REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
October 15, 2010, is by and among Imaging3, Inc., a California corporation with
offices located at 3200 W. Valhalla Drive, Burbank, California 91505 (the
"COMPANY"), and each of the undersigned buyers (each, a "BUYER," and
collectively, the "BUYERS").
RECITALS
A. In connection with the Securities Purchase Agreement by and among
the parties hereto, dated as of October 4, 2010 (the "SECURITIES PURCHASE
AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, to issue and sell to each Buyer
(i) shares (the "COMMON SHARES") of the Company's common stock, no par value
(the "COMMON STOCK") and (ii) the Warrants (as defined in the Securities
Purchase Agreement) which will be exercisable to purchase Warrant Shares (as
defined in the Securities Purchase Agreement) in accordance with the terms of
the Warrants.
B. To induce the Buyers to consummate the transactions contemplated by
the Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Buyers hereby agree as follows:
1. DEFINITIONS.
-----------
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement. As
used in this Agreement, the following terms shall have the following meanings:
(a) "BUSINESS DAY" means any day other than Saturday, Sunday or any
other day on which commercial banks in New York, New York are authorized or
required by law to remain closed.
(b) "CLOSING DATE" shall have the meaning set forth in the Securities
Purchase Agreement.
(c) "EFFECTIVE DATE" means the date that the applicable Registration
Statement has been declared effective by the SEC.
(d) "EFFECTIVENESS DEADLINE" means (i) with respect to the initial
Registration Statement required to be filed pursuant to Section 2(a), the
earlier of the (A) 90th calendar day after the Closing Date (or the 120th
calendar day after the Closing Date in the event that such Registration
Statement is subject to review by the SEC) and (B) 2nd Business Day after the
date the Company is notified (orally or in writing, whichever is earlier) by the
-1-
SEC that such Registration Statement will not be reviewed or will not be subject
to further review and (ii) with respect to any additional Registration
Statements that may be required to be filed by the Company pursuant to this
Agreement, the earlier of the (A) 90th calendar day following the date on which
the Company was required to file such additional Registration Statement (or the
120th calendar day after such date in the event that such Registration Statement
is subject to review by the SEC) and (B) 2nd Business Day after the date the
Company is notified (orally or in writing, whichever is earlier) by the SEC that
such Registration Statement will not be reviewed or will not be subject to
further review.
(e) "FILING DEADLINE" means (i) with respect to the initial
Registration Statement required to be filed pursuant to Section 2(a), the 30th
calendar day after the Closing Date and (ii) with respect to any additional
Registration Statements that may be required to be filed by the Company pursuant
to this Agreement, the date on which the Company was required to file such
additional Registration Statement pursuant to the terms of this Agreement.
(f) "INVESTOR" means a Buyer or any transferee or assignee of any
Registrable Securities or Warrants, as applicable, to whom a Buyer assigns its
rights under this Agreement and who agrees to become bound by the provisions of
this Agreement in accordance with Section 9 and any transferee or assignee
thereof to whom a transferee or assignee of any Registrable Securities or
Warrants, as applicable, assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section
9.
(g) "PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization or a government or any department or agency thereof.
(h) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 and the
declaration of effectiveness of such Registration Statement(s) by the SEC.
(i) "REGISTRABLE SECURITIES" means (i) the Common Shares, (ii) the
Warrant Shares and (iii) any capital stock of the Company issued or issuable
with respect to the Common Shares, the Warrant Shares or the Warrants,
including, without limitation, (1) as a result of any stock split, stock
dividend, recapitalization, exchange or similar event or otherwise and (2)
shares of capital stock of the Company into which the shares of Common Stock are
converted or exchanged and shares of capital stock of a Successor Entity (as
defined in the Warrants) into which the shares of Common Stock are converted or
exchanged, in each case, without regard to any limitations on exercise of the
Warrants.
(j) "REGISTRATION STATEMENT" means a registration statement or
registration statements of the Company filed under the 1933 Act covering
Registrable Securities.
(k) "REQUIRED REGISTRATION AMOUNT" means the sum of (i) the Common
Shares and (ii) 133% of the maximum number of Warrant Shares issued and issuable
pursuant to the Warrants as of the Trading Day (as defined in the Warrants)
-2-
immediately preceding the applicable date of determination (without taking into
account any limitations on the exercise of the Warrants set forth therein), all
subject to adjustment as provided in Section 2(d).
(l) "RULE 144" means Rule 144 promulgated by the SEC under the 1933
Act, as such rule may be amended from time to time, or any other similar or
successor rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration.
(m) "RULE 415" means Rule 415 promulgated by the SEC under the 1933
Act, as such rule may be amended from time to time, or any other similar or
successor rule or regulation of the SEC providing for offering securities on a
continuous or delayed basis.
(n) "SEC" means the United States Securities and Exchange Commission or
any successor thereto.
2. REGISTRATION.
------------
(a) MANDATORY REGISTRATION. The Company shall prepare and, as soon as
practicable, but in no event later than the Filing Deadline, file with the SEC
an initial Registration Statement on Form S-3 covering the resale of all of the
Registrable Securities, provided that such initial Registration Statement shall
register for resale at least the number of shares of Common Stock equal to the
Required Registration Amount as of the date such Registration Statement is
initially filed with the SEC, provided further that if Form S-3 is unavailable
for such a registration, the Company shall use such other form as is required by
Section 2(c). Such initial Registration Statement, and each other Registration
Statement required to be filed pursuant to the terms of this Agreement, shall
contain (except if otherwise directed by each of the Investors) the "SELLING
STOCKHOLDERS" and "PLAN OF DISTRIBUTION" sections in substantially the form
attached hereto as EXHIBIT B. The Company shall use its best efforts to have
such initial Registration Statement, and each other Registration Statement
required to be filed pursuant to the terms of this Agreement, declared effective
by the SEC as soon as practicable, but in no event later than the applicable
Effectiveness Deadline for such Registration Statement.
(b) LEGAL COUNSEL. Subject to Section 5 hereof, Cranshire Capital, L.P.
("CRANSHIRE") shall have the right to select one (1) legal counsel to review and
oversee, solely on its behalf, any registration pursuant to this Section 2
("LEGAL COUNSEL"), which shall be Greenberg Traurig, LLP or such other counsel
as thereafter designated by Cranshire.
(c) INELIGIBILITY TO USE FORM S-3. In the event that Form S-3 is not
available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form reasonably acceptable to each of the
Investors and (ii) undertake to register the resale of the Registrable
Securities on Form S-3 as soon as such form is available, provided that the
Company shall maintain the effectiveness of all Registration Statements then in
effect until such time as a Registration Statement on Form S-3 covering the
resale of all the Registrable Securities has been declared effective by the SEC.
(d) SUFFICIENT NUMBER OF SHARES REGISTERED. In the event the number of
shares available under any Registration Statement is insufficient to cover all
of the Registrable Securities required to be covered by such Registration
Statement or an Investor's allocated portion of the Registrable Securities
pursuant to Section 2(h), the Company shall amend such Registration Statement
(if permissible), or file with the SEC a new Registration Statement (on the
-3-
short form available therefor, if applicable), or both, so as to cover at least
the Required Registration Amount as of the Trading Day immediately preceding the
date of the filing of such amendment or new Registration Statement, in each
case, as soon as practicable, but in any event not later than fifteen (15) days
after the necessity therefor arises (but taking account of any Staff position
with respect to the date on which the Staff will permit such amendment to the
Registration Statement and/or such new Registration Statement (as the case may
be) to be filed with the SEC). The Company shall use its best efforts to cause
such amendment to such Registration Statement and/or such new Registration
Statement (as the case may be) to become effective as soon as practicable
following the filing thereof with the SEC, but in no event later than the
applicable Effectiveness Deadline for such Registration Statement. For purposes
of the foregoing provision, the number of shares available under a Registration
Statement shall be deemed "insufficient to cover all of the Registrable
Securities" if at any time the number of shares of Common Stock available for
resale under the applicable Registration Statement is less than the product
determined by multiplying (i) the Required Registration Amount as of such time
by (ii) 0.90. The calculation set forth in the foregoing sentence shall be made
without regard to any limitations on exercise of the Warrants (and such
calculation shall assume that the Warrants are then fully exercisable for shares
of Common Stock at the then-prevailing applicable Exercise Price).
(e) EFFECT OF FAILURE TO FILE AND OBTAIN AND MAINTAIN EFFECTIVENESS OF
ANY REGISTRATION STATEMENT. If (i) a Registration Statement covering the resale
of all of the Registrable Securities required to be covered thereby
(disregarding any reduction pursuant to Section 2(f)) and required to be filed
by the Company pursuant to this Agreement is (A) not filed with the SEC on or
before the Filing Deadline for such Registration Statement (a "FILING FAILURE")
(it being understood that if the Company files a Registration Statement without
affording each Investor the opportunity to review and comment on the same as
required by Section 3(c) hereof, the Company shall be deemed to not have
satisfied this clause (i)(A) and such event shall be deemed to be a Filing
Failure) or (B) not declared effective by the SEC on or before the Effectiveness
Deadline for such Registration Statement (an "EFFECTIVENESS FAILURE") (it being
understood that if on the Business Day immediately following the Effective Date
for such Registration Statement the Company shall not have filed a "final"
prospectus for such Registration Statement with the SEC under Rule 424(b) in
accordance with Section 3(b) (whether or not such a prospectus is technically
required by such rule), the Company shall be deemed to not have satisfied this
clause (i)(B) and such event shall be deemed to be an Effectiveness Failure),
(ii) other than during an Allowable Grace Period (as defined below), on any day
after the Effective Date of a Registration Statement sales of all of the
Registrable Securities required to be included on such Registration Statement
(disregarding any reduction pursuant to Section 2(f)) cannot be made pursuant to
such Registration Statement (including, without limitation, because of a failure
to keep such Registration Statement effective, a failure to disclose such
information as is necessary for sales to be made pursuant to such Registration
Statement, a suspension or delisting of (or a failure to timely list) the shares
of Common Stock on the Principal Market (as defined in the Securities Purchase
Agreement), or a failure to register a sufficient number of shares of Common
Stock or by reason of a stop order) or the prospectus contained therein is not
available for use for any reason (a "MAINTENANCE FAILURE"), or (iii) if a
Registration Statement is not effective for any reason or the prospectus
contained therein is not available for use for any reason, the Company fails to
file with the SEC any required reports under Section 13 or 15(d) of the 1934 Act
-4-
such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if
applicable) (a "CURRENT PUBLIC INFORMATION FAILURE") as a result of which any of
the Investors are unable to sell Registrable Securities without restriction
under Rule 144 (including, without limitation, volume restrictions), then, as
partial relief for the damages to any holder by reason of any such delay in, or
reduction of, its ability to sell the underlying shares of Common Stock (which
remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each holder of Registrable Securities relating
to such Registration Statement an amount in cash equal to two (2%) percent of
such Investor's Purchase Price (as defined in the Securities Purchase Agreement)
(1) on the date of such Filing Failure, Effectiveness Failure, Maintenance
Failure or Current Public Information Failure, as applicable, and (2) on every
thirty (30) day anniversary of (I) a Filing Failure until such Filing Failure is
cured; (II) an Effectiveness Failure until such Effectiveness Failure is cured;
(III) a Maintenance Failure until such Maintenance Failure is cured; and (IV) a
Current Public Information Failure until the earlier of (i) the date such
Current Public Information Failure is cured and (ii) such time that such public
information is no longer required pursuant to Rule 144 (in each case, pro rated
for periods totaling less than thirty (30) days). The payments to which a holder
of Registrable Securities shall be entitled pursuant to this Section 2(e) are
referred to herein as "REGISTRATION DELAY PAYMENTS." Following the initial
Registration Delay Payment for any particular event or failure (which shall be
paid on the date of such event or failure, as set forth above), without limiting
the foregoing, if an event or failure giving rise to the Registration Delay
Payments is cured prior to any thirty (30) day anniversary of such event or
failure, then such Registration Delay Payment shall be made on the third (3rd)
Business Day after such cure. In the event the Company fails to make
Registration Delay Payments in a timely manner in accordance with the foregoing,
such Registration Delay Payments shall bear interest at the rate of one and
one-half percent (1.5%) per month (prorated for partial months) until paid in
full. Notwithstanding the foregoing, no Registration Delay Payments shall be
owed to an Investor (other than with respect to a Maintenance Failure resulting
from a suspension or delisting of (or a failure to timely list) the shares of
Common Stock on the Principal Market) with respect to any period during which
all of such Investor's Registrable Securities may be sold by such Investor
without restriction under Rule 144 (including, without limitation, volume
restrictions) and without the need for current public information required by
Rule 144(c)(1) (or Rule 144(i)(2), if applicable).
(f) OFFERING. Notwithstanding anything to the contrary contained in
this Agreement, but subject to the payment of the Registration Delay Payments
pursuant to Section 2(e), in the event the staff of the SEC (the "Staff") or the
SEC seeks to characterize any offering pursuant to a Registration Statement
filed pursuant to this Agreement as constituting an offering of securities by,
or on behalf of, the Company, or in any other manner, such that the Staff or the
SEC do not permit such Registration Statement to become effective and used for
resales in a manner that does not constitute such an offering and that permits
the continuous resale at the market by the Investors participating therein (or
as otherwise may be acceptable to each Investor) without being named therein as
an "underwriter," then the Company shall reduce the number of shares to be
included in such Registration Statement by all Investors until such time as the
Staff and the SEC shall so permit such Registration Statement to become
effective as aforesaid. In making such reduction, the Company shall reduce the
number of shares to be included by all Investors on a pro rata basis (based upon
the number of Registrable Securities otherwise required to be included for each
Investor) unless the inclusion of shares by a particular Investor or a
particular set of Investors are resulting in the Staff or the SEC's "by or on
-5-
behalf of the Company" offering position, in which event the shares held by such
Investor or set of Investors shall be the only shares subject to reduction (and
if by a set of Investors on a pro rata basis by such Investors or on such other
basis as would result in the exclusion of the least number of shares by all such
Investors). In addition, in the event that the Staff or the SEC requires any
Investor seeking to sell securities under a Registration Statement filed
pursuant to this Agreement to be specifically identified as an "underwriter" in
order to permit such Registration Statement to become effective, and such
Investor does not consent to being so named as an underwriter in such
Registration Statement, then, in each such case, the Company shall reduce the
total number of Registrable Securities to be registered on behalf of such
Investor, until such time as the Staff or the SEC does not require such
identification or until such Investor accepts such identification and the manner
thereof. Any reduction pursuant to this paragraph will first reduce all
Registrable Securities other than those issued pursuant to the Securities
Purchase Agreement. In the event of any reduction in Registrable Securities
pursuant to this paragraph, an affected Investor shall have the right to
require, upon delivery of a written request to the Company signed by such
Investor, the Company to file a registration statement within thirty (30) days
of such request (subject to any restrictions imposed by Rule 415 or required by
the Staff or the SEC) for resale by such Investor in a manner acceptable to such
Investor, and the Company shall following such request cause to be and keep
effective such registration statement in the same manner as otherwise
contemplated in this Agreement for registration statements hereunder, in each
case until such time as: (i) all Registrable Securities held by such Investor
have been registered and sold pursuant to an effective Registration Statement in
a manner acceptable to such Investor or (ii) all Registrable Securities may be
resold by such Investor without restriction (including, without limitation,
volume limitations) pursuant to Rule 144 (taking account of any Staff position
with respect to "affiliate" status) and without the need for current public
information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or
(iii) such Investor agrees to be named as an underwriter in any such
Registration Statement in a manner acceptable to such Investor as to all
Registrable Securities held by such Investor and that have not theretofore been
included in a Registration Statement under this Agreement (it being understood
that the special demand right under this sentence may be exercised by an
Investor multiple times and with respect to limited amounts of Registrable
Securities in order to permit the resale thereof by such Investor as
contemplated above).
(g) PIGGYBACK REGISTRATIONS. Without limiting any obligation of the
Company hereunder or under the Securities Purchase Agreement, if there is not an
effective Registration Statement covering all of the Registrable Securities or
the prospectus contained therein is not available for use and the Company shall
determine to prepare and file with the SEC a registration statement relating to
an offering for its own account or the account of others under the 1933 Act of
any of its equity securities (other than on Form S-4 or Form S-8 (each as
promulgated under the 1933 Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with the Company's stock
option or other employee benefit plans), then the Company shall deliver to each
Investor a written notice of such determination and, if within fifteen (15) days
after the date of the delivery of such notice, any such Investor shall so
request in writing, the Company shall include in such registration statement all
or any part of such Registrable Securities such Investor requests to be
registered; provided, however, the Company shall not be required to register any
Registrable Securities pursuant to this Section 2(g) that are eligible for
-6-
resale pursuant to Rule 144 without restriction (including, without limitation,
volume restrictions) and without the need for current public information
required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or that are the
subject of a then-effective Registration Statement.
(h) ALLOCATION OF REGISTRABLE SECURITIES. The initial number of
Registrable Securities included in any Registration Statement and any increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time such Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such
Investor's Registrable Securities, each transferee or assignee (as the case may
be) that becomes an Investor shall be allocated a pro rata portion of the
then-remaining number of Registrable Securities included in such Registration
Statement for such transferor or assignee (as the case may be). Any shares of
Common Stock included in a Registration Statement and which remain allocated to
any Person which ceases to hold any Registrable Securities covered by such
Registration Statement shall be allocated to the remaining Investors, pro rata
based on the number of Registrable Securities then held by such Investors which
are covered by such Registration Statement.
(i) NO INCLUSION OF OTHER SECURITIES. In no event shall the Company
include any securities other than Registrable Securities on any Registration
Statement without the prior written consent of each of the Investors. Until the
Applicable Date (as defined in the Securities Purchase Agreement), the Company
shall not enter into any agreement providing any registration rights to any of
its security holders.
3. RELATED OBLIGATIONS.
-------------------
The Company shall use its best efforts to effect the registration of
the Registrable Securities in accordance with the intended method of disposition
thereof, and, pursuant thereto, the Company shall have the following
obligations:
(a) The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to all the Registrable Securities (but in no
event later than the applicable Filing Deadline) and use its best efforts to
cause such Registration Statement to become effective as soon as practicable
after such filing (but in no event later than the Effectiveness Deadline).
Subject to Allowable Grace Periods, the Company shall keep each Registration
Statement effective (and the prospectus contained therein available for use)
pursuant to Rule 415 for resales by the Investors on a delayed or continuous
basis at then-prevailing market prices (and not fixed prices) at all times until
the earlier of (i) the date as of which all of the Investors may sell all of the
Registrable Securities required to be covered by such Registration Statement
(disregarding any reduction pursuant to Section 2(f)) without restriction
pursuant to Rule 144 (including, without limitation, volume restrictions) and
without the need for current public information required by Rule 144(c)(1) (or
Rule 144(i)(2), if applicable) or (ii) the date on which the Investors shall
have sold all of the Registrable Securities covered by such Registration
Statement (the "REGISTRATION PERIOD"). Notwithstanding anything to the contrary
contained in this Agreement, the Company shall ensure that, when filed and at
all times while effective, each Registration Statement (including, without
limitation, all amendments and supplements thereto) and the prospectus
(including, without limitation, all amendments and supplements thereto) used in
connection with such Registration Statement (1) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
-7-
stated therein, or necessary to make the statements therein (in the case of
prospectuses, in the light of the circumstances in which they were made) not
misleading and (2) will disclose (whether directly or through incorporation by
reference to other SEC filings to the extent permitted) all material information
regarding the Company and its securities. The Company shall submit to the SEC,
within one (1) Business Day after the later of the date that (i) the Company
learns that no review of a particular Registration Statement will be made by the
Staff or that the Staff has no further comments on a particular Registration
Statement (as the case may be) and (ii) the consent of Legal Counsel is obtained
pursuant to Section 3(c) (which consent shall be immediately sought), a request
for acceleration of effectiveness of such Registration Statement to a time and
date not later than forty-eight (48) hours after the submission of such request.
(b) Subject to Section 3(r) of this Agreement, the Company shall
prepare and file with the SEC such amendments (including, without limitation,
post-effective amendments) and supplements to each Registration Statement and
the prospectus used in connection with each such Registration Statement, which
prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act,
as may be necessary to keep each such Registration Statement effective at all
times during the Registration Period for such Registration Statement, and,
during such period, comply with the provisions of the 1933 Act with respect to
the disposition of all Registrable Securities of the Company required to be
covered by such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
such Registration Statement; provided, however, by 8:30 a.m. (New York time) on
the Business Day immediately following each Effective Date, the Company shall
file with the SEC in accordance with Rule 424(b) under the 1933 Act the final
prospectus to be used in connection with sales pursuant to the applicable
Registration Statement (whether or not such a prospectus is technically required
by such rule). In the case of amendments and supplements to any Registration
Statement which are required to be filed pursuant to this Agreement (including,
without limitation, pursuant to this Section 3(b)) by reason of the Company
filing a report on Form 10-Q or Form 10-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the "1934 ACT"), the Company shall
have incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC on the
same day on which the 1934 Act report is filed which created the requirement for
the Company to amend or supplement such Registration Statement.
(c) The Company shall (A) permit Legal Counsel and legal counsel for
each other Investor to review and comment upon (i) each Registration Statement
at least five (5) Business Days prior to its filing with the SEC and (ii) all
amendments and supplements to each Registration Statement (including, without
limitation, the prospectus contained therein) (except for Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any
similar or successor reports) within a reasonable number of days prior to their
filing with the SEC, and (B) not file any Registration Statement or amendment or
supplement thereto in a form to which Legal Counsel or any legal counsel for any
other Investor reasonably objects. The Company shall not submit a request for
acceleration of the effectiveness of a Registration Statement or any amendment
or supplement thereto or to any prospectus contained therein without the prior
consent of Legal Counsel, which consent shall not be unreasonably withheld. The
-8-
Company shall promptly furnish to Legal Counsel and legal counsel for each other
Investor, without charge, (i) copies of any correspondence from the SEC or the
Staff to the Company or its representatives relating to each Registration
Statement, provided that such correspondence shall not contain any material,
non-public information regarding the Company or any of its Subsidiaries (as
defined in the Securities Purchase Agreement), (ii) after the same is prepared
and filed with the SEC, one (1) copy of each Registration Statement and any
amendment(s) and supplement(s) thereto, including, without limitation, financial
statements and schedules, all documents incorporated therein by reference, if
requested by an Investor, and all exhibits and (iii) upon the effectiveness of
each Registration Statement, one (1) copy of the prospectus included in such
Registration Statement and all amendments and supplements thereto. The Company
shall reasonably cooperate with Legal Counsel and legal counsel for each other
Investor in performing the Company's obligations pursuant to this Section 3.
(d) The Company shall promptly furnish to each Investor whose
Registrable Securities are included in any Registration Statement, without
charge, (i) after the same is prepared and filed with the SEC, at least one (1)
copy of each Registration Statement and any amendment(s) and supplement(s)
thereto, including, without limitation, financial statements and schedules, all
documents incorporated therein by reference, if requested by an Investor, all
exhibits and each preliminary prospectus, (ii) upon the effectiveness of each
Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably request from time to time) and
(iii) such other documents, including, without limitation, copies of any
preliminary or final prospectus, as such Investor may reasonably request from
time to time in order to facilitate the disposition of the Registrable
Securities owned by such Investor.
(e) The Company shall use its best efforts to (i) register and qualify,
unless an exemption from registration and qualification applies, the resale by
Investors of the Registrable Securities covered by a Registration Statement
under such other securities or "blue sky" laws of all applicable jurisdictions
in the United States, (ii) prepare and file in those jurisdictions, such
amendments (including, without limitation, post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, the
Company shall not be required in connection therewith or as a condition thereto
to (x) qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(e), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction. The Company shall promptly notify Legal
Counsel, legal counsel for each other Investor and each Investor who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
-9-
(f) The Company shall notify Legal Counsel, legal counsel for each
other Investor and each Investor in writing of the happening of any event, as
promptly as practicable after becoming aware of such 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 omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading
(provided that in no event shall such notice contain any material, non-public
information regarding the Company or any of its Subsidiaries), and, subject to
Section 3(r), promptly prepare a supplement or amendment to such Registration
Statement and such prospectus contained therein to correct such untrue statement
or omission and deliver ten (10) copies of such supplement or amendment to Legal
Counsel, legal counsel for each other Investor and each Investor (or such other
number of copies as Legal Counsel, legal counsel for each other Investor or such
Investor may reasonably request). The Company shall also promptly notify Legal
Counsel, legal counsel for each other Investor and each Investor in writing (i)
when a prospectus or any prospectus supplement or post-effective amendment has
been filed, when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to Legal
Counsel, legal counsel for each other Investor and each Investor by facsimile or
e-mail on the same day of such effectiveness and by overnight mail), and when
the Company receives written notice from the SEC that a Registration Statement
or any post-effective amendment will be reviewed by the SEC, (ii) of any request
by the SEC for amendments or supplements to a Registration Statement or related
prospectus or related information, (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate; and (iv) of the receipt of any request by the SEC or any other
federal or state governmental authority for any additional information relating
to the Registration Statement or any amendment or supplement thereto or any
related prospectus. The Company shall respond as promptly as practicable to any
comments received from the SEC with respect to each Registration Statement or
any amendment thereto (it being understood and agreed that the Company's
response to any such comments shall be delivered to the SEC no later than five
(5) days after the receipt thereof).
(g) The Company shall (i) use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of each Registration
Statement or the use of any prospectus contained therein, or the suspension of
the qualification, or the loss of an exemption from qualification, of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and (ii) notify Legal Counsel, legal counsel for
each other Investor and each Investor who holds Registrable Securities of the
issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.
(h) If any Investor may be required under applicable securities law to
be described in any Registration Statement as an underwriter and such Investor
consents to so being named an underwriter, at the request of any Investor, the
Company shall furnish to such Investor, on the date of the effectiveness of such
Registration Statement and thereafter from time to time on such dates as an
Investor may reasonably request (i) a letter, dated such date, from the
-10-
Company's independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the Investors, and (ii) an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the Investors.
(i) If any Investor may be required under applicable securities law to
be described in any Registration Statement as an underwriter and such Investor
consents to so being named an underwriter, upon the written request of such
Investor, the Company shall make available for inspection by (i) such Investor,
(ii) legal counsel for such Investor and (iii) one (1) firm of accountants or
other agents retained by such Investor (collectively, the "INSPECTORS"), all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "RECORDS"), as shall be reasonably
deemed necessary by each Inspector, and cause the Company's officers, directors
and employees to supply all information which any Inspector may reasonably
request; provided, however, each Inspector shall agree in writing to hold in
strict confidence and not to make any disclosure (except to such Investor) or
use of any Record or other information which the Company's board of directors
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (1) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (2) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a
court or government body of competent jurisdiction, or (3) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this Agreement or any other Transaction Document (as
defined in the Securities Purchase Agreement). Such Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and such Investor, if any) shall
be deemed to limit any Investor's ability to sell Registrable Securities in a
manner which is otherwise consistent with applicable laws and regulations.
(j) The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement or is otherwise required
to be disclosed in such Registration Statement pursuant to the 1933 Act, (iii)
the release of such information is ordered pursuant to a subpoena or other
final, non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
Transaction Document. The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt written notice to such Investor and allow such Investor, at such
Investor's expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.
(k) Without limiting any obligation of the Company under the Securities
Purchase Agreement, the Company shall use its best efforts either to (i) cause
all of the Registrable Securities covered by each Registration Statement to be
listed on each securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, (ii)
secure designation and quotation of all of the Registrable Securities covered by
each Registration Statement on the OTC Bulletin Board, or (iii) if, despite the
Company's best efforts to satisfy the preceding clauses (i) or (ii) the Company
-11-
is unsuccessful in satisfying the preceding clauses (i) or (ii), without
limiting the generality of the foregoing, to use its best efforts to arrange for
at least two market makers to register with the Financial Industry Regulatory
Authority ("FINRA") as such with respect to such Registrable Securities. In
addition, the Company shall cooperate with each Investor and any broker or
dealer through which any such Investor proposes to sell its Registrable
Securities in effecting a filing with FINRA pursuant to FINRA Rule 5110 as
requested by such Investor. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 3(k).
(l) The Company shall cooperate with the Investors who hold Registrable
Securities being offered and, to the extent applicable, facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be offered pursuant to a Registration
Statement and enable such certificates to be in such denominations or amounts
(as the case may be) as the Investors may reasonably request from time to time
and registered in such names as the Investors may request.
(m) If requested by an Investor, the Company shall as soon as
practicable after receipt of notice from such Investor and subject to Section
3(r) hereof, (i) incorporate in a prospectus supplement or post-effective
amendment such information as an Investor reasonably requests to be included
therein relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the number of
Registrable Securities being offered or sold, the purchase price being paid
therefor and any other terms of the offering of the Registrable Securities to be
sold in such offering; (ii) make all required filings of such prospectus
supplement or post-effective amendment after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) supplement or make amendments to any Registration Statement or prospectus
contained therein if reasonably requested by an Investor holding any Registrable
Securities.
(n) The Company shall use its best efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to
consummate the disposition of such Registrable Securities.
(o) The Company shall make generally available to its security holders
as soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with, and in
the manner provided by, the provisions of Rule 158 under the 1933 Act) covering
a twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the applicable Effective Date of each Registration
Statement.
(p) The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
(q) Within one (1) Business Day after a Registration Statement which
covers Registrable Securities is declared effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to the
-12-
transfer agent for such Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as EXHIBIT A.
(r) Notwithstanding anything to the contrary herein (but subject to the
last sentence of this Section 3(r)), at any time after the Effective Date of a
particular Registration Statement, the Company may delay the disclosure of
material, non-public information concerning the Company or any of its
Subsidiaries the disclosure of which at the time is not, in the good faith
opinion of the board of directors of the Company, in the best interest of the
Company and, in the opinion of counsel to the Company, otherwise required (a
"GRACE PERIOD"), provided that the Company shall promptly notify the Investors
in writing of the (i) existence of material, non-public information giving rise
to a Grace Period (provided that in each such notice the Company shall not
disclose the content of such material, non-public information to any of the
Investors) and the date on which such Grace Period will begin and (ii) date on
which such Grace Period ends, provided further that (I) no Grace Period shall
exceed ten (10) consecutive days and during any three hundred sixty five (365)
day period all such Grace Periods shall not exceed an aggregate of thirty (30)
days, (II) the first day of any Grace Period must be at least five (5) Trading
Days after the last day of any prior Grace Period and (III) no Grace Period may
exist during the sixty (60) Trading Day period immediately following the
Effective Date of such Registration Statement (provided that such sixty (60)
Trading Day period shall be extended by the number of Trading Days during such
period and any extension thereof contemplated by this proviso during which such
Registration Statement is not effective or the prospectus contained therein is
not available for use) (each, an "ALLOWABLE GRACE PERIOD"). For purposes of
determining the length of a Grace Period above, such Grace Period shall begin on
and include the date the Investors receive the notice referred to in clause (i)
above and shall end on and include the later of the date the Investors receive
the notice referred to in clause (ii) above and the date referred to in such
notice. The provisions of Section 3(g) hereof shall not be applicable during the
period of any Allowable Grace Period. Upon expiration of each Grace Period, the
Company shall again be bound by the first sentence of Section 3(f) with respect
to the information giving rise thereto unless such material, non-public
information is no longer applicable. Notwithstanding anything to the contrary
contained in this Section 3(r), the Company shall cause its transfer agent to
deliver unlegended shares of Common Stock to a transferee of an Investor in
accordance with the terms of the Securities Purchase Agreement in connection
with any sale of Registrable Securities with respect to which such Investor has
entered into a contract for sale, and delivered a copy of the prospectus
included as part of the particular Registration Statement to the extent
applicable, prior to such Investor's receipt of the notice of a Grace Period and
for which the Investor has not yet settled.
(s) The Company shall use its best efforts to maintain eligibility for
use of Form S-3 (or any successor form thereto) for the registration of the
resale of all the Registrable Securities.
(t) The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by each Investors of its Registrable
Securities pursuant to each Registration Statement.
-13-
4. OBLIGATIONS OF THE INVESTORS.
----------------------------
(a) At least five (5) Business Days prior to the first anticipated
filing date of each Registration Statement, the Company shall notify each
Investor in writing of the information the Company requires from each such
Investor with respect to such Registration Statement. It shall be a condition
precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it, as
shall be reasonably required to effect and maintain the effectiveness of the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.
(b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of each Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g) or
the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of Section 3(f) or receipt of notice that no supplement or
amendment is required. Notwithstanding anything to the contrary in this Section
4(c), the Company shall cause its transfer agent to deliver unlegended shares of
Common Stock to a transferee of an Investor in accordance with the terms of the
Securities Purchase Agreement in connection with any sale of Registrable
Securities with respect to which such Investor has entered into a contract for
sale prior to the Investor's receipt of a notice from the Company of the
happening of any event of the kind described in Section 3(g) or the first
sentence of Section 3(f) and for which such Investor has not yet settled.
(d) Each Investor covenants and agrees that it will comply with the
prospectus delivery requirements of the 1933 Act as applicable to it in
connection with sales of Registrable Securities pursuant to a Registration
Statement.
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees,
FINRA filing fees (if any) and fees and disbursements of counsel for the Company
shall be paid by the Company. The Company shall also reimburse Cranshire for the
fees and disbursements of Legal Counsel in connection with registration, filing
or qualification pursuant to Sections 2 and 3 of this Agreement which amount
shall be limited to $10,000.
-14-
6. INDEMNIFICATION.
---------------
(a) To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor and each of its
directors, officers, shareholders, members, partners, employees, agents,
advisors, representatives (and any other Persons with a functionally equivalent
role of a Person holding such titles notwithstanding the lack of such title or
any other title) and each Person, if any, who controls such Investor within the
meaning of the 1933 Act or the 1934 Act and each of the directors, officers,
shareholders, members, partners, employees, agents, advisors, representatives
(and any other Persons with a functionally equivalent role of a Person holding
such titles notwithstanding the lack of such title or any other title) of such
controlling Persons (each, an "INDEMNIFIED PERSON"), against any losses,
obligations, claims, damages, liabilities, contingencies, judgments, fines,
penalties, charges, costs (including, without limitation, court costs,
reasonable attorneys' fees and costs of defense and investigation), amounts paid
in settlement or expenses, joint or several, (collectively, "CLAIMS") incurred
in investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
"blue sky" laws of any jurisdiction in which Registrable Securities are offered
("BLUE SKY FILING"), or the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"VIOLATIONS"). Subject to Section 6(c), the Company shall reimburse the
Indemnified Persons, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified
Person arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by such
Indemnified Person for such Indemnified Person expressly for use in connection
with the preparation of such Registration Statement or any such amendment
thereof or supplement thereto and (ii) shall not be available to a particular
Investor to the extent such Claim is based on a failure of such Investor to
deliver or to cause to be delivered the prospectus made available by the Company
(to the extent applicable), including, without limitation, a corrected
prospectus, if such prospectus or corrected prospectus was timely made available
-15-
by the Company pursuant to Section 3(d) and then only if, and to the extent
that, following the receipt of the corrected prospectus no grounds for such
Claim would have existed; and (iii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld or
delayed. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of any of the Registrable Securities by any of the Investors
pursuant to Section 9.
(b) In connection with any Registration Statement in which an Investor
is participating, such Investor agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement and each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each, an
"INDEMNIFIED PARTY"), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case, to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(c) and the below provisos
in this Section 6(b), such Investor will reimburse an Indemnified Party any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such Claim; provided, however,
the indemnity agreement contained in this Section 6(b) and the agreement with
respect to contribution contained in Section 7 shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld or delayed, provided further that such Investor shall be liable under
this Section 6(b) for only that amount of a Claim or Indemnified Damages as does
not exceed the net proceeds to such Investor as a result of the applicable sale
of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
any of the Registrable Securities by any of the Investors pursuant to Section 9.
(c) Promptly after receipt by an Indemnified Person or Indemnified
Party (as the case may be) under this Section 6 of notice of the commencement of
any action or proceeding (including, without limitation, any governmental action
or proceeding) involving a Claim, such Indemnified Person or Indemnified Party
(as the case may be) shall, if a Claim in respect thereof is to be made against
any indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party (as the
case may be); provided, however, an Indemnified Person or Indemnified Party (as
the case may be) shall have the right to retain its own counsel with the fees
-16-
and expenses of such counsel to be paid by the indemnifying party if: (i) the
indemnifying party has agreed in writing to pay such fees and expenses; (ii) the
indemnifying party shall have failed promptly to assume the defense of such
Claim and to employ counsel reasonably satisfactory to such Indemnified Person
or Indemnified Party (as the case may be) in any such Claim; or (iii) the named
parties to any such Claim (including, without limitation, any impleaded parties)
include both such Indemnified Person or Indemnified Party (as the case may be)
and the indemnifying party, and such Indemnified Person or such Indemnified
Party (as the case may be) shall have been advised by counsel that a conflict of
interest is likely to exist if the same counsel were to represent such
Indemnified Person or such Indemnified Party and the indemnifying party (in
which case, if such Indemnified Person or such Indemnified Party (as the case
may be) notifies the indemnifying party in writing that it elects to employ
separate counsel at the expense of the indemnifying party, then the indemnifying
party shall not have the right to assume the defense thereof and such counsel
shall be at the expense of the Indemnifying Party, provided further that in the
case of clause (iii) above the indemnifying party shall not be responsible for
the reasonable fees and expenses of more than one (1) separate legal counsel for
such Indemnified Person or Indemnified Party (as the case may be). The
Indemnified Party or Indemnified Person (as the case may be) shall reasonably
cooperate with the indemnifying party in connection with any negotiation or
defense of any such action or Claim by the indemnifying party and shall furnish
to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person (as the case may be) which relates to
such action or Claim. The indemnifying party shall keep the Indemnified Party or
Indemnified Person (as the case may be) reasonably apprised at all times as to
the status of the defense or any settlement negotiations with respect thereto.
No indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent; provided, however, the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person (as the case may be), consent to entry
of any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person (as the case may be) of a
release from all liability in respect to such Claim or litigation, and such
settlement shall not include any admission as to fault on the part of the
Indemnified Party. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person (as the case may be) with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party (as the case may be) under this Section 6, except to the extent that the
indemnifying party is materially and adversely prejudiced in its ability to
defend such action.
(d) No Person involved in the sale of Registrable Securities who is
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) in connection with such sale shall be entitled to indemnification
from any Person involved in such sale of Registrable Securities who is not
guilty of fraudulent misrepresentation.
(e) The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
(f) The indemnity and contribution agreements contained herein shall be
in addition to (i) any cause of action or similar right of the Indemnified Party
or Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
-17-
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however: (i)
no contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section 6
of this Agreement, (ii) no Person involved in the sale of Registrable Securities
which Person is guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to
contribution from any Person involved in such sale of Registrable Securities who
was not guilty of fraudulent misrepresentation; and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the amount of net
proceeds received by such seller from the applicable sale of such Registrable
Securities pursuant to such Registration Statement. Notwithstanding the
provisions of this Section 7, no Investor shall be required to contribute, in
the aggregate, any amount in excess of the amount by which the net proceeds
actually received by such Investor from the applicable sale of the Registrable
Securities subject to the Claim exceeds the amount of any damages that such
Investor has otherwise been required to pay, or would otherwise be required to
pay under Section 6(b), by reason of such untrue or alleged untrue statement or
omission or alleged omission.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of Rule
144, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood and agreed
that nothing herein shall limit any obligations of the Company under the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company, if
true, that it has complied with the reporting, submission and posting
requirements of Rule 144 and the 1934 Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company with the SEC if such reports are not publicly available via
EDGAR, and (iii) such other information as may be reasonably requested to permit
the Investors to sell such securities pursuant to Rule 144 without registration.
-18-
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
All or any portion of the rights under this Agreement shall be
automatically assignable by each Investor to any transferee or assignee (as the
case may be) of all or any portion of such Investor's Registrable Securities or
Warrants if: (i) such Investor agrees in writing with such transferee or
assignee (as the case may be) to assign all or any portion of such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such transfer or assignment (as the case may be); (ii) the Company is,
within a reasonable time after such transfer or assignment (as the case may be),
furnished with written notice of (a) the name and address of such transferee or
assignee (as the case may be), and (b) the securities with respect to which such
registration rights are being transferred or assigned (as the case may be);
(iii) immediately following such transfer or assignment (as the case may be) the
further disposition of such securities by such transferee or assignee (as the
case may be) is restricted under the 1933 Act or applicable state securities
laws if so required; (iv) at or before the time the Company receives the written
notice contemplated by clause (ii) of this sentence such transferee or assignee
(as the case may be) agrees in writing with the Company to be bound by all of
the provisions contained herein; (v) such transfer or assignment (as the case
may be) shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement and the Warrants (as the case may be); and
(vi) such transfer or assignment (as the case may be) shall have been conducted
in accordance with all applicable federal and state securities laws.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended only with the written
consent of the Company and each of the Investors. No waiver shall be effective
unless it is in writing and signed by an authorized representative of the
waiving party. No consideration shall be offered or paid to any Person to amend
or consent to a waiver or modification of any provision of this Agreement unless
the same consideration also is offered to all of the parties to this Agreement.
11. MISCELLANEOUS.
-------------
(a) Solely for purposes of this Agreement, a Person is deemed to be a
holder of Registrable Securities whenever such Person owns, or is deemed to own,
of record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more Persons with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from such record owner of such
Registrable Securities.
(b) Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); (iii) with respect to Section 3(c), by electronic mail (provided
confirmation of transmission is electronically generated and kept on file by the
sending party); or (iv) one (1) Business Day after deposit with a nationally
recognized overnight delivery service with next day delivery specified, in each
case, properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
-19-
If to the Company:
3200 W. Valhalla Drive
Burbank, California 91505
Telephone: (800) 900-9729
Facsimile: (818) 260-0445
Attention: Chief Executive Officer
With a copy (for informational purposes only) to:
Richardson & Associates
1453 3rd Street Promenade #315
Santa Monica, CA 90401-3419
Telephone: (310) 393-9992
Facsimile: (310) 393-2004
Attention: Mark Richardson, Esq.
If to the Transfer Agent:
Mountain Share Transfer Company
1625 Abilene Dr.
Broomfield, Colorado 80020
Telephone: (303) 460-1149
Facsimile: (303) 438-9243
Attention: Beth Powell
If to Legal Counsel:
Greenberg Traurig, LLP
77 W. Wacker Drive, Suite 3100
Chicago, Illinois 60601
Telephone: (312) 456-8400
Facsimile: (312) 456-8435
Attention: Peter H. Lieberman, Esq.
Todd A. Mazur, Esq.
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached to the Securities Purchase Agreement, with copies to such
Buyer's representatives as set forth on the Schedule of Buyers, or to such other
address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party
five (5) days prior to the effectiveness of such change, provided that Greenberg
Traurig, LLP shall only be provided notices sent to Cranshire. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender's facsimile machine or electronic mail transmission containing the
time, date, recipient facsimile number or electronic mail address and an image
of the first page of such transmission or (C) provided by a courier or overnight
courier service shall be rebuttable evidence of personal service, receipt by
-20-
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof. The Company and each Investor acknowledge
and agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that each
party hereto shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement by any other party hereto and
to enforce specifically the terms and provisions hereof (without the necessity
of showing economic loss and without any bond or other security being required),
this being in addition to any other remedy to which any party may be entitled by
law or equity.
(d) The parties hereby agree that pursuant to 735 Illinois Compiled
Statutes 105/5-5 they have chosen that all questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of Illinois, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of Illinois or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of Illinois. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in Chicago, Illinois, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(e) This Agreement, the other Transaction Documents, the schedules and
exhibits attached hereto and thereto and the instruments referenced herein and
therein constitute the entire agreement among the parties hereto and thereto
solely with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement, the other Transaction
Documents, the schedules and exhibits attached hereto and thereto and the
instruments referenced herein and therein supersede all prior agreements and
understandings among the parties hereto solely with respect to the subject
matter hereof and thereof; provided, however, nothing contained in this
Agreement or any other Transaction Document shall (or shall be deemed to) (i)
-21-
have any effect on any agreements any Investor has entered into with the Company
or any of its Subsidiaries prior to the date hereof with respect to any prior
investment made by such Investor in the Company, (ii) waive, alter, modify or
amend in any respect any obligations of the Company or any of its Subsidiaries
or any rights of or benefits to any Investor or any other Person in any
agreement entered into prior to the date hereof between or among the Company
and/or any of its Subsidiaries and any Investor and all such agreements shall
continue in full force and effect or (iii) limit any obligations of the Company
under any of the other Transaction Documents.
(f) Subject to compliance with Section 9 (if applicable), this
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto. This Agreement is not for
the benefit of, nor may any provision hereof be enforced by, any Person, other
than the parties hereto, their respective permitted successors and assigns and
the Persons referred to in Sections 6 and 7 hereof.
(g) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof. Unless the
context clearly indicates otherwise, each pronoun herein shall be deemed to
include the masculine, feminine, neuter, singular and plural forms thereof. The
terms "including," "includes," "include" and words of like import shall be
construed broadly as if followed by the words "without limitation." The terms
"herein," "hereunder," "hereof" and words of like import refer to this entire
Agreement instead of just the provision in which they are found.
(h) This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event that any signature is delivered by
facsimile transmission or by an e-mail which contains a portable document format
(.pdf) file of an executed signature page, such signature page shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such signature page
were an original thereof.
(i) Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents as any other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
(j) The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party. Notwithstanding anything
to the contrary set forth in Section 10, terms used in this Agreement but
defined in the other Transaction Documents shall have the meanings ascribed to
such terms on the Closing Date in such other Transaction Documents unless
otherwise consented to in writing by each Investor.
(k) The obligations of each Investor under this Agreement and the other
Transaction Documents are several and not joint with the obligations of any
other Investor, and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor under this Agreement or any
other Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Investor pursuant hereto or thereto, shall
-22-
be deemed to constitute the Investors as, and the Company acknowledges that the
Investors do not so constitute, a partnership, an association, a joint venture
or any other kind of group or entity, or create a presumption that the Investors
are in any way acting in concert or as a group or entity with respect to such
obligations or the transactions contemplated by the Transaction Documents or any
matters, and the Company acknowledges that the Investors are not acting in
concert or as a group, and the Company shall not assert any such claim, with
respect to such obligations or the transactions contemplated by this Agreement
or any of the other the Transaction Documents. Each Investor shall be entitled
to independently protect and enforce its rights, including, without limitation,
the rights arising out of this Agreement or out of any other Transaction
Documents, and it shall not be necessary for any other Investor to be joined as
an additional party in any proceeding for such purpose. The use of a single
agreement with respect to the obligations of the Company contained herein was
solely in the control of the Company, not the action or decision of any
Investor, and was done solely for the convenience of the Company and not because
it was required or requested to do so by any Investor. It is expressly
understood and agreed that each provision contained in this Agreement and in
each other Transaction Document is between the Company and an Investor, solely,
and not between the Company and the Investors collectively and not between and
among Investors.
[SIGNATURE PAGES FOLLOW]
-23-
IN WITNESS WHEREOF, Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.
COMPANY:
IMAGING3, INC.
By:/s/ Dean Janes
------------------------------
Name: Dean Janes
Title: Chief Executive Officer
-24-
IN WITNESS WHEREOF, Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.
BUYER:
CRANSHIRE CAPITAL, L.P.
By: Downsview Capital, Inc.
Its: General Partner
/s/ Mitchell P. Kopin
------------------------------
By: Mitchell P. Kopin
--------------------------
Its: President
--------------------------
-25-
IN WITNESS WHEREOF, Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.
BUYER:
FREESTONE ADVANTAGE PARTNERS, L.P.
/s/ Keith Goodman
------------------------------
By: Keith Goodman
---------------------------
Its: Common Manager
---------------------------
-26-
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
- ----------------------
- ----------------------
- ----------------------
Attention:
------------
RE: IMAGING3, INC.
Ladies and Gentlemen:
[We are][I am] counsel to Imaging3, Inc., a California corporation (the
"COMPANY"), and have represented the Company in connection with that certain
Securities Purchase Agreement (the "SECURITIES PURCHASE AGREEMENT") entered into
by and among the Company and the buyers named therein (collectively, the
"HOLDERS") pursuant to which the Company issued to the Holders shares of the
Company's common stock, no par value per share (the "COMMON STOCK"), and
warrants exercisable for shares of Common Stock (the "WARRANTS"). Pursuant to
the Securities Purchase Agreement, the Company also has entered into a
Registration Rights Agreement with the Holders (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the shares of Common Stock issuable upon exercise of the
Warrants, under the Securities Act of 1933, as amended (the "1933 ACT"). In
connection with the Company's obligations under the Registration Rights
Agreement, on ____________ ___, 20__, the Company filed a Registration Statement
on Form [S-1][S-3] (File No. 333-_____________) (the "REGISTRATION STATEMENT")
with the Securities and Exchange Commission (the "SEC") relating to the
Registrable Securities which names each of the Holders as a selling stockholder
thereunder.
In connection with the foregoing, [we][I] advise you that a member of
the SEC's staff has advised [us][me] by telephone that the SEC has entered an
order declaring the Registration Statement effective under the 1933 Act at
[ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and [we][I] have
no knowledge, after telephonic inquiry of a member of the SEC's staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.
This letter shall serve as our standing opinion to you that the shares
of Common Stock and the shares of Common Stock underlying the Warrants are
freely transferable by the Holders pursuant to the Registration Statement. You
need not require further letters from us to effect any future legend-free
issuance or reissuance of such shares of Common Stock to the Holders as
contemplated by the Company's Irrevocable Transfer Agent Instructions dated
_________ __, 20__.
Very truly yours,
[ISSUER'S COUNSEL]
By:_____________________
CC: [LIST NAMES OF HOLDERS]
EXHIBIT B
SELLING STOCKHOLDERS
The shares of common stock being offered by the selling stockholders
are those that have been issued to the selling stockholders and those that are
issuable to the selling stockholders upon exercise of the warrants. For
additional information regarding the issuance of the common stock and the
warrants, see "Private Placement of Common Stock and Warrants" above. We are
registering the shares of common stock in order to permit the selling
stockholders to offer the shares for resale from time to time. Except for the
ownership of the common stock and the warrants issued pursuant to the Securities
Purchase Agreement, the selling stockholders have not had any material
relationship with us within the past three years.
The table below lists the selling stockholders and other information
regarding the beneficial ownership (as determined under Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder) of the shares of common stock held by each of the selling
stockholders. The second column lists the number of shares of common stock
beneficially owned by the selling stockholders, based on their respective
ownership of shares of common stock and warrants, as of ________, 2010, assuming
exercise of the warrants held by each such selling stockholder on that date but
taking account of any limitations on exercise set forth therein.
The third column lists the shares of common stock being offered by this
prospectus by the selling stockholders and does not take into account any
limitations on exercise of the warrants set forth therein.
In accordance with the terms of a registration rights agreement with
the holders of the shares of common stock and the warrants, this prospectus
generally covers the resale of the sum of (i) the number of shares of common
stock issued to the selling stockholders and (ii) 133% of the maximum number of
shares of common stock issuable upon exercise of the warrants determined as if
the outstanding warrants were exercised in full (without regard to any
limitations on exercise contained therein) as of the trading day immediately
preceding the date this registration statement was initially filed with the SEC.
Because the exercise price of the warrants may be adjusted, the number of shares
that will actually be issued may be more or less than the number of shares being
offered by this prospectus. The fourth column assumes the sale of all of the
shares offered by the selling stockholders pursuant to this prospectus.
Under the terms of the warrants, a selling stockholder may not exercise
the warrants to the extent (but only to the extent) such selling stockholder or
any of its affiliates would beneficially own a number of shares of our common
stock which would exceed 4.9%. The number of shares in the second column
reflects these limitations. The selling stockholders may sell all, some or none
of their shares in this offering. See "Plan of Distribution."
NUMBER OF SHARES OF MAXIMUM NUMBER OF NUMBER OF SHARES OF
COMMON STOCK OWNED SHARES OF COMMON STOCK COMMON STOCK OWNED
NAME OF SELLING STOCKHOLDER PRIOR TO OFFERING TO BE SOLD PURSUANT TO AFTER OFFERING
THIS PROSPECTUS
- --------------------------- ----------------- ----------------------- --------------
CRANSHIRE CAPITAL, L.P.
- ----------
(1) Downsview Capital, Inc. ("Downsview") is the general partner of Cranshire
Capital, L.P. ("Cranshire") and consequently has voting control and investment
discretion over securities held by Cranshire. Mitchell P. Kopin ("Mr. Kopin"),
President of Downsview, has voting control over Downsview. As a result, each of
Mr. Kopin, Downsview and Cranshire may be deemed to have beneficial ownership
(as determined under Section 13(d) of the Securities Exchange Act of 1934, as
amended) of the shares owned by Cranshire which are being registered hereunder.
PLAN OF DISTRIBUTION
We are registering the shares of common stock issued to the selling
stockholders and issuable upon exercise of the warrants to permit the resale of
these shares of common stock by the selling stockholders from time to time after
the date of this prospectus. We will not receive any of the proceeds from the
sale by the selling stockholders of the shares of common stock. We will bear all
fees and expenses incident to our obligation to register the shares of common
stock.
The selling stockholders may sell all or a portion of the shares of
common stock held by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the shares of
common stock are sold through underwriters or broker-dealers, the selling
stockholders will be responsible for underwriting discounts or commissions or
agent's commissions. The shares of common stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions, pursuant to one or more of the following methods:
o on any national securities exchange or quotation service on
which the securities may be listed or quoted at the time of
sale;
o in the over-the-counter market;
o in transactions otherwise than on these exchanges or systems
or in the over-the-counter market;
o through the writing or settlement of options, whether such
options are listed on an options exchange or otherwise;
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o 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;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales made after the date the Registration Statement is
declared effective by the SEC;
o broker-dealers may agree with a selling securityholder to sell
a specified number of such shares at a stipulated price per
share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares of common stock under
Rule 144 promulgated under the Securities Act of 1933, as amended, if available,
rather than under this prospectus. In addition, the selling stockholders may
transfer the shares of common stock by other means not described in this
prospectus. If the selling stockholders effect such transactions by selling
shares of common stock to or through underwriters, broker-dealers or agents,
such underwriters, broker-dealers or agents may receive commissions in the form
of discounts, concessions or commissions from the selling stockholders or
commissions from purchasers of the shares of common stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved). In connection
with sales of the shares of common stock or otherwise, the selling stockholders
may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the shares of common stock in the course of hedging in
positions they assume. The selling stockholders may also sell shares of common
stock short and deliver shares of common stock covered by this prospectus to
close out short positions and to return borrowed shares in connection with such
short sales. The selling stockholders may also loan or pledge shares of common
stock to broker-dealers that in turn may sell such shares.
The selling stockholders may pledge or grant a security interest in
some or all of the warrants or 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 pursuant
to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act amending, if necessary, 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 and donate the shares of common stock in
other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
To the extent required by the Securities Act and the rules and
regulations thereunder, the selling stockholders and any broker-dealer
participating in the distribution of the shares of common stock may be deemed to
be "underwriters" within the meaning of the Securities Act, and any commission
paid, or any discounts or concessions allowed to, any such broker-dealer may be
deemed to be underwriting commissions or discounts under the Securities Act. At
the time a particular offering of the shares of common stock is made, a
prospectus supplement, if required, will be distributed, which will set forth
the aggregate amount of shares of common stock being offered and the terms of
the offering, including the name or names of any broker-dealers or agents, any
discounts, commissions and other terms constituting compensation from the
selling stockholders and any discounts, commissions or concessions allowed or
re-allowed or paid to broker-dealers.
Under the securities laws of some states, the shares of common stock
may be sold in such states only through registered or licensed brokers or
dealers. In addition, in some states the shares of common stock may not be sold
unless such shares have been registered or qualified for sale in such state or
an exemption from registration or qualification is available and is complied
with.
There can be no assurance that any selling stockholder will sell any or
all of the shares of common stock registered pursuant to the registration
statement, of which this prospectus forms a part.
The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, to the extent applicable, Regulation M of the Exchange Act,
which may limit the timing of purchases and sales of any of the shares of common
stock by the selling stockholders and any other participating person. To the
extent applicable, Regulation M may also restrict the ability of any person
engaged in the distribution of the shares of common stock to engage in
market-making activities with respect to the shares of common stock. All of the
foregoing may affect the marketability of the shares of common stock and the
ability of any person or entity to engage in market-making activities with
respect to the shares of common stock.
We will pay all expenses of the registration of the shares of common
stock pursuant to the registration rights agreement, estimated to be $[ ] in
total, including, without limitation, Securities and Exchange Commission filing
fees and expenses of compliance with state securities or "blue sky" laws;
provided, however, a selling stockholder will pay all underwriting discounts and
selling commissions, if any. We will indemnify the selling stockholders against
liabilities, including some liabilities under the Securities Act in accordance
with the registration rights agreements or the selling stockholders will be
entitled to contribution. We may be indemnified by the selling stockholders
against civil liabilities, including liabilities under the Securities Act that
may arise from any written information furnished to us by the selling
stockholder specifically for use in this prospectus, in accordance with the
related registration rights agreements or we may be entitled to contribution.
Once sold under the registration statement, of which this prospectus
forms a part, the shares of common stock will be freely tradable in the hands of
persons other than our affiliates.