Exhibit 4.3 Registration Rights Agreement
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of January 19, 2001 (this
"Agreement"), is made by and between ▇▇▇▇▇▇▇▇▇▇.▇▇▇ HOLDINGS, INC., a Colorado
corporation with headquarters located at Suite 500, 750 West ▇▇▇▇▇▇ Street,
Vancouver, British Columbia, Canada V6C 2T7 (the "Company"), and each entity
named on a signature page hereto (each, an "Initial Lender") (each agreement
with an Initial Lender being deemed a separate and independent agreement between
the Company and such Initial Lender, except that each Initial Lender
acknowledges and consents to the rights granted to each other Initial Lender
under such agreement).
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Securities Purchase
Agreement, dated as of January 19, 2001, between the Initial Lender and the
Company (the "Securities Purchase Agreement"; terms not otherwise defined herein
shall have the meanings ascribed to them in the Securities Purchase Agreement),
the Company has agreed to issue and sell to the Initial Lenders the Debentures
in the principal amount specified on the Initial Lender's signature page to the
Securities Purchase Agreement; and
WHEREAS, the Debentures are convertible into shares of Common Stock (the
"Converted Shares"; which term, for purposes of this Agreement, shall include
shares of Common Stock of the Company issuable in lieu of accrued interest on
the Debentures through the Maturity Date of the Debentures) upon the terms and
subject to the conditions contained in the Debentures and the other Transaction
Agreements; and
WHEREAS, the Company has agreed to issue Warrants to the Initial Lender in
connection with the issuance of the Debentures, and the Warrants may be
exercised for the purchase of shares of Common Stock (the "Warrant Shares") upon
the terms and conditions of the Warrants; and
WHEREAS, to induce the Initial Lender to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Securities;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial Lender
hereby agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Securities Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
(a) "Investor" means the Initial Lender and any permitted transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof and who holds Registrable Securities.
(b) "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which
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determination shall be accompanied by a good faith determination by the Board of
Directors of the Company that the registration statement would be materially
misleading absent the inclusion of such information; or (iii) an underwritten
public offering of securities (a "UPO") by the Company.
(c) "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(d) "Registrable Securities" means the Securities (including the Converted
Shares, any Additional Shares and the Warrant Shares).
(e) "Registration Statement" means a registration statement of the Company
under the Securities Act on Form S-3, if the Company is then eligible to file
using such form, and if not so eligible, on Form SB-2 or other appropriate form
or an amendment to an existing Registration Statement covering the Registrable
Securities.
(f) "Required Effective Date" means the relevant Initial Required Effective
Date or Increased Required Effective Date (as those terms are defined below).
2. Registration.
(a) Mandatory Registration.
(i) The Company shall prepare and file with the SEC, as soon as possible
after the Initial Closing Date but no later than a date (the "Required Filing
Date") which is thirty (30) days after the Closing Date, a Registration
Statement registering for resale by the Investor a sufficient number of shares
of Common Stock for the Investors to sell the Registrable Securities, but in no
event less than the number of shares equal to the sum of (A) one hundred fifty
percent (150%) of the aggregate number of shares into which the principal of the
Debentures and all interest thereon through their Maturity Date would be
convertible at the time of filing of such Registration Statement (assuming for
such purposes that all Debentures had been eligible to be converted, and had
been converted into Converted Shares in accordance with their terms, whether or
not such accrual of interest, eligibility or conversion had in fact occurred as
of such date), plus (B) any Additional Shares issued prior to such date, plus
(C) the number of Warrant Shares for all the Warrants (or such lesser number as
may be required by the SEC). The Registration Statement (W) shall include only
the Registrable Securities; and (X) shall also state that, in accordance with
Rule 416 and 457 under the Securities Act, it also covers such indeterminate
number of additional shares of Common Stock as may become issuable to prevent
dilution resulting from stock splits, or stock dividends. The Company will use
its reasonable best efforts to cause such Registration Statement to be declared
effective on a date (the "Initial Required Effective Date") which is no later
than the earlier of (Y) five (5) days after notice by the SEC that it may be
declared effective or (Z) seventy-five (75) days after the Closing Date.
(ii) If at any time (an "Increased Registered Shares Date"), the number of
shares of Common Stock represented by the Registrable Shares, issued or to be
issued as contemplated by the Transaction Agreements, exceeds the aggregate
number of shares of Common Stock then registered, the Company shall either (X)
amend the Registration Statement filed by the Company pursuant to the preceding
provisions of this Section 2, if such Registration Statement has not been
declared effective by the SEC at that time, to register, in the aggregate, at
least the number of shares computed, as of the Increased Registered Shares Date,
in the manner contemplated by the immediately preceding subparagraph (i), or (Y)
if such Registration Statement has been declared effective by the SEC at that
time, file with the SEC an additional Registration Statement (an "Additional
Registration Statement") to register the excess of the sum of (A) one hundred
fifty percent (150%) of (x) the
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number of shares theretofore issued as Conversion Shares, plus (y) the number of
shares into which the unconverted Debentures and all interest thereon through
the Maturity Date would be convertible at the Increased Registered Shares Date
(assuming for such purposes that all such Debentures had been eligible to be
converted, and had been converted, into Conversion Shares in accordance with
their terms, whether or not such accrual of interest, eligibility or conversion
had in fact occurred as of such date), plus (B) any Additional Shares issued
prior to such date, plus (C) the number of Warrant Shares for all the Warrants,
over the aggregate number of shares of Common Stock already registered. The
Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (each, an "Increased Required
Effective Date") which is no later than (Q) with respect to a Registration
Statement under clause (X) of this subparagraph (ii), the Initial Required
Effective Date and (R) with respect to an Additional Registration Statement, the
earlier of (I) five (5) days after notice by the SEC that it may be declared
effective or (II) seventy five (75) days after the Increased Registered Shares
Date.
(b) Payments by the Company.
(i) If the Registration Statement covering the Registrable Securities is
not filed with the SEC by the Required Filing Date, the Company will make
payment to the Investor in such amounts and at such times as shall be determined
pursuant to this Section 2(b).
(ii) If the Registration Statement covering the Registrable Securities is
not effective by the relevant Required Effective Date or if the Investor is
restricted from making sales of Registrable Securities covered by any previously
effective Registration Statement at any time (the date such restriction
commences, a "Restricted Sale Date") after the relevant Effective Date other
than during a Permitted Suspension Period (as defined below), then the Company
will make payments to the Investor in such amounts and at such times as shall be
determined pursuant to this Section 2(b).
(iii) The amount (the "Periodic Amount") to be paid by the Company to the
Initial Lender shall be determined as of each Computation Date (as defined
below) and such amount shall be equal to the Periodic Amount Percentage (as
defined below) of the Purchase Price for all Securities. The "Periodic Amount
Percentage" means (A) one percent (1%) for the period from the date following
the relevant Required Filing Date, Required Effective Date or Restricted Sale
Date, as the case may be, to the first relevant Computation Date, and (B) after
the first relevant Computation Date or any succeeding Computation Date, two and
one-half percent (2.5%) from each preceding Computation Date to the immediately
succeeding Computation Date. After the Effective Date, the Purchase Price shall
be deemed to refer to the sum of (q) the principal amount of all Debentures not
yet converted and (r) the Held Shares Value (as defined below). The "Held Shares
Value" means, for shares acquired by the Investor upon a conversion within the
thirty (30) days preceding the Restricted Sale Date, but not yet sold by the
Investor, the principal amount of the Debentures converted into such Conversion
Shares; provided, however, that if the Investor effected more than one
conversion during such thirty (30) day period and sold less than all of such
shares, the sold shares shall be deemed to be derived first from the conversions
in the sequence of such conversions (that is, for example, until the number of
shares from the first of such conversions have been sold, all shares shall be
deemed to be from the first conversion; thereafter, from the second conversion
until all such shares are sold). By way of illustration and not in limitation of
the foregoing, if the Registration Statement is timely filed but is not declared
effective until one hundred fifty (150) days after the Closing Date and assuming
none of the Debentures have been converted, the Periodic Amount will aggregate
six percent (6%) of the Purchase Price of the Securities (1% for days 76-105,
plus 2.5% for days 106-135, plus 2.5% for days 136-150).
(iv) Each Periodic Amount will be payable by the Company, except as
provided in the other provisions of this subparagraph (iv), in cash or other
immediately available funds to the Investor (1) on the day after the Required
Filing Date or the Required Effective Date, as the case may be, and (2) on the
earlier of (A) each thirtieth day thereafter, (B) the third business day after
the date the Registration Statement is filed or is declared effective, or (C)
the third business day after the Registration Statement has its restrictions
removed
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after the relevant Effective Date, as the case may be, in each case without
requiring demand therefor by the Investor.
(v) The parties acknowledge that the damages which may be incurred by the
Investor if the Registration Statement is not filed by the Required Filing Date
or the Registration Statement has not been declared effective by a Required
Effective Date, or if the right to sell Registrable Securities under a
previously effective Registration Statement is suspended, may be difficult to
ascertain. The parties agree that the Periodic Amounts represent a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of such damages.
(vi) Notwithstanding the foregoing, the amounts payable by the Company
pursuant to this provision shall not be payable (i) to the extent any delay in
the effectiveness of the Registration Statement occurs because of an act of, or
a failure to act or to act timely by the Investor or its counsel, (ii) in the
event all of the Registrable Securities may be sold pursuant to Rule 144 or
another available exemption under the Securities Act without volume or other
restrictions or limits or (iii) with respect to a Permitted Suspension Period.
(vii) "Computation Date" means (A) the date which is the earlier of (1)
thirty (30) days after the Required Filing Date, any relevant Required Effective
Date or a Restricted Sale Date, as the case may be, or (2) the date after the
Required Filing Date, such Required Effective Date or Restricted Sale Date on
which the Registration Statement is filed (with respect to payments due as
contemplated by Section 2(b)(i) hereof) or is declared effective or has its
restrictions removed (with respect to payments due as contemplated by Section
2(b)(ii) hereof), as the case may be, and (B) each date which is the earlier of
(1) thirty (30) days after the previous Computation Date or (2) the date after
the previous Computation Date on which the Registration Statement is filed (with
respect to payments due as contemplated by Section 2(b)(i) hereof) or is
declared effective or has its restrictions removed (with respect to payments due
as contemplated by Section 2(b)(ii) hereof), as the case may be.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC by the Required Filing Date a
Registration Statement with respect to not less than the number of Registrable
Securities provided in Section 2(a) above, and thereafter use its reasonable
best efforts to cause such Registration Statement relating to Registrable
Securities to become effective by the Required Effective Date and keep the
Registration Statement effective at all times during the period (the
"Registration Period") continuing until the earliest of (i) the date that is
three (3) years after the last day of the calendar month following the month in
which the Effective Date occurs, (ii) the date when the Investors may sell all
Registrable Securities under Rule 144 without volume or other restrictions or
limits or (iii) the date the Investors no longer own any of the Registrable
Securities, which Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective at all times during the Registration
Period, and, during the Registration Period, comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities of
the Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(c) Permit a single firm of counsel designated by the Initial Lenders to
review the Registration Statement and all amendments and supplements thereto a
reasonable period of time (but not less than three (3) business
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days) prior to their filing with the SEC, and not file any document in a form to
which such counsel reasonably objects.
(d) Notify each Investor, such Investor's legal counsel identified to the
Company (which, until further notice, shall be deemed to be ▇▇▇▇▇▇▇ & Prager
LLP, Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.; each, an "Investor's Counsel"), and any
managing underwriters immediately (and, in the case of (i)(A) below, not less
than five (5) days prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than one (1) business day following the
day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) whenever
the SEC notifies the Company whether there will be a "review" of such
Registration Statement; (C) whenever the Company receives (or a representative
of the Company receives on its behalf) any oral or written comments from the SEC
in respect of a Registration Statement (copies or, in the case of oral comments,
summaries of such comments shall be promptly furnished by the Company to the
Investors); and (D) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any proceedings for that
purpose; (iv) if at any time any of the representations or warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
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 (vi) of the occurrence of any event that to the
best knowledge of the Company 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 light of the circumstances under which they were
made, not misleading. In addition, the Company shall furnish Investor's Counsel
with copies of all intended written responses to the comments contemplated in
clause (C) of this Section 3(d) not later than one (1) business day in advance
of the filing of such responses with the SEC so that the Investors shall have
the opportunity to comment thereon.
(e) Furnish to each Investor and such Investor's Counsel (i) promptly after
the same is prepared and publicly distributed, filed with the SEC, or received
by the Company, one (1) copy of the Registration Statement, each preliminary
prospectus and prospectus, and each amendment or supplement thereto, and (ii)
such number of copies of a prospectus, and all amendments and supplements
thereto and such other documents, as such Investor may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
Investor;
(f) As promptly as practicable after becoming aware thereof, notify each
Investor of the happening of any event of which the Company has knowledge, as a
result of which the prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;
(g) As promptly as practicable after becoming aware thereof, notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance
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by the SEC of a Notice of Effectiveness or any notice of effectiveness or any
stop order or other suspension of the effectiveness of the Registration
Statement at the earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Investor receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that the
Company may not so suspend the right to such holders of Registrable Securities
during the periods the Registration Statement is required to be in effect other
than during a Permitted Suspension Period (and the applicable provisions of
Section 2(b) shall apply with respect to any such suspension other than during a
Permitted Suspension Period). The term "Permitted Suspension Period" means one
or more suspension periods during any consecutive 12-month period which
suspension periods, in the aggregate, do not exceed fifty (50) days, provided,
however, that no one such suspension period shall either (i) be for more than
twenty (20) days or (ii) begin less than ten (10) business days after the last
day of the preceding suspension (whether or not such last day was during or
after a Permitted Suspension Period). In the event that the Potential Material
Event is a UPO under which the lead underwriter has deemed it necessary to
suspend the registration for a period of time that would cause the Company to
exceed the fifty (50) day limit set out above, and pursuant to which the Company
makes a written request to the Investors to suspend the registration for such
period of time as has been determined appropriate by said lead underwriter,
approval for such request will not unreasonably be withheld.
(i) Use its reasonable efforts to maintain the quotation and trading of its
common stock and the quotation of the Registrable Securities on the NASD OTC
Bulletin Board; and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. as such with respect to such Registrable Securities;
(j) Provide a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than the effective date of the
Registration Statement;
(k) Cooperate with the Investors to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and opinion
of such counsel; and
(l) Take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement.
4. Obligations of the Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it, and the intended method of disposition of the Registrable Securities
held by it, as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least ten (10) days prior
to the first anticipated filing
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date of the Registration Statement, the Company shall notify each Investor of
the information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
(b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(f) or 3(g),
above, such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. The
Company may provide appropriate stock transfer orders in order to enforce the
provisions of this section; and
(d) Each investor covenants and agrees that it will comply with the
prospectus delivery requirements of the 1934 Act as applicable to it in
connection with the sale of Registrable Securities pursuant to the Registration
Statement.
5. Expenses of Registration.
(a) All reasonable expenses (other than underwriting discounts and
commissions of the Investor) incurred in connection with registrations, filings
or qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printers and accounting fees,
the fees and disbursements of counsel for the Company and a fee for a single
counsel for the Investors, in the aggregate for all Investors, equal to $3,500
for the initial Registration Statement covering the Registrable Securities and
$2,500 for each subsequent Registration Statement or amendment covering
Registrable Securities, shall be borne by the Company.
(b) Except as and to the extent specifically set forth in Exhibit 1
attached hereto, neither the Company nor any of its subsidiaries has, as of the
date hereof, nor shall the Company nor any of its subsidiaries, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that conflicts with the provisions hereof. Except as and to the extent
specifically set forth in Exhibit 1 attached hereto, neither the Company nor any
of its subsidiaries has previously entered into any agreement granting any
registration rights with respect to any of its securities to any Person. Nothing
herein shall be deemed to prevent the Company from granting registration rights
with respect to any shares of its common stock offered and sold after the date
hereof. Without limiting the generality of the foregoing, the Company is
explicitly permitted to register any securities necessary pursuant to its
previously signed agreements with Deephaven Private Placement Trading Ltd. and
Amro International, S.A, and to renew any registrations previously granted to
them as necessary under said agreements.
6. Indemnification. In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
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(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person" or "Indemnified Party"), against any
losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to state
therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were made, not
misleading or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to clause (b) of this Section 6, the Company shall
reimburse the Investors, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a) shall not (I) apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (II) be available to the extent such Claim is based on a failure of
the Investor to deliver or cause to be delivered the prospectus made available
by the Company; (III) apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld; or (IV) be available to the extent
such Claim is based on any act of gross negligence on the part of the Investor.
Each Investor will indemnify the Company and its officers, directors and agents
(each, an "Indemnified Person" or "Indemnified Party") against any claims
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company, by or on behalf
of such Investor, expressly for use in connection with the preparation of the
Registration Statement or a Violation that arises due to a Securities Act or
Exchange Act violation by such Investor pursuant to the sale of shares of the
Company by such Investor, subject to such limitations and conditions as are
applicable to the indemnification provided by the Company to this Section 6.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be. In case any
such action is brought against any Indemnified Person or Indemnified Party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such Indemnified Person or Indemnified Party of its
election so to assume the defense thereof, the indemnifying party will not be
46
liable to such Indemnified Person or Indemnified Party under this Section 6 for
any legal or other reasonable out-of-pocket expenses subsequently incurred by
such Indemnified Person or Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation, unless the indemnifying
party shall not pursue the action to its final conclusion. The Indemnified
Person or Indemnified Party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
reasonable out-of-pocket expenses of such counsel shall not be at the expense of
the indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the Indemnified Person or
Indemnified Party. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(a) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation; and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the Investors
the benefits of Rule 144 promulgated under the Securities Act or any other
similar rule or regulation of the SEC that may at any time permit the Investors
to sell securities of the Company to the public without registration ("Rule
144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities only if: (a) the Investor 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, (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (i) the name and address of such transferee or assignee and
(ii) the securities with respect to which such registration rights are being
transferred or assigned, (c) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, and
(d) at or before the time the Company received the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of
47
the provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment, the
Company shall not be liable for any damages arising from such delay, or the
payments set forth in Section 2(c) hereof arising from such delay.
10. Amendment of Registration Rights. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold a sixty-seven (67%)
percent interest of the Registrable Securities. Any amendment or waiver effected
in accordance with this Section 10 shall be binding upon each Investor and the
Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be given in
the manner contemplated by the Securities Purchase Agreement, (i) if to the
Company or to the Initial Lender, to their respective address contemplated by
the Securities Purchase Agreement, and (ii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 11(b).
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
coveniens, to the bringing of any such proceeding in such jurisdictions. To the
extent determined by such court, the Company shall reimburse the Buyer for any
reasonable legal fees and disbursements incurred by the Buyer in enforcement of
or protection of any of its rights under this Agreement.
(e) If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
(f) Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a
48
party, may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
(j) The Company acknowledges that any failure by the Company to perform its
obligations under Section 3(a) hereof, or any delay in such performance could
result in loss to the Investors, and the Company agrees that, in addition to any
other liability the Company may have by reason of such failure or delay, the
Company shall be liable for all direct damages caused by any such failure or
delay, unless the same is the result of force majeure, has been permitted
pursuant to a written waiver from the Investor(s), or is permitted by any other
provision of this Agreement or the Securities Purchase Agreement or any
agreement or document thereto. Neither party shall be liable for consequential
damages.
(k) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement thereof.
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49
EXHIBIT 1
Agreements Previously Entered Granting Registration Rights
-------------------------------------- ------------------------ ----------------------------------------------------
Shareholder Name Shares of Common Stock Owned/Description of Right to Acquire
-------------------------------------- ------------------------ ----------------------------------------------------
Deephaven Private Placement Trading 8,007,705 Common Shares and 181,818 Warrants at
Ltd. and Amro International, S.A. 8,280,432 $3.30 each
-------------------------------------- ------------------------ ----------------------------------------------------
Jesup & ▇▇▇▇▇▇ Securities Corporation 90,909 Warrants at $3.30 each
-------------------------------------- ------------------------ ----------------------------------------------------
Continental Capital & Equity 200,000 100,000 Common shares at $1.625 each and 100,000
Corporation Warrants at $4.00 each
-------------------------------------- ------------------------ ----------------------------------------------------
50
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective officers thereunto duly authorized as of the day and year
first above written.
COMPANY:
▇▇▇▇▇▇▇▇▇▇.▇▇▇ HOLDINGS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
INITIAL LENDER:
------------------------------------
[Print Name of Initial Lender]
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
51