Exhibit 4.3
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of July __,
2007, by and among Enthrust Financial Services, Inc, a Delaware corporation.
(the "COMPANY"), and the undersigned persons executing this Agreement (each a
"HOLDER" and collectively, the "HOLDERS").
1. DEFINITIONS.
a. In addition to any other defined terms set forth herein,
when used in this Agreement, the following terms shall have the following
meanings:
(i) "COMMON STOCK" means the Company's common stock,
par value $.001 per share.
(ii) "EXCHANGE AGREEMENT" means the Exchange
Agreement dated July__, 2007 between the Holders and the Company.
(ii) "HOLDERS" means the persons and/or entities that
acquired Common Stock and/or Warrants pursuant the Exchange Agreement.
(iv) "REGISTER," "REGISTERED," and "REGISTRATION"
refer to a registration effected by preparing and filing a Registration
Statement or 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 by the United States Securities and Exchange
Commission (the "SEC").
(v) "REGISTRABLE SECURITIES" means the Common Stock
and the Common Stock underlying the Warrants.
(vi) "REGISTRATION STATEMENT" means a registration
statement of the Company under the 1933 Act.
(vii) "RESALE REGISTRATION STATEMENT" means a
Registration Statement covering the resale of all, or any portion of, the
Registrable Securities.
(viii) "WARRANTS" means the Warrants issued to the
Holders pursuant to the Exchange Agreement.
b. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Exchange Agreement
and the Warrants.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall prepare, and,
on or prior to [THE 90TH DAY FOLLOWING THE DATE OF THE EXCHANGE AGREEMENT] (the
"FILING DATE"), file with the SEC a Resale Registration Statement, which Resale
Registration Statement, to the extent allowable under the 1933 Act and the rules
and regulations promulgated thereunder (including
Rule 416), shall state that it also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon exercise of any of
the Registerable Securities to prevent dilution resulting from stock splits,
stock dividends or similar transactions. The Registration Statement shall
contain the "PLAN OF DISTRIBUTION" sections in substantially the form attached
hereto as EXHIBIT A; PROVIDED, HOWEVER, that "Plan of Distribution" sections
shall be amended as necessary to comply with then applicable securities law and
regulation.
b. PAYMENTS BY THE COMPANY. The Company shall use its
reasonable best efforts to obtain effectiveness of the Resale Registration
Statement as soon as practicable, but in no event later than the 180th day
following the Filing Date (the "REQUIRED EFFECTIVENESS DATE"), and after
obtaining such effectiveness to keep the Resale Registration Statement effective
pursuant to Rule 415 until the earlier of (i) the date on which all of the
Registerable Securities have been sold and (ii) the date on which all the
Registerable Securities are saleable under Rule 144(k) promulgated under the
1933 Act (the "REGISTRATION PERIOD"). If the Resale Registration Statement is
(i) not filed by the Filing Date, or (ii) not continually effective throughout
the Registration Period (except for an Allowed Delay (as defined below)), then,
except as otherwise provided herein, the Company will make payments to the
Holders in such amounts and at such times as shall be determined pursuant to
this Section 2(b) as partial relief for the damages to the Holders by reason of
any such delay in their ability to sell the Registrable Securities (which remedy
shall be exclusive of any other remedies available at law or in equity). The
Company shall pay to each Holder an amount equal to two (2%) percent per month
of the amount set forth next to such Holders name on EXHIBIT B to the Exchange
Agreement (which amount is equal to the principal amount of the debenture issued
by ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Holdings, LLC to such Holder which such Holder exchanged for
shares of Common Stock pursuant to the Exchange Agreement) (the "DEBENTURE
PURCHASE AMOUNT"), multiplied by the number of months (prorated for partial
months) after the Filing Date and prior to the date on which a Resale
Registration Statement is filed with the SEC; PROVIDED, HOWEVER, that there
shall be excluded from such period any delays which are solely attributable to
changes required by the Holders in the Resale Registration Statement with
respect to information relating to the Holders, including, without limitation,
changes to the plan of distribution, or to the failure of the Holders to conduct
their review of the Registration Statement pursuant to Section 3(g) below within
five (5) days of receipt thereof. In addition, the Company shall pay to each
Holder an amount equal to two (2%) percent per month of the Debenture Purchase
Amount multiplied by the number of months (prorated for partial months) that the
Resale Registration Statement is not effective during the Registration Period
(except for an Allowed Delay). Notwithstanding anything herein to the contrary,
in no event shall the aggregate amount of the payments due under this Section
2(b) payable to any Investor exceed, in the aggregate, ten (10%) percent of the
Debenture Purchase Amount. Any payments due pursuant to this Section 2(b) shall
be paid by the Company in cash.
c. PIGGYBACK RIGHTS.
(i) If, at any time during the Registration Period, the Company
shall determine to register any of its securities either for its own account or
for the account of a security holder or holders exercising their respective
demand registration rights (other than pursuant to this Agreement) or for any
other Affiliate of the Company, other than (i) a registration relating solely to
employee benefit plans, or (ii) a registration relating solely to a Rule 145 (or
its successor rule under the Securities Act) transaction, or (iii) a
registration on any registration form that does not permit secondary sales (such
as Form S-4 or S-8) the Company will:
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(a) at least five (5) business days prior to filing any such
registration statement under the 1933 Act, give to each
Holder written notice thereof; and
(b) use its best reasonable efforts to include in such
registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities
specified in a written request or requests, made by any
Holder and received by the Company within five (5) days
after the written notice from the Company described in
clause (A) above is mailed or delivered by the Company.
Such written request may specify all or a part of a
Holder's Registrable Securities. Piggyback registration
rights shall be afforded to such Holders in accordance
with the priorities set forth in Section 2(c)(iv)
hereof.
(ii) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
2(c)(i). In such event, the right of any Holder to registration pursuant to this
Section 2(c) shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the other holders of securities of the Company with registration rights to
participate therein distributing their securities through such underwriting)
enter into an underwriting agreement in customary form for offerings of the type
proposed with the representative of the underwriter or underwriters selected by
the Company.
(iii) Notwithstanding any other provision of this Section 2(c), if the
managing underwriter(s) advises the Company in writing that marketing factors
require a limitation on the number of Shares to be underwritten, the managing
underwriter(s) may limit the number of Registrable Securities to be included in
the registration and underwriting in accordance with Section 2(c)(iv) hereof;
PROVIDED, HOWEVER, that to the extent the Company proposed the underwriting, the
Company shall have first priority to have all of its securities included in such
underwriting without cutback and the rest of the underwriting shall be allocated
pro rata among the selling shareholders (including the Holders); PROVIDED,
FURTHER, to the extent any selling stockholder (including any Holder) demanded
the underwriting, all selling stockholders shall have first priority to have all
of their securities included in such underwriting (pro rata) without cutback,
then all securities to be registered by the Company. If any Holder does not
agree to the terms of any such underwriting, such Holder shall be excluded
therefrom by written notice from the Company or the underwriter. Any Registrable
Securities or other securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration. If securities are so withdrawn from
the registration and if the number of shares of Registrable Securities to be
included in such registration was previously reduced as a result of marketing
factors, the Company shall then offer to all persons who have retained the right
to include securities in the registration the right to include additional
securities in the registration in an aggregate amount equal to the number of
shares so withdrawn, with such shares to be allocated among the persons
requesting additional inclusion in accordance with Section 2(c)(iv) hereof.
(iv) In any circumstance in which all of the Registrable Securities
and other securities of the Company with registration rights (the "Other
Shares") requested to be included in a registration on behalf of the Holders or
other selling shareholders cannot be so included due to
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marketing factors or other reasons, the following rules of priority shall apply:
(a) the Company may limit, to the extent so advised by the managing
underwriter(s), the amount of securities (including Registrable Securities) to
be included in the registration by the Company's shareholders (including the
Holders), or may exclude, to the extent so advised by the underwriter(s), such
underwritten securities entirely from the registration. The Company shall so
advise all holders of securities requesting registration, and, subject to the
preceding sentence, the number of shares of securities that are entitled to be
included in the registration and underwriting shall be allocated first to the
Company for securities being sold for its own account and thereafter to the
holders of Registrable Securities and Other Shares electing to include shares in
the registration on a pro rata basis. If any Holder or other selling shareholder
does not request inclusion of the maximum number of shares of Registrable
Securities and Other Shares allocated to him pursuant to the above-described
procedure, the remaining portion of such person's allocation shall be
reallocated among those requesting Holders and other selling shareholders whose
allocations did not satisfy their requests pro rata on the basis of the number
of shares of Registrable Securities and Other Shares which would be held by such
Holders and other selling shareholders, assuming conversion, and this procedure
shall be repeated until all of the shares of Registrable Securities and Other
Shares which may be included in the registration on behalf of the Holders and
other selling shareholders have been so allocated. The Company shall not limit
the number of Registrable Securities to be included in a registration pursuant
to this Agreement in order to include Shares held by shareholders with no
registration rights or to include any Shares issued to employees, officers,
directors, or consultants pursuant to any of the Company's employee stock option
plans.
d. SUBSTITUTE REGISTRATION. If the Resale Registration Statement to
be filed by the Company as provided in Section 2(a) shall be filed on Form S-1,
then the Company may, when it is so eligible, file a Resale Registration
Statement on Form S-3, or such other "short form" as may then be available (the
"Short Form Registration"), covering all of the remaining Registrable Shares
covered by such Form S-1 and upon the effectiveness of the Short Form
Registration, the Company may withdraw such Form S-1.
e. RULE 415 CUT-BACKS. If the SEC does not declare the Registration
Statement effective on or before the Required Effectiveness Date, or (b), if the
SEC allows the Registration Statement to be declared effective at any time
before or after the Required Effectiveness Date, subject to the withdrawal of
certain Registrable Securities from the Registration Statement, and the reason
for (a) or (b) is the SEC's determination that (x) the offering of any of the
Registrable Securities constitutes a primary offering of securities by the
Company, (y) Rule 415 may not be relied upon for the registration of any or all
of the Registrable Securities, and/or (z) a Holder of any Registrable Securities
must be named as an underwriter, the Holders understand and agree that the
Company may reduce, on a PRO RATA basis, the total number of Registrable
Securities to be registered on behalf of each such Holder, and the failure to
include such Registrable Securities in any Registration Statement shall not
obligate the Company to pay any partial liquidated damages as described above.
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3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the
SEC not later than the Filing Date, a Resale Registration Statement with respect
to the number of Registrable Securities provided in Section 2(a), and thereafter
use its best efforts to cause such Resale Registration Statement relating to
Registrable Securities to become effective as soon as possible after such
filing, and keep the Resale Registration Statement effective pursuant to Rule
415 until the earlier of (i) the date on which all of the Registerable
Securities have been sold and (ii) the date on which all the Registerable
Securities are saleable under Rule 144(k) promulgated under the 1933 Act (the
"REGISTRATION PERIOD"), which Resale 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 not
misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the Resale
Registration Statement and the prospectus used in connection with the Resale
Registration Statement as may be necessary to keep the Resale Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities.
c. The Company shall furnish the Holders (i) promptly (but
in no event more than five (5) business days) after the same is prepared and
publicly distributed, filed with the SEC, or received by the Company, one copy
of the Resale Registration Statement and any amendment thereto and each
preliminary prospectus and prospectus and each amendment or supplement thereto,
and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents
as the Holders may reasonably request in order to facilitate the disposition of
the Registrable Securities. The Company will immediately notify each Holder by
facsimile of the effectiveness of the Resale Registration Statement or any
post-effective amendment. The Company will promptly respond to any and all
comments received from the SEC, with a view towards causing the Resale
Registration Statement or any amendment thereto to be declared effective by the
SEC as soon as practicable, shall promptly file an acceleration request as soon
as practicable (but in no event more than three (3) business days) following the
resolution or clearance of all SEC comments or, if applicable, following
notification by the SEC that the Resale Registration Statement or any amendment
thereto will not be subject to review and shall promptly file with the SEC a
final prospectus as soon as practicable (but in no event more than two (2)
business days) following receipt by the Company from the SEC of an order
declaring the Resale Registration Statement effective. In the event of a breach
by the Company of the provisions of this Section 3(c), the Company will be
required to make payments pursuant to Section 2(b) hereof.
d. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities under such other securities or "blue sky"
laws of such jurisdictions in the United States as the Holders who hold a
majority in interest of the Registrable Securities being offered reasonably
request, (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
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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 (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
cause the Company undue expense or burden, or (e) make any change in its charter
or bylaws, which in each case the Board of Directors of the Company determines
to be contrary to the best interests of the Company and its stockholders.
e. As promptly as practicable after becoming aware of such
event, the Company shall notify each Holder of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
the Resale Registration Statement and/or the Derivative 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 not misleading, and use its best efforts promptly to prepare
a supplement or amendment to the Resale Registration Statement the to correct
such untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Holder as such Holder may reasonably request;
provided that, for not more than sixty (60) consecutive trading days (or a total
of not more than one hundred and twenty (120) trading days in any twelve (12)
month period, the Company may delay the disclosure of material non-public
information concerning the Company the disclosure of which at the time is not,
in the good faith opinion of the Company, in the best interests of the Company
(an "ALLOWED DELAY"); provided, further, that the Company shall promptly (i)
notify the Holders in writing of the existence of (but in no event, without the
prior written consent of the Holders, shall the Company disclose to such Holders
any of the facts or circumstances regarding) material non-public information
giving rise to an Allowed Delay and (ii) advise the Holders in writing to cease
all sales under the Resale Registration Statement until the end of the Allowed
Delay. Upon expiration of the Allowed Delay, the Company shall again be bound by
the first sentence of this Section 3(e) with respect to the information giving
rise thereto.
f. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of the Resale
Registration Statement and/or the Derivative Registration Statement, and, if
such an order is issued, to obtain the withdrawal of such order at the earliest
possible moment and to notify each Holder who holds Registrable Securities being
sold (or, in the event of an underwritten offering, the managing underwriters)
of the issuance of such order and the resolution thereof.
g. The Company shall permit a single firm or counsel
designated by the Holders to review the Resale Registration Statement and all
amendments and supplements thereto a reasonable period of time prior to their
filing with the SEC, and not file any document in a form to which such counsel
reasonably objects. The sections of the Resale Registration Statement covering
information with respect to the Holders, the Holder's beneficial ownership of
securities of the Company or the Holders intended method of disposition of
Registrable Securities shall conform to the information provided to the Company
by each of the Holders.
h. The Company shall hold in confidence and not make any
disclosure of information concerning any Holders 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
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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 order from a court or governmental body of
competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The 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
notice to such Buyer prior to making such disclosure, and allow the Holder, at
its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.
i. The Company shall cause all the Registrable Securities
covered by the Resale Registration Statement to be listed on each national
securities exchange or Nasdaq trading market 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 market, as the case may be.
j. The Company shall provide a transfer agent and
registrar, which may be a single entity, for the Registrable Securities not
later than the effective date of the Resale Registration Statement.
k. The Company shall cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be offered pursuant to the Resale Registration
Statement and enable such certificates to be in such denominations or amounts,
as the case may be, or the Holders may reasonably request and registered in such
names as the Holders may request, and, within three (3) business days after the
Resale Registration Statement is effective, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Holders whose Registrable
Securities are included in such Registration Statement) an instruction and an
opinion of such counsel.
l. At the request of the holders of a majority-in-interest
of the Registrable Securities, the Company shall prepare and file with the SEC
such amendments (including post-effective amendments) and supplements to the
Resale Registration Statement and any prospectus used in connection with the
Resale Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Resale Registration Statement.
4. OBLIGATIONS OF THE HOLDERS.
In connection with the registration of the Registrable Securities, the
Holders shall have the following obligations:
a. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Holder that such Holder shall
furnish to the Company, in writing, such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. At
least ten (10) business days prior to the first anticipated filing date of the
Resale Registration Statement, the Company shall notify each Holder of the
information the Company requires from each such Holder.
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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 the
Resale 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 the Resale Registration Statements.
c. In the event Holders holding a majority-in-interest of
the Registrable Securities determine to engage the services of an underwriter,
each Holder agrees to enter into and perform such Holder's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Holder has notified the Company in writing
of such Holder's election to exclude all of such Holder's Registrable Securities
from the Resale Registration Statement.
d. 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(e)
or 3(f), such Holders will immediately discontinue disposition of Registrable
Securities pursuant to the Resale Registration Statement until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3(e) or 3(f) and, if so directed by the Company, such Holder shall
deliver to the Company (at the expense of the Company) or destroy (and deliver
to the Company a certificate of destruction) all copies in such Holder's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice.
e. The Company shall provide a CUSIP number for all
Registrable Securities and provide and cause to be maintained a transfer agent
and registrar for all such Registrable Securities covered by such Resale
Registration Statement not later than the effectiveness of such Resale
Registration Statement.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, all SEC, stock exchange, NASD
and other registration, listing and filing fees, all fees and expenses incurred
in connection with compliance with state securities or blue sky laws and
compliance with the rules of any stock exchange (including fees and
disbursements of counsel in connection with such compliance and the preparation
of a blue sky memorandum and legal investment survey), the fees and
disbursements of counsel for the Company, in connection with an underwritten
offering only, the fees and disbursements of all independent public accountants
(including the expenses of any audit and/or "cold comfort" letters) and the fees
and expenses of other Persons, including experts, retained by the Company and,
in connection with an underwritten offering only, the expenses incurred in
connection with making road show presentations and holding meetings with
potential investors to facilitate the distribution and sale of Registrable
Securities which are customarily borne by the issuer and the reasonable fees and
disbursements of one counsel selected by the Holders pursuant to Sections 2(b)
and 3(g) hereof shall be borne by the Company provided, however, the fees of
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such counsel shall not exceed $10,000 for each Resale Registration Statement
filed by the Company pursuant to terms hereof.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in the Resale
Registration Statement under this Agreement:
a. To the extent permitted by law, the Company will
indemnify, hold harmless and defend (i) each Holder who holds such Registrable
Securities, (ii) the directors, officers, partners, employees, agents and each
person who controls any Holder within the meaning of the 1933 Act or the
Securities Exchange Act of 1934, as amended (the "1934 ACT"), if any, (iii) any
underwriter (as defined in the ▇▇▇▇ ▇▇▇) for the Holder, and (iv) the directors,
officers, partners, employees and each person who controls any such underwriter
within the meaning of the 1933 Act or the 1934 Act, if any (each, an
"INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "CLAIMS") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in the Resale
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading; (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of the Resale Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities (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 Indemnified 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 or underwriter for such Indemnified Person
expressly for use in connection with the preparation of such Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; and (ii) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Holders pursuant to Section 9.
b. In connection with any Registration Statement in which a
Holder is participating, each such Holder agrees severally and not jointly to
indemnify, hold harmless and defend, to the same extent and in the same manner
set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Resale Registration Statement, each person, if any,
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who controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder or underwriter within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation by such Holder, 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 (promptly as
such expenses are incurred and are due and payable) 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) 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 Agreement (including this Section 6(b) and Section 7) for only
that amount as does not exceed the net proceeds to such Holder as a result of
the sale of Registrable Securities pursuant to the Resale Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Holder pursuant to
Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), 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 legal counsel shall be selected by Holders holding a
majority-in-interest of the Registrable Securities included in the Resale
Registration Statement to which the Claim relates (with the approval of a
majority-in-interest of the Holders), if the Holders are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. 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 actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
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investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; PROVIDED, HOWEVER, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) 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") once it is subject to the reporting
requirements of the 1934 Act, the Company agrees to:
a. make and keep public information available, as those
terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and
other documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements (it being understood
that nothing herein shall limit the Company's obligations under Section 4(c) of
the Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Holder so long as such Holder owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Buyers to sell such securities pursuant to Rule 144 without
registration.
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9. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company and
Holders who hold a majority interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 9 shall be binding
upon each Holder and the Company.
10. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
b. Any notices required or permitted to be given under the
terms hereof shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery service) or by facsimile, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
Enthrust Financial Services, Inc.
c/o Rodman & ▇▇▇▇▇▇▇, LLC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to:
Morse, Zelnick, Rose & Lander, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to any Holders: to the address set forth immediately below such
Buyer's name on the signature pages to the Subscription Agreement.
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. CHOICE OF LAW; CONSENT TO JURISDICTION. This Agreement
shall be enforced, governed and construed in accordance with the internal laws
(without giving effect to the conflicts of law principles) of the State of New
York. Each of the parties hereto submits to the
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exclusive jurisdiction of any state or federal court sitting in the Borough of
Manhattan, County of New York, in any action or proceeding arising out of or
relating to this Agreement, agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court and agrees not to bring
any action or proceeding arising out of or relating to this Agreement in any
other court. Each of the parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety
or other security that might be required of any other party with respect
thereto. Any party may make service on any other party hereto by sending or
delivering a copy of the process to the party to be served at the address for
each respective party provided for herein. Nothing in this Section, however,
shall affect the right of any party to serve legal process in any other manner
permitted by law. Each party agrees that a final judgment in any action or
proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law.
e. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
f. 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.
g. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns.
h. The headings in this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.
i. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party.
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.
j. 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. Except as otherwise provided herein, all consents and
other determinations to be made by the Holders pursuant to this Agreement shall
be made by Holders holding a majority of the Registrable Securities, determined
as if all of the Debentures then outstanding have been converted into
Registrable Securities.
IN WITNESS WHEREOF, the Company and the undersigned Holders have caused
this Agreement to be duly executed as of the date first above written.
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ENTHRUST FINANCIAL SERVICES, INC.
BY: _________________________
▇▇▇▇ ▇. ▇▇▇▇▇, III
CHIEF EXECUTIVE OFFICER
[HOLDERS]
____________________________
____________________________
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EXHIBIT A
PLAN OF DISTRIBUTION
We are registering the shares of Common Stock issued pursuant to the
Exchange Agreement and the shares of Common Stock issuable upon exercise of the
Warrants issued pursuant to the Exchange Agreement to permit the resale of these
shares of Common Stock by the holders thereof from time to time after the date
of this prospectus. We will not receive any of the proceeds from the sale by the
selling stockholders of the shares of Common Stock. We will bear all fees and
expenses incident to our obligation to register the shares of Common Stock.
The selling stockholders may sell all or a portion of the shares of
Common Stock beneficially owned by them and offered hereby from time to time
directly or through one or more underwriters, broker-dealers or agents. If the
shares of Common Stock are sold through underwriters or broker-dealers, the
selling stockholders will be responsible for underwriting discounts or
commissions or agent's commissions. The shares of Common Stock may be sold in
one or more transactions at fixed prices, at prevailing market prices at the
time of the sale, at varying prices determined at the time of sale, or at
negotiated prices. These sales may be effected in transactions, which may
involve crosses or block transactions,
o on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale;
o in the over-the-counter market;
o in transactions otherwise than on these exchanges or systems or in
the over-the-counter market;
o through the writing of options, whether such options are listed on an
options exchange or otherwise;
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 short sales;
o sales pursuant to Rule 144;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
15
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
If the selling stockholders effect such transactions by selling shares
of Common Stock to or through underwriters, broker-dealers or agents, such
underwriters, broker-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling stockholders or
commissions from purchasers of the shares of Common Stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved); provided that
the commissions payable to, or discounts received by, any member of the National
Securities Dealers Association, Inc. shall not exceed 8% of the sale of any
shares of Common Stock being registered pursuant to Rule 415. In connection with
sales of the shares of Common Stock or otherwise, the selling stockholders may
enter into hedging transactions with broker-dealers, which may in turn engage in
short sales of the shares of Common Stock in the course of hedging in positions
they assume. The selling stockholders may also sell shares of Common Stock short
and deliver shares of Common Stock covered by this prospectus to close out short
positions and to return borrowed shares in connection with such short sales. The
selling stockholders may also loan or pledge shares of Common Stock to
broker-dealers that in turn may sell such shares.
The selling stockholders may pledge or grant a security interest in some
or all of the convertible notes, warrants or shares of Common Stock 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 pursuant to this prospectus or any amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of
1933, as amended, amending, if necessary, the list of selling stockholders to
include the pledgee, transferee or other successors in interest as selling
stockholders under this prospectus. The selling stockholders also may transfer
and donate the shares of Common Stock in other circumstances in which case the
transferees, donees, 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 of Common Stock 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. Each Selling
Stockholder has informed the Company that it does not have any written or oral
agreement or understanding, directly or indirectly, with any person to
distribute the Common Stock. The maximum commission or discount to be received
by any NASD member or independent broker/dealer will not be greater than eight
percent (8.0%) for the sale of any securities registered pursuant to this
registration statement. At the time a particular offering of the shares of
Common Stock is made, a prospectus supplement, if required, will be distributed
which will set forth the aggregate amount of shares of Common Stock being
offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to broker-dealers.
Under the securities laws of some states, the shares of Common Stock may
be sold in such states only through registered or licensed brokers or dealers.
In addition, in some states the shares of Common Stock may not be sold unless
such shares have been registered or qualified for
16
sale in such state or an exemption from registration or qualification is
available and is complied with.
There can be no assurance that any selling stockholder will sell any or
all of the shares of Common Stock registered pursuant to the registration
statement, of which this prospectus forms a part.
The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may limit the timing
of purchases and sales of any of the shares of Common Stock by the selling
stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of Common
Stock to engage in market-making activities with respect to the shares of Common
Stock. All of the foregoing may affect the marketability of the shares of Common
Stock and the ability of any person or entity to engage in market-making
activities in respect of the shares of Common Stock.
We will pay all expenses of the registration of the shares of Common
Stock pursuant to the registration rights agreements, estimated to be $[ ] in
total, including, without limitation, Securities and Exchange Commission filing
fees and expenses of compliance with state securities or "blue sky" laws;
PROVIDED, HOWEVER, that a selling stockholder will pay all underwriting
discounts and selling commissions, if any. We will indemnify the selling
stockholders against liabilities, including some liabilities under the
Securities Act, in accordance with the registration rights agreements, or the
selling stockholders will be entitled to contribution. We may be indemnified by
the selling stockholders against civil liabilities, including liabilities under
the Securities Act, that may arise from any written information furnished to us
by the selling stockholder specifically for use in this prospectus, in
accordance with the related registration rights agreements, or we may be
entitled to contribution.
Once sold under the registration statement, of which this prospectus forms a
part, the shares of Common Stock will be freely tradable in the hands of persons
other than our affiliates.
17