Registration Rights Agreement by and among the Company and the Investors

 

 

 

 

 

 

1. Definitions. As used in this Agreement, the following terms have the meanings indicated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2. Registration.

 

(a) Demand Registration.

 

(i) During the Demand Registration Period, the Holders of at least 200,000 Registrable Securities (adjusted for any stock split, stock dividend, reverse stock split or similar change in the Common Stock after the date of this Agreement) shall have the option and right, exercisable by delivering a written notice to the Company (a “Holder Demand Notice”), to require the Company to, pursuant to the terms of and subject to the limitations contained in this Agreement, prepare and file with the Commission a Registration Statement on Form S-1 (or any equivalent or successor form under the Securities Act) (or to the extent the Company is eligible to use Form S-3 or any equivalent or successor form or forms, on Form S-3 or any comparable or successor form) registering the offering and sale of at least 200,000 Registrable Securities (adjusted for any stock split, stock dividend, reverse stock split or similar change in the Common Stock after the date of this Agreement) on the terms and conditions specified in the Holder Demand Notice, which may include sales on a delayed or continuous basis pursuant to Rule 415 pursuant to a Shelf Registration Statement (a “Holder Demand Registration”). The Holder Demand Notice must set forth the number and type of Registrable Securities that the Initiating Holders anticipate will be included in such Holder Demand Registration and the intended methods of disposition thereof.

 

(ii) Within five (5) Business Days of the receipt of the Demand Notice, the Company shall give written notice of such Demand Notice to all Holders (other than the Initiating Holders) and, within thirty (30) days thereof, shall, subject to the limitations of this Section 2(a), file a Registration Statement in accordance with the terms and conditions of the Demand Notice, which Registration Statement shall cover, in addition to the Registrable Securities set forth in the Demand Notice, all of the Registrable Securities that such Holders shall in writing request to be included in the Demand Registration (provided such request is given to the Company within ten (10) days of receipt of notice of the Demand Notice given by the Company pursuant to this Section 2(a)(ii) and includes such information regarding the requesting Holder as is required to be disclosed in connection with such Demand Registration pursuant to Regulation S-K promulgated under the Securities Act). The Company shall use commercially reasonable efforts to cause such Registration Statement to become and remain effective under the Securities Act until the earlier of (A) one hundred eighty (180) days (or one (1) year if a Shelf Registration Statement is requested) after the Effective Date or (B) the date on which all Registrable Securities covered by such Registration Statement have been sold or cease to be Registrable Securities (the “Demand Effectiveness Period”); provided, however, that such period shall be extended for a period of time equal to the period the Selling Stockholders refrain from selling any securities included in such Registration Statement at the request of an underwriter of the Company or the Company pursuant to this Agreement.

 

(iii) Subject to the other limitations contained in this Agreement, the Company is not obligated hereunder to effect: (A) more than two (2) Demand Registrations during the Demand Registration Period, (B) more than one (1) Demand Registration in a calendar year, (C) a Demand Registration within one hundred eighty (180)) days of the closing of any Underwritten Offering, or (D) a subsequent Demand Registration pursuant to a Demand Notice if a Registration Statement covering all of the Registrable Securities covered by such Demand Notice shall already have become effective under the Securities Act and remains effective under the Securities Act and is sufficient to permit offers and sales of such Registrable Securities on the terms and conditions specified in such Demand Notice in accordance with the intended timing and method or methods of distribution thereof specified in such Demand Notice.

 

(iv) Subject to Section 2(a)(i), a Selling Stockholder may withdraw all or any portion of its Registrable Securities included in a Demand Registration from such Demand Registration at any time prior to the effectiveness of the applicable Registration Statement. Upon delivery of a notice by a Selling Stockholder to the effect that the Selling Stockholder is withdrawing Registrable Securities such that the remaining Registrable Securities are below the Minimum Amount, the Company shall cease all efforts to secure effectiveness of the applicable Registration Statement.

 

(v) Subject to the limitations contained in this Agreement, the Company shall effect any Demand Registration on such appropriate registration form of the Commission (x) as shall be selected by the Company and (y) as shall permit the disposition of the Registrable Securities in accordance with the intended method or methods of disposition specified in the Initiating Holders’ request for such registration; provided, however, that if the Company becomes, and is at the time of its receipt of a Demand Notice, a WKSI, the Demand Registration for any offering and selling of Registrable Securities shall be effected pursuant to an Automatic Shelf Registration Statement, which shall be on Form S-3 or any equivalent or successor form under the Securities Act if available to the Company. If at any time a Registration Statement is effective and a Selling Stockholder provides written notice to the Company that it intends to effect an offering of all or part of the Registrable Securities included on such Registration Statement, the Company will amend or supplement such Registration Statement as may be necessary in order to enable such offering to take place.

 

(vi) Without limiting Section 3, in connection with any Demand Registration pursuant to and in accordance with this Section 2(a), the Company shall (A) promptly prepare and file or cause to be prepared and filed (1) such additional forms, amendments, supplements, prospectuses, certificates, letters, opinions and other documents, as may be necessary or advisable to register or qualify the securities subject to such Demand Registration, including under the securities laws of such states as the Selling Stockholders shall reasonably request; provided, however, that no such registration or qualification shall be required in any jurisdiction where, as a result thereof, the Company would become subject to general service of process or to taxation or would be required to qualify to do business or register as a broker or dealer, and (2) such forms, amendments, supplements, prospectuses, certificates, letters, opinions and other documents as may be necessary to apply for listing or to list the Registrable Securities subject to such Demand Registration on the Trading Market and (B) do any and all other acts and things that may be reasonably necessary or appropriate or reasonably requested by the Selling Stockholders to enable the Selling Stockholders to consummate a public sale of such Registrable Securities in accordance with the intended timing and method or methods of distribution thereof.

 

(b) Mandatory Shelf Registration.

 

(i) As soon as practicable following the date hereof, and no later than July 31, 2021 (such filing date, the “Mandatory Shelf Filing Date”), the Company shall use its reasonable efforts to prepare and file with the Commission a Registration Statement providing for registration and resale, on a continuous or delayed basis pursuant to Rule 415, of all of the Mandatory Shelf Securities (the “Mandatory Shelf Registration Statement”). The Mandatory Shelf Registration Statement shall be on Form S-1 (or any equivalent or successor form) under the Securities Act (or to the extent the Company is eligible to use Form S-3 or any equivalent or successor form or forms, on Form S-3 or any comparable or successor form). The Company shall use its reasonable efforts to cause the Mandatory Shelf Registration Statement to be declared effective under the Securities Act by the Commission on or before the date that is ninety (90) days the Mandatory Shelf Filing Date of the filing (or, in the event of a “full review” by the Commission, the date that is one hundred twenty (120) days after the date of the filing).. The Company shall use its reasonable efforts to keep the Mandatory Shelf Registration Statement (or any successor Shelf Registration Statement) continuously effective under the Securities Act until the earlier of (A) the date when all of the Mandatory Shelf Securities covered by such Mandatory Shelf Registration Statement have been sold or cease to be Registrable Securities and (B) one (1) year after the Effective Date (such period, the “Mandatory Shelf Effectiveness Period”). The Investors agree that the Company may include for registration and resale in the Mandatory Shelf Registration Statement the shares of Common Stock that it is required to register pursuant to that certain Securities Purchase Agreement, dated as of June 18, 2020, among the Company and the purchasers party thereto.

 

(ii) In the event that the Mandatory Shelf Registration Statement is (A) not filed on or before July 31, 2021 or (B) not declared effective on or before the date that is ninety (90) days the Mandatory Shelf Filing Date of the filing (or, in the event of a “full review” by the Commission, the date that is one hundred twenty (120) days after the date of the filing (A and B collectively, an “Event”), then after the occurrence and pendency of an Event until the Event is cured, the Company shall, upon the demand of any Holder of Mandatory Shelf Securities made within 90 days after the occurrence of such Event, pay to each such Holder an amount in cash equal to one per cent (1.0%) per month (applied ratably for partial months) of the amount paid for by such Holder for the Purchased Shares pursuant to the Placement Agreement then held by such Holder; provided that such liquidated damages shall cease to accrue in the event that Rule 144 under the Securities Act is available to you for the resale of the Purchased Shares without volume or manner restrictions.

 

(iii) Without limiting Section 3, the Company shall, as promptly as practicable during the Mandatory Shelf Effectiveness Period:

 

(1) if required by applicable law, file with the Commission a post-effective amendment to the Mandatory Shelf Registration Statement or prepare and, if required by applicable law, file a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document necessary to permit the Holders of Mandatory Shelf Securities to deliver such Prospectus to purchasers of Mandatory Shelf Securities in accordance with applicable law and, if the Company shall file a post-effective amendment to the Mandatory Shelf Registration Statement, use its reasonable efforts to cause such post-effective amendment to be declared effective under the Securities Act as promptly as is practicable;

 

(2) provide the Holders of Mandatory Shelf Securities copies of any documents to filed pursuant to Section 2(b)(ii)(1) a reasonable period of time prior to such filing, and use commercially reasonable efforts to address in each such document when so filed with the Commission such comments as such Holder of Mandatory Shelf Securities reasonably shall propose prior to the filing thereof; and

 

(3) notify the Holders of Mandatory Shelf Securities as promptly as practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to Section 2(b)(ii)(1).

 

(c) Requested Underwritten Offering.

 

(i) Any Holder then able to effectuate a Demand Registration pursuant to the terms of Section 2(a) shall have the option and right, exercisable by delivering written notice to the Company (an “Underwritten Offering Notice”), to require the Company, pursuant to the terms of and subject to the limitations of this Agreement, to effectuate a distribution of Registrable Securities by means of an Underwritten Offering pursuant to an effective Registration Statement (or pursuant to an effective Automatic Shelf Registration Statement) (a “Requested Underwritten Offering”); provided, however, that the Registrable Securities requested to be included in such Requested Underwritten Offering have an aggregate value at least equal to $5,000,000.

 

(ii) The managing underwriter or managing underwriters of a Requested Underwritten Offering shall be designated by the Initiating Holders (provided, however, that such designated managing underwriter or managing underwriters shall be a nationally recognized investment banking firm reasonably acceptable to the Company). Notwithstanding the foregoing, the Company is not obligated to effect a Requested Underwritten Offering within 90 days of the closing of an Underwritten Offering.

 

(iii) If the managing underwriter or underwriters of a proposed Requested Underwritten Offering of the Registrable Securities included in a Demand Registration advise the Company that, in its or their opinion, the number of securities requested to be included in such Requested Underwritten Offering exceeds the number which can be sold in such Requested Underwritten Offering without being likely to have a significant adverse effect on the price, timing or distribution of the securities offered or the market for the securities offered, the securities to be included in such Requested Underwritten Offering shall be allocated, (A) first, pro rata among the Parties (other than the Company) that (prior to any cutback) would participate in such Underwritten Offering based on the relative number of Registrable Securities that would be held by each such Party following any related resale distribution, if any; provided, however, that any securities thereby allocated to a Party that exceed such Party’s request shall be reallocated among the remaining Parties in like manner; (B) second, and only if all the securities referred to in clause (A) have been included in such registration, to the Company up to the number of securities that the Company proposes to include in such registration that, in the opinion of the managing underwriter or underwriters can be sold without having such adverse effect and (C) third, and only if all of the securities referred to in clause (B) have been included in such registration, up to the number of securities that in the opinion of the managing underwriter or underwriters can be sold without having such adverse effect.

 

(d) Piggyback Registration.

 

(i) If the Company shall at any time propose to conduct a registered offering of Common Stock (whether a registered offering of Common Stock by the Company or a registered offering of Common Stock by the Company’s stockholders (including a Requested Underwritten Offering), or both, but excluding an offering pursuant to Section 2(b), an offering relating solely to an employee benefit plan, an offering relating to a transaction on Form S-4 or S-8 (or any similar forms adopted after the date hereof as replacements therefor) or an offering on any registration statement form that does not permit secondary sales), the Company shall promptly notify all Holders of such proposal reasonably in advance of (and in any event at least five (5) Business Days before) the commencement of such offering, which notice will set forth the principal terms and conditions of the issuance, including the proposed offering price (or range of offering prices), the anticipated filing date of the registration statement (if not yet filed) and the number of shares of Common Stock that are proposed to be registered (the “Piggyback Notice”); provided, however, notwithstanding any other provision of this Agreement, if the managing underwriter or managing underwriters of an Underwritten Offering (other than a Requested Underwritten Offering) advise the Company that in their reasonable opinion that the inclusion of a Holder’s Registrable Securities requested for inclusion in the subject Underwritten Offering (and any related registration, if applicable) would likely have an adverse effect on the price, timing, marketing or distribution of Common Stock proposed to be included in such Underwritten Offering, the Company shall have no obligation to provide a Piggyback Notice to such Holder and such Holder shall have no right to include any Registrable Securities in such Underwritten Offering (and any related registration, if applicable). The Piggyback Notice shall offer the Holders the opportunity to include in such offering (and any related registration, if applicable) the number of Registrable Securities as they may request (a “Piggyback Registration”); provided, however, that in the event that the Company proposes to effectuate the subject offering pursuant to an effective Shelf Registration Statement of the Company other than an Automatic Shelf Registration Statement, only Registrable Securities of Holders which are subject to such effective Shelf Registration Statement may be included in such Piggyback Registration. The Company shall use commercially reasonable efforts to include in each such Piggyback Registration such Registrable Securities for which the Company has received written requests for inclusion within three (3) Business Days (or within one (1) Business Day in the case of an “overnight” offering or “bought deal”) after sending the Piggyback Notice, provided that such written request sets forth such information regarding the Selling Stockholder as is required to be disclosed in connection with the offering (and any related registration, if applicable) pursuant to Regulation S-K promulgated under the Securities Act.

 

(ii) If a Holder decides not to include for registration in an offering contemplated by this Section 2(c) (and any related registration, if applicable) such Holder’s Registrable Securities following the receipt of a Piggyback Notice, such Holder shall nevertheless continue to have the right to include any of such Holder’s Registrable Securities in any subsequent offering contemplated by this Section 2(c) (and any related registration, if applicable) in accordance with this Section 2(c).

 

(iii) If the managing underwriter or managing underwriters of an Underwritten Offering advise the Company and the Holders that in their reasonable opinion that the inclusion of all of the Registrable Securities requested for inclusion in an Underwritten Offering (other than a Requested Underwritten Offering) would likely have an adverse effect on the price, timing, marketing or distribution of Common Stock proposed to be included in such offering, the Company shall include in such Underwritten Offering only that number of shares of Common Stock proposed to be included in such Underwritten Offering that, in the reasonable opinion of the managing underwriter or managing underwriters, will not have such effect, with such number to be allocated as follows: (A) first, to the Company, (B) second, if there remains availability for additional shares of Common Stock to be included in such Underwritten Offering following the allocation to the Company under (A), pro rata among the Parties (other than the Company) that (prior to any cutback) would participate in such Underwritten Offering based on the relative number of Registrable Securities that would be held by each such Party following any related resale distribution, if any, and (C) if there remains availability for additional shares of Common Stock to be included in such registration following the allocation to the Parties under (B), third pro rata among all other Persons holding Common Stock who may be seeking to register such Common Stock pursuant to incidental or piggyback registration rights based on the number of Common Stock such Person is entitled to include in such registration.

 

(iv) Any Holder or Limited Partner shall have the right to withdraw all or part of its request for inclusion of its Registrable Securities in a Piggyback Registration by giving written notice to the Company of its request to withdraw; provided, however, that (i) such request must be made in writing prior to the effectiveness of such Registration Statement and (ii) such withdrawal shall be irrevocable and, after making such withdrawal, a Holder or Limited Partner shall no longer have any right to include Registrable Securities in the Piggyback Registration as to which such withdrawal was made.

 

(v) The Company shall have the right to terminate or suspend any registered offering as to which Holders have a right to a Piggyback Registration pursuant to this Section 2(c) (other than any registered offering initiated by a Holder pursuant to Section 2(a) or 2(b)) at any time in its sole discretion, and without any obligation to any Party (whether or not such Party has elected to exercise its right to a Piggyback Registration pursuant to this Section 2(c)).

 

3. Registration and Underwritten Offering Procedures.

 

 

(a) in connection with a Demand Registration, the Company will, at least three (3) Business Days prior to the anticipated filing of the Registration Statement and any related Prospectus or any amendment or supplement thereto (other than, after effectiveness of the Registration Statement, any filing made under the Exchange Act that is incorporated by reference into the Registration Statement), (i) furnish to such Selling Stockholders copies of all such documents prior to filing and (ii) use commercially reasonable efforts to address in each such document when so filed with the Commission such comments as such Selling Stockholders reasonably shall propose prior to the filing thereof.

 

(b) in connection with a Piggyback Registration or a Requested Underwritten Offering, the Company will, at least three (3) Business Days prior to the anticipated filing of any initial Registration Statement that identifies the Selling Stockholders and any related Prospectus or any amendment or supplement thereto (other than amendments and supplements that do not materially alter the previous disclosure or do nothing more than name the Selling Stockholders and provide information with respect thereto), as applicable, (i) furnish to such Selling Stockholders copies of any such Registration Statement or related Prospectus or amendment or supplement thereto that identify the Selling Stockholder and any related Prospectus or any amendment or supplement thereto (other than amendments and supplements that do not materially alter the previous disclosure or do nothing more than name Selling Stockholders and provide information with respect thereto) prior to filing and (ii) use commercially reasonable efforts to address in each such document when so filed with the Commission such comments as such Selling Stockholders reasonably shall propose prior to the filing thereof.

 

(c) The Company will use commercially reasonable efforts to as promptly as reasonably practicable (i) prepare and file with the Commission such amendments, including post-effective amendments, and supplements to each Registration Statement and the Prospectus used in connection therewith as may be necessary under applicable law to keep such Registration Statement continuously effective with respect to the disposition of all Registrable Securities covered thereby during the Effectiveness Period; (ii) cause the related Prospectus to be amended or supplemented by any required prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424; and (iii) respond to any comments received from the Commission with respect to each Registration Statement or any amendment thereto and, as promptly as reasonably practicable provide such Selling Stockholders true and complete copies of all correspondence from and to the Commission relating to such Registration Statement that pertains to such Selling Stockholders as selling stockholders but not any comments that would result in the disclosure to such Selling Stockholders of material and non-public information concerning the Company.

 

(d) The Company will comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the Registration Statements and the disposition of all Registrable Securities covered by each Registration Statement.

 

(e) The Company will notify such Selling Stockholders who are included in a Registration Statement as promptly as reasonably practicable: (i)(A) when a Prospectus or any prospectus supplement or post-effective amendment to a Registration Statement in which such Selling Stockholder is included has been filed; (B) when the Commission notifies the Company whether there will be a “review” of the applicable Registration Statement and whenever the Commission comments in writing on such Registration Statement (in which case the Company shall provide true and complete copies thereof and all written responses thereto to each of such Selling Stockholders that pertain to such Selling Stockholders as selling stockholders); and (C) with respect to each applicable Registration Statement or any post-effective amendment thereto, when the same has been declared effective; (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to such Registration Statement or Prospectus or for additional information that pertains to such Selling Stockholders as sellers of Registrable Securities; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of such Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) 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 Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (v) of the occurrence of any event or passage of time that makes any statement made in such Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to such Registration Statement, Prospectus or other documents so that, in the case of such Registration Statement or the Prospectus, as the case may be, it will not contain any 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, in the light of the circumstances under which they were made, not misleading (provided, however, that no notice by the Company shall be required pursuant to this clause (v) in the event that the Company either promptly files a prospectus supplement to update the Prospectus or a Form 8-K or other appropriate Exchange Act report that is incorporated by reference into the Registration Statement, which in either case, contains the requisite information that results in such Registration Statement no longer containing any untrue statement of material fact or omitting to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading).

 

(f) The Company will use commercially reasonable efforts to avoid the issuance of or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as promptly as reasonably practicable, or if any such order or suspension is made effective during any Blackout Period or Suspension Period, as promptly as reasonably practicable after such Blackout Period or Suspension Period is over.

 

(g) During the Effectiveness Period, the Company will furnish to each Selling Stockholder, without charge, at least one conformed copy of each Registration Statement and each amendment thereto and all exhibits to the extent requested by such Selling Stockholder (including those incorporated by reference) promptly after the filing of such documents with the Commission; provided, however, that the Company will not have any obligation to provide any document pursuant to this clause that is available on the Commission’s EDGAR system.

 

(h) The Company will promptly deliver to each Selling Stockholder, without charge, as many copies of each Prospectus or Prospectuses (including each form of prospectus) authorized by the Company for use and each amendment or supplement thereto as such Selling Stockholder may reasonably request during the Effectiveness Period. Subject to the terms of this Agreement, including Section 3(o), the Company consents to the use of such Prospectus and each amendment or supplement thereto by each of the Selling Stockholders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto.

 

(i) The Company will cooperate with such Selling Stockholders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free of all restrictive legends indicating that the Registrable Securities are unregistered or unqualified for resale under the Securities Act, Exchange Act or other applicable securities laws, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Selling Stockholder may request in writing. In connection therewith, if required by the Company’s transfer agent, the Company will promptly, after the Effective Date of the Registration Statement, cause an opinion of counsel as to the effectiveness of the Registration Statement to be delivered to and maintained with its transfer agent, together with any other authorizations, certificates and directions required by the transfer agent which authorize and direct the transfer agent to issue such Registrable Securities without any such legend upon sale by the Selling Stockholder of such Registrable Securities under the Registration Statement.

 

(j) Upon the occurrence of any event contemplated by Section 3(e)(v), as promptly as reasonably practicable, the Company will prepare a supplement or amendment, including a post-effective amendment, if required by applicable law, to the affected Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, no Registration Statement nor any Prospectus will 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 the light of the circumstances under which they were made, not misleading.

 

(k) In connection with any Requested Underwritten Offering, the Company will use commercially reasonable efforts to cause appropriate officers and employees to be available, on a customary basis and upon reasonable notice, to meet with prospective investors in presentations, meetings and “road shows.”

 

(l) With respect to Underwritten Offerings, (i) the right of any Selling Stockholder to include such Selling Stockholder’s Registrable Securities in an Underwritten Offering shall be conditioned upon such Selling Stockholder’s participation in such underwriting and the inclusion of such Selling Stockholder’s Registrable Securities in the underwriting to the extent provided herein, (ii) each Selling Stockholder participating in such Underwritten Offering agrees to enter into an underwriting agreement in customary form and sell such Selling Stockholder’s Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled to select the managing underwriter or managing underwriters hereunder and (iii) each Selling Stockholder participating in such Underwritten Offering agrees to complete and execute all questionnaires, powers of attorney, indemnities, custody agreements, lock-ups, “hold back” agreements, and other documents reasonably required under the terms of such underwriting arrangements. The Company hereby agrees with each Selling Stockholder that, in connection with any Underwritten Offering in accordance with the terms hereof, it will negotiate in good faith and execute all customary indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, including using all commercially reasonable efforts to procure customary legal opinions and auditor “comfort” letters. In the event such Selling Stockholders seek to complete an Underwritten Offering, for a reasonable period prior to the filing of any Registration Statement and throughout the Effectiveness Period, the Company will make available upon reasonable notice at the Company’s principal place of business or such other reasonable place for inspection during normal business hours by the managing underwriter or managing underwriters selected in accordance with this Section 3(l) such financial and other information and books and records of the Company (collectively, the “Records”), and cause the officers, employees, counsel and independent certified public accountants of the Company to respond to such inquiries, as shall be reasonably necessary (and in the case of counsel, not violate an attorney-client privilege in such counsel’s reasonable belief) to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that, unless the disclosure of such Records is necessary to avoid or correct a misstatement or omission in the Registration Statement or the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, the Company shall not be required to provide any Records under this Section 3(l) if (i) the Company believes, after consultation with counsel for the Company, that to do so would cause the Company to forfeit an attorney-client privilege that was applicable to such Records, or (ii) if either (A) the Company has requested and been granted from the Commission confidential treatment of such Records contained in any filing with the Commission or documents provided supplementally or otherwise or (B) the Company reasonably determines in good faith that such Records are confidential and so notifies the Person so inspecting in writing, unless prior to furnishing any such Records with respect to clause (ii) such Person requesting such Records agrees to enter into a confidentiality agreement in customary form and subject to customary exceptions; and provided, further, that each Party agrees that it shall, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action and to prevent disclosure of the Records deemed confidential.

 

(m) Each Selling Stockholder agrees to furnish to the Company any other information regarding the Selling Stockholder and the distribution of such securities as the Company reasonably determines is required to be included in any Registration Statement or any prospectus or prospectus supplement relating to an Underwritten Offering.

 

(n) Notwithstanding any other provision of this Agreement, the Company shall not be required to file a Registration Statement (or any amendment thereto) or effect a Requested Underwritten Offering (or, if the Company has filed a Shelf Registration Statement and has included Registrable Securities therein, the Company shall be entitled to suspend the offer and sale of Registrable Securities pursuant to such Registration Statement) for a period of up to 120 days, if (A) the Board determines that a postponement is in the best interest of the Company and its stockholders generally due to a pending transaction involving the Company (including a pending securities offering by the Company, or any proposed financing, acquisition, merger, tender offer, business combination, corporate reorganization, consolidation or other significant transaction involving the Company), (B) the Board determines such registration would render the Company unable to comply with applicable securities laws, (C) the Board determines such registration would require disclosure of material information that the Company has a bona fide business purpose for preserving as confidential, or (D) audited financial statements as of a date other than the fiscal year end of the Company would be required to be prepared (any such period, a “Blackout Period”); provided, however, that in no event shall any Blackout Period together with any Suspension Period collectively exceed an aggregate of 120 days in any 12 month period. In addition, if the Company receives a Demand Notice and the Company is then in the process of preparing to engage in a public offering, the Company shall inform the Initiating Holders of the Company’s intent to engage in a public offering and may require the Initiating Holders to withdraw the Demand Notice for a period of up to one hundred twenty (120) days so that the Company may complete its public offering. In the event that the Company ceases to pursue such public offering, it shall promptly inform the Initiating Holders, and the Initiating Holders shall be permitted to submit a new Demand Notice.

 

(o) Discontinued Disposition. Each Selling Stockholder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in clauses (ii) through (v) of Section 3(e), such Selling Stockholder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Selling Stockholder’s receipt of the copies of the supplemental Prospectus or amended Registration Statement as contemplated by Section 3(j) or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement (a “Suspension Period”). During any Suspension Period, if so directed by the Company, such Selling Stockholder must deliver to the Company all copies in its possession, other than permanent file copies then in the Selling Stockholder’s possession, of the Prospectus covering such Registrable Shares current at the time of receipt of such notice, and shall keep the information contained in such, as well as any knowledge related to the reason for the Suspension Period, confidential. The Company may provide appropriate stop orders to enforce the provisions of this Section 3(o).

 

(p) Except as otherwise specifically provided in this Agreement, in all offerings of the Company’s securities the Company shall have sole discretion to select the underwriters.

 

4. No Inconsistent Agreements. The Company shall not hereafter enter into, and is not currently a party to, any agreement with respect to its securities that is inconsistent in any material respect with the rights granted to the Parties by this Agreement.

 

5. Registration Expenses. All Registration Expenses incident to the Company’s performance of or compliance with its obligations under this Agreement shall be borne by the Company, whether or not any Registrable Securities are sold pursuant to a Registration Statement. In addition, the Company shall be responsible for all of its expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including expenses payable to third parties and including all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on the Trading Market. The Company shall not be required to pay any Selling Expenses, fees of any counsel retained by any underwriter with respect to any Requested Underwritten Offering, or any other expenses of the Parties (other than the Company) not specifically required to be paid pursuant to this Section 5.

 

6. Indemnification.

 

(a) The Company shall indemnify and hold harmless each Selling Stockholder whose Registrable Securities are covered by a Registration Statement, each Person who controls such Selling Stockholder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), and each of their respective officers and directors and any agent thereof (collectively, “Selling Stockholder Indemnified Persons”), to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, joint or several, costs (including reasonable costs of preparation and reasonable attorneys’ fees) and expenses, judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Selling Stockholder Indemnified Person may be involved, or is threatened to be involved, as a party or otherwise, under the Securities Act or otherwise (collectively, “Losses”), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in any Registration Statement under which any Registrable Securities of such Selling Stockholder were registered, in any related preliminary prospectus (if the Company authorized the use of such preliminary prospectus prior to the Effective Date), or in any related summary or final prospectus or free writing prospectus (if such free writing prospectus was authorized for use by the Company) or in any amendment or supplement thereto (if used during the period the Company is required to keep the Registration Statement current), or arising out of, based upon or resulting from the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances in which they were made, not misleading; provided, however, that the Company shall not be liable to any Selling Stockholder Indemnified Person to the extent that any such claim arises out of, is based upon or results from: (i) an untrue or alleged untrue statement or omission or alleged omission made in such Registration Statement, such preliminary, summary or final prospectus or free writing prospectus or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Selling Stockholder Indemnified Person or any underwriter specifically for use in the preparation thereof; or (ii) any sales by a Selling Stockholder after the delivery by the Company to such Selling Stockholder of written notice of a Suspension Period and before the written confirmation by the Company that sales may be resumed. The Company shall notify the Selling Stockholders promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement. This indemnity shall be in addition to any liability the Company may otherwise have.

 

(b) In connection with any Registration Statement in which a Selling Stockholder participates, all such participating Selling Stockholders shall, severally and not jointly, indemnify and hold harmless the Company, each Person who controls the Company (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), and each of their respective officers, directors and any agent thereof to the fullest extent permitted by applicable law, from and against any and all Losses as incurred, arising out of or relating to (i) any untrue or alleged untrue statement of a material fact contained in any such Registration Statement, in any preliminary prospectus (if used prior to the Effective Date of such Registration Statement), or in any summary or final prospectus or free writing prospectus or in any amendment or supplement thereto (if used during the period the Company is required to keep the Registration Statement current), or arising out of, based upon or resulting from the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances in which they were made, not misleading, but only to the extent that the same are made in reliance and in conformity with information relating to the Selling Stockholder furnished in writing to the Company by or on behalf of such Selling Stockholder for use therein and (ii) any sales by such Selling Stockholders after the delivery by the Company to such Selling Stockholders of written notice of a Suspension Period and before the written confirmation by the Company that sales may be resumed. This indemnity shall be in addition to any liability such Selling Stockholder may otherwise have. In no event shall the liability of any Selling Stockholder hereunder be greater in amount than the dollar amount of the proceeds received by such Selling Stockholder under the sale of the Registrable Securities giving rise to such indemnification obligation, except in the case of fraud or willful misconduct by such Selling Stockholder.

 

(c) Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim or there may be reasonable defenses available to the indemnified party that are different from or additional to those available to the indemnifying party, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel (in addition to any local counsel) for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party there may be one or more legal or equitable defenses available to such indemnified party that are in addition to or may conflict with those available to another indemnified party with respect to such claim. The delay or failure to give prompt written notice shall not release the indemnifying party from its obligations hereunder except to the extent that the indemnifying party has been prejudiced by such delay or failure. An indemnifying party shall not be liable for any settlement effected by the indemnified party without the written consent of such indemnifying party.

 

(d) If the indemnification provided for in this Section 6 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any Losses referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and of the indemnified party, on the other, in connection with the untrue or alleged untrue statement of a material fact or the omission to state a material fact that resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that in no event shall any contribution by a Selling Stockholder hereunder exceed the net proceeds from the offering received by such Selling Stockholder.

 

7. Facilitation of Sales Pursuant to Rule 144. For so long as the Company is subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act, the Company shall (i) timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144), and (ii) take such further action as any Holder may reasonably request, all to the extent required from time to time to enable the Holders to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144. Upon the request of any Holder in connection with that Holder’s sale pursuant to Rule 144, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements.

 

8. Duration of Agreement. This Agreement shall terminate and be of no further force or effect when there shall no longer be any Registrable Securities outstanding; provided, however, that the Company’s and any Selling Stockholder’s obligations under Section 6 shall survive such termination.

 

9. Uplisting. The Company agrees to take such steps as are commercially reasonable in order for the Company to meet the listing requirements of the Nasdaq Capital Market and, if such listing requirements are met, to list the Common Stock on the Nasdaq Capital Market.

 

10. Miscellaneous.

 

(a) Remedies. In the event of a breach by the Company of any of its obligations under this Agreement, each Holder, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

 

(b) Amendments and Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and Investors holding a majority in interest of the Registrable Securities then outstanding or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought, provided that if any amendment, modification or waiver disproportionately and adversely impacts an Investor (or group of Investors), the consent of such disproportionately impacted Investor (or group of Investors) shall also be required. The Company shall provide prior notice to all Parties of any proposed waiver or amendment. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any Party to exercise any right hereunder in any manner impair the exercise of any such right. Notwithstanding the foregoing, a waiver or consent to depart from the provisions of this Agreement with respect to a matter that relates exclusively to the rights of Selling Stockholders whose Registrable Securities are being sold pursuant to a Registration Statement and that does not materially adversely affect the rights of other Parties may be given by Selling Stockholders selling of a majority of the Registrable Securities being sold pursuant to such Registration Statement. Any amendment effected in accordance with accordance with this Section 10(b) shall be binding upon each Investor and holder of Registrable Securities and the Company.

 

(c) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile or electronic mail as specified in this Section 10(c) prior to 5:00 p.m. Eastern Time on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile or electronic mail as specified in this Agreement later than 5:00 p.m. Eastern Time on any date and earlier than 11:59 p.m. Eastern Time on such date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service, (iv) the date of delivery, if delivered personally, or (v) upon actual receipt by the Party to whom such notice is required to be given. The contact information for such notices and communications shall be as set forth on the signature pages hereto (or as any such party may designate by written notice to the other parties in accordance with this Section 10(c)).

 

(d) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective heirs, executors, administrators, successors, legal representatives and permitted assigns. Except as provided in this Section 10(d), this Agreement, and any rights or obligations hereunder, may not be assigned without the prior written consent of the Company. Notwithstanding anything in the foregoing to the contrary, the registration rights of any of the Investors pursuant to this Agreement with respect to all or any portion of its Registrable Securities may be assigned without such consent (but only with all related obligations) with respect to such Registrable Securities by such Party to a transferee of not less than 200,000 of such Registrable Securities (adjusted for any stock split, stock dividend, reverse stock split or similar change in the Common Stock after the date of this Agreement); provided (i) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the Registrable Securities with respect to which such registration rights are being assigned and (ii) such transferee or assignee agrees in writing to be bound by and subject to the terms set forth in this Agreement. The Company may not assign its rights or obligations hereunder without the prior written consent of the Holders.

 

(e) No Third Party Beneficiaries. Nothing in this Agreement, whether express or implied, shall be construed to give any Person, other than the parties hereto or their respective successors and permitted assigns, any legal or equitable right, remedy, claim or benefit under or in respect of this Agreement.

 

(f) Execution and Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile or electronic mail transmission, such signature shall create a valid binding obligation of the Party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such signature delivered by facsimile or electronic mail transmission were the original thereof.

 

(g) Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to its choice of law or conflict of law provisions or rules. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York over any suit, action, or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each Party anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the Parties irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Each of the Parties agrees that a judgment in any such suit, action or proceeding may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

(h) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

 

(i) Headings. The section and paragraph headings contained in this Agreement are for reference purposes only and should not affect in any way the meaning or interpretation of this Agreement.

 

(j) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the Parties shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the Parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

(k) Entire Agreement. This Agreement constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous contracts, agreements and understandings with respect to the subject matter hereof and the matters addressed or governed hereby, whether oral or written.

 

 

 

SCIENTIFIC INDUSTRIES, INCBy: ________________________________Name: Title:     Information for Notice: Scientific Industries, Inc.80 Orville Drive, Suite 102Bohemia, NY 11716Attention: Helena SantosFax: Electronic mail: ***@*** With a copy to:Reitler Kailas & Rosenblatt 885 3rd Ave, 20th FloorNew York, NY 10022 Attention: John F.F. Watkins, Esq.Fax: (212) 371-5500Electronic mail: ***@***