form SB-2 is
unavailable for such a registration, the Company shall use such other form as is
available for such a registration on another appropriate form reasonably
acceptable to the Required Holders, subject to the provisions of Section 2(e).
The Additional Registration Statement prepared pursuant hereto shall register
for resale at least the number of shares of Common Stock equal to the Additional
Required Registration Amount determined as of date the Additional Registration
Statement is initially filed with the SEC. The Additional Registration Statement
shall contain (except if otherwise directed by the Required Holders) the
"SELLING STOCKHOLDERS" and "PLAN OF DISTRIBUTION" sections in substantially the
form attached hereto as EXHIBIT B. The Company shall use its best efforts to
have the Additional Registration Statement declared effective by the SEC as soon
as practicable, but in no event later than the Additional Effectiveness
Deadline. By 9:30 am on the Business Day following the Additional Effective Date
of the applicable Additional Registration Statement, the Company shall file with
the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to
be used in connection with sales pursuant to such Additional Registration
Statement.
c. ALLOCATION OF REGISTRABLE SECURITIES. The initial number of
Registrable Securities included in any Registration Statement and any increase
or decrease in the number of Registrable Securities included therein shall be
allocated pro rata among the Investors based on the number of 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. In no event shall
the Company include any securities other than Registrable Securities on any
Registration Statement without the prior written consent of the Required
Holders; except that the shares of Common Stock underlying the Warrants
previously issued to Xxxxxxxxxx & Co., LLC, as placement agent and the shares of
Common Stock underlying the Existing Registrable Securities may be included in
one or more Registration Statements, provided that all of the remaining
Conversion Shares issued or issuable upon conversion of all of the Notes and all
of the remaining Warrant Shares issued or issuable upon exercise of all of the
Warrants are included in the same Registration Statement or have previously been
included in one or more Registration Statements. Subject to the previous
sentence, the Investors party to the Amended and Restated Registration Rights
Agreement, the 2007 Registration Rights Agreement and/or the 2008 Registration
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Rights Agreement hereby consent to the inclusion of the Registrable Securities
on the same Registration Statement with the Existing Registrable Securities.
d. LEGAL COUNSEL. Subject to Section 5 hereof, each Investor
(with Cedar Hill Capital Partners Onshore, LP and Cedar Hill Capital Partners
Offshore, Ltd. (together, "CEDAR HILL") being deemed one Investor for purposes
hereof) shall have the right to select one legal counsel to review and oversee
any registration pursuant to this Section 2 ("LEGAL COUNSEL"). The Company and
Legal Counsel shall reasonably cooperate with each other in performing the
Company's obligations under this Agreement.
e. FORM S-3. The Company shall undertake to register the
Registrable Securities on Form S-3 as soon as such form is available for use by
the Company, provided that the Company shall maintain the effectiveness of the
Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the SEC.
f. SUFFICIENT NUMBER OF SHARES REGISTERED. In the event the
number of shares available under a Registration Statement filed pursuant to
Section 2(a) or Section 2(b) is insufficient to cover all of the Registrable
Securities required pursuant to this Agreement to be covered by such
Registration Statement or an Investor's allocated portion of the Registrable
Securities pursuant to Section 2(c) required pursuant to this Agreement to be
covered by such Registration Statement, the Company shall amend the applicable
Registration Statement, or file a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to cover at least the
Required Registration Amount as of the Trading Day immediately preceding the
date of the filing of such amendment or new Registration Statement, in each
case, as soon as permitted by 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. For purposes of the foregoing
provision, the number of shares available under a Registration Statement shall
be deemed "insufficient to cover all of the Registrable Securities required
pursuant to this Agreement to be covered by such Registration Statement" if at
any time the number of shares of Common Stock available for resale under the
Registration Statement is less than the product determined by multiplying (i)
the Required Registration Amount as of such time by (ii) 0.80. The calculation
set forth in the foregoing sentence shall be made without regard to any
limitations on the conversion of the Notes or the exercise of the Warrants and
such calculation shall assume that the Notes are then convertible into shares of
Common Stock at the then prevailing Conversion Rate (as defined in the Notes)
and that the Warrants are then exercisable for shares of Common Stock at the
then prevailing Exercise Price (as defined in the Warrants).
g. EFFECT OF FAILURE TO FILE AND OBTAIN AND MAINTAIN
EFFECTIVENESS OF REGISTRATION STATEMENT. If (i) a Registration Statement
covering all of the Registrable Securities required to be covered thereby and
required to be filed by the Company pursuant to this Agreement is (A) not filed
with the SEC on or before the respective Filing Deadline (a "FILING FAILURE") or
(B) not declared effective by the SEC on or before the respective Effectiveness
Deadline (an "EFFECTIVENESS FAILURE") or (ii) on any day after the applicable
Effective Date sales of all of the Registrable Securities required to be
included on such Registration Statement cannot be made (other than during an
Allowable Grace Period (as defined in Section 3(r)) pursuant to such
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Registration Statement (including, without limitation, because of a failure to
keep such Registration Statement effective, to disclose such information as is
necessary for sales to be made pursuant to such Registration Statement, to
register a sufficient number of shares of Common Stock or to maintain the
listing of the Common Stock) (a "MAINTENANCE FAILURE") then, as partial relief
for the damages to any holder by reason of any such delay in or reduction of its
ability to sell the underlying shares of Common Stock (which remedy shall not be
exclusive of any other remedies available at law or in equity), the Company
shall pay to each holder of Registrable Securities relating to such Registration
Statement an amount in cash equal to two percent (2.0%) of the aggregate
Purchase Price (as such term is defined in the Securities Purchase Agreement) of
such Investor's Notes relating to the Registrable Securities included in such
Registration Statement on each of the following dates: (i) the day of a Filing
Failure and on every thirtieth day (pro rated for periods totaling less than
thirty days) after a Filing Failure until such Filing Failure is cured; (ii) (A)
the day of an Effectiveness Failure (except if such Effectiveness Failure occurs
between February 11 and April 14 of a particular year and the Effectiveness
Failure occurs because the Company's most recent 1934 Act reports do not include
financial statements less than 135 days old, the Registration Delay Payment
pursuant to this clause (A) shall not apply) and (B) on every thirtieth day (pro
rated for periods totaling less than thirty days) after an Effectiveness Failure
until such Effectiveness Failure is cured; and (iii) the initial day of a
Maintenance Failure and on every thirtieth day (pro rated for periods totaling
less than thirty days) after a Maintenance Failure until such Maintenance
Failure is cured. The payments to which a holder shall be entitled pursuant to
this Section 2(g) are referred to herein as "REGISTRATION DELAY PAYMENTS."
Registration Delay Payments shall be paid on the day of the Filing Failure,
Effectiveness Failure and the initial day of a Maintenance Failure, as
applicable, and thereafter on the earlier of (I) the thirtieth day after the
event or failure giving rise to the Registration Delay Payments has occurred and
(II) the third Business Day after the event or failure giving rise to the
Registration Delay Payments is cured. In the event the Company fails to make
Registration Delay Payments in a timely manner, such Registration Delay Payments
shall bear interest at the rate of two percent (2.0%) per month (prorated for
partial months) until paid in full. Notwithstanding anything herein to the
contrary, in no event shall the aggregate Registration Delay Payments exceed
twelve and one-half percent (12.5%) of the aggregate Purchase Price for all
Investors (the "REGISTRATION DELAY PAYMENTS CAP"). Notwithstanding anything to
the contrary contained herein, in no event shall the Company be liable for any
damages in connection with the Warrants or Warrant Shares. In addition, and
notwithstanding anything to the contrary contained herein, in no event shall the
Registration Delay Payments be payable with respect to any Registrable
Securities that are not included on any applicable Registration Statement solely
as a result of a comment received by the SEC requiring a limit on the number of
Registrable Securities included in such Registration Statement in order for such
Registration Statement to be able to avail itself of Rule 415.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to file a
Registration Statement with the SEC pursuant to Section 2(a), 2((b), 2(e) or
2(f), 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:
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a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities and use its
best efforts to cause such Registration Statement relating to the Registrable
Securities to become effective as soon as practicable after such filing (but in
no event later than the 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 the
requirement to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144 (or any successor thereto)
promulgated under the 1933 Act or (ii) the date on which the Investors shall
have sold all of the Registrable Securities covered by such Registration
Statement (the "REGISTRATION PERIOD"). The Company shall ensure that each
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein (in the case of prospectuses, in the
light of the circumstances in which they were made) not misleading. The term
"best efforts" shall mean, the Company's reasonable best efforts, which include
among other things, that the Company shall submit to the SEC, within two (2)
Business Days after the later of the date that (i) the Company learns that no
review of a particular Registration Statement will be made by the staff of the
SEC or that the staff has no further comments on a particular Registration
Statement, as the case may be, and (ii) the approval of Legal Counsel pursuant
to Section 3(c) (which approval is immediately sought), 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 Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company filing a report on Form 10-Q, Form
10-QSB, Form 10-K, Form 10-KSB or any analogous report under the Securities
Exchange Act of 1934, as amended (the "1934 ACT"), the Company shall have
incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC on the
same day on which the 1934 Act report is filed which created the requirement for
the Company to amend or supplement such Registration Statement.
c. The Company shall (A) permit Legal Counsel to review and
comment upon (i) the Initial Registration Statement at least one (1) Business
Day prior to its filing with the SEC and any Additional Registration Statement
at least five (5) Business Days prior to its filing with the SEC and (ii) all
amendments and supplements to all Registration Statements (except for amendments
and supplements required to be filed by reason of the Company filing Annual
Reports on Form 10-K or Form 10 KSB, Quarterly Reports on Form 10-Q or 10-QSB,
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or Current Reports on Form 8-K (except those that refer to an Investor or the
transactions contemplated hereby, which will be subject to such review and
comment) and any similar or successor reports) within a reasonable number of
days prior to their filing with the SEC, and (B) not file any Registration
Statement or amendment or supplement thereto 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 the prior approval of Legal Counsel, which consent shall not be
unreasonably withheld. The Company shall furnish to Legal Counsel, without
charge, (i) copies of any correspondence from the SEC or the staff of the SEC to
the Company or its representatives relating to any Registration Statement, (ii)
promptly after the same is prepared and filed with the SEC, one copy of any
Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, if
requested by an Investor, and all exhibits and (iii) upon the effectiveness of
any Registration Statement, one copy of the prospectus included in such
Registration Statement and all amendments and supplements thereto. The Company
shall reasonably cooperate with Legal Counsel in performing the Company's
obligations pursuant to this Section 3.
d. The Company shall furnish to each Investor whose
Registrable Securities are included in any Registration Statement, without
charge, (i) promptly after the same is prepared and filed with the SEC, at least
one copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, if requested by an Investor, all exhibits and each preliminary
prospectus, (ii) upon the effectiveness of any Registration Statement, ten (10)
copies of the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies as such
Investor may reasonably request) and (iii) such other documents, including
copies of any preliminary or final prospectus, as such Investor may reasonably
request from time to time in order to facilitate the disposition of the
Registrable Securities owned by such Investor.
e. The Company shall use its best efforts to (i) register and
qualify, unless an exemption from registration and qualification applies, the
resale by Investors of the Registrable Securities covered by a Registration
Statement under such other securities or "blue sky" laws of all applicable
jurisdictions in the United States, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(e), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
Legal Counsel and each Investor who holds Registrable Securities of the receipt
by the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United States
or its receipt of notice of the initiation or threatening of any proceeding for
such purpose.
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f. The Company shall notify Legal Counsel and each Investor in
writing of the happening of any event, as promptly as practicable after becoming
aware of such event, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (provided that in no event shall such
notice contain any material, nonpublic information), and, subject to Section
3(r), promptly prepare a supplement or amendment to such Registration Statement
to correct such untrue statement or omission, and deliver ten (10) copies of
such supplement or amendment to Legal Counsel and each Investor (or such other
number of copies as Legal Counsel or such Investor may reasonably request). The
Company shall also promptly notify Legal Counsel and each Investor in writing
(i) when a prospectus or any prospectus supplement or post-effective amendment
has been filed, and when a Registration Statement or any post-effective
amendment has become effective (notification of such effectiveness shall be
delivered to Legal Counsel and each Investor by facsimile or e-mail on the same
day of such effectiveness and by overnight mail), (ii) of any request by the SEC
for amendments or supplements to a Registration Statement or related prospectus
or related information, and (iii) of the Company's reasonable determination that
a post-effective amendment to a Registration Statement 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 or 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 notice of the initiation or threat of any
proceeding for such purpose.
h. If any Investor is deemed to be, alleged to be or
reasonably believes it may be deemed or alleged to be, an underwriter or is
required under applicable securities laws to be described in the Registration
Statement as an underwriter, at the reasonable request 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 Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the Investors.
i. Upon the written request of any investor in connection with
such Investor's due diligence requirements, if any, the Company shall make
available for inspection 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
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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 Agreement or any other Transaction Document.
Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investors' ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
j. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or 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 either to (i) cause
all of the Registrable Securities covered by a Registration Statement to be
listed on each securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange or
(ii) secure the inclusion for quotation of all of the Registrable Securities on
The NASDAQ Global Market or (iii) if, despite the Company's best efforts, the
Company is unsuccessful in satisfying the preceding clauses (i) and (ii), to
secure the inclusion for quotation on The NASDAQ Capital Market or the American
Stock Exchange for such Registrable Securities and, without limiting the
generality of the foregoing, to use its best efforts to arrange for at least two
market makers to register with the Financial Industry Regulatory Authority
("FINRA") 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 an
effective Registration Statement and enable such certificates to be in such
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denominations or amounts, as the case may be, as the Investors may reasonably
request and registered in such names as the Investors may request.
m. If requested by an Investor, the Company shall (i) as soon
as practicable incorporate in a prospectus supplement or post-effective
amendment such information as an Investor reasonably requests to be included
therein relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the number of
Registrable Securities being offered or sold, the purchase price being paid
therefor and any other terms of the offering of the Registrable Securities to be
sold in such offering; (ii) 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 holding any
Registrable Securities.
n. The Company shall use its best efforts to cause the
Registrable Securities covered by a Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
o. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with, and in the manner provided by, the provisions of Rule 158 under the 0000
Xxx) covering a twelve-month period beginning not later than the first day of
the Company's fiscal quarter next following the Effective Date of a Registration
Statement.
p. The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.
q. Within two (2) Business Days after a Registration Statement
which covers 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 the form attached hereto as EXHIBIT A.
r. Notwithstanding anything to the contrary herein, at any
time after the Effective Date of an applicable Registration Statement, the
Company may (x) 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 and (y) file supplements and/or amendments to the
Registration Statement to incorporate filings under the 1934 Act into the
Registration Statement in order to maintain the effectiveness of the
Registration Statement which may cause the Registration Statement to be
ineffective while being reviewed by the SEC (each, a "GRACE PERIOD"); provided,
that the Company shall promptly (i) notify the Investors in writing of the
existence of material, non-public information or other event giving rise to a
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Grace Period (provided that in each notice the Company will not disclose the
content of such material, non-public information to the Investors) and the date
on which the Grace Period will begin, and (ii) notify the Investors in writing
of the date on which the Grace Period ends; and, provided further, that no Grace
Period of the type described in clause (x) above shall exceed ten (10)
consecutive days, no Grace Period of the type described in clause (y) above
shall exceed twenty (20) consecutive days and during any three hundred sixty
five (365) day period such Grace Periods shall not exceed an aggregate of sixty
(60) days and the first day of any Grace Period must be at least five (5)
Trading Days after the last day of any prior Grace Period (each, an "ALLOWABLE
GRACE PERIOD"). For purposes of determining the length of a Grace Period above,
the Grace Period shall begin on and include the date the Investors are
prohibited from selling Registrable Securities under the Registration Statement
due to the ineffectiveness of the Registration Statement and shall end on and
include the date the effectiveness of the Registration Statement is restored and
the Investors can continue to sell Registrable Securities pursuant to such
Registration Statement. 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. 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 and delivered a copy of the prospectus included as part of the
applicable Registration Statement (unless an exemption from such prospectus
delivery requirement exists) the ineffectiveness of the Registration Statement
and for which the Investor has not yet settled.
s. Neither the Company nor any Subsidiary or affiliate thereof
shall identify any Buyer as an underwriter in any public disclosure or filing
with the SEC or any Principal Market (as defined in the Securities Purchase
Agreement) or Eligible Market and any Buyer being deemed an underwriter by the
SEC shall not relieve the Company of any obligations it has under this Agreement
or any other Transaction Document (as defined in the Securities Purchase
Agreement); PROVIDED, HOWEVER, that the foregoing shall not prohibit the Company
from including the disclosure found in the "Plan of Distribution" section
attached hereto as EXHIBIT B in the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS.
a. At least five (5) Business Days prior to the first
anticipated filing date of a Registration Statement, the Company shall notify
each Investor in writing of the information the Company requires from each such
Investor if such Investor elects to have any of such Investor'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 Investor that such Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the effectiveness of the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of 3(f) or receipt of notice that no supplement or amendment is
required. 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.
d. Each Investor covenants and agrees that it will comply with the prospectus
delivery requirements of the 1933 Act as applicable to it or an exemption
therefrom in connection with sales of Registrable Securities pursuant to the
Registration Statement.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company shall be paid by the Company.
The Company shall also reimburse each Investor (with Cedar Hill being deemed one
Investor for purposes hereof) for the fees and disbursements of Legal Counsel in
connection with registration, filing or qualification pursuant to Sections 2 and
3 of this Agreement which amount shall be limited to $15,000 per Investor (and
limited to a total of $15,000 for each group of affiliated Investors) for each
Registration Statement filed by the Company with the SEC.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and hereby does,
indemnify, hold harmless and defend each Investor, the directors, officers,
members, partners, employees, agents, representatives of, and each Person, if
any, who controls any 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,
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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 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 the light of the circumstances under which the statements therein
were made, not misleading, (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement or (iv) any violation of this Agreement (the matters in
the foregoing clauses (i) through (iv) being, collectively, "VIOLATIONS").
Subject to Section 6(c), the Company shall reimburse the Indemnified Persons,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising
out of or based upon a Violation 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) and (ii) shall not apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld or delayed. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of 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 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
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Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that the Investor
shall be liable under this Section 6(b) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least a majority in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate 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
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the prior written consent of the Indemnified Party or Indemnified
Person, consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such Claim or litigation, and such
settlement shall not include any admission as to fault on the part of the
Indemnified Party. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations
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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 in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities pursuant to
such Registration Statement.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company, if true, that it has complied with the reporting requirements of Rule
144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
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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 such Investor's
Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the Registrable 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
Registrable Securities by the transferee or assignee is restricted under the
1933 Act or applicable state securities laws; (iv) at or before the time the
Company receives the written notice contemplated by clause (ii) of this sentence
the transferee or assignee agrees in writing with the Company 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 this Agreement and the
other Transaction Documents (as defined in 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 the Required Holders. 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. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision 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 such record owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
-19-
If to the Company:
Raptor Networks Technology, Inc.
0000 X. Xxxx Xxxx, Xxxxx 000
Xxxxx Xxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxxxxxxx
Xxx Xxx Xxxxx
With a copy to:
Xxxxx & Xxxxxx , LLP
000 Xxxxx Xxxx. 00xx Xxxxx
Xxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
If to Legal Counsel:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
and
Sadis & Xxxxxxxx LLP
000 0xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxx Xxxxxxx, Esq.
If to an Investor, to its address and facsimile number set forth on the Schedule
of Investors attached hereto, with copies to such Investor's representatives as
set forth on the Schedule of Investors, or to such other address and/or
facsimile number and/or to the attention of such other Person as the recipient
party has specified by written notice given to each other party five (5) days
prior to the effectiveness of such change. Written confirmation of receipt (A)
given by the recipient of such notice, consent, waiver or other communication,
(B) mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
-20-
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.
e. If any provision of this Agreement is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).
f. This Agreement, the other Transaction Documents (as defined
in the Securities Purchase Agreement) and the instruments referenced herein and
therein constitute the entire agreement among the parties hereto with respect to
the subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the other Transaction Documents and the instruments
-21-
referenced herein and therein supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
g. 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.
h. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
i. This Agreement may be executed in 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.
j. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as any other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
k. All consents and other determinations required to be made
by the Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by the Required Holders.
l. 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.
m. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
n. The obligations of each Investor hereunder are several and
not joint with the obligations of any other Investor, and no provision of this
Agreement is intended to confer any obligations on any Investor vis-a-vis any
other Investor. Nothing contained herein, and no action taken by any Investor
pursuant hereto, shall be deemed to constitute the Investors as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated herein.
[Signature Page Follows]
-22-
IN WITNESS WHEREOF, each Investor and the Company have caused
their respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.
COMPANY:
RAPTOR NETWORKS TECHNOLOGY, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxxxxxxxxxx
Title: Chief Executive Officer
IN WITNESS WHEREOF, each Investor and the Company have caused
their respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.
INVESTORS:
CASTLERIGG MASTER INVESTMENTS LTD.
BY: XXXXXXX ASSET MANAGEMENT CORP.
By: /s/ Xxxxxxx X'Xxxxx
------------------------------------
Name: Xxxxxxx X'Xxxxx
Title: Chief Financial Officer
IN WITNESS WHEREOF, each Investor and the Company have caused
their respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.
INVESTORS:
CEDAR HILL CAPITAL PARTNERS ONSHORE, LP
By:
/s/ Xxxxxxx Xxxxxxxxxx
Name: Xxxxxxx Xxxxxxxxxx
Title: Managing Member
IN WITNESS WHEREOF, each Investor and the Company have caused
their respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.
INVESTORS:
CEDAR HILL CAPITAL PARTNERS OFFSHORE,
LTD.
By:
/s/ Xxxxxxx Xxxxxxxxxx
Name:Xxxxxxx Xxxxxxxxxx
Title: Manager
SCHEDULE OF INVESTORS
INVESTOR'S ADDRESS INVESTOR'S REPRESENTATIVE'S
INVESTOR AND FACSIMILE NUMBER ADDRESS
AND FACSIMILE NUMBER
CASTLERIGG MASTER INVESTMENTS LTD c/o Sandell Asset Management Corp. Xxxxxxx Xxxx & Xxxxx LLP
00 Xxxx 00xx Xxxxxx 000 Xxxxx Xxxxxx
00xx Xxxxx Xxx Xxxx, Xxx Xxxx 00000
Xxx Xxxx, Xxx Xxxx 00000 Attn: Xxxxxxx Xxxxx, Esq.
Attention: Cem Hacioglu/Xxxxxxx Xxxxxxx Facsimile: (000) 000-0000
Facsimile: (000) 000-0000 Telephone: (000) 000-0000
Telephone: (000) 000-0000
CEDAR HILL CAPITAL PARTNERS 445 Park Avenue, 5th Floor Sadis & Xxxxxxxx LLP
ONSHORE, LP Xxx Xxxx, Xxx Xxxx 00000 000 0xx Xxxxxx
Attention: Xxxxxxx Xxxxxxxxxx Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000 Attention: Xxx Xxxxxxx, Esq.
Telephone: (000) 000-0000 Facsimile: (000) 000-0000
Residence: New York Telephone: (000) 000-0000
CEDAR HILL CAPITAL PARTNERS 445 Park Avenue, 5th Floor Sadis & Xxxxxxxx LLP
OFFSHORE. LTD Xxx Xxxx, Xxx Xxxx 00000 000 0xx Xxxxxx
Attention: Xxxxxxx Xxxxxxxxxx Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000 Attention: Xxx Xxxxxxx, Esq.
Telephone: (000) 000-0000 Facsimile: (000) 000-0000
Residence: Cayman Islands Telephone: (000) 000-0000
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
First American Stock Transfer
000 X. Xxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Re: RAPTOR NETWORKS TECHNOLOGY, INC.
Ladies and Gentlemen:
[We are][I am] counsel to Raptor Networks Technology, Inc., 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 investors named
therein (collectively, the "HOLDERS") pursuant to which the Company issued to
the Holders convertible notes (the "NOTES") convertible into the Company's
common stock, $0.001 par value per share (the "COMMON STOCK"), warrants
exercisable for shares of Common Stock (the "WARRANTS") and shares (the "COMMON
SHARES") of Common Stock. 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, the shares of Common Stock issuable upon exercise
of the Warrants and the Common Shares, 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 SB-2 (File No. 333-_____________) (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Holders as
a selling stockholder thereunder.
In connection with the foregoing, [we][I] advise you that a
member of the SEC's staff has advised [us][me] by telephone that the SEC has
entered an order declaring the Registration Statement effective under the 1933
Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and
[we][I] have no knowledge, after telephonic inquiry of a member of the SEC's
staff, that any stop order suspending its effectiveness has been issued or that
any proceedings for that purpose are pending before, or threatened by, the SEC
and the Registrable Securities are available for resale under the 1933 Act
pursuant to the Registration Statement.
This letter shall serve as our standing instruction to you
that the shares of Common Stock are freely transferable by the Holders pursuant
to the Registration Statement. You need not require further letters from us to
effect any future legend-free issuance or reissuance of shares of Common Stock
to the Holders as contemplated by the Company's Irrevocable Transfer Agent
Instructions dated _____________, 2008.
Very truly yours,
[ISSUER'S COUNSEL]
By:_____________________
CC: [LIST NAMES OF HOLDERS]
A-1
EXHIBIT B
SELLING STOCKHOLDERS
The shares of Common Stock being offered by the selling stockholders
are those previously issued to the selling stockholders and those issuable upon
conversion of the convertible notes and upon exercise of the warrants. For
additional information regarding the issuance of those convertible notes and
warrants, see "Private Placement of Convertible Notes, Warrants and Common
Shares" above. We are registering the shares of Common Stock in order to permit
the selling stockholders to offer the shares for resale from time to time.
Except for the ownership of the convertible notes, the warrants and common
shares issued pursuant to the Securities Purchase Agreement and prior
convertible debt, common stock and warrant purchases with the Company, the
selling stockholders have not had any material relationship with us within the
past three years.
The table below lists the selling stockholders and other information
regarding the beneficial ownership of the shares of Common Stock by each of the
selling stockholders. The second column lists the number of shares of Common
Stock beneficially owned by each selling stockholder, based on its ownership of
the convertible notes and warrants, as of ________, 200_, assuming conversion of
all convertible notes and exercise of the warrants held by the selling
stockholders on that date, without regard to any limitations on conversions or
exercise.
The third column lists the shares of Common Stock being offered by this
prospectus by the selling stockholders.
In accordance with the terms of registration rights agreement among the
Company and the selling stockholders, this prospectus covers the resale of (i) [
] shares of Common Stock, (ii) [ ] shares of Common Stock issuable upon
conversion of the convertible notes as of the Trading Day immediately preceding
the date the registration statement is initially filed with the SEC and (iii) [
] shares of Common Stock issuable upon exercise of the related warrants as of
the Trading Day immediately preceding the date the registration statement is
initially filed with the SEC. Because the conversion price of the convertible
notes and the exercise price of the warrants may be adjusted, the number of
shares that will actually be issued may be more or less than the number of
shares being offered by this prospectus. The fourth column assumes the sale of
all of the shares offered by the selling stockholders pursuant to this
prospectus.
Under the terms of the convertible notes and the warrants, a selling
stockholder may not convert the convertible notes or exercise the warrants to
the extent such conversion or exercise would cause such selling stockholder,
together with its affiliates, to beneficially own a number of shares of Common
Stock which would exceed 4.99% of our then outstanding shares of Common Stock
following such conversion or exercise, excluding for purposes of such
determination shares of Common Stock issuable upon conversion of the convertible
notes which have not been converted and upon exercise of the warrants which have
not been exercised. The number of shares in the second column does not reflect
this limitation. The selling stockholders may sell all, some or none of their
shares in this offering. See "Plan of Distribution."
B-1
MAXIMUM NUMBER OF SHARES
NUMBER OF SHARES OWNED TO BE SOLD PURSUANT TO NUMBER OF SHARES
NAME OF SELLING STOCKHOLDER PRIOR TO OFFERING THIS PROSPECTUS OWNED AFTER OFFERING
--------------------------- ----------------- --------------- --------------------
CASTLERIGG MASTER INVESTMENTS (1) 0
CEDAR HILL CAPITAL PARTNERS ONSHORE,
LP (2)
CEDAR HILL CAPITAL PARTNERS OFFSHORE,
LTD. (3)
(1) Xxxxxxx Asset Management Corp. ("SAMC") is the investment manager
of Castlerigg Master Investments Ltd. ("Master"). Xxxxxx Xxxxxxx is the
sole-shareholder of SAMC and may be deemed to have voting and dispositive power
over the shares beneficially owned by Master. No other natural person has voting
or dispositive power over the shares being registered on behalf of Master.
Castlerigg International Ltd. ("Castlerigg International") is the controlling
shareholder of Castlerigg International Holdings Limited ("Holdings"). Holdings
is the controlling shareholder of Master. Each of Holdings and Castlerigg
International may be deemed to share beneficial ownership of the shares
beneficially owned by Castlerigg Master Investments. SAMC, Xx. Xxxxxxx, Holdings
and Castlerigg International each disclaims beneficial ownership of the
securities with respect to which indirect beneficial ownership is described.
(2) Power to vote or dispose of the shares is shared by Xxxx Xxxxx and
Xxxxxxx Xxxxxxxxxx, who are the principals of Cedar Hill Capital Partners, LLC,
which is the investment advisor to Cedar Hill Capital Partners Onshore, LP.
(3) Power to vote or dispose of the shares is shared by Xxxx Xxxxx and
Xxxxxxx Xxxxxxxxxx, who are the principals of Cedar Hill Capital Partners, LLC,
which is the investment advisor to Cedar Hill Capital Partners Offshore, Ltd.
B-2
PLAN OF DISTRIBUTION
We are registering the shares of Common Stock previously issued and
those issuable upon conversion of the convertible notes and upon exercise of the
warrants to permit the resale of these shares of Common Stock by the holders of
the convertible notes and warrants from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale by the selling
stockholders of the shares of Common Stock. We will bear all fees and expenses
incident to our obligation to register the shares of Common Stock.
The selling stockholders may sell all or a portion of the shares of
Common Stock beneficially owned by them and offered hereby from time to time
directly or through one or more underwriters, broker-dealers or agents. If the
shares of Common Stock are sold through underwriters or broker-dealers, the
selling stockholders will be responsible for underwriting discounts or
commissions or agent's commissions. The shares of Common Stock may be sold in
one or more transactions at fixed prices, at prevailing market prices at the
time of the sale, at varying prices determined at the time of sale, or at
negotiated prices. These sales may be effected in transactions, which may
involve crosses or block transactions,
o on any national securities exchange or quotation service on
which the securities may be listed or quoted at the time of
sale;
o in the over-the-counter market;
o in transactions otherwise than on these exchanges or systems
or in the over-the-counter market;
o through the writing of options, whether such options are
listed on an options exchange or otherwise;
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o sales pursuant to Rule 144;
B-3
o broker-dealers may agree with the selling securityholders to
sell a specified number of such shares at a stipulated price
per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
If the selling stockholders effect such transactions by selling shares
of Common Stock to or through underwriters, broker-dealers or agents, such
underwriters, broker-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling stockholders or
commissions from purchasers of the shares of Common Stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved). In connection
with sales of the shares of Common Stock or otherwise, the selling stockholders
may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the shares of Common Stock in the course of hedging in
positions they assume. The selling stockholders may also sell shares of Common
Stock short and deliver shares of Common Stock covered by this prospectus to
close out short positions and to return borrowed shares in connection with such
short sales. The selling stockholders may also loan or pledge shares of Common
Stock to broker-dealers that in turn may sell such shares.
The selling stockholders may pledge or grant a security interest in
some or all of the convertible notes, warrants or shares of Common Stock owned
by them and, if they default in the performance of their secured obligations,
the pledgees or secured parties may offer and sell the shares of Common Stock
from time to time pursuant to this prospectus or any amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities
Act of 1933, as amended, amending, if necessary, the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus. The selling stockholders also may
transfer and donate the shares of Common Stock in other circumstances in which
case the transferees, donees, pledgees or other successors in interest will be
the selling beneficial owners for purposes of this prospectus.
The selling stockholders and any broker-dealer participating in the
distribution of the shares of Common Stock may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commission paid, or any
discounts or concessions allowed to, any such broker-dealer may be deemed to be
underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of Common Stock is made, a prospectus
supplement, if required, will be distributed which will set forth the aggregate
amount of shares of Common Stock being offered and the terms of the offering,
including the name or names of any broker-dealers or agents, any discounts,
commissions and other terms constituting compensation from the selling
stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to broker-dealers.
Under the securities laws of some states, the shares of Common Stock
may be sold in such states only through registered or licensed brokers or
dealers. In addition, in some states the shares of Common Stock may not be sold
unless such shares have been registered or qualified for sale in such state or
an exemption from registration or qualification is available and is complied
with.
B-4
There can be no assurance that any selling stockholder will sell any or
all of the shares of Common Stock registered pursuant to the registration
statement, of which this prospectus forms a part.
The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may limit the timing
of purchases and sales of any of the shares of Common Stock by the selling
stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of Common
Stock to engage in market-making activities with respect to the shares of Common
Stock. All of the foregoing may affect the marketability of the shares of Common
Stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of Common Stock.
We will pay all expenses of the registration of the shares of Common
Stock pursuant to the registration rights agreement, estimated to be $125,000 in
total, including, without limitation, Securities and Exchange Commission filing
fees and expenses of compliance with state securities or "blue sky" laws;
provided, however, that a selling stockholder will pay all underwriting
discounts and selling commissions, if any. We will indemnify the selling
stockholders against liabilities, including some liabilities under the
Securities Act, in accordance with the registration rights agreements, or the
selling stockholders will be entitled to contribution. We may be indemnified by
the selling stockholders against civil liabilities, including liabilities under
the Securities Act, that may arise from any written information furnished to us
by the selling stockholder specifically for use in this prospectus, in
accordance with the related registration rights agreement, or we may be entitled
to contribution.
Once sold under the registration statement, of which this prospectus
forms a part, the shares of Common Stock will be freely tradable in the hands of
persons other than our affiliates.
B-5
