EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated the 2nd day of
November, 1998, between the "Purchasers" (collectively GCA Strategic Investment
Fund Limited, Manchester Asset Management, Ltd., Gilston Corporation, Ltd., and
Avalon Capital, Ltd.), Settondown Capital International, Ltd., located at c/o
Charlotte House, Charlotte Street, Nassau, Bahamas, a limited liability company
organized under the laws of Bahamas, a non-USA jurisdiction (the "Finder") (the
Purchasers and the Finder are collectively referred to as "Holder" or
"Holders"), issued pursuant to the 6% Convertible Preferred Stock Series 98-C
Subscription Agreement of even date herewith (the "Subscription Agreement"), and
SGI INTERNATIONAL, INC., a Utah corporation having its principal place of
business at 1200 Prospect Street, Suite 325, La Jolla, CA 92037 (the "Company").
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Purchasers are purchasing from the Company, pursuant to the
Subscription Agreement up to 2,000 shares of Preferred Stock, and Warrants to
purchase up to 100,000 shares of Common Stock. The Common Stock of the Company
underlying the Preferred Stock is referred to as the "Conversion Shares", and
the Common Stock of the Company underlying the Warrants is referred to as the
"Warrant Shares" (capitalized terms defined in the Subscription Agreement and
not otherwise defined herein have the meanings specified in the Subscription
Agreement); and
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Finder is receiving from the Company, pursuant to the
Subscription Agreement, up to 200 shares of the Preferred Stock, and Warrants to
purchase 100,000 shares of Common Stock; and
WHEREAS, the Company desires to grant to the Holders the
registration rights set forth herein.
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term
Registrable Securities means the Conversion Shares, and the Warrant Shares;
provided, however, that with respect to any particular Registrable Security,
such security shall cease to be a Registrable Security when, as of the date of
determination, (i) it has been effectively registered under the Securities Act
of 1933, as amended (the Securities Act) and disposed of pursuant thereto, (ii)
registration under the Securities Act is no longer required for the immediate
public distribution of such security as a result of the provisions of Rule 144,
or (iii) it has ceased to be outstanding. In the event of any merger,
reorganization, consolidation, recapitalization or other change in corporate
structure affecting the Common Stock, such adjustment shall be made in the
definition of Registrable Security as is appropriate in order to prevent any
dilution or enlargement of the rights granted pursuant to this Section 1.
Section 2. Restrictions on Transfer. The Holders acknowledge
and understand that prior to the registration of the Securities as provided
herein, the Securities are "restricted securities" as defined in Rule 144
promulgated under the Securities Act. The Holders understand that no disposition
or transfer of the Securities may be made by Holders in the absence of (i) an
opinion of counsel reasonably satisfactory to the Company that such transfer may
be made or (ii) a registration statement under the Securities Act including the
Registrable Securities is then in effect with respect thereto.
Section 3. Registration Rights.
(a) The Company agrees that it will prepare and file with the
Securities and Exchange Commission ("SEC"), within thirty calendar days after
the Closing Date, a registration statement on Form S-2 or Form S-3 (the
"Registration Statement"), at the sole expense of the Company (except as
provided in Section 3(c) hereof), in respect of all holders of Registrable
Securities, so as to permit a non-underwritten public offering and sale of the
Registrable Securities under the Securities Act, provided, the Company shall not
be obligated to take any action to effect any such registration, qualification
or compliance pursuant to this Section 3(a) in any jurisdiction in which the
Company would be required to qualify as a dealer in securities, under the
securities or blue sky laws of such jurisdiction. The Company agrees that it
will use its best efforts to cause the Registration Statement to become
effective within ninety (90) days after the Closing Date. The number of
Registrable Securities to be registered shall be two hundred (200%) percent of
the number of shares that would be required if all of the Registrable Securities
were converted in accordance with the Certificate of Secretary, on a date which
is five (5) business days prior to the filing of the Registration Statement. The
Company must declare the Registration Statement effective at the earlier to
occur of: five business days after it has been informed by the SEC that it may
declare the Registration Statement effective: or five business days of receipt
of a no review letter from the SEC. The Company agrees that it shall use its
best efforts to respond to comments and/or questions by the SEC regarding the
Registration Statement within ten business days after receipt of such comment
and/or question.
(b) The Company will use its best efforts to maintain the
Registration Statement or post-effective amendment filed under this Section 3
hereof current under the Securities Act until the earlier of (i) the date that
all of the Registrable Securities have been sold pursuant to the Registration
Statement, (ii) the date that the Registrable Securities may be sold under the
provisions of Rule 144, without volume limitation, or (iii) two (2) years after
the effective date of the Registration Statement.
(c) All fees, disbursements and out-of-pocket expenses and
costs incurred by the Company in connection with the preparation and filing of
the Registration Statement under Section 3(a) and in complying with applicable
securities and Blue Sky laws (including, without limitation, all attorneys'
fees) shall be borne by the Company. The Holders shall bear the cost of the fees
and expenses applicable to registration of the Registrable Securities, including
of its fees and expenses of its counsel. The Company shall use its best efforts
to qualify any of the securities for sale in such states as such Holder
reasonably designates and shall furnish indemnification in the manner provided
in Section 9 hereof. The Company at its expense will supply the Holders with
copies of such Registration Statement and the prospectus or offering circular
included therein and other related documents in such quantities as may be
reasonably requested by the Holders.
(d) The Company shall not be required by this Section 3 to
include Holder's Registrable Securities in the Registration Statement which is
to be filed if, in the opinion of counsel for both the Holder and the Company
(or, should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holders and the Company)
the proposed offering or other transfer as to which such registration is
requested is exempt from applicable federal and state securities laws and would
result in all purchasers or transferees obtaining securities which are not
restricted securities, as defined in Rule 144 under the Securities Act.
(e) In the event the Registration Statement to be filed by the
Company pursuant to Section 3(a) above is not filed by the Company by the 30th
calendar day after the Closing Date, or if the Registration Statement is not
declared effective by the SEC by the 90th calendar day after the Closing Date
(the "Effective Date"), for any reason whatsoever, then the Company will pay, in
cash, to the Holders on a pro-rata basis by wire transfer, as liquidated damages
for such failure and not as a penalty, one and one-half (1.5%) percent of the
principal amount of the Securities for the first month late, and two (2%)
percent of the principal amount of the Securities each month thereafter until
the Registration Statement has been filed and/or declared effective. Liquidated
damages shall cease to accrue upon the earlier of the Effective Date or
redemption. In the event the Registration Statement is not declared effective
prior to the 180th calendar day after the Closing Date the Company must redeem
the Preferred Stock pursuant to the terms of the Certificate of Secretary.
If the Company does not remit the damages to the Holders as
set forth above, the Company will pay the Holders reasonable costs of
collection, including attorneys fees, in addition to the liquidated damages.
Such payment shall be made to the Holders in cash immediately if the
registration of the Securities are not effected; provided, however, that the
payment of such liquidated damages shall not relieve the Company from its
obligations to register the Securities pursuant to this Section. The
registration of the Securities pursuant to this provision shall not affect or
limit Holder's other rights or remedies as set forth in this Agreement.
(f) No provision contained herein shall preclude the Company
from selling securities pursuant to any registration statement in which it is
required to include Registrable Securities pursuant to this Section 3.
Section 4. Cooperation with Company. Holders will cooperate
with the Company in all respects in connection with this Agreement, including,
timely supplying all information reasonably requested by the Company and
executing and returning all documents reasonably requested in connection with
the registration and sale of the Registrable Securities.
Section 5. Registration Procedures. Whenever the Company is
required by the provisions of this Agreement to effect the registration of any
of the Registrable Securities under the Securities Act, the Company shall
(except as otherwise provided in this Agreement), as expeditiously as possible:
(a) 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 as
per Section 3(b) herein and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all securities covered by such
registration statement when the Holder or Holders of such securities shall
desire to sell or otherwise dispose of the same (including prospectus
supplements with respect to the sales of securities from time to time in
connection with a registration statement pursuant to Rule 415 under the
Securities Act);
(b) furnish to each Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the Securities Act, and such other documents, as such Holder may reasonably
request in order to facilitate the public sale or other disposition of the
securities owned by such Holder;
(c) use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as the Holders, shall reasonably request,
and do any and all other acts and things which may be necessary or advisable to
enable each Holder to consummate the public sale or other disposition in such
jurisdiction of the securities owned by such Holder, except that the Company
shall not for any such purpose be required to qualify to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified or to
file therein any general consent to service of process;
(d) use its best efforts to list such securities on the OTC
Bulletin Board or any securities exchange on which any securities of the Company
is then listed, if the listing of such securities is then permitted under the
rules of such exchange or OTC Bulletin Board;
(e) enter into and perform its obligations under an
underwriting agreement, if the offering is an underwritten offering, in usual
and customary form, with the managing underwriter or underwriters of such
underwritten offering;
(f) notify each Holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto
covered by such registration statement is required to be delivered under the
Securities Act, of the happening of any event of which it has knowledge as a
result of which the prospectus included in such 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 in the light of the circumstances then existing.
Section 6. Assignment. The rights granted the Holders under
this Agreement shall not be assigned without the written consent of the Company,
which consent shall not be unnecessarily withheld. In the event of a transfer of
the rights granted under this Agreement, the transferring Holder agrees that the
Company may require that the transferee comply with reasonable conditions as
determined in the discretion of the Company. This Agreement is binding upon and
inures to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
Section 7. Termination of Registration Rights. The rights granted
pursuant to this Agreement shall terminate as to each Holder (and permitted
transferees or assignees) upon the occurrence of any of the following:
(a) all Holder's securities subject to this Agreement have been
registered;
(b) such Holder's securities subject to this Agreement can be
sold pursuant to Rule 144(k), without volume limitations.
Section 8. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Holders and each officer and director of the Holders or person, if any, who
controls the Holders within the meaning of the Securities Act (the "Distributing
Holders") against any losses, claims, damages or liabilities, joint or several
(which shall, for all purposes of this Agreement, include, but not be limited
to, all costs of defense and investigation and all attorneys' fees), to which
the Distributing Holders may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
or any related preliminary prospectus, final prospectus, offering circular,
notification or amendment or supplement 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;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, preliminary prospectus, final
prospectus, offering circular, notification or amendment, or supplement thereto
in reliance upon, and in conformity with, written information furnished to the
Company by the Distributing Holders, specifically for use in the preparation
thereof. This Section shall not inure to the benefit of any Distributing Holder
with respect to any person asserting such loss, claim, damage or liability who
purchased the Registrable Securities which are the subject thereof if the
Distributing Holder failed to send or give (in violation of the Securities Act
or the rules and regulations promulgated thereunder) a copy of the prospectus
contained in the Registration Statement to such person at or prior to the
written confirmation to such person of the sale of such Registrable Securities,
where the Distributing Holder was obligated to do so under the Securities Act or
the rules and regulations promulgated hereunder. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) Each Distributing Holder agrees that it will indemnify and
hold harmless the Company, and each officer and director of the Company or
person, if any, who controls the Company within the meaning of the Securities
Act, against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees) to which the Company or any such
officer, director or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses claims, damages or liabilities (or
actions in respect thereof); arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement prepared by the Company, or any related preliminary prospectus, final
prospectus, offering circular, notification or amendment or supplement thereto,
or arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in such Registration Statement, preliminary prospectus, final prospectus,
offering circular, notification or amendment or supplement thereto in reliance
upon, and in conformity with, written information furnished to the Company by
such Distributing Holder, specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which the distributing
Holders may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified party
otherwise than as to the particular item as to which indemnification is then
being sought solely pursuant to this Section. In case any such action is brought
against any 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 party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such 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 party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and 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 party; provided that if the indemnified party is
the Distributing Holder, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both the
Distributing Holder and the indemnifying party and the Distributing Holder shall
have been advised by such counsel that there may be one or more legal defenses
available to the indemnifying party different from or in conflict with any legal
defenses which may be available to the Distributing Holder (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Distributing Holder, it being understood, however, that the
indemnifying party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing Holder,
which firm shall be designated in writing by the Distributing Holder). No
settlement of any action against an indemnified party shall be made without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld.
Section 9. Contribution. In order to provide for just and
equitable contribution under the Securities Act in any case in which (i) the
Distributing Holder, or the Company, makes a claim for indemnification, but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of this Agreement provide
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any Distributing Holder, or the Company, then the
Company and the applicable Distributing Holder shall contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (which
shall, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys' fees), in either such case
(after contribution from others) on the basis of relative fault as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the applicable Distributing Holder, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Distributing Holder agree that
it would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
Section. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. 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.
Section 10. Notices. Any notice pursuant to this Agreement by
the Company or by the Holders shall be in writing and shall be deemed to have
been duly given if delivered by (i) hand, (ii) by facsimile and followed by mail
delivery or (iii) if mailed by certified mail, return receipt requested, postage
prepaid, addressed as follows:
(a) If to the Company, at the address set forth herein, or to
such other address as any such party may designate by notice to the other party.
(b) If to the Holders, to their respective address set forth
on Schedule A annexed hereto or to such other address as any such party may
designate by notice to the other party.
(c) If to the Finder, at the address set forth herein, or to such
other address as any such party may designate by notice to the other party.
Notices shall be deemed given at the time they are delivered
personally or five (5) days after they are mailed in the manner set forth above.
Section 11. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 12. Headings. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
Section 13. Governing Law, Venue. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the Securities Act, without
reference to principles of conflicts of law. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
State 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 conveniens, to the bringing of any
such proceeding in such jurisdictions. Each party hereby agrees that if another
party to this Agreement obtains a judgment against it in such a proceeding, the
party which obtained such judgment may enforce same by summary judgment in the
courts of any state or country having jurisdiction over the party against whom
such judgment was obtained, and each party hereby waives any defenses available
to it under local law and agrees to the enforcement of such a judgment. Each
party to this Agreement irrevocably consents to the service of process in any
such proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to such party at its address set forth herein. Nothing
herein shall affect the right of any party to serve process in any other manner
permitted by law.
Section 14. Severability/Defined Terms. If any provision of
this Agreement shall for any reason be held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provision hereof and
this Agreement shall be construed as if such invalid or unenforceable provision
had never been contained herein. Terms not otherwise defined herein shall be
defined in accordance with the Subscription Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed, on the day and year first
above written.
SGI INTERNATIONAL
/s/ JOSEPH A. SAVOCA
By_________________________
Name: Joseph A. Savoca
Title: Chairman/CEO
MANCHESTER ASSET MANAGEMENT
/s/ DAWN E. DAVIES
By__________________________________
Name: Dawn E. Davies
Title: Director
GILSTON CORPORATION, LTD.
/s/ DAWN E. DAVIES
By_______________________________
Name: Dawn E. Davies
Title: Director
AVALON CAPITAL, LTD.
/s/ GLORA LAVIE
By___________________________
Name: Glora Lavie
Title: Attorney-In-Fact
GCA STRATEGIC INVESTMENT FUND LIMITED
/s/ MICHAEL S. BROWN
By__________________________________________
Name: Michael S. Brown
Title: Director
SETTONDOWN CAPITAL INTERNATIONAL, LTD.
/s/ DAWN E. DAVIES
By____________________________________________
Name: Dawn E. Davies
Title: Director
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
6% Convertible Preferred Stock)
The undersigned hereby irrevocably elects to convert Preferred Stock Certificate
No. ___ into shares of Common Stock of SGI INTERNATIONAL (the "Company")
according to the conditions hereof, as of the date written below.
The undersigned represents and warrants that:
(i) that all offers and sales by the undersigned of the shares of
Common Stock issuable to the undersigned upon conversion of
the Preferred Stock shall be made pursuant to an exemption
from registration under the Securities Act of 1933, as amended
(the "Act"), or pursuant to registration of the Common Stock
under the Act, subject to any restrictions on sale or transfer
set forth in the Subscription Agreement between the Company
and the original holder of the Preferred Stock submitted
herewith for conversion;
(ii) the undersigned has not engaged in any transaction or series
of transaction that is a part of or a plan or scheme to evade
the registration requirements of the Act; and
(iii) upon conversion pursuant to this Notice of Conversion, the
undersigned will not hold 4.99% or more of the then issued and
outstanding shares of the Company.
- ---------------------------------- ---------------------------------
Date of Conversion Applicable Conversion Price
- ---------------------------------- ---------------------------------
Number of Common Shares upon Conversion $ Amount of Conversion
- ---------------------------------- ---------------------------------
Signature Name
Address: Delivery of Shares to:
* This original Preferred Stock and Notice of Conversion must be received by the
Company by the third business day following the Date of Conversion.