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EXHIBIT 2.5
REGISTRATION RIGHTS AGREEMENT
DATED AS OF
DECEMBER 7, 1998
BY AND BETWEEN
LAHAINA ACQUISITIONS, INC.
AND
GCA STRATEGIC INVESTMENT FUND LIMITED
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TABLE OF CONTENTS
1. INTRODUCTION.............................................................................................2
1.1 SECURITIES PURCHASE AGREEMENT...................................................................2
1.2 DEFINITION OF SECURITIES........................................................................2
1.3 NATIONAL MARKET REPRESENTATION..................................................................2
2. REGISTRATION UNDER SECURITIES ACT, ETC...................................................................2
2.1 MANDATORY REGISTRATION..........................................................................2
(A) REGISTRATION OF REGISTRABLE SECURITIES.................................................2
(B) REGISTRATION STATEMENT FORM............................................................2
(C) EXPENSES...............................................................................2
(D) EFFECTIVE REGISTRATION STATEMENT.......................................................2
(E) PLAN OF DISTRIBUTION...................................................................2
2.2 INCIDENTAL REGISTRATION.........................................................................2
(A) RIGHT TO INCLUDE REGISTRABLE SECURITIES................................................2
(B) PRIORITY IN INCIDENTAL REGISTRATIONS...................................................3
2.3 REGISTRATION PROCEDURES.........................................................................3
2.4 UNDERWRITTEN OFFERINGS..........................................................................7
(A) INCIDENTAL UNDERWRITTEN OFFERINGS......................................................7
(B) HOLDBACK AGREEMENTS....................................................................7
(C) PARTICIPATION IN UNDERWRITTEN OFFERINGS................................................7
2.5 PREPARATION; REASONABLE INVESTIGATION...........................................................7
2.6 REGISTRATION DEFAULT FEE........................................................................8
2.7 INDEMNIFICATION.................................................................................8
(A) INDEMNIFICATION BY THE COMPANY.........................................................8
(B) INDEMNIFICATION BY THE SELLERS.........................................................9
(C) NOTICES OF CLAIMS, ETC.................................................................9
(D) OTHER INDEMNIFICATION.................................................................10
(E) INDEMNIFICATION PAYMENTS..............................................................10
(F) CONTRIBUTION..........................................................................10
3. DEFINITIONS.............................................................................................11
4. RULE 144................................................................................................13
5. AMENDMENTS AND WAIVERS..................................................................................13
6. NOMINEES FOR BENEFICIAL OWNERS..........................................................................13
7. NOTICES.................................................................................................13
8. ASSIGNMENT..............................................................................................14
9. DESCRIPTIVE HEADINGS....................................................................................14
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10. GOVERNING LAW...........................................................................................14
11. COUNTERPARTS............................................................................................14
12. ENTIRE AGREEMENT........................................................................................14
13. SEVERABILITY............................................................................................14
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
December 7, 1998, between Lahaina Acquisitions, Inc., a Colorado corporation
(the "Company"), and GCA Strategic Investment Fund Limited (the "Fund").
1. INTRODUCTION.
1.1 SECURITIES PURCHASE AGREEMENT The Company and the
Fund has today executed that certain Securities Purchase Agreement (the
"Securities Purchase Agreement"), pursuant to which the Company has agreed,
among other things, to issue an aggregate of Seven Hundred Fifty Thousand
Dollars ($750,000.00) (U.S.) principal amount of 9% Convertible Notes of the
Company (the "Notes") to the Fund or its successors, assigns or transferees
(collectively, the "Holders"). The Notes are convertible into an indeterminable
number of shares (the "Note Conversion Shares") of the Company's common stock,
no par value per share (the "Common Stock") pursuant to the terms of the Notes.
The number of Note Conversion Shares is subject to adjustment upon the
occurrence of stock splits, recapitalizations and similar events occurring after
the date hereof.
1.2 DEFINITION OF SECURITIES. The Note Conversion Shares
are herein referred to as the "Securities."
1.3 NATIONAL MARKET REPRESENTATION. The Company
represents and warrants that the Company's Common Stock is currently eligible
for trading on the over-the-counter Bulletin Board operated by the National
Association of Securities Dealers, Inc. (the "OTC Bulletin Board") under the
symbol "▇▇▇▇." Certain capitalized terms used in this Agreement are defined in
Section 3 hereof; references to sections shall be to sections of this Agreement.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1 MANDATORY REGISTRATION.
(A) REGISTRATION OF REGISTRABLE SECURITIES. On
or before December 30, 1998, the Company shall prepare and file a registration
statement on Form S-1 to effect the registration under the Securities Act of
all, but not less than all, of the Registrable Securities which relate (or,
because of the indeterminable number thereof, which could reasonably be deemed
to relate) to the Securities; all to the extent requisite to permit the public
disposition of such Registrable Securities so to be registered. The Company
shall us its best efforts to cause the Registration Statement which is the
subject of this Section 2.1(a) (the "Registration Statement") to be declared
effective by the Commission no later than February 12, 1999 (the "Required
Effectiveness Date"). Nothing contained herein shall be deemed to limit the
number of Registrable Securities to be registered by the Company hereunder. As a
result, should the Registration Statement not relate to the maximum number of
Registrable Securities acquired by (or potentially acquirable by) the holders
thereof upon conversion of the Notes, or exercise of the Common Stock Purchase
Warrants described in Section 1 above, the Company shall be required to promptly
file a separate registration
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statement (utilizing Rule 462 promulgated under the Exchange Act, where
applicable) relating to such Registrable Securities which then remain
unregistered. The provisions of this Agreement shall relate to such separate
registration statement as if it were an amendment to the Registration Statement.
(B) REGISTRATION STATEMENT FORM. Registrations
under this Section 2.1 shall be on Form S-1 or such other appropriate
registration form of the Commission as shall permit the disposition of such
Registrable Securities in accordance with the intended method or methods of
disposition specified by the Fund; provided, however, such intended method of
deposition shall not include an underwritten offering of the Registrable
Securities.
(C) EXPENSES. The Company will pay all
Registration Expenses in connection with any registration required by this
Section 2.1.
(D) EFFECTIVE REGISTRATION STATEMENT. A
registration requested pursuant to this Section 2.1 shall not be deemed to have
been effected (i) unless a registration statement with respect thereto has
become effective within the time period specified herein, provided that a
registration which does not become effective after the Company filed a
registration statement with respect thereto solely by reason of the refusal to
proceed of any holder of Registrable Securities (other than a refusal to proceed
based upon the advice of counsel in the form of a letter signed by such counsel
and provided to the Company relating to a disclosure matter unrelated to such
holder) shall be deemed to have been effected by the Company unless the holders
of the Registrable Securities shall have elected to pay all Registration
Expenses in connection with such registration, (ii) if, after it has become
effective, such registration becomes subject to any stop order, injunction or
other order or extraordinary requirement of the Commission or other governmental
agency or court for any reason or (iii) if, after it has become effective, such
registration ceases to be effective for more than an aggregate of ninety (90)
days.
(E) PLAN OF DISTRIBUTION. The Company hereby
agrees that the Registration Statement shall include a plan of distribution
section reasonably acceptable to the Fund and substantially in the form annexed
hereto; provided, however, such plan of distribution section shall be modified
by the Company so as to not provide for the disposition of the Registrable
Securities on the basis of an underwritten offering.
2.2 INCIDENTAL REGISTRATION.
(A) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If
at any time after the date hereof but before the third anniversary of the date
hereof, the Company proposes to register any of its securities under the
Securities Act (other than by a registration in connection with an acquisition
in a manner which would not permit registration of Registrable Securities for
sale to the public, on Form S-8, or any successor form thereto, on Form S-4, or
any successor form thereto and other than pursuant to Section 2.1), on an
underwritten basis (either best-efforts or firm-commitment), then, the Company
will each such time give prompt written notice to all Holders of its intention
to do so and of such Holders' rights under this Section 2.2. Upon the written
request of any such Holder made within twenty (20) days after the receipt of any
such notice (which request shall specify the
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Registrable Securities intended to be disposed of by such Holder an and the
intended method of disposition thereof), the Company will, subject to the terms
of this Agreement, use its commercially reasonable best efforts to effect the
registration under the Securities Act of the Registrable Securities, to the
extent requisite to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of such Registrable Securities so to be
registered, by inclusion of such Registrable Securities in the registration
statement which covers the securities which the Company proposes to register,
provided that if, at any time after 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 either not to register or to delay registration of such securities, the
Company may, at its election, give written notice of such determination to each
Holder and, thereupon, (i) in the case of a determination not to register, shall
be relieved of this obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith), without prejudice, however, to
the rights of any holder or holders of Registrable Securities entitled to do so
to request that such registration be effected as a registration under Section
2.1, and (ii) in the case of a determination to delay registering, shall be
permitted to delay registering any Registrable Securities, for the same period
as the delay in registering such other securities. No registration effected
under this Section 2.2 shall relieve the Company of its obligation to effect any
registration upon request under Section 2.1, nor shall any such registration
hereunder be deemed to have been effected pursuant to Section 2.1. The Company
will pay all Registration Expenses in connection with each registration of
Registrable Securities requested pursuant to this Section 2.2. The right
provided the Holders of the Registrable Securities pursuant to this Section
shall be exercisable at their sole discretion and will in no way limit any of
the Company's obligations to pay the Securities according to their terms.
(B) PRIORITY IN INCIDENTAL REGISTRATIONS. If the
managing underwriter of the underwritten offering contemplated by this Section
2.2 shall inform the Company and holders of the Registrable Securities
requesting such registration by letter of its belief that the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, then the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering, (i) first securities proposed by the Company to be sold
for its own account, and (iii) second Registrable Securities and securities of
other selling security holders requested to be included in such registration pro
rata on the basis of the number of shares of such securities so proposed to be
sold and so requested to be included; provided, however, the holders of
Registrable Securities shall have priority to all shares sought to be included
by officers and directors of the Company as well as holders of ten percent (10%)
or more of the Company's Common Stock.
2.3 REGISTRATION PROCEDURES. If and whenever the Company
is required to effect the registration of any Registrable Securities under the
Securities Act as provided in Section 2.1 and, as applicable, 2.2, the Company
shall, as expeditiously as possible:
(i) prepare and file with the Commission the
Registration Statement to effect such registration (including such audited
financial statements as may be required by the Securities Act or the rules and
regulations promulgated thereunder) and thereafter use its commercially
reasonable best efforts to cause such registration statement to be declared
effective by
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the Commission, as soon as practicable, but in any event no later than the
Required Effectiveness Date (with respect to a registration pursuant to Section
2.1); provided, however, that before filing such registration statement or any
amendments thereto, the Company will furnish to the counsel selected by the
holders of Registrable Securities which are to be included in such registration,
copies of all such documents proposed to be filed;
(ii) with respect to any Registration Statement
pursuant to Section 2.1, prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by such registration
statement until the earlier to occur of six (6) years after the date of this
Agreement(subject to the right of the Company to suspend the effectiveness
thereof for not more than 10 consecutive days or an aggregate of 30 days in such
six (6) years period) or such time as all of the securities which are the
subject of such registration statement cease to be Registrable Securities (such
period, in each case, the "Registration Maintenance Period");
(iii) furnish to each seller of Registrable
Securities covered by such registration statement such number of conformed
copies of such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under Rule
424 under the Securities Act, in conformity with the requirements of the
Securities Act, and such other documents, as such seller and underwriter, if
any, may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities owned by such seller;
(iv) use its commercially reasonable best efforts
to register or qualify all Registrable Securities and other securities covered
by such registration statement under such other securities laws or blue sky laws
as any seller thereof shall reasonably request, to keep such registrations or
qualifications in effect for so long as such registration statement remains in
effect, and take any other action which may be reasonably necessary to enable
such seller to consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified or to consent to general
service of process in any such jurisdiction;
(v) use its commercially reasonable best efforts
to cause all Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable
Securities a signed counterpart, addressed to such seller, and the underwriters,
if any, of:
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(A) an opinion of counsel for the
Company, dated the effective date of such registration statement (or, if such
registration includes an underwritten public offering, an opinion dated the date
of the closing under the underwriting agreement),reasonably satisfactory in form
and substance to such seller) including that the prospectus and any prospectus
supplement forming a part of the Registration Statement does not contain an
untrue statement of a material fact or omits a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and
(B) a "comfort" letter (or, in the case
of any Person which does not satisfy the conditions for receipt of a "comfort"
letter specified in Statement on Auditing Standards No. 72, an "agreed upon
procedures" letter), dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, a letter of
like kind dated the date of the closing under the underwriting agreement),
signed by the independent public accountants who have certified the Company's
financial statement included in such registration statement, covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of the accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to the underwriters in underwritten public offerings of
securities (with, in the case of an "agreed upon procedures" letter, such
modifications or deletions as may be required under Statement on Auditing
Standards No. 35) and, in the case of the accountants' letter, such other
financial matters, and, in the case of the legal opinion, such other legal
matters, as such seller (or the underwriters, if any) may reasonably request;
(vii) notify the Sellers' Representative and its
counsel promptly and confirm such advice in writing promptly after the Company
has knowledge thereof:
(A) when the Registration Statement, the
prospectus or any prospectus supplement related thereto or post-effective
amendment to the Registration Statement has been filed, and, with respect to the
Registration Statement or any post-effective amendment thereto, when the same
has become effective;
(B) of any request by the Commission for
amendments or supplements to the Registration Statement or the prospectus or for
additional information;
(C) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings by an Person for that purpose; and
(D) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation or threat of any proceeding for such purpose;
(viii) notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, the
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prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material facts
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and at the request
of any such seller promptly prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include 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 not misleading in the light of the circumstances then
existing;
(ix) use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of the Registration
Statement at the earliest possible moment;
(x) otherwise use its commercially reasonable
best efforts to comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve
months, but not more than eighteen months, beginning with the first full
calendar month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(xi) enter into such agreements and take such
other actions as the Sellers' Representative shall reasonably request in writing
(at the expense of the requesting or benefiting sellers) in order to expedite or
facilitate the disposition of such Registrable Securities; and
(xii) use its commercially reasonable best efforts
to list all Registrable Securities covered by such registration statement on any
securities exchange on which any of the Registrable Securities are then listed.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing.
The Company will not file any registration statement pursuant to
Section 2.1, or amendment thereto or any prospectus or any supplement thereto
(including such documents incorporated by reference and proposed to be filed
after the initial filing of the Registration Statement) to which the Sellers'
Representative shall reasonably object, provided that the Company may file such
documents in a form required by law or upon the advice of its counsel.
The Company represents and warrants to each holder of Registrable
Securities that it has obtained all necessary waivers, consents and
authorizations necessary to execute this Agreement and consummate the
transactions contemplated hereby other than such waivers, consents and/or
authorizations specifically contemplated by the Securities Purchase Agreement.
Each Fund agrees that, upon receipt of any notice from the Company of
the occurrence of any event of the kind described in subdivision (viii) of this
Section 2.3, such Fund will forthwith discontinue such Fund's disposition of
Registrable Securities pursuant to the Registration Statement
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relating to such Registrable Securities until such Fund's receipt of the copies
of the supplemented or amended prospectus contemplated by subdivision (viii) of
this Section 2.3 and, if so directed by the Company, will deliver to the Company
(at the Company's expense) all copies, other than permanent file copies, then in
such Fund's possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice.
2.4 UNDERWRITTEN OFFERINGS.
(A) INCIDENTAL UNDERWRITTEN OFFERINGS. If the
Company at any time proposes to register any of its securities under the
Securities Act as contemplated by Section 2.2 and such securities are to be
distributed by or through one or more underwriters, the Company will, if
requested by any holder of Registrable Securities as provided in Section 2.2 and
subject to the provisions of Section 2.2(a), use its commercially reasonable
best efforts to arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such holder among the securities to be
distributed by such underwriters.
(B) HOLDBACK AGREEMENTS. Subject to such other
reasonable requirements as may be imposed by the underwriter as a condition of
inclusion of a Fund's Registrable Securities in the registration statement, each
Fund agrees by acquisition of Registrable Securities, if so required by the
managing underwriter, not to sell, make any short sale of, loan, grant any
option for the purchase of, effect any public sale or distribution of or
otherwise dispose of, except as part of such underwritten registration, any
equity securities of the Company, during such reasonable period of time
requested by the underwriter; provided however, such period shall not exceed the
120 day period commencing 30 days prior to the commencement of such underwritten
offering and ending 90 days following the completion of such underwritten
offering.
(C) PARTICIPATION IN UNDERWRITTEN OFFERINGS. No
holder of Registrable Securities may participate in any underwritten offering
under Section 2.2 unless such holder of Registrable Securities (i) agrees to
sell such Person's securities on the basis provided in any underwriting
arrangements approved, subject to the terms and conditions hereof, by the
holders of a majority of Registrable Securities to be included in such
underwritten offering and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents (other than powers of
attorney) required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other agreement in
connection with such offering) shall require any holder of Registrable
Securities to make an representations or warranties to or agreements with the
Company or the underwriters other than representations and warranties contained
in a writing furnished by such holder expressly for use in the related
registration statement or representations, warranties or agreements regarding
such holder, such holder's Registrable Securities and such holder's intended
method of distribution and any other representation required by law.
2.5 PREPARATION; REASONABLE INVESTIGATION. In connection
with the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the holders of
Registrable Securities registered under such registration statement, and their
respective counsel and accountants, the opportunity to participate in the
preparation of such
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registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the reasonable opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
2.6 REGISTRATION DEFAULT FEE. If the Registration
Statement contemplated in Section 2.1 is (x) not declared effective by the
Required Effectiveness Date or (y) such effectiveness is not maintained for the
Registration Maintenance Period, then the Company shall pay to the Fund the
Default Fee specified in Section 10.4 of the Securities Purchase Agreement.
2.7 INDEMNIFICATION.
(A) INDEMNIFICATION BY THE COMPANY. In the event
of any registration of any securities of the Company under the Securities Act,
the Company will, and hereby does agree to indemnify and hold harmless the
holder of any Registrable Securities covered by such registration statement, its
directors and officers, each other Person who participates as an underwriter in
the offering or sale of such securities and each other Person, if any, who
controls such holder or any such underwriter within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint or
several, to which such holder or any such director or officer or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or 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, and the Company will reimburse such holder and each such
director, officer, underwriter and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding, provided that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability, (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such holder or underwriter stating that it is for
use in the preparation thereof and, provided further that the Company shall not
be liable to any Person who participates as an underwriter in the offering or
sale of Registrable Securities or to any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
within the time required by the Securities Act to the Person asserting the
existence of an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person
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if such statement or omission was corrected in such final prospectus or an
amendment or supplement thereto. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such holder or
any such director, officer, underwriter or controlling person and shall survive
the transfer of such securities by such holder.
(B) INDEMNIFICATION BY THE SELLERS. The Company
may require, as a condition to including any Registrable Securities in any
registration statement filed pursuant to this Agreement, that the Company shall
have received an undertaking satisfactory to it from the prospective seller of
such Registrable Securities, to indemnify and hold harmless (in the same manner
and to the same extent as set forth in subdivision (a) of this Section 2.7) the
Company, each director of the Company, each officer of the Company and each
other Person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such seller specifically stating that it is for use in the preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Any such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by such seller.
(C) NOTICES OF CLAIMS, ETC. Promptly after
receipt by an indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding subdivisions of this
Section 2.7, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under the preceding subdivisions of this Section 2.7, except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party shall be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified, to the extent that the indemnifying party may wish, with counsel
reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability, or a covenant not to ▇▇▇, in respect to such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
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(D) OTHER INDEMNIFICATION. Indemnification
similar to that specified in the preceding subdivisions of this Section 2.7
(with appropriate modifications) shall be given by the Company and each seller
of Registrable Securities (but only if and to the extent required pursuant to
the terms of Section 2.7(b)) with respect to any required registration or other
qualification of securities under any Federal or state law or regulation of any
governmental authority, other than the Securities Act.
(E) INDEMNIFICATION PAYMENTS. The
indemnification required by this Section 2.7 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.
(F) CONTRIBUTION. If the indemnification
provided for in the preceding subdivision of this Section 2.7 is unavailable to
an indemnified party in respect of any expense, loss, claim, damage or liability
referred to therein, 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 expense, loss, claim, damage or liability
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the holder or underwriter, as the
case may be, on the other from the distribution of the Registrable Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and of the holder or underwriter, as the case may
be, on the other in connection with the statements or omissions which resulted
in such expense, loss, damage or liability, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the holder or underwriter, as the case may be, on the other in
connection with the distribution of the Registrable Securities shall be deemed
to be in the same proportion as the total net proceeds received by the Company
from the initial sale of the Registrable Securities by the Company to the
purchasers bear to the gain, if any, realized by all selling holders
participating in such offering or the underwriting discounts and commissions
received by the underwriter, as the case may be. The relative fault of the
Company on the one hand and of the holder or underwriter, as the case may be, on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission to state a
material fact relates to information supplied by the Company, by the holder or
by the underwriter and the parties' relative intent, knowledge, access to
information supplied by the Company, by the holder or by the underwriter and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, provided that the foregoing
contribution agreement shall not inure to the benefit of any indemnified party
if indemnification would be unavailable to such indemnified party by reason of
the provisions contained in the first sentence of subdivision (a) of this
Section 2.7, and in no event shall the obligation of any indemnifying party to
contribute under this subdivision (f) exceed the amount that such indemnifying
party would have been obligated to pay by way of indemnification if the
indemnification provided for under subdivisions (b) of this Section 2.7 had been
available under the circumstances.
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The Company and the holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this subdivision (f)
were determined by pro rata allocation (even if the holders and any underwriters
were treated as one entity for such purpose) or by any other method of
allocation that 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 and liabilities
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth in the preceding sentence and subdivision
(c) of this Section 2.7, 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 subdivision (f), no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
allege untrue statement or 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.
3. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"Agreement": As defined in Section 1.
"Commission": The Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"Common Stock": As defined in Section 1.
"Company": As defined in the introductory paragraph of this
Agreement.
"Conversion Shares": As defined in Section 1.
"Exchange Act": The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Notes": As defined in Section 1, such term to include any
securities issued in substitution of or in addition to such Notes.
"OTC Bulletin Board": As defined in Section 1.
"Person": A corporation, association, partnership,
organization, business, individual, governmental or political subdivision
thereof or a governmental agency.
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"Registrable Securities": The Securities and any securities
issued or issuable with respect to such Securities by way of stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. Once issued such
securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) they shall have been
distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (c) they shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent disposition of them shall not
require registration or qualification of them under the Securities Act or any
similar state law then in force, (d) they shall have ceased to be outstanding,
(e) on the expiration of the applicable Registration Maintenance Period or (f)
any and all legends restricting transfer thereof have been removed in accordance
with the provisions of Rule 144(k) (or any successor provision) under the
Securities Act.
"Registration Expenses": All expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, all registration, filing and NASD fees, all stock exchange and OTC
Bulletin Board or other NASD or stock exchange listing fees, all fees and
expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, the
reasonable fees and disbursements of not more than one law firm (not to exceed
$25,000) retained by the holder or holders of more than 50% of the Registrable
Securities, premiums and other costs of policies of insurance of the Company
against liabilities arising out of the public offering of the Registrable
Securities being registered and any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities, but excluding underwriting
discounts and commissions and transfer taxes, if any, provided that, in any case
where Registration Expenses are not to be borne by the Company, such expenses
shall not include salaries of Company personnel or general overhead expenses of
the Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event.
"Registration Maintenance Period": As defined in Section 2.3.
"Required Effectiveness Date": As defined in Section 2.1.
"Securities Act": The Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder.
"Securities Purchase Agreement": As defined in Section 1.
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"Sellers' Representative": Global Capital Advisors Ltd. or
such Person designated by Global Capital Advisors Ltd. as of the time of
disposition of the last of the Notes held by the Fund (or subsequent Sellers'
Representative).
4. RULE 144. The Company shall timely file the reports required
to be filed by it under the Securities Act and the Exchange Act (including but
not limited to the reports under Sections 13 and 15(d) of the Exchange Act
referred to in subparagraph (c) of Rule 144 adopted by the Commission under the
Securities Act) and the rules and regulations adopted by the Commission
thereunder (or, if the Company is not required to file such reports, will, upon
the request of any holder of Registrable Securities, make publicly available
other information) and will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement as to whether it has
complied with the requirements of this Section 4.
5. AMENDMENTS AND WAIVERS. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of the sum of the 51% or more of the shares of (i) Registrable
Securities issued at such time, plus (ii) Registrable Securities issuable upon
exercise or conversion of the Securities then constituting derivative securities
(if such Securities were not fully exchanged or converted in full as of the date
such consent if sought). Each holder of any Registrable Securities at the time
or thereafter outstanding shall be bound by any consent authorized by this
Section 5, whether or not such Registrable Securities shall have been marked to
indicate such consent.
6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election, be treated as the holder of
such Registrable Securities for purposes of any request or other action by any
holder or holders of Registrable Securities pursuant to this Agreement or any
determination of any number of percentage of shares of Registrable Securities
held by an holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership or such Registrable Securities.
7. NOTICES. Except as otherwise provided in this Agreement, all
notices, requests and other communications to any Person provided for hereunder
shall be in writing and shall be given to such Person (a) in the case of a party
hereto other than the Company, addressed to such party in the manner set forth
in the Securities Purchase Agreement or at such other address as such party
shall have furnished to the Company in writing, or (b) in the case of any other
holder of Registrable Securities, at the address that such holder shall have
furnished to the Company in writing, or, until
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any such other holder so furnishes to the Company an address, then to and at the
address of the last holder of such Registrable Securities who has furnished an
address to the Company, or (c) in the case of the Company, at the address set
forth on the signature page hereto, to the attention of its President, or at
such other address, or to the attention of such other officer, as the Company
shall have furnished to each holder of Registrable Securities at the time
outstanding. Each such notice, request or other communication shall be effective
(i) if given by mail, 72 hours after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid or (ii) if given
by any other means (including, without limitation, by fax or air courier), when
delivered at the address specified above, provided that any such notice, request
or communication shall not be effective until received.
8. ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto. In addition, and
whether or not any express assignment shall have been made, the provisions of
this Agreement which are for the benefit of the parties hereto other than the
Company shall also be for the benefit of and enforceable by any subsequent
holder of any Registrable Securities. Each of the Holders of the Registrable
Securities agrees, by accepting any portion of the Registrable Securities after
the date hereof, to the provisions of this Agreement including, without
limitation, appointment of the Sellers' Representative to act on behalf of such
Holder pursuant to the terms hereof which such actions shall be made in the good
faith discretion of the Sellers' Representative and be binding on all persons
for all purposes.
9. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS
OF THE STATE OF GEORGIA WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF
LAWS.
11. COUNTERPARTS. This Agreement may be executed by facsimile and
may be signed simultaneously in any number of counterparts, each of which shall
be deemed an original, but all such counterparts shall together constitute one
and the same instrument.
12. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the Company and each other party hereto relating to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
13. SEVERABILITY. If any provision of this Agreement, or the
application of such provisions to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those to which it is held invalid, shall
not be affected thereby.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
LAHAINA ACQUISITIONS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Title: President
-------------------------------
Address: P.O. Box N 8160
-----------------------------
Nassau, Bahamas
-----------------------------
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
-------------------------
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------
GCA STRATEGIC INVESTMENT FUND LIMITED
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Director
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇ ▇▇▇-▇▇▇▇
Tel.: ▇▇▇ ▇▇▇-▇▇▇▇
Registration Rights Agreement
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CERTIFICATE OF MONGOOSE INVESTMENTS, LCC
GCA Strategies Investment Fund, Limited
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
This Certificate is executed and delivered by Mongoose Investments, LLC
("Mongoose") in connection with the Securities Purchase Agreement ("the
Agreement") dated as of December 7, 1998 between Lahaina Acquisitions, Inc.
("Lahaina") and GCA Strategies Investment Fund, Limited ("GCA Fund") and the
Convertible Notes, Registration Rights Agreement and Warrant as defined in the
Agreement, and the Stock Purchase Agreement dated as of December 7, 1998 between
Lahaina and Mongoose.
In connection with the transaction contemplated by the Agreement,
Mongoose is acquiring 1,910,000 shares of the no par value per share Series A
Preferred Stock of Lahaina. The terms of the Preferred Stock are attached here
as Exhibit A.
This Certificate is to confirm that so long as the Convertible Notes,
Registration Rights Agreement and Warrant are outstanding, Mongoose will not
enforce any term of the Series A Preferred Stock which is inconsistent with the
obligations of Lahaina under the Convertible Notes, the Registration Rights
Agreement or the Warrant without the prior written consent of GCA Fund or any
successor holder of the Convertible Notes or Warrant, respectively.
This ____ day of December, 1998.
MONGOOSE INVESTMENTS, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Member
--------------------------------
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FORM OF REGISTRATION RIGHTS AGREEMENT
