Exhibit 10.24

 

REGISTRATION RIGHTS AGREEMENT

 

REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of November 23, 2005,
by and among Aphton Corporation, a Delaware corporation (the “Company”), and the
undersigned investors (each, an “Investor” and collectively, the “Investors”).

 

BACKGROUND

 

A. In connection with the Exchange Agreement by and among the parties hereto of
even date herewith (the “Exchange Agreement”), the Company has agreed, upon the
terms and subject to the conditions of the Exchange Agreement, to issue and sell
to each Investor in exchange for the cancellation of each Senior Convertible
Note issued by the Company and held by such Investor (i) shares (the “Preferred
Shares”) of the Company’s Series A-1 Convertible Preferred Stock (“Series A-1
Preferred Stock”) and (ii) shares of the Company’s common stock (“Common Stock”)
a portion of which (the “Initial Common Shares”) will be delivered to the
Investors at the closing and a portion of which (the “Escrow Common Shares” and
together with the Initial Common Shares, the “Common Shares”) will be delivered
to an escrow agent to be held in escrow pursuant to the terms of an Escrow
Agreement (the “Escrow Agreement”) among the parties of even date herewith. The
shares of Common Stock issuable upon conversion of the Series A-1 Preferred
Stock are referred to herein as the “Conversion Shares”.

 

B. To induce the Investors to execute and deliver the Exchange Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the “1933 Act”), and applicable state
securities laws.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the
Investors hereby agree as follows:

 

1. Definitions.

 

As used in this Agreement, the following terms shall have the following
meanings:

 

(a) “Business Day” means any day other than Saturday, Sunday or any other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.

 

(b) “Effectiveness Deadline” has the meaning provided in Section 2(a) below.

 

(c) “Escrow Release Date” means the date upon which all or any portion of the
Escrow Common Shares are released from escrow to the Investors pursuant to the
terms of the Escrow Agreement.

 

(d) “Holder” means an Investor, any transferee or assignee thereof to whom an
Investor assigns its rights under this Agreement and who agrees to become bound
by the

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provisions of this Agreement in accordance with Section 9 and any transferee or
assignee thereof to whom a transferee or assignee assigns its rights under this
Agreement and who agrees to become bound by the provisions of this Agreement in
accordance with Section 9.

 

(e) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and
governmental authority or any department or agency thereof.

 

(f) “register,” “registered,” and “registration” refer to a registration
effected by preparing and filing one or more Registration Statements (as defined
below) in compliance with the 1933 Act and pursuant to Rule 415 under the 1933
Act or any successor rule providing for offering securities on a continuous or
delayed basis (“Rule 415”), and the declaration or ordering of effectiveness of
such Registration Statement(s) by the United States Securities and Exchange
Commission (the “SEC”).

 

(g) “Registrable Securities” means (i) the Common Shares, (ii) the Conversion
Shares and (iii) any shares of capital stock issued or issuable with respect to
the Initial Common Shares or the Conversion Shares as a result of any stock
split, stock dividend, recapitalization, exchange or similar event or otherwise,
without regard to any limitations on conversions of the Preferred Shares.

 

(h) “Registration Statement” means a registration statement or registration
statements of the Company filed under the 1933 Act covering the Registrable
Securities.

 

Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Exchange Agreement.

 

2. Registration.

 

(a) Mandatory Registration. The Company shall prepare, and, as soon as
practicable but in no event later than December 23, 2005, file with the SEC a
Registration Statement on Form S-3 covering the resale of all of the Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415, on Form S-3 (except if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3, in which case such registration
shall be on another appropriate form for such purpose). Each such Registration
Statement shall contain (except if otherwise required pursuant to written
comments received from the SEC upon a review of such Registration Statement) the
“Plan of Distribution” attached hereto as Annex A. The Registration Statement
prepared pursuant hereto shall register for resale 27,333,333 shares of Common
Stock. The Company shall use its best efforts to have the Registration Statement
declared effective by the SEC as soon as practicable, but in no event later than
February 21, 2006 or, if the Registration Statement is reviewed by the SEC,
March 23, 2006 (such date, as applicable, the “Effectiveness Deadline”), and
shall use its reasonable best efforts to keep such Registration Statement
continuously effective under the Securities Act during the entire Registration
Period (as defined below).

 

(b) Allocation of Registrable Securities. The initial number of Registrable
Securities included in any Registration Statement and each increase in the
number of Registrable Securities included therein shall be allocated pro rata
among the Holders based on the number of

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Registrable Securities held by each Holder at the time the Registration
Statement covering such initial number of Registrable Securities or increase
thereof is declared effective by the SEC. In the event that a Holder sells or
otherwise transfers any of such Holder’s Registrable Securities, each transferee
shall be allocated a pro rata portion of the then remaining number of
Registrable Securities included in such Registration Statement for such
transferor. Any shares of Common Stock included in a Registration Statement and
which remain allocated to any Person which ceases to hold any Registrable
Securities covered by such Registration Statement shall be allocated to the
remaining Holders, pro rata, based on the number of Registrable Securities then
held by such Holders which are covered by such Registration Statement.

 

(c) Effect of Non-Effectiveness of Registration Statement. If a Registration
Statement covering all the Registrable Securities required to be covered thereby
and required to be filed by the Company pursuant to this Agreement is not
declared effective by the SEC on or before the Effectiveness Deadline or on or
before expiration of an Allowable Grace Period (a “Registration Delay”), then,
as liquidated damages to the Holders for any such Registration Delay (which
remedy shall be the exclusive remedy for such Registration Delay), the Company
shall pay to each holder of Registrable Securities for each full 30-day period
(or portion thereof) during which there is a Registration Delay an amount in
cash equal to (i) the aggregate number of Registrable Securities that such
Holder is unable to sell as a result of the Registration Delay (other than
during an Allowable Grace Period (as defined in Section 3(p) hereof)),
multiplied by (ii) $0.44 (subject to adjustment for stock splits, stock
dividends or like transactions), multiplied by (iii) 0.015 (which damages shall
be prorated based on the number of days elapsed for each period not totaling
thirty (30) days). The payments to which a holder shall be entitled pursuant to
this Section 2(c) are referred to herein as “Registration Delay Payments.”
Registration Delay Payments shall be paid within five (5) Business Days after
each 30-day period (or such shorter period, as the case may be) of Registration
Delay. In the event the Company does not pay a Registration Delay Payment within
said five (5) Business Days, the Company shall pay interest on the amount of the
Registration Delay Payment at the rate of ten percent (10%) per annum (based on
a 365 day year) for each day the Registration Delay Payment remains unpaid after
such five (5) Business-Day Period.

 

(d) (i) If for any reason the SEC does not permit all of the Registrable
Securities identified in Section 2(a) to be included in the initial Registration
Statement filed pursuant to Section 2(a), or for any other reason any
outstanding or then issuable Registrable Securities are not then covered by an
effective Registration Statement, then the Company shall prepare and file by the
filing date for such Registration Statement, an additional Registration
Statement covering the resale of all Registrable Securities not already covered
by an existing and effective Registration Statement for an offering to be made
on a continuous basis pursuant to Rule 415, on Form S-3 (except if the Company
is not then eligible to register for resale the Registrable Securities on
Form S-3, in which case such registration shall be on another appropriate form
for such purpose). Each such Registration Statement shall contain (except if
otherwise required pursuant to written comments received from the SEC upon a
review of such Registration Statement) the “Plan of Distribution” attached
hereto as Annex A. The Company shall cause each such Registration Statement to
be declared effective under the Securities Act as soon as possible but, in any
event, by the Effectiveness Deadline, and shall use its reasonable best efforts
to keep such Registration Statement continuously effective under the Securities
Act during the entire Registration Period.

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(ii) Promptly following any date on which the Company becomes eligible to use a
registration statement on Form S-3 to register the Registrable Securities for
resale, the Company shall file a registration statement on Form S-3 covering the
Registrable Securities (or a post-effective amendment on Form S-3 to the then
effective Registration Statement) and shall cause such Registration Statement to
be declared effective as soon as possible thereafter, but in any event within
ninety (90) days of the filing thereof. Such Registration Statement shall
contain (except if otherwise required pursuant to written comments received from
the SEC upon a review of such Registration Statement) the “Plan of Distribution”
attached hereto as Annex A. The Company shall use its reasonable best efforts to
keep such Registration Statement continuously effective under the Securities Act
during the entire Registration Period.

 

3. Related Obligations.

 

At such time as the Company is obligated to file a Registration Statement with
the SEC pursuant to Section 2(a) or 2(b) the Company will use its best efforts
to effect the registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company shall
have the following obligations:

 

(a) The Company shall submit to the SEC, within five (5) Business Days after the
Company learns that no review of a particular Registration Statement will be
made by the staff of the SEC or that the staff has no further comments on a
particular Registration Statement, as the case may be, a request for
acceleration of effectiveness of such Registration Statement at 5:00 p.m. (New
York City time) on a date not later than 48 hours after the submission of such
request or, if longer, the shortest period of time permitted by the SEC. The
Company shall keep each Registration Statement effective pursuant to Rule 415 at
all times until the earliest of (i) the date as of which the Holders may sell
all of the Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or successor thereto) promulgated under the
1933 Act, (ii) the date on which the Holders shall have sold all the Registrable
Securities covered by such Registration Statement, (iii) the date on which the
Common Stock is no longer registered under the Securities and Exchange Act of
1934, as amended (the “1934 Act”) (the “Registration Period”). The Company shall
ensure that each Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall 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 case of
prospectuses, in the light of the circumstances in which they were made) not
misleading.

 

(b) The Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep such Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
such Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be

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filed pursuant to this Agreement (including pursuant to this Section 3(b)) by
reason of the Company filing a report on Form 10-K, Form 10-Q or Form 8-K or any
analogous report under the 1934 Act, the Company shall have incorporated such
report by reference into such Registration Statement, if applicable, or shall
file such amendments or supplements with the SEC within two (2) Business Days of
the day on which the 1934 Act report is filed which created the requirement for
the Company to amend or supplement such Registration Statement.

 

(c) The Company shall permit each Holder to review and provide reasonable
comments to (i) the “Selling Securityholder” section of, and the “Plan of
Distribution” attached to, a Registration Statement at least five (5) Business
Days prior to its filing with the SEC and (ii) all amendments and supplements to
all Registration Statements (except for Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K and any similar or
successor reports) within a reasonable number of days prior to their filing with
the SEC. The Company shall furnish to each Holder (and in the case of (i) and
(iii) below such other individuals set forth next to each Holder’s name on the
Schedule of Investors attached hereto), without charge, (i) on the same Business
Day as effectiveness of any Registration Statement, or if any correspondence is
not received by the Company prior to 4:00 p.m. (New York City time), by 9:00
a.m. (New York City time) on the first Business Day following receipt of such
correspondence, copies of any correspondence from the SEC or the staff of the
SEC to the Company or its representatives relating to any Registration
Statement, (ii) promptly after the same is prepared and filed with the SEC, one
copy of any Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, if requested by a Holder, and all exhibits, (iii) on the same
Business Day as effectiveness of any Registration Statement, or if notice
thereof is not received by the Company prior to 4:00 p.m. (New York City time),
by 9:00 a.m. (New York City time) on the first Business Day following the
effectiveness of any Registration Statement, one copy of the prospectus included
in such Registration Statement and all amendments and supplements thereto (which
delivery may be effected electronically), and (iv) such other documents,
including copies of any preliminary or final prospectus, as such Holder may
reasonably request from time to time in order to facilitate the disposition of
the Registrable Securities owned by such Holder; provided, however, that at no
time may the Company furnish any documents to the Investors which contain
material non-public information.

 

(d) The Company shall by the effective date of the Registration Statement
(i) register and qualify, unless an exemption from registration and
qualification applies, the resale by Holders of the Registrable Securities
covered by a Registration Statement under such other securities or “blue sky”
laws of the states of New York, Wisconsin, and Maryland, (ii) prepare and file
in those jurisdictions, such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(e), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
Legal

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Counsel and each Holder who holds Registrable Securities of the receipt by the
Company of any notification with respect to the suspension of the registration
or qualification of any of the Registrable Securities for sale under the
securities or “blue sky” laws of any jurisdiction in the United States or its
receipt of actual notice of the initiation or threatening of any proceeding for
such purpose.

 

(e) The Company shall use best efforts to notify each Holder in writing of the
happening of any event, on the same day the Company becomes aware of such event,
as a result of which the prospectus included in a Registration Statement, as
then in effect, includes an untrue statement of a material fact or omission to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading (provided that in no event shall such notice contain any
material, nonpublic information), and, subject to Section 3(p), promptly prepare
a supplement or amendment to such Registration Statement to correct such untrue
statement or omission, and deliver one (1) copy of such supplement or amendment
to each Holder (or such other number of copies as such Holder may reasonably
request). The Company shall also promptly notify each Holder in writing (i) when
a prospectus or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to each
Holder (and such other individuals set forth next to each Holder’s name on the
Schedule of Investors attached hereto) via email on the same day of such
effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company’s reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.

 

(f) The Company shall use its best efforts to prevent the issuance of any stop
order or other suspension of effectiveness of a Registration Statement, or the
suspension of the qualification of any of the Registrable Securities for sale in
any jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible moment and to
notify Legal Counsel and each Holder who holds Registrable Securities being sold
of the issuance of such order and the resolution thereof or its receipt of
actual notice of the initiation or threat of any proceeding for such purpose.

 

(g) The Company shall make available for inspection during normal business hours
and upon 2 Business Days prior notice by (i) any Holder (ii) its legal counsel
and (iii) one firm of accountants or other agents retained by the Holders
(collectively, the “Inspectors”), all pertinent financial and other records, and
pertinent corporate documents and properties of the Company (collectively, the
“Records”), as shall be reasonably deemed necessary by each Inspector, and cause
the Company’s officers, directors and employees to supply all information which
any Inspector may reasonably request; provided, however, that each Inspector and
the Investors shall agree to hold in strict confidence and shall not make any
disclosure (except to a Holder) or use of any Record or other information which
the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a subpoena or final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (c) the information in such Records has been

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made generally available to the public other than by disclosure in violation of
this or any other agreement of which the Inspector has knowledge. Each Holder
agrees that it shall, upon learning that disclosure of such Records is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt written notice to the Company and allow the Company, at its
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential. Nothing herein (or in
any other confidentiality agreement between the Company and any Holder) shall be
deemed to limit the Holders’ ability to sell Registrable Securities in a manner
which is otherwise consistent with applicable laws and regulations.

 

(h) The Company shall hold in confidence and not make any disclosure of
information concerning a Holder provided to the Company unless (i) disclosure of
such information is necessary to comply with federal or state securities laws,
(ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning a Holder is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to such Holder and allow such Holder, at the Holder’s expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.

 

(i) The Company shall use its best efforts to cause all the Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange. The Company shall pay all fees and
expenses in connection with satisfying its obligation under this Section 3(j).

 

(j) The Company shall cooperate with the Holders who hold Registrable Securities
being offered and, to the extent applicable, facilitate the timely preparation
and delivery of certificates (not bearing any restrictive legend) representing
the Registrable Securities to be offered pursuant to a Registration Statement
and enable such certificates to be in such denominations or amounts, as the case
may be, as the Holders may reasonably request and registered in such names as
the Holders may request.

 

(k) If requested by a Holder, the Company shall (i) as soon as practicable
incorporate in a prospectus supplement or post-effective amendment such
information as a Holder reasonably requests to be included therein relating to
the sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being offered or sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such offering;
(ii) as soon as practicable make all required filings of such prospectus
supplement or post-effective amendment after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) as soon as practicable, supplement or make amendments to any Registration
Statement if reasonably requested by a Holder holding any Registrable
Securities.

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(l) The Company shall use its best efforts to cause the Registrable Securities
covered by a Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to consummate the
disposition of such Registrable Securities.

 

(m) The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.

 

(n) Within two (2) Business Days after a Registration Statement which covers
Registrable Securities is ordered effective by the SEC, the Company shall
deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Holders whose
Registrable Securities are included in such Registration Statement) confirmation
that such Registration Statement has been declared effective by the SEC.

 

(o) Notwithstanding anything to the contrary contained herein, at any time after
the Registration Statement has been declared effective by the SEC, the Company
may delay the disclosure of material non-public information concerning the
Company the disclosure of which at the time is not, in the good faith opinion of
the Board of Directors of the Company, in the best interest of the Company and
otherwise required (a “Grace Period”); provided, that the Company shall on the
same day it becomes aware (i) notify the Holders in writing of the existence of
material non-public information giving rise to a Grace Period (provided that in
each notice the Company will not disclose the content of such material
non-public information to the Holders) and the date on which the Grace Period
will begin, and (ii) notify the Holders in writing of the date on which the
Grace Period ends; and, provided further, that the Company shall be permitted no
more than two (2) Grace Periods during any three hundred sixty five (365) day
period and all such Grace Periods shall not exceed an aggregate of sixty
(60) days (each, an “Allowable Grace Period”). For purposes of determining the
length of a Grace Period above, the Grace Period shall begin on and include the
date the Holders receive the notice referred to in clause (i) and shall end on
and include the later of the date the Holders receive the notice referred to in
clause (ii) and the date referred to in such notice. The provisions of
Section 3(f) hereof shall not be applicable during the period of any Allowable
Grace Period. Upon expiration of the Grace Period, the Company shall again be
bound by the first sentence of Section 3(f) with respect to the information
giving rise thereto unless such material non-public information is no longer
applicable. Notwithstanding the foregoing, in the event that upon the Company
filing a registration statement on Form S-3 to fulfill its obligations under
Section 2(d)(ii) hereof, the SEC requires the Company to suspend the
effectiveness of a Registration Statement, the Company shall be permitted to
suspend the effectiveness of the Registration Statement for a period of up to
thirty (30) days and such period of time the Registration Statement remains
suspended shall be exclusive of, and in addition to, any Allowable Grace Period
hereunder; provided, however, the Company shall use reasonable best efforts to
file a registration statement on Form S-3 in a manner that would not cause
suspension of effectiveness of a Registration Statement. After such thirty
(30) day period and until such time the registration statement on Form S-3 is
declared effective by the SEC, the Company shall make Registration Delay
Payments to the Holders.

 

(p) Without the consent of all Holders, the Company shall not include in a
Registration Statement any securities of the Company other than Registrable
Securities.

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4. Obligations Of The Holders.

 

(a) At least ten (10) Business Days prior to the first anticipated filing date
of a Registration Statement, the Company shall notify each Holder in writing of
the information the Company requires from each such Holder and each Holder
shall, not later than three (3) Business Days prior to the first anticipated
filing date of a Registration Statement, either provide such information to the
Company or notify that Company that it elects not to have any of such Holder’s
Registrable Securities included in such Registration Statement. It shall be a
condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Holder that such Holder shall furnish to the Company
such information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the effectiveness of the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.

 

(b) Each Holder, by such Holder’s acceptance of the Registrable Securities,
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of any Registration Statement
hereunder, unless such Holder has notified the Company in writing of such
Holder’s election to exclude all of such Holder’s Registrable Securities from
such Registration Statement.

 

(c) Each Holder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(p) or the first
sentence of Section 3(f), such Holder will immediately discontinue disposition
of Registrable Securities pursuant to any Registration Statement(s) covering
such Registrable Securities until such Holder’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(p) or the first
sentence of Section 3(f) or receipt of notice that no supplement or amendment is
required.

 

(d) Each Holder agrees that if as a result of a Holder’s failure to reply to a
Company notice or request required hereunder, the Company fails to perform any
obligation hereunder within the time period set forth herein with respect to
such obligation, such time period shall be extended by one day for each day such
Holder does not timely respond to such request by the Company.

 

5. Expenses Of Registration.

 

All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company shall be paid by the Company.

 

6. Indemnification.

 

In the event any Registrable Securities are included in a Registration Statement
under this Agreement:

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(a) To the fullest extent permitted by law, the Company will, and hereby does,
indemnify, hold harmless and defend each Holder, the directors, officers,
partners, employees, agents, representatives of, and each Person, if any, who
controls any Holder within the meaning of Section 15 of the 1933 Act or
Section 20(a) of the 1934 Act (each, an “Indemnified Person”), against any
losses, claims, damages, liabilities, judgments, fines, penalties, charges,
costs, reasonable attorneys’ fees, amounts paid in settlement or expenses, joint
or several, (collectively, “Claims”) incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto (“Indemnified
Damages”), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other “blue sky” laws of any jurisdiction
in which Registrable Securities are offered (“Blue Sky Filing”), or the omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any material violation
of this Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, “Violations”). Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim by an Indemnified Person arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of such Indemnified Person
for such Indemnified Person expressly for use in connection with the preparation
of the Registration Statement or any such amendment thereof or supplement
thereto, if such prospectus was timely made available by the Company pursuant to
Section 3(d); (ii) with respect to any preliminary prospectus, shall not inure
to the benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(d), and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a violation and such Indemnified
Person, notwithstanding such advice, used it or failed to deliver the correct
prospectus as required by the 1933 Act and such correct prospectus was timely
made available pursuant to Section 3(d); (iii) shall not be available to the
extent such Claim is based on a failure of the Holder to deliver or to cause to
be delivered the prospectus made available by the Company, including a corrected
prospectus, if such prospectus or corrected prospectus was

--------------------------------------------------------------------------------

timely made available by the Company pursuant to Section 3(d); and (iv) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld or delayed. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Holders pursuant to Section 9.

 

(b) In connection with any Registration Statement in which a Holder is
participating, each such Holder agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement and each Person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20(a) of the
1934 Act (each, an “Indemnified Party”), against any Claim or Indemnified
Damages to which any of them may become subject, under the 1933 Act, the 1934
Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or
are based upon any Violation, in each case to the extent, and only to the
extent, that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly for use in
connection with such Registration Statement or any such amendment thereof or
supplement thereto; and, subject to Section 6(c), such Holder will promptly
reimburse any legal or other expenses reasonably incurred by an Indemnified
Party in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) and the
agreement with respect to contribution contained in Section 7 shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Holder, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that the Holder
shall be liable under this Section 6(b) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Holder as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Holders pursuant to
Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.

 

(c) Promptly after receipt by an Indemnified Person or Indemnified Party under
this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified

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Party to be paid by the indemnifying party, if, in the reasonable opinion of the
Indemnified Person or Indemnifying Party, the representation by such counsel of
the Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In the case of an Indemnified Person, legal counsel
referred to in the immediately preceding sentence shall be selected by the
Holders holding at least two-thirds in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The
Indemnified Party or Indemnified Person shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or Claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the Indemnified Party or
Indemnified Person which relates to such action or Claim. The indemnifying party
shall keep the Indemnified Party or Indemnified Person fully apprised at all
times as to the status of the defense or any settlement negotiations with
respect thereto. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its prior written consent;
provided, however, that the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall, without the prior
written consent of the Indemnified Party or Indemnified Person, consent to entry
of any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such Claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.

 

(d) The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or Indemnified Damages are incurred.

 

(e) The indemnity agreements contained herein shall be in addition to (i) any
cause of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.

 

7. Contribution. To the extent any indemnification by an indemnifying party is
prohibited or limited by law, then each indemnifying party, in lieu of
indemnifying such Indemnified Person or Indemnified Party, shall contribute to
the amount paid or payable by such Indemnified Person or Indemnified Party as a
result of such Claims, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the Indemnified Person or
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Claim or Indemnified Damages as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and such
Indemnified Person or Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any

--------------------------------------------------------------------------------

untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or relates to
information supplied by, such indemnifying party or such Indemnified Person or
Indemnified Party, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Claim or
Indemnified Damages shall be deemed to include any reasonable attorneys’ or
other reasonable fees or expenses incurred by such party in connection with any
Claim to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.

 

The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 7 were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7, contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities pursuant to
such Registration Statement. No person involved in the sale of Registrable
Securities which person is guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be
entitled to contribution from any person involved in such sale of Registrable
Securities who was not guilty of fraudulent misrepresentation.

 

8. Reports Under The 1934 Act.

 

With a view to making available to the Holders the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Holders to sell securities of the Company to
the public without registration (“Rule 144”), the Company agrees to:

 

(a) make and keep public information available, as those terms are understood
and defined in Rule 144;

 

(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and

 

(c) furnish to each Holder so long as such Holder owns Registrable Securities,
promptly upon request, (i) a written statement by the Company, if true, that it
has complied with the reporting requirements of Rule 144, the 1933 Act and the
1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested to permit the
Holders to sell such securities pursuant to Rule 144 without registration.

 

9. Assignment of Registration Rights.

 

The rights under this Agreement shall be automatically assignable by the Holders
to any transferee of all or any portion of such Holder’s Registrable Securities
if: (i) the Holder agrees in writing with the transferee or assignee to assign
such rights, and a copy of such

--------------------------------------------------------------------------------

agreement is furnished to the Company within a reasonable time after such
assignment; (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such securities
by the transferee or assignee is restricted under the 1933 Act and applicable
state securities laws; (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein; and (v) such transfer shall have been made in accordance with
the applicable requirements of the Exchange Agreement.

 

10. Amendment of Registration Rights.

 

Provisions of this Agreement may be amended and the observance thereof may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Holders who
then hold at least two-thirds of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Holder and the Company. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the Registrable Securities. No
consideration shall be offered or paid to any Person to amend, or consent to a
waiver or modification of, any provision of this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.

 

11. Miscellaneous.

 

(a) A Person is deemed to be a holder of Registrable Securities whenever such
Person owns or is deemed to own of record such Registrable Securities. If the
Company receives conflicting instructions, notices or elections from two or more
Persons with respect to the same Registrable Securities, the Company shall act
upon the basis of instructions, notice or election received from the such record
owner of such Registrable Securities.

 

(b) Any notices, consents, waivers or other communications required or permitted
to be given under the terms of this Agreement must be in writing and will be
deemed to have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile if received by 4:59 p.m. local time of
the recipient, or the following business day if received after 4:59 p.m. local
time of the recipient (provided in each case that confirmation of transmission
is mechanically or electronically generated and kept on file by the sending
party) or (iii) one Business Day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:

 

If to the Company:

 

Aphton Corporation

8 Penn Center, Suite 2300

1628 JFK Boulevard

Philadelphia, PA 19103

--------------------------------------------------------------------------------

Telephone:      (215)             

Facsimile:         (215) 218-4355

Attention:        Chief Executive Officer

 

With a copy to:

 

Akerman Senterfitt

One Southest Third Avenue

28th Floor

Miami FL 33131-1714

Telephone:        (305) 982-5592

Facsimile:          (305) 374-5095

Attention:          Kara MacCullough

 

If to an Investor, to its address and facsimile number set forth on the Schedule
of Investors attached hereto, with copies to such Investor’s representatives as
set forth on the Schedule of Investors, or to such other address and/or
facsimile number and/or to the attention of such other person as the recipient
party has specified by written notice given to each other party five (5) days
prior to the effectiveness of such change. Written confirmation of receipt
(A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender’s
facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by a courier or
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.

 

(c) Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.

 

(d) All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York. Each party hereby irrevocably submits to the non- exclusive
jurisdiction of the state and federal courts sitting The City of New York,
Borough of Manhattan and the State of New York, in each case for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner

--------------------------------------------------------------------------------

permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

(e) This Agreement, the Exchange Agreement, the Escrow Agreement and the
instruments referenced herein and therein constitute the entire agreement among
the parties hereto with respect to the subject matter hereof and thereof. There
are no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement, the Exchange Agreement,
the Escrow Agreement and the instruments referenced herein and therein supersede
all prior agreements and understandings among the parties hereto with respect to
the subject matter hereof and thereof, including without limitation, the letter
agreement, dated as of the date hereof, among the parties hereto.

 

(f) Subject to the requirements of Section 9, this Agreement shall inure to the
benefit of and be binding upon the permitted successors and assigns of each of
the parties hereto.

 

(g) The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.

 

(h) This Agreement may be executed in identical counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.

 

(i) Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

 

(j) All consents and other determinations required to be made by the Holders
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by Holders holding at least two-thirds of the Registrable Securities,
determined as if all of the Preferred Shares held by Holders then outstanding
have been converted into Registrable Securities without regard to any
limitations on conversion of the Preferred Shares.

 

(k) The language used in this Agreement will be deemed to be the language chosen
by the parties to express their mutual intent and no rules of strict
construction will be applied against any party.

 

(l) This Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person.

--------------------------------------------------------------------------------

(m) Heartland Value Fund. The Company understands and agrees that Heartland
Group, Inc. is entering into this Agreement solely on behalf of Heartland Value
Fund and that any claims that the Company may have against Heartland Group, Inc.
under this Agreement or otherwise in connection with the transactions
contemplated hereby shall only be made against the assets of the Heartland Value
Fund.

 

(n) Independent Nature of Investors’ Obligations and Rights. The obligations of
each Investor under this Agreement are several and not joint with obligations of
each other Investor, and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor under this Agreement.
Nothing contained herein or in any Transaction Document, and no action taken by
any Investor pursuant thereto, shall be deemed to constitute the Investors as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Investors are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated by the
Agreement or any other Transaction Document. Each Investor acknowledges that no
other Investor will be acting as agent of such Investor in enforcing its rights
under this Agreement. Each Investor shall be entitled to independently protect
and enforce its rights, including without limitation the rights arising out of
this Agreement, and it shall not be necessary for any other Investor to be
joined as an additional party in any Proceeding for such purpose. The Company
acknowledges that each of the Investors has been provided with the same
Registration Rights Agreement for the purpose of closing a transaction with
multiple Investors and not because it was required or requested to do so by any
Investor.

 

* * * * * *

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Company has caused this Registration Rights Agreement to
be duly executed as of the date first written above.

 

COMPANY:

 

APHTON CORPORATION

 

By:

 

 

/s/ Patrick T. Mooney

--------------------------------------------------------------------------------

    Patrick T. Mooney, M.D.     Chief Executive Officer

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the undersigned Investor has caused this Registration Rights
Agreement to be duly executed as of the date first written above.

 

SF CAPITAL PARTNERS LTD. By:  

/s/ Brian H. Davidson

--------------------------------------------------------------------------------

Name:   Brian H. Davidson Title:   Authorized Signatory

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the undersigned Investor has caused this Registration Rights
Agreement to be duly executed as of the date first written above.

 

HEARTLAND GROUP, INC

solely on behalf of the Heartland Value Fund

By:  

/s/ Paul T. Beste

--------------------------------------------------------------------------------

Name:   Paul T. Beste Title:   Vice President

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the undersigned Investor has caused this Registration Rights
Agreement to be duly executed as of the date first written above.

 

SMITH BARNEY FUNDAMENTAL VALUE FUND INC.

(Nominee Name: Horizon Waves & Co.)

By:  

/s/ John G. Goode

--------------------------------------------------------------------------------

Name:   John G. Goode Title:   Vice President

--------------------------------------------------------------------------------

Annex A

 

Plan of Distribution

 

We are registering                      shares of our Common Stock,             
of which are issuable upon the conversion of our Series A-1 Convertible
Preferred Stock, to permit the resale of these shares of Common Stock by the
Selling Stockholders from time to time after the date of this prospectus. We
will not receive any of the proceeds from the sale by any Selling Stockholder of
the shares of Common Stock.

 

The Selling Stockholders and any of their pledgees, donees, transferees,
assignees and successors-in-interest may, from time to time, sell any or all of
their shares of Common Stock on any stock exchange, market, quotation service or
trading facility on which the shares are traded or in private transactions
directly or indirectly through one or more underwriters, broker-dealers or
agents. The Common Stock may be sold in one or more transactions at fixed
prices, at prevailing market prices at the time of sale, at prices related to
such prevailing market prices, at varying prices determined at the time of sale,
or at negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:

 

•   Ordinary brokerage transactions and transactions in which the broker-dealer
solicits Investors;

 

•   Block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;

 

•   Purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;

 

•   An exchange distribution in accordance with the rules of the applicable
exchange;

 

•   Privately negotiated transactions;

 

•   To cover short sales made after the date that this Registration Statement is
declared effective by the Commission;

 

•   Broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;

 

•   A combination of any such methods of sale; and

 

•   Any other method permitted pursuant to applicable law.

--------------------------------------------------------------------------------

The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act rather than under this prospectus provided that they meet the
criteria and conform to the requirements of Rule 144.

 

Broker-dealers engaged by the Selling Stockholders may arrange for other
broker-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if an broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved. In
connection with sales of the Common Stock or otherwise, a Selling Stockholder
may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the Common Stock in the course of hedging in positions
they assume. A Selling Stockholder may also sell shares of Common Stock short
and deliver shares of Common Stock covered by this prospectus to close out short
positions.

 

The Selling Stockholders may from time to time pledge or grant a security
interest in some or all of the Shares owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell shares of Common Stock from time to time under this prospectus,
or under an amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933 amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus.

 

Upon the Company being notified in writing by a Selling Stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
Common Stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each Selling Stockholder and of the
participating broker-dealer(s), (ii) the number of shares involved, (iii) the
price at which such shares of Common Stock were sold, (iv) the commissions paid
or discounts or concessions allowed to such broker-dealer(s), where applicable,
(v) that such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus, and
(vi) other facts material to the transaction. In addition, upon the Company
being notified in writing by a Selling Stockholder that a donee or pledgee
intends to sell more than 500 shares of Common Stock, a supplement to this
prospectus will be filed if then required in accordance with applicable
securities law.

 

The Selling Stockholders also may transfer the shares of Common Stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.

 

The Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the

--------------------------------------------------------------------------------

Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and may profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Discounts, concessions, commissions and
similar selling expenses, if any, that can be attributed to the sale of
Securities will be paid by the Selling Stockholder and/or the purchasers. Each
Selling Stockholder has represented and warranted to the Company that it
acquired the securities subject to this registration statement in the ordinary
course of such Selling Stockholder’s business and, at the time of its purchase
of such securities such Selling Stockholder had no agreements or understandings,
directly or indirectly, with any person to distribute any such securities. Any
person deemed to be an underwriter will be subject to the prospectus delivery
requirements of the Securities Act.

 

The Company has advised each Selling Stockholder that it may not use shares
registered on this Registration Statement to cover short sales of Common Stock
made prior to the date on which this Registration Statement shall have been
declared effective by the Commission. If a Selling Stockholder uses this
prospectus for any sale of the Common Stock, it will be subject to the
prospectus delivery requirements of the Securities Act. The Selling Stockholders
will be responsible to comply with the applicable provisions of the Securities
Act and Exchange Act, and the rules and regulations thereunder promulgated,
including, without limitation, Regulation M, as applicable to such Selling
Stockholders in connection with resales of their respective shares under this
Registration Statement, which may limit the timing of purchases and sales of any
of the shares of Common Stock by the Selling Stockholders and any other
participating person. Regulation M may also restrict the ability of any person
engaged in the distribution of the shares of Common Stock to engage in
market-making activities with respect to the shares of Common Stock. All of the
foregoing may affect the marketability of the shares of Common Stock and the
ability of any person or entity to engage in market-making activities with
respect to the shares of Common Stock.

 

We will pay all expenses of the registration of the shares of Common Stock
pursuant to the Registration Rights Agreement, estimated to be $             in
total, including, without limitation, Commission filing fees and expenses of
compliance with state securities or “blue sky” laws; provided, however, that the
Selling Stockholders will pay, on a pro rata basis based on the number of
securities registered, all applicable underwriting discounts and selling
commissions, if any. We will indemnify each Selling Stockholder against
liabilities, including some liabilities under the Securities Act, in accordance
with the Registration Rights Agreement, or each Selling Stockholder will be
entitled to contribution. We may be indemnified by each Selling Stockholder,
severally and not jointly, against civil liabilities, including liabilities
under the Securities Act, that may arise from any written information furnished
to us by that Selling Stockholder specifically for use in this prospectus, in
accordance with the Registration Rights Agreement, or we may be entitled to
contribution. Each Selling Stockholder may agree to indemnify any agent, dealer
or broker-dealer that participates in transactions involving sales of the shares
of our Common Stock against civil liabilities, including liabilities under the
Securities Act.

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There can be no assurance that any Selling Stockholder will sell any or all of
the shares of Common Stock registered pursuant to the Registration Statement
which includes this prospectus. Once sold under the Registration Statement which
includes this prospectus, the shares of Common Stock will be freely tradable in
the hands of persons other than our affiliates.