EXHIBIT 10.16
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of August 19, 2003, among QT 5, Inc., a Delaware corporation
(the "COMPANY"), and the purchasers signatory hereto (each such purchaser is a
"PURCHASER" and all such purchasers are, collectively, the "PURCHASERS").
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"PURCHASE AGREEMENT").
The Company and the Purchasers hereby agree as follows:
1. DEFINITIONS
CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED HEREIN THAT ARE
DEFINED IN THE PURCHASE AGREEMENT SHALL HAVE THE MEANINGS GIVEN SUCH TERMS IN
THE PURCHASE AGREEMENT. As used in this Agreement, the following terms shall
have the following meanings:
"EFFECTIVENESS DATE" means the 150th calendar day
following the First Closing Date and, with respect to any additional
Registration Statements which may be required pursuant to Section 3(c),
the 90th calendar day following the date on which the Company first
knows, or reasonably should have known, that such additional
Registration Statement is required hereunder; PROVIDED, HOWEVER, in the
event the Company is notified by the Commission that one of the above
Registration Statements will not be reviewed or is no longer subject to
further review and comments, the Effectiveness Date as to such
Registration Statement shall be the fifth Trading Day following the
date on which the Company is so notified if such date precedes the
dates required above.
"EFFECTIVENESS PERIOD" shall have the meaning set forth
in Section 2(a).
"FILING DATE" means the 30th day following the First
Closing Date and, with respect to any additional Registration
Statements which may be required pursuant to Section 3(c), the 15th day
following the date on which the Company first knows, or reasonably
should have known that such additional Registration Statement is
required hereunder.
"HOLDER" or "HOLDERS" means the holder or holders, as the
case may be, from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in
Section 5(c) hereof.
"INDEMNIFYING PARTY" shall have the meaning set forth in
Section 5(c) hereof.
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"LOSSES" shall have the meaning set forth in Section 5(a).
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in a
Registration Statement (including, without limitation, a prospectus
that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of
the offering of any portion of the Registrable Securities covered by a
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"REGISTRABLE SECURITIES" means all of the shares of Common
Stock issuable upon conversion in full of the Debentures, all shares
issuable as interest on the Debentures assuming all interest payments
are made in shares of Common Stock and the Debentures are held for
[three] years or maturity, if earlier, exercise in full of the
Warrants, shares issuable in lieu of the payment of liquidated damages,
together with any securities issued or issuable upon any stock split,
dividend or other distribution recapitalization or similar event with
respect to the foregoing or in connection with any anti-dilution
provisions in the Debentures.
"REGISTRATION STATEMENT" means the registration
statements required to be filed hereunder and any additional
registration statements contemplated by Section 3(c), including (in
each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by
reference or deemed to be incorporated by reference in such
registration statement.
"RULE 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same purpose and effect as such
Rule.
"RULE 424" means Rule 424 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same purpose and effect as such
Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
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"WARRANTS" shall mean the Common Stock purchase warrants
issued to the Purchasers pursuant to the Purchase Agreement.
"WARRANT SHARES" shall mean the shares of Common Stock
issuable upon exercise of the Warrants.
2. SHELF REGISTRATION
(a) On or prior to each Filing Date, the Company shall prepare
and file with the Commission a "Shelf" Registration Statement covering the
resale of 130% of the Registrable Securities on such Filing Date for an offering
to be made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form S-3 (unless the Company is not then eligible to
register for resale the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith) and
shall contain (unless otherwise directed by the Holders) substantially the "Plan
of Distribution" attached hereto as ANNEX A. Subject to the terms of this
Agreement, the Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the applicable
Effectiveness Date, and shall use its best efforts to keep such Registration
Statement continuously effective under the Securities Act until the date which
is two years after the date that such Registration Statement is declared
effective by the Commission or such earlier date when all Registrable Securities
covered by such Registration Statement have been sold or may be sold without
volume restrictions pursuant to Rule 144(k) as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent and the affected Holders (the
"EFFECTIVENESS PERIOD"). The Company shall immediately notify the Holders via
facsimile of the effectiveness of the Registration Statement on the same day
that the Company receives notification of the effectiveness from the Commission.
(b) If: (i) a Registration Statement is not filed on or prior to
its Filing Date (if the Company files a Registration Statement without affording
the Holders the opportunity to review and comment on the same as required by
Section 3(a), the Company shall not be deemed to have satisfied clause (i)), or
(ii) the Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act, within five
Trading Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not
be "reviewed," or not subject to further review, or (iii) prior to its
Effectiveness Date, the Company fails to file a pre-effective amendment and
otherwise respond in writing to comments made by the Commission in respect of
such Registration Statement within 10 Trading Days after the receipt of comments
by or notice from the Commission that such amendment is required in order for a
Registration Statement to be declared effective, or (iv) a Registration
Statement filed or required to be filed hereunder is not declared effective by
the Commission by its Effectiveness Date, or (v) after the Effectiveness Date, a
Registration Statement ceases for any reason to remain continuously effective as
to all Registrable Securities for which it is required to be effective, or the
Holders are not permitted to utilize the Prospectus therein to resell such
Registrable Securities for 15 consecutive Trading Days or in any individual case
an aggregate of 25 Trading Days during any 12 month period (which need not be
consecutive Trading Days) (any such failure or breach being referred to as an
"EVENT", and for purposes of clause (i) or (iv) the date on which such Event
occurs, or for purposes of clause (ii) the date on which such five Trading Day
period is exceeded, or for purposes of clause (iii) the date which such 10
Trading Day period is exceeded, or for purposes of clause (v) the date on which
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such 15 or 25 Trading Day period, as applicable, is exceeded being referred to
as "EVENT DATE"), then, on each such Event Date and every monthly anniversary
thereof until the applicable Event is cured, the Company shall pay to each
Holder an amount in cash, as liquidated damages and not as a penalty, equal to
2.0% per month, pro rata on a daily basis, of (i) the Subscription Amount paid
by such Holder pursuant to the Purchase Agreement for Debentures then held by
such Holder, and (ii) if the Warrants are "in the money" and then held by the
Holder, the value of any outstanding Warrants (valued at the difference between
the average of the Closing Prices during the applicable month and the Exercise
Price multiplied by the number of shares of Common Stock the Warrants are
exercisable into). If the Company fails to pay any liquidated damages pursuant
to this Section in full within seven days after the date payable, the Company
will pay interest thereon at a rate of 18% per annum (or such lesser maximum
amount that is permitted to be paid by applicable law) to the Holder, accruing
daily from the date such liquidated damages are due until such amounts, plus all
such interest thereon, are paid in full. The liquidated damages pursuant to the
terms hereof shall apply on a pro-rata basis for any portion of a month prior to
the cure of an Event.
3. REGISTRATION PROCEDURES
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Not less than five Trading Days prior to the filing of each
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall, (i) furnish to each
Holder copies of all such documents proposed to be filed, which documents (other
than those incorporated or deemed to be incorporated by reference) will be
subject to the review of such Holders, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of respective
counsel to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement or any
such Prospectus or any amendments or supplements thereto to which the Holders of
a majority of the Registrable Securities shall reasonably and in good faith
object, provided, the Company is notified of such objection in writing no later
than 3 Trading Days after the Holders have been so furnished copies of such
documents.
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(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to a Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep a
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement
(subject to the terms of this Agreement), and as so supplemented or amended to
be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible,
and in any event within 10 Trading Days, to any comments received from the
Commission with respect to a Registration Statement or any amendment thereto and
as promptly as reasonably possible provide the Holders true and complete copies
of all correspondence from and to the Commission relating to a Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by a Registration Statement during the applicable
period in accordance (subject to the terms of this Agreement) with the intended
methods of disposition by the Holders thereof set forth in such Registration
Statement as so amended or in such Prospectus as so supplemented.
(c) If during the Effectiveness Period, the number of Registrable
Securities at any time exceeds 90% of the number of shares of Common Stock then
registered in a Registration Statement, then the Company shall file as soon as
reasonably practicable but in any case prior to the applicable Filing Date, an
additional Registration Statement covering the resale by the Holders of not less
than 125% of the number of such Registrable Securities.
(d) Notify the Holders of Registrable Securities to be sold
(which notice shall, pursuant to clauses (ii) through (vi) hereof, shall be
accompanied by an instruction to suspend the use of the Prospectus until the
requisite changes have been made) as promptly as reasonably possible (and, in
the case of (i)(A) below, not less than five Trading Days prior to such filing)
and (if requested by any such Person) confirm such notice in writing no later
than one Trading Day following the day (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to a Registration Statement is
proposed to be filed; (B) when the Commission notifies the Company whether there
will be a "review" of such Registration Statement and whenever the Commission
comments in writing on such Registration Statement (the Company shall provide
true and complete copies thereof and all written responses thereto to each of
the Holders); and (C) with respect to a Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to a Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of a Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; (v) of the occurrence of any
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event or passage of time that makes the financial statements included in a
Registration Statement ineligible for inclusion therein or any statement made in
a Registration Statement or Prospectus or any document incorporated or deemed to
be incorporated therein by reference untrue in any material respect or that
requires any revisions to a Registration Statement, Prospectus or other
documents so that, in the case of a Registration Statement or the Prospectus, as
the case may be, it will not contain any untrue statement of a material fact or
omit to state any 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 (vi) the occurrence or existence of any pending
corporate development with respect to the Company that the Company believes may
be material and that, in the determination of the Company, makes it not in the
best interests of the Company to allow continued availability or the
Registration Statement or Prospectus; provided that any and all of such
information shall remain confidential to each Holder until such information
otherwise becomes public, unless disclosure by a Holder is required by law;
PROVIDED, FURTHER, notwithstanding each Holder's agreement to keep such
information confidential, the Holders make no acknowledgement that any such
information is material, non-public information.
(e) Promptly deliver to each Holder, without charge, as many
copies of the Prospectus or Prospectuses (including each form of prospectus) and
each amendment or supplement thereto as such Persons may reasonably request.
Subject to the terms of this Agreement, the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement thereto.
(f) Use commercially reasonable efforts to register or qualify
the resale of such Registrable Securities as required under applicable
securities or Blue Sky laws of each State within the United States as any Holder
requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period; provided, that
the Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(g) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by the Purchase Agreement,
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any such Holders may request.
(h) Upon the occurrence of any event contemplated by this Section
3, as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to a Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
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that, as thereafter delivered, neither a Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If the Company notifies the Holders in accordance with clauses
(ii) through (vi) of Section 3(d) above to suspend the use of the use of any
Prospectus until the requisite changes to such Prospectus have been made, or the
Company otherwise notifies the Holders of its election to suspend the
availability of a Registration Statement and Prospectus pursuant to clause (vi)
of Section 3(d), then the Holders shall suspend use of such Prospectus. The
Company will use its best efforts to ensure that the use of the Prospectus may
be resumed as promptly as is practicable, except that in the case of suspension
of the availability of a Registration Statement and Prospectus pursuant to
clause (vi) of Section 3(d), the Company shall not be required to take such
action until such time as it shall determine that the continued availability of
the Registration Statement and Prospectus is no longer not in the best interests
of the Company.
(i) Comply with all applicable rules and regulations of the
Commission.
(j) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(k) The Company may require, at any time prior to the third
Trading Day prior to the Filing Date, each Holder to furnish to the Company a
statement as to the number of shares of Common Stock beneficially owned by such
Holder and, if requested by the Commission, the controlling person thereof,
within three Trading days of the Company's request. During any periods that the
Company is unable to meet its obligations hereunder with respect to the
registration of the Registrable Securities solely because any Holder fails to
furnish such information within three Trading Days of the Company's request, any
liquidated damages that are accruing at such time shall be tolled and any Event
that may otherwise occur solely because of such delay shall be suspended, until
such information is delivered to the Company.
4. REGISTRATION EXPENSES. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Principal Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as requested by the Holders), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
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Registrable Securities and of printing prospectuses requested by the Holders),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, and (v) fees and expenses of all other Persons retained
by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Holders.
5. INDEMNIFICATION
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and reasonable attorneys' fees) and expenses
(collectively, "LOSSES"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in a Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (1) such untrue statements or omissions or alleged
untrue statements or omissions are based upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein, or
to the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in a Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (2) in the case of an occurrence of an event of the type
specified in Section 3(d)(ii)-(vi), the use by such Holder of an outdated or
defective Prospectus after the Company has notified such Holder in writing that
the Prospectus is outdated or defective and prior to the receipt by such Holder
of the Advice contemplated in Section 6(e). The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding arising from
or in connection with the transactions contemplated by this Agreement of which
the Company is aware.
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(b) Indemnification by Holders. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising out of or based upon any untrue statement of a
material fact contained in any Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising solely
out of or based solely upon: (i) such Holder's failure to comply with the
prospectus delivery requirements of the Securities Act or (ii) any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (1) such untrue statements or
omissions are based upon information regarding such Holder furnished in writing
to the Company by such Holder expressly for use therein, or to the extent such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
or (2) in the case of an occurrence of an event of the type specified in Section
3(d)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(e). In no event shall the liability of any selling
Holder hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "INDEMNIFIED PArty"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that such failure shall have
prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
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reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a material conflict of
interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense thereof and the expense of
one such counsel for each Holder shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any settlement of any
such Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.
Subject to the terms of this Agreement, all fees and expenses of
the Indemnified Party (including reasonable fees and expenses to the extent
incurred in connection with investigating or preparing to defend such Proceeding
in a manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten Trading Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
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The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6. MISCELLANEOUS
(a) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and all of the Holders of the then outstanding Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of all of the Registrable Securities to which
such waiver or consent relates; PROVIDED, HOWEVER, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(b) No Inconsistent Agreements. Neither the Company nor any of
its subsidiaries has entered, as of the date hereof, nor shall the Company or
any of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof. Except as set forth on Schedule 6(b),
neither the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person that have not been satisfied in full.
(c) No Piggyback on Registrations. Except as set forth on
Schedule 6(c) attached hereto, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
11
(d) Compliance. Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
(e) Discontinued Disposition. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice from
the Company of the occurrence of any event of the kind described in Sections
3(d)(ii), (iii) or (vi), such Holder will forthwith discontinue disposition of
such Registrable Securities under a Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(h), or until it is advised in writing (the
"ADVICE") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph. The Company
agrees and acknowledges that any periods during which the Holder is required to
discontinue the disposition of the Registrable Securities hereunder shall be
subject to the provisions of Section 2(b).
(f) Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity 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, then the Company shall send to each Holder written notice of such
determination and, if within fifteen days after receipt of such notice, any such
Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered; provided, that, the Company shall not be
required to register any Registrable Securities pursuant to this Section 6(f)
that are eligible for resale pursuant to Rule 144(k) promulgated under the
Securities Act or that are the subject of a then effective Registration
Statement.
(g) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be delivered as
set forth in the Purchase Agreement.
(h) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
all of the Holders of the then-outstanding Registrable Securities. Each Holder
may assign their respective rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.
12
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(j) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is 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 in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of this Agreement, then the
prevailing party in such Proceeding shall be reimbursed by the other party for
its attorneys fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding.
(k) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
13
(n) Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of any other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.
********************
14
IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.
QT 5, INC.
By: ______________________________________
Name:
Title:
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
15
[SIGNATURE PAGE OF HOLDERS TO RRA]
PALISADES MASTER FUND, L.P.
By: PEF ADVISORS, LLC, its authorized agent
By: _____________________________________
Name:
Title:
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
16
[SIGNATURE PAGE OF HOLDERS TO RRA]
CRESCENT INTERNATIONAL LTD.
By: ____________________________
Name:
Title:
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
17
[SIGNATURE PAGE OF HOLDERS TO RRA]
ALPHA CAPITAL AG
By: _____________________________________
Name:
Title:
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
18
[PURCHASER'S SIGNATURE PAGE TO RRA]
BRISTOL INVESTMENT FUND, LTD.
By: ___________________________
Name:
Title:
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
19
[SIGNATURE PAGE OF HOLDERS TO RRA]
▇▇▇▇▇ INTERNAIONAL LTD
By: __________________________
Name:
Title:
ZENNY TRADING LIMITED
By: ____________________________
Name:
Title:
20
PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o broker-dealers may agree with the selling stockholders to sell
a specified number of such shares at a stipulated price per
share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus. Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
selling stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.
The selling stockholder may from time to time pledge or grant a
security interest in some or all of the Shares or common stock or Warrant owned
by them and, if they default in the performance of their secured obligations,
the pledgees or secured parties may offer and sell the shares of common stock
from time to time under this prospectus, or under an amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities
Act of 1933 amending the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this
prospectus.
21
The selling stockholders also may transfer the shares of common stock
in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The selling stockholders have
informed the Company that none of them have any agreement or understanding,
directly or indirectly, with any person to distribute the common stock.
The Company is required to pay all fees and expenses incurred by the
Company incident to the registration of the shares. The Company has agreed to
indemnify the selling stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
22
SCHEDULE 6(B)
23
SCHEDULE 6(C)
24