EXHIBIT 10.27
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of March 3,
2000, by and among Xxxxxxxxx.Xxx, a Nevada corporation, with headquarters at 000
Xxxxxxx Xxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxx 00000 (the Company"), and the
undersigned buyer (the "Buyer").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties of even date herewith (the "Securities Purchase Agreement"), the Company
has agreed, upon the terms and subject to the conditions of the Securities
Purchase Agreement, (i) to issue and sell to the Buyer(s) shares of the
Company's Series A Preferred Stock (the "Preferred Stock"), which will be
convertible into shares of the Company's common stock, $.00l par value per share
(the "Common Stock") (as converted, the "Conversion Shares") in accordance with
the terms of the Company's Certificate of Designations, Preferences and Rights
of the stock (the "Certificate of Designations"); and
B. To induce the Buyer(s) to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyer(s)
hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "INVESTOR" means the Buyer and any transferee or assignee thereof to
whom the Buyer assigns its fights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9.
b. "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.
c. "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
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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").
d. "SECURITIES" means the Conversion Shares issued or issuable upon
conversion of the Preferred Stock and any shares of capital stock issued or
issuable with respect to the Conversion Shares or the Preferred Stock as a
result of any stock split, stock dividend, recapitalization, exchange or similar
event.
e. "REGISTRATION STATEMENT" means a registration statement of the Company
filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set for-the in the Securities Purchase Agreement.
2. REGISTRATION.
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a. Mandatory Registration.The Company shall prepare and file with the SEC a
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Registration Statement or Registration Statements (as is necessary) on Form S-1,
or SB-2, no later than 60 days from the Closing (or, if such forms are
unavailable for such a registration, on such other form as is available for such
a registration, subject to the consent of each Buyer and the provisions of
Section 2(c), which consent will not be unreasonably withheld), 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(s) also covers such indeterminate number of
additional shares of Common Stock as may become issuable to prevent dilution
resulting from stock splits, stock dividends or similar transactions.
Such Registration Statement shall initially register for resale at least
665,000 shares of Common Stock, subject to adjustment as provided in Section 3
(b), and such registered shares of Common Stock shall be allocated among the
Investors pro rata based on the total number of Registrable Securities issued or
issuable as of each date that a Registration Statement, as amended, relating to
the resale of the Registrable Securities is declared effective by the SEC. The
Company shall use its best efforts to have the Registration Statement declared
effective by the SEC within one hundred and twenty (120) days following THE
CLOSING DATE OR DAY OF FILING THE ISSUANCE DATE ( the "REGISTRATION DEADLINE" ).
The Company shall permit the registration statement to become effective within
five (5) business days after receipt of a "NO REVIEW" notice from the SEC. In
the event that the Registration Statement is not filed by the Company with the
SEC by the Filing Deadline the Company will pay as liquidated damages ( the
"LIQUIDATED DAMAGES") to the Buyer(s) a cash amount within three (3) business
days of the end of the month equal two percent (2%) per month of the
Liquidation Value of the Series A Preferred Shares outstanding as Liquidated
Damages. (For example, if the Registration Statement becomes effective one (l)
month after the Scheduled Effective Date, the Company will pay in cash to the
Buyer(s) Twenty Five Thousand ($25,000) dollars in Liquidated Damages per month
for every month the Registration Statement is not declared effective by the SEC
(2.0% of 1,250,000).
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b. Underwritten Offering.If any offering pursuant to a Registration
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Statement pursuant to Section 2(a) involves an underwritten offering, the
Buyer(s) shall have the right to select one legal counsel and an investment
banker or bankers and manager or managers to administer their interest in the
offering, which investment banker or bankers or manager or managers shall be
reasonably satisfactory to the Company.
c. Piggy-Back Registrations. If at any time prior to the expiration of the
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Registration Period (as hereinafter defined) the Company proposes to file with
the SEC a Registration Statement relating to an offering for its own account or
the account of others under the I933 Act of any of its securities (other than on
Form S-4 or Form S-8 or their then equivalents relating to securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans) the Company shall promptly send to each Investor who is entitled
to registration rights under this Section 2(c) written notice of the Company's
intention to file a Registration Statement and of such Investor's rights under
this Section 2(c) and, if within twenty (20) days after receipt of such notice,
such Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
investor requests to be registered, subject to the priorities set forth in
Section 2(d) below. No right to registration of Registrable Securities under
this Section 2(c) shall be construed to limit any registration required under
Section 2(a). The obligations of the Company under this Section 2(c) may be
waived by Investors holding a majority of the Registrable Securities. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(c) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
d. Priority in PiggyBack Registration Rights in connection with
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Registrations or Company Account.If the registration referred to in Section 2(c)
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is to be an underwritten public offering for the account of the Company and the
managing underwriter(s) advise the Company in writing, that in their reasonable
good Faith opinion, marketing or other factors dictate that a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement is necessary to facilitate and not adversely affect the proposed
offering, then the Company shall include in such registration: (1) first, all
securities the Company proposes to sell for its own account, (2) second, up to
the full number of securities proposed to be registered for the account of the
holders of securities entitled to inclusion of their securities in the
Registration Statement by reason of demand registration rights, and (3) third,
the securities requested to be registered by the Investors and other holders of
securities entitled to participate in the registration, drawn from them pro rata
based on the number each has requested to be included in such registration.
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e. Non-eligibility for Form S-3.The Company is not eligible for the use of
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Form S-3. Therefore (i) the Company, with the consent of each Investor pursuant
to Section 2(a), shall register the sale of the Registrable Securities on all
other appropriate form, such as Form S-1 or Form SB-2 and (ii) the Company shall
undertake to register the Registrable Securities on Form S-3 as soon as such
form is available.
3. RELATED OBLIGATIONS.
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Whenever an Investor(s) has requested that any Registrable Securities be
registered pursuant to Section 2(c) or at such time as the Company is obligated
to file a Registration Statement with the SEC pursuant to Section 2(a), the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC a Registration
Statement with respect to the Registrable Securities (on or prior to the
sixtieth (60th ) day following the Issuance Date, for the registration of
Registrable Securities pursuant to Section 2(a)) and use its best efforts to
cause such Registration Statement(s) relating to Registrable Securities to
become effective as soon as possible after such filing (by the one hundred and
twentieth (120th) day following the Issuance Date in the case of a Registration
Statement filed with the SEC on Form S-1 or SB-2, pursuant to Section 2(a)), and
keep the Registration Statement(s) effective pursuant to Rule 415 at all times
until the earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act (or successor thereto) or (ii) the date on which (A) the
Investors shall have sold all the Registrable Securities and (B) none of the
Preferred Stock or Warrants is outstanding (the "Registration Period"), which
Registration Statement(s) (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.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement(s) and the prospectus(es) used in connection with tile Registration
Statement(s), which prospectus(es) are to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep the Registration
Statement(s) effective at ail times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act
with respect to the disposition of all Registrable Securities of the Company
covered by the Registration Statement(s) until such time as all of such
Registrable Securities shall have been disposed of in accordance wish the
intended methods of disposition by the seller or sellers thereof as set forth in
the Registration Statement(s). In the event the number of shares available under
a Registration Statement filed pursuant to this Agreement is insufficient to
cover all of the Registrable Securities, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
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available therefore, 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 fifteen (15) days after the necessity therefore arises (based on the
market price of the Common Stock and other relevant factors on which the Company
reasonably elects to rely). The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof. For purposes of the foregoing
provision, the number of shares available under a Registration Statement shall
be deemed "insufficient to cover all of the Registrable Securities" if at any
time the number of Registrable Securities issued or issuable upon conversion of
the Preferred Stock is greater than the quotient determined by dividing (i) the
number of shares of Common Stock available for resale under such Registration
Statement by (ii) 2.0; provided that in the case of the initial registration of
the Registrable Securities pursuant to Section 2(a), the Company shall be
required to register solely for the purpose of effecting the conversion of the
Series A Preferred Shares such number of shares of Common Stock equal to or
greater than 200% of the number of shares of Common Stock for which are issuable
upon conversion of all of the then outstanding Series A Preferred Shares which
are then outstanding or which could be issued at any time under this Agreement
or the Series A Preferred Shares.
c. The Company shall furnish to each Investor whose Registrable Securities
are included in the Registration Statement(s) and its legal counsel without
charge (i) promptly after the same is prepared and filed with the SEC at least
one copy of the Registration Statement and any amendment thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits, the prospectus(es) included it such Registration
Statement(s) (including each preliminary prospectus ) and, with regards to the
Registration Statement, any correspondence by or on behalf of the Company to the
SEC or the staff of the SEC and any correspondence from the SEC or the staff of
the SEC to the Company or its representatives, (ii) upon the effectiveness of
any Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such investor may reasonably request) and (iii) such other
documents, including any preliminary prospectus, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement(s) under such other
securities or "BLUE SKY" laws of such jurisdictions 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 quality 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
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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. in the event investors who hold a majority of the Registrable Securities
being offered in the offering select underwriters for the offering, the Company
shall enter into and perform its obligations under art underwriting agreement,
in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering.
f. As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor in writing of the happening of any event, of
which the Company has knowledge, 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, and promptly prepare a supplement or
amendment to the Registration Statement to correct such untrue statement or
omission, and deliver ten (10) copies of such supplement or amendment to each
Investor (or such other number of copies as such Investor may reasonably
request). The Company shall also promptly notify each Investor in writing (i)
when a prospectus or any prospectus supplement or post-effective amendment has
been filed, and when a Registration Statement or any post-effective amendment
has become effective (notification of such effectiveness shall be delivered to
each Investor by facsimile on the same day of such effectiveness and by
overnight mail) (ii) of any request by the SEC for amendments or supplements to
a Registration Statement or related prospectus or related information, (iii) of
the Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
g. The Company shall use its best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement, or
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify each Investor who holds Registrable Securities being sold
(and, in the event of an underwritten offering, the managing underwriters) of
the issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.
h. The Company shall permit each Investor a single firm of counsel or such
other counsel as thereafter designated as selling stockholders' counsel by the
Investors who hold a majority of the Registrable Securities being sold, to
review and comment upon the Registration Statement(s) and all amendments and
supplements thereto at least seven (7) days prior to their filing with the SEC,
and not file any document in a form to which such counsel reasonably objects.
The Company shall not submit a request for acceleration of the effectiveness of
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a Registration Statement(s) or any amendment or supplement thereto without the
prior approval of such counsel, which consent shall not be unreasonably
withheld.
i. At the request of the Investor(s) who hold a majority of the Registrable
Securities being sold, the Company shall furnish, on the date that Registrable
Securities are delivered to an underwriter, if any, for sale in connection with
the Registration Statement (i) if required by an underwriter, a letter, dated
such date, from the Company's independent certified public accountants in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwrite, eh public offering, addressed to
the underwriters, and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering,
addressed to the underwriters and the Investor(s).
j. The Company shall make available for inspection by (i) any Investor,
(ii) any underwriter participating in any disposition pursuant to a Registration
Statement, (iii) one firm of attorneys and one firm of accountants or other
agents retained by the Investors, and (iv) one firm of attorneys retained by all
such underwriters (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 to enable each Inspector to exercise its due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of such due
diligence provided, however, that each Inspector shall hold in strict confidence
and shall not make any disclosure (except to an Investor) or use of any Record
or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement or is otherwise required
under the 1933 Act, (b) the release of such Records is ordered pursuant to a
final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other agreement. 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.
k. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
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Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
1. The Company shall use its best efforts either to (i) cause all the
Registrable Securities covered by a Registration Statement to be listed on each
national securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, (ii)
to secure designation and quotation of ail the Registrable Securities covered by
the Registration Statement on the Nasdaq National Market System, (iii) if,
despite the Company's best efforts to satisfy the preceding clause (i) or (ii),
the Company is unsuccessful in satisfying the preceding clause (i) or (ii) to
secure the inclusion for quotation on the Bulletin for such Registrable
Securities or, (iv) if, despite the Company's best efforts to satisfy the
preceding clause (iii), the Company is unsuccessful in satisfying the preceding
clause (iii), to secure the inclusion for quotation on the over-the-counter
market for such Registrable Securities, and, without limiting the generality of
the foregoing, in the case of clause (iii) or (iv), to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. ("NASD") as such with respect to such Registrable Securities. The Company
shall pay all fees and expenses in connection with satisfying its obligation
under this Section 3(i).
m. The Company shall cooperate with the Investors who hold Registrable
Securities being offered and, to the extent applicable, any managing underwriter
or underwriters, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the Registrable
Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or, if there is no managing
underwriter or underwriters, the Investors may reasonably request and registered
in such names as the managing underwriter or underwriters, if any, or the
Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permits sales
of unlegended securities in a timely fashion that complies with then mandated
securities settlement procedures for regular way market transactions.
n. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.
o. The Company shall provide a transfer agent and registrar of all such
Registrable Securities not later than the effective date of such Registration
Statement.
p. If requested by the managing underwriters or an Investor, the Company
shall immediately incorporate in a prospectus supplement or post-effective
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amendment such information as the managing underwriters and the Investors agree
should be included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the
number of Registrable Securities being sold to such underwriters, the purchase
price being paid therefore by such underwriters and with respect to any other
terms of the underwritten (or best efforts underwritten) offering of the
Registrable Securities to be sold in such offering; make all required filings of
such prospectus supplement or post-effective amendment as soon as notified of
the matters to be incorporated in such prospectus supplement or post-effective
amendment; and supplement or make amendments to any Registration Statement if
requested by a shareholder or any underwriter of such Registrable Securities.
q. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
r. The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
4. OBLIGATIONS OF THE INVESTOR(S).
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a. At least seven (7) days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor in writing of
the information the Company requires from each such Investor if such Investor
elects to have any of such Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement(s) 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 the Registration Statement.
c. In the event Investor(s) holding a majority of the Registrable
Securities being registered determine to engage the services of an underwriter,
each Investor agrees to enter into mid perform such Investor's obligations under
an underwriting agreement, in usual and customary, form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor notifies the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement(s).
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d. Each Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(g) or the first
sentence of 3(f), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement(s) covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(g) or the first
sentence of 3(f) and, if so directed by the Company, such Investor shall deliver
to the Company (at the expense of the Company) or destroy all copies in such
Investor's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration hereunder
unless such Investor (i) agrees to sell such Investor's Registrable Securities
on the basis provided in any underwriting arrangements approved by the Investors
entitled hereunder to approve such arrangements, (ii) completes and executes ail
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions.
5. EXPENSES OF REGISTRATION.
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All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company shall be borne by the Company.
6. INDEMNIFICATION
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In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and hereby
does, indemnify, hold harmless and defend each Investor who holds such
Registrable Securities, the directors, officers, partners, employees, agents 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"), and any
underwriter (as defined in the 0000 Xxx) for the Investors, and the directors
and officers of, and each Person, if any, who controls, any such underwriter
within the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities, judgments, fines,
penalties, charges, costs, 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
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a party thereto "Indemnified Damages"), to which any of them may become subject
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
"blue sky" laws of any jurisdiction in which Registrable Securities are offered
("Blue Sky Filing"), or the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which the statements therein were made, not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used. prior to the effective
date of such Registration Statement, or contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to state
therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were made, not
misleading, 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(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c);
(ii) with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
mission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c), and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a violation and such Indemnified
Person, notwithstanding such advice, used it; (iii) shall not be available to
the extent such Claim is based on a failure of the Investor to deliver or to
cause to be delivered the prospectus made available by the Company (i) and (iv)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
124
b. In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement, each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim
or Indemnified Damages to which any of them may become subject, under the 1933
Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages
arise out of or are based upon any Violation, in each case to the extent, and
only to the extent, that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and, subject
to Section 6(d), 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 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 transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in any distribution, to the same extent as provided above, with
respect to information such persons so furnished in writing expressly for
inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim such
indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the indemnified Person or
the indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
125
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for only one separate legal counsel for the Investors, and
such legal counsel shall be selected by the Investors holding a majority in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person, which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its 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 ail liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to ail 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.
e. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or Indemnified Damages are incurred.
f. The indemnity agreements contained herein shall be in addition to (i)
any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
-------------
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that: (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6; (ii) no seller of Registrable Securities guilty of fraudulent
126
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; (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; and (III)
CONTRIBUTION BY THE COMPANY SHALL BE LIMITED AS TO THE PLACEMENT OF THE
SECURITIES.
8. REPORTS UNDER THE 1934 ACT.
-------------------------------
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the investors to sell securities of the Company
to the public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the investors to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
-------------------------------------
The rights to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assignable by the Investor(s) to any
transferee of all or any portion of Registrable Securities if: (i) the
Investor(s) agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned;
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the 1933
Act and applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein; (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
127
Agreement; (vi) such transferee shall be an "accredited investor" as that term
is defined in Rule 501 of Regulation D promulgated under the 1933 Act; and (vii)
in the event the assignment occurs subsequent to the date of effectiveness of
the Registration Statement required to be filed pursuant to Section 2(a), the
transferee agrees to pay all reasonable expenses of amending or supplementing
such Registration Statement to reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
-------------------------------------
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and Investors
who hold two-thirds of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
11. MISCELLANEOUS.
---------------
a. A person or entity is 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. Any notices consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile, provided a copy is mailed
by U.S. certified mail, return receipt requested; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (d) one (1) day
after deposit with a nationally recognized overnight delivery, service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Xxxxxxxxx.Xxx Group.
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
With Copy to Company Counsel:
Xxxxx Xxxxx, Esq.
Silicone Valley Law Group
000 Xxxxx 0xx Xxxxxx
Xxxxx 00
Xxx Xxxx, Xxxxxxxxxx 00000
128
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's counsel as set forth on the Schedule of
Buyers. Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York without regard to the principles of conflict
of laws. If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. This Agreement and the Securities Purchase Agreement constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the Securities Purchase Agreement supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall inure to
the benefit and of and be binding upon the permitted successors and assigns of
each of the parties hereto.
g. The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such
other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
[REMAINDER OF PAGE INTENTIONALL LEFT BLANK]
129
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
-------- -------
XXXXXXXXX.XXX
By: By:
Name: Xxxx Xxxxxxxx Name: Its:
President Its:
130
SCHEDULE OF BUYERS
Buyer's Name Address/Facsimile Number
of Buyer
------------------------- ------------------------
Xx. Xxxxxxx Xxxxxxxxxxxxx 00 Xxxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
------------------------- ------------------------
Xxxx Xxxxxxxx 0000 Xxxxx Xxx Xxxx,
Xxxxxxxxx XX
------------------------- ------------------------
Xxxxx Xxxxxx 000 Xxxxxx Xxxxxxx Xxxx,
Xxxxxxx Xxxx, XX 00000
------------------------- ------------------------
Cranshire Capital 000 Xxxxxx Xxxx, Xxx
Xx: Xxxxxxx Xxxxx 1901, Xxxxxxxxxx, XX
00000
------------------------- ------------------------
Xxxxxxx Xxxxxxx 000 00xx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
------------------------- ------------------------
Illinois Holding Co. 0000 0xx Xxxxxx
By: Xxxxxx Xxxxxxxxx Xxxxxx, XX 00000
FEIN #00-0000000
------------------------- ------------------------
Xxxxx Che Xxx Xxxx 00X Xxxxxxx Xxxx Xxxxx
Xxxxxx, 0000 Xxxxxxxxx
------------------------- ------------------------
Xxx Xx Xxxx 0X Fly Dragon Terr 00-00
Xxxxxx Xxxxxx Xxxx,
Xxxx Xxxx Xxxxx
------------------------- ------------------------
Xxx X. Xxx 00 Xxxx Xxxx
Xxxxx Xxxxxx Xxxxx, XX
00000
------------------------- ------------------------
Xxxxxx Xxxxx 000 Xxxxxx Xx
Xxx Xxxxx, XX 00000
------------------------- ------------------------
Xxxxxx Xxxxxx 00 Xxxxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
------------------------- ------------------------
Xxxxxx Xxxxx 000 Xxxx 00xx Xxxxxx
Xxx.# 00X
Xxx Xxxx, XX 00000
------------------------- ------------------------
Xxxxxx Xxxxx 00 Xxxxxxx Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
------------------------- ------------------------
Xxxxx X. Xxxxx 00 Xxxxxxx Xxxxx
Xxxxxx, XX 00000
------------------------- ------------------------
Xxxxx X. Xx 0000 Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
------------------------- ------------------------
131
Qilu Xxxx 000-00 xxxxx Xxxx
Xxxxxxx Xxxx Xxxxxx,
Xxxxx 114004
------------------------- ------------------------
Xxxxxxxx Xx 00 Xxxx Xxxxxx Xxx 0X
X. Xxxxxxxxx, XX 00000
------------------------- ------------------------
Xxxxxxx X. Xxxxx
------------------------- ------------------------
132
