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Exhibit 99.5
INVESTOR RIGHTS AGREEMENT
This
Investor Rights Agreement (this "Agreement") is made and entered
into
as of ___________ _, 2005, by and among
Sunset Brands, Inc., a Nevada
corporation formerly known as Cascade Sled
Dog Adventures, Inc. (the "Company"),
and certain holders of the Company's Series
B Preferred Stock and related
warrants identified on the signature page
of this Agreement (each, a "Purchaser"
and collectively, the "Purchasers"). The
Company and Purchasers are each
sometimes referred to herein as a "Party"
and collectively as the "Parties."
A.
Pursuant to the terms of that certain Acquisition Agreement and
Plan of
Merger (the "Merger Agreement"), dated as
of February 18, 2005, the Company
acquired all of the outstanding common
stock of U.S. Mills, Inc., a Delaware
corporation ("USM") through a merger of a
wholly-owned subsidiary of the Company
with and into USM.
B. As part of the consideration
payable holders of USM capital stock in
connection with the closing of the
transactions contemplated by the Merger
Agreement (the "Closing"), the Purchasers
received shares of Series B Preferred
Stock and Warrants (as defined below) of
the Company.
C. The
Parties wish to enter into this Agreement in order to (i)
provide
for certain restrictions on transfer and
sale of the Series B Preferred Stock
and Warrants, (ii) provide for the
repurchase by the Company or its designees of
the Series B Preferred Stock and
cancellation of all or a portion of the
Warrants in certain circumstances, and
(iii) provide certain registration rights
to the holders of the Series B Preferred
Stock and Warrants with respect to
Common Stock issuable upon conversion of
the Series B Preferred Stock or
exercise of the Warrants.
NOW,
THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby
acknowledged, the Parties hereto agree as
follows:
1.
Definitions. As used in this Agreement, the following terms shall
have
the following meanings:
"Available Funds" means assets of the Company legally available
for
distribution to holders of the Company's
Series B Preferred Stock, whether such
assets are capital, surplus or
earnings.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means shares of the Company's common stock, par
value
$0.001 per share.
"Effectiveness Period" shall have the meaning set forth in
Section
2(a).
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any successor statute.
"Filing Date" means, with respect to the Registration Statement
required to be filed hereunder, a date no
later than ninety (90) days following
the date hereof.
"Holder" or "Holders" means the Purchasers or any of their
respective affiliates or permissible
transferees to the extent any of them hold
Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
2(d).
"Indemnifying Party" shall have the meaning set forth in
Section
2(d).
"Original Issue Price" shall mean $____ [PRICE PER SHARE AT
WHICH
THE SERIES B PREFERRED STOCK IS ORIGINALLY
SOLD/ISSUED] (subject to proportional
adjustment in the event of stock
combinations, splits or similar events
effecting the Series B Preferred
Stock).
"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 or
deemed to be incorporated by reference in
such Prospectus.
"Registrable Securities" means (i) the Warrant Shares, (ii) the
shares of Common Stock issued or issuable
upon the conversion of the Series B
Preferred Stock and (iii) any shares of
Common Stock issued or issuable with
respect to the Warrant Shares or the shares
of Common Stock referred to in
clause (ii) above upon any stock split,
stock dividend, recapitalization or
similar event.
"Registration Statement" means each registration statement
required
to be filed hereunder, including 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 or
deemed to be 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.
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"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 Act" means the Securities Act of 1933, as amended,
and
any successor statute.
"Series B Certificate" means the Certificate of Designation,
Preferences and Rights of Series B
Preferred Stock in the form attached hereto
and incorporated herein as Exhibit A, as it
may be amended from time to time
subsequent to the date of this
Agreement.
"Series B Preferred Stock" shall mean the Series B Preferred
Stock
of the Company, the rights, preferences and
privileges of which are set forth in
the Series B Certificate.
"Series B Repurchase Price" shall mean a price per share equal
to
the Original Issue Price plus the amount of
any accrued but unpaid Repurchase
Premiums (as defined in Section 4(g) of
this Agreement).
"Trading Market" means any of the NASD OTC Bulletin Board,
NASDAQ
SmallCap Market, the Nasdaq National
Market, the American Stock Exchange or the
New York Stock Exchange.
"Warrants" means Warrants of the Company in the form attached
hereto
and incorporated herein as Exhibit B issued
to Purchasers in connection with the
Closing.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
2.
Registration.
(a) Participation in Registration. If at any time the Company
proposes to file a registration statement
under the Securities Act with respect
to a public offering or resale of shares of
Common Stock underlying Series B
Preferred Stock or related warrants having
substantially similar terms to those
of the Warrants, for the account of any
holder of Series B Preferred Stock or
related Warrants (or underlying shares of
Common Stock), then the Company shall
include in each such registration statement
all Registrable Securities, and such
registration statement shall also cover the
issuance of the Warrant Shares.
(b) Filing of Registration Statement.
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(i) Promptly following the date of this Agreement, if the
Registrable Securities and the issuance of
the Warrant Shares have not been
included in a registration statement
pursuant to Section 2(a), the Company will
prepare and file with the Commission a
Registration Statement covering the offer
and resale of the Registrable Securities by
the Purchasers which offering will
be made on a continuous basis pursuant to
Rule 415 and the issuance of the
Warrant Shares. The Company shall use
commercially reasonable efforts to cause
the Registration Statement to be filed on
or prior to the Filing Date. The
Registration Statement shall be on Form
SB-2 or such other appropriate form
promulgated under the Securities Act. The
Company shall use its commercially
reasonable commercial efforts to cause the
Registration Statement to be declared
effective under the Securities Act within
ninety (90) days following the Filing
Date. The Company shall use its
commercially reasonable efforts to keep the
Registration Statement effective under the
Securities Act until the date which
is the earlier date of when (i) all
Registrable Securities have been sold or
(ii) all Registrable Securities (other than
those, if any, held by affiliates of
the Company as such term is defined in Rule
144(a)(1) of the Securities Act) may
be sold immediately without registration
under the Securities Act and without
volume restrictions pursuant to Rule 144(k)
thereof, as determined by the
counsel to the Company pursuant to a
written opinion letter to such effect,
addressed and acceptable to the Company's
transfer agent (the "Effectiveness
Period").
(ii) In the event that (A) a Registration Statement required to
be
filed pursuant to Section 2(a) or 2(b) is
not declared effective under the
Securities Act on or before the date on
which the restrictions on transfer set
forth in Section 3(a) no longer apply to
any Restricted Securities or (B) any
such Registration Statement is filed and
declared effective on or prior to such
date but shall thereafter either be
withdrawn by the Company or shall become
subject to an effective stop order issued
pursuant to Section 8(d) of the
Securities Act suspending the effectiveness
of such Registration Statement
without being succeeded immediately by an
additional Registration Statement
filed and declared effective (each such
event referred to in clauses (A) and
(B), a "Registration Default" and each
period during which a Registration
Default has occurred and is continuing, a
"Registration Default Period"), then,
as liquidated damages for such Registration
Default, the Company shall pay to
the Holders of any shares of Series B
Preferred Stock that remain outstanding
and have not been sold, transferred or
assigned by the original Purchaser
thereof, a per share amount in cash equal
to one percent (1%) of the Original
Issue Price for the first thirty (30) days
(or part thereof) of the Registration
Default Period, and an additional one
percent (1%) of the Original Issue Price
for any subsequent 30-day period (or part
thereof) of the Registration Default
Period. Each such payment shall be made by
the Company on the business day
following the expiration of each such
30-day period or, if applicable, on the
business day following the termination of
the Registration Default Period. The
Registration Default Period shall terminate
upon the earlier to occur of (x) the
effectiveness of a Registration Statement
covering the offer and resale of the
Registrable Securities by the Purchasers
and the issuance of the Warrant Shares
and (y) the second anniversary of the
Closing.
(c) Covenants Relating to Registration. In connection with the
registrations required by Sections 2(a) and
2(b), the Company will:
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(i) respond as promptly as possible to any comments received
from the Commission, and use its
commercially reasonable efforts to cause the
applicable Registration Statement to become
and remain effective for the
Effectiveness Period with respect thereto,
and promptly provide to the
Purchaser, upon request, copies of all
filings made with the Commission relating
to any such Registration Statement;
(ii) prepare and file with the Commission such amendments and
supplements to each Registration Statement
and the Prospectus used in connection
therewith as may be necessary to comply
with the provisions of the Securities
Act with respect to the disposition of all
Registrable Securities covered by
such Registration Statement and use its
commercially reasonable efforts to keep
any such Registration Statement effective
until the expiration of the
Effectiveness Period;
(iii) furnish to the Purchaser such number of copies of each
Registration Statement and the Prospectus
included therein (including each
preliminary Prospectus) as the Purchaser
reasonably may request to facilitate
the public sale or disposition of the
Registrable Securities covered by such
Registration Statement;
(iv) list the Registrable Securities covered by such
Registration Statement with any securities
exchange on which the Common Stock of
the Company is then listed;
(v) immediately notify the Purchaser at any time when a
Prospectus relating thereto is required to
be delivered under the Securities
Act, of the happening of any event of which
the Company has knowledge as a
result of which the Prospectus contained in
such Registration Statement, as then
in effect, includes an untrue statement of
a material fact or omits to state a
material fact required to be stated therein
or necessary to make the statements
therein not misleading in light of the
circumstances then existing, and in any
such event use its commercially reasonable
efforts to update the Prospectus and
Registration Statement in accordance with
the requirements of the Securities
Act; and
(vi) make available for inspection by the Purchaser and any
attorney, accountant or other designated
agent retained by the Purchaser, all
publicly available, non-confidential
financial and other records, pertinent
corporate documents and properties of the
Company, and cause the Company's
officers, directors and employees to supply
all publicly available,
non-confidential information reasonably
requested by the attorney, accountant or
designated agent of the Purchaser.
(d) Covenants of Purchaser Relating to Registration. Purchaser
and,
by virtue of such Holder's acquisition of
Registrable Securities, each Holder,
covenants and agrees as follows:
(i) Purchaser and such Holder will comply with the prospectus
delivery requirements of the Securities Act
as applicable to it in connection
with any sales of Registrable Securities
pursuant to a Registration Statement;
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(ii) Upon receipt of a notice from the Company of the
occurrence and continuation of a
Discontinuation Event (as defined below),
Purchaser or such Holder will forthwith
discontinue disposition of such
Registrable Securities under the applicable
Registration Statement until
Purchaser's or such Holder's receipt of the
copies of the supplemented
Prospectus and/or amended Registration
Statement, which the Company will prepare
and file, and use its commercially
reasonable efforts to cause to be declared
effective, as promptly as practicable after
the occurrence of the
Discontinuation Event, 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. The Company may
provide appropriate stop orders to
enforce the provisions of this Section. For
purposes of this Section 2(d), a
"Discontinuation Event" shall mean (i) when
the Commission notifies the Company
whether there will be a "review" of such
Registration Statement and whenever the
Commission comments in writing on such
Registration Statement; (ii) any request
by the Commission or any other Federal or
applicable state governmental
authority for amendments or supplements to
such Registration Statement or
Prospectus; (iii) the issuance by the
Commission of any stop order suspending
the effectiveness of such Registration
Statement covering any or all of the
Registrable Securities and the issuance of
the Warrant Shares or the initiation
of any Proceedings for that purpose; (iv)
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/or (v) the occurrence of any
event (not arising from the fraud,
negligence or willful misconduct of the
Company) or passage of time that makes
the financial statements included in such
Registration Statement ineligible for
inclusion therein or any statement made in
such Registration Statement or
Prospectus or any document incorporated or
deemed to be incorporated therein by
reference untrue in any material respect or
that requires any revisions to such
Registration Statement, Prospectus or other
documents so that, in the case of
such Registration Statement or 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
(iii) The Company will advise the Purchaser, promptly after it
receives notice of issuance by the
Commission, any state securities commission
or any other regulatory authority of any
stop order or of any order preventing
or suspending any offering of any
securities of the Company, or of the
suspension of the qualification of the
Common Stock of the Company for offering
or sale in any jurisdiction, or the
initiation of any proceeding for any such
purpose.
(e) Registration Expenses. All expenses relating to the
Company's
compliance with its obligations under
Section 2 hereof, including, without
limitation, all registration and filing
fees, printing expenses, fees and
disbursements of counsel and independent
public accountants for the Company,
fees and expenses incurred in connection
with complying with state securities or
"blue sky" laws, fees of the NASD, transfer
taxes, fees of transfer agents and
registrars and fees of, and disbursements
incurred by, one counsel
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for the Holders (not to exceed $10,000),
are called "Registration Expenses". The
Company shall only be responsible for all
Registration Expenses.
(f) Indemnification.
(i) In the event of any registration of Registrable Securities
under the Securities Act pursuant to this
Agreement, the Company will indemnify
and hold harmless the Purchaser, and its
officers, directors and each other
person, if any, who controls the Purchaser
within the meaning of the Securities
Act, against any losses, claims, damages or
liabilities, joint or several, to
which the Purchaser, or such persons may
become subject under the Securities Act
or otherwise, insofar as such losses,
claims, damages or liabilities (or actions
in respect thereof) are based on third
party or governmental or regulatory
claims or proceedings and arise out of or
are (i) based upon any violation by
the Company of any applicable federal or
state securities laws, (ii) based upon
any untrue statement or alleged untrue
statement of any material fact contained
in any Registration Statement under which
such Registrable Securities were
registered under the Securities Act
pursuant to this Agreement, any preliminary
Prospectus or final Prospectus contained
therein, or any amendment or supplement
thereof, or (iii) arise out of or are based
upon the omission or alleged
omission to state therein a material fact
required to be stated therein or
necessary to make the statements therein
not misleading; and will reimburse the
Purchaser, and each such person for any
reasonable legal or other expenses
incurred by them in connection with
investigating or defending any such loss,
claim, damage, liability or action;
provided, however, that the Company will not
be liable in any such case if and to the
extent that any such loss, claim,
damage or liability arises out of or is
based upon an untrue statement or
alleged untrue statement or omission or
alleged omission so made in conformity
with information furnished by or on behalf
of the Purchaser or any such person
in writing specifically for use in any such
document.
(ii) In the event of a registration of the Registrable
Securities under the Securities Act
pursuant to this Agreement, the Purchaser
will indemnify and hold harmless the
Company, and its officers, directors and
each other person, if any, who controls the
Company within the meaning of the
Securities Act, against all losses, claims,
damages or liabilities, joint or
several, to which the Company or such
persons may become subject under the
Securities Act or otherwise, insofar as
such losses, claims, damages or
liabilities (or actions in respect thereof)
are based on third party or
governmental or regulatory claims or
proceedings and arise out of or are based
upon any untrue statement or alleged untrue
statement of any material fact which
was furnished in writing by the Purchaser
to the Company expressly for use in
(and such information is contained in) the
Registration Statement under which
such Registrable Securities were registered
under the Securities Act pursuant to
this Agreement, any preliminary Prospectus
or final Prospectus contained
therein, or any amendment or supplement
thereof, or arise out of or are based
upon the omission or alleged omission to
state therein a material fact required
to be stated therein or necessary to make
the statements therein not misleading,
and will reimburse the Company and each
such person for any reasonable legal or
other expenses incurred by them in
connection with investigating or defending
any such loss, claim, damage, liability or
action, provided, however, that the
Purchaser will be liable in any such case
if and only to the extent that any
such loss, claim, damage or liability
arises out of or is based upon an untrue
statement or alleged untrue statement or
omission or alleged omission so made in
conformity with
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information furnished in writing to the
Company by or on behalf of the Purchaser
specifically for use in any such document.
Notwithstanding the provisions of
this paragraph, the Purchaser shall not be
required to indemnify any person or
entity in excess of the amount of the
aggregate net proceeds received by the
Purchaser in respect of Registrable
Securities in connection with any such
registration under the Securities Act.
(iii) Promptly after receipt by a party entitled to claim
indemn
