MAGNEGAS CORPORATION AND THE PURCHASERS NAMED HEREIN ____________________________________________________________ COMMON STOCK AND WARRANT PURCHASE AGREEMENT ____________________________________________________________ __________________, 2011 MAGNEGAS CORPORATION COMMON STOCK AND WARRANT PURCHASE AGREEMENT

2.11           Governmental Consents.  No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, local or provincial governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement, except for notices required or permitted to be filed with certain state and federal securities commissions, which notices will be filed on a timely basis.

 

2.12           No Brokers. Except for any fees payable to the Placement Agent, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based on arrangements made by the Company.

 

2.13           Compliance.  The Company is not in violation of its Certificate of Incorporation or Bylaws.  Neither the Company nor the subsidiaries have been advised or have reason to believe, that it is not conducting its business in compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting business, including, without limitation, all applicable local, state and federal environmental laws and regulations; except where failure to be so in compliance would not have a Material Adverse Effect.  Each of the Company and the subsidiaries has all necessary franchises, licenses, certificates and other authorizations from any foreign, federal, state or local government or governmental agency, department or body that are currently necessary for the operation of the business of the Company and they subsidiaries as currently conducted, except where the failure to currently possess such franchises, licenses, certificates and other authorizations would not reasonably be expected to have a Material Adverse Effect.

 

2.14           No Material Changes.  Except as disclosed in the Company SEC Documents, since June 30, 2011, there has been no material adverse change in the assets, liabilities, business, properties, operations, financial condition or results of operations of the Company and its subsidiaries, taken as a whole.  Since June 30, 2011, the Company has not declared or paid any dividend or distribution or its capital stock.

 

2.15           Contracts.  Except for matters which are not reasonably likely to have a Material Adverse Effect and those contracts that are substantially or fully performed or expired by their terms, the contracts listed as exhibits to or described in the Company SEC Documents that are material to the Company or any of its subsidiaries and all amendments thereto, are in full force and effect on the date hereof, and neither the Company nor, to the Company’ knowledge, any other party to such contracts is in breach of or default under any of such contracts.  The Company has no contracts or agreements that would constitute a material contract as such term is defined in Item 601(b) of Regulation S-K, except for such contracts or agreements that are filed as exhibits to or described in the Company SEC Documents.

 

 

(a) The Company and its subsidiaries have ownership or license or legal right to use all patent, copyright, trade secret, know-how trademark, trade name customer lists, designs, manufacturing or other processes, computer software, systems, data compilation, research results or other proprietary rights used in their businesses (collectively “Intellectual Property”).  All of such patents, registered trademarks and registered copyrights have been duly registered in, filed in or issued by the United States Patent and Trademark Office, the United States Register of Copyrights or the corresponding offices of other jurisdictions and have been maintained and renewed in accordance with all applicable provisions of law and administrative regulations in the United States and all such jurisdictions.

(b) The Company believes it has taken all reasonable steps required in accordance with sound business practice and business judgment to establish and preserve its and its subsidiaries ownership of all material Intellectual Property with respect to their products and technology.

 

(c) To the knowledge of the Company, the present business, activities and products of the Company and its subsidiaries do not infringe any intellectual property of any other person, except where such infringement would not have a Material Adverse Effect.  No proceeding charging the Company with infringement of any adversely held Intellectual Property has been filed.

 

(d) No proceedings have been instituted or pending or, to the knowledge of the Company, threatened, which challenge the rights of the Company to the use of the Intellectual Property. To the knowledge of the Company, there is no infringement of the Intellectual Property by any third party. The Company has the right to use, free and clear of material claims or rights of other persons, all of its customer lists, designs, computer software, systems, data compilations, and other information that are required for its products or its business as presently conducted.  Neither the Company nor any subsidiary is making unauthorized use of any confidential information or trade secrets of any person.  The activities of any of the employees on behalf of the Company or of any subsidiary do not violate any agreements or arrangements between such employees and third parties are related to confidential information or trade secrets of third parties or that restrict any such employee’s engagement in business activity of any nature.

 

(e) All licenses or other agreements under which (i) the Company or any subsidiary employs rights in Intellectual Property, or (ii) the Company or any subsidiary has granted rights to others in Intellectual Property owned or licensed by the Company or any subsidiary are in full force and effect, and there is no default (and there exists no condition which, with the passage of time or otherwise, would constitute a default by the Company or such subsidiary) by the Company or any subsidiary with respect thereto.

 

2.17           Exchange Compliance.  The Company’s common stock is registered pursuant to Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) and is listed on the Over-the-Counter-Bulletin Board (the “Principal Market”), and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock (including the Shares and Warrant Shares) from the Principal Market.  The Company is and on each Closing Date will be in compliance with all of the presently applicable requirements for continued listing of the Common Stock on the Principal Market. The issuance of the Securities and the Warrant Shares does not require stockholder approval including, without limitation, pursuant to the rules and regulations of the Principal Market.

(d)           Accredited Investor Status.  The Purchaser is an “accredited investor” as such term is defined in Rule 501(a) of the rules and regulations promulgated under the Securities Act. The Purchaser represents and warrants that it meets such status due to satisfying the criteria set forth on Exhibit D attached hereto.

(a) As promptly as reasonably practicable following final Closing, but in no event later than 45 days following the Initial Closing Date, the Company shall prepare and file (i) with the SEC a registration statement on Form S-1 (or any successor to Form S-1), covering the resale of the Registrable Securities (as defined below) (such registration statement, together with any registration statement for any Cut Back Shares (as defined below), the “Registration Statement”); and (ii) to the extent required for resale of the Registrable Securities in any state of the United States of America by a Purchaser at the time of or after the effectiveness of the Registration Statement, a registration statement or other applicable document (each a “Blue Sky Registration”) allowing the Purchaser to resell the Registrable Securities in such state in accordance with the blue sky laws of such state.  Subject to Section 6.1(b), as soon as reasonably practicable after the Initial Closing Date, but in no event later than 90 days following the Initial Closing Date (120 days in the event of a full review of the Registration Statement by the SEC), the Company shall cause the Registration Statement and each Blue Sky Registration to become effective and effect any related qualification or compliance with respect to all Registrable Securities held by the Purchasers.  For purposes of this Agreement, the term “Registrable Securities” shall mean the Warrants, the Shares, the Warrant Shares, and any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, any Shares or Warrant Shares.  Subject to Section 6.1(b), if the Registration Statement or any Blue Sky Registration has not been declared effective by the applicable governmental authority on or before the date that is 90 days after the Initial Closing Date, or 120 days after the Initial Closing Date in the event of a full review of the Registration Statement by the SEC (the “Required Effective Date”), the Company shall, on the business day immediately following the Required Effective Date and each 30th day thereafter, make a payment to the Purchasers as partial liquidated damages for such delay (together, the “Late Registration Payments”) equal to 1% (capped at 6%) of the Purchase Price paid for the Shares and Warrants then owned by the Purchasers that have not been so registered until the Registration Statement and each Blue Sky Registration is declared effective by the applicable governmental authority.  Late Registration Payments will be prorated on a daily basis during each 30 day period and will be paid to the Purchasers by wire transfer or check within five business days after the earlier of (i) the end of each 30 day period following the Required Effective Date or (ii) the effective date of the Registration Statement and each Blue Sky Registration.  The Company and the Purchaser each acknowledge that the Late Registration Payments provided for in this Section 6.1(a) bear a reasonable relationship to the anticipated loss that would be suffered by the Purchaser for the Company’s failure to comply with the terms of this Section 6.1(a) and the actual loss the Purchaser would suffer for the Company’s failure to comply with the terms of this Section 6.1(a) is difficult to ascertain or incapable of estimation.  If the Company fails to pay any liquidated damages pursuant to this section in full within seven days after the date payable, the Company will pay interest thereon at a rate of 10% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Purchasers, accruing daily from the date such liquidated damages are due until such amounts, plus all such interest thereon, are paid in full.  “Business day” means any day except Saturday, Sunday and any day that is a federal legal holiday in the United States.

(b) Notwithstanding anything to the contrary in this Section 6, if the Company is required by the SEC to cutback the number of securities being registered in the Registration Statement pursuant to Rule 415 under the Securities Act, then the Company shall reduce the Registrable Securities pro rata, and unless otherwise directed in writing by a Purchaser as to its Registrable Securities, the number of Registrable Securities and other securities to be registered on such Registration Statement will first be reduced by securities (if any) included in such Registration Statement that are not Registrable Securities, second by the Registrable Securities represented by the Warrants, third by the Registrable Securities represented by the Warrant Shares, and fourth by the Registrable Securities represented by the Shares.  Notwithstanding anything to the contrary contained in this Section 6, if the Company receives comments from the SEC with respect to the Registration Statement, and following discussions with and responses to the SEC in which the Company uses its commercially reasonable best efforts to cause as many Registrable Securities for as many Purchasers as possible to be included in the Registration Statement filed pursuant to Section 6 without characterizing any Purchaser as an underwriter, the Company is unable to cause the inclusion of all Registrable Securities in such Registration Statement, then the Company may, following not less than one Business day prior written notice to the Purchasers, (i) remove from the Registration Statement Registrable Securities (the “Cut Back Shares”) in accordance with the terms of this Section 6.1(b) and/or (ii) agree to such restrictions and limitations on the registration and resale of the Registrable Securities, in each case as the SEC may require in order for the SEC to allow such Registration Statement to become effective (collectively, the “SEC Restrictions”).  Unless the SEC Restrictions otherwise require, any cutback imposed pursuant to this Section 6.1(b) shall be allocated among the Registrable Securities of the Purchasers on a pro rata basis.  No liquidated damages under this Section 6 shall accrue on or as to any Cut Back Shares, and the Required Effective Date with respect to such additional Registration Statement including the Cutback Shares will be tolled, until such time as the Company is able to effect the registration of the Cut Back Shares in accordance with any SEC Restrictions (such date, the “Restriction Termination Date”).  From and after the Restriction Termination Date, all provisions of this Section 6 (including, without limitation, the liquidated damages provisions, subject to tolling as provided above) shall again be applicable to the Cut Back Shares (which, for avoidance of doubt, retain their character as Registrable Securities) so that the Company will be required to file with and cause to be declared effective by the SEC such additional Registration Statements in the time frames set forth herein as necessary to ultimately cause to be covered by effective Registration Statements all Registrable Securities (if such Registrable Securities cannot at such time be resold by the Purchaser thereof pursuant to Rule 144 under the Securities Act).  For purposes of this Section 6.1(b), the Warrants and shares of Common Stock issuable upon exercise of the warrants to be issued to the Placement Agent in connection with the transactions contemplated hereby shall be considered “Registrable Securities” and the Placement Agent shall be treated as a “Purchaser.”

(i) prepare and file with the applicable governmental authority such amendments and supplements to each Blue Sky Registration, the Registration Statement and the Prospectus used in connection therewith as may be necessary or advisable to keep the Blue Sky Registration and the Registration Statement current and effective for the resale of the Securities held by a Purchaser in the manner contemplated by such Purchaser for a period ending on the earlier of (i) the second anniversary of the final Closing Date, (ii) the date on which all Securities may be sold pursuant to Rule 144 under the Securities Act or any successor rule (“Rule 144”) and the blue sky laws of any state or (iii) such time as all Securities have been sold pursuant to a registration statement or Rule 144 and any applicable blue sky exemption for resale.  At such time the Company is no longer required to keep the Blue Sky Registrations and the Registration Statement current and effective for the Securities held by a Purchaser (the “Registration Statement Termination Date”), that Purchaser will no longer accrue any additional liquidated damages payments pursuant to Sections 6.1(a) or 6.2(c); however, the Company shall still be obligated to make all payments under Sections 6.1(a) or 6.2(c) that were not made prior to the Registration Statement Termination Date for that Purchaser.  The Company shall notify each Purchaser promptly upon each Blue Sky Registration, the Registration Statement and each post-effective amendment to any of the foregoing, being declared effective by the applicable governmental authority and advise each Purchaser that the form of Prospectus contained in the Registration Statement or post-effective amendment thereto, as the case may be, at the time of effectiveness meets the requirements of Section 10(a) of the Securities Act or that it intends to file a Prospectus pursuant to Rule 424(b) under the Securities Act that meets the requirements of Section 10(a) of the Securities Act;

(ii) furnish to the Purchaser with respect to the Securities registered under the Registration Statement such number of copies of the Registration Statement and the Prospectus (including supplemental prospectuses) filed with the SEC in conformance with the requirements of the Securities Act and other such documents (including any Blue Sky Registration) as the Purchaser may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Securities by the Purchaser;

 

(iii) make any necessary blue sky filings in addition the Blue Sky Registrations;

 

(iv) pay the expenses incurred by the Company and the Purchasers in complying with Section 6, including, all registration and filing fees, FINRA fees, exchange listing fees, printing expenses, fees and disbursements of counsel for the Company, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding attorneys’ fees of any Purchaser and any and all underwriting discounts and selling commissions applicable to the sale of Registrable Securities by the Purchasers);

 

(v) advise the Purchasers, promptly after it shall receive notice or obtain knowledge of the issuance of any stop order by the SEC or any state securities regulator delaying or suspending the effectiveness of the Registration Statement or any Blue Sky Registration or of the initiation of any proceeding for that purpose; and it will promptly use its commercially reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued; and

 

(vi) with a view to making available to the Purchaser the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit the Purchaser to sell Securities to the public without registration, the Company covenants and agrees to use reasonable efforts to:  (i) make and keep public information available, as those terms are understood and defined in Rule 144, until the earlier of (A) such date as all of the Securities qualify to be resold immediately pursuant to Rule 144 or any other rule of similar effect and all blue sky laws or (B) such date as all of the Securities shall have been resold pursuant to Rule 144 and applicable blue sky laws (and may be further resold without restriction); (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and under the Exchange Act; and (iii) furnish to the Purchaser upon request, as long as the Purchaser owns any Securities, (A) a written statement by the Company as to whether it has complied with the reporting requirements of the Securities Act and the Exchange Act, (B) a copy of the Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such other information as may be reasonably requested in order to avail the Purchaser of any rule or regulation of the SEC and any state that permits the selling of any such Securities without registration.

 

The Company understands that the Purchasers disclaim being an underwriter, but acknowledges that a determination by the SEC that a Purchaser is deemed an underwriter shall not relieve the Company of any obligations it has hereunder.

 

6.2 Transfer of Shares After Registration; Suspension.

 

(a) Except in the event that Section 6.2(b) applies, the Company shall: (i) if deemed necessary or advisable by the Company, prepare and file from time to time with the applicable governmental authority a post-effective amendment to any Blue Sky Registration, the Registration Statement or a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that such Blue Sky Registration or such Registration Statement will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and so that, as thereafter delivered to purchasers of the securities being sold thereunder, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (ii) provide the Purchasers copies of any documents filed pursuant to Section 6.2(a)(i); and (iii) upon request, inform each Purchaser who so requests that the Company has complied with its obligations in Section 6.2(b)(i) (or that, if the Company has filed a post-effective amendment to the Registration Statement or any Blue Sky Registration which has not yet been declared effective, the Company will notify the Purchaser to that effect, will use its commercially reasonable best efforts to secure the effectiveness of such post-effective amendment as promptly as possible and will promptly notify the Purchaser pursuant to Section 6.2(b)(i) when the amendment has become effective).

 

 

(b) Subject to Section 6.2(c), in the event: (i) of any request by the SEC or any other federal or state governmental authority during the period of effectiveness of any Blue Sky Registration or the Registration Statement or for amendments or supplements to such Blue Sky Registration, the Registration Statement or related Prospectus or for additional information; (ii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of such Blue Sky Registration or of the Registration Statement or the initiation of any proceedings for that purpose; (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose; or (iv) of any event or circumstance which necessitates the making of any changes in any Blue Sky Registration, the Registration Statement or Prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that, in the case of any Blue Sky Registration or the Registration Statement, it will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; then the Company shall promptly deliver a certificate in writing to the Purchasers (the “Suspension Notice”) to the effect of the foregoing and, upon receipt of such Suspension Notice, the Purchasers will refrain from selling any Securities pursuant to such Blue Sky Registration or the Registration Statement (a “Suspension”) until the Purchasers are advised in writing by the Company that the current Blue Sky Registration or the Prospectus may be used, and have received copies from the Company of any additional or supplemental filings that are incorporated or deemed incorporated by reference in any such Blue Sky Registration or Prospectus.  In the event of any Suspension, the Company will use its commercially reasonable best efforts to cause the use of the Blue Sky Registration or Prospectus so suspended to be resumed as soon as reasonably practicable after delivery of a Suspension Notice to the Purchasers.  In addition to and without limiting any other remedies (including, without limitation, at law or at equity) available to the Company and the Purchaser, the Company and the Purchasers shall be entitled to specific performance in the event that the other party fails to comply with the provisions of this Section 6.2(b).

 

(c) Notwithstanding the foregoing paragraphs of this Section 6.2, the Company shall use its commercially reasonable best efforts to ensure that (i) a Suspension shall not exceed 30 days individually, (ii) Suspensions covering no more than 45 days, in the aggregate, shall occur during any twelve month period and (iii) each Suspension shall be separated by a period of at least 30 days from a prior Suspension (each Suspension that satisfies the foregoing criteria being referred to herein as a “Qualifying Suspension”). In the event that there occurs a Suspension (or part thereof) that does not constitute a Qualifying Suspension, the Company shall pay to the Purchaser, on the 30th day following the first day of such Suspension (or the first day of such part), and on each 30th day thereafter, an amount equal to 1% of the Purchase Price paid for the Securities purchased by the Purchaser and not previously sold by the Purchaser with such payments to be prorated on a daily basis during each 30 day period and will be paid to the Purchaser by wire transfer or check within five business days after the end of each 30 day period following.  The Company and the Purchaser each acknowledge that the payments provided for in this Section 6.2(c) bear a reasonable relationship to the anticipated loss that would be suffered by the Purchaser as a result of a Suspension and the actual loss the Purchaser would suffer as a result of a Suspension is difficult to ascertain or incapable of estimation.

 

 

(d) If a Suspension is not then in effect, the Purchasers may sell Securities under the Registration Statement and each Blue Sky Registration, provided that they comply with any applicable prospectus delivery requirements.  Upon receipt of a request therefor, the Company will provide an adequate number of current Prospectuses or Blue Sky Registrations to a Purchaser and to any other parties reasonably requiring such documents.

 

(e) The Company agrees that it shall, immediately prior to the Registration Statement and all Blue Sky Registrations being declared effective, deliver to its transfer agent an opinion letter of counsel, opining that at any time the Registration Statement and the Blue Sky Registrations are effective, the transfer agent may issue, in connection with the sale of the Securities, certificates representing such Securities without restrictive legend, provided the Securities are to be sold pursuant to the prospectus contained in the Registration Statement and any applicable Blue Sky Registration.  Upon receipt of such opinion, the Company shall cause the transfer agent to confirm promptly, for the benefit of the Purchasers, that no further opinion of counsel is required at the time of transfer in order to issue such Securities without restrictive legend.

 

The Company shall cause its transfer agent to issue promptly a certificate without any restrictive legend to a purchaser of any Securities from the Purchasers, if no Suspension is in effect at the time of sale, and (a) the sale of such Securities is registered under the Registration Statement (including registration pursuant to Rule 415 under the Securities Act) and all applicable blue sky laws; (b) the holder has provided the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the Securities Act or any blue sky law; or (c) such Securities are sold in compliance with Rule 144 under the Securities Act and all applicable blue sky laws.  In addition, the Company shall remove the restrictive legend from any Securities held by the Purchasers following the expiration of the holding period required by Rule 144 under the Securities Act (or any successor rule) and all blue sky laws.

 

6.3 Indemnification.  For the purpose of this Section 6.3:

 

(a) the term “Selling Stockholder” shall mean a Purchaser, its executive officers and directors and each person, if any, who controls that Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act;

 

(b) the term “Registration Statement” shall include any final Prospectus, exhibit, supplement or amendment included in or relating to, and any document incorporated by reference in, the Registration Statement (or deemed to be a part thereof) referred to in Section 6.1; and

 

(c) the term “untrue statement” shall mean any untrue statement or alleged untrue statement of a material fact, or any omission or alleged omission to state in the Registration Statement or a Blue Sky Registration 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.

(g)            If the indemnification provided for in this Section 6.3 is unavailable to or insufficient to hold harmless an indemnified party under subsection (d) or (e) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the liable Purchaser on the other in connection with the statements or omissions or other matters which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations.  The relative fault shall be determined by reference to, among other things, in the case of an untrue statement, whether the untrue statement relates to information supplied by the Company on the one hand or the liable Purchaser on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement.  The Company and the Purchasers agree that it would not be just and equitable if contribution pursuant to this subsection (g) were determined by pro rata allocation (even if the Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this subsection (g).  The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (g) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this subsection (g), no Purchasers shall be required to contribute any amount in excess of the amount by which the net amount received by that Purchaser from the sale of the Securities to which such loss relates exceeds the amount of any damages which that Purchaser has otherwise been required to pay to the Company by reason of such untrue statement.  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.  The Purchasers’ obligations in this subsection to contribute are several in proportion to their sales of Securities to which such loss relates and not joint.

 

(h)            The parties to this Agreement hereby acknowledge that they are sophisticated business persons who were represented by counsel during the negotiations regarding the provisions hereof including, without limitation, the provisions of this Section 6.3, and are fully informed regarding said provisions.  They further acknowledge that the provisions of this Section 6.3 fairly allocate the risks in light of the ability of the parties to investigate the Company and its business in order to assure that adequate disclosure is made in the Registration Statement and Blue Sky Registration as required by the Securities Act and the Exchange Act and applicable blue sky laws.

 

(i)            The obligations of the Company and of the Purchasers under this Section 6.3 shall survive completion of any offering of Registrable Securities in such Registration Statement and Blue Sky Registration for a period of two years from the effective date of the Registration Statement and Blue Sky Registration.  No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

 

 

6.4   Termination of Conditions and Obligations.  The conditions precedent imposed by Section 3 or this Section 6 upon the transferability of the Securities shall cease and terminate as to any particular number of the Securities when such Securities shall have been effectively registered under the Securities Act and any applicable blue sky laws and sold or otherwise disposed of in accordance with the intended method of disposition set forth in the Registration Statement and Blue Sky Registration covering such Securities or at such time as an opinion of counsel satisfactory to the Company shall have been rendered to the effect that such conditions are not necessary in order to comply with the Securities Act and any applicable blue sky laws.  The Company shall request an opinion of counsel promptly upon receipt of a request therefor from Purchaser.

 

6.5   Information Available.  So long as the Registration Statement is effective covering the resale of Securities owned by a Purchaser, the Company will furnish (or, to the extent such information is available electronically through the Company’s filings with the SEC, the Company will make available via the SEC’s EDGAR system or any successor thereto) to each Purchaser:

 

(a) as soon as practicable after it is available, one copy of (i) its Annual Report to Stockholders (which Annual Report shall contain financial statements audited in accordance with generally accepted accounting principles by a national firm of certified public accountants) and (ii) if not included in substance in the Annual Report to Stockholders, its Annual Report on Form 10-K (the foregoing, in each case, excluding exhibits);

 

(b) upon the request of the Purchaser, all exhibits excluded by the parenthetical to subparagraph (a)(ii) of this Section 6.5 as filed with the SEC and all other information that is made available to stockholders; and

 

(c) upon the reasonable request of the Purchaser, an adequate number of copies of the Prospectuses to supply to any other party requiring such Prospectuses; and the Company, upon the reasonable request of a Purchaser, will meet with each Purchaser or a representative thereof at the Company’s headquarters during the Company’s normal business hours to discuss all information relevant for disclosure in the Registration Statement covering the Securities and will otherwise reasonably cooperate with the Purchasers conducting an investigation for the purpose of reducing or eliminating the Purchasers’ exposure to liability under the Securities Act, including the reasonable production of information at the Company’s headquarters; provided, that the Company shall not be required to disclose any confidential information to or meet at its headquarters with a Purchaser until and unless that Purchaser shall have entered into a confidentiality agreement in form and substance reasonably satisfactory to the Company with the Company with respect thereto.

 

6.6       Public Statements; Limitation on Information.  The Company agrees to disclose on a Current Report on Form 8-K (the “Initial Closing 8-K”) the existence of the Offering and the material terms, thereof, including pricing, within four business days after it specifies the Initial Closing Date in accordance with Section 1.3.  Such Current Report on Form 8-K shall include a form of this Agreement (and all exhibits and schedules thereto) as an exhibit thereto.   If not disclosed in the Initial Closing 8-K, the Company will disclose on a Current Report on Form 8-K the occurrence and material terms of any Closing subsequent to the Initial Closing, including the number of Securities sold and the Purchase Price therefor, within four business days after the applicable Closing Date.  The Company will not issue any public statement, press release or any other public disclosure listing a Purchaser as one of the purchasers of the Securities without that Purchaser’s prior written consent, except as may be required by applicable law or rules of any exchange on which the Company’s securities are listed.  The Company shall not provide, and shall cause each of its subsidiaries and the respective officers, directors, employees and agents of the Company and each of its subsidiaries not to provide, the Purchasers with any material nonpublic information regarding the Company or any subsidiary from and after the date the Company files, or is required by this Section to file, the Current Report on Form 8-K with the SEC without the prior express written consent of the Purchaser.

 

 

6.7        Limits on Additional Issuances.  The Company will not, for a period of six months following the Closing Date offer for sale or sell any securities unless, in the opinion of the Company’s counsel, such offer or sale does not jeopardize the availability of exemptions from the registration and qualification requirements under applicable securities laws with respect to the Offering.  Except for the issuance of stock options under the Company’s stock option plans, the issuance of common stock upon exercise of outstanding options and warrants, the issuance of common stock purchase warrants, and the offering contemplated hereby, the Company has not engaged in any offering of equity securities during the six months prior to the date of this Agreement.  The foregoing provisions shall not prevent the Company from filing a “shelf” registration statement pursuant to Rule 415 under the Securities Act, but the foregoing provisions shall apply to any sale of securities thereunder.

 

6.8       Form D and State Securities Filings.  The Company will file with the SEC a Notice of Sale of Securities on Form D with respect to the Securities, as required under Regulation D under the Securities Act, no later than 15 days after the Initial Closing Date.  The Company will promptly and timely file all documents and pay all filing fees required by any states’ securities laws in connection with the sale of Securities.

 

6.9        Assignment of Registration Rights.  The rights to cause the Company to register Registrable Securities pursuant to this Section 6 may be assigned by a Purchaser to a party that acquires, other than pursuant to the Registration Statement or Rule 144, any of the Shares and Warrant Shares originally issued or issuable to such Purchaser pursuant to this Agreement and the Warrants (or any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, any such Shares or Warrant Shares), or to any affiliate of a Purchaser that acquires any Registrable Securities.  Any such permitted assignee shall have all the rights of such Purchaser under this Section 6 with respect to the Registrable Securities transferred.

 

6.10     Selling Stockholder Questionnaire.  Each Purchaser agrees to furnish to the Company a completed questionnaire in the form attached to this Agreement as Exhibit D (a “Selling Holder Questionnaire”).  The Company shall not be required to include the Registrable Securities of a Purchaser in a Registration Statement and shall not be required to pay any liquidated or other damages hereunder to any such Purchaser who fails to furnish to the Company a fully completed Selling Holder Questionnaire at least three business days prior to the filing of the Registration Statement.