WARRANT AGREEMENT BETWEEN PURE CAPITAL INCORPORATED AND ALAN BROWN
WARRANT
AGREEMENT BETWEEN
PURE
CAPITAL INCORPORATED
AND
▇▇▇▇
▇▇▇▇▇
STOCK
PURCHASE WARRANT
Neither
this Warrant nor the Warrant Shares as defined herein have been registered
under
the Securities Act of 1933, as amended, or any applicable state securities
laws.
Neither this Warrant nor the Warrant Shares may be sold or transferred in
the
absence of such registration or any exemption from such registration. Any
sale
or transfer of this Warrant or the Warrant Shares must comply with the
restrictions on transfer set forth herein.
Right
to
Purchase 8,000,000 Shares of Common Stock
Dated
as
of November __, 2006
Pure
Capital Incorporated, a Canadian Federal corporation (the “Company”),
grants ▇▇▇▇ ▇▇▇▇▇, an Individual residing at ______________________ (“▇▇▇▇▇” and
each of his successors and assigns, a “Holder”)
a
warrant (this “Warrant”)
to
purchase the Warrant Shares at the Purchase Price. Capitalized terms not
otherwise defined have the definitions set forth in Appendix A.
(a) This
Warrant is immediately exercisable and will expire upon the five year
anniversary of the date hereof. “Exercise
Period”
shall
mean the period of time between the date hereof and the expiration of this
Warrant in accordance with the terms hereof.
(b) This
Warrant may be exercised during the Exercise Period by the Holder, in whole
or
in part, by delivering this Warrant to the Company with payment of the Purchase
Price in U.S. dollars. In lieu of such cash payment, the Holder may exercise
the
Warrant by delivery to the Company of written notice of an election to effect
a
cashless exercise for Warrant Shares pursuant to this Section 1(b) (“Cashless
Exercise”). To effect a Cashless Exercise, the Holder will surrender this
Warrant for that number of shares of Common Stock determined by multiplying
the
number of Warrant Shares to which it would otherwise be entitled by a fraction,
the numerator if which shall be the difference between (i) the then current
Market Price of a share of Common Stock on the date of exercise and (ii)
the
Purchase Price, and the denominator of which shall be the then current Market
Price per share of Common Stock. In the event that this Warrant in not exercised
in full immediately prior to the end of the Exercise Period and at such time
the
then current Market Price of a share of Common Stock is greater than the
Purchase Price, this Warrant shall be deemed automatically exercised as to
the
remaining Warrant Shares as such time by Cashless Exercise without delivery
of
any notice from the Holder.
(c) Upon
exercise of this Warrant, the Company will issue to the Holder (i) a
certificate or certificates for the number of full Warrant Shares to which
the
Holder shall be entitled upon such exercise plus the value of any fractional
share to which the Holder would otherwise be entitled,
and (ii) in case such exercise is in part only, a new warrant or warrants
representing the remaining Warrant Shares.
(d) Each
exercise of this Warrant shall be deemed to have been effected immediately
prior
to the close of business on the day on which this Warrant shall have been
surrendered pursuant to Section 1(b).
(a) By
the
Holder. The Holder represents and warrants to the Company as follows:
(i) It
is an
“accredited investor” within the meaning of Rule 501 of the Securities Act.
This Warrant is acquired for the Holder’s own account for investment purposes
and not with a view to any offering or distribution within the meaning of
the
Securities Act of 1933 (“Securities Act”) and any applicable state securities
laws. The Holder has no present intention of selling or otherwise disposing
of
the Warrant or the Warrant Shares in violation of such laws; and
(ii) The
Holder has sufficient knowledge and expertise in financial and business matters
so as to be capable of evaluating the merits and risks of its investment
in the
Company. The Holder acknowledges that it has received all the information
it
considers necessary or appropriate for deciding whether to make this investment.
The Holder understands that this investment involves a high degree of risk
and
could result in a substantial or complete loss of its investment. The Holder
is
capable of bearing the economic risks of such investment.
(iii) This
Warrant has been authorized by all necessary corporate action of the Holder
and
constitutes a valid and legally binding obligation of the Holder, enforceable
in
accordance with its terms.
The
Holder acknowledges that the Company has indicated that the Warrant and the
Warrant Shares have not been registered under the Securities Act by reason
of
their issuance in a transaction exempt from the registration requirements
thereof, and that the Warrant Shares will bear a legend stating that such
securities have not been registered under the Securities Act and may not
be sold
or transferred in the absence of such registration or an exemption from such
registration.
(b) By
the
Company. The Company represents and warrants that:
(i) It
(A) is a corporation duly organized, validly existing and in good standing
under the laws of the state or province of its organization, (B) has all
requisite power and authority to conduct its business as now conducted and
as
presently contemplated and to consummate the transactions contemplated hereby
and (C) is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned or leased by
it or
in which the transaction of its business makes such qualification necessary.
(ii) It
has outstanding as of the date hereof but before giving effect to this Warrant,
that number of shares of Common Stock, calculated on a fully diluted basis,
giving effect to the conversion of all options, warrants, rights and other
securities convertible into, or exchangeable for, Common Stock as shall be
provided to Holder by the Company in writing as promptly as practicable
following the date hereof.
(iii) The
execution, delivery and performance by the Company of this Warrant (A) has
been duly authorized by all necessary corporate action, (B) does not and
will
not contravene the Company’s charter or bylaws or any other organizational
document and (C) does not and will not contravene any applicable law or any
contractual restriction binding on or otherwise affecting the Company or
any of
its properties or result in a default under any agreement or instrument to
which
the Company is a party or by which the Company or its properties may be subject.
(iv) This
Warrant has been duly executed and delivered by the Company, and is a legal,
valid and binding obligation of the Company, enforceable against the Company
in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, moratorium and other laws affecting the rights of creditors
generally and general principles of equity.
(v) Assuming
the accuracy of the representations made by the Holder in Section 2(a) hereof,
no authorization, consent, approval, license, exemption or other action by,
and
no registration, qualification, designation, declaration or filing with,
any
governmental authority is or will be necessary in connection with the execution
and delivery by the Company of this Warrant, the issuance by the Company
of the
Warrant Shares, the consummation of the transactions contemplated hereby,
the
performance of or compliance with the terms and conditions hereof, or to
ensure
the legality, validity, and enforceability hereof.
(vi) The
Company has reserved solely for issuance and delivery upon the exercise of
this
Warrant, such number of shares of Common Stock to provide for the exercise
in
full of this Warrant.
(vii) Neither
the Company, nor any of its Affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security
or
solicited any offers to buy any security under circumstances that would require
registration, or the filing of a prospectus qualifying the distribution,
of this
Warrant being issued hereby under the Securities Act or cause the issuance
of
this Warrant to be integrated with any prior offering of securities of the
Company for purposes of the Securities Act.
(a) Shares
to
be Fully Paid. All Warrant Shares will, upon issuance in accordance with
the
terms of this Warrant, be validly issued, fully paid, and nonassessable and
free
from all taxes, liens, claims and encumbrances.
(b) Authorization
and Reservation of Shares. During the Exercise Period, the Company shall
have
duly authorized a sufficient number of shares of Common Stock, free from
preemptive rights and from any other restrictions imposed by the Company
without
the consent of the Holder, to provide for the exercise in full of this Warrant.
The Company shall at all times during the Exercise Period reserve and keep
available out of such authorized but unissued shares of Common Stock such
number
of shares to provide for the exercise in full of this Warrant.
(c) Listing.
In connection with the Holder’s exercise of Registration Rights hereunder, the
Company shall use its best efforts to promptly secure the listing of the
shares
of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares
of
Common Stock are then listed or become listed (subject to official notice
of
issuance upon exercise of this Warrant) and shall maintain such listing for
so
long as any other shares of Common Stock shall be so listed.
(d) Certain
Actions Prohibited. The Company will not, by amendment of its charter or
through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities, or any other voluntary action, avoid or seek
to
avoid the observance or performance of any of the terms to be observed or
performed by it hereunder, but will at all times in good faith assist in
the
carrying out of all the provisions of this Warrant and in the taking of all
such
action as may reasonably be requested by the Holder of this Warrant in order
to
protect the exercise privilege of the Holder of this Warrant against dilution
or
other impairment, consistent with the tenor and purpose of this Warrant.
(e) Successors
and Assigns. Except as expressly provided otherwise herein, this Warrant
will be
binding upon any entity succeeding to the Company by merger, consolidation,
or
acquisition of all or substantially all of the Company’s assets.
(f) Blue
Sky
Laws. The Company shall, on or before the date of issuance of any Warrant
Shares, take such actions as the Company shall reasonably determine are
necessary to qualify the Warrant Shares for, or obtain exemption for the
Warrant
Shares for, sale to the Holder of this Warrant upon the exercise hereof under
applicable securities or “blue sky” laws of the states of the United States, and
shall provide written evidence of any such action so taken to the Holder
of this
Warrant prior to such date; provided, however, that the Company shall not
be
required to qualify as a foreign corporation or file a general consent to
service of process in any such jurisdiction.
(g) Rule 144
Reports. For so long as the Company is subject to the reporting requirements
of
Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”)
the Company agrees to use its best efforts to take all actions reasonably
necessary to enable the Holder to sell the Registrable Securities without
registration under the Securities Act within the limitations of the exemptions
provided by Rule 144 under the Securities Act, as such rule may be amended
from
time to time, or any similar rule or regulation hereafter adopted by the
SEC,
including filing on a timely basis all reports required to be filed by the
Exchange Act. Upon the request of the Holder, the Company shall deliver to
the
Holder a written statement as to whether it has complied with such requirements.
(a) Transferability.
(i) The
Holder covenants not to transfer this Warrant or the Warrant Shares except
in
compliance with this Section 7(a). Subject to compliance with the transfer
restrictions set forth in clause (ii) of this Section 7(a), this Warrant
(in whole only), the Warrant Shares (in whole or in part) and the rights
granted
to the Holder hereof are freely transferable upon surrender of this Warrant,
together with an assignment form, at the office or agency of the Company
referred to in Section 8 below.
(ii) This
Warrant shall not be transferable except (a) in whole in the event of a
sale of the Holder, (b) in whole to any Affiliate of the Holder or
(c) in whole to any qualified financial institution; provided that a Holder
that is a qualified financial institution may only transfer this Warrant
to
another qualified financial institution. For purposes of this Section 7,
“qualified financial institution” means a registered broker-dealer or commercial
bank organized and licensed under the laws of the United States of America
or of
any State thereof and having a combined capital and surplus of at least
$300 million. The Holder shall not effect any transfer except pursuant to a
transaction either registered, or exempt from registration, under the Securities
Act. Prior to any transfer in reliance upon an exemption from such registration
other than Rule 144 of the Securities Act, the Holder shall provide to the
Company an opinion letter from counsel to the Holder (which counsel may include
in-house counsel), reasonably satisfactory to the Company, opining that such
transfer does not require registration under the Securities Act. The transferee,
by acceptance of this Warrant, acknowledges that it takes such warrant subject
to the terms and conditions hereof. Until due presentment for registration
of
transfer on the books of the Company, the Company may treat the registered
Holder hereof as the owner hereof for all purposes, and the Company shall
not be
affected by any notice to the contrary.
(b) Replacement
of Warrant. Upon receipt of evidence reasonably satisfactory to the Company
of
the loss, theft, destruction, or mutilation of this Warrant and, in the case
of
any such loss, theft, or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company, or, in the case
of
any such mutilation, upon surrender and cancellation of this Warrant, the
Company, at its expense, will execute and deliver, in lieu thereof, a new
Warrant of like tenor.
(c) Cancellation;
Payment of Expenses. Upon the surrender of this Warrant in connection with
any
transfer or replacement as provided in this Section 7, this Warrant shall
be promptly canceled by the Company. The Company shall pay all taxes (other
than
securities transfer taxes) and all other customary expenses (other than legal
expenses, if any, incurred by the Holder or transferee) and charges payable
in
connection with the preparation, execution, and delivery of warrants pursuant
to
this Section 7.
(d) Warrant
Register. The Company shall maintain, at its principal executive offices
(or
such other office or agency of the Company as it may designate by notice
to the
Holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each transferee and each prior owner of
this
Warrant.
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If
to the Company:
Pure
Capital Incorporated
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Tel.
(604) xxx-xxxx
Fax
(604) xxx-xxxx
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If
to ▇▇▇▇▇ or Holder:
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With
a Copy to:
SteadyLaw
Group, LLP
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Tel.
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Fax
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If
to any
other Holder, at such address as such Holder shall have provided in writing
to
the Company, or at such other address as any Holder furnishes by notice given
in
accordance with this Section 8.
9. Governing
Law; Jurisdiction and Venue.
This
Warrant shall be governed by the laws of the State of California, without
regard
to conflicts or choice of law rules or principles. Each of the Company and
the
Holder submits to the jurisdiction and venue of the federal and state courts
of
San Diego, California, to resolve all issues that may arise out of or relate
to
this Warrant. The parties waive any right to a jury trial.
(a) Amendments.
This Warrant and any provision hereof may only be amended by an instrument
in
writing signed by the Company and the Holder hereof.
(b) U.S.
Dollars. All references in this Warrant to “dollars”
or
“$”
shall
mean the U.S. dollar.
(c) Fractional
Shares. The Company shall not be required upon the exercise of this Warrant
to
issue any fractional shares, but shall make an adjustment therefor in cash
on
the basis of the fair market value per share of Common Stock, as determined
in
good faith by the Board.
(d) Descriptive
Headings. The descriptive headings of the several sections of this Warrant
are
inserted for purposes of reference only, and shall not affect the meaning
or
construction of any of the provisions hereof.
(e) Business
Day. For purposes of this Warrant, the term “business
day”
means
any day, other than a Saturday or Sunday or a day on which banking institutions
in New York, New York or the city and state provided in Section 8 hereof
for notices to the Company, are authorized or obligated by law, regulation
or
executive order to close.
(f) Counterparts.
This agreement may be executed in counterparts, and any such executed
counterpart shall be, and shall be deemed to be, an original instrument.
(g) Severability.
If any term, provision, covenant or restriction of this Agreement is held
by a
court of competent jurisdiction to be invalid, void or unenforceable, it
shall
be deemed replaced with a valid and enforceable provision, which comes as
close
as possible to the economic purpose of the invalid, void or unenforceable
provision, and the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and
shall
in no way be affected, impaired or invalidated.
(h) Successors
and Assigns. This Agreement shall be binding on, and shall inure to the benefit
of, the parties hereto and their respective successors and assigns.
(i) Survival.
The representations, warranties and covenants made by the parties hereto
shall
survive the execution and delivery of this Agreement.
(j) No
Stockholder Rights. Prior to the exercise of this Warrant, the Holder shall
not
be entitled to any rights of a stockholder with respect to the Warrant Shares,
including without limitation the right to vote the Warrant Shares, receive
dividends or other distributions thereon, or be notified of a stockholder
meeting or receive any notice or communication regarding the business or
affairs
of the Company.
[SIGNATURE PAGE FOLLOWS]
IN
WITNESS WHEREOF, the undersigned have executed this Warrant as of the date
first
written above.
PURE
CAPITAL INCORPORATED
___________________________
By:
Its:
Dated:
▇▇▇▇
▇▇▇▇▇
___________________________
By:
Dated:
“Affiliate”
shall
mean any entity directly or indirectly controlled by, controlling or under
common control with another entity.
“Board”
shall
mean the Board of Directors of the Company.
“Cashless
Exercise”
shall
have the meaning specified in Section 1(b) of the Warrant.
“Company”
shall
have the meaning specified in the initial paragraph of the Warrant.
“Common
Stock”
shall
mean the common shares of the Company.
“Exercise
Period”
shall
have the meaning specified in Section 1(a) of the Warrant.
“Holder”
shall
have the meaning specified in the initial paragraph of the Warrant.
“Market
Price”
shall
mean the following: (i) the average of the closing sales process for the
shares
of Common Stock as reported on the principal trading exchange or the OTC
BB for
the Common Stock of the five (5) consecutive trading days immediately preceding
such date, or if no sale price is so reported for such period, the last bid
price for such period, or (ii) if the foregoing does not apply, the last
sales
price of such security in the over-the-counter market on the pink sheets
or
bulletin board for such security on the last trading day immediately preceding
such date, or if no sale price is so reported for such security, the average
of
the last bid and ask price for such security on the last trading day immediately
preceding such date, or (iii) if market value cannot be calculated as such
date
on any of the foregoing bases, the Market Price shall be the fair market
value
as reasonably determined by an investment banking firm selected by the Company
and reasonably acceptable to the Holder, with the costs of the appraisal
to be
borne by the Company.
“Person”
or
“person”
shall
mean all natural persons, corporations, business trusts, associations,
companies, partnerships, joint ventures, governments, agencies, political
subdivisions and other entities.
“Piggyback
Registration Right”
shall
mean a right of the Holder under Appendix C(a)
“Purchase
Price”
shall
mean $0.10 per share of Common Stock, as may be adjusted from time to time
pursuant to Appendix B.
“Registrable
Securities”
shall
mean the Warrant Shares issued or issuable with respect to the Warrant.
“Registration
Expenses”
shall
mean all expenses incident to the Company’s performance of or compliance with
the registration provisions of Appendix C
herein,
including without limitation (i) all fees and expenses of compliance with
federal securities and state securities laws; (ii) all U.S. Securities and
Exchange Commission and state securities laws filing fees; (iii) all
printing expenses; (iv) all fees and disbursements of counsel for the
Company; and (v) all fees and disbursements of accountants of the Company,
but excluding (i) underwriter’s discounts, selling commissions and stock
transfer taxes relating to securities sold by the Selling Holder; (ii) filings
made with the NASD and counsel fees in connection therewith; and (iii) fees
and
disbursements of counsel for the Selling Holder.
“Registration
Rights”
shall
mean the Piggyback, Demand and SB-2 registration rights set forth in
Appendix C.
“SB-2
Registration Right”
shall
mean a right of the Holder under Appendix C(c).
“Selling
Holder”
shall
have the meaning specified in Appendix
C(d)(ii)
of the
Warrant.
“Warrant”
shall
have the meaning specified in the initial paragraph of the Warrant.
“Warrant
Shares”
shall
mean shares of Common Stock, as may be adjusted from time to time pursuant
to
Appendix B.
Appendix B
— Antidilution Provisions
(a)
Reserved.
(b) Recapitalizations.
If outstanding shares of the Company’s Common Stock shall be subdivided into a
greater number of shares or a dividend in Common Stock shall be paid in respect
of Common Stock, the Purchase Price in effect immediately prior to such
subdivision or at the record date of such dividend shall simultaneously with
the
effectiveness of such subdivision or immediately after the record date of
such
dividend be proportionately reduced. If outstanding shares of Common Stock
shall
be combined into a smaller number of shares, the Purchase Price in effect
immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately increased. See
also
paragraph (c) of this Appendix B (“Adjustment in Number of Warrant
Shares”).
(c) Adjustment
in Number of Warrant Shares. When any adjustment is required to be made in
the
Purchase Price, the number of Warrant Shares purchasable upon the exercise
of
this Warrant shall be changed to the number determined by dividing (i) an
amount equal to the number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Purchase Price in
effect
immediately prior to such adjustment, by (ii) the Purchase Price in effect
immediately after such adjustment.
(d) Certificate
of Adjustment. When any adjustment is required to be made pursuant to this
Appendix B,
the
Company shall promptly mail to the Holder a certificate setting forth the
Purchase Price after such adjustment and setting forth a brief statement
of the
facts requiring such adjustment. Such certificate shall also set forth the
kind
and amount of stock or other securities or property into which this Warrant
shall be exercisable following such adjustment.
(e) Other
Notices. In case at any time:
(i) the
Company shall declare any dividend upon the Common Stock payable in shares
of
stock of any class or make any other distribution (other than dividends or
distributions payable in cash out of retained earnings consistent with the
Company’s past practices with respect to declaring dividends and making
distributions) to the holders of the Common Stock;
(ii) the
Company shall offer for subscription pro rata to the holders of the Common
Stock
any additional shares of stock of any class or other rights;
(iii) there
shall be any capital reorganization of the Company, or reclassification of
the
Common Stock, or consolidation or merger of the Company with or into, or
sale of
all or substantially all of its assets to, another corporation or entity;
or
(iv) there
shall be a voluntary or involuntary dissolution, liquidation or winding-up
of
the Company; then, in each such case, the Company shall give to the Holder
(a) notice of the date on which the books of the Company shall close or a
record shall be taken for determining the holders of Common Stock entitled
to
receive any such dividend, distribution, or subscription rights or for
determining the holders of Common Stock entitled to vote in respect of any
such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable estimate
thereof by the Company) when the same shall take place. Such notice shall
also
specify the date on which the holders of Common Stock shall be entitled to
receive such dividend, distribution, or subscription rights or to exchange
their
Common Stock for stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice shall be given
at
least thirty (30) days prior to the record date or the date on which the
Company’s books are closed in respect thereto. Failure to give any such notice
or any defect therein shall not affect the validity of the proceedings referred
to in clauses (i), (ii), (iii) and (iv) above.
(f) Certain
Events. If, at any time during the Exercise Period, any event occurs of the
type
contemplated by the adjustment provisions of this Appendix B
but not
expressly provided for by such provisions, the Company will give notice of
such
event, and the Board will make an appropriate adjustment in the Purchase
Price
and the number of shares of Common Stock acquirable upon exercise of this
Warrant so that the rights of the Holder shall be neither enhanced nor
diminished by such event.
Appendix C
— Registration Rights
(a) Piggyback
Registration.
(i) Participation.
If the Company elects to file a registration statement under the Securities
Act
covering the offer and sale of any Common Stock (or equity securities converted
into Common Stock) in connection with any public offering (other than a
registration statement on Form S-8 or Form S-4, or their successors, or any
other form for a similar limited purpose, or any registration statement covering
only securities proposed to be issued in exchange for securities or assets
of
another corporation), the Company shall give written notice thereof to the
Holder at least twenty business days before filing. The Holder shall have
a
Piggyback Registration Right to participate in such offering on a pro rata
basis
with the Company and any other Holders upon the giving of notice to the Company
within ten business days of receipt by it of notice from the Company. If
the
Holder notifies the Company of its intent to exercise such Piggyback
Registration Right, subject to (a)(ii) below, the Company shall include in
such
registration statement such number of shares of Registrable Securities as
requested by the Holder. Such Registrable Securities shall be included in
the
underwriting for the public offering on the same terms and conditions as
the
securities otherwise being sold in such offering.
(ii) Underwriters’
Cutback. If, in the opinion of the managing underwriter of such offering
the
inclusion of all of the shares of Registrable Securities and other Common
Stock
requested to be registered would be inappropriate, then the number of shares
of
Registrable Securities and other Common Stock to be included in the offering
shall be reduced, with the participation in such offering to be in the following
order of priority: (1) first, securities to be issued by the Company shall
be included, and (2) second, any other Common Stock required to be included
pursuant to any demand registration right granted to such other holder of
Common
Stock shall be included, and (3) third Registrable Securities and any other
Common Stock requested to be included, on a pro rata basis (based upon the
number of registrable securities owned by the Holder and the holders of Common
Stock requesting participation in the offering), shall be included.
(iii) Registrant
Controls. The Company may decline to file a Registration Statement after
giving
notice to any Holder, or withdraw a Registration Statement after filing and
after such notice, but prior to the effectiveness thereof, provided that
such
registrant shall promptly notify each Holder of Registrable Securities in
writing of any such action and provided further that such registrant shall
bear
all reasonable expenses incurred by such Holder of Registrable Securities
or
otherwise in connection with such withdrawn Registration Statement.
(iv) Underwriting
Agreement. In connection with any registration under this Section
(a) involving an underwriting, the Company shall not be required to include
any Registrable Shares in such registration unless the Holder accepts the
terms
of the underwriting as determined by the underwriters selected by the Company
(provided that such terms must be consistent with this Agreement and provided,
further, that any inability of the Holder to agree with the underwriters
shall
not restrict the ability of the Company to proceed with the registration).
(b) [Reserved]
(c) Registration
on Form SB-2.
(i) The
Company will use its best efforts to qualify for the registration of its
securities on Form SB-2 (or an alternative, acceptable form including only
a
Form 10-SB or Form SB-1). Subject to paragraph (iii) below, Holders owning
or having the right to purchase a majority of the Registrable Securities
may
request on one occasion by written notice to the Company that the Company
file a
Registration Statement on Form SB-2 (or any successor form) for a public
offering of Registrable Securities the reasonably anticipated aggregate price
to
the public of which, net of underwriting discounts and commissions, would
exceed
$100,000. The Company shall use its best efforts to cause such Registrable
Shares to be registered for the offering on such form and to cause such
Registrable Securities to be qualified in such jurisdictions as the Holder
may
reasonably request; provided,
however,
that
the Company shall not be required to effect more than one (1) such
registration at the request of the Holders. The Company shall prepare and
file
any amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all the Registrable Securities.
(ii) Notwithstanding
the foregoing, the Company shall not be obligated to take any action pursuant
to
this section (c) during the period starting with the date sixty
(60) days prior to the Company’s good faith estimate of the date of filing
of, and ending on a date one hundred eighty (180) days following the
effective date of, a Company-initiated Registration Statement that is subject
to
paragraph (a) of this Appendix C,
provided
that the
Company is actively employing in good faith all reasonable effort to cause
such
Registration Statement to become effective.
(iii) If
the
Company is requested to effect a Registration Statement on Form SB-2 and
the
Company furnishes to the Holders of Registrable Securities requesting such
registration a notice certified by the President or Chief Financial Officer
of
the Company stating that in the good faith judgment of the Company it would
be
seriously detrimental to the Company and its stockholders for such registration
statement to be filed, the Company shall have the right to defer such filing
for
a period of not more than 120 days after receipt of the request for such
registration from the Holder or Holders of Registrable Securities requesting
such registration; provided that during such time the Company may not file
a
registration statement (other than a registration statement on Form S-4 or
Form
S-8 or a registration statement already approved by the Board) for securities
to
be issued and sold for its own account or that of anyone other than the Holder
or Holders of Registrable Securities requesting such registration.
(d) Indemnification.
(i) Indemnification
by the Company. The Company agrees to indemnify and hold harmless any Holder
of
Registrable Securities which has included Registrable Securities in a
registration statement, its officers, directors and agents and each Person,
if
any, who controls such Holder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and
all losses, claims, damages, liabilities and expenses (including reasonable
attorneys fees and costs of investigation) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained
in any
registration statement or final prospectus relating to the Registrable
Securities or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or based upon any omission or alleged omission
to
state therein a material fact required to be stated therein or necessary
to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of, or are based upon, any such
untrue statement or omission based upon information furnished in writing
to
Company by the Holder of the Registrable Securities or on such Holder’s behalf
expressly for use therein; provided, that with respect to any untrue statement
or omission made in any preliminary prospectus, the indemnity agreement
contained in this paragraph shall not apply to the extent that any such loss,
claim, damage, liability or expense results from the fact that a current
copy of
the prospectus was not sent or given to the person asserting any such loss,
claim, damage, liability or expense at or prior to the written confirmation
of
the sale of the Registrable Securities concerned if it is determined that
it was
the responsibility of the Holder of such Registrable Securities to provide
such
person with a current copy of the prospectus and such current copy of the
prospectus would have cured the defect giving rise to such loss, claim, damage,
liability or expense. It is agreed that the foregoing indemnity shall not
apply
to amounts paid in settlement of any such loss, claim, damage, liability
or
expense if such settlement is effected without the consent of the Company.
The
Company also agrees to indemnify any underwriters of the Registrable Securities,
their officers and directors and each person who controls such underwriters
on
substantially the same basis as that of the indemnification of the Holder
of
such Registrable Securities provided in this section (d).
(ii) Indemnification
by the Holder of Registrable Securities. The Holder of Registrable Securities,
to the extent it is selling Registrable Securities (“Selling
Holder”),
agrees to indemnify and hold harmless the Company, its directors and officers
and each Person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to the Selling
Holder, but only with respect to, and to the extent that, information furnished
in writing by the Selling Holder or on the Selling Holder’s behalf expressly for
use in any registration statement or final prospectus relating to the
Registrable Securities (or any amendment or supplement thereto, or any
preliminary prospectus) which contained an untrue statement or alleged untrue
statement of a material fact or omitted or allegedly omitted to state therein
a
material fact required to be stated therein or necessary to make the statements
therein not misleading. It is agreed that the foregoing indemnity shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or expense if such settlement is effected without the consent of the Selling
Holder. Notwithstanding anything to the contrary contained herein, the liability
of the Holder hereunder shall be limited to the proportion of any such loss,
claim, damage, liability or expense that is equal to the proportion that
the
public offering price of the shares of Registrable Securities sold by the
Holder
bears to the total public offering price of all securities sold in such
offering. The Selling Holder also agrees to indemnify and hold harmless the
underwriters on substantially the same basis of that of the indemnification
of
the Company provided in the preceding subsection.
(e) Contribution.
If the indemnification provided for in this Appendix C
is
unavailable to the Company, the Selling Holder or the underwriters in respect
of
any losses, claims, damages, liabilities, expenses or judgments referred
to
herein, then each such indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities,
expenses and judgments (i) as between the Company and the Selling Holder on
the one hand and the underwriters on the other, in such proportion as is
appropriate to reflect the relative benefits received by the Company and
the
Selling Holder on the one hand and the underwriters on the other from the
offering of the Registrable Securities, or if such allocation is not permitted
by applicable law, in such proportion as is appropriate to reflect not only
such
relative benefits but also the relative fault of the Company and the Selling
Holder on the one hand and of the underwriters on the other in connection
with
the statements or omissions which resulted in such losses, claims, damages,
liabilities, expenses or judgments, as well as any other relevant equitable
considerations and (ii) as between the Company on the one hand and each
Selling Holder on the other, in such proportion as is appropriate to reflect
the
relative fault of the Company and of each Selling Holder in connection with
such
statements or omissions, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Selling Holder on the
one
hand and the underwriters on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the
Company
and the Selling Holder bear to the total underwriting discounts and commissions
received by the underwriters, in each case as set forth in the table on the
cover page of the prospectus. The relative fault of the Company on the one
hand
and of each Selling Holder on the other shall be determined by reference
to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates
to
information supplied by such party, and the party’s relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or
omission. The Company and the Holder agree that it would not be just and
equitable if contribution pursuant to this section were determined by pro
rata
allocation or by any other method of allocation which does not take account
of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities, expenses or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred
by
such indemnified party in connection with investigating or defending any
such
action or claim. Notwithstanding the provisions of this section, no underwriter
shall be required to contribute any amount in excess of the amount by which
the
total price at which the Registrable Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any
damages which such underwriter has otherwise been required to pay by reason
of
such untrue or alleged untrue statement or omission or alleged omission,
and no
Selling Holder shall be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities of such
Selling Holder were offered to the public exceeds the amount of any damages
which such Selling Holder has otherwise been required to pay by reason of
such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of
the Securities Act) shall be entitled to contribution from any person who
was
not guilty of such fraudulent misrepresentation.
(f) Registration
Expenses and Enforcement.
(i) Registrations
Rights. The Company shall bear all Registration Expenses incurred in connection
with Piggyback Registration Rights, the Demand Registration Right and the
SB-2
Registration Right.
(ii) Expenses
of Registrant. The Company shall pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit, the fees and
expenses incurred in connection with any listing of the securities to be
registered on a securities exchange, and the fees and expenses of any person,
including special experts, retained by the Company.
(iii) Enforcement
of Registration Rights. Notwithstanding anything to the contrary contained
herein, the Company hereby agrees that each Holder of Registrable Securities
shall be entitled to specific performance of the registration rights hereunder.
(g) Assignment
of Registration Rights. Any of the rights of the Holders under this
Appendix C, including the right to have the Company register Registrable
Securities pursuant to this Agreement, may be assigned by each Holder to
any
permitted transferee if: (i) the Holder agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement
is
furnished to the Company after such assignment, (ii) the Company is
furnished with written notice of (A) the name and address of such
transferee or assignee, and (B) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, and (iv) such transfer shall have been made in
accordance with the applicable requirements of the Warrant. The transferee,
by
acceptance of the transfer of any registration rights hereunder, acknowledges
that it takes such rights subject to the terms and conditions hereof. Upon
any
transfer of less than all of its Registrable Securities, the Holder retains
registration rights with respect to Registrable Securities held by
it.