Exhibit 4.3
REGISTRATION RIGHTS AGREEMENT
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This Registration Rights Agreement (the "Agreement") is made and entered
into as of this ___ day of March, 2006 by and among Circle Group Holdings Inc.,
an Illinois corporation (the "Company"), National Securities Corporation, a
Washington corporation ("Placement Agent"), and certain accredited investors
purchasing shares of common stock, par value $.00005 per share, of the Company
(the "Common Stock") offered in private placement (the "Offering") by the
Company. Such investors are each referred to herein as an "Investor" and,
collectively, as the "Investors".
WHEREAS, in connection with certain Subscription Agreements among the
Investors and the Company (the "Subscription Agreement") which have been
executed in connection with the consummation of the transactions contemplated in
that certain Confidential Private Placement Memorandum dated February 10, 2006
(the "Memorandum"), the Company has agreed, upon the terms and subject to the
conditions of the Subscription Agreements and the Memorandum to issue and sell
to the Investors an aggregate of up to 200 units ($5,000,000), with each unit (a
"Unit" or "Units") consisting of 40,323 shares of Common Stock, and each
Investor who invests at least $500,000 in the Offering receiving five-year
warrants (the "Warrants") to purchase 10% of the number of shares of Common
Stock purchased, or 20% of the number of shares of Common Stock purchased for
Investors who invest at least $1,000,000 in the Offering;
WHEREAS, to induce the Investors to execute and deliver the Subscription
Agreement, the Company has agreed to provide certain registration rights with
respect to the shares of Common Stock (i) sold in the Offering and (ii) issuable
upon exercise of the Warrants; and
WHEREAS, the Company has agreed to provide certain registration rights with
respect to the shares (the "Placement Agent Warrant Shares") of Common Stock
issuable upon exercise of the warrants issued to the Placement Agent and its
permitted transferees (the "Placement Agent Warrants") both on the terms and
conditions provided herein.
NOW, THEREFORE, for good and valuable consideration, the parties hereby
agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliate" means, with respect to any person, any other person which
directly or indirectly controls, is controlled by, or is under common control
with, such person.
"Business Day" means a day, other than a Saturday or Sunday, on which banks
in New York City are open for the general transaction of business.
"Common Stock" as defined in the Preamble.
"Investors" means the Investors purchasing Registrable Securities pursuant
to the Subscription Agreements, the Placement Agent and any Affiliate or
permitted transferee of any Investor or the Placement Agent who is a subsequent
holder of any Warrants or Registrable Securities.
"Memorandum" as defined in the Preamble.
"Offering" as defined in the Preamble.
"Placement Agent Warrants" as defined in the Preamble.
"Placement Agent Warrant Shares" as defined in the Preamble.
"Prospectus" means the prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities covered by
such Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference in such prospectus.
"Register," "registered" and "registration" refer to a registration made by
preparing and filing a Registration Statement or similar document in compliance
with the 1933 Act (as defined below), and the declaration or ordering of
effectiveness of such Registration Statement or document.
"Registrable Securities" shall mean (i) the shares of Common Stock sold in
the Offering, (ii) the Warrant Shares, (iii) the Placement Agent Warrant Shares
and (iv) any other securities issued or issuable with respect to or in exchange
for Registrable Securities; provided, that, a security shall cease to be a
Registrable Security upon (A) sale pursuant to a Registration Statement or Rule
144 under the 1933 Act, or (B) such security becoming eligible for sale by the
Investors pursuant to Rule 144(k) under the 1933 Act.
"Registration Statement" shall mean any registration statement of the
Company filed under the 1933 Act that covers the resale of any of the
Registrable Securities pursuant to the provisions of this Agreement, amendments
and supplements to such Registration Statement, including post-effective
amendments, all exhibits and all material incorporated by reference in such
Registration Statement.
"Required Investors" means the Investors holding a majority of the
Registrable Securities.
"SEC" means the U.S. Securities and Exchange Commission.
"Shares" means the shares of Common Stock sold in the Offering.
"Subscription Agreement" as defined in the Preamble.
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"Warrants" as defined in the Preamble.
"Warrant Shares" means the shares of Common Stock issuable upon the
exercise of the Warrants.
2. Registration.
(a) Registration Statements.
(i) Promptly following the final closing of the purchase and sale of
the securities contemplated by the Memorandum (the "Closing Date") but no later
than thirty (30) days after the Closing Date (the "Filing Deadline"), the
Company shall prepare and file with the SEC one Registration Statement on Form
S-3 (or, if Form S-3 is not then available to the Company, on such form of
registration statement as is then available to effect a registration for resale
of the Registrable Securities, subject to the Required Investors' consent),
covering the resale of the Registrable Securities in an amount at least equal to
the Shares, the Warrant Shares and the Placement Agent Warrant Shares. Such
Registration Statement shall include the plan of distribution attached hereto as
Exhibit A. Such Registration Statement also shall cover, to the extent allowable
under the 1933 Act and the rules promulgated thereunder (including Rule 416),
such indeterminate number of additional shares of Common Stock resulting from
stock splits, stock dividends or similar transactions with respect to the
Registrable Securities. The Company shall use its reasonable best efforts to
obtain from each person who now has piggyback registration rights a waiver of
those rights with respect to the Registration Statement. The Registration
Statement (and each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided in accordance with
Section 3(c) to the Investors and their counsel prior to its filing or other
submission. If a Registration Statement covering the Registrable Securities is
not filed with the SEC on or prior to the Filing Deadline, the Company will make
pro rata payments to each Investor, as liquidated damages and not as a penalty,
in an amount equal to 2.0% of the aggregate amount invested by such Investor for
each 30-day period or pro rata for any portion thereof following the Filing
Deadline for which no Registration Statement is filed with respect to the
Registrable Securities. Such payments shall be in partial compensation to the
Investors, and shall not constitute the Investors' exclusive remedy for such
events. Such payments shall be made to each Investor in cash or additional
shares of Common Stock, as determined by each Investor, and shall be paid
monthly within three (3) Business Days after the last day of each month
following the Filing Deadline.
(ii) Additional Registrable Securities. Upon the written demand of any
Investor and upon any change in the Exercise Price (as defined in the Warrants
and the Placement Agent Warrants, respectively) such that additional shares of
Common Stock become issuable upon the exercise of the Warrants and/or Placement
Agent Warrants, the Company shall prepare and file with the SEC one or more
Registration Statements on Form S-3 or amend the Registration Statement filed
pursuant to clause (i) above, if such Registration Statement has not previously
been declared effective (or, if Form S-3 is not then available to the Company,
on such form of registration statement as is then available to effect a
registration for resale of such additional shares of Common Stock (the
"Additional Shares"), subject to the Required Investors' consent) covering the
resale of the Additional Shares, but only to the extent the Additional Shares
are not at the time covered by an effective Registration Statement. Such
Registration Statement also shall cover, to the extent allowable under the 1933
Act and the rules promulgated thereunder (including Rule 416), such
indeterminate number of additional shares of Common Stock resulting from stock
splits, stock dividends or similar transactions with respect to the Additional
Shares. The Company shall use its reasonable best efforts to obtain from each
person who now has piggyback registration rights a waiver of those rights with
respect to such Registration Statement. The Registration Statement (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to the
Investors and their counsel prior to its filing or other submission. If a
Registration Statement covering the Additional Shares is required to be filed
under this Section 2(a)(ii) and is not filed with the SEC within five (5)
Business Days after the request of any Investor or the occurrence of any of the
events specified in this Section 2(a)(ii) (the "Additional Shares Deadline"),
the Company will make pro rata payments to each Investor, as liquidated damages
and not as a penalty, in an amount equal to 2.0% of the aggregate amount
invested by such Investor for each 30-day period or pro rata for any portion
thereof following the date by which such Registration Statement should have been
filed for which no Registration Statement is filed with respect to the
Additional Shares. Such payments shall be in partial compensation to the
Investors, and shall not constitute the Investors' exclusive remedy for such
events. Such payments shall be made to each Investor in cash or additional
shares of Common Stock, as determined by each Investor, and shall be paid
monthly within three (3) Business Days after the last day of each month
following the Additional Shares Deadline.
(iii) S-3 Qualification. If the Company is not eligible to use a
registration statement on Form S-3 as provided in Sections 2(a)(i) and 2(a)(ii)
above, then, promptly following the date (the "Qualification Date") upon which
the Company becomes eligible to use a registration statement on Form S-3 to
register the Registrable Securities or Additional Shares, as applicable, for
resale, but in no event more than ten (10) days after the Qualification Date
(the "Qualification Deadline"), the Company shall file a registration statement
on Form S-3 covering the Registrable Securities or Additional Shares, as
applicable (or a post-effective amendment on Form S-3 to the registration
statement on Form S-1) (a "Shelf Registration Statement") and shall use
commercially reasonable efforts to cause such Shelf Registration Statement to be
declared effective as promptly as practicable thereafter. If a Shelf
Registration Statement covering the Registrable Securities is not filed with the
SEC on or prior to the Qualification Deadline, the Company will make pro rata
payments to each Investor, as liquidated damages and not as a penalty, in an
amount equal to 2.0% of the aggregate amount invested by such Investor for each
30-day period or pro rata for any portion thereof following the date by which
such Shelf Registration Statement should have been filed for which no such Shelf
Registration Statement is filed with respect to the Registrable Securities or
Additional Shares, as applicable. Such payments shall be in partial compensation
to the Investors, and shall not constitute the Investors' exclusive remedy for
such events. Such payments shall be made to each Investor in cash or additional
shares of Common Stock, as determined by each Investor, and shall be paid
monthly within three (3) Business Days after the last day of each month
following the Qualification Deadline.
(b) Expenses. The Company will pay all expenses associated with each
registration, including filing and printing fees, the Company's counsel and
accounting fees and expenses, costs associated with clearing the Registrable
Securities for sale under applicable state securities laws, listing fees, and
fees and expenses of one counsel to the Investors (not to exceed $7,500). Other
than the above, the Investors shall bear their respective expenses in connection
with the registration, including, without limitation, discounts, commissions,
fees of underwriters, selling brokers, dealer managers or similar securities
industry professionals with respect to the Registrable Securities being sold.
(c) Effectiveness.
(i) The Company shall use commercially reasonable efforts to have the
Registration Statement declared effective as soon as practicable. The Company
shall notify the Investors by facsimile or e-mail as promptly as practicable,
and in any event, within twenty-four (24) hours, after any Registration
Statement is declared effective and shall simultaneously provide the Investors
with copies of any related Prospectus to be used in connection with the sale or
other disposition of the securities covered thereby. If (A)(x) a Registration
Statement covering the Registrable Securities is not declared effective by the
SEC prior to the earlier of (i) five (5) Business Days after the SEC has
notified the Company that no review of the Registration Statement will be made
or (ii) within ninety (90) days after the Closing Date, (y) a Registration
Statement covering Additional Shares is not declared effective by the SEC within
ninety (90) days after the Additional Shares Deadline or (z) a Shelf
Registration Statement is not declared effective by the SEC within ninety (90)
days after the Qualification Deadline, or (B) after a Registration Statement has
been declared effective by the SEC, sales cannot be made pursuant to such
Registration Statement for any reason (including without limitation by reason of
a stop order, or the Company's failure to update the Registration Statement),
but excluding the inability of any Investor to sell the Registrable Securities
covered thereby due to market conditions and except as excused pursuant to
subparagraph (ii) below, then the Company will make pro rata payments to each
Investor, as liquidated damages and not as a penalty, in an amount equal to 2.0%
of the aggregate amount invested by such Investor for each 30-day period or pro
rata for any portion thereof following the date by which such Registration
Statement should have been effective (the "Blackout Period"). Such payments
shall be in partial compensation to the Investors, and shall not constitute the
Investors' exclusive remedy for such events. The amounts payable as liquidated
damages pursuant to this paragraph shall be paid monthly within three (3)
Business Days after the last day of each month following the commencement of the
Blackout Period until the termination of the Blackout Period. Such payments
shall be made to each Investor in cash or in additional shares of Common Stock
as determined by each Investor.
(ii) For not more than twenty (20) consecutive days or for a total of
not more than forty-five (45) days in any twelve (12) month period, the Company
may delay the disclosure of material non-public information concerning the
Company, by suspending the use of any Prospectus included in any registration
contemplated by this Section containing such information, the disclosure of
which at the time is not, in the good faith opinion of the Company, in the best
interests of the Company (an "Allowed Delay"); provided, that the Company shall
promptly (a) notify the Investors and the Placement Agent in writing of the
existence of (but in no event, without the prior written consent of an Investor
and the Placement Agent, shall the Company disclose to such Investor any of the
facts or circumstances regarding) material non-public information giving rise to
an Allowed Delay, (b) advise the Investors and the Placement Agent in writing to
cease all sales under the Registration Statement until the end of the Allowed
Delay and (c) use commercially reasonable efforts to terminate an Allowed Delay
as promptly as practicable.
3. Company Obligations. The Company will use commercially reasonable
efforts to effect the registration of the Registrable Securities in accordance
with the terms hereof, and pursuant thereto the Company will, as expeditiously
as possible:
(a) use commercially reasonable efforts to cause such Registration
Statement to become effective and to remain continuously effective for a period
that will terminate upon the earlier of (i) the date on which all Registrable
Securities covered by such Registration Statement as amended from time to time,
have been sold, and (ii) the date on which all Registrable Securities covered by
such Registration Statement may be sold pursuant to Rule 144(k) (the
"Effectiveness Period") and advise the Investors in writing when the
Effectiveness Period has expired;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement and the Prospectus as may be necessary
to keep the Registration Statement effective for the period specified in Section
3(a) and to comply with the provisions of the 1933 Act and the 1934 Act with
respect to the distribution of all of the Registrable Securities covered
thereby;
(c) provide copies to and permit counsel designated by the Investors
to review each Registration Statement and all amendments and supplements thereto
no fewer than seven (7) days prior to their filing with the SEC and not file any
document to which such counsel reasonably objects;
(d) furnish to the Investors and their legal counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company (but not later than two (2) Business Days after the
filing date, receipt date or sending date, as the case may be) one (1) copy of
any Registration Statement and any amendment thereto, each preliminary
prospectus and Prospectus and each amendment or supplement thereto, and each
letter written by or on behalf of the Company to the SEC or the staff of the
SEC, and each item of correspondence from the SEC or the staff of the SEC, in
each case relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment), and (ii) such number of copies of a Prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as each Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor that are
covered by the related Registration Statement;
(e) use commercially reasonable efforts to (i) prevent the issuance of
any stop order or other suspension of effectiveness and, (ii) if such order is
issued, obtain the withdrawal of any such order at the earliest possible moment;
(f) prior to any public offering of Registrable Securities, use
commercially reasonable efforts to register or qualify or cooperate with the
Investors and their counsel in connection with the registration or qualification
of such Registrable Securities for offer and sale under the securities or blue
sky laws of such jurisdictions requested by the Investors and do any and all
other commercially reasonable acts or things necessary or advisable to enable
the distribution in such jurisdictions of the Registrable Securities covered by
the Registration Statement; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (i) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(f), (ii) subject itself to general taxation in any
jurisdiction where it would not otherwise be so subject but for this Section
3(f), or (iii) file a general consent to service of process in any such
jurisdiction;
(g) use commercially reasonable efforts to cause all Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange, interdealer quotation system or other market on which similar
securities issued by the Company are then listed;
(h) immediately notify the Investors, at any time when a Prospectus
relating to Registrable Securities is required to be delivered under the 1933
Act, upon discovery that, or upon the happening of any event as a result of
which, the Prospectus included in a Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing, and at the request
of any such holder, promptly prepare and furnish to such holder 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 Registrable
Securities, such Prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances then
existing; and
(i) otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act,
take such other actions as may be reasonably necessary to facilitate the
registration of the Registrable Securities hereunder; and make available to its
security holders, as soon as reasonably practicable, but not later than the
Availability Date (as defined below), an earnings statement covering a period of
at least twelve (12) months, beginning after the effective date of each
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the 1933 Act, including Rule 158 promulgated thereunder (for
the purpose of this subsection 3(i), "Availability Date" means the 45th day
following the end of the fourth fiscal quarter that includes the effective date
of such Registration Statement, except that, if such fourth fiscal quarter is
the last quarter of the Company's fiscal year, "Availability Date" means the
90th day after the end of such fourth fiscal quarter).
(j) With a view to making available to the Investors the benefits of
Rule 144 (or its successor rule) and any other rule or regulation of the SEC
that may at any time permit the Investors to sell shares of Common Stock to the
public without registration, the Company covenants and agrees to: (i) make and
keep public information available, as those terms are understood and defined in
Rule 144, until the earlier of (A) six months after such date as all of the
Registrable Securities may be resold pursuant to Rule 144(k) or any other rule
of similar effect or (B) such date as all of the Registrable Securities shall
have been resold; (ii) file with the SEC in a timely manner all reports and
other documents required of the Company under the 1934 Act; and (iii) furnish to
each Investor upon request, as long as such Investor owns any Registrable
Securities, (A) a written statement by the Company that it has complied with the
reporting requirements of the 1934 Act, (B) a copy of the Company's most recent
Annual Report on Form 10-KSB or Quarterly Report on Form 10-QSB, and (C) such
other information as may be reasonably requested in order to avail such Investor
of any rule or regulation of the SEC that permits the selling of any such
Registrable Securities without registration.
4. Due Diligence Review; Information. The Company shall make available,
during normal business hours, for inspection and review by the Investors,
advisors to and representatives of the Investors (who may or may not be
affiliated with the Investors and who are reasonably acceptable to the Company),
all financial and other records, all SEC filings, and all other corporate
documents and properties of the Company as may be reasonably necessary for the
purpose of such review, and cause the Company's officers, directors and
employees, within a reasonable time period, to supply all such information
reasonably requested by the Investors or any such representative, advisor or
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling the
Investors and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of such Registration
Statement.
The Company shall not disclose material nonpublic information to the
Investors, or to advisors to or representatives of the Investors, unless prior
to disclosure of such information the Company identifies such information as
being material nonpublic information and provides the Investors, such advisors
and representatives with the opportunity to accept or refuse to accept such
material nonpublic information for review and any Investor wishing to obtain
such information enters into an appropriate confidentiality agreement with the
Company with respect thereto.
5. Obligations of the Investors.
(a) Each Investor shall furnish in writing 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 five (5) Business Days prior to
the first anticipated filing date of any Registration Statement, the Company
shall notify each Investor of the information the Company requires from such
Investor if such Investor elects to have any of the Registrable Securities
included in the Registration Statement. An Investor shall provide such
information to the Company at least two (2) Business Days prior to the first
anticipated filing date of such Registration Statement if such Investor elects
to have any of the Registrable Securities included in the Registration
Statement.
(b) Each Investor, by its 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 a Registration Statement
hereunder, unless such Investor has notified the Company in writing of its
election to exclude all of its Registrable Securities from such Registration
Statement.
(c) Each Investor agrees that, upon receipt of any notice from the
Company of either (i) the commencement of an Allowed Delay pursuant to Section
2(c)(ii) or (ii) the happening of an event pursuant to Section 3(h) hereof, such
Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities,
until the Investor's receipt of the copies of the supplemented or amended
prospectus filed with the SEC and until any related post-effective amendment is
declared effective and, if so directed by the Company, the 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 the Investor's
possession of the Prospectus covering the Registrable Securities current at the
time of receipt of such notice.
6. Indemnification.
(a) Indemnification by the Company. The Company will indemnify and
hold harmless each Investor and its officers, directors, members, employees and
agents, successors and assigns, and each other person, if any, who controls such
Investor within the meaning of the 1933 Act, against any losses, claims, damages
or liabilities, joint or several, to which they may become subject under the
1933 Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof; (ii) any blue sky application
or other document executed by the Company specifically for that purpose or based
upon written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Registrable Securities under
the securities laws thereof (any such application, document or information
herein called a "Blue Sky Application"); (iii) 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; (iv) any violation by the Company or
its agents of any rule or regulation promulgated under the 1933 Act applicable
to the Company or its agents and relating to action or inaction required of the
Company in connection with such registration; or (v) any failure to register or
qualify the Registrable Securities included in any such Registration in any
state where the Company or its agents has affirmatively undertaken or agreed in
writing that the Company will undertake such registration or qualification on an
Investor's behalf and will reimburse such Investor, and each such officer,
director or member and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case if and 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 so
made in conformity with information furnished by such Investor or any such
controlling person in writing specifically for use in such Registration
Statement or Prospectus.
(b) Indemnification by the Investors. Each Investor agrees, severally
but not jointly, to indemnify and hold harmless, to the fullest extent permitted
by law, the Company, its directors, officers, employees, stockholders and each
person who controls the Company (within the meaning of the 1933 Act) against any
losses, claims, damages, liabilities and expense (including reasonable attorney
fees) resulting from any untrue statement of a material fact or any omission of
a material fact required to be stated in the Registration Statement or
Prospectus or preliminary prospectus or amendment or supplement thereto or
necessary to make the statements therein not misleading, to the extent, but only
to the extent that such untrue statement or omission is contained in any
information furnished in writing by such Investor to the Company specifically
for inclusion in such Registration Statement or Prospectus or amendment or
supplement thereto. In no event shall the liability of an Investor be greater in
amount than the dollar amount of the proceeds (net of all expense paid by such
Investor in connection with any claim relating to this Section 6 and the amount
of any damages such Investor has otherwise been required to pay by reason of
such untrue statement or omission) received by such Investor upon the sale of
the Registrable Securities included in the Registration Statement giving rise to
such indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, that any person entitled to
indemnification hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of such person unless (a) the indemnifying party
has agreed to pay such fees or expenses, or (b) the indemnifying party shall
have failed to assume the defense of such claim and employ counsel reasonably
satisfactory to such person or (c) in the reasonable judgment of any such
person, based upon written advice of its counsel, a conflict of interest exists
between such person and the indemnifying party with respect to such claims (in
which case, if the person notifies the indemnifying party in writing that such
person elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such person); and provided, further, that the failure of
any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations hereunder, except to the extent that such
failure to give notice shall materially adversely affect the indemnifying party
in the defense of any such claim or litigation. It is understood that the
indemnifying party shall not, in connection with any proceeding in the same
jurisdiction, be liable for fees or expenses of more than one separate firm of
attorneys at any time for all such indemnified parties. No indemnifying party
will, except with the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such claim or litigation.
(d) Contribution. If for any reason the indemnification provided for
in the preceding paragraphs (a) and (b) is unavailable to an indemnified party
or insufficient to hold it harmless, other than as expressly specified therein,
then the indemnifying party shall contribute to the amount paid or payable by
the indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect the relative fault of the
indemnified party and the indemnifying party, as well as any other relevant
equitable considerations. No person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the 1933 Act shall be entitled to
contribution from any person not guilty of such fraudulent misrepresentation. In
no event shall the contribution obligation of a holder of Registrable Securities
be greater in amount than the dollar amount of the proceeds (net of all expenses
paid by such holder in connection with any claim relating to this Section 6 and
the amount of any damages such holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission) received by it upon the sale of the Registrable Securities giving rise
to such contribution obligation.
7. Miscellaneous.
(a) Amendments and Waivers. This Agreement may be amended only by a
writing signed by the Company and the Required Investors. The Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, action or omission to act, of the Required Investors.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in accordance with the provisions of the
Subscription Agreement.
(c) Assignments and Transfers by Investors. The provisions of this
Agreement shall be binding upon and inure to the benefit of the Investors and
their respective successors and assigns. An Investor may transfer or assign, in
whole or from time to time in part, to one or more persons its rights hereunder
in connection with the transfer of Registrable Securities by such Investor to
such person, provided that such Investor complies with all laws applicable
thereto and provides written notice of assignment to the Company promptly after
such assignment is effected.
(d) Assignments and Transfers by the Company. This Agreement may not
be assigned by the Company (whether by operation of law or otherwise) without
the prior written consent of the Required Investors, provided, however, that the
Company may assign its rights and delegate its duties hereunder to any surviving
or successor corporation in connection with a merger or consolidation of the
Company with another corporation, or a sale, transfer or other disposition of
all or substantially all of the Company's assets to another corporation, without
the prior written consent of the Required Investors, after notice duly given by
the Company to each Investor.
(e) Benefits of the Agreement. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
(f) Counterparts; Faxes. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed via facsimile, which shall be deemed an original.
(g) Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(h) Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provisions hereof prohibited or
unenforceable in any respect.
(i) Further Assurances. The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
(k) Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York located in New York County
and the United States District Court for the Southern District of New York for
the purpose of any suit, action, proceeding or judgment relating to or arising
out of this Agreement and the transactions contemplated hereby. Service of
process in connection with any such suit, action or proceeding may be served on
each party hereto anywhere in the world by the same methods as are specified for
the giving of notices under this Agreement. Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. Each party hereto
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in such courts and irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A
TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS
THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties have executed this Agreement or caused
their duly authorized officers to execute this Agreement as of the date first
above written.
The Company: CIRCLE GROUP HOLDINGS INC.
By: /s/ Gregory J. Halpern
----------------------
Name: Gregory J. Halpern
Title: Chief Executive Officer
The Placement Agent: NATIONAL SECURITIES CORPORATION
By: /s/ Brian Friedman
------------------
Name: Brian Friedman
Title: Director Corporate Finance
The Investors: [Contained in Omnibus Signature Page in Subscription Agreement]
Exhibit A
Plan of Distribution
The selling stockholders (the "Selling Stockholders", which as used herein
includes donees, pledgees, transferees or other successors-in-interest of a
Selling Stockholder selling shares of Common Stock or interests in shares of
Common Stock received after the date of this prospectus from a Selling
Stockholder as a gift, pledge, partnership distribution or other transfer) may,
from time to time, sell, transfer or otherwise dispose of any or all of their
shares of Common Stock or interests in shares of Common Stock on any stock
exchange, market or trading facility on which the shares are traded or in
private transactions. These dispositions may be at fixed prices, at prevailing
market prices at the time of sale, at prices related to the prevailing market
price, at varying prices determined at the time of sale, or at negotiated
prices.
The Selling Stockholders may use any one or more of the following methods
when disposing of shares or interests therein:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares
as agent, but may position and resell a portion of the block as principal to
facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- short sales effected after the date the registration statement of which
this Prospectus is a part is declared effective by the SEC;
- through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
- broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share; and
- a combination of any such methods of sale.
The Selling Stockholders may, from time to time, pledge or grant a security
interest in some or all of the shares of Common Stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of Common Stock, from time to time, under
this Prospectus, or under an amendment to this Prospectus under Rule 424(b)(3)
or other applicable provision of the 1933 Act amending the list of Selling
Stockholders to include the pledgee, transferee or other successors-in-interest
as Selling Stockholders under this Prospectus. The Selling Stockholders also may
transfer the shares of Common Stock in other circumstances, in which case the
transferees, pledgees or other successors-in-interest will be the selling
beneficial owners for purposes of this Prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
National Securities Corporation ("NSC") has indicated to us its willingness
to act as selling agent on behalf of the Selling Stockholders named in the
Prospectus under "Selling Security Holders" that purchased our privately placed
securities. All shares sold, if any, on behalf of Selling Stockholders by NSC
would be in transactions executed by NSC on an agency basis and commissions
charged to its customers in connection with each transaction shall not exceed a
maximum of 5% of the gross proceeds. NSC does not have an underwriting agreement
with us and/or the Selling Stockholders and no Selling Stockholders are required
to execute transactions through NSC.
In connection with the sale of our Common Stock or interests therein, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of our Common Stock short and deliver these
securities to close out their short positions, or loan or pledge the Common
Stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this Prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
Prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholders will receive the aggregate proceeds from the sale
of the Common Stock offered by them. The aggregate proceeds to the Selling
Stockholders from the sale of the Common Stock offered by them will be the
purchase price of the Common Stock less discounts or commissions, if any. Each
of the Selling Stockholders reserves the right to accept and, together with
their agents from time to time, to reject, in whole or in part, any proposed
purchase of Common Stock to be made directly or through agents. We will not
receive any of the proceeds from the sale of Common Stock in this offering. We
may receive proceeds from holders who exercise their warrants and pay the
applicable cash exercise price in connection with those exercises.
The Selling Stockholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act of
1933, provided that they meet the criteria and conform to the requirements of
that rule.
The Selling Stockholders and any underwriters, broker-dealers or agents
that participate in the sale of the Common Stock or interests therein may be
"underwriters" within the meaning of Section 2(11) of the 1933 Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the 1933 Act. Selling
Stockholders who are "underwriters" within the meaning of Section 2(11) of the
1933 Act will be subject to the prospectus delivery requirements of the 1933
Act.
To the extent required, the shares of our common stock to be sold, the
names of the Selling Stockholders, the respective purchase prices and public
offering prices, the names of any agent, dealer or underwriter, any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this Prospectus.
In order to comply with the securities laws of some states, if applicable,
the Common Stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states the Common Stock may
not be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.
We have advised the Selling Stockholders that the anti-manipulation rules
of Regulation M under the 1934 Act may apply to sales of shares in the market
and to the activities of the Selling Stockholders and their affiliates. In
addition, we will make copies of this Prospectus (as it may be supplemented or
amended from time to time) available to the Selling Stockholders for the purpose
of satisfying the prospectus delivery requirements of the 1933 Act. The Selling
Stockholders may indemnify any broker-dealer that participates in transactions
involving the sale of the shares of Common Stock against certain liabilities,
including liabilities arising under the 1933 Act.
We will pay all of the expenses incident to registration other than
commissions, fees and discounts of underwriters, brokers, dealers and agents. We
will pay for offering expenses including the SEC registration fee, accounting
fees, legal fees, printing expenses and other related miscellaneous expenses. We
have agreed to indemnify the Selling Stockholders against liabilities, including
liabilities under the 1933 Act and state securities laws, relating to the
registration of the shares offered by this Prospectus.
We have agreed with the Selling Stockholders to keep the registration
statement of which this Prospectus constitutes a part effective until the
earlier of (1) such time as all of the shares covered by this Prospectus have
been disposed of pursuant to and in accordance with the registration statement
or (2) the date on which the shares may be sold pursuant to Rule 144(k) of the
1933 Act. Notwithstanding anything contained herein to the contrary, an
aggregate of ________ shares of Common Stock issuable upon exercise of warrants
held by NSC and/or "associated persons" of NSC are subject to a 180 day lock-up
agreement in accordance with the requirements of NASD Rule 2710(g)(1).