Exhibit 99.2
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is made and entered
into as of January 12, 2006 by and between Electric & Gas Technology, Inc., a
Texas corporation (the "Company") and Vision Opportunity Master Fund, Ltd., a
Cayman Islands corporation (the "Purchaser").
This Agreement is being entered into pursuant to the Common Stock and
Warrant Purchase Agreement, dated as of the date hereof, by the parties hereto
(the "Purchase Agreement").
The Company and the Purchaser hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein 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 3(m).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Blackout Period" shall have the meaning set forth in Section 3(n).
"Board" shall have the meaning set forth in Section 3(n).
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
Texas generally are authorized or required by law or other government actions to
close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $0.01 per
share.
"Effective Date" means, as applicable, (i) ninety (90) days after the
Filing Date or (ii) 120 days after the Filing Date if the Registration Statement
is reviewed by the Commission.
"Effectiveness Period" shall have the meaning set forth in Section 2.
"Event" shall have the meaning set forth in Section 8(e).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means April 30, 2006.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities, including without limitation the
Purchaser and its assignees.
"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).
"Over-Allotment Option" shall have the meaning set forth in the
Warrant.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in any 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 such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Purchased Shares" means the shares of Common Stock purchased by the
Purchasers pursuant to the Purchase Agreement and the shares of Common Stock
which have been or may be purchased pursuant to the Over-Allotment Option.
"Registrable Securities" means (a) the Purchased Shares and the Warrant
Shares (without regard to any limitations on beneficial ownership contained in
the Purchase Agreement or Warrants) or other securities issued or issuable to
each Purchaser or its transferee or designee (i) upon exercise of the Warrants,
or (ii) upon any distribution with respect to, any exchange for or any
replacement of such Purchased Shares or Warrants or (iii) upon any conversion,
exercise or exchange of any securities issued in connection with any such
distribution, exchange or replacement; (b) securities issued or issuable upon
any stock split, stock dividend, recapitalization or similar event with respect
to the foregoing; and (c) any other security issued as a dividend or other
distribution with respect to, in exchange for, in replacement or redemption of,
or in reduction of the liquidation value of, any of the securities referred to
in the preceding clauses; provided, however, that such securities shall cease to
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be Registrable Securities when such securities have been sold to or through a
broker or dealer or underwriter in a public distribution or a public securities
transaction or when such securities may be sold without any restriction pursuant
to Rule 144(k) as determined by the counsel to the Company pursuant to a written
opinion letter, addressed to the Company's transfer agent to such effect as
described in Section 2 of this Agreement.
"Registration Statement" means the registration statements and any
additional registration statements contemplated by Section 2, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference in such registration
statement.
"Rule 144" means Rule 144 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 effect as such Rule.
"Rule 158" means Rule 158 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 effect as such Rule.
"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 effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means ▇▇▇▇▇▇ and ▇▇▇▇ LLP.
"Warrants" means the warrants issued pursuant to the Purchase Agreement
and issued or issuable pursuant to the Over-Allotment Option.
"Warrant Shares" means the shares of Common Stock issuable upon the
exercise of the warrants issued or to be issued to the Purchasers or their
assignees or designees in connection with the offering consummated under the
Purchase Agreement and any warrants issued or issuable in connection with the
Over-Allotment Option.
2. Registration. As soon as possible following the Closing Date (but
not later than the Filing Date), the Company shall prepare and file with the
Commission a "shelf" Registration Statement covering all Registrable Securities
for a secondary or resale offering to be made on a continuous basis pursuant to
Rule 415. The Registration Statement shall be on Form S-3 (or if such form is
not available to the Company on another form appropriate for such registration
in accordance herewith). The Company shall use its best efforts to cause the
Registration Statement to be declared effective under the Securities Act not
later than the Effective Date (including filing with the Commission a request
for acceleration of effectiveness in accordance with Rule 461 promulgated under
the Securities Act within five (5) Business Days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission that a
Registration Statement will not be "reviewed," or not be subject to further
review) and to keep such Registration Statement continuously effective under the
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Securities Act until such date as is the earlier of (x) the date when all
Registrable Securities covered by such Registration Statement have been sold or
(y) with respect to any Holder, such time as all Registrable Securities held by
such Holder may be sold without any restriction pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion letter,
addressed to the Company's transfer agent to such effect (the "Effectiveness
Period"). For purposes of the obligations of the Company under this Agreement,
no Registration Statement shall be considered "effective" with respect to any
Registrable Securities unless such Registration Statement lists the Holders of
such Registrable Securities as "Selling Stockholders" and includes such other
information as is required to be disclosed with respect to such Holders to
permit them to sell their Registrable Securities pursuant to such Registration
Statement, unless any such Holder is not included as a "Selling Stockholder"
pursuant to Section 3(m). Upon the initial filing thereof, the Registration
Statement shall cover at least 100% of the Purchased Shares and 100% of the
Warrant Shares. Such Registration Statement also shall cover, to the extent
allowable under the Securities Act and the Rules promulgated thereunder
(including Securities Act Rule 416), such indeterminate number of additional
shares of Common Stock resulting from stock splits, stock dividends or similar
transactions with respect to the Registrable Securities.
3. Registration Procedures.
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on Form S-3 (or if such form is not available to
the Company on another form appropriate for such registration in accordance
herewith) (which shall include a Plan of Distribution substantially in the form
of Exhibit A attached hereto) and cause the Registration Statement to become
effective and remain effective as provided herein; provided, however, that not
less than three (3) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto, the
Company shall (i) furnish to the Special Counsel, copies of all such documents
proposed to be filed, which documents (other than those incorporated by
reference) will be subject to the review of such Special Counsel, and (ii) at
the request of any Holder 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 counsel to such Holders, 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 or the Special Counsel shall reasonably object within
three (3) Business Days after their receipt thereof. In the event of any such
objection, the Holders shall provide the Company with any requested revisions to
such prospectus or supplement within two (2) Business Days of such objection.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and to the extent any
Registrable Securities are not included in such Registration Statement for
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reasons other than the failure of the Holder to comply with Section 3(m) hereof,
shall prepare and file with the Commission such amendments to the Registration
Statement or such additional Registration Statements in order to register for
resale under the Securities Act all 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
(or any similar provisions then in force) promulgated under the Securities Act;
(iii) respond as promptly as possible, and in no event later than ten (10)
Business Days to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as reasonably
possible provide the Holders true and complete copies of all correspondence from
and to the Commission relating to 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.
(c) Notify Holders of Registrable Securities to be sold and the Special
Counsel as promptly as possible (A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed (but in no event in the case of this subparagraph (A), less than
three (3) Business Days prior to date of such filing); (B) when the Commission
notifies the Company whether there will be a "review" of such Registration
Statement and whenever the Commission comments in writing on such Registration
Statement; and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective, and after the
effectiveness thereof: (i) of any request by the Commission or any other Federal
or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (ii) of the
issuance by the Commission 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; (iii) 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 (iv) if the financial statements included in the Registration
Statement become ineligible for inclusion therein or of the occurrence of any
event that makes 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 the light of the circumstances under which they were made, not misleading.
Without limitation to any remedies to which the Holders may be entitled under
this Agreement, if any of the events described in Section 3(c)(C)(i),
3(c)(C)(ii) and 3(c)(C)(iii) occur, the Company shall use its best efforts to
respond to and correct the event.
(d) Use its best efforts to avoid the issuance of, or, if issued, use
best efforts to obtain the withdrawal of, (i) any order suspending the
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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 time.
(e) If requested by any Holder of Registrable Securities, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the Company reasonably agrees should
be included therein and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment.
(f) Furnish to each Holder and the Special Counsel, without charge, at
least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, 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.
(g) Promptly deliver to each Holder and the Special Counsel, 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; and 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.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders and
the Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided, however,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process in any jurisdiction where it is
not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(i) Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold pursuant
to a Registration Statement, which certificates shall be free, to the extent
permitted by applicable law and 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 Holder may request at least two (2) Business
Days prior to any sale of Registrable Securities. In connection therewith, the
Company shall promptly after the effectiveness of the Registration Statement
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cause an opinion of counsel to be delivered to and maintained with its transfer
agent, together with any other authorizations, certificates and directions
required by the transfer agent, which authorize and direct the transfer agent to
issue such Registrable Securities without legend upon sale by the Holder of such
shares of Registrable Securities under the Registration Statement.
(j) Following the occurrence of any event contemplated by Section
3(c)(C)(iv), as promptly as 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 the light of the circumstances under which they were
made, not misleading.
(k) Cause all Registrable Securities relating to such Registration
Statement to be listed on any United States securities exchange, quotation
system, market or over-the-counter bulletin board, if any, on which similar
securities issued by the Company are then listed.
(l) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its security
holders earnings statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 3-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(m) Request each selling Holder to furnish to the Company information
regarding such Holder and the distribution of such Registrable Securities as is
required by law or the Commission to be disclosed in the Registration Statement,
and the Company may exclude from such registration the Registrable Securities of
any such Holder who fails to furnish such information within a reasonable time
prior to the filing of each Registration Statement, supplemented Prospectus
and/or amended Registration Statement.
If the Registration Statement refers to any Holder by name or otherwise
as the holder of any securities of the Company, then such Holder shall have the
right to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
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)(C)(i), 3(c)(C)(ii), 3(c)(C)(iii),
3(c)(C)(iv), or 3(n), 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 contemplated by Section 3(j), or until it is advised in writing (the
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"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.
(n) If (i) there is material non-public information regarding the
Company which the Company's Board of Directors (the "Board") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose and which the Company would be required to disclose
under the Registration Statement, then the Company may postpone or suspend
filing or effectiveness of a registration statement for a period not to exceed
30 consecutive days, provided that the Company may not postpone or suspend its
obligation under this Section 3(n) for more than 60 days in the aggregate during
any 12 month period (each, a "Blackout Period").
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 the
Registration Statement is filed or becomes effective and 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 each
securities exchange, quotation system, market or over-the-counter bulletin board
on which Registrable Securities are required hereunder to be listed, (B) with
respect to filings required to be made with the Commission, and (C) in
compliance with state securities or Blue Sky laws (including, without
limitation, reasonable and documented fees and disbursements of Special Counsel
in connection with Blue Sky qualifications of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the Holders of a majority of Registrable
Securities may designate)), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities and of
printing or photocopying prospectuses), (iii) messenger, telephone and delivery
expenses, (iv) Securities Act liability insurance, if the Company so desires
such insurance, (v) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement, including, without limitation, the Company's independent public
accountants (including, in the case of an underwritten offering, the expenses of
any comfort letters or costs associated with the delivery by independent public
accountants of a comfort letter or comfort letters) and legal counsel, and (vi)
reasonable and documented fees and expenses of the Special Counsel in connection
with any Registration Statement hereunder. 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,
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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 the listing of the Registrable
Securities on any securities exchange as required hereunder.
5. Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and employees
of each of them, each Person who controls any such Holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and reasonable attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained or incorporated by reference 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 amendment or supplement thereto, in the
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, which information was
reasonably relied on by the Company for use therein or to the extent that such
information relates to (x) such Holder and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of prospectus or in any amendment or supplement thereto
or (y) such Holder's proposed method of distribution of Registrable Securities
as set forth in Exhibit A (or as such Holder otherwise informs the Company in
writing); or (ii) in the case of an occurrence of an event of the type described
in Section 3(c)(C)(ii), 3(c)(C)(iii), 3(c)(C)(iv) or 3(n), the use by a Holder
of an outdated or defective Prospectus after the delivery to the Holder of
written notice from the Company that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 3(m);
provided, however, that the indemnity agreement contained in this Section 5(a)
shall not apply to amounts paid in settlement of any Losses if such settlement
is effected without the prior written consent of the Company, which consent
shall not be unreasonably withheld. 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. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of an Indemnified Party (as defined in
Section 5(c) to this Agreement) and shall survive the transfer of the
Registrable Securities by the Holders.
(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 and employees of such controlling Persons, to the
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fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any 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 arising solely
out of or based solely upon any 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 the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that (i) such untrue statement or omission is contained in
or omitted from any information so furnished in writing by such Holder to the
Company specifically for inclusion in the Registration Statement or such
Prospectus and that such information was reasonably relied upon by the Company
for use in the Registration Statement, such Prospectus, or in any amendment or
supplement thereto, or to the extent that such information relates to (x) such
Holder and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus, or such form
of prospectus or in any amendment or supplement thereto or (y) such Holder's
proposed method of distribution of Registrable Securities as set forth in
Exhibit A (or as such Holder otherwise informs the Company in writing) or (ii)
in the case of an occurrence of an event of the type described in Section
3(c)(C)(ii), 3(c)(C)(iii), 3(c)(C)(iv) or 3(n), the use by a Holder of an
outdated or defective Prospectus after the delivery to the Holder of written
notice from the Company that the Prospectus is outdated or defective and prior
to the receipt by such Holder of the Advice contemplated in Section 3(m);
provided, however, that the indemnity agreement contained in this Section 5(b)
shall not apply to amounts paid in settlement of any Losses if such settlement
is effected without the prior written consent of the Holder, which consent shall
not be unreasonably withheld. Notwithstanding anything to the contrary contained
herein, the Holder shall be liable under this Section 5(b) for only that amount
as does not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement.
(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 promptly shall 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 reasonable 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 proximately and materially adversely prejudiced the Indemnifying
Party.
An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
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satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the reasonable
expense of the Indemnifying Party). The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding and does not impose any monetary or other obligation or
restriction on the Indemnified Party.
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 (10) Business Days of written notice thereof to the
Indemnifying Party, which notice shall be delivered no more frequently than on a
monthly basis (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
Notwithstanding anything to the contrary contained herein, the Holder shall be
11
required to contribute under this Section 5(d) for only that amount as does not
exceed the net proceeds to such Holder as a result of the sale of Registrable
Securities pursuant to such Registration Statement.
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.
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.
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. The indemnity and contribution agreements herein are in
addition to and not in diminution or limitation of any indemnification
provisions under the Purchase Agreement.
6. Rule 144.
As long as any Holder owns Purchased Shares, Warrants or Warrant
Shares, the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of
the Exchange Act. As long as any Holder owns Purchased Shares, Warrants or
Warrant Shares, if the Company is not required to file reports pursuant to
Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the
Holders and make publicly available in accordance with Rule 144(c) promulgated
under the Securities Act annual and quarterly financial statements, together
with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act, as
well as any other information required thereby, in the time period that such
filings would have been required to have been made under the Exchange Act. The
Company further covenants that it will take such further action as any Holder
may reasonably request, all to the extent required from time to time to enable
such Person to sell Purchased Shares and Warrant Shares without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144 promulgated under the Securities Act, including compliance with the
provisions of the Purchase Agreement relating to the transfer of the Purchased
Shares and Warrant Shares. Upon the request of any Holder, the Company shall
deliver to such Holder a written certification of a duly authorized officer as
to whether it has complied with such requirements.
7. Other Agreements.
(a) Right of First Refusal for Future Financings. For a period
beginning on the date hereof and ending one (1) year after the effective date of
the Registration Statement hereunder, the Holder shall have a right of first
refusal to purchase any capital stock, warrants, debt or other securities (the
"Securities") offered by the Company on the terms and conditions set forth in
this Section 7(a) (the "Right of First Refusal").
12
(i) Notice of Proposed Offer. The Company shall: (A) deliver
to the Holder a written notice (the "Notice") stating: (I) its bona fide
intention to issue, grant, sell or otherwise transfer the Securities; (II) the
bona fide cash price or other consideration for which the Company proposes to
issue the Securities (the "Offered Price") and (III) the material terms and
conditions of the proposed issuance (the "Offer Terms") and (B) offer the
Securities to the Holder at the Offered Price and on the Offer Terms.
(ii) Exercise of Right of First Refusal. At any time within
fifteen (15) days after receipt of the Notice, the Holder may, by giving written
notice to the Company, elect to purchase all, but not less than all, of the
Securities proposed to be issued, at the Purchase Price and on the terms
determined in accordance with subsection (iii) below. The parties shall
thereupon work together in good faith to prepare definitive legal agreements
reflecting such price and terms.
(iii) Purchase Price. The purchase price (the "Purchase
Price") for the Securities purchased by the Holder under this Section 7(a) shall
be the Offered Price, and the terms and conditions of the transaction shall be
identical in all material respects to the Offer Terms.
(iv) Payment. Payment of the Purchase Price shall be made in
cash (by check or wire transfer) upon execution of definitive legal documents
and within thirty (30) days after delivery of the written notice by the Company
as set forth in (i), above.
(v) Company's Right to Transfer. If the Holder does not elect
to exercise its right of first refusal hereunder, then the Company may issue or
otherwise transfer the Securities at the Offered Price or at a higher price and
on the Offer Terms for a period of ninety (90) days; provided, that if such
securities are not sold within the 90-day period the right to sell such
Securities shall thereupon terminate and the terms of this Section 7(a) shall
once again apply.
(b) Limitation on Additional Registration Statements. For a period
commencing on the date hereof and ending on the 90th day following the effective
date of the Registration Statement contemplated by this Agreement, the Company
shall not file any other registration statement with the Commission other than
registration statements on Forms S-4 or S-8 or equivalent forms.
8. 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.
13
(b) No Inconsistent Agreements. Except as otherwise disclosed in the
Purchase Agreement, neither the Company nor any of its subsidiaries is a party
to an agreement currently in effect, 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 is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Without limiting the generality of the foregoing, without the written consent of
the Holders of a majority of the then outstanding Registrable Securities, the
Company shall not grant to any Person the right to request the Company to
register any securities of the Company under the Securities Act unless the
rights so granted are subject in all respects to the rights of the Holders set
forth herein, and are not otherwise in conflict with the provisions of this
Agreement.
(c) Notice of Effectiveness. Within two (2) Business Days after the
Registration Statement which includes the Registrable Securities is ordered
effective by the Commission, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Holders whose Registrable Securities are included
in such Registration Statement) confirmation that the Registration Statement has
been declared effective by the Commission in the form attached hereto as Exhibit
B.
(d) Piggy-Back Registrations. If at any time when there is not an
effective Registration Statement covering all of the Registrable Securities, 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 its then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each Holder of Registrable Securities written notice of such
determination and, if within seven (7) Business Days after receipt of such
notice, any such Holder shall so request in writing (which request shall specify
the Registrable Securities intended to be disposed of by the Holder), the
Company will cause the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the Holder, to
the extent required to permit the disposition of the Registrable Securities so
to be registered, provided that if at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to such Holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay expenses in accordance with Section 4 hereof), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities being registered pursuant to this Section 8(d) for the
same period as the delay in registering such other securities. The Company shall
include in such registration statement all or any part of such Registrable
Securities such Holder requests to be registered. In the case of an underwritten
public offering, if the managing underwriter(s) or underwriter(s) should
14
reasonably object to the inclusion of the Registrable Securities in such
registration statement, then if the Company after consultation with the managing
underwriter should reasonably determine that the inclusion of such Registrable
Securities, would materially adversely affect the offering contemplated in such
registration statement, and based on such determination recommends inclusion in
such registration statement of fewer or none of the Registrable Securities of
the Holders, then (x) the number of Registrable Securities of the Holders
included in such registration statement shall be reduced pro-rata among such
Holders (based upon the number of Registrable Securities requested to be
included in the registration), if the Company after consultation with the
underwriter(s) recommends the inclusion of fewer Registrable Securities, or (y)
none of the Registrable Securities of the Holders shall be included in such
registration statement, if the Company after consultation with the
underwriter(s) recommends the inclusion of none of such Registrable Securities;
provided, however, that if securities are being offered for the account of other
persons or entities as well as the Company, such reduction shall not represent a
greater fraction of the number of Registrable Securities intended to be offered
by the Holders than the fraction of similar reductions imposed on such other
persons or entities (other than the Company).
(e) Failure to File Registration Statement and Other Events. The
Company and the Holders agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to April 30, 2006 and maintained
in the manner contemplated herein during the Effectiveness Period. The Company
and the Holders further agree that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, if (i) the Registration
Statement is not filed on or prior to April 30, 2006, 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 (5) Business Days of the
date that the Company is notified (orally or in writing, whichever is earlier)
by the Commission that a Registration Statement will not be "reviewed," or not
subject to further review, or (iii) the Registration Statement is filed with and
declared effective by the Commission but thereafter ceases to be effective as to
all Registrable Securities at any time prior to the expiration of the
Effectiveness Period, without being succeeded immediately by a subsequent
Registration Statement filed with the Commission, except as otherwise permitted
by this Agreement, including pursuant to Section 3(n), or (iv) trading in the
Common Stock shall be suspended or if the Common Stock is delisted from any
securities exchange, quotation system, market or over-the-counter bulletin board
on which Registrable Securities are required hereunder to be listed (each an
"Exchange"), without immediately being listed on any other Exchange, for any
reason for more than one (1) Business Day, other than pursuant to Section 3(n),
or (v) the rights of the Holders to exercise into Warrant Shares are suspended
for any reason without the consent of the particular Holder other than as set
forth in the Purchase Agreement (any such failure or breach being referred to as
an "Event"), the Company shall pay in cash as liquidated damages for such
failure and not as a penalty to each Holder an amount equal to one percent (1%)
of such Holder's pro rata share of the purchase price paid by all Holders for
Purchased Shares purchased pursuant to the Purchase Agreement or the
Over-Allotment Option for the initial thirty (30) day period until the
applicable Event has been cured, which shall be pro rated for such periods less
than thirty (30) days and one percent (1%) of such Holder's pro rata share of
the purchase price paid by all Holders for Purchased Shares purchased pursuant
to the Purchase Agreement or the Over-Allotment Option for each subsequent
thirty (30) day period until the applicable Event has been cured which shall be
15
pro rated for such periods less than thirty days (the "Periodic Amount").
Payments to be made pursuant to this Section 8(e) shall be due and payable
immediately upon demand in immediately available cash funds. The parties agree
that the Periodic Amount represents a reasonable estimate on the part of the
parties, as of the date of this Agreement, of the amount of damages that may be
incurred by the Holders if the Registration Statement is not filed on or prior
to April 30, 2006 and maintained in the manner contemplated herein during the
Effectiveness Period or if any other Event as described herein has occurred.
Notwithstanding the foregoing, the Company shall remain obligated to cure the
breach or correct the condition that caused the Event, and the Holder shall have
the right to take any action necessary or desirable to enforce such obligation.
(f) Failure of Registration Statement to Become Effective. The Company
and the Holders agree that the Holders will suffer damages if the Registration
Statement is not declared effective on or prior to the Effective Date. The
Company and the Holders further agree that it would not be feasible to ascertain
the extent of such damages with precision. Accordingly, if the Registration
Statement is not declared effective on or prior to the Effective Date, the
Company shall pay in cash as liquidated damages for such failure and not as a
penalty to each Holder an amount equal to (i) one percent (1%) of such Holder's
pro rata share of the purchase price paid by all Holders for Purchased Shares
purchased pursuant to the Purchase Agreement or the Over-Allotment Option and
(ii) one percent (1%) of such Holder's pro rata share of the purchase price paid
by all Holders for Purchased Shares purchased pursuant to the Purchase Agreement
or the Over-Allotment Option for each subsequent thirty (30) day period (which
shall be pro rated for such periods less than thirty (30) days) until either (x)
the Registration Statement is declared effective or (y) the twelfth (12th) month
after the Closing Date has ended. Payments to be made pursuant to this Section
8(f) shall be due and payable immediately upon demand in immediately available
cash funds. The parties agree that the amounts set forth in this Section 8(f)
represent a reasonable estimate on the part of the parties, as of the date of
this Agreement, of the amount of damages that may be incurred by the Holders if
the Registration Statement is not declared effective on or prior to the
Effective Date. At any time that amounts continue to accrue pursuant to Section
8(e), such amounts shall be credited against any amounts that simultaneously
accrue pursuant to this Section 8(f) such that the Company shall in no event be
obligated to make any payments under this Section 8(f) with respect to any
period for which it is obligated to pay the Periodic Amount under Section 8(e).
Notwithstanding the foregoing, the Company shall remain obligated to cause the
Registration Statement to become effective, and the Holders shall have the right
to take any action necessary or desirable to enforce this obligation.
(g) Specific Enforcement, Consent to Jurisdiction. (i) The Company and
the Holders acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity.
(i) Each of the Company and the Holders (i) hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts located in New
York City, New York for the purposes of any suit, action or proceeding arising
out of or relating to this Agreement and (ii) hereby waives, and agrees not to
16
assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Each of the Company and the Holders consents
to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 8(g) shall affect
or limit any right to serve process in any other manner permitted by law.
(h) 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 the
Holders of at least a majority of the 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 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.
(i) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., New York City time, on
a Business Day, (ii) the next Business Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Business Day or later than 5:00
p.m., New York City time, on any date and earlier than 11:59 p.m., New York City
time, on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service such as Federal Express
or (iv) actual receipt by the party to whom such notice is required to be given.
The addresses for such communications shall be as set forth below:
If to the Company, addressed to:
Electric & Gas Technology, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Copy to:
Legal & Compliance, LLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
If to the Purchaser, addressed to:
Vision Opportunity Master Fund, Ltd.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Antti Uusiheimala
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Copy to:
▇▇▇▇▇▇ and ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice.
(j) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns
and shall inure to the benefit of each Holder and its successors and assigns;
provided, that the Company may not assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of each Holder; and
provided, further, that each Holder may assign its rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.
(k) Assignment of Registration Rights. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the Purchased Shares, the Warrants or the Registrable Securities
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 within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, 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 assignees is restricted under the Securities Act
and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section 8(k),
the transferee or assignee agrees in writing with the Company to be bound by all
18
of the provisions of this Agreement, and (v) such transfer shall have been made
in accordance with the applicable requirements of the Purchase Agreement. The
rights to assignment shall apply to the Holders (and to subsequent) successors
and assigns.
The Company may require, as a condition of allowing such assignment in
connection with a transfer of Purchased Shares, Warrants or Registrable
Securities (i) that the Holder or transferee of all or a portion of the
Purchased Shares, the Warrants or the Registrable Securities as the case may be,
furnish to the Company a written opinion of counsel that is reasonably
acceptable to the Company to the effect that such transfer may be made without
registration under the Securities Act, (ii) that the Holder or transferee
execute and deliver to the Company an investment letter in form and substance
acceptable to the Company and (iii) that the transferee be an "accredited
investor" as defined in Rule 501(a) promulgated under the Securities Act.
(l) Counterparts; Facsimile. 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 electronic means or
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.
(m) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law thereof.
(n) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(o) 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 in any respect, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(p) Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
(q) Registrable Securities Held by the Company and its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by the
Company or its Affiliates (other than any Holder or transferees or successors or
assigns thereof if such Holder is deemed to be an Affiliate solely by reason of
19
its holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(r) Obligations of Holders. The Company acknowledges that the
obligations of each Holder under this Agreement, are several and not joint with
the obligations of any other Holder, and no Holder shall be responsible in any
way for the performance of the obligations of any other Holder under this
Agreement. The decision of each Holder to enter into to this Agreement has been
made by such Holder independently of any other Holder. The Company further
acknowledges that nothing contained in this Agreement, and no action taken by
any Holder pursuant hereto, 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 or as a
group with respect to such obligations or the transactions contemplated hereby.
Each Holder shall be entitled to independently 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.
[signature page follows]
20
IN WITNESS WHEREOF, the parties hereto have caused this Investor Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
COMPANY:
Electric & Gas Technology, Inc.
By:____________________________
Name:__________________________
Title:_________________________
PURCHASER:
Vision Opportunity Master Fund, Ltd.
By:____________________________
Name:__________________________
Title:_________________________
21
EXHIBIT A
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the selling
security holders. Sales of shares may be made by selling security holders,
including their respective donees, transferees, pledgees or other
successors-in-interest directly to purchasers or to or through underwriters,
broker-dealers or through agents. Sales may be made from time to time on the OTC
Bulletin Board, any other exchange or market upon which our shares may trade in
the future, in the over-the-counter market or otherwise, at market prices
prevailing at the time of sale, at prices related to market prices, or at
negotiated or fixed prices. The shares may be sold by one or more of, or a
combination of, the following:
- a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction (including crosses in
which the same broker acts as agent for both sides of the transaction);
- purchases by a broker-dealer as principal and resale by such
broker-dealer, including resales for its account, pursuant to this
prospectus;
- ordinary brokerage transactions and transactions in which the broker
solicits purchases;
- through options, swaps or derivatives;
- in privately negotiated transactions;
- in making short sales or in transactions to cover short sales; and
- put or call option transactions relating to the shares.
The selling security holders may effect these transactions by selling
shares directly to purchasers or to or through broker-dealers, which may act as
agents or principals. These broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the selling security holders
and/or the purchasers of shares for whom such broker-dealers may act as agents
or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions). The
selling security holders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities.
The selling security holders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with those
transactions, the broker-dealers or other financial institutions may engage in
short sales of the shares or of securities convertible into or exchangeable for
the shares in the course of hedging positions they assume with the selling
22
security holders. The selling security holders may also enter into options or
other transactions with broker-dealers or other financial institutions which
require the delivery of shares offered by this prospectus to those
broker-dealers or other financial institutions. The broker-dealer or other
financial institution may then resell the shares pursuant to this prospectus (as
amended or supplemented, if required by applicable law, to reflect those
transactions).
The selling security holders and any broker-dealers that act in
connection with the sale of shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933, and any commissions
received by broker-dealers or any profit on the resale of the shares sold by
them while acting as principals may be deemed to be underwriting discounts or
commissions under the Securities Act. The selling security holders may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the shares against liabilities, including liabilities arising
under the Securities Act. We have agreed to indemnify each of the selling
security holders and each selling security holder has agreed, severally and not
jointly, to indemnify us against some liabilities in connection with the
offering of the shares, including liabilities arising under the Securities Act.
The selling security holders will be subject to the prospectus delivery
requirements of the Securities Act. We have informed the selling security
holders that the anti-manipulative provisions of Regulation M promulgated under
the Securities Exchange Act of 1934 may apply to their sales in the market.
Selling security holders also may resell all or a portion of the shares
in open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of Rule 144.
Upon being notified by a selling security holder that a material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, we will file a supplement to
this prospectus, if required pursuant to Rule 424(b) under the Securities Act,
disclosing:
- the name of each such selling security holder and of the participating
broker-dealer(s);
- the number of shares involved;
- the initial price at which the shares were sold;
- the commissions paid or discounts or concessions allowed to the
broker-dealer(s), where applicable;
- that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this
prospectus; and
- other facts material to the transactions.
23
In addition, if required under applicable law or the rules or
regulations of the Commission, we will file a supplement to this prospectus when
a selling security holder notifies us that a donee or pledgee intends to sell
more than 500 shares of common stock.
We are paying all expenses and fees customarily paid by the issuer in
connection with the registration of the shares. The selling security holders
will bear all brokerage or underwriting discounts or commissions paid to
broker-dealers in connection with the sale of the shares.
24
EXHIBIT B
FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT
[Name and Address of Transfer Agent]
Re: Electric & Gas Technology, Inc.
Dear [___________]:
We are counsel to Electric & Gas Technology, Inc., a Texas corporation
(the "Company"), and have represented the Company in connection with that
certain Common Stock and Warrant Purchase Agreement (the "Purchase Agreement")
dated as of ______________, ____ by and among the Company and the buyers named
therein (collectively, the "Holders") pursuant to which the Company issued to
the Holders shares of its Common Stock, par value $0.01 per share (the "Common
Stock"), and warrants to purchase shares of the Common Stock (the "Warrants").
Pursuant to the Purchase Agreement, the Company has also entered into an
Investor Rights Agreement with the Holders (the "Investor Rights Agreement")
pursuant to which the Company agreed, among other things, to register the shares
of Common Stock issued pursuant to the Purchase Agreement and the Common Stock
issuable upon exercise of the Warrants, under the Securities Act of 1933, as
amended (the "1933 Act"). In connection with the Company's obligations under the
Investor Rights Agreement, on __________ __, ____, the Company filed a
Registration Statement on Form S-__ (File No. ___-____________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Holders as
a selling securityholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
By:__________________________________
cc: [LIST NAMES OF HOLDERS]