Exhibit 10.08

 

EXECUTION COPY

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into
as of May 27, 2016, between Discovery Energy Corp., a Nevada corporation (the
“Company”), DEC Funding LLC, a Texas limited liability corporation (“Original
Purchaser”) and each of the several other purchasers from time to time who
become a party to the Purchase Agreement (defined below).

 

This Agreement is made pursuant to the Securities Purchase Agreement, dated as
of the date hereof, between Company and each Purchaser (the “Purchase
Agreement”).

 

Company and each Purchaser hereby agree as follows:

 

1.          Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:

 

“Advice” shall have the meaning set forth in Section 7(d).

 

“Effectiveness Date” means, with respect to any Registration Statement required
to be filed hereunder other than a Registration Statement filed pursuant to an
Underwriting Request, the 30th calendar day following the Filing Date (or, in
the event of a “full review” by the Commission, the 90th calendar day following
the Filing Date) and with respect to any additional Registration Statements
which may be required pursuant to Section 2(c) or Section 4(c), the 30th
calendar day following the date on which an additional Registration Statement is
required to be filed hereunder (or, in the event of a “full review” by the
Commission, the 90th calendar day following the date such additional
Registration Statement is required to be filed hereunder); provided, however,
that in the event Company is notified by the Commission that one or more of the
above Registration Statements will not be reviewed or is no longer subject to
further review and comments, the Effectiveness Date as to such Registration
Statement shall be the fifth Trading Day following the date on which Company is
so notified if such date precedes the dates otherwise required above (unless
Company is required to update its financial statements prior to requesting
acceleration of such Registration Statement, which will require Company to file
an amendment to such Registration Statement, in which case Company shall file
any necessary amendment to such Registration Statement and request effectiveness
thereof as soon as reasonably practicable and in no event later than the dates
set forth above), provided, further, if such Effectiveness Date falls on a day
that is not a Trading Day, then the Effectiveness Date shall be the next
succeeding Trading Day.

 

“Effectiveness Period” shall have the meaning set forth in Section 2(a).

 

“Event” shall have the meaning set forth in Section 2(d).

 

“Event Date” shall have the meaning set forth in Section 2(d).

 

 

 

 

“Filing Date” means, with respect to any Registration Statement required
hereunder other than pursuant to an Underwriting Request, the 30th calendar day
following the date on which Company receives a written request to file the
Initial Registration Statement from the Holders of 50% or more of the then
outstanding Registrable Securities, subject to Section 2(f) herein; provided,
however, that in the case of an Underwriting Request, the Filing Date shall mean
the date as soon as practicable following the Underwriting Request; and
provided, further, that in either case, such written request by the Holders
shall not be made until (i) six months from the date of this Agreement and (ii)
the 90th calendar day following the date on which a registration statement
relating to an offering by Company for its own account or the account of others
under the Securities Act of any of Company’s equity securities is declared
effective by the Commission, and, with respect to any additional Registration
Statements which may be required pursuant to Section 2(c) or Section 4(c), the
earliest practical date on which Company is permitted by SEC Guidance to file
such additional Registration Statement related to the Registrable Securities,
and provided, further that, if the written request to file the Initial
Registration Statement from the Holders of 50% or more of the then outstanding
Registrable Securities or the Underwriting Request is given more than 45 days
after the end of Company’s fiscal year, then the Filing Date shall be the
earlier of five days after the filing of the Company’s Annual Report on Form
10-K for the past fiscal year or five days after such Report should have been
filed, taking into account any permitted extensions.

 

“Holder” or “Holders” means the holder or holders, as the case may be, from time
to time of Registrable Securities.

 

“Indemnified Party” shall have the meaning set forth in Section 6(c).

 

“Indemnifying Party” shall have the meaning set forth in Section 6(c).

 

“Initial Registration Statement” means the initial Registration Statement filed
pursuant to this Agreement.

 

“Losses” shall have the meaning set forth in Section 6(a).

 

“Participating Stockholders” shall have the meaning set forth in Section 3(b).

 

“Plan of Distribution” shall have the meaning set forth in Section 2(a).

 

“Prospectus” means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated by the Commission pursuant to
the Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by a Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.

 

“Registrable Securities” means, as of any date of determination, (a) all of the
shares of Common Stock then issuable upon conversion in full of the Debentures
(assuming on such date the Debentures are converted in full without regard to
any conversion limitations therein), (b) all Warrant Shares then issuable upon
exercise of the Warrants (assuming on such date the Warrants are exercised in
full without regard to any exercise limitations therein), (c) any additional
shares of Common Stock issuable in connection with any anti-dilution provisions
in the Debentures or the Warrants (in each case, without giving effect to any
limitations on conversion set forth in the Debentures or limitations in exercise
set forth in the Warrants) and (d) any securities issued or then issuable upon
any stock split, dividend or other distribution, recapitalization or similar
event with respect to the foregoing; provided, however, that any such
Registrable Securities shall cease to be Registrable Securities (and Company
shall not be required to maintain the effectiveness of any, or file another,
Registration Statement hereunder with respect thereto) for so long as (a) a
Registration Statement with respect to the sale of such Registrable Securities
is declared effective by the Commission under the Securities Act and such
Registrable Securities have been disposed of by the Holder in accordance with
such effective Registration Statement, (b) such Registrable Securities have been
previously sold in accordance with Rule 144, or (c) such securities become
eligible for resale by the affected Holders without volume or manner-of-sale
restrictions and without current public information pursuant to Rule 144 as set
forth in a written opinion letter to such effect, addressed, delivered and
reasonably acceptable to the Transfer Agent and the affected Holders.

 

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“Registration Statement” means any registration statement required to be filed
hereunder pursuant to Section 2(a) and any additional registration statements
contemplated by Section 2(c) or Section 4(c), including (in each case) the
Prospectus, amendments and supplements to any such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference in any such registration statement.

 

“Requesting Stockholders” shall have the meaning set forth in Section 3(a).

 

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.

 

“Selling Stockholder Questionnaire” shall have the meaning set forth in Section
4(a).

 

“SEC Guidance” means (i) any publicly-available written or oral guidance of the
Commission staff, or any comments, requirements or requests of the Commission
staff and (ii) the Securities Act.

 

“Underwriting Request” shall have the meaning set forth in Section 3(a).

 

“Underwritten Registration Cutback” shall have the meaning set forth in Section
3(a).

 

2.           Resale Registration.

 

(a)          On or prior to each Filing Date, Company shall prepare and file
with the Commission a Registration Statement covering the resale of all of the
Registrable Securities that are not then registered on an effective Registration
Statement for an offering to be made on a continuous basis pursuant to Rule 415
(except in connection with an Underwriting Request under Section 3(a)). Each
Registration Statement filed hereunder shall be on Form S-3 (except if 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 in
accordance herewith, subject to the provisions of Section 2(e)) and shall
contain (unless otherwise directed by at least 60% in interest of the Holders
and except in connection with an Underwriting Request) substantially the “Plan
of Distribution” attached hereto as Annex A. Subject to the terms of this
Agreement, Company shall use its reasonable best efforts to cause a Registration
Statement filed under this Agreement (including, without limitation, under
Section 4(c)) to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event no later than the applicable
Effectiveness Date, and, in the case of an offering to be made on a continuous
basis under Rule 415 or any other registration hereunder not involving an
Underwriting Request, shall use its reasonable best efforts to keep such
Registration Statement continuously effective under the Securities Act until all
Registrable Securities covered by such Registration Statement (i) have been
sold, thereunder or pursuant to Rule 144, or (ii) may be sold without volume or
manner-of-sale restrictions pursuant to Rule 144 and without the requirement for
Company to be in compliance with the current public information requirement
under Rule 144, as determined by the counsel to Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the Transfer Agent
and the affected Holders (the “Effectiveness Period”). Company shall
telephonically request effectiveness of a Registration Statement as of 5:00 p.m.
Eastern Time on a Trading Day. Company shall immediately notify the Holders via
facsimile or by e-mail of the effectiveness of a Registration Statement on the
same Trading Day that Company telephonically confirms effectiveness with the
Commission, which shall be the date requested for effectiveness of such
Registration Statement. Company shall, by 9:30 a.m. Eastern Time on the Trading
Day after the effective date of such Registration Statement, file a final
Prospectus with the Commission as required by Rule 424. Failure to so notify the
Holder within one (1) Trading Day of such notification of effectiveness or
failure to file a final Prospectus as foresaid shall be deemed an Event under
Section 2(d).

 

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(b)           Notwithstanding the registration obligations set forth in Section
2(a), if the Commission informs Company that all of the Registrable Securities
cannot, as a result of the application of Rule 415, be registered for resale as
a secondary offering on a single registration statement, Company agrees to
promptly inform each of the Holders thereof and use its commercially reasonable
efforts to file amendments to the Initial Registration Statement as required by
the Commission, covering the maximum number of Registrable Securities permitted
to be registered by the Commission, on Form S-3 or such other form available to
register for resale the Registrable Securities as a secondary offering, subject
to the provisions of Section 2(e); provided, however, that prior to filing such
amendment, Company shall be obligated to use diligent efforts to advocate with
the Commission for the registration of all of the Registrable Securities in
accordance with the SEC Guidance, including without limitation, Compliance and
Disclosure Interpretation 612.09.

 

(c)          Notwithstanding any other provision of this Agreement and subject
to the payment of liquidated damages pursuant to Section 2(d), if the Commission
or any SEC Guidance sets forth a limitation on the number of Registrable
Securities permitted to be registered on a particular Registration Statement as
a secondary offering (and notwithstanding that Company used diligent efforts to
advocate with the Commission for the registration of all or a greater portion of
Registrable Securities), unless otherwise directed in writing by a Holder as to
its Registrable Securities, the number of Registrable Securities to be
registered on such Registration Statement will be reduced as follows:

 

  (i) First, Company shall reduce or eliminate any securities to be included by
any Person other than a Holder;         (ii) Second, Company shall reduce
Registrable Securities represented by Warrant Shares (applied, in the case that
some Warrant Shares may be registered, to the Holders on a pro rata basis based
on the total number of unregistered Warrant Shares held by such Holders); and  
      (iii) Third, Company shall reduce Registrable Securities represented by
Conversion Shares (applied, in the case that some Conversion Shares may be
registered, to the Holders on a pro rata basis based on the total number of
unregistered Conversion Shares held by such Holders).

 

In the event of a cutback hereunder, Company shall give the Holder at least five
(5) Trading Days prior written notice along with the calculations as to such
Holder’s allotment. In the event Company amends the Initial Registration
Statement in accordance with the foregoing, Company will use its reasonable best
efforts to file with the Commission, as promptly as allowed by Commission or SEC
Guidance provided to Company or to registrants of securities in general, one or
more registration statements on Form S-3 or such other form available to
register for resale those Registrable Securities that were not registered for
resale on the Initial Registration Statement, as amended.

 

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(d)          If: (i) the Initial Registration Statement is not filed on or prior
to its Filing Date (if Company files the Initial Registration Statement without
affording the Holders the opportunity to review and comment on the same as
required by Section 4(a) herein, Company shall be deemed to have not satisfied
this clause (i)), or (ii) Company fails to file with the Commission a request
for acceleration of a Registration Statement in accordance with Rule 461
promulgated by the Commission pursuant to the Securities Act, within five
Trading Days of the date that Company is notified (orally or in writing,
whichever is earlier) by the Commission that such Registration Statement will
not be “reviewed” or will not be subject to further review, or (iii) prior to
the effective date of a Registration Statement, Company fails to file a
pre-effective amendment and otherwise respond in writing to comments made by the
Commission in respect of such Registration Statement within twenty (20) calendar
days after the receipt of comments by or notice from the Commission that such
amendment is required in order for such Registration Statement to be declared
effective (provided that, if such amendment or response requires year-end
financial statements, such filing or response shall be within ten (10) calendar
days following the filing of such year-end financial statements with the
Commission), or (iv) a Registration Statement registering for resale all of the
Registrable Securities is not declared effective by the Commission by the
Effectiveness Date of the Initial Registration Statement, or (v) after the
effective date of a Registration Statement, such Registration Statement ceases
for any reason to remain continuously effective as to all Registrable Securities
included in such Registration Statement, or the Holders are otherwise not
permitted to utilize the Prospectus therein to resell such Registrable
Securities, for more than ten (10) consecutive calendar days or more than an
aggregate of fifteen (15) calendar days (which need not be consecutive calendar
days) during any 12-month period, or (vi) Company shall fail for any reason to
satisfy the current public information requirement under Rule 144 as to the
applicable Registrable Securities (any such failure or breach being referred to
as an “Event”, and for purposes of clauses (i), (iv), and (vi), the date on
which such Event occurs, and for purposes of clause (ii) the date on which such
five (5) Trading Day period is exceeded, and for purpose of clause (iii) the
date which such twenty (20) or ten (10) calendar day period is exceeded, and for
purpose of clause (v) the date on which such ten (10) or fifteen (15) calendar
day period, as applicable, is exceeded being referred to as “Event Date”), then,
in addition to any other rights the Holders may have hereunder or under
applicable law, on each such Event Date and on each monthly anniversary of each
such Event Date (if the applicable Event shall not have been cured by such date)
until the applicable Event is cured, Company shall pay to each Holder an amount
in cash, as partial liquidated damages and not as a penalty, equal to 1.0% of
the aggregate purchase price paid by such Holder pursuant to the Purchase
Agreement. The parties agree that the maximum aggregate liquidated damages
payable to a Holder under this Agreement shall be 6% of the aggregate
Subscription Amount paid by such Holder pursuant to the Purchase Agreement. If
Company fails to pay any partial liquidated damages pursuant to this Section in
full within seven days after the date payable, Company will pay interest thereon
at a rate of 18% per annum (or such lesser maximum amount that is permitted to
be paid by applicable law) to the Holder, accruing daily from the date such
partial liquidated damages are due until such amounts, plus all such interest
thereon, are paid in full. The partial liquidated damages pursuant to the terms
hereof shall apply on a daily pro rata basis for any portion of a month prior to
the cure of an Event.

 

(e)          If Form S-3 is not available for the registration of the resale of
Registrable Securities hereunder, Company shall (i) register the resale of the
Registrable Securities on another appropriate form and (ii) undertake to
register the Registrable Securities on Form S-3 as soon as such form is
available, provided that Company shall maintain the effectiveness of the
Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the Commission.

 

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(f)          Notwithstanding anything herein to the contrary, if (i) the Board
of Directors, using good faith judgment, determines that the filing of the
Initial Registration Statement covering the Registrable Securities would be
detrimental to Company and it is in the best interests of Company to delay the
filing of the Initial Registration Statement, and (ii)  Company furnishes to
such Holders a written certification by Company’s Chief Executive Officer of the
determinations by the Board of Directors described in clause (i) herein, then
Company shall have the right to delay the filing of the Initial Registration
Statement for a period of not more than ninety (90) days after receipt of the
request of the Holders, provided that Company shall not delay the filing of the
Initial Registration Statement in this manner more than once in any twelve-month
period.

 

3.           Underwritten Offerings.

 

(a)          At the request (an “Underwriting Request”) of the Holders of at
least a majority of the then outstanding Registrable Securities (the “Requesting
Stockholders”), the distribution of the Registrable Securities covered by a
Registration Statement filed or to be filed pursuant to Section 2 hereof shall
be effected by means of an underwriting.

 

(b)          In the event of an Underwriting Request, Company, together with all
Holders proposing to distribute their securities through such underwriting (the
“Participating Stockholders”), shall enter into an underwriting agreement in
customary form with the managing underwriter(s) selected for such underwriting
by the Requesting Stockholders, which underwriter(s) shall be reasonably
acceptable to Company; provided, however, that no Holder shall be required to
make any representations or warranties concerning Company or its business,
properties, prospects, financial condition or related matters. Notwithstanding
any other provision of this Section 3, if the managing underwriter(s) advises
Company and the Participating Stockholders in writing that because the number of
shares requested by the Participating Stockholders to be included in the
registration exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the Requesting Stockholders or that
marketing factors require a limitation of the number of shares to be
underwritten on behalf of the Participating Stockholders (the “Underwritten
Registration Cutback”), and such Underwritten Registration Cutback results in
less than all of the Registrable Securities of the Participating Stockholders
that are requested to be included in such registration to actually be included
in such registration, then Company will include in such registration, to the
extent of the number which Company is so advised can be sold in (or during the
time of) such offering without such interference or effect on the price or sale,
such number of Registrable Securities shared pro rata among all of the
Participating Stockholders based on the total number of Registrable Securities
held by each such Participating Stockholder. For the avoidance of doubt, Company
shall not sell shares in any underwritten offering in connection with a
Registration Statement filed pursuant to Section 2 in the event of an
Underwritten Registration Cutback.

 

(c)          In the event of an Underwriting Request, in addition to and not in
limitation of the requirements of Section 4 below, Company shall:

 

(i)          cooperate with the Participating Stockholders, the underwriters
participating in the offering and their counsel in any due diligence
investigation reasonably requested by the Participating Stockholders or the
underwriters in connection therewith, and participate, to the extent reasonably
requested by the Participating Stockholders and the underwriter for the
offering, in efforts to sell the Registrable Securities under the offering
(including, without limitation, participating in “roadshow” meetings with
prospective investors) that would be customary for underwritten primary
offerings of a comparable amount of equity securities by Company;

 

(ii)         cooperate, to the extent reasonably requested, with each
underwriter participating in the disposition of such Registrable Securities and
their respective counsel in connection with any filings required to be made with
each Trading Market;

 

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(iii)           afford the underwriters and any Participating Stockholder owning
at least 25% of the Registrable Securities being included in the Registration
Statement with the opportunity to participate in the drafting of the
registration statement and the documentation relating thereto;

 

(iv)        furnish, on the date on which such Registrable Securities are sold
to the underwriter, (A) an opinion, dated such date, of the counsel representing
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and (B) a “comfort” letter dated such date, from
the independent certified public accountants of Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters;
and

 

(v)         take all other steps reasonably necessary to effect the registration
of the Registrable Securities contemplated hereby.

 

4.          Registration Procedures.

 

In connection with Company’s registration obligations hereunder, Company shall:

 

(a)          Not less than five (5) Trading Days prior to the filing of each
Registration Statement and not less than one (1) Trading Day prior to the filing
of any related Prospectus or any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein by
reference), (i) furnish to each Holder copies of all such documents proposed to
be filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders, and
(ii) cause its officers and directors, counsel and independent registered public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to each Holder, to conduct a reasonable
investigation within the meaning of the Securities Act. Notwithstanding the
above, Company shall not be obligated to provide the Holders advance copies of
any universal shelf registration statement registering securities in addition to
those required hereunder, or any Prospectus prepared thereto. Company shall not
file a Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities shall reasonably object in good faith, provided that, Company is
notified of such objection in writing no later than five (5) Trading Days after
the Holders have been so furnished copies of a Registration Statement or one (1)
Trading Day after the Holders have been so furnished copies of any related
Prospectus or amendments or supplements thereto. Each Holder agrees to furnish
to Company a completed questionnaire in the form attached to this Agreement as
Annex B (a “Selling Stockholder Questionnaire”) on a date that is not less than
two (2) Trading Days prior to the Filing Date or by the end of the fourth (4th)
Trading Day following the date on which such Holder receives draft materials in
accordance with this Section, whichever is earlier.

 

(b)          (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to a Registration Statement and the Prospectus used
in connection therewith as may be necessary (in the case of an offering to be
made on a continuous basis under Rule 415) to keep a Registration Statement
continuously effective as to the applicable Registrable Securities for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities, (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement (subject to the
terms of this Agreement), and, as so supplemented or amended, to be filed
pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any
comments received from the Commission with respect to a Registration Statement
or any amendment thereto and provide as promptly as reasonably possible to the
Holders true and complete copies of all correspondence from and to the
Commission relating to a Registration Statement (provided that, Company shall
excise any information contained therein which would constitute material
non-public information regarding Company or any of its Subsidiaries), and (iv)
comply in all material respects with the applicable provisions of the Securities
Act and the Exchange Act with respect to the disposition of all Registrable
Securities covered by a Registration Statement during the applicable period in
accordance (subject to the terms of this Agreement) with the intended methods of
disposition by the Holders thereof set forth in such Registration Statement as
so amended or in such Prospectus as so supplemented.

 

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(c)          In the case of an offering to be made on a continuous basis under
Rule 415, if during the Effectiveness Period, the number of Registrable
Securities at any time exceeds 100% of the number of shares of Common Stock then
registered in a Registration Statement, then Company, upon notice from the
Holders, shall file as soon as reasonably practicable, but in any case by the
applicable Filing Date, an additional Registration Statement covering the resale
by the Holders of not less than the number of such Registrable Securities.

 

(d)          Notify the Holders of Registrable Securities to be sold (which
notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by
an instruction to suspend the use of the Prospectus until the requisite changes
have been made) as promptly as reasonably possible (and, in the case of (i)(A)
below, not less than one (1) Trading Day prior to such filing) and (if requested
by any such Person) confirm such notice in writing no later than one (1) Trading
Day following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to a Registration Statement is proposed to be filed,
(B) when the Commission notifies Company whether there will be a “review” of
such Registration Statement and whenever the Commission comments in writing on
such Registration Statement, and (C) with respect to a Registration Statement or
any post-effective amendment, when the same has become effective, (ii) of any
request by the Commission or any other federal or state governmental authority
for amendments or supplements to a Registration Statement or Prospectus or for
additional information, (iii) of the issuance by the Commission or any other
federal or state governmental authority of any stop order suspending the
effectiveness of a Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose, (iv) of the
receipt by 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, (v) of the occurrence of any event or passage of
time that makes the financial statements included in a Registration Statement
ineligible for inclusion therein or any statement made in a 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 a Registration Statement, Prospectus or other
documents so that, in the case of a 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 light of the circumstances under which they were
made, not misleading, and (vi) of the occurrence or existence of any pending
corporate development with respect to Company that Company believes may be
material and that, in the determination of Company, makes it not in the best
interest of Company to allow continued availability of a Registration Statement
or Prospectus, provided, however, in no event shall any such notice contain any
information which would constitute material, non-public information regarding
Company or any of its Subsidiaries.

 

(e)          Use its reasonable best efforts to obtain the withdrawal of (i) any
order stopping or 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, at the earliest
practicable moment.

 

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(f)          Furnish to each Holder, without charge, at least one conformed copy
of each such Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference to the extent requested by such Person, and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission; provided, that any such item which is available
on the EDGAR system (or successor thereto) need not be furnished in physical
form.

 

(g)          Subject to the terms of this Agreement, Company hereby consents to
the use of such Prospectus and each amendment or supplement thereto by each of
the selling Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement thereto,
except after the giving of any notice pursuant to Section 4(d).

 

(h)           Company shall cooperate with any broker-dealer through which a
Holder proposes to resell its Registrable Securities in effecting a filing with
the FINRA Corporate Financing Department pursuant to FINRA Rule 5110, as
requested by any such Holder, and Company shall pay the filing fee required by
such filing within two (2) Business Days of request therefor.

 

(i)          Prior to any resale of Registrable Securities by a Holder, use its
commercially reasonable efforts to register or qualify or cooperate with the
selling Holders in connection with the registration or qualification (or
exemption from the Registration or qualification) of such Registrable Securities
for the resale by the Holder under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in
writing, to keep each registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and to do any and all other acts or
things reasonably necessary to enable the disposition in such jurisdictions of
the Registrable Securities covered by each Registration Statement; provided,
that, Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified, subject Company to any material
tax in any such jurisdiction where it is not then so subject or file a general
consent to service of process in any such jurisdiction.

 

(j)          If requested by a Holder, cooperate with such Holder 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, to the extent permitted by the Purchase
Agreement, of all restrictive legends, and to enable such Registrable Securities
to be in such denominations and registered in such names as any such Holder may
request.

 

(k)          Upon the occurrence of any event contemplated by Section 4(d), as
promptly as reasonably possible under the circumstances taking into account
Company’s good faith assessment of any adverse consequences to Company and its
stockholders of the premature disclosure of such event, prepare a supplement or
amendment, including a post-effective amendment, to a 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, neither a Registration Statement nor such
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 light of the circumstances under which they were made,
not misleading.

 

(l)          Comply with all applicable rules and regulations of the Commission.

 

(m)          Once Company becomes eligible to use a Form S-3 (or any successor
form thereto) for the registration of the resale of Registrable Securities,
Company shall use its reasonable best efforts to maintain such eligibility.

 

 9 

 

 

(n)          Company may require each selling Holder to furnish to Company a
certified statement as to the number of shares of Common Stock beneficially
owned by such Holder and, if required by the Commission, the natural persons
thereof that have voting and dispositive control over the shares. During any
periods that Company is unable to meet its obligations hereunder with respect to
the registration of the Registrable Securities solely because any Holder fails
to furnish such information within three Trading Days of Company’s request, any
liquidated damages that are accruing at such time as to such Holder only shall
be tolled and any Event that may otherwise occur solely because of such delay
shall be suspended as to such Holder only, until such information is delivered
to Company.

 

5.           Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by Company shall be borne by
Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses of Company’s counsel and
independent registered public accountants) (A) with respect to filings made with
the Commission, (B) with respect to filings required to be made with any Trading
Market on which the Common Stock is then listed for trading, (C) in compliance
with applicable state securities or Blue Sky laws reasonably agreed to by
Company in writing (including, without limitation, fees and disbursements of
counsel for Company in connection with Blue Sky qualifications or exemptions of
the Registrable Securities) and (D) if not previously paid by Company, with
respect to any filing that may be required to be made by any broker through
which a Holder intends to make sales of Registrable Securities with FINRA
pursuant to FINRA Rule 5110, so long as the broker is receiving no more than a
customary brokerage commission in connection with such sale, (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for Company, (v) Securities Act liability
insurance, if Company so desires such insurance, and (vi) fees and expenses of
all other Persons retained by Company in connection with the consummation of the
transactions contemplated by this Agreement. In addition, Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, 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 any securities exchange as required hereunder. In no event shall
Company be responsible for any underwriting, broker or similar commissions of
any Holder or, except to the extent provided for in the Transaction Documents,
any legal fees or other costs of the Holders; the Holders shall be responsible
for any and all underwriting, broker or similar commissions, and any and all
legal fees or other costs incurred by them except to the extent provided
otherwise in the Transaction Documents.

 

 10 

 

 

6.           Indemnification.

 

(a)          Indemnification by Company. Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, members, partners, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees (and any other Persons with a functionally equivalent role of a
Person holding such titles, notwithstanding a lack of such title or any other
title) of each of them, each Person who controls any such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, members, stockholders, partners, agents and
employees (and any other Persons with a functionally equivalent role of a Person
holding such titles, notwithstanding a lack of such title or any other title) of
each such controlling Person, to the fullest extent permitted by applicable law,
from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable attorneys’ fees) and expenses
(collectively, “Losses”), as incurred, arising out of or relating to (1) any
untrue or alleged untrue statement of a material fact contained in a
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the case of
any Prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading or (2) any violation or alleged violation by
Company of the Securities Act, the Exchange Act or any state securities law, or
any rule or regulation thereunder, in connection with the performance of its
obligations under this Agreement, except to the extent, but only to the extent,
that (i) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to Company by such Holder expressly
for use therein, or to the extent that such information relates to such Holder
or such Holder’s proposed method of distribution of Registrable Securities and
was reviewed and expressly approved in writing by such Holder expressly for use
in a Registration Statement, such Prospectus or in any amendment or supplement
thereto (it being understood that the Holder has approved Annex A hereto for
this purpose) or (ii) in the case of an occurrence of an event of the type
specified in Section 4(d)(iii)-(vi), the use by such Holder of an outdated,
defective or otherwise unavailable Prospectus after Company has notified such
Holder in writing that the Prospectus is outdated, defective or otherwise
unavailable for use by such Holder and prior to the receipt by such Holder of
the Advice contemplated in Section 7(d), but only if and to the extent that
following the receipt of the Advice the misstatement or omission giving rise to
such Loss would have been corrected. Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding arising from or in
connection with the transactions contemplated by this Agreement of which Company
is aware. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such indemnified person and shall survive
the transfer of any Registrable Securities by any of the Holders in accordance
with Section 7(h).

 

(b)          Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless Company, its directors, officers, agents
and employees, each Person who controls Company (within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to the fullest extent
permitted by applicable law, from and against all Losses, as incurred, to the
extent arising out of or based solely upon: (x) such Holder’s failure to comply
with any applicable prospectus delivery requirements of the Securities Act
through no fault of Company or (y) any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, any Prospectus, or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the case of
any Prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading (i) to the extent, but only to the extent, that
such untrue statement or omission is contained in any information so furnished
in writing by such Holder to Company expressly for inclusion in such
Registration Statement or such Prospectus or (ii) to the extent, but only to the
extent, that such information relates to such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in a Registration Statement (it
being understood that the Holder has approved Annex A hereto for this purpose),
such Prospectus or in any amendment or supplement thereto or (iii) in the case
of an occurrence of an event of the type specified in Section 4(d)(iii)-(vi), to
the extent, but only to the extent, related to the use by such Holder of an
outdated, defective or otherwise unavailable Prospectus after Company has
notified such Holder in writing that the Prospectus is outdated, defective or
otherwise unavailable for use by such Holder and prior to the receipt by such
Holder of the Advice contemplated in Section 7(d), but only if and to the extent
that following the receipt of the Advice the misstatement or omission giving
rise to such Loss would have been corrected. In no event shall the liability of
any selling Holder under this Section 6(b) be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.

 

 11 

 

 

(c)          Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
“Indemnified Party”), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the “Indemnifying Party”) in writing, and the
Indemnifying Party shall have the right to assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that, the failure of any Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have materially and adversely prejudiced the Indemnifying Party. An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses, (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding, or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and counsel to the Indemnified Party shall
reasonably believe that a material conflict of interest is likely to exist if
the same counsel were to represent such Indemnified Party and the Indemnifying
Party (in which case, if such Indemnified Party notifies the Indemnifying Party
in writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense thereof and the reasonable fees and expenses of no more than one
separate counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld or delayed. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding. Subject to
the terms of this Agreement, all reasonable fees and expenses of the Indemnified
Party (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in a manner
not inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the Indemnifying
Party; provided, that, the Indemnified Party shall promptly reimburse the
Indemnifying Party for that portion of such fees and expenses applicable to such
actions for which such Indemnified Party is finally determined by a court of
competent jurisdiction (which determination is not subject to appeal or further
review) not to be entitled to indemnification hereunder.

 

(d)          Contribution. If the indemnification under Section 6(a) or 6(b) is
unavailable to an Indemnified Party or insufficient to hold an Indemnified Party
harmless for any Losses, then each Indemnifying Party shall contribute to the
amount paid or payable by such Indemnified Party, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and 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 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 Losses shall be deemed to include, subject
to the limitations set forth in this Agreement, any reasonable attorneys’ or
other fees or expenses incurred by such party in connection with any Proceeding
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 6(d) 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 6(d), no Holder shall
be required to contribute pursuant to this Section 6(d), in the aggregate, any
amount in excess of the amount by which the net proceeds actually received by
such Holder from the sale of the Registrable Securities subject to the
Proceeding exceeds the amount of any damages that such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.

 

 12 

 

 

7.            Miscellaneous.

 

(a)          Remedies. In the event of a breach by Company or by a Holder of any
of their respective obligations under this Agreement, each Holder or Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, shall be entitled
to specific performance of its rights under this Agreement. Each of Company and
each Holder 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 hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall not assert or shall
waive the defense that a remedy at law would be adequate.

 

(b)          No Piggyback on Registrations. Subject to the registration rights
agreements disclosed in the Purchase Agreement or a schedule thereto (which do
not currently permit the stockholders who are a party thereto to participate in
a piggyback registration in view of the availability of Rule 144(b)(1)(i) under
the Securities Act), neither Company nor any of its security holders (other than
the Holders in such capacity pursuant hereto) may include securities of Company
in any Registration Statements other than the Registrable Securities.

 

(c)          Compliance. Each Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as applicable to
it (unless an exemption therefrom is available) in connection with sales of
Registrable Securities pursuant to a Registration Statement.

 

(d)          Discontinued Disposition. By its acquisition of Registrable
Securities, each Holder agrees that, upon receipt of a notice from Company of
the occurrence of any event of the kind described in Section 4(d)(iii) through
(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until it is advised in writing (the
“Advice”) by Company that the use of the applicable Prospectus (as it may have
been supplemented or amended) may be resumed. Company will use its reasonable
best efforts to ensure that the use of the Prospectus may be resumed as promptly
as is practicable. Company agrees and acknowledges that any periods during which
the Holder is required to discontinue the disposition of the Registrable
Securities hereunder shall be subject to the provisions of Section 2(d). Company
shall be entitled to exercise its right under this Section 7(d) to suspend the
availability of a Registration Statement and Prospectus, subject to the payment
of partial liquidated damages otherwise required pursuant to Section 2(d), for a
period not to exceed 60 calendar days (which need not be consecutive days) in
any 12-month period.

 

 13 

 

 

(e)          Piggy-Back Registrations. If there is not an effective Registration
Statement covering all of the Registrable Securities and Company shall determine
to prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its equity securities (other than a registration (i) pursuant to a
Registration Statement on Form S-8 or other registration solely relating to an
offering or sale of equity securities to employees or directors of the Company
pursuant to an employee stock plan or other employee benefit arrangement, or
(ii) pursuant to a Registration Statement on Form S-4 or other registration
solely relating to a transaction subject to Rule 145 under the Securities Act or
otherwise covering equity securities to be issued solely in connection with any
acquisition of any entity or business), then Company shall deliver to each
Holder a written notice of such determination and, if within fifteen days after
the date of the delivery of such notice, any such Holder shall so request in
writing, Company shall include in such registration statement all or any part of
such Registrable Securities such Holder requests to be registered; provided,
however, that Company shall not be required to register any Registrable
Securities pursuant to this Section 7(e) that are eligible for resale pursuant
to Rule 144 (without volume restrictions or current public information
requirements) promulgated by the Commission pursuant to the Securities Act or
that are the subject of a then effective Registration Statement. Notwithstanding
the foregoing, if Company’s proposed registration of equity securities hereunder
is, in whole or in part, an underwritten public offering, and the managing
underwriter of such proposed registration determines and advises in writing that
the inclusion of all Registrable Securities proposed to be included in the
underwritten public offering, together with any other issued and outstanding
shares of Company’s common stock proposed to be included therein (such other
shares hereinafter collectively referred to as the “Other Shares”), would
interfere with the successful marketing of Company’s securities, then the total
number of such securities proposed to be included in such underwritten public
offering shall be reduced, (i) first by the shares requested to be included in
such registration by the holders of Other Shares, and (ii) second, if necessary,
(A) one-half (½) by the securities proposed to be issued by Company, and (B)
one-half (½) by the Registrable Securities proposed to be included in such
registration by the Holders, on a pro rata basis, based upon the number of
Registrable Securities then held by each such Holder.

 

(f)          Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by Company and the Holders
of 60% or more of the then outstanding Registrable Securities (for purposes of
clarification, this includes any Registrable Securities issuable upon exercise
or conversion of any security), provided that this Agreement may not be amended
in a manner adversely affecting the rights or obligations of any Holder which
does not adversely affect the rights or obligations of all similarly situated
Holders in the same manner without the consent of such Holder. If a Registration
Statement does not register all of the Registrable Securities pursuant to a
waiver or amendment done in compliance with the previous sentence, then the
number of Registrable Securities to be registered for each Holder shall be
reduced pro rata among all Holders and each Holder shall have the right to
designate which of its Registrable Securities shall be omitted from such
Registration Statement. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of a Holder or some Holders and that does not directly
or indirectly affect the rights of other Holders may be given only by such
Holder or Holders of all of the Registrable Securities to which such waiver or
consent relates; provided, however, that the provisions of this sentence may not
be amended, modified, or supplemented except in accordance with the provisions
of the first sentence of this Section 7(f). 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.

 

(g)          Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be delivered as set forth
in the Purchase Agreement.

 

(h)          Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. Company may not assign
(except by merger) its rights or obligations hereunder without the prior written
consent of all of the Holders of the then outstanding Registrable Securities.
Each Holder may assign their respective rights hereunder in the manner and to
the Persons as permitted under Section 5.7 of the Purchase Agreement.

 

 14 

 

 

(i)          No Inconsistent Agreements. Neither Company nor any of its
Subsidiaries has entered, as of the date hereof, nor shall Company or any of its
Subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities, that would have the effect of impairing the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof.

 

(j)          Execution and Counterparts. This Agreement may be executed in two
or more counterparts, all of which when taken together shall be considered one
and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood that
both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or “.pdf” signature page were an original
thereof.

 

(k)          Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be determined in
accordance with the provisions of the Purchase Agreement.

 

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

 

(m)          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
hereto shall use their commercially 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.

 

(n)          Headings. The headings in this Agreement are for convenience only,
do not constitute a part of the Agreement and shall not be deemed to limit or
affect any of the provisions hereof.

 

(o)          Independent Nature of Holders’ Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be responsible in
any way for the performance of the obligations of any other Holder hereunder.
Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be
deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of group or entity, or create a presumption that the
Holders are in any way acting in concert or as a group or entity with respect to
such obligations or the transactions contemplated by this Agreement or any other
matters, and Company acknowledges that the Holders are not acting in concert or
as a group, and Company shall not asset any such claim, with respect to such
obligations or transactions. Each Holder shall be entitled to protect and
enforce its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Holder to be joined as an
additional party in any proceeding for such purpose. The use of a single
agreement with respect to the obligations of Company contained was solely in the
control of Company, not the action or decision of any Holder, and was done
solely for the convenience of Company and not because it was required or
requested to do so by any Holder. It is expressly understood and agreed that
each provision contained in this Agreement is between Company and a Holder,
solely, and not between Company and the Holders collectively and not between and
among Holders.

 

(p)          Entire Agreement. This Agreement, together with the exhibits
hereto, constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.

 

(Signature Pages Follow)

 

 15 

 

 

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as of the date first written above.

 

  DISCOVERY ENERGY CORP.       By: /s/ Keith D. Spickelmier     Keith D.
Spickelmier, Chairman         DEC FUNDING LLC       By: /s/ Steven Webster    
Steven Webster, Manager

 

[Registration Rights Agreement]

 

 

 

 

Annex A

 

Plan of Distribution

 

Each Selling Stockholder (the “Selling Stockholders”) of the securities and any
of their pledgees, assignees and successors-in-interest may, from time to time,
sell any or all of their securities covered hereby on the [principal Trading
Market] or any other stock exchange, market or trading facility on which the
securities are traded or in private transactions. These sales may be at fixed or
negotiated prices. A Selling Stockholder may use any one or more of the
following methods when selling securities:

 

·ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

 

·block trades in which the broker-dealer will attempt to sell the securities 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;

 

·settlement of short sales entered into after the effective date of the
registration statement of which this prospectus is a part;

 

·in transactions through broker-dealers that agree with the Selling Stockholders
to sell a specified number of such securities at a stipulated price per
security;

 

·through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;

 

·a combination of any such methods of sale; or

 

·any other method permitted pursuant to applicable law.

 

The Selling Stockholders may also sell securities under Rule 144 under the
Securities Act of 1933, as amended (the “Securities Act”), if available, rather
than under this prospectus.

 

Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for Purchaser of securities, from Purchaser) in amounts to be negotiated,
but, except as set forth in a supplement to this Prospectus, in the case of an
agency transaction not in excess of a customary brokerage commission in
compliance with FINRA Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with FINRA IM-2440.

 

In connection with the sale of the securities or interests therein, the Selling
Stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the
securities in the course of hedging the positions they assume. The Selling
Stockholders may also sell securities short and deliver these securities to
close out their short positions, or loan or pledge the securities to
broker-dealers that in turn may sell these securities. The Selling Stockholders
may also enter into option or other transactions with broker-dealers or other
financial institutions or create one or more derivative securities which require
the delivery to such broker-dealer or other financial institution of securities
offered by this prospectus, which securities such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or
amended to reflect such transaction).

 

[Registration Rights Agreement]

 

 

 

 

The Selling Stockholders and any broker-dealers or agents that are involved in
selling the securities 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 any profit on the resale of the
securities purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Stockholder has informed
Company that it does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the securities. In no
event shall any broker-dealer receive fees, commissions and markups which, in
the aggregate, would exceed eight percent (8%).

 

Company is required to pay certain fees and expenses incurred by Company
incident to the registration of the securities. Company has agreed to indemnify
the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.

 

Because Selling Stockholders may be deemed to be “underwriters” within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act including Rule 172 thereunder. In addition,
any securities covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than under
this prospectus. The Selling Stockholders have advised us that there is no
underwriter or coordinating broker acting in connection with the proposed sale
of the resale securities by the Selling Stockholders.

 

We agreed to keep this prospectus effective until the earlier of (i) the date on
which the securities may be resold by the Selling Stockholders without
registration and without regard to any volume or manner-of-sale limitations by
reason of Rule 144 under the Securities Act or any other rule of similar effect
or (ii) all of the securities have been sold pursuant to this prospectus or Rule
144 under the Securities Act or any other rule of similar effect. The resale
securities will be sold only through registered or licensed brokers or dealers
if required under applicable state securities laws. In addition, in certain
states, the resale securities covered hereby may not be sold unless they have
been registered or qualified for sale in the applicable state or an exemption
from the registration or qualification requirement is available and is complied
with.

 

Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale securities may not simultaneously
engage in market making activities with respect to the common stock for the
applicable restricted period, as defined in Regulation M, prior to the
commencement of the distribution. In addition, the Selling Stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of securities of the common stock by the Selling
Stockholders or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time of
the sale (including by compliance with Rule 172 under the Securities Act).

 

[Registration Rights Agreement]

 

 

 

 

 

Annex B

 

DISCOVERY ENERGY CORP.

 

Selling Stockholder Notice and Questionnaire

 

The undersigned beneficial owner of common stock (the “Registrable Securities”)
of Discovery Energy Corp., a Delaware corporation (the “Company”), understands
that Company has filed or intends to file with the Securities and Exchange
Commission (the “Commission”) a registration statement (the “Registration
Statement”) for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the “Securities Act”), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement (the
“Registration Rights Agreement”) to which this document is annexed. A copy of
the Registration Rights Agreement is available from Company upon request at the
address set forth below. All capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Registration Rights Agreement.

 

Certain legal consequences arise from being named as a selling stockholder in
the Registration Statement and the related prospectus. Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling stockholder in the Registration Statement and the related
prospectus.

 

NOTICE

 

The undersigned beneficial owner (the “Selling Stockholder”) of Registrable
Securities hereby elects to include the Registrable Securities owned by it in
the Registration Statement.

 

 

 

The undersigned hereby provides the following information to Company and
represents and warrants that such information is accurate:

 

QUESTIONNAIRE

 

1.Name.

 

  (a) Full Legal Name of Selling Stockholder      

 

  (b) Full Legal Name of Registered Holder (if not the same as (a) above)
through which Registrable Securities are held:      

 

  (c) Full Legal Name of Natural Control Person (which means a natural person
who directly or indirectly alone or with others has power to vote or dispose of
the securities covered by this Questionnaire):      

 

 

 

 

2.Address for Notices to Selling Stockholder:

  Telephone:   Fax:   Contact Person:

 

3.Broker-Dealer Status:

 

  (a) Are you a broker-dealer?

 

Yes ¨     No ¨

 

  (b) If “yes” to Section 3(a), did you receive your Registrable Securities as
compensation for investment banking services to Company?

 

Yes ¨      No ¨

 

  Note: If “no” to Section 3(b), the Commission’s staff has indicated that you
should be identified as an underwriter in the Registration Statement.

 

 

 

  (c) Are you an affiliate of a broker-dealer?

 

Yes ¨      No ¨

 

  (d) If you are an affiliate of a broker-dealer, do you certify that you
purchased the Registrable Securities in the ordinary course of business, and at
the time of the purchase of the Registrable Securities to be resold, you had no
agreements or understandings, directly or indirectly, with any person to
distribute the Registrable Securities?

 

Yes ¨     No ¨

 

  Note: If “no” to Section 3(d), the Commission’s staff has indicated that you
should be identified as an underwriter in the Registration Statement.

 

4.Beneficial Ownership of Securities of Company Owned by the Selling
Stockholder.

 

Except as set forth below in this Item 4, the undersigned is not the beneficial
or registered owner of any securities of Company other than the securities
issuable pursuant to the Purchase Agreement.

 

  (a) Type and Amount of other securities beneficially owned by the Selling
Stockholder:      

 

 

 

5.Relationships with Company:

 

Except as set forth below, neither the undersigned nor any of its affiliates,
officers, directors or principal equity holders (owners of 5% of more of the
equity securities of the undersigned) has held any position or office or has had
any other material relationship with Company (or its predecessors or affiliates)
during the past three years.

 

  State any exceptions here:    

 

The undersigned agrees to promptly notify Company of any inaccuracies or changes
in the information provided herein that may occur subsequent to the date hereof
at any time while the Registration Statement remains effective.

 

 

 

 

By signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 5 and the inclusion of such
information in the Registration Statement and the related prospectus and any
amendments or supplements thereto. The undersigned understands that such
information will be relied upon by Company in connection with the preparation or
amendment of the Registration Statement and the related prospectus.

 

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.

 

Date: Beneficial Owner:    

 

By:    

 

Name:   Title:

 

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO: