Exhibit 3.7
Registration Rights Agreement
REGISTRATION RIGHTS AGREEMENT
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Registration Rights Agreement (the "Agreement"), dated as of April 7, 2004,
by and between 12 to 20 Plus, Incorporated a corporation organized under the
laws of State of Nevada, with its principal executive office at with its
principal executive office at ▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and Dutchess Private Equities Fund, II, L.P.,
a Delaware limited partnership with its principal office at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Investor").
Whereas, in connection with the Investment Agreement by and between the
Company and the Investor of even date herewith (the "Investment Agreement"), the
Company has agreed to issue and sell to the Investor an indeterminate number of
shares of the Company's Common Stock, .001 par value per share (the "Common
Stock"), to be purchased pursuant to the terms and subject to the conditions set
forth in the Investment Agreement; and
Whereas, to induce the Investor to execute and deliver the Investment
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws, with respect to the shares of Common Stock
issuable pursuant to the Investment Agreement.
Now therefore, in consideration of the foregoing premises and the mutual
covenants contained hereinafter and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investor hereby agree as follows:
Section 1. DEFINITIONS.
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As used in this Agreement, the following terms shall have the following
meanings:
"Execution Date" means the date first written above.
"Investor" means Dutchess Private Equities Fund, L.P., II, a Delaware
limited partnership.
"Person" means a corporation, a limited liability company, an association,
a partnership, an organization, a business, an individual, a governmental or
political subdivision thereof or a governmental agency.
"Potential Material Event" means any of the following: (i) the possession
by the Company of material information not ripe for disclosure in a Registration
Statement, which shall be evidenced by determinations in good faith by the Board
of Directors of the Company that disclosure of such information in the
Registration Statement would be detrimental to the business and affairs of the
Company, or (ii) any material engagement or activity by the Company which would,
in the good faith determination of the Board of Directors of the Company, be
adversely affected by disclosure in a Registration Statement at such time, which
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DEFINITIONS - continued
determination shall be accompanied by a good faith determination by the Board of
Directors of the Company that the Registration Statement would be materially
misleading absent the inclusion of such information.
"Principal Market" shall mean The American Stock Exchange, National
Association of Securities Dealer's, Inc. Over-the-Counter electronic bulletin
board, the Nasdaq National Market or The Nasdaq SmallCap Market whichever is the
principal market on which the Common Stock is listed.
"Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing one or more Registration Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such Registration
Statement(s) by the United States Securities and Exchange Commission (the
"SEC").
"Registrable Securities" means (i) the shares of Common Stock issued or
issuable pursuant to the Investment Agreement, and (ii) any shares of capital
stock issued or issuable with respect to such shares of Common Stock, if any, as
a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise, which have not been (x) included in a Registration
Statement that has been declared effective by the SEC or (y) sold under
circumstances meeting all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the 1933 Act.
"Registration Statement" means a registration statement of the Company
filed under the 1933 Act covering the Registrable Securities.
All capitalized terms used in this Agreement and not otherwise defined
herein shall have the same meaning ascribed to them as in the Investment
Agreement.
Section 2. REGISTRATION.
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(a) On or before the execution of this Agreement, the Company shall have
provided a draft of the Registration Statement covering the Registrable
Securities to the Investor. The Company shall, as soon as practicable, but not
later than fifteen calendar days following the Execution Date, file with the SEC
a Registration Statement or Registration Statements (as is necessary) on Form
SB-2 (or, if such form is unavailable for such a registration, on such other
form as is available for such a registration), covering the resale of all of the
Registrable Securities, which Registration Statement(s) shall state that, in
accordance with Rule 416 promulgated under the 1933 Act, such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon stock splits, stock dividends or similar
transactions. The Company shall initially register for resale _________ shares
of Common Stock which would be issuable on the date preceding the filing of the
Registration Statement based on the closing bid price of the Company's Common
Stock on such date and the amount reasonably calculated that represents Common
Stock issuable to other parties as set forth in the Investment Agreement except
to the extent that the SEC requires the share amount to be reduced as a
condition of effectiveness..
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REGISTRATION - continued
(b) The Company shall use commercially reasonable efforts to have the
Registration Statement(s) declared effective by the SEC within 90 calendar days
after the Execution Date.
(c) The Company agrees not to include any other securities in the Registration
Statement covering the Registrable Securities without Investor's prior written
consent which Investor may withhold in its sole discretion. Furthermore, the
Company agrees that it will not file any other Registration Statement for other
securities, until thirty calendar days after the Registration Statement for the
Registrable Securities is declared effective by the SEC.
Section 3. RELATED OBLIGATIONS.
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At such time as the Company is obligated to prepare and file a Registration
Statement with the SEC pursuant to Section 2(a), the Company will effect the
registration of the Registrable Securities in accordance with the intended
method of disposition thereof and, with respect thereto, the Company shall have
the following obligations:
(a) The Company shall use commercially reasonable efforts to cause such
Registration Statement relating to the Registrable Securities to become
effective within 90 days after the Execution Date and shall keep such
Registration Statement effective until the earlier to occur of (i) the date as
of which the Investor may sell all of the Registrable Securities without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto); or (ii) the date on which (A) the Investor shall have sold all the
Registrable Securities; and (B) the Investor has no right to acquire any
additional shares of Common Stock under the Investment Agreement (the
"Registration Period"). The Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading. The Company shall use its
best efforts to respond to all SEC comments within seven business days from
receipt of such comments by the Company. The Company shall use its best efforts
to cause the Registration Statement relating to the Registrable Securities to
become effective no later than three business days after notice from the SEC
that the Registration Statement may be declared effective. The Investor agrees
to provide all information which it is required by law to provide to the
Company, including the intended method of disposition of the Registrable
Securities, and the Company's obligations set forth above shall be conditioned
on the receipt of such information.
(b) The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the Investor
thereof as set forth in such Registration Statement. In the event the number of
shares of Common Stock covered by a Registration Statement filed pursuant to
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RELATED OBLIGATIONS - continued
this Agreement is at any time insufficient to cover all of the Registrable
Securities, the Company shall amend such Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable), or
both, so as to cover all of the Registrable Securities, in each case, as soon as
practicable, but in any event within 30 calendar days after the necessity
therefor arises (based on the then Purchase Price of the Common Stock and other
relevant factors on which the Company reasonably elects to rely), assuming the
Company has sufficient authorized shares at that time, and if it does not,
within 30 calendar days after such shares are authorized. The Company shall use
commercially reasonable efforts to cause such amendment and/or new Registration
Statement to become effective as soon as practicable following the filing
thereof.
(c) The Company shall make available to the Investor whose Registrable
Securities are included in any Registration Statement and its legal counsel
without charge (i) promptly after the same is prepared and filed with the SEC at
least one copy of such Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits, the prospectus included in such Registration
Statement (including each preliminary prospectus) and, with regards to such
Registration Statement(s), any correspondence by or on behalf of the Company to
the SEC or the staff of the SEC and any correspondence from the SEC or the staff
of the SEC to the Company or its representatives; (ii) upon the effectiveness of
any Registration Statement, the Company shall make available copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto; and (iii) such other documents, including copies of any
preliminary or final prospectus, as the Investor may reasonably request from
time to time in order to facilitate the disposition of the Registrable
Securities.
(d) The Company shall use commercially reasonable efforts to (i) register
and qualify the Registrable Securities covered by a Registration Statement under
such other securities or "blue sky" laws of such states in the United States as
any Investor reasonably requests; (ii) prepare and file in those jurisdictions,
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period; (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (x) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), or (y) subject itself to general taxation in any such
jurisdiction. The Company shall promptly notify each Investor who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
(e) As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor in writing of the happening of any event as a
result of which the prospectus included in a Registration Statement, as then in
effect, includes an untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading ("Registration Default") and use all diligent efforts to promptly
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RELATED OBLIGATIONS - continued
prepare a supplement or amendment to such Registration Statement and take any
other necessary steps to cure the Registration Default, (which, if such
Registration Statement is on Form S-3, may consist of a document to be filed by
the Company with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the
1934 Act (as defined below) and to be incorporated by reference in the
prospectus) to correct such untrue statement or omission, and make available
copies of such supplement or amendment to each Investor. The Company shall also
promptly notify each Investor (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 (the Company will prepare
notification of such effectiveness which shall be delivered to the Investor on
the same day of such effectiveness and by overnight mail), additionally, the
Company will promptly provide to the Investor a copy of the effectiveness order
prepared by the SEC once it is received by the Company; (ii) of any request by
the SEC for amendments or supplements to a Registration Statement or related
prospectus or related information, (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate, (iv) in the event the Registration Statement is no longer
effective, or (v) if Registration Statement is stale as a result of the
Company's failure to timely file its financials or otherwise. The Company
acknowledges that its failure to cure the Registration Default within ten
business days will cause the Investor to suffer damages in an amount that will
be difficult to ascertain. Accordingly, the parties agree that it is appropriate
to include a provision for liquidated damages. The parties acknowledge and agree
that the liquidated damages provision set forth in this section represents the
parties' good faith effort to quantify such damages and, as such, agree that the
form and amount of such liquidated damages are reasonable and will not
constitute a penalty. It is the intention of the parties that interest payable
under any of the terms of this Agreement shall not exceed the maximum amount
permitted under any applicable law. If a law, which applies to this Agreement
which sets the maximum interest amount, is finally interpreted so that the
interest in connection with this Agreement exceeds the permitted limits, then:
(1) any such interest shall be reduced by the amount necessary to reduce the
interest to the permitted limit; and (2) any sums already collected (if any)
from the Company which exceed the permitted limits will be refunded to the
Company. The Investor may choose to make this refund by reducing the amount that
the Company owes under this Agreement or by making a direct payment to the
Company. If a refund reduces the amount that the Company owes the Investor, the
reduction will be treated as a partial payment. In case any provision of this
Agreement is held by a court of competent jurisdiction to be excessive in scope
or otherwise invalid or unenforceable, such provision shall be adjusted rather
than voided, if possible, so that it is enforceable to the maximum extent
possible, and the validity and enforceability of the remaining provisions of
this Agreement will not in any way be affected or impaired thereby.
(f) The Company shall use commercially reasonable efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify the Investor who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
(g) The Company shall permit the Investor and one legal counsel, designated
by the Investor, to review and comment upon a Registration Statement and all
amendments and supplements thereto at least seven business days prior to their
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RELATED OBLIGATIONS - continued
filing with the SEC, and not file any document in a form to which such counsel
reasonably objects. The Company may request to shorten the Investor's review
period and the Investor will, if possible, attempt to comply with the
accelerated review period. The Company shall not submit to the SEC a request for
acceleration of the effectiveness of a Registration Statement or file with the
SEC a Registration Statement or any amendment or supplement thereto without the
prior approval of such counsel, which approval shall not be unreasonably
withheld.
(h) At the request of the Investor, the Company shall cause to be furnished
to such Investor, on the date of the effectiveness of a Registration Statement,
a legal opinion, in form and substance reasonably acceptable to Investor's
counsel, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement.
(i) The Company shall make available for inspection by (i) the Investor and
(ii) one legal counsel and one firm of accountants or other agents retained by
the Investor (collectively, the "Inspectors"), all pertinent financial and other
records, and pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed necessary by each
Inspector, and cause the Company's officers, directors and employees to supply
all information which any Inspector may reasonably request; provided, however,
that each Inspector shall hold in strict confidence and shall not make any
disclosure (except to a Investor) or use of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. Each Investor agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental body
of competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential.
(j) The Company shall hold in confidence and not make any disclosure of
information concerning a 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 a 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 commercially reasonable efforts to maintain
designation and quotation of all the Registrable Securities covered by any
Registration Statement on the Principal Market. If, despite the Company's best
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RELATED OBLIGATIONS - continued
efforts, the Company is unsuccessful in satisfying the preceding sentence, it
shall use commercially reasonable efforts to cause all the Registrable
Securities covered by any Registration Statement to be listed on each other
national securities exchange and automated quotation system, if any, on which
securities of the same class or series issued by the Company are then listed, if
any, if the listing of such Registrable Securities is then permitted under the
rules of such exchange or system. The Company shall pay all fees and expenses in
connection with satisfying its obligation under this Section 3(k).
(l) The Company shall cooperate with the Investor to facilitate the
prompt preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the Investor may reasonably request.
(m) The Company shall provide a transfer agent for all the Registrable
Securities not later than the effective date of the first Registration Statement
filed pursuant hereto.
(n) If requested by the Investor, the Company shall (i) as soon as
reasonably practical incorporate in a prospectus supplement or post-effective
amendment such information as such Investor reasonably determine should be
included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the
offering of the Registrable Securities to be sold in such offering; (ii) make
all required filings of such prospectus supplement or post-effective amendment
as soon as reasonably possible after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) supplement or make amendments to any Registration Statement if reasonably
requested by such Investor.
(o) The Company shall use commercially reasonable efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.
(p) The Company shall otherwise use commercially reasonable efforts to
comply with all applicable rules and regulations of the SEC in connection with
any registration hereunder.
(q) Within one business day after the Registration Statement which includes
Registrable Securities is declared effective by the SEC, the Company shall
deliver to the transfer agent for such Registrable Securities, with copies to
the Investor, confirmation that such Registration Statement has been declared
effective by the SEC.
(r) At or prior to the date of the first Put Notice (as that term is
defined in the Investment Agreement) and at such other times as the Investor may
reasonably request, the Company shall cause to be delivered, letters from the
Company's independent certified public accountants (i) addressed to the Investor
that such accountants are independent public accountants within the meaning of
the 1933 Act and the applicable published rules and regulations thereunder, and
(ii) in customary form and covering such financial and accounting matters as are
customarily covered by letters of independent certified public accountants
delivered to underwriters in connection with public offerings.
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RELATED OBLIGATIONS - continued
(s) The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investor of Registrable Securities
pursuant to a Registration Statement.
Section 4. OBLIGATIONS OF THE INVESTOR.
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(a) At least five calendar days prior to the first anticipated filing date
of a Registration Statement the Company shall notify the 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 in writing to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall reasonably be required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. Each
Investor covenants and agrees that, in connection with any sale of Registrable
Securities by it pursuant to a Registration Statement, it shall comply with the
"Plan of Distribution" section of the current prospectus relating to such
Registration Statement.
(b) The 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) The Investor agrees that, upon receipt of written notice from the
Company of the happening of any event of the kind described in Section 3(f) or
the first sentence of 3(e), 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(f) or the
first sentence of 3(e).
Section 5. EXPENSES OF REGISTRATION.
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All expenses, other than underwriting discounts and commissions and other
than as set forth in the Investment Agreement, incurred in connection with
registrations including comments, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration, listing and
qualifications fees, printing and accounting fees, and fees and disbursements of
counsel for the Company or for the Investor shall be paid by the Company.
Section 6. INDEMNIFICATION.
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In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
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INDEMNIFICATION - continued
(a) To the fullest extent permitted by law, the Company will, and hereby
does, indemnify, hold harmless and defend each Investor who holds such
Registrable Securities, the directors, officers, partners, employees, counsel,
agents, representatives of, and each Person, if any, who controls, any Investor
within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as
amended (the "1934 Act") (each, an "Indemnified Person"), against any losses,
claims, damages, liabilities, judgments, fines, penalties, charges, costs,
attorneys' fees, amounts paid in settlement or expenses, joint or several
(collectively, "Claims"), incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or the SEC, whether pending or threatened, whether or
not an indemnified party is or may be a party thereto ("Indemnified Damages"),
to which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any jurisdiction in
which the Investor has requested in writing that the Company register or qualify
the Shares ("Blue Sky Filing"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which the statements therein were
made, not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Investor and each such controlling
person, promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which is due to the inclusion in the Registration
Statement of the information furnished to the Company by any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not be
available to the extent such Claim is based on (a) a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the Company
or (b) the Indemnified Person's use of an incorrect prospectus despite being
promptly advised in advance by the Company in writing not to use such incorrect
prospectus; (iii) any claims based on the manner of sale of the Registrable
Securities by the Investor or of the Investor's failure to register as a dealer
under applicable securities laws; (iv) any omission of the Investor to notify
the Company of any material fact that should be stated in the Registration
Statement or prospectus relating to the Investor or the manner of sale; and (v)
any amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
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INDEMNIFICATION - continued
and shall survive the resale of the Registrable Securities by the Investor
pursuant to the Registration Statement.
(b) In connection with any Registration Statement in which a Investor is
participating, each such Investor agrees to severally and jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement, each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act and the Company's
agents (collectively and together with an Indemnified Person, an "Indemnified
Party"), against any Claim or Indemnified Damages to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim or Indemnified Damages arise out of or are based upon any Violation, in
each case to the extent, and only to the extent, that such Violation is due to
the inclusion in the Registration Statement of the 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 them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) and the agreement with
respect to contribution contained in Section 7 shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; 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 resale of the
Registrable Securities by the Investor pursuant to the Registration Statement.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
were corrected on a timely basis in the prospectus, as then amended or
supplemented. This indemnification provision shall apply separately to each
Investor and liability hereunder shall not be joint and several.
(c) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the Indemnified Person or
Indemnified Party, the representation by counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal counsel
for the Indemnified Persons or the Indemnified Parties, as applicable, and such
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INDEMNIFICATION - continued
counsel shall be selected by the Investor, if the Investor are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The Indemnified Party or Indemnified
Person shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or Claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the Indemnified Party or Indemnified Person which relates to such action or
Claim. The indemnifying party shall keep the Indemnified Party or Indemnified
Person fully appraised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the Indemnified Party or Indemnified Person,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such Claim. Following indemnification
as provided for hereunder, the indemnifying party shall be surrogated to all
rights of the Indemnified Party or Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which indemnification
has been made. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.
(d) The 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.
Section 7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that: (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
Section 8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investor 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 Investor to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:
11
REPORTS UNDER THE 1934 ACT - continued
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 5(c) of the
Investment Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and
(c) furnish to the Investor, promptly upon request, (i) a written statement
by the Company that it has complied with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested to
permit the Investor to sell such securities pursuant to Rule 144 without
registration.
Section 9. NO ASSIGNMENT OF REGISTRATION RIGHTS.
------------------------------------
The rights under this Agreement shall not be assignable.
Section 10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended only with the written consent
of the Company and Investor. No such amendment shall be effective to the extent
that it applies to less than all of the Investor of the Registrable Securities.
Section 11. MISCELLANEOUS.
-------------
(a) Any notices or other communications required or permitted to be given
under the terms of this Agreement that must be in writing will be deemed to have
been delivered (i) upon receipt, when delivered personally; (ii) upon receipt,
when sent by facsimile (provided a confirmation of transmission is mechanically
or electronically generated and kept on file by the sending party); or (iii) one
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: A If to the Company:
12 to 20 Plus, Incorporated
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇)-▇▇▇-▇▇▇▇
Facsimile: (▇▇▇)-▇▇▇-▇▇▇▇
With Copy to:
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MISCELLANEOUS - continued
If to the Investor:
Dutchess Private Equities Fund, II, LP
▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Each party shall provide five business days prior notice to the other party
of any change in address, phone number or facsimile number.
(b) 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.
(c) The laws of the Commonwealth of Massachusetts shall govern all issues
arising from or related to this Agreement without regard to the principles of
conflict of laws. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Boston,
County of Suffolk, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(d) This Agreement and the Transaction Documents constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein.
(e) This Agreement and the Transaction Documents supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
(f) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof. Whenever required by
the context of this Agreement, the singular shall include the plural and
masculine shall include the feminine. This Agreement shall not be construed as
if it had been prepared by one of the parties, but rather as if all the parties
had prepared the same.
(g) This Agreement may be executed in two or more identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
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MISCELLANEOUS - continued
(h) Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
* * *
SIGNATURE PAGE OF REGISTRATION RIGHTS AGREEMENT
Agreed as of the date first written above.
DUTCHESS PRIVATE EQUITIES FUND, II, L.P.
BY ITS GENERAL PARTNER,
DUTCHESS CAPITAL MANAGEMENT, LLC
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Managing Member
12 to 20 plus, incorporated,
/s/▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer
14
