Exhibit 10.7

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into
as of December 29, 2017 by and among Emmaus Life Sciences, Inc., a Delaware
corporation (the “Company”), and the purchaser identified on the signature
pages hereto (including its successors and assigns, the “Purchaser”).

 

This Agreement is being entered into pursuant to the Securities Purchase
Agreement dated as of the date hereof among the Company and the Purchaser (the
“Purchase Agreement”).

 

The Company and the Purchaser hereby agrees as follows:

 

1.                          Definitions.

 

Capitalized terms used and not otherwise defined herein 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 meaning set forth in Section 3(m).

 

“Affiliate” means, with respect to any Person, any other Person which directly
or indirectly through one or more intermediaries Controls, is controlled by, or
is under common control with, such Person.  For the avoidance of doubt, with
respect to a Purchaser which is a general or limited partnership, an Affiliate
shall be deemed to include affiliated partnerships managed by the same
management company or managing general partner or by an entity which controls,
is controlled by, or is under common control with, such management company or
managing general partner.

 

“Board” shall have meaning set forth in Section 3(n).

 

“Business Day” means any day except Saturday, Sunday and any day which shall be
a legal holiday or a day on which banking institutions in the State of New York
generally are authorized or required by law or other government actions to
close.

 

“Closing Date” means the date of the closing of a public listing of the Common
Stock for trading on any national securities exchange (excluding any
over-the-counter (OTC”) market), whether through a direct listing application or
merger transaction.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the Company’s common stock, par value $0.001 per share.

 

“Control” (including the terms “controlling”, “controlled by” or “under common
control with”) means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.

 

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“Effectiveness Date” means with respect to the Registration Statement under
Section 2(a), the earlier of (A) the date that is two-hundred and forty (240)
days following the later to occur of (i) the Closing Date or (ii) or in the
event the Registration Statement receives a “full review” by the Commission, the
date that is three-hundred (300) days following the Closing Date, or (B) the
date which is within three (3) Business Days after the date on which the
Commission informs the Company (i) that the Commission will not review the
Registration Statement or (ii) that the Company may request the acceleration of
the effectiveness of the Registration Statement; provided, however, that, if the
Effectiveness Date falls on a Saturday, Sunday or any other day which shall be a
legal holiday or a day on which the Commission is authorized or required by law
or other government actions to close, the Effectiveness Date shall be the
following Business Day.

 

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

 

“Event” shall have the meaning set forth in Section 7(f).

 

“Event Date” shall have the meaning set forth in Section 7(f).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Filing Date” means with respect to a Registration Statement under Section 2(a),
the date that is one hundred and eighty (180) days following the Closing Date;
provided, however that if the Filing Date falls on a Saturday, Sunday or any
other day which shall be a legal holiday or a day on which the Commission is
authorized or required by law or other government actions to close, the Filing
Date shall be the following Business Day.

 

“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 5(c).

 

“Indemnifying Party” shall have the meaning set forth in Section 5(c).

 

“Losses” shall have the meaning set forth in Section 5(a).

 

“Note” means the $20,000,000 initial face value original issue discount 12.5%
Senior Secured Convertible Note issued to the Purchaser pursuant to the Purchase
Agreement.

 

“Note Shares” means the Common Stock issuable upon conversion of the Note.

 

“Offering” means the offering made pursuant to Section 4(a)(2) of the Securities
Act and Rule 506 promulgated thereunder of the Securities of the Company
pursuant to the Purchase Agreement.

 

“Person” means an individual or a corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or political subdivision thereof) or
other entity of any kind.

 

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

 

“Prospectus” means the prospectus included in the 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 under 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 the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.

 

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“Purchase Agreement” means the Securities Purchase Agreement, dated the date
hereof by and between the Company and the Purchaser.

 

“Registrable Securities” means, collectively (i) the Note Shares; (ii) the
Warrant Shares; (iii) any other securities of the Company subsequently acquired
by the Purchaser pursuant to the Purchase Agreement or otherwise; (iv) any
securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the foregoing;
provided, that the Holder has completed and delivered to the Company a Selling
Stockholder Questionnaire; and provided, further, that the Note Shares and
Warrant Shares shall cease to be Registrable Securities upon the sale pursuant
to a Registration Statement or Rule 144 under the Securities Act (in which case,
only such security sold shall cease to be a Registrable Security).

 

“Registration Statement” means either (a) an appropriate Registration Statement
that register the Registrable Securities, or (b) a registration statement and
any additional registration statements contemplated by Section 2, including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

“Rule 158” means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

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

 

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

 

“Securities” means the Note, the Shares, the Warrant and the Warrant Shares.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“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.

 

“Selling Stockholder Questionnaire” means a questionnaire in the form attached
as Exhibit B hereto, or such other form of questionnaire as may reasonably be
adopted by the Company from time to time.

 

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“Warrants” means the warrants to purchase the Warrant Shares issued to the
Purchasers pursuant to the Purchase Agreement.

 

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrant.

 

2.                                      Resale Registration.

 

(a)                                 On or prior to the Filing Date, the Company
shall prepare and file with the Commission a “resale” Registration Statement
providing for the resale of all Registrable Securities by means of an offering
to be made on a continuous basis pursuant to Rule 415.  The Registration
Statement shall be on Form S-1 or S-3 (or another appropriate form in accordance
herewith).  The Company shall (i) not permit any securities other than the
Registrable Securities to be included in the Registration Statement and (ii) use
its commercially reasonable efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as possible after the
filing thereof, but in any event prior to the Effectiveness Date, and to keep
such Registration Statement continuously effective under the Securities Act
until such date as is the earlier of (x) the date when all Registrable
Securities covered by such Registration Statement have been sold, or (y) the
date on which the Registrable Securities may be sold without any restriction
pursuant to Rule 144 as determined by the counsel to the Company pursuant to a
written opinion letter, addressed to the Company’s transfer agent to such effect
(the “Effectiveness Period”).  The Company shall request that the effective time
of the Registration Statement be 4:00 p.m. Eastern Time on the Effectiveness
Date.  If at any time and for any reason, an additional Registration Statement
is required to be filed because at such time the actual number of Registrable
Securities exceeds the number of Registrable Securities remaining under the
Registration Statement and such Registrable Securities are not saleable under
Rule 144, without limitation, the Company shall have sixty (60) Business Days to
file such additional Registration Statement, and the Company shall use its
commercially reasonable efforts to cause such additional Registration Statement
to be declared effective by the Commission as soon as possible, but in no event
later than ninety (90)) days after such filing; provided, however that if the
prior Registration Statement was filed within six months of such sixty (60) or
ninety (90) day period, then the sixty (60) and ninety (90 ) days shall commence
immediately after the expiration of the date that is six months after the filing
of the prior Registration Statement, unless then current securities laws permit
the earlier registration of same.

 

(b)                                 Notwithstanding anything to the contrary set
forth in this Section 2, in the event the Commission does not permit the Company
to register all of the Registrable Securities in the Registration Statement
because of the Commission’s application of Rule 415, the number of Registrable
Securities to be registered on such Registration Statement will be reduced in
the order of the Registrable Securities represented by the total number of Note
Shares and Warrant Shares owned by the Holders, applied on a pro rata basis, The
Company shall use its commercially reasonable efforts to file additional
Registration Statements to register the Registrable Securities that were not
registered in the initial Registration Statement and are not saleable under
Rule 144 without limitation as promptly as possible but in no event later than
on the Filing Date and in a manner permitted by the Commission.  For purposes of
this Section 2(b), “Filing Date” means with respect to each subsequent
Registration Statement filed pursuant hereto, the later of (i) sixty (60) days
following the sale of substantially all of the Registrable Securities included
in the initial Registration Statement or any subsequent Registration Statement
and (ii) six (6) months following the effective date of the initial Registration
Statement or any subsequent Registration Statement, as applicable, or such
earlier date as permitted by the Commission.  For purposes of this Section 2(b),
“Effectiveness Date” means with respect to each subsequent Registration
Statement filed pursuant hereto, the earlier of (A) the ninetieth (90th) day
following the filing date of such Registration Statement (or in the event such
Registration Statement receives a “full review” by the Commission, the one
hundred twentieth (120th) day following such filing date) or (B) the date which
is within three (3) Business Days after the date on which the Commission informs
the Company (i) that the

 

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Commission will not review such Registration Statement or (ii) that the Company
may request the acceleration of the effectiveness of such Registration
Statement; provided, that, if the Effectiveness Date falls on a Saturday, Sunday
or any other day which shall be a legal holiday or a day on which the Commission
is authorized or required by law or other government actions to close, the
Effectiveness Date shall be the following Business Day.

 

(c)                                  Each Holder agrees to furnish to the
Company a completed Selling Stockholder Questionnaire not more than ten
(10) Business Days prior to the filing of a Registration Statement. Each Holder
further agrees that it shall not be entitled to be named as a selling security
holder in the Registration Statement or use the Prospectus for offers and
resales of Registrable Securities at any time, unless such Holder has returned
to the Company a completed and signed Selling Stockholder Questionnaire. If a
Holder of Registrable Securities returns a Selling Stockholder Questionnaire
after the deadline specified in the previous sentence, the Company shall use its
commercially reasonable efforts to take such actions as are required to name
such Holder as a selling security holder in the Registration Statement or any
pre-effective or post-effective amendment thereto and to include (to the extent
not theretofore included) in the Registration Statement the Registrable
Securities identified in such late Selling Stockholder Questionnaire; provided
that the Company shall not be required to file an additional Registration
Statement solely for such shares. Each Holder acknowledges and agrees that the
information in the Selling Stockholder Questionnaire will be used by the Company
in the preparation of the Registration Statement and hereby consents to the
inclusion of such information in the Registration Statement.

 

3.                                      Registration Procedures.

 

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

 

(a)                                 Prepare and file with the Commission, on or
prior to the Filing Date, a Registration Statement on Form S-1 or S-3 (or
another appropriate form in accordance herewith) in accordance with the plan of
distribution as set forth on Exhibit A hereto and in accordance with applicable
law, and cause the Registration Statement to become effective and remain
effective as provided herein; provided, however, that not less than five
(5) Business Days prior to the filing of the Registration Statement or any
related Prospectus or any amendment or supplement thereto, the Company shall
(i) furnish to the Holders copies of all such documents proposed to be filed,
which documents will be subject to the review of such Holders, and (ii) cause
its officers and directors, counsel and independent certified public accountants
to respond to such inquiries as shall be necessary to conduct a reasonable
review of such documents.  The Company shall not file the Registration Statement
or any such Prospectus or any amendments or supplements thereto to which the
Purchasers shall reasonably object in writing within three (3) Business Days of
their receipt thereof.

 

(b)                                 (i) Prepare and file with the Commission
such amendments, including post-effective amendments, to the Registration
Statement as may be necessary to keep the 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 as necessary 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, and as so
supplemented or amended to be filed pursuant to Rule 424 (or any similar
provisions then in force) promulgated under the Securities Act; (iii) respond as
promptly as possible, but in no event later than twenty (20) Business Days, to
any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as possible provide the
Holders true and complete copies of all correspondence from and to the
Commission relating to the Registration Statement; (iv) file the final
prospectus pursuant to Rule 424 of the Securities Act no later than two (2) 

 

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Business Days following the date the Registration Statement is declared
effective by the Commission; and (v) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the Effectiveness Period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration Statement as so
amended or in such Prospectus as so supplemented.

 

(c)                                  Notify the Holders of Registrable
Securities as promptly as possible (i) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is filed;
with respect to the Registration Statement or any post-effective amendment, when
the same has become effective; (ii)of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation or threatening of any
Proceedings for that purpose; (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (iv) of the occurrence of any event that makes any statement made
in the 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 the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in the light of the
circumstances under which they were made) not misleading.

 

(d)                                 Use its commercially reasonable efforts to
avoid the issuance of, or, if issued, obtain the withdrawal of, as promptly as
possible, (i) any order suspending the effectiveness of the Registration
Statement or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction.

 

(e)                                  If requested by the Holders of a majority
in interest of the Registrable Securities, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment to the Registration Statement
such information as the Company reasonably agrees should be included therein and
(ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment.

 

(f)                                   If requested by any Holder, furnish to
such Holder, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference, 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.

 

(g)                                  Promptly deliver to each Holder, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and subject to the provisions of Sections 3(m) and 3(n), the
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.

 

(h)                                 Prior to any resale of Registrable
Securities, 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 such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder

 

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requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and to do any and
all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.

 

(i)                                     Cooperate with the Holders to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be sold pursuant to a Registration Statement, which certificates,
to the extent permitted by the Purchase Agreement and applicable federal and
state securities laws, shall be free of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such
names of the Holder in connection with any sale of Registrable Securities.

 

(j)                                    Upon the occurrence of any event
contemplated by Section 3(c)(iv), as promptly as possible, prepare a supplement
or amendment, including a post-effective amendment, to the 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 the 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 the case of the Prospectus, in the light of the
circumstances under which they were made) not misleading.

 

(k)                                 Use its commercially reasonable efforts to
cause all Registrable Securities relating to the Registration Statement, to
continue to be quoted or listed on a securities exchange, quotation system or
market, if any, on which similar securities issued by the Company are then
listed or traded as and when required pursuant to the Purchase Agreement.

 

(l)                                     Comply in all material respects with all
applicable rules and regulations of the Commission and make generally available
to its security holders all documents filed or required to be filed with the
Commission, including, but not limited, to, earning statements satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 not later than 45
days after the end of any 12-month period (or 90 days after the end of any
12-month period if such period is a fiscal year) commencing on the first day of
the first fiscal quarter of the Company after the effective date of the
Registration Statement, which statement shall conform to the requirements of
Rule 158.

 

(m)                             The Company may require each selling Holder to
furnish to the Company a certified statement as to the number of shares of
Common Stock beneficially owned by such Holder and the natural persons thereof
that have voting and dispositive control over the Registrable Securities. During
any periods that the 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 five (5) Business Days of the
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 the Company.

 

If the Registration Statement refers to any Holder by name or otherwise as the
holder of any securities of the Company, then such Holder shall have the right
to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.

 

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Each Holder covenants and agrees that it will not sell any Registrable
Securities under the Registration Statement until the Company has electronically
filed the Prospectus as then amended or supplemented as contemplated in
Section 3(e) and notice from the Company that the Registration Statement and any
post-effective amendments thereto have become effective as contemplated by
Section 3(c).

 

Each Holder agrees by its acquisition of such Registrable Securities that, upon
receipt of a notice from the Company of the occurrence of any event of the kind
described in Section 3(c)(ii), 3(c)(iii), or 3(c)(iv)or 3(n), such Holder will
forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until such Holder’s receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 3(e), or until it is advised in writing (the “Advice”) by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.

 

(n)                                 If (i) there is material non-public
information regarding the Company which the Company’s Board of Directors (the
“Board”) determines not to be in the Company’s best interest to disclose and
which the Company is not otherwise required to disclose, (ii) there is a
significant business opportunity (including, but not limited to, the acquisition
or disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board determines not to be in the Company’s best interest
to disclose, or (iii) the Company is required to file a post-effective amendment
to the Registration Statement to incorporate the Company’s quarterly and annual
reports and audited financial statements on Forms 10-Q and 10-K, then the
Company may (x) postpone or suspend filing of a registration statement for a
period not to exceed forty-five (45) consecutive days or (y) postpone or suspend
effectiveness of a registration statement for a period not to exceed forty-five
(45) consecutive days; provided that the Company may not postpone or suspend
effectiveness of a registration statement under this Section 3(n) for more than
ninety (90) days in the aggregate during any three hundred sixty (360) day
period; provided, however, that no such postponement or suspension shall be
permitted for consecutive twenty (20) day periods arising out of the same set of
facts, circumstances or transactions.

 

4.                                      Registration Expenses.

 

All fees and expenses incident to the performance of or compliance with this
Agreement by the Company, except as and to the extent specified in this
Section 4, shall be borne by the Company whether or not the Registration
Statement is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to the 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 (A) with respect to filings required to be made with any
securities exchange or market on which Registrable Securities are required
hereunder to be listed, if any, (B) with respect to filing fees required to be
paid to the Financial Industry Regulatory Authority, Inc. (including, without
limitation, pursuant to FINRA Rule 5110) and (C) in compliance with state
securities or Blue Sky laws (including, without limitation, fees and
disbursements of one counsel for the Holders up to a maximum amount of $5,000 in
connection with Blue Sky qualifications of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the Holders of a majority of Registrable
Securities may designate)), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities and of
printing prospectuses if the printing of prospectuses is requested by the
holders of a majority of the Registrable Securities included in the Registration
Statement), (iii) messenger, telephone and delivery expenses, (iv) Securities
Act liability insurance, if the Company so desires such insurance, and (v) fees
and expenses of

 

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all other Persons retained by the Company in connection with the consummation of
the transactions contemplated by this Agreement, including, without limitation,
the Company’s independent public accountants (including the expenses of any
comfort letters or costs associated with the delivery by independent public
accountants of a comfort letter or comfort letters).  In addition, the 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, the fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange if required hereunder.  The
Company shall not be responsible for any discounts, commissions, transfer taxes
or other similar fees incurred by the Holders in connection with the sale of the
Registrable Securities.

 

5.                                      Indemnification.

 

(a)                                 Indemnification by the Company.  The Company
shall, notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, the officers, directors, managers, partners, members,
shareholders, agents, brokers, investment advisors and employees 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, agents and employees 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, costs of preparation
and attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising
out of or relating to any violation of securities laws or untrue statement of a
material fact contained in the 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 of a
material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or supplement
thereto, in the light of the circumstances under which they were made) not
misleading, except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding such Holder
or such other Indemnified Party furnished in writing to the Company by such
Holder for use therein.  The Company shall notify the Holders promptly of the
institution, threat or assertion of any Proceeding of which the Company is aware
in connection with the transactions contemplated by this Agreement.

 

(b)                                 Indemnification by Holders.  Each Holder
shall, severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents and employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and
against all Losses, as incurred, arising out of or based upon any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising  out of or based upon any omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in the
light of the circumstances under which they were made) not misleading, 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 or other
Indemnifying Party to the Company specifically for inclusion in the Registration
Statement or such Prospectus.  Notwithstanding anything to the contrary
contained herein, each Holder shall be liable under this Section 5(b) only for
the lesser of (a) the actual damages incurred or (b) that amount as does not
exceed the gross proceeds to such Holder as a result of the sale of his/her/its
Registrable Securities pursuant to such Registration Statement.

 

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(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 be entitled 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 proximately and materially 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; or (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 such parties shall have been advised by counsel
that a 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
such 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 or
threatened Proceeding in respect of which any Indemnified Party is a party and
indemnity has been sought hereunder, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.

 

(d)                                         Contribution. If a claim for
indemnification under Section 5(a) or 5(b) is due but unavailable to an
Indemnified Party because of a failure or refusal of a governmental authority to
enforce such indemnification in accordance with its terms (by reason of public
policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative benefits received by the Indemnifying Party
on the one hand and the Indemnified Party on the other from the offering of the
Note and Warrants.  If, but only if, the allocation provided by the foregoing
sentence is not permitted by applicable law, the allocation of contribution
shall be made in such proportion as is appropriate to reflect not only the
relative benefits referred to in the foregoing sentence but also the relative
fault, as applicable, 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 statement of a material fact or 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 Section 5(c), any
reasonable attorneys’ or other reasonable 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.  In no
event shall any selling Holder be required to contribute an amount under this
Section 5(d) in excess of the gross proceeds received by such Holder upon sale
of such Holder’s Registrable Securities pursuant to the Registration Statement
giving rise to such contribution obligation.

 

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The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(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.  No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.

 

The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties pursuant to applicable law.

 

6.                                      Filing Obligations.

 

The Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act.  As long as any Holder owns Warrants or Registrable Securities, if
the Company is not required to file reports pursuant to Section 13(a) or
15(d) of the Exchange Act, it will prepare and furnish to the Holders and make
publicly available in accordance with Rule 144(c) promulgated under the
Securities Act, annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as
any other information required thereby, in the time period that such filings
would have been required to have been made under the Exchange Act.  The Company
further covenants that it will take such further action as any Holder may
reasonably request, all to the extent reasonably required from time to time to
enable such Person to sell the Note Shares and the Warrant Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including providing
any legal opinions relating to such sale pursuant to Rule 144.  Upon the request
of any Holder, the Company shall deliver to such Holder a written certification
of a duly authorized officer as to whether it has complied with such
requirements.

 

7.                                      Miscellaneous.

 

(a)                                 Remedies.  In the event of a breach by the
Company or by a Holder of any of their obligations under this Agreement, such
Holder or the 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, will be entitled to specific performance of its rights under this
Agreement.  Each of the 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 waive the defense that a remedy at law would be adequate.

 

(b)                                 No Inconsistent Agreements.  The Company has
not entered into, and shall not enter into on or after the date of this
Agreement, any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof.  The Company has not previously entered into any
agreement that is currently in effect granting any registration rights with
respect to any of its securities to any Person.  Without limiting the generality
of the foregoing, without the written consent of the Holders of a majority of
the then outstanding Registrable Securities, the Company shall not grant to any
Person the right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Holders set forth herein, and are
not otherwise in conflict with the provisions of this Agreement.

 

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(c)                                  No Piggyback on Registrations for Other
Securities.  Neither the Company nor any of its security holders may include
securities of the Company in the Registration Statement, and the Company shall
not after the date hereof enter into any agreement providing such right to any
of its security holders, unless the right so granted is subject in all respects
to the prior rights in full of the Holders set forth herein, and is not
otherwise in conflict with the provisions of this Agreement.

 

(d)                                 Piggy-Back Registrations for Registrable
Securities.  If at any time when there is not an effective Registration
Statement covering the Note Shares and Warrant Shares, the 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 on Form S-4 or
Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each Holder of Registrable Securities written notice of such
determination and, if within ten (10) calendar days after receipt of such
notice, or within such shorter period of time as may be specified by the Company
in such written notice as may be necessary for the Company to comply with its
obligations with respect to the timing of the filing of such registration
statement, any such Holder shall so request in writing (which request shall
specify the Registrable Securities intended to be disposed of by the such
Holder), the Company will cause the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the Holder, to the extent requisite to permit the disposition of the Registrable
Securities so to be registered, provided that if at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to such Holder and, thereupon, (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay expenses in accordance with Section 4 hereof),
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities being registered pursuant to
this Section 7(d) for the same period as the delay in registering such other
securities. The Company shall include in such registration statement all or any
part of such Registrable Securities such Holder requests to be registered;
provided, however, that the Company shall not be required to register any
Registrable Securities pursuant to this Section 7(d) that are eligible for sale
pursuant to Rule 144 of the Securities Act.  In the case of an underwritten
public offering, if the managing underwriter(s) or underwriter(s) should
reasonably object to the inclusion of the Registrable Securities in such
registration statement, then if the Company after consultation with the managing
underwriter should reasonably determine that the inclusion of such Registrable
Securities would materially adversely affect the offering contemplated in such
registration statement, and based on such determination recommends inclusion in
such registration statement of fewer or none of the Registrable Securities of
the Holders, then (x) the number of Registrable Securities of the Holders
included in such registration statement shall be reduced among such
Holders based upon the number of Registrable Securities requested to be included
in the registration in the order set forth in Section 2(b) hereof, if the
Company after consultation with the underwriter(s) recommends the inclusion of
fewer Registrable Securities, or (y) none of the Registrable Securities of the
Holders shall be included in such registration statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities; provided, however, that if securities are being offered
for the account of other persons or entities as well as the Company, such
reduction shall not represent a greater fraction of the number of Registrable
Securities intended to be offered by the Holders than the fraction of similar
reductions imposed on such other persons or entities (other than the
Company).  For purposes of this Section 7(d), Registrable Securities shall
include any shares actually issued to the Purchasers pursuant to the Securities
Escrow Agreement.

 

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(e)                                  Intentionally Left Blank.

 

(f)                                   Failure to File Registration Statement and
Other Events.  The Company and the Holders agree that the Holders will suffer
damages if the Registration Statement is not filed on or prior to the Filing
Date and not declared effective by the Commission on or prior to the
Effectiveness Date and maintained in the manner contemplated herein during the
Effectiveness Period or if certain other events occur.  The Company and the
Holders further agree that it would not be feasible to ascertain the extent of
such damages with precision.  Accordingly, if (A) the Registration Statement is
not filed on or prior to the Filing Date, or (B) the Registration Statement is
not declared effective by the Commission on or prior to the Effectiveness Date,
or (C) the Company fails to file with the Commission a request for acceleration
in accordance with Rule 461 promulgated under the Securities Act within three
(3) Business Days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that a Registration Statement
will not be “reviewed,” or not subject to further review, or (D) the
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective as to all Registrable Securities at any
time prior to the expiration of the Effectiveness Period, without being
succeeded immediately by a subsequent Registration Statement filed with and
declared effective by the Commission in accordance with Section 2(a) hereof, or
(E) the Company has breached Section 3(n) of this Agreement, or (F) trading in
the Common Stock shall be suspended or if the Common Stock is no longer quoted
on or is delisted from the OTCQB (or other principal exchange on which the
Common Stock is traded) for any reason for more than three (3) consecutive
Business Days or twelve (12) Business Days in the aggregate for any twelve month
period, (any such failure or breach being referred to as an “Event,” and for
purposes of clauses (A) and (B) the date on which such Event occurs, or for
purposes of clauses (C) and (F) the date on which such three (3) Business Day
period is exceeded, or for purposes of clause (D) after more than fifteen (15)
Business Days, being referred to as “Event Date”), then the Company shall pay to
each Holder for liquidated damages an amount of cash  equal to 2% of the product
of (i) the number of Registrable Securities and (ii) the Closing Sale Price or
Closing Bid Price  as of the trading day immediately prior to the Event Date,
such payments to be made on the  Event Date and every  thirty (30) day
anniversary thereafter with a maximum penalty of 12% until the applicable Event
is cured; provided, however, that in the event the Commission does not permit
all of the Registrable Securities to be included in the Registration Statement
because of its application of Rule 415, liquidated damages payable pursuant to
this Section shall only be payable by the Company based on the portion of the
Holder’s initial investment in the Securities that corresponds to the number of
such Holder’s Registrable Securities permitted to be registered by the
Commission in such Registration Statement pursuant to Rule 415.  For further
clarification, the parties understand that no liquidated damages shall be
payable pursuant to this Section with respect to any Registrable Securities that
the Company is not permitted to include on such Registration Statement due to
the Commission’s application of Rule 415. In addition, no liquidated damages
shall be payable with respect to Registrable Securities that may be sold
pursuant to Rule 144.  Notwithstanding anything to the contrary in this
paragraph (e), if (a) any of the Events described in clauses (A), (B), (C),
(D) or (F) shall have occurred, (b) on or prior to the applicable Event Date,
the Company shall have exercised its rights under Section 3(n) hereof and
(c) the postponement or suspension permitted pursuant to such Section 3(n) shall
remain effective as of such applicable Event Date, then the applicable Event
Date shall be deemed instead to occur on the second Business Day following the
termination of such postponement or suspension.  Liquidated damages payable by
the Company pursuant to this Section 7(f) shall be payable on the Event Date and
the first (1st) Business Day of each thirty (30) day period following the Event
Date.  Notwithstanding anything to the contrary contained herein, in no event
shall any liquidated damages be payable with respect to the Warrants or the
Warrant Shares.

 

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(g)                                  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 the Company and the Holders of a majority of the then outstanding
Registrable Securities.

 

(h)                                 Notices.  Whenever notice is required to be
given under this Agreement, unless otherwise provided herein, such notice shall
be given in accordance with Section 5.4 of the Purchase Agreement.

 

(i)                                     Successors and Assigns.  This Agreement
shall be binding upon and inure to the benefit of the parties and their
successors and permitted assigns and shall inure to the benefit of each Holder
and its successors and assigns.  The Company may not assign this Agreement or
any of its rights or obligations hereunder without the prior written consent of
each Holder.  Each Purchaser may assign its rights hereunder in the manner and
to the Persons as permitted under the Purchase Agreement.

 

(j)                                    Assignment of Registration Rights.  The
rights of each Holder hereunder, including the right to have the Company
register for resale Registrable Securities in accordance with the terms of this
Agreement, shall be automatically assignable by each Holder to any Person who
acquires all or a portion of the Warrants or the 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) following such transfer or assignment the further disposition of such
securities by the transferee or assignees is restricted under the Securities Act
and applicable state securities laws unless such securities are registered in a
Registration Statement under this Agreement (in which case the Company shall be
obligated to amend such Registration Statement to reflect such transfer or
assignment) or are otherwise exempt from registration, (iv) at or before the
time the Company receives the written notice contemplated by clause (ii) of this
Section, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions of this Agreement, and (v) such transfer shall
have been made in accordance with the applicable requirements of the Purchase
Agreement.  The rights to assignment shall apply to the Holders (and to
subsequent) successors and assigns.

 

(k)                                 Counterparts.  This Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and, all of which taken together shall constitute one
and the same Agreement and shall become effective when counterparts have been
signed by each party and delivered to the other parties hereto, it being
understood that all parties need not sign the same counterpart.  In the event
that any signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

 

(l)                                     Governing Law; Jurisdiction.  All
questions concerning the construction, validity, enforcement and interpretation
of the Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all legal
Proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, Borough of

 

14

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Manhattan for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents),
and hereby irrevocably waives, and agrees not to assert in any Action or
Proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such Action or Proceeding is improper or is an inconvenient
venue for such Proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such Action or Proceeding
by mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for 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 other
manner permitted by law.   If any party shall commence an Action or Proceeding
to enforce any provisions of the Transaction Documents, then, in addition to the
obligations of the Company elsewhere in this Agreement, the prevailing party in
such Action or Proceeding shall be reimbursed by the non-prevailing party for
its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Action or Proceeding.

 

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

 

(n)                                 Severability. If any term, provision,
covenant or restriction of this Agreement is held to be invalid, illegal, void
or unenforceable in any respect, 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 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.

 

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

 

(p)                                 Shares Held by the Company and its
Affiliates. Whenever the consent or approval of Holders of a specified
percentage of Registrable Securities is required hereunder, Registrable
Securities held by the Company or its Affiliates (other than any Holder or
transferees or successors or assigns thereof if such Holder is deemed to be an
Affiliate solely by reason of its holdings of such Registrable Securities) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.

 

 

 

COMPANY:

 

 

 

EMMAUS LIFE SCIENCES, INC.

 

 

 

 

 

By:

 

 

Name: Yutaka Niihara, MD, MPH

 

Title:  Chief Executive Officer

 

 

 

 

 

PURCHASER:

 

 

 

GPB DEBT HOLDINGS II, LLC

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

[Signature Page to Registration Rights Agreement]

 

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Exhibit A

Plan of Distribution

 

The selling security holders and any of their pledgees, donees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock being offered under this prospectus on any stock exchange,
market or trading facility on which shares of our common stock are traded or in
private transactions.  These sales may be at fixed or negotiated prices.  The
selling security holders may use any one or more of the following methods when
disposing of shares:

 

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

 

·              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 resales 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 the registration
statement of which this prospectus is a part is declared effective by the
Commission;

 

·              broker-dealers may agree with the selling security holders to
sell a specified number of such shares at a stipulated price per share;

 

·              a combination of any of these methods of sale; and

 

·              any other method permitted pursuant to applicable law.

 

The shares may also be sold under Rule 144 under the Securities Act of 1933, as
amended (“Securities Act”), if available, rather than under this prospectus. 
The selling security holders have the sole and absolute discretion not to accept
any purchase offer or make any sale of shares if they deem the purchase price to
be unsatisfactory at any particular time.

 

The selling security holders may pledge their shares to their brokers under the
margin provisions of customer agreements.  If a selling security holder defaults
on a margin loan, the broker may, from time to time, offer and sell the pledged
shares.

 

Broker-dealers engaged by the selling security holders may arrange for other
broker-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling security holders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, which commissions as to a particular broker or dealer may be in
excess of customary commissions to the extent permitted by applicable law.

 

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If sales of shares offered under this prospectus are made to broker-dealers as
principals, we would be required to file a post-effective amendment to the
registration statement of which this prospectus is a part.  In the
post-effective amendment, we would be required to disclose the names of any
participating broker-dealers and the compensation arrangements relating to such
sales.

 

The selling security holders and any broker-dealers or agents that are involved
in selling the shares offered under this prospectus may be deemed to be
“underwriters” within the meaning of the Securities Act in connection with these
sales.  Commissions received by these broker-dealers or agents and any profit on
the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.  Any broker-dealers or agents
that are deemed to be underwriters may not sell shares offered under this
prospectus unless and until we set forth the names of the underwriters and the
material details of their underwriting arrangements in a supplement to this
prospectus or, if required, in a replacement prospectus included in a
post-effective amendment to the registration statement of which this prospectus
is a part.

 

The selling security holders and any other persons participating in the sale or
distribution of the shares offered under this prospectus will be subject to
applicable provisions of the Exchange Act, and the rules and regulations under
that act, including Regulation M.  These provisions may restrict activities of,
and limit the timing of purchases and sales of any of the shares by, the selling
security holders or any other person.  Furthermore, under Regulation M, persons
engaged in a distribution of securities are prohibited from simultaneously
engaging in market making and other activities with respect to those securities
for a specified period of time prior to the commencement of such distributions,
subject to specified exceptions or exemptions.  All of these limitations may
affect the marketability of the shares.

 

If any of the shares of common stock offered for sale pursuant to this
prospectus are transferred other than pursuant to a sale under this prospectus,
then subsequent holders could not use this prospectus until a post-effective
amendment or prospectus supplement is filed, naming such holders.  We offer no
assurance as to whether any of the selling security holders will sell all or any
portion of the shares offered under this prospectus.

 

We have agreed to pay all fees and expenses we incur incident to the
registration of the shares being offered under this prospectus.  However, each
selling security holder and purchaser is responsible for paying any discounts,
commissions and similar selling expenses they incur.

 

We and the selling security holders have agreed to indemnify one another against
certain losses, damages and liabilities arising in connection with this
prospectus, including liabilities under the Securities Act.

 

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Exhibit B

Selling Stockholder 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 Listed in Item 3
below 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 the questionnaire):

 

 

 

 

2.                                      Address for Notices to Selling
Stockholder:

 

 

 

Telephone:

Fax:

Contact Person:

E-mail address of Contact Person:

 

3.                                      Beneficial Ownership of Registrable
Securities:

 

(a)                                 Type and Number of Registrable Securities
beneficially owned:

 

 

(b)                                 Number of shares of Common Stock to be
registered pursuant to this Notice for resale:

 

 

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4.                                      Broker-Dealer Status:

 

(a)           Are you a broker-dealer?

 

Yes o          No o

 

(b)           If “yes” to Section 4(a), did you receive your Registrable
Securities as compensation for investment banking services to the Company?

 

Yes o          No o

 

Note:                  If no, 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 o          No o

 

Note:                  If yes, provide a narrative explanation below:

 

(d)                                 If you are an affiliate of a broker-dealer,
do you certify that you bought 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 o          No o

 

Note:                  If no, the Commission’s staff has indicated that you
should be identified as an underwriter in the Registration Statement.

 

5.                                      Beneficial Ownership of Other Securities
of the Company Owned by the Selling Stockholder.

 

Except as set forth below in this Item 5, the undersigned is not the beneficial
or registered owner of any securities of the Company other than the Registrable
Securities listed above in Item 3.

 

Type and amount of other securities beneficially owned:

 

 

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6.                                      Relationships with the 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 the Company (or its predecessors or
affiliates) during the past three years.

 

State any exceptions here:

 

 

 

7.                                      Plan of Distribution:

 

The undersigned has reviewed the form of Plan of Distribution attached as
Exhibit A to the Agreement, and hereby confirms that, except as set forth below,
the information contained therein regarding the undersigned and its plan of
distribution is correct and complete.

 

State any exceptions here:

 

 

 

***********

 

The undersigned agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein that may occur subsequent to the date
hereof and prior to the effective date of any applicable Resale Registration
Statement. All notices hereunder shall be made in writing, by hand delivery,
confirmed or facsimile transmission, first-class mail or air courier
guaranteeing overnight delivery at the address set forth below. In the absence
of any such notification, the Company shall be entitled to continue to rely on
the accuracy of the information in this Notice and Questionnaire.

 

By signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items (1) through (7) above and the inclusion
of such information in the Resale Registration Statement and the Prospectus. The
undersigned understands that such information will be relied upon by the Company
in connection with the preparation or amendment of any such Registration
Statement and the Prospectus.

 

By signing below, the undersigned acknowledges that it understands its
obligation to comply, and agrees that it will comply, with the provisions of the
Exchange Act and the rules and regulations thereunder, particularly Regulation M
in connection with any offering of Registrable Securities pursuant to the Resale
Registration Statement. The undersigned also acknowledges that it understands
that the answers to this Questionnaire are furnished for use in connection with
Registration Statements filed pursuant to the Agreement and any amendments or
supplements thereto filed with the Commission pursuant to the Securities Act.

 

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The undersigned hereby acknowledges and is advised of the following
Interpretation A.65 of the July 1997 SEC Manual of Publicly Available Telephone
Interpretations regarding short selling:

 

“An Issuer filed a Form S-3 registration statement for a secondary offering of
common stock which is not yet effective. One of the selling stockholders wanted
to do a short sale of common stock “against the box” and cover the short sale
with registered shares after the effective date. The issuer was advised that the
short sale could not be made before the registration statement become effective,
because the shares underlying the short sale are deemed to be sold at the time
such sale is made. There would, therefore, be a violation of Section 5 if the
shares were effectively sold prior to the effective date.”

 

By returning this Questionnaire, the undersigned will be deemed to be aware of
the foregoing interpretation.

 

I confirm that, to the best of my knowledge and belief, the foregoing statements
(including without limitation the answers to this Questionnaire) are correct.

 

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

 

Dated:

 

 

Beneficial Owner:

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

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