U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005
[ ] Transition report under Section 13 or 15(d) of the Exchange
Act
For the transition period from __________ to __________
Commission file number 0-50977
ECHELON ACQUISITION CORP.
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE N/A
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
c/o William Tay, P.O. Box 42198
Philadelphia, Pennsylvania 19101
(Address of Principal Executive Offices)
(215) 359-2163
(Issuer's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year,
If changed since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: As of July 11, 2005 there
were 11,648,000 shares of common stock issued and outstanding, par value $.001,
and no shares of preferred stock are issued and outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The Financial Statements of the Registrant required to be filed with this 10-
QSB Quarterly Report were prepared by management and commence on the following
page, together with related Notes. In the opinion of management, the Financial
Statements fairly present the financial condition of the Registrant.
ECHELON ACQUISITION CORP.
(A Development Stage Enterprise)
Balance Sheet
As of June 30, 2005
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ -
--------
TOTAL ASSETS $ -
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 800
--------
Total Current Liabilities 800
--------
Total Liabilities $ 800
STOCKHOLDERS' EQUITY:
Preferred Stock at $0.001 par value; authorized
20,000,000 shares; no shares issued and
outstanding -
Common stock at $0.001 par value; authorized
100,000,000 shares; 11,648,000 shares issued
and outstanding 11,648
Accumulated deficit (12,448)
--------
Total Stockholders' Equity (800)
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ -
========
The accompanying notes are an integral part of these financial statements.
ECHELON ACQUISITION CORP.
(A Development Stage Enterprise)
Statement of Operations
(Unaudited)
For the For the Period from
3-Months 6-Months July 27, 2004
Ended Ended (inception)
June 30, June 30, to June 30,
2005 2005 2005
------------ ------------ ------------
Revenue $ - $ - $ -
------------ ------------ ------------
Expenses
Organization and related expenses - - 148
Administrative and general expenses - 11,500 12,300
------------ ------------ ------------
Net loss $ - $ (11,500) $ (12,448)
============ ============ ============
Basic and diluted loss per share $ - $ (0.001) $ (0.001)
============ ============ ============
Weighted average number of common
shares outstanding 11,648,000 11,648,000 11,648,000
============ ============ ============
The accompanying notes are an integral part of these financial statements.
ECHELON ACQUISITION CORP.
(A Development Stage Enterprise)
Statement of Cash Flows
(Unaudited)
For the For the Period from
3-Months 6-Months July 27, 2004
Ended Ended (inception)
June 30, June 30, to June 30,
2005 2005 2005
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ $ (11,500) $ (12,448)
Issuance of stock for services rendered - 11,500 11,648
Increases (Decrease) in accrued expenses - - 800
------------ ------------ ------------
Net Cash Provided (used) by Operating
Activities - - -
CASH FLOWS FROM INVESTING ACTIVITIES - - -
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES - - -
------------ ------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS - - -
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD - - -
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ - $ - $ -
============ ============ ============
NONCASH FINANCING AND INVESTING ACTIVITIES
Common stock issued for services rendered $ - $ 11,500 $ 11,648
============ ============ ============
SUPPLEMENTAL SCHEDULE OF CASH FLOW
ACTIVITIES:
Cash Paid For:
Interest $ - $ - $ -
============ ============ ============
Income taxes $ - $ - $ -
============ ============ ============
The accompanying notes are an integral part of these financial statements.
ECHELON ACQUISITION CORP.
(A Development Stage Enterprise)
Notes to Financial Statements
For the Period Ended June 30, 2005 (Unaudited)
NOTE 1 -- ORGANIZATION
Echelon Acquisition Corp. (A Development Stage Enterprise) (the "Company") was
incorporated on July 27, 2004 under the laws of the State of Delaware. The
Company intends to develop operating opportunities through business
combinations or mergers. To date, the Company has not conducted any significant
operations, and its activities have focused primarily on organizational
efforts, corporate compliance matters and locating potential merger candidates.
Since the Company has not yet commenced any principal operations, and has not
yet earned significant revenues, the Company is considered to be a development
stage enterprise as of June 30, 2005.
The accompanying financial statements include the accounts of the Company from
the date of its formation.
The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
of America for interim financial information and the instructions to Form 10-
QSB. Accordingly, they do not include all the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, the
interim financial statements include all adjustments considered necessary for a
fair presentation of the Company's financial position, results of operations
and cash flows for the three and six months ended June 30, 2005 and from its
inception (July 27, 2004) to June 30, 2005. These statements are not
necessarily indicative of the results to be expected for the full fiscal year.
These statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Form 10-KSB for the year ended
December 31, 2004 as filed with the U.S. Securities and Exchange Commission.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - Development Stage Company
The Company has not earned any revenue from operations. Accordingly, the
Company's activities have been accounted for as those of a "Development Stage
Enterprise" as set forth in Financial Accounting Standards Board Statement No.
7 ("SFAS 7"). Among the disclosures required by SFAS 7 are that the Company's
financial statements be identified as those of a development stage company, and
that the statements of operations, stockholders' equity and cash flows disclose
activity since the date of the Company's inception.
A. Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a fiscal year ending on December 31.
B. Income Taxes
The Company accounts for income taxes under the Financial Accounting Standards
Board of Financial Accounting No. 109, "Accounting for Income Taxes" "Statement
109"). Under Statement 109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Under Statement 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. There were no current or deferred income tax expense or
benefits due to the Company not having any material operations for the period
ended June 30, 2005.
C. Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
D. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
If the Company is successful in raising funds and becoming a business
development company, its principal estimates will involve the determination of
the value of its portfolio companies.
The net asset value per share of our outstanding shares of common stock will be
determined quarterly, as soon as practicable after, and as of the end of, each
calendar quarter, by dividing the value of total assets minus total liabilities
by the number of shares outstanding at the date as of which such determination
is made.
In calculating the value of our total assets, we will value securities that are
publicly traded at the closing price on the valuation date for exchange traded
and NASDAQ listed securities or the average of the bid and asked prices for
other securities. Debt and equity securities that are not publicly traded will
be valued at fair value as determined in good faith by the valuation committee
of our board of directors based on the recommendation by our investment adviser
and under valuation guidelines adopted by our board of directors, and then
approved by our entire board of directors. Initially, the fair value of these
securities will be their original cost. Debt securities valued at cost would be
revalued for significant events affecting the issuer's performance and equity
securities valued at cost would be revalued if significant developments or
other factors affecting the investment provide a basis for valuing the security
at a price other than cost, such as results of subsequent financing, the
availability of market quotations, the portfolio company's operations and
changes in market conditions.
For warrants, our cost usually will be a nominal amount, such as $.01 per
share. Debt securities with remaining maturities of 60 days or less at the time
of purchase will be valued at amortized cost. Debt securities which are
publicly traded will be valued by using market quotations obtained from pricing
services or dealers. Our valuation guidelines are subject to periodic review by
our board of directors and may be revised in light of our experience,
regulatory developments or otherwise.
Determination of fair values involves subjective judgment and estimates not
susceptible to substantiation by auditing procedures. Accordingly, under
current auditing standards, the notes to our financial statements will refer to
the uncertainty with respect to the possible effect of such valuations, and any
change in such valuations, on our financial statements.
E. Basic Loss Per Common Share
Basic loss per common share has been calculated based on the weighted average
number of shares outstanding during the period after giving retroactive effect
to stock splits. There are no dilutive securities at June 30, 2005 for
purposes of computing fully diluted earnings per share.
F. Impact Of New Accounting Standards
In April 2002, the FASB issued Statement of Financial Accounting Standards No.
145, "Rescission of FASB Statements No. 4, 44 and 62, Amendment of FASB
Statement 13, and Technical Corrections" ("SFAS 145"). For most companies, SFAS
145 requires gains and losses from the extinguishment of debt to be classified
as a component of income or loss from continuing operations. Prior to the
issuance of SFAS 145, early debt extinguishments were required to be recognized
as extraordinary items. SFAS 145 amended other previously issued statements and
made numerous technical corrections. SFAS 145 is effective for fiscal years
beginning after May 15, 2002. Adoption of this standard has had no impact on
the Company.
The FASB recently issued Statement of Financial Accounting Standards No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS
146"). SFAS 146 nullifies the Emerging Issues Task Force ("EITF") Issue No. 94-
3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity. SFAS 146 requires that a liability associated with
an exit or disposal activity be recognized when the liability is incurred while
EITF Issue No. 94-3 recognized such liability at such time that an entity
committed to an exit plan. The provisions of SFAS 146 are effective for exit or
disposal activities initiated after December 31, 2002 with early application
encouraged.
On December 31, 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure," which amends SFAS No. 123, Accounting
for Stock Based Compensation.
SFAS 148 provides alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee
compensation. (Under the fair value based method, compensation cost for stock
options is measured when options are issued.) In addition, SFAS 148 amends the
disclosure requirements of SFAS 123 to require more prominent and more frequent
disclosures in financial statements of the effects of stock-based compensation.
The transition guidance and annual disclosure provisions of SFAS 148 are
effective for fiscal years ending after December 15, 2002, with earlier
application permitted in certain circumstances. The interim disclosure
provisions are effective for financial reports containing financial statements
for interim periods beginning after December 15, 2002.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." This
statement establishes standards for how an issuer classifies and measures in
its statement of financial position certain financial instruments with
characteristics of both liabilities and equity. In accordance with the
standard, financial instruments that embody obligations for the issuer are
required to be classified as liabilities. This Statement is effective for
financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. The Company does not expect the provision of this
statement to have a significant impact on the Company's financial statements.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." Interpretation 45 requires a guarantor
to include disclosure of certain obligations, and if applicable, at the
inception of the guarantee, recognize a liability for the fair value of other
certain obligations undertaken in issuing a guarantee. The recognition
requirement is effective for guarantees issued or modified after December 31,
2002. The Company has no obligations regarding Interpretation No. 45.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." Interpretation 46 clarifies the application of
Accounting Research Bulletin No. 51, Consolidated Financial Statements, and
applies immediately to any variable interest entities created after January 31,
2003 and to variable interest entities in which an interest is obtained after
that date. The Company holds no interest in variable interest entities.
NOTE 3 -- GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern that contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has not established any source of revenue to cover its
operating costs. The Company will engage in very limited activities without
incurring any liabilities that must be satisfied in cash until a source of
funding is secured. The Company will offer noncash consideration and seek
equity lines as a means of financing its operations. If the Company is unable
to obtain revenue producing contracts or financing or if the revenue or
financing it does obtain is insufficient to cover any operating losses it may
incur, it may substantially curtail or terminate its operations or seek other
business opportunities through strategic alliances, acquisitions or other
arrangements that may dilute the interests of existing stockholders.
NOTE 4 - SHAREHOLDER'S EQUITY
On July 27, 2004, the Board of Directors issued 148,000 shares of common stock
for $148 in services to the founding shareholder of the Company to fund
organizational start-up costs.
On February 23, 2005, the Board of Directors approved the issuance of
11,500,000 shares of common stock to retain the services of William Tay as CEO
and President of the Company and were deemed fully paid and non-assessable on
that date.
The shares were deemed to have been issued pursuant to an exemption provided by
Section 4(2) of the Act, which exempts from registration "transactions by an
issuer not involving a public offering."
Common Stock
The holders of the Company's common stock:
- - Have equal ratable rights to dividends from funds legally available for
payment of dividends when, as and if declared by the board of directors;
- - Are entitled to share ratably in all of the assets available for distribution
to holders of common stock upon liquidation, dissolution or winding up of our
affairs;
- - Do not have preemptive, subscription or conversion rights, or redemption or
access to any sinking fund; and
- - Are entitled to one noncumulative vote per share on all matters submitted to
stockholders for a vote at any meeting of stockholders.
The Company has authorized, but not issued, 20,000,000 shares of preferred
stock at $.001 per share. The board of directors has the authority to establish
and fix the designation, powers, or preferences of preferred shares without
further vote by the shareholders.
Warrant and Options
There are no warrants or options outstanding to issue any additional shares of
common stock.
Item 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion contains certain forward-looking statements that are
subject to business and economic risks and uncertainties, and the Company's
actual results could differ materially from those forward-looking statements.
The following discussion regarding the financial statements of the Company
should be read in conjunction with the financial statements and notes thereto.
BACKGROUND OF THE COMPANY
Echelon Acquisition Corp. (the "Company") was organized under the Laws of the
State of Delaware, on July 27, 2004, as a blank check or shell company whose
primary purpose is to engage in a merger with, or acquisition of one or a small
number of private firms. Such firms are expected to be private corporations,
partnerships or sole proprietorships. From inception through the present time,
the primary activity of the Company has been directed towards organizational
efforts, compliance matters and locating potential merger candidates.
The Company is still a "blank check" or "shell" company. At present, the
Company has no business opportunities under contemplation for acquisitions.
GENERAL OVERVIEW
The Company's activities since inception have been limited to organizational
matters, compliance efforts and locating potential merger candidates, and the
Company has not engaged in any operating activity since its inception.
The Company has registered its Common Stock on a Form 10-SB registration
statement filed pursuant to the Securities Exchange Act of 1934 (the Exchange
Act) and Rule 12(g) thereof. The Company files with the Securities and Exchange
Commission periodic reports under Rule 13(a) of the Exchange Act, including
quarterly reports on Form 10-QSB and annual reports on Form 10-KSB.
The Company was formed to engage in a merger with or acquisition of an
unidentified foreign or domestic private company which desires to become a
reporting (public) company whose securities are qualified for trading in the
United States secondary market. The Company meets the definition of a blank
check company contained in Section 7(b)(3) of the Securities Act of 1933, as
amended.
Management believes that there are perceived benefits to being a reporting
company with a class of publicly-traded securities which may be attractive to
foreign and domestic private companies.
These benefits are commonly thought to include (1) the ability to use
registered securities to make acquisition of assets or businesses; (2)
increased visibility in the financial community; (3) the facilitation of
borrowing from financial institutions; (4) improved trading efficiency; (5)
shareholder liquidity; (6) greater ease in subsequently raising capital; (7)
compensation of key employees through options for stock for which there is a
public market; (8) enhanced corporate image; and, (9) a presence in the United
States capital market.
A private company which may be interested in a business combination with the
Company may include (1) a Company for which a primary purpose of becoming
public is the use of its securities for the acquisition of assets or
businesses; (2) a company which is unable to find an underwriter of its
securities or is unable to find an underwriter of securities on terms
acceptable to it; (3) a company which wishes to become public with less
dilution of its Common Stock than would occur normally upon an underwriting;
(4) a company which believes that it will be able to obtain investment capital
on more favorable terms after it has become public; (5) a foreign company which
may wish an initial entry into the United States securities market; (6) a
special situation company, such as a company seeking a public market to satisfy
redemption requirements under a qualified Employee Stock Option Plan; and, (7)
a company seeking one or more of the other benefits believed to attach to a
public company.
The Company is authorized to enter into a definitive agreement with a wide
variety of private businesses without limitation as to their industry or
revenues. It is not possible at this time to predict with which private
company, if any, the Company will enter into a definitive agreement or what
will be the industry, operating history, revenues, future prospects or other
characteristics of that company.
As of the date hereof, management has not made any final decision concerning,
and has not entered into any agreements for, a business combination. When any
such agreement is reached or other material fact occurs, the Company will file
notice of such agreement or fact with the Securities and Exchange Commission on
Form 8-K. Persons reading this Form 10-QSB are advised to see if the Company
has subsequently filed a Form 8-K.
There is no trading market for our common stock and no market may ever exist
for the Company's common stock. The Company plans to apply for a corporate
CUSIP # for its securities and to assist broker-dealers in complying with Rule
15c2-11 of the Securities Exchange Act of 1934, as amended, so that such
brokers can trade the Company's common stock in the Over-The-Counter Electronic
Bulletin Board (the "OTC Bulletin Board"). There can be no assurance to
investors that any broker-dealer will actually file the materials required in
order for such OTC Bulletin Board trading to proceed.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes
in financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
GOING CONCERN
The financial statements included in this filing have been prepared in
conformity with generally accepted accounting principles that contemplate the
continuance of us as a going concern. Our lack of cash is inadequate to pay all
of the costs associated with our operations. Management intends to use
borrowings and security sales to mitigate the effects of its cash position,
however no assurance can be given that debt or equity financing, if and when
required will be available. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets and classification of liabilities that might be necessary should we be
unable to continue existence.
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This report contains various forward-looking statements that are based on the
Company's beliefs as well as assumptions made by and information currently
available to the Company. When used in this report, the words "believe,"
"expect," "anticipate," "estimate" and similar expressions are intended to
identify forward-looking statements. Such statements may include statements
regarding seeking business opportunities, payment of operating expenses, and
the like, and are subject to certain risks, uncertainties and assumptions which
could cause actual results to differ materially from projections or estimates
contained herein. Factors which could cause actual results to differ
materially include, among others, unanticipated delays or difficulties in
location of a suitable business acquisition candidate, unanticipated or
unexpected costs and expenses, competition and changes in market conditions,
lack of adequate management personnel and the like. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially form those anticipated,
estimated or projected. The Company cautions again placing undue reliance on
forward-looking statements all of that speak only as of the date made.
Item 3. Controls and Procedures.
Based on his most recent evaluation, which was completed within 90 days of the
filing of this Form 10-QSB, the Company's president and principal financial
officer believe the Company's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) are effective to ensure that information
required to be disclosed by the Company in this report is accumulated and
communicated to the Company's management, as appropriate, to allow timely
decisions regarding required disclosure.
There were no significant changes in the Company's internal controls or other
factors that could significantly affect these controls subsequent to the date
of their evaluation and there were no corrective actions with regard to
significant deficiencies and material weaknesses.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
There are no legal proceedings against the Company and the Company is unaware
of such proceedings contemplated against it.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
The Company's promoters, who held 11,648,000 shares of the Company's common
stock, have received certain registration rights to sell shares of common stock
held by them in the public market. Such rights consist of demand and piggyback
registration rights. Demand registration obligates the Company to register up
to the entire 11,648,000 shares of its common stock upon written request from
the promoters holding a majority of such shares. The Company's promoters paid
$.001 per share for their shares of common stock. The Company shall not be
obligated to effect more than two demand registrations under the agreement.
Piggy-back registration obligates the Company to include the promoters' shares
in any subsequent registration made by the Company under the Securities Act,
subject to certain exclusions specified in the agreement. Both demand and
piggyback registration rights become effective immediately following the
consummation of a merger or acquisition. A subsequent sale of a large number of
shares by the Company's promoters following a demand or piggyback registration
may have the effect of reducing the fair market value of the Company's common
stock by increasing the number of shares available in the open market. Copy of
the registration rights agreement is attached hereto as an exhibit to this
report on Form 10-QSB.
Item 6. Exhibits and Reports on Form 8-K.
1) Exhibits
4.1 Registration Rights Agreement.
31.1 Certification Pursuant to Section 302 Of The Sarbanes-Oxley Act
Of 2002.
32.1 Certification Pursuant to Section 906 Of The Sarbanes-Oxley Act
Of 2002
2) Reports on Form 8-K: None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ECHELON ACQUISITION CORP.
Dated: July 11, 2005 By: /s/ William Tay
-------------------------
William Tay
Chief Executive Officer
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is entered into as of the 30th
day of June, 2005, by and among ECHELON ACQUISITION CORP., a Delaware
corporation (the "Company"), and the undersigned parties listed under Investor
on the signature page hereto (each, an "Investor" and collectively, the
"Investors").
The Investors currently hold all of the issued and outstanding securities of
the Company; and
The Investors and the Company desire to enter into this Agreement to provide
the Investors with certain rights relating to the registration of shares of
Common Stock (as defined below) held by them.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. The following capitalized terms used herein have the
following meanings:
"Agreement" means this Agreement, as amended, restated, supplemented, or
otherwise modified from time to time.
"Commission" means the Securities and Exchange Commission, or any other federal
agency then administering the Securities Act or the Exchange Act.
"Common Stock" means the common stock, par value $0.001 per share, of the
Company.
"Company" is defined in the preamble to this Agreement.
"Demand Registration" is defined in Section 2.1.1.
"Demanding Holder" is defined in Section 2.1.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission promulgated thereunder, all as the same
shall be in effect at the time.
"Form S-3" is defined in Section 2.3.
"Indemnified Party" is defined in Section 4.3.
"Indemnifying Party" is defined in Section 4.3.
"Investor" is defined in the preamble to this Agreement.
"Investor Indemnified Party" is defined in Section 4.1.
"IPO" is defined as the Company's initial public offering (if any) of its
securities pursuant to a Registration Statement on Form SB-2, as amended.
"Maximum Number of Shares" is defined in Section 2.1.4.
"Notices" is defined in Section 6.3.
"Piggy-Back Registration" is defined in Section 2.2.1.
"Prospectus" means the Company's prospectus relating to the IPO.
"Register," "registered" and "registration" mean a registration effected by
preparing and filing a registration statement or similar document in compliance
with the requirements of the Securities Act, and the applicable rules and
regulations promulgated thereunder, and such registration statement becoming
effective.
"Registrable Securities" means all of the shares of Common Stock held by
Investors. Registrable Securities includes shares of capital stock or other
securities of the Company issued as a dividend or other distribution with
respect to or in exchange for or in replacement of such shares of Common Stock.
As to any particular Registrable Securities, such securities shall cease to be
Registrable Securities when: (a) a Registration Statement with respect to the
sale of such securities shall have become effective under the Securities Act
and such securities shall have been sold, transferred, disposed of or exchanged
in accordance with such Registration Statement; (b) such securities shall have
been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not require registration under the
Securities Act; (c) such securities shall have ceased to be outstanding; or (d)
the Securities and Exchange Commission makes a definitive determination to the
Company that the Registrable Securities are salable under Rule 144(k).
"Registration Statement" means a registration statement filed by the Company
with the Commission in compliance with the Securities Act and the rules and
regulations promulgated thereunder for a public offering and sale of Common
Stock (other than a registration statement on Form S-4 or Form S-8, or its
successor, or any registration statement covering only securities proposed to
be issued in exchange for securities or assets of another entity).
"Release Date" means the date upon which the Company consummates a "business
combination" with a "target business."
"Securities Act" means the Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder, all as the same shall
be in effect at the time.
"Underwriter" means a securities dealer who purchases any Registrable
Securities as principal in an underwritten offering and not as part of such
dealer's market-making activities.
2. REGISTRATION RIGHTS.
2.1 Demand Registration.
2.1.1 Request for Registration. At any time and from time to time on or after
the Release Date, the holders of a majority-in-interest of the Registrable
Securities held by the Investors (other than the transferees of the Investors),
may make a written demand for registration under the Securities Act of all or
part of their Registrable Securities (a "Demand Registration"). Any demand for
a Demand Registration shall specify the number of shares of Registrable
Securities proposed to be sold and the intended method(s) of distribution
thereof. The Company will notify all holders of Registrable Securities of the
demand, and each holder of Registrable Securities who wishes to include all or
a portion of such holder's Registrable Securities in the Demand Registration
(each such holder including shares of Registrable Securities in such
registration, a "Demanding Holder") shall so notify the Company within fifteen
(15) days after the receipt by the holder of the notice from the Company. Upon
any such request, the Demanding Holders shall be entitled to have their
Registrable Securities included in the Demand Registration, subject to Section
2.1.4 and the provisions set forth in Section 3.1.1. The Company shall not be
obligated to effect more than an aggregate of two (2) Demand Registrations
under this Section 2.1.1 in respect of Registrable Securities.
2.1.2 Effective Registration. A registration will not count as a Demand
Registration until the Registration Statement filed with the Commission with
respect to such Demand Registration has been declared effective and the Company
has complied with all of its obligations under this Agreement with respect
thereto; provided, however, that if, after such Registration Statement has been
declared effective, the offering of Registrable Securities pursuant to a Demand
Registration is interfered with by any stop order or injunction of the
Commission or any other governmental agency or court, the Registration
Statement with respect to such Demand Registration will be deemed not to have
been declared effective, unless and until, (i) such stop order or injunction is
removed, rescinded or otherwise terminated, and (ii) a majority-in-interest of
the Demanding Holders thereafter elect to continue the offering; provided,
further, that the Company shall not be obligated to file a second Registration
Statement until a Registration Statement that has been filed is counted as a
Demand Registration or is terminated.
2.1.3 Underwritten Offering. If a majority-in-interest of the Demanding Holders
so elect and such holders so advise the Company as part of their written demand
for a Demand Registration, the offering of such Registrable Securities pursuant
to such Demand Registration shall be in the form of an underwritten offering.
In such event, the right of any holder to include its Registrable Securities in
such registration shall be conditioned upon such holder's participation in such
underwriting and the inclusion of such holder's Registrable Securities in the
underwriting to the extent provided herein. All Demanding Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the Underwriter or Underwriters
selected for such underwriting by a majority-in-interest of the holders
initiating the Demand Registration.
2.1.4 Reduction of Offering. If the managing Underwriter or Underwriters for a
Demand Registration that is to be an underwritten offering advises the Company
and the Demanding Holders in writing that the dollar amount or number of shares
of Registrable Securities which the Demanding Holders desire to sell, taken
together with all other shares of Common Stock or other securities which the
Company desires to sell and the shares of Common Stock, if any, as to which
registration has been requested pursuant to written contractual piggy-back
registration rights held by other stockholders of the Company who desire to
sell, exceeds the maximum dollar amount or maximum number of shares that can be
sold in such offering without adversely affecting the proposed offering price,
the timing, the distribution method, or the probability of success of such
offering (such maximum dollar amount or maximum number of shares, as
applicable, the "Maximum Number of Shares"), then the Company shall include in
such registration: (i) first, the Registrable Securities as to which Demand
Registration has been requested by the Demanding Holders (pro rata in
accordance with the number of shares of Registrable Securities which such
Demanding Holder has requested be included in such registration, regardless of
the number of shares of Registrable Securities held by each Demanding Holder)
that can be sold without exceeding the Maximum Number of Shares; (ii) second,
to the extent that the Maximum Number of Shares has not been reached under the
foregoing clause (i), the shares of Common Stock or other securities that the
Company desires to sell that can be sold without exceeding the Maximum Number
of Shares; (iii) third, to the extent that the Maximum Number of Shares has not
been reached under the foregoing clauses (i) and (ii), the shares of Common
Stock for the account of other persons that the Company is obligated to
register pursuant to written contractual arrangements with such persons and
that can be sold without exceeding the Maximum Number of Shares; and (v)
fourth, to the extent that the Maximum Number of Shares have not been reached
under the foregoing clauses (i), (ii), and (iii), the shares of Common Stock
that other stockholders desire to sell that can be sold without exceeding the
Maximum Number of Shares.
2.1.5 Withdrawal. If a majority-in-interest of the Demanding Holders disapprove
of the terms of any underwriting or are not entitled to include all of their
Registrable Securities in any offering, such majority-in-interest of the
Demanding Holders may elect to withdraw from such offering by giving written
notice to the Company and the Underwriter or Underwriters of their request to
withdraw prior to the effectiveness of the Registration Statement filed with
the Commission with respect to such Demand Registration. If the majority-in-
interest of the Demanding Holders withdraws from a proposed offering relating
to a Demand Registration, then such registration shall not count as a Demand
Registration provided for in Section 2.1.1.
2.2 Piggy-Back Registration.
2.2.1 Piggy-Back Rights. If at any time on or after the Release Date the
Company proposes to file a Registration Statement under the Securities Act with
respect to an offering of equity securities, or securities or other obligations
exercisable or exchangeable for, or convertible into, equity securities, by the
Company for its own account or for stockholders of the Company for their
account (or by the Company and by stockholders of the Company including,
without limitation, pursuant to Section 2.1), other than a Registration
Statement (i) filed in connection with any employee stock option or other
benefit plan, (ii) for an exchange offer or offering of securities solely to
the Company's existing stockholders, (iii) for an offering of debt that is
convertible into equity securities of the Company or (iv) for a dividend
reinvestment plan, then the Company shall (x) give written notice of such
proposed filing to the holders of Registrable Securities as soon as practicable
but in no event less than ten (10) days before the anticipated filing date,
which notice shall describe the amount and type of securities to be included in
such offering, the intended method(s) of distribution, and the name of the
proposed managing Underwriter or Underwriters, if any, of the offering, and (y)
offer to the holders of Registrable Securities in such notice the opportunity
to register the sale of such number of shares of Registrable Securities as such
holders may request in writing within five (5) days following receipt of such
notice (a "Piggy-Back Registration"). The Company shall cause such Registrable
Securities to be included in such registration and shall use its best efforts
to cause the managing Underwriter or Underwriters of a proposed underwritten
offering to permit the Registrable Securities requested to be included in a
Piggy-Back Registration to be included on the same terms and conditions as any
similar securities of the Company and to permit the sale or other disposition
of such Registrable Securities in accordance with the intended method(s) of
distribution thereof. All holders of Registrable Securities proposing to
distribute their securities through a Piggy-Back Registration that involves an
Underwriter or Underwriters shall enter into an underwriting agreement in
customary Form with the Underwriter or Underwriters selected for such Piggy-
Back Registration.
2.2.2 Reduction of Offering. If the managing Underwriter or Underwriters for a
Piggy-Back Registration that is to be an underwritten offering advises the
Company and the holders of Registrable Securities in writing that the dollar
amount or number of shares of Common Stock which the Company desires to sell,
taken together with shares of Common Stock, if any, as to which registration
has been demanded pursuant to written contractual arrangements with persons
other than the holders of Registrable Securities hereunder, the Registrable
Securities as to which registration has been requested under this Section 2.2,
and the shares of Common Stock, if any, as to which registration has been
requested pursuant to the written contractual piggy-back registration rights of
other stockholders of the Company, exceeds the Maximum Number of Shares, then
the Company shall include in any such registration:
(i) If the registration is undertaken for the Company's account: (A) first, the
shares of Common Stock or other securities that the Company desires to sell
that can be sold without exceeding the Maximum Number of Shares; (B) second, to
the extent that the Maximum Number of Shares has not been reached under the
foregoing clause (A), the shares of Common Stock, if any, including the
Registrable Securities, as to which registration has been requested pursuant to
written contractual piggy-back registration rights of security holders (pro
rata in accordance with the number of shares of Common Stock which each such
person has actually requested to be included in such registration, regardless
of the number of shares of Common Stock with respect to which such persons have
the right to request such inclusion) that can be sold without exceeding the
Maximum Number of Shares; and
(ii) If the registration is a "demand" registration undertaken at the demand of
persons other than the holders of Registrable Securities pursuant to written
contractual arrangements with such persons, (A) first, the shares of Common
Stock for the account of the demanding persons that can be sold without
exceeding the Maximum Number of Shares; (B) second, to the extent that the
Maximum Number of Shares has not been reached under the foregoing clause (A),
the shares of Common Stock or other securities that the Company desires to sell
that can be sold without exceeding the Maximum Number of Shares; and (C) third,
to the extent that the Maximum Number of Shares has not been reached under the
foregoing clauses (A) and (B), the Registrable Securities as to which
registration has been requested under this Section 2.2 (pro rata in accordance
with the number of shares of Registrable Securities held by each such holder);
and (D) fourth, to the extent that the Maximum Number of Shares has not been
reached under the foregoing clauses (A), (B) and (C), the shares of Common
Stock, if any, as to which registration has been requested pursuant to written
contractual piggy-back registration rights which such other stockholders desire
to sell that can be sold without exceeding the Maximum Number of Shares.
2.2.3 Withdrawal. Any holder of Registrable Securities may elect to withdraw
such holder's request for inclusion of Registrable Securities in any Piggy-Back
Registration by giving written notice to the Company of such request to
withdraw prior to the effectiveness of the Registration Statement. The Company
may also elect to withdraw a registration statement at any time prior to the
effectiveness of the Registration Statement. Notwithstanding any such
withdrawal, the Company shall pay all expenses incurred by the holders of
Registrable Securities in connection with such Piggy-Back Registration as
provided in Section 3.3.
2.3 Registrations on Form S-3. The holders of Registrable Securities may at any
time and from time to time, request in writing that the Company register the
resale of any or all of such Registrable Securities on Form S-3 or any similar
short-Form registration which may be available at such time ("Form S-3");
provided, however, that the Company shall not be obligated to effect such
request through an underwritten offering. Upon receipt of such written request,
the Company will promptly give written notice of the proposed registration to
all other holders of Registrable Securities, and, as soon as practicable
thereafter, effect the registration of all or such portion of such holder's or
holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other holder or
holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration pursuant to this Section 2.3: (i) if Form S-3 is not available for
such offering; or (ii) if the holders of the Registrable Securities, together
with the holders of any other securities of the Company entitled to inclusion
in such registration, propose to sell Registrable Securities and such other
securities (if any) at any aggregate price to the public of less than $100,000.
Registrations effected pursuant to this Section 2.3 shall not be counted as
Demand Registrations effected pursuant to Section 2.1.
3. REGISTRATION PROCEDURES.
3.1 Filings; Information. Whenever the Company is required to effect the
registration of any Registrable Securities pursuant to Section 2, the Company
shall use its best efforts to effect the registration and sale of such
Registrable Securities in accordance with the intended method(s) of
distribution thereof as expeditiously as practicable, and in connection with
any such request:
3.1.1 Filing Registration Statement. The Company shall, as expeditiously as
possible and in any event within sixty (60) days after receipt of a request for
a Demand Registration pursuant to Section 2.1, prepare and file with the
Commission a Registration Statement on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate and which
form shall be available for the sale of all Registrable Securities to be
registered thereunder in accordance with the intended method(s) of distribution
thereof, and shall use its best efforts to cause such Registration Statement to
become and remain effective for the period required by Section 3.1.3; provided,
however, that the Company shall have the right to defer any Demand Registration
for up to thirty (30) days, and any Piggy-Back Registration for such period as
may be applicable to deferment of any demand registration to which such Piggy-
Back Registration relates, in each case if the Company shall furnish to the
holders a certificate signed by the Chief Executive Officer of the Company
stating that, in the good faith judgment of the Board of Directors of the
Company, it would be materially detrimental to the Company and its stockholders
for such Registration Statement to be effected at such time; provided further,
however, that the Company shall not have the right to exercise the right set
forth in the immediately preceding proviso more than once in any 365-day period
in respect of a Demand Registration hereunder.
3.1.2 Copies. The Company shall, prior to filing a Registration Statement or
prospectus, or any amendment or supplement thereto, furnish without charge to
the holders of Registrable Securities included in such registration, and such
holders' legal counsel, copies of such Registration Statement as proposed to be
filed, each amendment and supplement to such Registration Statement (in each
case including all exhibits thereto and documents incorporated by reference
therein), the prospectus included in such Registration Statement (including
each preliminary prospectus), and such other documents as the holders of
Registrable Securities included in such registration or legal counsel for any
such holders may request in order to facilitate the disposition of the
Registrable Securities owned by such holders.
3.1.3 Amendments and Supplements. The Company shall prepare and file with the
Commission such amendments, including post-effective amendments, and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective and in compliance with the provisions of the Securities Act until all
Registrable Securities and other securities covered by such Registration
Statement have been disposed of in accordance with the intended method(s) of
distribution set forth in such Registration Statement (which period shall not
exceed the sum of one hundred eighty (180) days plus any period during which
any such disposition is interfered with by any stop order or injunction of the
Commission or any governmental agency or court) or such securities have been
withdrawn.
3.1.4 Notification. After the filing of a Registration Statement, the Company
shall promptly, and in no event more than two (2) business days after such
filing, notify the holders of Registrable Securities included in such
Registration Statement of such filing, and shall further notify such holders
promptly and confirm such advice in writing in all events within two (2)
business days of the occurrence of any of the following: (i) when such
Registration Statement becomes effective; (ii) when any post-effective
amendment to such Registration Statement becomes effective; (iii) the issuance
or threatened issuance by the Commission of any stop order (and the Company
shall take all actions required to prevent the entry of such stop order or to
remove it if entered); and (iv) any request by the Commission for any amendment
or supplement to such Registration Statement or any prospectus relating thereto
or for additional information or of the occurrence of an event requiring the
preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of the securities covered by such
Registration Statement, such prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
promptly make available to the holders of Registrable Securities included in
such Registration Statement any such supplement or amendment; except that
before filing with the Commission a Registration Statement or prospectus or any
amendment or supplement thereto, including documents incorporated by reference,
the Company shall furnish to the holders of Registrable Securities included in
such Registration Statement and to the legal counsel for any such holders,
copies of all such documents proposed to be filed sufficiently in advance of
filing to provide such holders and legal counsel with a reasonable opportunity
to review such documents and comment thereon, and the Company shall not file
any Registration Statement or prospectus or amendment or supplement thereto,
including documents incorporated by reference, to which such holders or their
legal counsel shall object.
3.1.5 State Securities Laws Compliance. The Company shall use its best efforts
to (i) register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions in the United States as the holders of Registrable Securities
included in such Registration Statement (in light of their intended plan of
distribution) may request and (ii) take such action necessary to cause such
Registrable Securities covered by the Registration Statement to be registered
with or approved by such other governmental authorities as may be necessary by
virtue of the business and operations of the Company and do any and all other
acts and things that may be necessary or advisable to enable the holders of
Registrable Securities included in such Registration Statement to consummate
the disposition of such Registrable Securities in such jurisdictions; provided,
however, that the Company shall not be required to qualify generally to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (e) or subject itself to taxation in any such
jurisdiction.
3.1.6 Agreements for Disposition. The Company shall enter into customary
agreements (including, if applicable, an underwriting agreement in customary
form) and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such Registrable Securities. The
representations, warranties and covenants of the Company in any underwriting
agreement which are made to or for the benefit of any Underwriters, to the
extent applicable, shall also be made to and for the benefit of the holders of
Registrable Securities included in such registration statement. No holder of
Registrable Securities included in such registration statement shall be
required to make any representations or warranties in the underwriting
agreement except, if applicable, with respect to such holder's organization,
good standing, authority, title to Registrable Securities, lack of conflict of
such sale with such holder's material agreements and organizational documents,
and with respect to written information relating to such holder that such
holder has furnished in writing expressly for inclusion in such Registration
Statement.
3.1.7 Cooperation. The principal executive officer of the Company, the
principal financial officer of the Company, the principal accounting officer of
the Company and all other officers and members of the management of the Company
shall cooperate fully in any offering of Registrable Securities hereunder,
which cooperation shall include, without limitation, the preparation of the
Registration Statement with respect to such offering and all other offering
materials and related documents, and participation in meetings with
Underwriters, attorneys, accountants and potential investors.
3.1.8 Records. The Company shall make available for inspection by the holders
of Registrable Securities included in such Registration Statement, any
Underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other professional retained by any
holder of Registrable Securities included in such Registration Statement or any
Underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, as shall be necessary to enable them to exercise
their due diligence responsibility, and cause the Company's officers, directors
and employees to supply all information requested by any of them in connection
with such Registration Statement.
3.1.9 Opinions and Comfort Letters. The Company shall furnish to each holder of
Registrable Securities included in any Registration Statement a signed
counterpart, addressed to such holder, of (i) any opinion of counsel to the
Company delivered to any Underwriter and (ii) any comfort letter from the
Company's independent public accountants delivered to any Underwriter. In the
event no legal opinion is delivered to any Underwriter, the Company shall
furnish to each holder of Registrable Securities included in such Registration
Statement, at any time that such holder elects to use a prospectus, an opinion
of counsel to the Company to the effect that the Registration Statement
containing such prospectus has been declared effective and that no stop order
is in effect.
3.1.10 Earnings Statement. The Company shall comply with all applicable rules
and regulations of the Commission and the Securities Act, and make available to
its stockholders, as soon as practicable, an earnings statement covering a
period of twelve (12) months, beginning within three (3) months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.
3.1.11 Listing. The Company shall use its best efforts to cause all Registrable
Securities included in any registration to be listed on such exchanges or
otherwise designated for trading in the same manner as similar securities
issued by the Company are then listed or designated or, if no such similar
securities are then listed or designated, in a manner satisfactory to the
holders of a majority of the Registrable Securities included in such
registration.
3.2 Obligation to Suspend Distribution. Upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
3.1.4(iv), or, in the case of a resale registration on Form S-3 pursuant to
Section 2.3 hereof, upon any suspension by the Company, pursuant to a written
insider trading compliance program adopted by the Company's Board of Directors,
of the ability of all "insiders" covered by such program to transact in the
Company's securities because of the existence of material non-public
information, each holder of Registrable Securities included in any registration
shall immediately discontinue disposition of such Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such holder receives the supplemented or amended prospectus contemplated
by Section 3.1.4(iv) or the restriction on the ability of "insiders" to
transact in the Company's securities is removed, as applicable, and, if so
directed by the Company, each such holder will deliver to the Company all
copies, other than permanent file copies then in such holder's possession, of
the most recent prospectus covering such Registrable Securities at the time of
receipt of such notice.
3.3 Registration Expenses. The Company shall bear all costs and expenses
incurred in connection with any Demand Registration pursuant to Section 2.1,
any Piggy-Back Registration pursuant to Section 2.2, and any registration on
Form S-3 effected pursuant to Section 2.3, and all expenses incurred in
performing or complying with its other obligations under this Agreement,
whether or not the Registration Statement becomes effective, including, without
limitation: (i) all registration and filing fees; (ii) fees and expenses of
compliance with securities or "blue sky" laws (including fees and disbursements
of counsel in connection with blue sky qualifications of the Registrable
Securities); (iii) printing expenses; (iv) the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees); (v) the fees and expenses incurred in connection with the listing
of the Registrable Securities as required by Section 3.1.11; (vi) National
Association of Securities Dealers, Inc. fees; (vii) fees and disbursements of
counsel for the Company and fees and expenses for independent certified public
accountants retained by the Company (including the expenses or costs associated
with the delivery of any opinions or comfort letters requested pursuant to
Section 3.1.9); (viii) the fees and expenses of any special experts retained by
the Company in connection with such registration and (ix) the fees and expenses
of one legal counsel selected by the holders of a majority-in-interest of the
Registrable Securities included in such registration. The Company shall have no
obligation to pay any underwriting discounts or selling commissions
attributable to the Registrable Securities being sold by the holders thereof,
which underwriting discounts or selling commissions shall be borne by such
holders. Additionally, in an underwritten offering, all selling stockholders
and the Company shall bear the expenses of the underwriter pro rata in
proportion to the respective amount of shares each is selling in such offering.
3.4 Information. The holders of Registrable Securities shall provide such
information as may reasonably be requested by the Company, or the managing
Underwriter, if any, in connection with the preparation of any Registration
Statement, including amendments and supplements thereto, in order to effect the
registration of any Registrable Securities under the Securities Act pursuant to
Section 2 and in connection with the Company's obligation to comply with
federal and applicable state securities laws.
4. INDEMNIFICATION AND CONTRIBUTION.
4.1 Indemnification by the Company. The Company agrees to indemnify and hold
harmless each Investor and each other holder of Registrable Securities, and
each of their respective officers, employees, affiliates, directors, partners,
members, attorneys and agents, and each person, if any, who controls an
Investor and each other holder of Registrable Securities (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) (each, an
"Investor Indemnified Party"), from and against any expenses, losses,
judgments, claims, damages or liabilities, whether joint or several, arising
out of or based upon any untrue statement (or allegedly untrue statement) of a
material fact contained in any Registration Statement under which the sale of
such Registrable Securities was registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained in the
Registration Statement, or any amendment or supplement to such Registration
Statement, or arising out of or based upon any omission (or alleged omission)
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation promulgated thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration; and the Company shall promptly reimburse
the Investor Indemnified Party for any legal and any other expenses reasonably
incurred by such Investor Indemnified Party in connection with investigating
and defending any such expense, loss, judgment, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such expense, loss, claim, damage or liability arises
out of or is based upon any untrue statement or allegedly untrue statement or
omission or alleged omission made in such Registration Statement, preliminary
prospectus, final prospectus, or summary prospectus, or any such amendment or
supplement, in reliance upon and in conformity with information furnished to
the Company, in writing, by such selling holder expressly for use therein. The
Company also shall indemnify any Underwriter of the Registrable Securities,
their officers, affiliates, directors, partners, members and agents and each
person who controls such Underwriter on substantially the same basis as that of
the indemnification provided above in this Section 4.1.
4.2 Indemnification by Holders of Registrable Securities. Each selling holder
of Registrable Securities will, in the event that any registration is being
effected under the Securities Act pursuant to this Agreement of any Registrable
Securities held by such selling holder, indemnify and hold harmless the
Company, each of its directors and officers and each underwriter (if any), and
each other person, if any, who controls such selling holder or such underwriter
within the meaning of the Securities Act, against any losses, claims,
judgments, damages or liabilities, whether joint or several, insofar as such
losses, claims, judgments, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or allegedly
untrue statement of a material fact contained in any Registration Statement
under which the sale of such Registrable Securities was registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or arise out of or are based upon any
omission or the alleged omission to state a material fact required to be stated
therein or necessary to make the statement therein not misleading, if the
statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by such selling holder
expressly for use therein, and shall reimburse the Company, its directors and
officers, and each such controlling person for any legal or other expenses
reasonably incurred by any of them in connection with investigation or
defending any such loss, claim, damage, liability or action. Each selling
holder's indemnification obligations hereunder shall be several and not joint
and shall be limited to the amount of any net proceeds actually received by
such selling holder.
4.3 Conduct of Indemnification Proceedings. Promptly after receipt by any
person of any notice of any loss, claim, damage or liability or any action in
respect of which indemnity may be sought pursuant to Section 4.1 or 4.2, such
person (the "Indemnified Party") shall, if a claim in respect thereof is to be
made against any other person for indemnification hereunder, notify such other
person (the "Indemnifying Party") in writing of the loss, claim, judgment,
damage, liability or action; provided, however, that the failure by the
Indemnified Party to notify the Indemnifying Party shall not relieve the
Indemnifying Party from any liability which the Indemnifying Party may have to
such Indemnified Party hereunder, except and solely to the extent the
Indemnifying Party is actually prejudiced by such failure. If the Indemnified
Party is seeking indemnification with respect to any claim or action brought
against the Indemnified Party, then the Indemnifying Party shall be entitled to
participate in such claim or action, and, to the extent that it wishes, jointly
with all other Indemnifying Parties, to assume control of the defense thereof
with counsel satisfactory to the Indemnified Party. After notice from the
Indemnifying Party to the Indemnified Party of its election to assume control
of the defense of such claim or action, the Indemnifying Party shall not be
liable to the Indemnified Party for any legal or other expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof other
than reasonable costs of investigation; provided, however, that in any action
in which both the Indemnified Party and the Indemnifying Party are named as
defendants, the Indemnified Party shall have the right to employ separate
counsel (but no more than one such separate counsel) to represent the
Indemnified Party and its controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the
Indemnified Party against the Indemnifying Party, with the fees and expenses of
such counsel to be paid by such Indemnifying Party if, based upon the written
opinion of counsel of such Indemnified Party, representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, consent to entry of judgment or effect any
settlement of any claim or pending or threatened proceeding in respect of which
the Indemnified Party is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Party, unless such judgment or
settlement includes an unconditional release of such Indemnified Party from all
liability arising out of such claim or proceeding.
4.4 Contribution.
4.4.1 If the indemnification provided for in the foregoing Sections 4.1, 4.2
and 4.3 is unavailable to any Indemnified Party in respect of any loss, claim,
damage, liability or action referred to herein, then each such Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
claim, damage, liability or action in such proportion as is appropriate to
reflect the relative fault of the Indemnified Parties and the Indemnifying
Parties in connection with the actions or omissions which resulted in such
loss, claim, damage, liability or action, as well as any other relevant
equitable considerations. The relative fault of any Indemnified Party and any
Indemnifying Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such Indemnified Party or such Indemnifying Party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
4.4.2 The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4.4 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding Section
4.4.1. The amount paid or payable by an Indemnified Party as a result of any
loss, claim, damage, liability or action referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.4, no holder of Registrable
Securities shall be required to contribute any amount in excess of the dollar
amount of the net proceeds (after payment of any underwriting fees, discounts,
commissions or taxes) actually received by such holder from the sale of
Registrable Securities which gave rise to such contribution obligation. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
5. UNDERWRITING AND DISTRIBUTION.
5.1 Rule 144. The Company covenants that it shall file any reports required to
be filed by it under the Securities Act and the Exchange Act and shall take
such further action as the holders of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holders to
sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 under the
Securities Act, as such Rules may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission.
6. MISCELLANEOUS.
6.1 Other Registration Rights. The Company represents and warrants that no
person, other than a holder of the Registrable Securities, has any right to
require the Company to register any shares of the Company's capital stock for
sale or to include shares of the Company's capital stock in any registration
filed by the Company for the sale of shares of capital stock for its own
account or for the account of any other person.
6.2 Assignment; No Third Party Beneficiaries. This Agreement and the rights,
duties and obligations of the Company hereunder may not be assigned or
delegated by the Company in whole or in part. This Agreement and the rights,
duties and obligations of the holders of Registrable Securities hereunder may
be freely assigned or delegated by such holder of Registrable Securities in
conjunction with and to the extent of any transfer of Registrable Securities by
any such holder. This Agreement and the provisions hereof shall be binding upon
and shall inure to the benefit of each of the parties and their respective
successors and the permitted assigns of the Investor or holder of Registrable
Securities or of any assignee of the Investor or holder of Registrable
Securities. This Agreement is not intended to confer any rights or benefits on
any persons that are not party hereto other than as expressly set forth in
Article 4 and this Section 6.2.
6.3 Notices. All notices, demands, requests, consents, approvals or other
communications (collectively, "Notices") required or permitted to be given
hereunder or which are given with respect to this Agreement shall be in writing
and shall be personally served, delivered by reputable air courier service with
charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile,
addressed as set forth below, or to such other address as such party shall have
specified most recently by written notice. Notice shall be deemed given on the
date of service or transmission if personally served or transmitted by
telegram, telex or facsimile; provided, that if such service or transmission is
not on a business day or is after normal business hours, then such notice shall
be deemed given on the next business day. Notice otherwise sent as provided
herein shall be deemed given on the next business day following timely delivery
of such notice to a reputable air courier service with an order for next-day
delivery.
To the Company:
Echelon Acquisition Corp.
c/o William Tay
P.O. Box 42198
Philadelphia, PA 19101
Attention: President
To an Investor, to:
William Tay
P.O. Box 42198
Philadelphia, PA 19101
Soloman Lam
11863 Wimbledon Circle, #418
Wellington, FL 33414
6.4 Severability. This Agreement shall be deemed severable, and the invalidity
or unenforceability of any term or provision hereof shall not affect the
validity or enforceability of this Agreement or of any other term or provision
hereof. Furthermore, in lieu of any such invalid or unenforceable term or
provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
6.5 Counterparts. This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original, and all of which taken together shall
constitute one (1) and the same instrument.
6.6 Entire Agreement. This Agreement (including all agreements entered into
pursuant hereto and all certificates and instruments delivered pursuant hereto
and thereto) constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede all prior and contemporaneous agreements,
representations, understandings, negotiations and discussions between the
parties, whether oral or written.
6.7 Modifications and Amendments. No amendment, modification or termination of
this Agreement shall be binding upon any party unless executed in writing by
such party.
6.8 Titles and Headings. Titles and headings of sections of this Agreement are
for convenience only and shall not affect the construction of any provision of
this Agreement.
6.9 Waivers and Extensions. Any party to this Agreement may waive any right,
breach or default which such party has the right to waive, provided that such
waiver will not be effective against the waiving party unless it is in writing,
is signed by such party, and specifically refers to this Agreement. Waivers may
be made in advance or after the right waived has arisen or the breach or
default waived has occurred. Any waiver may be conditional. No waiver of any
breach of any agreement or provision herein contained shall be deemed a waiver
of any preceding or succeeding breach thereof nor of any other agreement or
provision herein contained. No waiver or extension of time for performance of
any obligations or acts shall be deemed a waiver or extension of the time for
performance of any other obligations or acts.
6.10 Remedies Cumulative. In the event that the Company fails to observe or
perform any covenant or agreement to be observed or performed under this
Agreement, the Investor or any other holder of Registrable Securities may
proceed to protect and enforce its rights by suit in equity or action at law,
whether for specific performance of any term contained in this Agreement or for
an injunction against the breach of any such term or in aid of the exercise of
any power granted in this Agreement or to enforce any other legal or equitable
right, or to take any one or more of such actions, without being required to
post a bond. None of the rights, powers or remedies conferred under this
Agreement shall be mutually exclusive, and each such right, power or remedy
shall be cumulative and in addition to any other right, power or remedy,
whether conferred by this Agreement or now or hereafter available at law, in
equity, by statute or otherwise.
6.11 Governing Law. This Agreement shall be governed by, interpreted under, and
construed in accordance with the internal laws of the State of Delaware
applicable to agreements made and to be performed within the State of Delaware,
without giving effect to any choice-of-law provisions thereof that would compel
the application of the substantive laws of any other jurisdiction.
6.12 Waiver of Trial by Jury. Each party hereby irrevocably and unconditionally
waives the right to a trial by jury in any action, suit, counterclaim or other
proceeding (whether based on contract, tort or otherwise) arising out of,
connected with or relating to this Agreement, the transactions contemplated
hereby, or the actions of the Investor in the negotiation, administration,
performance or enforcement hereof.
IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to be executed and delivered by their duly authorized representatives as of the
date first written above.
Echelon Acquisition Corp.
A Delaware corporation
By:
-----------------------------
Name: William Tay
Title: President
INVESTORS:
- -----------------------------
William Tay
- -----------------------------
Soloman Lam
EXHIBIT 31.1
CERTIFICATION
I, William Tay, certify that:
1. I have reviewed this report on Form 10-QSB of Echelon Acquisition Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
small business issuer as of, and for, the periods presented in this quarterly
report;
4. I am the sole officer and director and I am responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:
a. Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under my supervision, to ensure that
material information relating to the small business issuer, including its
consolidated subsidiaries, is made known to me by others within those entities,
particularly during the period in which this report is being prepared;
b. Evaluated the effectiveness of the small business issuer disclosure controls
and procedures and presented in this report my conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the small business issuer's internal
control over financial reporting that occurred during the small business
issuer's most recent fiscal quarter (the small business issuer's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control
over financial reporting, to the small business issuer's auditors of the small
business issuer's board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's internal
control over financial reporting.
Date: July 11, 2005
/s/ William Tay
- -------------------------------------
William Tay, President, CEO and CFO
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Echelon Acquisition
Corp. (the "Company") on Form 10-QSB for the period ending June 30, 2005 as
filed with the Securities and Exchange Commission on July 11, 2005 (the
"Report"), I, William Tay, Chief Executive Officer and Chief Financial Officer
of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant
to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and result of
operations of the Company.
/s/ William Tay
- --------------------------------------------
William Tay
Chief Executive Officer and
Chief Financial Officer
July 11, 2005