EXHIBIT 10.3
REGISTRATION RIGHTS
AGREEMENT
THIS REGISTRATION RIGHTS
AGREEMENT (this “
Agreement ”), dated as of April 10, 2007, by and among
ISONICS CORPORATION, a California corporation (the
“ Company ”), and the undersigned Buyers listed
on Schedule I attached hereto (each, a “ Buyer
” and collectively, the “ Buyers
”).
WHEREAS:
A.
In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the “
Securities Purchase Agreement ”), the Company has
agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyers (i)
secured convertible debentures (the “ Convertible
Debentures ”) which shall be convertible into shares of
the Company’s common stock, no par value per share (the
“ Common Stock ,” as converted, the “
Conversion Shares ”) in accordance with the terms of
the Convertible Debentures, and (ii) warrants (the “
Warrants ”), which will be exercisable to purchase
shares of Common Stock (as exercised, collectively, the “
Warrant Shares ”). Capitalized terms not defined
herein shall have the meaning ascribed to them in the Securities
Purchase Agreement.
B.
To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor
statute (collectively, the “ Securities Act
”), and applicable state securities laws.
NOW, THEREFORE,
in consideration of the premises and
the mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Buyers hereby agree as
follows:
1.
DEFINITIONS .
As used in this Agreement, the
following terms shall have the following meanings:
(a)
“ Effectiveness Deadline ” means, with respect
to the initial Registration Statement required to be filed
hereunder, the 120th calendar day following the receipt of a
written demand from the Buyers requesting the filing of such
Registration Statement and, with respect to any Subsequent
Registration Statements which may be required pursuant to Section
3(c), the 60th calendar day following the date on which the Company
first knows, or reasonably should have known, that it is obligated
to file such Subsequent Registration Statement; provided, however,
in the event the Company is notified by the U.S. Securities and
Exchange Commission (“ SEC ”) that one of the
above Registration Statements will not be reviewed or is no longer
subject to further review and comments, the Effectiveness Date as
to such Registration Statement shall be the fifth Trading Day
following the date on which the Company is so notified if such date
precedes the dates required above.
(b)
“ Filing Deadline ” means, with respect to the
initial Registration Statement required hereunder, the 30th
calendar day following the receipt of a written demand from the
Buyers requesting the filing of such Registration Statement and,
with respect to any Subsequent Registration Statements which may be
required pursuant to Section 3(c), the 30th day following the date
on which the Company first knows, or reasonably should have known
that it is obligated to file such Subsequent Registration
Statement.
(c)
“ Initial Required Registration Amount ” means
shares of the Company’s Common Stock, in an amount equal to
nineteen and ninety-nine one hundredths percent (19.99%) if such
initial Registration Statement is filed prior to obtaining
shareholder approval, on or before November 30, 2007 to issue
shares of the Company’s Common Stock in excess of nineteen
and ninety-nine one hundredths percent (19.99%) or if such initial
Registration Statement is filed after obtaining shareholder
approval on or before November 30, 2007 than in an amount equal to
thirty three percent (33%) of the outstanding shares of the
Company’s Common Stock excluding “insiders” as of
the date the initial Registration Statement or any Subsequent
Registration Statement, issued or to be issued upon conversion of
the Convertible Debentures or exercise of the series Warrants, with
amount includes shares issued or issuable by the Company which will
be aggregated by the Securities and Exchange Commission under Rule
415(a) in calculating the maximum number of shares that can be
registered.
(d)
“ Person ” means a corporation, a limited
liability company, an association, a partnership, an organization,
a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
(e)
“ Prospectus ” means the prospectus included in
a Registration Statement (including, without limitation, a
prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in
reliance upon Rule 430A promulgated 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 a Registration Statement, and all other
amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such
Prospectus.
(f)
“ Registrable Securities ” means all of (i) the
Conversion Shares issuable upon conversion of the Convertible
Debentures, (ii) the Warrant Shares issued or issuable upon
exercise of the Warrants, (iii) any additional shares issuable in
connection with any anti-dilution provisions in the Warrants or the
Convertible Debentures (without giving effect to any limitations on
exercise set forth in the Warrants or Convertible Debentures) and
(iv) any shares of Common Stock issued or issuable with respect to
the Conversion Shares, the Convertible Debentures, the Warrant
Shares, or the Warrants as a result of any stock split, dividend or
other distribution, recapitalization or similar event or otherwise,
without regard to any limitations on the conversion of the
Convertible Debentures or exercise of the Warrants.
(g)
“ Registration Statement ” means the
registration statements required to be filed hereunder and any
additional registration statements contemplated by Section 3(c),
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
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all material
incorporated by reference or deemed to be incorporated by reference
in such registration statement.
(h)
“ Rule 415 ” means Rule 415 promulgated by the
SEC 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 SEC having substantially the same purpose and
effect as such Rule.
2.
REGISTRATION .
(a)
On or prior to each Filing Deadline, the Company shall prepare and
file with the SEC a Registration Statement on Form S-3 (if the
Company is then eligible, on Form S-3) or other appropriate form
covering the resale of all of the Registrable Securities. The
Registration Statement prepared pursuant hereto shall register for
resale at least the number of shares of Common Stock equal to the
Required Registration Amount as of date the Registration Statement
is initially filed with the SEC. The Registration Statement
shall contain the “ Selling Stockholders ” and
“ Plan of Distribution ” sections in
substantially the form attached hereto as Exhibit A and
contain all the required disclosures set forth on Exhibit B
. The Company shall use its best efforts to have the
Registration Statement declared effective by the SEC as soon as
practicable, but in no event later than the Effectiveness
Deadline. No later than the second (2 nd ) trading day following the
date of effectiveness, the Company shall file with the SEC in
accordance with Rule 424 under the 1933 Act the final Prospectus to
be used in connection with sales pursuant to such Registration
Statement. The Company shall use its best efforts to cause
the Registration Statement to remain effective until all of the
Registrable Securities have been sold or may be sold without volume
restrictions pursuant to Rule 144(k), 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 and
the affected Holders (“ Registration Period
”). Prior to the filing of the Registration Statement
with the SEC, the Company shall furnish a draft of the Registration
Statement to the Buyers for their review and comment. The
Buyers shall furnish comments on the Registration Statement to the
Company within twenty-four (24) hours of the receipt thereof from
the Company.
(b)
Failure to File or Obtain Effectiveness of the Registration
Statement . If: (i) a Registration
Statement is not filed on or prior to its Filing Date (if the
Company files a Registration Statement without affording the
Holders the opportunity to review and comment on the same as
required by Section 2(a), the Company shall not be deemed to have
satisfied this clause (i)), or (ii) the Company fails to file with
the SEC a request for acceleration in accordance with Rule 461
promulgated under the Securities Act, within five Trading Days of
the date that the Company is notified (orally or in writing,
whichever is earlier) by the SEC that a Registration Statement will
not be “reviewed,” or not subject to further review, or
(iii) a Registration Statement filed or required to be filed
hereunder is not declared effective by the SEC by its Effectiveness
Deadline, or (iv) after the effectiveness, a Registration Statement
ceases for any reason to remain continuously effective as to all
Registrable Securities for which it is required to be effective, or
the Holders are otherwise not permitted to utilize the Prospectus
therein to resell such Registrable Securities for more than 30
consecutive calendar days or more than an aggregate of 40 calendar
days during any 12-month period (which need not be consecutive
calendar days) (any such failure or breach being referred to as an
“ Event ”), then in addition to any other rights
the holders of the Convertible Debentures may have hereunder or
under
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applicable law,
on each such Event date and on each monthly anniversary of each
such Event date (if the applicable Event shall not have been cured
by such date) until the applicable Event is cured, the Company
shall pay to each holder of Convertible Debentures, at the
Company’s option, either an amount in cash or shares of the
Company’s Common Stock, as partial liquidated damages
(“ Liquidated Damages ”) and not as a penalty,
equal to 1.0% of the aggregate purchase price paid by such holder
pursuant to the Securities Purchase Agreement for any Convertible
Debentures then held by such holder. The parties agree that
(1) the Company shall not be liable for Liquidated Damages under
this Agreement with respect to any Warrants or Warrant Shares and
(2) the maximum aggregate Liquidated Damages payable to a holder of
Convertible Debentures under this Agreement shall be twelve percent
(12%) of the aggregate Purchase Price paid by such holder pursuant
to the Securities Purchase Agreement. The partial Liquidated
Damages pursuant to the terms hereof shall apply on a daily
pro-rata basis for any portion of a month prior to the cure of an
Event.
(c)
Liquidated Damages . The Company and the Buyer hereto
acknowledge and agree that the sums payable under subsection 2(b)
above shall constitute liquidated damages and not penalties and are
in addition to all other rights of the Buyer, including the right
to call a default. The parties further acknowledge that (i)
the amount of loss or damages likely to be incurred is incapable or
is difficult to precisely estimate, (ii) the amounts specified in
such subsections bear a reasonable relationship to, and are not
plainly or grossly disproportionate to, the probable loss likely to
be incurred in connection with any failure by the Company to obtain
or maintain the effectiveness of a Registration Statement, (iii)
one of the reasons for the Company and the Buyer reaching an
agreement as to such amounts was the uncertainty and cost of
litigation regarding the question of actual damages, and (iv) the
Company and the Buyer are sophisticated business parties and have
been represented by sophisticated and able legal counsel and
negotiated this Agreement at arm’s length.
3.
RELATED OBLIGATIONS .
(a)
The Company shall, not less than three (3) Trading Days prior to
the filing of each Registration Statement and not less than one (1)
Trading Day prior to the filing of any related amendments and
supplements to all Registration Statements (except for annual
reports on Form 10-K or Form 10-KSB), furnish to each Buyer copies
of all such documents proposed to be filed, which documents (other
than those incorporated or deemed to be incorporated by reference)
will be subject to the reasonable and prompt review of such Buyers,
The Company shall not file a Registration Statement or any such
Prospectus or any amendments or supplements thereto to which the
Buyers shall reasonably object in good faith; provided that,
the Company is notified of such objection in writing no later than
two (2) Trading Days after the Buyers have been so furnished copies
of a Registration Statement.
(b)
The Company shall (i) prepare and file with the SEC such
amendments (including post-effective amendments) and
supplements to a Registration Statement and the Prospectus used in
connection with such Registration Statement, which prospectus is to
be filed pursuant to Rule 424 promulgated under the Securities Act,
as may be necessary to keep such Registration Statement effective
at all times during the Registration Period, and prepare and file
with the SEC such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended
or
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supplemented by
any required Prospectus supplement (subject to the terms of this
Agreement), and as so supplemented or amended to be filed pursuant
to Rule 424; (iii) respond as promptly as reasonably possible to
any comments received from the SEC with respect to a Registration
Statement or any amendment thereto and as promptly as reasonably
possible provide the Buyers true and complete copies of all
correspondence from and to the SEC relating to a Registration
Statement (provided that the Company may excise any information
contained therein which would constitute material non-public
information as to any Buyer which has not executed a
confidentiality agreement with the Company); and (iv) comply with
the provisions of the Securities Act with respect to the
disposition of all Registrable Securities of the Company covered by
such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance
with the intended methods of disposition by the seller or sellers
thereof as set forth in such Registration Statement. In the
case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of the
Company’s filing a report on Form 10-K, Form 10-Q or Form 8-K
or any analogous report under the Securities Exchange Act of 1934,
as amended (the “ Exchange Act ”), the Company
shall incorporate such report by reference into the Registration
Statement, if applicable, or shall file such amendments or
supplements with the SEC on the same day on which the Exchange Act
report is filed which created the requirement for the Company to
amend or supplement the Registration Statement.
(c)
To the extent that the Buyer holds any Registrable Securities that
are prohibited from being included on a the initial Registration
Statement or any other Registration Statement (the “
Non-Registered Shares ”) either under Rule 415, as
interpreted by the SEC, or because the Company’s shareholders
had not approved the issuance of in excess of 19.99% of the
outstanding shares of the Company’s Common Stock as
contemplated in Section 4(q) of the Securities Purchase Agreement,
then the Company shall become obligated to file an additional
Registration Statement (each, a “ Subsequent Registration
Statement ”) on the first day after such Subsequent
Registration Statement may be filed without objection by the SEC
under Rule 415 covering the resale by the Buyers of the maximum
number of such Non-Registered Shares allowed under Rule 415 as
interpreted by the SEC.
(d)
The Company shall file with the SEC pursuant to Rule 424(b) a copy
of the definitive prospectus for each Registration Statement not
later than the second (2 nd ) business day after the
effectiveness of such Registration Statement. The Company
shall provide the Buyers such other documents as such Buyers may
reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such
Investor.
(e)
The Company shall use its best efforts to (i) register and qualify
the Registrable Securities covered by a Registration Statement
under such other securities or “blue sky” laws of such
jurisdictions in the United States as any Buyer reasonably
requests, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to
such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period,
(iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably
necessary or advisable to qualify
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the Registrable
Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a
condition thereto to (w) make any change to its articles of
incorporation or by-laws, (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (y) subject itself to general taxation
in any such jurisdiction, or (z) file a general consent to service
of process in any such jurisdiction. The Company shall
promptly notify each Buyer who holds Registrable Securities of the
receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or “blue
sky” laws of any jurisdiction in the United States or its
receipt of actual notice of the initiation or threat of any
proceeding for such purpose.
(f)
As promptly as practicable after becoming aware of such event or
development, the Company shall notify each Buyer in writing of the
happening of any event as a result of which the Prospectus included
in a Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading (provided that in no event shall such notice contain
any material, nonpublic information), and promptly prepare a
supplement or amendment to such Registration Statement to correct
such untrue statement or omission, and deliver ten (10) copies of
such supplement or amendment to each Buyer. The Company shall
also promptly notify each Buyer in writing (i) when a Prospectus or
any Prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective
amendment has become effective (notification of such effectiveness
shall be delivered to each Buyer by facsimile on the same day of
such effectiveness), (ii) of any request by the SEC for amendments
or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company’s
reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(g)
The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of
any of the Registrable Securities for sale in any jurisdiction
within the United States of America and, if such an order or
suspension is issued, to obtain the withdrawal of such order or
suspension at the earliest possible moment and to notify each Buyer
who holds Registrable Securities being sold of the issuance of such
order and the resolution thereof or its receipt of actual notice of
the initiation or threat of any proceeding for such
purpose.
(h)
If, after the execution of this Agreement, a Buyer believes, after
consultation with its legal counsel, that it could reasonably be
deemed to be an underwriter of Registrable Securities, at the
request of any Buyer, the Company shall furnish to such Buyer, on
the date of the effectiveness of the Registration Statement and
thereafter from time to time on such dates as a Buyer may
reasonably request (i) a letter, dated such date, from the
Company’s independent certified public accountants in form
and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public
offering, and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration
Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the
Buyers.
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(i)
If, after the execution of this Agreement, a Buyer believes, after
consultation with its legal counsel, that it could reasonably be
deemed to be an underwriter of Registrable Securities, at the
request of any Buyer, the Company shall make available for
inspection by (i) any Buyer and (ii) one (1) firm of
accountants or other agents retained by the Buyers (collectively,
the “ Inspectors ”) all pertinent financial and
other records, and pertinent corporate documents and properties of
the Company (collectively, the “ Records ”), as
shall be reasonably deemed necessary by each Inspector, and cause
the Company’s officers, directors and employees to supply all
information which any Inspector may reasonably request; provided,
however, that each Inspector shall agree, and each Buyer hereby
agrees, to hold in strict confidence and shall not make any
disclosure (except to a Buyer) or use any Record or other
information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the Securities Act, (b)
the release of such Records is ordered pursuant to a final,
non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has
been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the
Inspector and the Buyer has knowledge. Each Buyer agrees that
it shall, upon learning that disclosure of such Records is sought
in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential.
(j)
The Company shall hold in confidence and not make any disclosure of
information concerning a Buyer provided to the Company unless (i)
disclosure of such information is necessary to comply with federal
or state securities laws, (ii) the disclosure of such information
is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (iii) the release of such information is
ordered pursuant to a subpoena or other final, non-appealable order
from a court or governmental body of competent jurisdiction, or
(iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or
any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning a Buyer is
sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt written notice to
such Buyer and allow such Buyer, at the Buyer’s expense, to
undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
(k)
The Company shall use its best efforts either to cause all the
Registrable Securities covered by a Registration Statement (i) to
be listed on each securities exchange on which securities of the
same class or series issued by the Company are then listed, if any,
if the listing of such Registrable Securities is then permitted
under the rules of such exchange or (ii) the inclusion for
quotation on the National Association of Securities Dealers, Inc.
OTC Bulletin Board for such Registrable Securities. The
Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 3(j).
(l)
The Company shall cooperate with each Buyer who holds Registrable
Securities being offered and, to the extent applicable, to
facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legend) representing the Registrable
Securities
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