REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement dated as of April 6, 2001 (this
"Agreement") by and among MeltroniX, Inc., a California corporation,
with principal executive offices located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), The ▇▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇
(the "Initial Investor") and La Jolla Cove Investors Inc. ("LJCI").
WHEREAS, upon the terms and subject to the conditions of the Loan
Agreement and Stock Issuance Agreement dated as of December 29, 2000,
by and between LJCI and the Company (the "First Securities Purchase
Agreement"), the Company delivered to LJCI a Secured Convertible
Promissory Note (the "First Convertible Note") of the Company in the
aggregate principal amount of $250,000 which, upon the terms of and
subject to the conditions contained therein is convertible into shares
of the Company's Common Stock, no par value (the "Common Stock");
WHEREAS, upon the terms and subject to the conditions of the Loan
Agreement and Stock Issuance Agreement dated as of January 18, 2001, by
and between the Initial Investor and the Company (the "Second Securities
Purchase Agreement"), the Company delivered to the Initial Investor a
Secured Convertible Promissory Note (the "Second Convertible Note") of
the Company in the aggregate principal amount of $250,000 (U.S.) which,
upon the terms of and subject to the conditions contained therein, is
convertible into shares of the Common Stock;
WHEREAS, upon the terms and subject to the conditions of the Loan
Agreement dated as of the date hereof (the "Loan Agreement") between
the Company and LJCI, the Company has issued to LJCI 1,000,00 shares
of Common Stock and loaned to the Company the amount of $200,000 (the
"Loan"), evidenced by the promissory note of the Company in such amount
(the "April Note").
WHEREAS, LCJI has certain rights to purchase shares of Common Stock
pursuant to the conversion of the First Convertible Note and the terms
of the First Securities Purchase Agreement;
WHEREAS, the Initial Investor has certain rights to purchase shares of
Common Stock pursuant to the conversion of the Second Convertible Note
and the terms of the Second Securities and Purchase Agreement;
WHEREAS, to induce LJCI to execute and deliver the Loan Agreement, the
Company has agreed to provide with respect to the Common Stock issued
pursuant to the Loan Agreement certain registration rights under the
Securities Act as well as with respect to the Common Stock issuable
pursuant to First Convertible Note, the Second Convertible Note, the
First Securities Purchase Agreement and the Second Securities Purchase
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Definitions
(A) As used in this Agreement, the following terms shall have the
meanings:
(1) "Affiliate" of any specified Person means any other Person who
directly, or indirectly through one or more intermediaries, is in
control of, is controlled by, or is under common control with, such
specified Person. For purposes of this definition, control of a
Person means the power, directly or indirectly, to direct or cause
the direction of the management and policies of such Person whether
by contract, securities, ownership or otherwise; and the terms
"controlling" and "controlled" have the respective meanings correlative
to the foregoing.
(2) "Closing Date" means April 6, 2001.
(3) "Commission" means the Securities and Exchange Commission.
(4) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder,
or any similar successor statute.
(5) "Investors" means each of the Initial Investor, LJCI and any
transferee or assignee of Registrable Securities which agrees to become
bound by all of the terms and provisions of this Agreement in accordance
with Section 8 hereof.
(6) "Person" means any individual, partnership, corporation, limited
liability company, joint stock company, association, trust,
unincorporated organization, or a government or agency or political
subdivision thereof.
(7) "Prospectus" means the prospectus (including, without limitation,
any preliminary prospectus and any final prospectus filed pursuant to
Rule 424(b) under the Securities Act, including any prospectus that
discloses information previously omitted from a prospectus filed as part
of an effective registration statement in reliance on Rule 430A under the
Securities Act) included in the Registration Statement, as amended or
supplemented by any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other amendments and supplements to such
prospectus, including all material incorporated by reference in such
prospectus and all documents filed after the date of such prospectus by the
Company under the Exchange Act and incorporated by reference therein.
(8) "Public Offering" means an offer registered with the Commission and
the appropriate state securities commissions by the Company of its Common
Stock and made pursuant to the Securities Act.
(9) "Registrable Securities" means the Common Stock issued (i) upon
conversion of the First Convertible Note and Second Convertible Note,
(ii) pursuant to the terms and provisions of the First Securities
Purchase Agreement and Second Securities Purchase Agreement, including
pursuant to Section 5 thereof, (iii) instead of cash dividends, (iv)
pursuant to the Loan Agreement, and (v) in connection with any
distribution, recapitalization, stock-split, stock adjustment or
reorganization of the Company; provided, however, a share of Common
Stock shall cease to be a Registrable Security for purposes of this
Agreement when it no longer is a Restricted Security.
(10) "Registration Statement" means a registration statement of the
Company filed on an appropriate form under the Securities Act providing
for the registration of, and the sale on a continuous or delayed basis
by the holders of, all of the Registrable Securities pursuant to Rule
415 under the Securities Act, including the Prospectus contained
therein and forming a part thereof, any amendments to such
registration statement and supplements to such Prospectus, and all
exhibits to and other material incorporated by reference in such
registration statement and Prospectus.
(11) "Restricted Security" means any Registrable Securities except any
such share that (i) has been registered pursuant to an effective
registration statement under the Securities Act and sold in a manner
contemplated by the prospectus included in such registration statement,
(ii) has been transferred in compliance with the resale provisions of
Rule 144 under the Securities Act (or any successor provision thereto)
or is transferable pursuant to paragraph (k) of Rule 144 under the
Securities Act (or any successor provision thereto) or (iii) otherwise
has been transferred and a new share of Common Stock not subject to
transfer restrictions under the Securities Act has been delivered by or
on behalf of the Company.
(12) "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder, or any similar
successor statute.
(B) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase
Agreement and/or the Convertible Note.
2. Registration
(A) Filing and Effectiveness of Registration Statement. The Company
agrees to prepare and file with the Commission as soon as practicable
but no later than thirty days from the Closing Date (the "Filing
Deadline"), a Registration Statement relating to the offer and sale
of the Registrable Securities and shall use its best efforts to cause
the Commission to declare such Registration Statement effective under
the Securities Act as promptly as practicable but in no event later
than ninety (90) days after the Closing Date ("Registration Deadline").
The Company shall promptly (and, in any event, no more than 24 hours
after it receives comments from the Commission), notify the Buyer when
and if it receives any comments from the Commission on the Registration
Statement and promptly forward a copy of such comments, if they are in
writing, to the Buyer. At such time after the filing of the
Registration Statement pursuant to this Section 2(A) as the Commission
indicates, either orally or in writing, that it has no further comments
with respect to such Registration Statement or that it is willing to
entertain appropriate requests for acceleration of effectiveness of such
Registration Statement, the Company shall promptly, and in no event
later than two (2) business days after receipt of such indication from
the Commission, request that the effectiveness of such Registration
Statement be accelerated within forty-eight (48) hours of the
Commission's receipt of such request. The Company shall notify the
Investors by written notice that such Registration Statement has been
declared effective by the Commission within 24 hours of such
declaration by the Commission. In the event that (a) the Registration
Statement has not been filed by the Filing Deadline, (b) the
Registration Statement for any reason has not been declared effective
by the Registration Deadline, or (c) if the Registration Statement has
been declared effective by the Registration Deadline but thereafter is
not effective, then as of the fifteenth (15th) day of each calendar
month after the Filing Deadline during which the Registration has not
been filed or after the Registration Deadline during which the
Registration Statement for any reason is not effective, the Company
shall be obligated to pay to LJCI a monthly fee in the amount of Ten
Thousand Dollars ($10,000.00) ("Monthly Fee") with such Monthly Fee
increasing to Fifteen Thousand Dollars ($15,000) after the first thirty
day period. Regardless of the foregoing provisions, any obligation of
Meltronix to pay the Monthly Fee shall automatically and irrevocably
terminate as of the time at which all Registrable Securities have
become excluded from the definition of Restricted Securities as
described in Section 1(A)(11) hereof.
(B) Eligibility for Use of Form S-3. The Company agrees that at
such time as it meets all the requirements for the use of Securities
Act Registration Statement on Form S-3 it shall file all reports and
information required to be filed by it with the Commission in a
timely manner and take all such other action so as to maintain such
eligibility for the use of such form.
(C) Additional Registration Statement. In the event the current market
price declines to a price per share the result of which is that the
Company cannot satisfy its conversion obligations to Initial Investor
or LJCI pursuant to the First Convertible Note or Secured Convertible
Note, the Company shall, to the extent required by the Securities Act
(because the additional shares were not covered by the Registration
Statement filed pursuant to Section 2(a)), as reasonably determined
by the Investors, file an additional Registration Statement with the
Commission for such additional number of Registrable Securities as
would be issuable upon conversion of the First Convertible Note or
Second Convertible Note or pursuant to the First Securities Purchase
Agreement or Second Securities Purchase Agreement, as the case may be
(the "Additional Registrable Securities"), in addition to those
previously registered. The Company shall, to the extent required by
the Securities Act, as reasonably determined by the Investors, prepare
and file with the Commission not later than the 30th day thereafter, a
Registration Statement relating to the offer and sale of such
Additional Registrable Securities and shall use its best efforts to
cause the Commission to declare such Registration Statement effective
under the Securities Act as promptly as practicable but not later
than 60 days thereafter.
(D) (i) If the Company proposes to register any of its warrants,
Common Stock or any other shares of common stock of the Company under
the Securities Act (other than a registration (A) on Form S-8 or S-4 or
any successor or similar forms, (B) relating to Common Stock or any
other shares of common stock of the Company issuable upon exercise of
employee share options or in connection with any employee benefit or
similar plan of the Company or (C) in connection with a direct or
indirect acquisition by the Company of another Person or any transaction
with respect to which Rule 145 (or any successor provision) under the
Securities Act applies), whether or not for sale for its own account,
it will each such time, give prompt written notice at least 20 days
prior to the anticipated filing date of the registration statement
relating to such registration to each Investor, which notice shall set
forth such Investor's rights under this Section 2(D) and shall offer
such Investor the opportunity to include in such registration statement
such number of Registrable Securities as such Investor may request.
Upon the written request of any Investor made within 10 days after the
receipt of notice from the Company (which request shall specify the
number of Registrable Securities intended to be disposed of by such
Investor), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities
that the Company has been so requested to register by each Investor, to
the extent requisite to permit the disposition of the Registrable
Securities so to be registered; provided, however, that (A) if such
registration involves a Public Offering, each Investor must sell its
Registrable Securities to any underwriters selected by the Company
with the consent of such Investor on the same terms and conditions as
apply to the Company and (B) if, at any time after giving written
notice of its intention to register any Registrable Securities pursuant
to this Section 2 and prior to the effective date of the registration
statement filed in connection with such registration, the Company
shall determine for any reason not to register such Registrable
Securities, the Company shall give written notice to each Investor
and, thereupon, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration. The
Company's obligations under this Section 2(D) shall terminate on the
date that the registration statement to be filed in accordance with
Section 2(A) is declared effective by the Commission. (ii) If a
registration pursuant to this Section 2(D) involves a Public Offering
and the managing underwriter thereof advises the Company that, in its
view, the number of shares of Common Stock that the Company and the
Investors intend to include in such registration exceeds the largest
number of shares of Common Stock that can be sold without having an
adverse effect on such Public Offering (the "Maximum Offering Size"),
the Company will include in such registration only such number of shares
of Common Stock as does not exceed the Maximum Offering Size, and the
number of shares in the Maximum Offering Size shall be allocated among
the Company, the Investors, and any other sellers of Common Stock in
such Public Offering ("Third-Party Sellers"), pro rata on the basis of
the relative number of shares of Common Stock originally proposed to be
offered for sale under such registration by each of the Investors, the
Company and the Third-Party Sellers, as the case may be. If as a
result of the proration provisions of this Section 2(D)(ii), any
Investor is not entitled to include all such Registrable Securities
in such registration, such Investor may elect to withdraw its request
to include any Registrable Securities in such registration. With
respect to registrations pursuant to this Section 2(D), the number
of securities required to satisfy any underwriters' over-allotment
option shall be allocated among the Company, the Investors and any
Third Party Seller pro rata on the basis of the relative number of
securities offered for sale under such registration by each of the
Investors, the Company and any such Third Party Sellers before the
exercise of such over-allotment option.
3. Obligations of the Company
In connection with the registration of the Registrable Securities, the
Company shall:
(A) Promptly (i) prepare and file with the Commission such amendments
(including post-effective amendments) to the Registration Statement
and supplements to the Prospectus as may be necessary to keep the
Registration Statement continuously effective and in compliance with
the provisions of the Securities Act applicable thereto so as to permit
the Prospectus forming part thereof to be current and useable by
Investors for resales of the Registrable Securities for a period of
five (5) years from the date on which the Registration Statement is
first declared effective by the Commission (the "Effective Time") or
such shorter period that will terminate when all the Registrable
Securities covered by the Registration Statement have been sold
pursuant thereto in accordance with the plan of distribution provided
in the Prospectus, transferred pursuant to Rule 144 under the
Securities Act or otherwise transferred in a manner that results in
the delivery of new securities not subject to transfer restrictions
under the Securities Act (the "Registration Period") and (ii) take all
lawful action such that each of (A) the Registration Statement and any
amendment thereto does not, when it becomes effective, contain an
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, not misleading and (B) the Prospectus forming part of the
Registration Statement, and any amendment or supplement thereto, does
not at any time during the Registration Period include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
(B) During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the
Company covered by the Registration Statement until such time as all
of such Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the Investors as set forth in the
Prospectus forming part of the Registration Statement;
(C) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or
delivery of any Prospectus (including any supplements thereto), provide
(A) draft copies thereof to the Investors and reflect in such documents
all such comments as the Investors (and their counsel) reasonably may
propose and (B) to the Investors a copy of the accountant's consent letter
to be included in the filing and (ii) furnish to each Investor whose
Registrable Securities are included in the Registration Statement and its
legal counsel identified to the Company, (A) promptly after the same is
prepared and publicly distributed, filed with the Commission, or received
by the Company, one copy of the Registration Statement, each Prospectus,
and each amendment or supplement thereto and (B) such number of copies of
the Prospectus and all amendments and supplements thereto and such other
documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(D) (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare
and file in such jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as
may be necessary to maintain the effectiveness thereof at all times during
the Registration Period, (iii) take all such other lawful actions as may
be necessary to maintain such registrations and qualifications in effect
at all times during the Registration Period and (iv) take all such other
lawful 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 (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but
for this Section 3(D), (B) subject itself to general taxation in any
such jurisdiction or (C) file a general consent to service of process
in any such jurisdiction;
(E) As promptly as practicable after becoming aware of such event,
notify each Investor of the occurrence of any event, as a result of
which the Prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading, and promptly prepare an amendment to the
Registration Statement and supplement to the Prospectus to correct such
untrue statement or omission, and deliver a number of copies of such
supplement and amendment to each Investor as such Investor may reasonably
request;
(F) As promptly as practicable after becoming aware of such event, notify
each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time
and take all lawful action to effect the withdrawal, recession or removal
of such stop order or other suspension;
(G) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange,
and included in an inter-dealer quotation system of a registered national
securities association, on or in which securities of the same class or
series issued by the Company are then listed or included;
(H) Maintain a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than the effective date of the
Registration Statement;
(I) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates
for the Registrable Securities to be offered pursuant to the registration
statement and enable such certificates for the Registrable Securities to be
in such denominations or amounts, as the case may be, as the Investors
and facilitate the disposition by the Investors of their Registrable
Securities in accordance with the intended methods therefor provided in the
Prospectus which are customary under the circumstances;
(K) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after (i)
the effective date (as defined in Rule 158(c) under the Securities Act)
of the Registration Statement and (ii) the effective date of each
post-effective amendment to the Registration Statement, as the case may
be, an earnings statement of the Company and its subsidiaries complying
with Section 11 (a) of the Securities Act and the rules and regulations
of the Commission thereunder (including, at the option of the Company,
Rule 158);
(L) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to
the Registration Statement such information as the managers reasonably
agree should be included therein and to which the Company does not
reasonably object and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after it
is notified of the matters to be included or incorporated in such
Prospectus supplement or post-effective amendment;
(M) (i) Make reasonably available for inspection by Investors, any
underwriter participating in any disposition pursuant to the
Registration Statement, and any attorney, accountant or other agent
retained by such Investors or any such underwriter all relevant
financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and (ii) cause the
Company's officers, directors and employees to supply all information
reasonably requested by such Investors or any such underwriter,
attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence
examinations; provided, however, that all records, information and
documents that are designated in writing by the Company, in good faith,
as confidential, proprietary or containing any material nonpublic
information shall be kept confidential by such Investors and any such
underwriter, attorney, accountant or agent (pursuant to an appropriate
confidentiality agreement in the case of any such holder or agent),
unless such disclosure is made pursuant to judicial process in a court
proceeding (after first giving the Company an opportunity promptly to
seek a protective order or otherwise limit the scope of the information
sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or
through a third party not in violation of an accompanying obligation of
confidentiality; and provided, further, that, if the foregoing
inspection and information gathering would otherwise disrupt the
Company's conduct of its business, such inspection and information
gathering shall, to the maximum extent possible, be coordinated on
behalf of the Investors and the other parties entitled thereto by one
firm of counsel designed by and on behalf of the majority in interest
of Investors and other parties;
(N) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope
as are customarily made by the Company to underwriters in secondary
underwritten offerings;
(O) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the managers)
addressed to the underwriters, covering such matters as are customarily
covered in opinions requested in secondary underwritten offerings (it
being agreed that the matters to be covered by such opinions shall
include, without limitation, as of the date of the opinion and as of
the Effective Time of the Registration Statement or most recent
post-effective amendment thereto, as the case may be, the absence from
the Registration Statement and the Prospectus, including any documents
incorporated by reference therein, of an untrue statement of a material
fact or the omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus,
in light of the circumstances under which they were made) not misleading,
subject to customary limitations);
(P) In connection with any underwritten offering, obtain "cold comfort"
letters and updates thereof from the independent public accountants of
the Company (and, if necessary, from the independent public accountants
of any subsidiary of the Company or of any business acquired by the
Company, in each case for which financial statements and financial data
are, or are required to be, included in the Registration Statement),
addressed to each underwriter participating in such underwritten
offering (if such underwriter has provided such letter, representations
or documentation, if any, required for such cold comfort letter to be
so addressed), in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(Q) In connection with any underwritten offering, deliver such documents
and certificates as may be reasonably required by the managers, if any,
and
(R) In the event that any broker-dealer registered under the Exchange Act
shall be an "Affiliate" (as defined in Rule 2729(b)(1) of the rules and
regulations of the National Association of Securities Dealers, Inc. (the
"NASD Rules") (or any successor provision thereto)) of the Company or
has a "conflict of interest" (as defined in Rule 2720(b)(7) of the NASD
Rules (or any successor provision thereto)) and such broker-dealer shall
underwrite, participate as a member of an underwriting syndicate or
selling group or assist in the distribution of any Registrable
Securities covered by the Registration Statement, whether as a holder
of such Registrable Securities or as an underwriter, a placement or
sales agent or a broker or dealer in respect thereof, or otherwise,
the Company shall assist such broker-dealer in complying with the
requirements of the NASD Rules, including, without limitation, by
(A) engaging a "qualified independent underwriter" (as defined in
Rule 2720(b)(15) of the NASD Rules (or any successor provision
thereto)) to participate in the preparation of the Registration
Statement relating to such Registrable Securities, to exercise
usual standards of due diligence in respect thereof and to
recommend the public offering price of such Registrable
Securities, (B) indemnifying such qualified independent
underwriter to the extent of the indemnification of underwriters
provided in Section 6 hereof and (C) providing such information to
such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.
4. Obligations of the Investors
In connection with the registration of the Registrable Securities,
the Investors shall have the following obligations:
(A) 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 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 its acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the preparation
and filing of the Registration Statement hereunder, unless such
Investor has notified the Company in writing of its election to exclude
all of its Registrable Securities from the Registration Statement; and
(C) Each Investor agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in
Section 3(E) or 3(F), it shall immediately discontinue its disposition
of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until such Investor's receipt of
the copies of the supplemented or amended Prospectus contemplated by
Section 3(E) and, if so directed by the Company, such Investor shall
deliver to the Company (at the expense of the Company) or destroy (and
deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice.
5. Expenses of Registration
All expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications
pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printing and engraving
fees, accounting fees, and the fees and disbursements of counsel for
the Company, and the reasonable fees of one firm of counsel to the
holders of a majority in interest of the Registrable Securities shall
be borne by the Company. Notwithstanding the foregoing, LJCI shall
advance to the Company up to the first $25,000 of the legal fees of
counsel to the Company, in connection with the preparation of the
initial Registration Statement herewith which advance will bear
interest at the rate of % per annum with the amount thereof and
interest to be paid concurrently with and in accordance with the
April Note.
6. Indemnification and Contribution
(A) The Company shall indemnify and hold harmless each Investor and
each underwriter, if any, which facilitates the disposition of
Registrable Securities, and each of their respective officers and
directors and each person who controls such Investor or underwriter
within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act (each such person being sometimes hereinafter
referred to as an "Indemnified Person") from and against any losses,
claims, damages or liabilities, joint or several, to which such
Indemnified Person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or an omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, not misleading, or arise
out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Prospectus or an omission or alleged
omission to state therein 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; and the Company
hereby agrees to reimburse such Indemnified Person for all reasonable
legal and other expenses incurred by them in connection with investigating
or defending any such action or claim as and when such expenses are
incurred; provided, however, that the Company shall not be liable to any
such Indemnified Person in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon (i) an
untrue statement or alleged untrue statement made in, or an omission or
alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in
the case of the occurrence of an event of the type specified in Section
3(E), the use by the Indemnified Person of an outdated or defective
Prospectus after the Company has provided to such Indemnified Person an
updated Prospectus correcting the untrue statement or alleged untrue
statement or omission or alleged omission giving rise to such loss, claim,
damage or liability.
(B) Indemnification by the Investors and Underwriters. Each Investor
agrees, as a consequence of the inclusion of any of its Registrable
Securities in a Registration Statement, and each underwriter, if any,
which facilitates the disposition of Registrable Securities shall agree,
as a consequence of facilitating such disposition of Registrable
Securities, severally and not jointly, to (i) indemnify and hold
harmless the Company, its directors (including any person who, with his
or her consent, is named in the Registration Statement as a director
nominee of the Company), its officers who sign any Registration Statement
and each person, if any, who controls the Company within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange
Act, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in
such Registration Statement or Prospectus or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
(in light of the circumstances under which they were made, in the case of
the Prospectus), not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company by such holder or
underwriter expressly for use therein; provided, however, that no
Investor or underwriter shall be liable under this Section 6(B) for any
amount in excess of the net proceeds paid to such Investor or underwriter
in respect of shares sold by it and (ii) reimburse the Company for any
legal or other expenses incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(C) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "Indemnified Party") of
written notice of any investigation, claim, proceeding or other action
in respect of which indemnification is being sought (each, a "Claim"),
the Indemnified Party promptly shall notify the party against whom
indemnification pursuant to this Section 6 is being sought
(the "Indemnifying Party") of the commencement thereof; but the omission
to so notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party, except to
the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and
the Indemnified Party are parties, the Indemnifying Party shall be
entitled to assume the defense thereof. Notwithstanding the assumption
of the defense of any Claim by the Indemnifying Party, the Indemnified
Party shall have the right to employ separate legal counsel and to
participate in the defense of such Claim, and the Indemnifying Party shall
bear the reasonable fees, out-of-pocket costs and expenses of such separate
legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, costs and
expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party
by the Indemnifying Party by the same legal counsel would not be
appropriate due to actual or, as reasonably determined by legal counsel
to the Indemnified Party, potentially differing interests between such
parties in the conduct of the defense of such Claim, or if there may be
legal defenses available to the Indemnified Party that are in addition
to or disparate from those available to the Indemnifying Party or (z)
the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable
period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other
than as described in clauses (x), (y) or (z) above, the fees, costs and
expenses of such legal counsel shall be borne exclusively by the
Indemnified Party. Except as provided above, the Indemnifying Party
shall not, in connection with any Claim in the same jurisdiction, be
liable for the fees and expenses of more than one firm of counsel for the
Indemnified Party (together with appropriate local counsel). The
Indemnified Party shall not, without the prior written consent of the
Indemnifying Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment
that does not include an unconditional release of the Indemnifying Party
from all liabilities with respect to such Claim or judgment.
(D) Contribution. If the indemnification provided for in this Section 6
is unavailable to or insufficient to hold harmless an Indemnified Person
under subsection (A) or (B) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then each Indemnifying Party shall contribute to the amount paid
or payable by such Indemnified Party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion
as is appropriate to reflect the relative fault of the Indemnifying Party
and the Indemnified Party in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions
in respect thereof), as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by such Indemnifying Party or by such Indemnified
Party, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(D) were determined by pro rata
allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which
does not take account of the equitable considerations referred to in
this Section 6(D). The amount paid or payable by an Indemnified Party
as a result of the losses, claims, damages or liabilities (or actions
in respect thereof) referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any
such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Investors and
any underwriters in this Section 6(D) to contribute shall be several
in proportion to the percentage of Registrable Securities registered
or underwritten, as the case may be, by them and not joint.
(E) Notwithstanding any other provision of this Section 6, in no event
shall any (i) Investor be required to undertake liability to any
person under this Section 6 for any amounts in excess of the dollar
amount of the proceeds to be received by such Investor from the sale
of such Investor's Registrable Securities (after deducting any fees,
discounts and commissions applicable thereto) pursuant to any
Registration Statement under which such Registrable Securities are
to be registered under the Securities Act and (ii) underwriter be
required to undertake liability to any Person hereunder for any
amounts in excess of the aggregate discount, commission or other
compensation payable to such underwriter with respect to the
Registrable Securities underwritten by it and distributed pursuant
to the Registration Statement.
(F) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under
this Section 6 shall be in addition to any liability which such
Indemnified Person may otherwise have to the Company. The remedies
provided in this Section 6 are not exclusive and shall not limit any
rights or remedies which may otherwise be available to an indemnified
party at law or in equity.
7. Rule 144
With a view to making available to the Investors the benefits of Rule
144 under the Securities Act or any other similar rule or regulation of
the Commission 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 use its best efforts to:
(1) comply with the provisions of paragraph (c) (1) of Rule 144 and
(2) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13
or 15(d) under the Exchange Act; and, if at any time it is not
required to file such reports but in the past had been required to or
did file such reports, it will, upon the request of any Investor, make
available other information as required by, and so long as necessary
to permit sales of, its Registrable Securities pursuant to Rule 144.
8. Assignment
The rights to have the Company register Registrable Securities pursuant
to this Agreement shall be automatically assigned by the Investors to
any permitted transferee of all or any portion of such Registrable
Securities (or all or any portion of the Convertible Note and/or the
Securities Purchase Agreement) only if (a) 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, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice
of (i) the name and address of such transferee or assignee and (ii)
the securities with respect to which such registration rights are being
transferred or assigned, (c) immediately following such transfer or
assignment, the securities so transferred or assigned to the transferee
or assignee constitute Restricted Securities and (d) at or before the
time the Company received the written notice contemplated by clause (b)
of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein.
9. Amendment and Waiver
Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a majority-in-interest
of the Registrable Securities. Any amendment or waiver effected in
accordance with this Section 9 shall be binding upon each Investor
and the Company.
10. Changes in Common Stock
If, and as often as, there are any changes in the Common Stock by way
of stock split, stock dividend, reverse split, combination or
reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall
be made in the provisions hereof, as may be required, so that the
rights and privileges granted hereby shall continue with respect to
the Common Stock as so changed.
11. Miscellaneous
(A) A person or entity shall be deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or
entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election
received from the registered owner of such Registrable Securities.
(B) If, after the date hereof and prior to the Commission declaring
the Registration Statement to be filed pursuant to Section 2(a)
effective under the Securities Act, the Company grants to any Person
any registration rights with respect to any Company securities which
are more favorable to such other Person than those provided in this
Agreement, then the Company forthwith shall grant on a pro-rata basis
(by means of an amendment to this Agreement or otherwise) identical
registration rights to all Investors hereunder.
(C) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally, or sent by telecopier
machine or by a nationally recognized overnight courier service, and
shall be deemed given when so delivered personally, or by telecopier
machine or overnight courier service as follows:
(1) if to the Company, to:
MeltroniX, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier:
Telephone: ▇▇▇.▇▇▇.▇▇▇▇
with a copy to:
▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ "▇" ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Van ▇. ▇▇▇▇▇▇, Esq.
Telecopier: ▇▇▇.▇▇▇.▇▇▇▇
Telephone: ▇▇▇.▇▇▇.▇▇▇▇
(2) if to Lizt or LJCI, to:
La Jolla Cove Investors, Inc.
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇
Telecopier: ▇▇▇.▇▇▇.▇▇▇▇
Telephone: ▇▇▇.▇▇▇.▇▇▇▇
with a copy to:
Loeb & Loeb LLP
Suite 2200
10100 Santa ▇▇▇▇▇▇ Boulevard
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telecopier: ▇▇▇.▇▇▇.▇▇▇▇
Telephone: ▇▇▇.▇▇▇.▇▇▇▇
(3) If to any other Investor, at such address as such Investor shall
have provided in writing to the Company. The Company, the Initial
Investor or any Investor may change the foregoing address by notice
given pursuant to this Section 11(C).
(D) 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.
(E) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California. Each of the parties
consents to the jurisdiction of the federal courts whose districts
encompass any part of the City of San Diego or the state courts of
the State of California sitting in the City of San Diego in connection
with any dispute arising under this Agreement and hereby waives, to the
maximum extent permitted by law, any objection including any objection
based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions.
(F) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed
the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
(G) The Company shall not enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the holders
of Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof.
(H) This Agreement supersedes all prior agreements and undertakings
among the parties hereto with respect to the subject matter hereof
including, without limitation, the Registration Rights Agreement
entered into in connection with the First Securities Purchase
Agreement and Second Securities Purchase Agreement.
(I) Subject to the requirements of Section 8 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(J) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(K) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(L) The Company acknowledges that any failure by the Company to
perform its obligations under Sections 2 and 3, or any delay in
such performance, could result in direct damages to the Investors
and the Company agrees that, in addition to any other liability the
Company may have by reason of any such failure or delay, the Company
shall be liable for all direct damages caused by such failure
or delay.
(M) This Agreement may be executed in two (2) counterparts, each of
which shall be deemed an original but both of which shall constitute
one and the same agreement. A facsimile transmission of this signed
Agreement shall be legal and binding on the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed and delivered on the date first above written.
MELTRONIX, INC
By:
▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer
THE ▇▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇
By:
Name:
Title:
LA JOLLA COVE INVESTORS INC.
By:
Name:
Title:
