REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made as of
December 30, 2003, by and between AXM Pharma, Inc., a Nevada corporation (the
"Company"), and those persons whose names appear on Schedule A, as such Schedule
A is amended from time to time (collectively, the "Investors").
WITNESSETH:
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WHEREAS, the Company has entered into a Securities Purchase Agreement,
dated December 30, 2003, with each of the Investors (the "Purchase Agreement"),
pursuant to which each Investor has agreed to purchase shares of the Company's
Series B Preferred Sock ("Shares") and warrants to purchase the Company's Common
Stock (defined below) for $3.00 per share, subject to adjustment ("Warrants"),
as set forth in the Purchase Agreement; and
WHEREAS, as a condition to the consummation of the transactions
contemplated by the Purchase Agreement, the Company has agreed to grant certain
registration rights to the Investors on the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties hereto agree as follows:
1. Definitions. The following terms used in this Agreement shall have
the meanings set forth below:
1.1 "Commission" means the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
1.2 "Common Stock" shall mean the common stock, par value
$.001 per share, of the Company, or in the case of a conversion,
reclassification or exchange (or any other adjustment or readjustment under
Section 5 of the Warrants) of such shares such Common Stock, shares of the stock
issued or issuable in respect of such shares of Common Stock, and all provisions
of this Agreement shall be applied appropriately thereto and to any stock
resulting therefrom.
1.3 "Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any similar federal statute enacted hereafter, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
1.4 "Form SB-2" means such form under the Securities Act as in
effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the Commission which permits inclusion or incorporation
of substantial information by reference to other documents filed by the Company
with the Commission.
1.5 "Other Stockholders" means any other stockholders of the
Company (including any other investors) who are granted registration rights that
would affect the rights granted to the Investors under this Agreement.
1.6 "Person" shall mean any individual, firm, corporation,
partnership, limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind.
1.7 "Register," "Registered" and "Registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of
effectiveness of such registration statement by the Commission.
1.8 "Registrable Securities" means the shares of Common Stock
issuable upon the conversion of the Series B Preferred Stock and/or the exercise
of the Warrants purchased pursuant to the Purchase Agreement.
1.9 "Registration Expenses" means all expenses incurred by the
Company in compliance with Section 3 of this Agreement, including, without
limitation, all registration and filing fees, listing fees, printing expenses,
fees and disbursements of counsel and accountants for the Company, blue sky fees
and expenses, the expenses of any special audits incident to or required by any
such registration and the expense of any "comfort letters" (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).
1.10 "Securities Act" means the Securities Act of 1933, as
amended, or any similar federal statute enacted hereafter, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
1.11 "Selling Expenses" means all selling commissions or
underwriter's discounts applicable to the sale of Registrable Securities.
2. Registration. The Company will file, six months of the date of this
Agreement (the "Filing Date"), a registration statement on Form SB-2 (or such
other form as is appropriate) registering the offer and sale of the Registrable
Securities by the holders thereof and containing the "Plan of Distribution"
attached hereto as Schedule B.
3. Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Agreement will be borne by the Company, and all Selling Expenses will be borne
by the Investors.
4. Registration Procedures.
4.1 With respect to the registration effected by the Company
pursuant to this Agreement, the Company will confirm initiation of the
registration by giving written notice of initiation and completion thereof to
all of the Investors and will, at its expense:
(a) Keep the registration statement continuously
effective for a period of 24 months or until all of the Registrable Securities
are freely tradable under the Securities Act, whichever occurs first; provided,
however, that the Company will keep such registration effective for longer than
24 months if the costs and expenses associated with such extended registration
are borne by the selling Investors; and provided further that in the case of any
registration of Registrable Securities on Form SB-2 which are intended to be
offered on a continuous or delayed basis, such 24-month period shall, at the
cost and expense of the Company, be extended, if necessary, to keep the
registration statement effective until all such Registrable Securities are sold,
provided that Rule 415, or any successor rule under the Securities Act, permits
an offering on a continuous or delayed basis, and provided, further, that
applicable rules and regulations under the Securities Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (y) includes any prospectus required by Section
10(a)(3) of the Securities Act or (z) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information otherwise required to
be included in such post-effective amendment covered by (y) and (z) above to be
contained in periodic reports filed pursuant to Section 13 or 15(d) of the
Exchange Act in the registration statement;
(b) Prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement;
(c) Furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as an Investor from time to time may reasonably request;
(d) Notify each seller of Registrable Securities
covered by the registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event 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 not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller, 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 shares, 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 or
incomplete in the light of the circumstances then existing;
(e) List all such Registrable Securities registered
in the registration on each securities exchange or automated quotation system on
which the Common Stock of the Company is then listed;
(f) Provide a transfer agent and registrar for all
Registrable Securities and a CUSIP number for all such Registrable Securities,
not later than the effective date of the registration;
(g) Make available for inspection by any Investor and
any attorney or accountant retained by any such Investor, all financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers and directors to supply all information reasonably
requested by any such Investor, attorney or accountant in connection with the
registration statement;
(h) Furnish to each selling Investor upon request a
signed counterpart, addressed to each such selling Investor, of
(i) an opinion of counsel for the Company,
dated the effective date of the registration
statement in form reasonably acceptable to such
Investor and its counsel, and
(ii) "comfort" letters signed by the
Company's independent public accountants who have
examined and reported on the Company's financial
statements included in the registration statement, to
the extent permitted by the standards of the American
Institute of Certified Public Accountants, covering
such matters as are customarily covered in opinions
of issuer's counsel and accountants' "comfort"
letters delivered to underwriters in underwritten
public offerings of securities;
(i) Furnish to each selling Investor upon request a
copy of all documents filed with and all correspondence from or to the
Commission in connection with the offering; and
(j) Make available to its stockholders, as soon as
reasonably practicable, an earnings statement covering the period of at least 12
months, but not more than 18 months, beginning with the first month after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
4.2 It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Agreement in respect of the
Registrable Securities of any Investor that such Investor shall furnish to the
Company such information regarding itself and the Registrable Securities held by
it as the Company shall reasonably request and as shall be required in
connection with the action to be taken by the Company.
4.3 In connection with the preparation and filing of the
registration statement under this Agreement, the Company will give the Investors
on whose behalf such Registrable Securities are to be registered and their
respective counsel and accountants the opportunity to review and make comments
to the registration statement, each prospectus included therein or filed with
the Commission, and each amendment thereof or supplement thereto, and will give
each such Investor such access to the Company's books and records and such
opportunities to discuss the business of the Company with its officers, its
counsel and the independent public accountants who have certified the Company's
financial statements, as shall be necessary, in the opinion of such Investors or
their counsel, in order to conduct a reasonable and diligent investigation
within the meaning of the Securities Act.
5. Indemnification.
5.1 To the extent permitted by law, the Company will indemnify
and hold harmless each Investor, each of its officers, directors and partners,
and each Person, if any, controlling such Investor, against all losses, claims,
damages and liabilities (or actions, proceedings or settlements in respect
thereof), joint or several, to which they may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions, proceedings or settlements in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement, or
any misstatement of a material fact or alleged misstatement of a material fact
contained in the registration statement, including any prospectus, offering
circular or other document, notification or the like, or any amendments or
supplements thereto, or arise out of or are based upon the omissions or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with the registration, qualification or compliance; and will
reimburse each such Investor, each of its officers, directors and partners, and
each Person, if any, controlling such Investor, for any legal or other expenses
reasonably incurred and as incurred by them in connection with investigating or
defending or settling any such loss, claim, damage, liability, or action;
provided, however, that the Company shall not be liable in any such case for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission or misstatement or alleged misstatement made in reliance
upon and based upon written information furnished to the Company expressly for
use in connection with such registration by any such Investor or controlling
Person.
5.2 To the extent permitted by law, each Investor severally
but not jointly will, if Registrable Securities held by such Investor are
included in the securities as to which the registration, qualification or
compliance is being effected, indemnify and hold harmless the Company, each of
its directors and officers who have signed the registration statement, each
Person, if any, who controls the Company (other than such Investor), each other
such Investor and each of their officers, directors and partners, and each
Person controlling such Investor or other stockholder, against all losses,
claims, damages and liabilities (or actions, proceedings or settlements in
respect thereof) to which the Company or any such director, officer, controlling
Person, agent or attorney may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages, or liabilities (or actions,
proceedings or settlements in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement or misstatement of a material
fact or alleged misstatement of a material fact contained in the registration
statement, including any prospectus or any amendments or supplements thereto, or
arise out of or are based upon 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, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission or misstatement or alleged misstatement was made in such
registration statement, prospectus, or amendments or supplements thereto, in
reliance upon and in conformity with written information with respect to such
Investor furnished by such Investor expressly for use in connection with such
registration; and each such Investor will reimburse any legal or other expenses
reasonably incurred by the Company, each of its directors and officers, each
other Investor and each of their officers, directors and partners and each
Person controlling such other Investor or other stockholder for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such loss, claim, damage, liability, or action, in each case only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission is made in the registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Company by such Investor and stated to be
specifically for use therein. Notwithstanding anything to the contrary contained
herein, no Investor shall be liable under this Section 5.2 for any amount in
excess of the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such registration statement.
5.3 Promptly after receipt by an indemnified party under this
paragraph of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this paragraph, notify the indemnifying party in writing 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 given notice to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that if the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party, or if the interests
of the indemnified party may reasonably be deemed to conflict with the interests
of the indemnifying party, the indemnified party shall have the right to select
a separate counsel and to assume such legal defense and otherwise to participate
in the defense of such action, with the expense and fees of such separate
counsel and other expenses relating to such participation to be reimbursed by
the indemnifying party as incurred. The failure to notify an indemnifying party
promptly of the commencement of any such action, if prejudicial to his ability
to defend such action, shall not relieve such indemnifying party of liability to
the indemnified party under this paragraph, but such liability shall be reduced
in accordance with the extent of such prejudice.
6. Information by the Investor. Each Investor holding Registrable
Securities to be included in the registration will furnish to the Company such
information regarding such Investor and the distribution proposed by such
Investor as the Company may reasonably request in writing and as may be
reasonably required by applicable law in connection with any registration,
qualification or compliance referred to in this Agreement.
7. Transfer or Assignment. The rights to cause the Company to register
securities granted by the Company under this Agreement may be assigned or
otherwise transferred by any Investor or by any subsequent transferee of any
such rights without the written consent of the Company.
8. No Conflict of Rights. The Company will not hereafter enter into any
agreement with respect to its securities which is inconsistent with the rights
granted to the Investors in this Agreement. Without limiting the generality of
the foregoing, the Company will not hereafter enter into any agreement with
respect to its securities which grants or modifies any existing agreement with
respect to its securities to grant to any holder of its securities in connection
with an incidental registration of such securities equal or higher priority to
the rights granted to the Investors in this Agreement.
9. Exchange Act Compliance. So long as the Company remains subject to
the reporting requirements of the Exchange Act, the Company shall file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the Commission thereunder, and will
take all actions reasonably necessary to enable holders of Registrable
Securities to sell such securities without registration under the Securities Act
within the limitation of the provisions of (a) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, (b) Rule 144A under the
Securities Act, as such Rule may be amended from time to time, if applicable or
(c) any similar rules or regulations hereunder adopted by the Commission. Upon
the request of any Investor holding Registrable Securities, the Company will
deliver to such Investor a written statement as to whether it has complied with
such requirements.
10. Miscellaneous.
10.1 Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any person, or which such person is
prohibited from taking, such provision will be applicable whether such action is
taken directly or indirectly by such person.
10.2 Governing Law. This Agreement will be deemed to have been
made and delivered in New York, New York and will be governed as to validity,
interpretation, construction, effect and all other respects by internal laws of
the State of New York. The Company and Investor agree that any legal suit,
action or proceeding arising out of or relating to this Agreement shall be
instituted exclusively before the United States District Court for the Southern
District of New York or the courts of the State of New York located in New York
County.
10.3 Section Headings. The headings of the sections and
subsections of this Agreement are inserted for convenience only and may not be
deemed to constitute a part thereof.
10.4 Notices. All communications and notices under this
Agreement must be in writing and delivered by hand or mailed by overnight
courier that can provide receipt of delivery or by registered or certified mail,
postage prepaid:
If to the Company: AXM Pharma, Inc.
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Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with copies (which copies
shall not constitute notice
to the Company) to: Law Offices of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, P.C.
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Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
If to any Investor: To the address set forth in the Purchase
Agreement
10.5 Successors and Assigns. This Agreement will inure to
the benefit of and be binding upon the successors and assigns of each of the
parties.
10.6 Entire Agreement; Amendment and Waiver. This Agreement
constitutes the entire understanding of the parties hereto relating to the
subject matter hereof and supersedes all prior agreements or understandings with
respect to the subject matter hereof among such parties.
10.7 Counterparts; Fax Execution. This Agreement may be
executed in one or more counterparts, each of which will be deemed an original
and all of which together will be considered one and the same agreement. This
Agreement may be executed by fax delivery of a signed signature page to the
other parties and such fax execution will be effective for all purposes.
10.8 Severability. Any provision of this Agreement which is
determined to be illegal, prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such illegality,
prohibition or unenforceability without invalidating the remaining provisions
hereof which shall be severable and enforceable according to their terms and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
[SIGNATURE PAGE FOLLOWS]
EXECUTED:
AXM PHARMA, INC.
By:____________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President
BANYAN ASIA LIMITED
By: BANYAN FUND MANAGEMENT, LLC,
its General Partner
By: _____________________________
S.P. Wijegoonaratna,
Managing Member
BANYAN MAC 24, LTD.
By: BANYAN FUND MANAGEMENT, LLC,
its General Partner
By: _____________________________
S.P. Wijegoonaratna,
Managing Member
SCHEDULE A
LIST OF INVESTORS
Banyan Asia Limited
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Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Banyan Mac 24, Ltd.
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▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
SCHEDULE B
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the selling
stockholders. The shares of common stock may be sold in one or more transactions
at fixed prices, at prevailing market prices at the time of sale, at prices
related to the prevailing market prices, at varying prices determined at the
time of sale, or at negotiated prices. These sales may be effected at various
times in one or more of the following transactions, or in other kinds of
transactions:
o transactions on any national securities exchange or U.S. inter-dealer
system of a registered national securities association on which the
common stock may be listed or quoted at the time of sale;
o in the over-the-counter market;
o in private transactions and transactions otherwise than on these
exchanges or systems or in the over-the-counter market;
o in connection with short sales of the shares;
o by pledge to secure or in payment of debt and other obligations;
o through the writing of options, whether the options are listed on an
options exchange or otherwise;
o in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions
in standardized or over-the-counter options; or
o through a combination of any of the above transactions.
Each selling stockholder and its successors, including its transferees,
pledgees or donees or their successors, may sell the common stock directly to
the purchaser or through underwriters, broker-dealers or agents, who may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholder or the purchaser. These discounts, concessions or
commissions as to any particular underwriter, broker-dealer or agent may be in
excess of those customary in the types of transactions involved.
In addition, any securities covered by this prospectus which qualify
for sale pursuant to Rule 144 of the Securities Act may be sold under Rule 144
rather than pursuant to this prospectus.
We entered into a registration rights agreement for the benefit of the
selling stockholders to register the common stock under applicable federal and
state securities laws. The registration rights agreement provides for
cross-indemnification of the selling stockholders and us and our respective
directors, officers and controlling persons against specific liabilities in
connection with the offer and sale of the common stock, including liabilities
under the Securities Act. We will pay substantially all of the expenses incurred
by the selling stockholders incident to the registration of the offering and
sale of the common stock.
