EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of August 23
2002, by and between FTS Apparel, Inc., a company organized under the laws of
State of Colorado, with its principal executive office at 0000 Xxxxx Xxxx,
Xxxxxxx, XX 00000 (the "Company"), and Dutchess Private Equities Fund, L.P. (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 (i) 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:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "Execution Date" means the date this Agreement and the Investment Agreement
are signed by the Company and the Investor.
b. "Holder" means Dutchess Private Equities Fund, L.P., a Delaware limited
partnership.
c. "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.
d. "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
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.
e. "Principal Market" shall mean the National Association of Securities
Dealer's, Inc. OTC electronic bulletin board or if the Common Stock ceases to be
traded on the electronic bulletin board, The American Stock Exchange, Inc., the
Nasdaq National Market or The Nasdaq SmallCap Market whichever is the principal
market on which the Common Stock is listed.
f. "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").
g. "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.
h. "Registration Statement" means a registration statement of the Company filed
under the 1933 Act.
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.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, as soon as
practicable file, but not later than thirty (30) calendar days following the
Execution Date, [this conflicts with Section 9(vi) of the Investment Agreement,
which allows 60 days to 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 11,000,000 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.
b. The Company shall use its best efforts to have the Registration
Statement(s) declared effective by the SEC within ninety (90) calendar days
after the Execution Date.
c. The Company agrees not to include any other securities in this
Registration Statement without Investor's prior written consent. Furthermore,
the Company agrees that it will not file any other Registration Statement for
other securities, until thirty (30) calendar days after the Registration
Statement for the Registrable Securities is declared effective.
d. Counsel. Subject to Section 5 hereof, in connection with any offering of
the Registrable Securities pursuant to this Section 2, the Holder shall have the
right to select one legal counsel to administer its interests in the offering.
The Company shall reasonably cooperate with any such counsel.
3. RELATED OBLIGATIONS.
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 use its best
efforts to 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 its best efforts to cause such Registration
Statement relating to the Registrable Securities to become effective within
ninety (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
Holders 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 Holders 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 respectively (the "Registration Period"), which
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 respond to all SEC comments
within a reasonable amount of time of receipt by the Company. The Company shall
cause the Registration Statement relating to the Registrable Securities to
become effective no later than three (3) business days after notice from the SEC
that the Registration Statement may be declared effective. In order to achieve
the foregoing objectives, the Holder agrees to provide all information necessary
to complete the registration statement, 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 available under a Registration
Statement filed pursuant to 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 thirty
(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 thirty (30) calendar
days after such shares are authorized. The Company shall use it best 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 furnish to the Holders 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, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as the Holders may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus, as the
Holders may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities.
d. The Company shall use 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 Holder
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), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify each Holder 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 Holder 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
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 deliver ten (10)
copies of such supplement or amendment to each Holder (or such other number of
copies as such Holder may reasonably request). Failure to cure the Registration
Default within ten (10) business days shall result in the Company paying
liquidated damages of 2.0% of the cost of all Common Stock then held by the
Holders for each thirty (30) calendar day period or portion thereof, beginning
on the date of suspension. The Company shall also promptly notify each Holder 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 Holder 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, (iv)
in the event the Registration Statement is no longer effective or, (v) the
Registration Statement is stale for a period of more than five (5) Trading Days
as a result of the Company's failure to timely file its financials.
The Company acknowledges that its failure to cure the Registration Default
within ten (10) 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 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 Holder 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 each Holder and a single firm of counsel,
designated by the Holder, to review and comment upon a Registration Statement
and all amendments and supplements thereto at least seven (7) business 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 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 any Holder, the Company shall cause to be furnished to
such Holder, on the date of the effectiveness of a Registration Statement, an
opinion, 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) any Holder and
(ii) one firm of attorneys and one firm of accountants or other agents retained
by the Holders (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 Holder) 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 Holder 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 Holder 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 Holder is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to such Holder and allow such Holder, at the Holder's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
k. The Company shall use its best efforts to secure designation and
quotation of all the Registrable Securities covered by any Registration
Statement on the Principal Market. If, despite the Company's best efforts, the
Company is unsuccessful in satisfying the preceding sentence, it shall use its
best 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. If,
despite the Company's best efforts, the Company is unsuccessful in satisfying
the two preceding sentences, it will use its best efforts to secure the
inclusion for quotation on the Nasdaq SmallCap Market for such Registrable
Securities and, without limiting the generality of the foregoing, to arrange for
at least two market makers to register with the National Association of
Securities Dealers, Inc. as such with respect to such Registrable Securities.
The Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(k).
l. The Company shall cooperate with the Investor 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 Holders 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 Holders, the Company shall (i) as soon as reasonably
practical incorporate in a prospectus supplement or post-effective amendment
such information as such Holders 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 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 Holders.
o. The Company shall use its best efforts to cause the Registrable
Securities covered by the
applicable Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to consummate the
disposition of such Registrable Securities.
p. The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
q. Within one (1) business day after the Registration Statement which
includes Registrable Securities is declared effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities, with copies to the Investor,
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A.
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 Holders may
reasonably request, the Company shall cause to be delivered, letters from the
Company's independent certified public accountants (i) addressed to the Holders
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.
s. The Company shall take all other reasonable actions necessary to expedite
and facilitate disposition by the Holders of Registrable Securities pursuant to
a Registration Statement.
4. OBLIGATIONS OF THE HOLDERS.
a. At least five (5) calendar days prior to the first anticipated filing
date of a Registration Statement the Company shall notify each Holder in
writing of the information the Company requires from each such Holder if such
Holder elects to have any of such Holder'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 Holder that
such Holder 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 Holder 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. Each Holder, by such Holder'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 Holder has notified the Company in writing of such
Holder's election to exclude all of such Holder's Registrable
Securities from such Registration Statement.
c. Each Holder agrees that, upon receipt of any 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 Holder will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or the first
sentence of 3(e).
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and commissions
and fees of the Holder's counsel other than as set forth in the Investment
Agreement, incurred in connection with registrations, 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 shall be paid by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and hereby
does, indemnify, hold harmless and defend each Holder who holds such Registrable
Securities, the directors, officers, partners, employees, agents,
representatives of, and each Person, if any, who controls, any Holder 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 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 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 Holders 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 occurs in
reliance upon and in conformity with information furnished in writing 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, if such prospectus were timely made available by the Company
pursuant to Section 3(c); (ii) shall not be available to the extent such Claim
is based on (a) a failure of the Holder 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 Holder; (iv) any
omission of the Holder to notify the Company of any material fact that should be
stated in the Registration Statement or prospectus relating to the Holder or the
manner of sale; or (v) 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 resale of the Registrable
Securities by the Holders pursuant to the Registration Statement.
b. In connection with any Registration Statement in which a Holder is
participating, each such Holder 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 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 occurs in
reliance upon and in conformity with written information furnished to the
Company by such Holder expressly for use in connection with such Registration
Statement; and, subject to Section 6(c), such Holder 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
Holder, which consent shall not be unreasonably withheld; provided, further,
however, that the Holder 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 Holder 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 Holders
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 indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The indemnifying
party shall pay for only one separate legal counsel for the Indemnified Persons
or the Indemnified Parties, as applicable, and such counsel shall be selected by
the Holders, if the Holders 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 indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or Indemnified Damages are incurred.
e. The indemnity agreements contained herein shall be in addition to (i) any
cause of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that: (i) no
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 0000 Xxx) 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.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Holders 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 Holders 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 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.
9. NO ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall not be assignable.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended only with the written consent
of the Company and Holders. No such amendment shall be effective to the extent
that it applies to less than all of the Holders of the Registrable Securities.
11. MISCELLANEOUS.
a. A Person is deemed to be a Holder of Registrable Securities whenever
such Person owns of record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more Persons with
respect to the same Registrable Securities, the Company shall act upon the basis
of instructions, notice or election received from the registered owner of such
Registrable Securities.
b. Any notices 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 confirmation of transmission is mechanically
or electronically generated and kept on file by the sending party); or (iii) 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:
FTS Apparel, Inc.
0000 Xxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx, CEO
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
And
Xxxxx Xxxxxxx, Esq.
0000 X. Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Investor:
At the address listed in the Questionnaire.
With a copy to:
Xxxxxx X. XxXxxxx, Esq.
00 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxx, XX 00000
Telephone No.: 000-000-0000
Telecopier No.: 000-000-0000
Each party shall provide five (5) business days prior notice to the other
party of any change in address, phone number or facsimile number.
c. Failure of any party to exercise any right or remedy under this Agreement
or otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.
d. The laws of the State of Colorado 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 non-exclusive jurisdiction of the
state and federal courts sitting in the City of New York, borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. 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 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.
f. 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.
g. 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.
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.
k. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent and no rules of strict
construction will be applied against any party.
IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to be duly executed as of the day and year first above written.
FTS APPAREL, INC.
/s/ Xxxxx Xxxxxxxxx
By: ____________________________________
Name: Xxxxx Xxxxxxxxx
Title: CEO
DUTCHESS PRIVATE EQUITIES FUND, L.P.
BY ITS GENERAL PARTNER DUTCHESS
CAPITAL MANAGEMENT, LLC
/s/ Xxxxxxx X. Xxxxxxxx
By: ____________________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: A Managing Member
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
Date: __________
[TRANSFER AGENT]
Re: FTS Apparel, Inc.
Ladies and Gentlemen:
We are counsel to FTS Apparel, Inc., a Colorado corporation (the
"Company"), and have represented the Company in connection with that certain
Investment Agreement (the "Investment Agreement") entered into by and among the
Company and _________________________ (the "Investor") pursuant to which the
Company has agreed to issue to the Investor shares of the Company's common
stock, $.001 par value per share (the "Common Stock") on the terms and
conditions set forth in the Investment Agreement. Pursuant to the Investment
Agreement, the Company also has entered into a Registration Rights Agreement
with the Investor (the "Registration Rights Agreement") pursuant to which the
Company agreed, among other things, to register the Registrable Securities (as
defined in the Registration Rights Agreement), including the shares of Common
Stock issued or issuable under the Investment Agreement, under the Securities
Act of 1933, as amended (the "1933 Act"). In connection with the Company's
obligations under the Registration Rights Agreement, on ____________ ___, 2002,
the Company filed a Registration Statement on Form S- ___ (File No.
333-________) (the "Registration Statement") with the Securities and Exchange
Commission (the "SEC") relating to the Registrable Securities which names the
Investor as a selling shareholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [enter the time of
effectiveness] on [enter the date of effectiveness] and to the best of our
knowledge, , no stop order suspending its effectiveness has been issued and no
proceedings for that purpose are pending before, or threatened by, the SEC and
the Registrable Securities are available for resale under the 1933 Act pursuant
to the Registration Statement.
Very truly yours,
[Company Counsel]
By: ____________________
cc: [Investor]
