EXHIBIT 10.27
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of February 22, 2006, by and among ▇▇▇▇▇▇▇ Industries, Inc., a
Delaware corporation (the "Company"), and the purchasers signatory hereto (each
such purchaser, a "Purchaser" and 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:
"Advice" shall have the meaning set forth in Section 6(d).
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Event" shall have the meaning set forth in Section 2(b).
"Event Date" shall have the meaning set forth in Section 2(b).
"Filing Date" means, with respect to the Registration Statement
required to be filed hereunder, the earlier of (i) the 30th day following
the filing of the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2005 or (ii) April 30, 2006.
"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).
"Indemnifying Party" shall have the meaning set forth in Section
5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Plan of Distribution" shall have the meaning set forth in Section
2(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.
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"Prospectus" means the prospectus included in the 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 the 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 issuable and the
shares of Common Stock issuable upon exercise of the warrants issued to
First Montauk Securities Corp. ("First Montauk"), as placement agent on
behalf of the Company, together with any shares of Common Stock issued or
issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing.
"Registration Statement" means the registration statements required
to be filed hereunder, including (in each case) the Prospectus, amendments
and supplements to the 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 the
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.
"Selling Shareholder Questionnaire" shall have the meaning set forth
in Section 3(a).
2. Registration.
(a) On or prior to the Filing Date, the Company shall prepare and
file with the Commission the Registration Statement covering the resale of
all of the Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement required
hereunder shall be on Form S-3 (except if the Company is not then eligible
to register for resale the Registrable Securities on Form S-3, in which
case the Registration shall be on another appropriate form in accordance
herewith). The Registration Statement required hereunder shall contain
(except if 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
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as promptly as possible after the filing thereof, and shall use its best
efforts to keep the Registration Statement continuously effective under
the Securities Act until the date when all Registrable Securities covered
by the 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. Failure to so notify the Holder within 1 Trading Day of
such notification shall be deemed an Event under Section 2(b).
(b) If: (i) a Registration Statement is not filed on or prior to the
Filing Date (if the Company files a Registration Statement without
affording First Montauk on behalf of the Holders not participating in the
1,250,000 Share Offering, and each of the individual Holders participating
in the 1,250,000 Share Offering, the opportunity to review and comment on
the same as required by Section 3(a), the Company shall not be deemed to
have satisfied this 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
is not subject to further review, or (iii) prior to the date when such
Registration Statement is first declared effective by the Commission, 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 21 calendar 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) after a
Registration Statement is first declared effective by the Commission, it
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 in any such case 10 consecutive calendar days
but no more than an aggregate of 15 calendar 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
(iii) 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 calendar day period is
exceeded, or for purposes of clause (iv) the date on which such 20 or 30
calendar day period, as applicable, is exceeded being referred to as
"Event Date"), then in addition to any other rights the Holders may have
hereunder or under applicable law, then, on each such Event Date and on
each monthly anniversary of each such Event Date (if the applicable Event
shall not have been cured by such date) until the applicable Event is
cured, the Company shall pay to each Holder an amount in cash, as partial
liquidated damages and not as a penalty, equal to 1.0% of the aggregate
purchase price paid by such Holder pursuant to the Purchase Agreement for
any Registrable Securities then held by such Holder, up to a maximum
aggregate penalty amount of $150,000 for all Holders. If the Company fails
to pay any partial 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 partial liquidated damages are due until such amounts, plus
all such interest thereon, are paid in full. The partial liquidated
damages pursuant to the terms hereof shall apply on a daily pro-rata basis
for any portion of a month prior to the cure of an Event.
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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 the
Registration Statement or any related Prospectus or any amendment or
supplement thereto (i) furnish to First Montauk on behalf of the Holders
not participating in the 1,250,000 Share Offering, and each of the
individual Holders participating in the 1,250,000 Share Offering, copies
of all such documents proposed to be filed (including documents
incorporated or deemed incorporated by reference to the extent requested
by such Person) which documents 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 object in
good faith, provided that the Company is notified of such objection in
writing no later than 5 Trading Days after First Montauk, and each of the
individual Holders participating in the 1,250,000 Share Offering, has been
so furnished copies of such documents. Each Holder agrees to furnish to
the Company a completed Questionnaire in the form attached to this
Agreement as Annex B (a "Selling Shareholder Questionnaire") not less than
two Trading Days prior to the Filing Date or by the end of the fourth
Trading Day following the date on which First Montauk, and each of the
individual Holders participating in the 1,250,000 Share Offering, receives
draft materials in accordance with this Section.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
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, and as so supplemented
or amended to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably possible to any comments received from the Commission with
respect to the Registration Statement or any amendment thereto and, as
promptly as reasonably possible, upon request, provide First Montauk on
behalf of the Holders not participating in the 1,250,000 Share Offering,
and each of the individual Holders participating in the 1,250,000 Share
Offering, true and complete copies of all correspondence from and to the
Commission relating to the 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 the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Holders thereof
set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.
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(c) Notify First Montauk, on behalf of the Holders not participating
in the 1,250,000 Share Offering, of Registrable Securities to be sold, and
each of the individual Holders participating in the 1,250,000 Share
Offering, as promptly as reasonably possible and (if requested by First
Montauk on behalf of the Holders not participating in the 1,250,000 Share
Offering, or each individual Holder participating in the 1,250,000 Share
Offering) confirm such notice in writing promptly following the day (i)(A)
when a Prospectus or any Prospectus supplement or post-effective amendment
to the Registration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a "review" of the
Registration Statement and whenever the Commission comments in writing on
the Registration Statement (the Company shall upon request provide true
and complete copies thereof and all written responses thereto to First
Montauk on behalf of the Holders not participating in the 1,250,000 Share
Offering, and to each individual Holder participating in the 1,250,000
Share Offering); and (C) with respect to the 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 during the period of effectiveness of the Registration Statement
for amendments or supplements to the Registration Statement or Prospectus
or for additional information; (iii) of the issuance by the Commission or
any other federal or state governmental authority of any stop order
suspending the effectiveness of the 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; and (v) of the occurrence of any event or passage of time that
makes the financial statements included in the Registration Statement
ineligible for inclusion therein or any statement made in the 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 the Registration Statement, Prospectus or other
documents so that, in the case of the 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.
(d) Use commercially reasonable efforts to avoid the issuance of,
or, if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of the 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.
(e) Furnish to each Holder, without charge, at least one conformed
copy of the Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed
to be incorporated therein by reference to the extent requested by such
Person, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after
the filing of such documents with the Commission.
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(f) 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 in connection with resales by the Holder of Registrable
Securities. 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, except after the giving on any notice
pursuant to Section 3(c).
(g) Prior to any resale of Registrable Securities by a Holder, use
its commercially reasonable efforts to register or qualify or cooperate
with the selling Holders in connection with the registration or
qualification (or exemption from the Registration or qualification) of
such Registrable Securities for the resale by the Holder under the
securities or Blue Sky laws of such jurisdictions within the United States
as any Holder reasonably requests in writing, to keep the Registration or
qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things reasonably necessary to
enable the disposition in such jurisdictions of the Registrable Securities
covered by the Registration Statement; provided, that the Company shall
not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified, subject the Company to any material tax
in any such jurisdiction where it is not then so subject or file a general
consent to service of process in any such jurisdiction.
(h) If NASDR Rule 2710 requires any broker-dealer to make a filing
prior to executing a sale by a Holder, make an Issuer Filing with the
NASDR, Inc. Corporate Financing Department pursuant to NASDR Rule
2710(b)(10)(A)(i) and use commercially reasonable efforts to respond
within five Trading Days to any comments received from NASDR in connection
therewith, and pay the filing fee required in connection therewith.
(i) If requested by the Holders, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be delivered to a transferee
pursuant to the 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.
(j) Upon the occurrence of any event contemplated by Section
3(c)(v), as promptly as reasonably, possible, prepare a supplement or
amendment, including a post-effective amendment, to the 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 that, as thereafter delivered, neither the
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
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the circumstances under which they were made, not misleading. If the
Company notifies the Holders in accordance with clauses (ii) through (v)
of Section 3(c) above to suspend the use of any Prospectus until the
requisite changes to such Prospectus have been made, 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. The Company shall be entitled to exercise its
right under this Section 3(j) to suspend the availability of a
Registration Statement and Prospectus, subject to the payment of partial
liquidated damages pursuant to Section 2(b), for a period not to exceed 60
days (which need not be consecutive days) in any 12 month period.
(k) Comply with all applicable rules and regulations of the
Commission.
(l) The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Holder and, if required by the Commission, the
person thereof that has voting and dispositive control over the Shares.
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 as to such Holder only shall be tolled and any Event
that may otherwise occur solely because of such delay shall be suspended
as to such Holder only, 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 Trading Market on which the Common Stock is then
listed for trading, (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) and (C) if not
previously paid by the Company in connection with an Issuer Filing, with respect
to any filing that may be required to be made by any broker through which a
Holder intends to make sales of Registrable Securities with NASD Regulation,
Inc. pursuant to the NASD Rule 2710, so long as the broker is receiving no more
than a customary brokerage commission in connection with such sale, (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is reasonably requested by the holders of a majority of
the Registrable Securities included in the Registration Statement), (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
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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, 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 the 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 (i) such untrue
statements or omissions are based solely 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 the Registration Statement, such Prospectus or such
form of Prospectus or in any amendment or supplement thereto (it being
understood that the Holder has approved Annex A hereto for this purpose)
or (ii) in the case of an occurrence of an event of the type specified in
Section 3(c)(ii)-(v), 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(d). The Company shall
notify the Holders promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(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 incurred, to the extent arising out of or based
solely upon: (x) such Holder's failure to comply with the prospectus
delivery requirements of the Securities Act or (y) any untrue or alleged
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 in any preliminary prospectus, or arising out of
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or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein
not misleading (i) to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in
writing by such Holder to the Company specifically for inclusion in the
Registration Statement or such Prospectus or (ii) to the extent that (1)
such untrue statements or omissions are based solely 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 the Registration Statement (it being
understood that the Holder has approved Annex A hereto for this purpose),
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(c)(ii)-(v), 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(d).
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 have the right to 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 it shall be finally
determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) 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; (2) the Indemnifying Party shall
have failed promptly to assume the defense of such Proceeding and to
employ counsel 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 reasonably
believe 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
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of the Indemnifying Party, the Indemnifying Party shall not have the right
to assume the defense thereof and the reasonable fees and expenses of one
separate counsel shall be at the expense of the Indemnifying Party). For
purposes of this Section 5(c), the term "conflict of interest" shall mean
that there are one or more legal defenses available to the Indemnified
Party that are different from or additional to those available to the
Indemnifying Party or such other Indemnified Parties, as applicable, which
different or additional defenses make joint representation inappropriate.
The Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its prior 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 reasonable 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; provided, that
the Indemnified Party shall promptly reimburse the Indemnifying Party for
that portion of such fees and expenses applicable to such actions for
which such Indemnified Party is not entitled to indemnification hereunder,
determined based upon the relative faults of the parties.
(d) Contribution. If the indemnification under Section 5(a) or 5(b)
is unavailable to an Indemnified Party or insufficient to hold an
Indemnified Party harmless for any Losses, then each Indemnifying Party
shall contribute to the amount paid or payable by such Indemnified Party,
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 this Agreement,
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.
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),
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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, except in the case of fraud by
such Holder.
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) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or
the Company, as the case may be, in addition to being entitled to exercise
all rights granted by law and under this Agreement, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would
not provide adequate compensation for any losses incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy at law
would be adequate.
(b) No Piggyback on Registrations. Except as set forth on Schedule
6(b) 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 a Registration Statement other than the
Registrable Securities. No Person has any right to cause the Company to
effect the registration under the Securities Act of any securities of the
Company. The Company shall not file any other registration statements
until 60 Trading Days following the date that the Registration Statement
required hereunder is declared effective by the Commission, provided that
this Section 6(b) shall not prohibit the Company from filing amendments to
registration statements already filed.
(c) 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.
(d) 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 Section
3(c), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such
Holder's receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement 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 will
use its best efforts to ensure that the use of the Prospectus may be
resumed as promptly as is practicable. Except as otherwise provided in
Section 3(j), 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).
11
(e) 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 the stock option or other employee
benefit plans, then the Company shall send to each Holder a written notice
of such determination and, if within fifteen days after the date 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, subject to customary
underwriter cutbacks applicable to all holders of registration rights.
(f) 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 each Holder 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.
(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.
(i) 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 conflict
with or violate the provisions hereof or of any of the Transaction
Documents. Except as set forth on Schedule 6(i), 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 has not been satisfied in full.
12
(j) Execution and 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.
(k) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be
determined with the provisions of the Purchase Agreement.
(l) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(m) 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 commercially 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.
(n) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(o) Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be
responsible in any way for the performance of the obligations of any other
Holder hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Holder
pursuant hereto or thereto, shall be deemed to constitute the Holders as a
partnership, an association, a joint venture or any other kind of entity,
or create a presumption that the Holders are in any way acting in concert
with respect to such obligations or the transactions contemplated by this
Agreement. Each Holder 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 Holder to be joined
as an additional party in any proceeding for such purpose.
*************************
13
IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.
▇▇▇▇▇▇▇ INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: CFO
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
14
[HOLDER'S SIGNATURE PAGE TO ▇▇▇▇▇▇▇ RRA]
Name of Holder: __________________________
Signature of Authorized Signatory of Holder: __________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
[SIGNATURE PAGES CONTINUE]
15
ANNEX A
Plan of Distribution
The Selling Stockholders (the "Selling Stockholders") of the common stock
("Common Stock") of ▇▇▇▇▇▇▇ Industries, Inc., a Delaware corporation (the
"Company") 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 settlement of short sales entered into after the date of this
prospectus;
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;
o through the writing or settlement of options or other hedging
transactions, whether through an options exchange or
otherwise; or
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (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, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with NADSR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.
16
In connection with the sale of the Common Stock or interests therein, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
Common Stock in the course of hedging the positions they assume. The Selling
Stockholders may also, on or after the date of this Prospectus, sell shares of
the Common Stock short and deliver these securities to close out their short
positions, or loan or pledge the Common Stock to broker-dealers that in turn may
sell these securities. The Selling Stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions or the
creation of one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
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. 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. In no event shall any broker-dealer receive fees, commissions and markups
which, in the aggregate, would exceed eight percent (8%).
The Company is required to pay certain 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.
Because Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act. In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than under this prospectus. Each Selling
Stockholder has advised us that they have not entered into any written or oral
agreements, understandings or arrangements with any underwriter or broker-dealer
regarding the sale of the resale shares. There is no underwriter or coordinating
broker acting in connection with the proposed sale of the resale shares by the
Selling Stockholders.
We agreed to keep this prospectus effective until the earlier of (i) the
date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule
144(e) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
17
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale shares may not simultaneously engage
in market making activities with respect to the Common Stock for a period of two
business days prior to the commencement of the distribution. In addition, the
Selling Stockholders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including Regulation M, which may
limit the timing of purchases and sales of shares of the Common Stock by the
Selling Stockholders or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time of
the sale.
18
Annex B
▇▇▇▇▇▇▇ INDUSTRIES, INC.
Selling Securityholder Notice and Questionnaire
The undersigned beneficial owner of common stock, par value $0.001 per
share (the "Common Stock"), of ▇▇▇▇▇▇▇ Industries, Inc., a Delaware corporation
(the "Company"), (the "Registrable Securities") understands that the Company has
filed or intends to file with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (the "Registration
Statement") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "Securities Act"), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement, dated as of
February 22, 2006 (the "Registration Rights Agreement"), among the Company and
the Purchasers named therein. A copy of the Registration Rights Agreement is
available from the Company upon request at the address set forth below. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.
Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.
NOTICE
The undersigned beneficial owner (the "Selling Securityholder") of
Registrable Securities hereby elects to include the Registrable Securities owned
by it and listed below in Item 3 (unless otherwise specified under such Item 3)
in the Registration Statement.
19
The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
QUESTIONNAIRE
1. Name.
(a) Full Legal Name of Selling Securityholder
____________________________________________________________________
(b) Full Legal Name of Registered Holder (if not the same as (a) above)
through which Registrable Securities Listed in Item 3 below are
held:
____________________________________________________________________
(c) Full Legal Name of Natural Control Person (which means a natural
person who directly you indirectly alone or with others has power to
vote or dispose of the securities covered by the questionnaire):
____________________________________________________________________
2. Address for Notices to Selling Securityholder:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Telephone: _____________________________________________________________________
Fax: ___________________________________________________________________________
Contact Person: ________________________________________________________________
3. Beneficial Ownership of Registrable Securities:
(a) Type and Number of Registrable Securities beneficially owned:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
20
4. Broker-Dealer Status:
(a) Are you a broker-dealer?
Yes |_| No |_|
Note: If yes, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
(b) Are you an affiliate of a broker-dealer?
Yes |_| No |_|
(c) If you are an affiliate of a broker-dealer, do you certify that you
bought the Registrable Securities in the ordinary course of
business, and at the time of the purchase of the Registrable
Securities to be resold, you had no agreements or understandings,
directly or indirectly, with any person to distribute the
Registrable Securities?
Yes |_| No |_|
Note: If no, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
5. Beneficial Ownership of Other Securities of the Company Owned by the Selling
Securityholder.
Except as set forth below in this Item 5, the undersigned is not the
beneficial or registered owner of any securities of the Company other than
the Registrable Securities listed above in Item 3.
(a) Type and Amount of Other Securities beneficially owned by the
Selling Securityholder:
____________________________________________________________________
____________________________________________________________________
21
6. Relationships with the Company:
Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (owners of 5%
of more of the equity securities of the undersigned) has held any position
or office or has had any other material relationship with the Company (or
its predecessors or affiliates) during the past three years.
State any exceptions here:
__________________________________________________________________________
__________________________________________________________________________
The undersigned agrees to promptly notify the Company of any inaccuracies
or changes in the information provided herein that may occur subsequent to the
date hereof at any time while the Registration Statement remains effective.
By signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items 1 through 6 and the
inclusion of such information in the Registration Statement and the related
prospectus. The undersigned understands that such information will be relied
upon by the Company in connection with the preparation or amendment of the
Registration Statement and the related prospectus.
IN WITNESS WHEREOF the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.
Dated: Beneficial Owner:
-------------------- ------------------------------
By:
--------------------------------------------
Name:
Title:
PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:
▇▇▇▇▇▇▇ Industries, Inc.
▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, CFO
22
Schedule 6(i)
Piggyback Registration Rights:
A. ▇▇▇▇ ▇▇▇▇▇ - 416,667 shares
Stillwater National Bank and Trust Company - 2,368,000 common shares
Stillwater National Bank and Trust Company - shares issuable upon conversion of
convertible note in the principal amount of $2,500,000, convertible at $1.00 per
share