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Exhibit
10.39
E
XECUTION C OPY
REGISTRATION RIGHTS
AGREEMENT
THIS REGISTRATION RIGHTS
AGREEMENT (this “ Agreement ”) is
dated as of January 26, 2007, between Monarch Pointe Fund, Ltd.
(“ Monarch ”), Mercator Momentum Fund,
L.P. (“ MMF ”), Mercator Momentum Fund
III, L.P. (“ MMF III ) and each of the
undersigned additional accredited investors signatories hereto (the
“ Accredited Investors ,” and together
with Monarch, MMF and MMF III, referred to individually as a
“ Holder ” and collectively as the
“ Holders ”) and SunFuels, Inc., a
Colorado corporation (the “ Company ”).
Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Subscription Agreement (as defined
below). References to the Company herein shall be deemed to also
refer to any successor to the Company.
WHEREAS , on the date
hereof, the Company, M.A.G. Capital, LLC and the Holders have
entered into a Subscription Agreement (the “
Subscription Agreement ”), pursuant to which
the Holders have purchased from the Company, for aggregate
consideration of $20,250,000: (i) warrants (the “
Warrants ”) from the Company, pursuant to which
the Holders have the right to purchase in the aggregate up to
750,000 shares of the Company’s common stock, no par value
(the “ Common Stock ”); and
(ii) 1,500,000 shares of the Company’s Series A
Convertible Preferred Stock (the “ Series A
Stock ”), and have the right to cause such Series A
Stock to be converted into shares of Common Stock, pursuant to the
conversion formula set forth in the Certificate of Designations of
Series A Convertible Preferred Stock as filed with the Secretary of
State of the State of Colorado on or about January 25, 2007
(the “ Certificate of Designations ”);
and
WHEREAS , the Company
desires to grant to the Holders the registration rights set forth
herein with respect to the shares of Common Stock issuable upon the
conversion of the Series A Stock and the exercise of the
Warrants.
NOW, THEREFORE , the
parties hereto mutually agree as follows:
1. Registrable
Securities . As used herein the terms “
Registrable Security ” means each share of
Common Stock (A) issuable (i) upon the conversion of the
Series A Stock (the “ Conversion Shares
”), (ii) upon exercise of the Warrants (the “
Warrant Shares ”) or (iii) upon the
exercise or conversion of the other securities set forth in
Section 2(b) hereof and (B) issued as a dividend or other
distribution with respect to or in exchange for or in replacement
of the shares referenced in clause (A) above ; provided,
however , that with respect to any particular Registrable
Security, such security shall cease to be a Registrable Security as
of the date of determination that such security (i) has been
effectively registered under the Securities Act of 1933, as amended
(the “ Securities Act ”), and disposed of
pursuant thereto, (ii) has been sold pursuant to Rule 144, or
(iii) may be sold without 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. The term
“ Registrable Securities ” means any
and/or all of the securities falling within the
foregoing
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definition of a “Registrable
Security.” In the event of any merger, reorganization,
consolidation, recapitalization or other change in corporate
structure affecting the Common Stock, such adjustment shall be made
in the definition of “Registrable Security” as is
appropriate in order to prevent any dilution or enlargement of the
rights granted pursuant to this Section 1.
2. Registration
.
(a) The Company shall prepare
and file a registration statement (the “ Registration
Statement ”) with the Securities and Exchange
Commission (the “ SEC ”) no later than
the date that is sixty (60) days from the closing date of the
Merger (as defined in the Subscription Agreement) (such date of
filing, the “ Filing Date ”), in order to
register the resale of the Registrable Securities under the
Securities Act. The Company shall use its commercially reasonable
efforts to cause the Registration Statement to be declared
effective no later than the date that is one hundred twenty
(120) days after the Filing Date. Once effective, the Company
shall, subject to the provisions of this Agreement, use its best
efforts to maintain the effectiveness of the Registration Statement
until the date that all of the Registrable Securities have been
sold or such date as there are no longer any Registrable Securities
(such date, the “ Expiration Date
”).
(b) The Company will
initially include in the Registration Statement as Registrable
Securities (i) the maximum number of shares of Common Stock
issuable upon conversion of the Series A Stock, and (ii) the
maximum number of shares of Common Stock issuable upon exercise of
the Warrants.
(c) The Company shall deliver
to each Holder written notice of the proposed filing of the
Registration Statement or any related prospectus or any amendment
or supplement thereto no less than ten (10) business days
prior to the filing thereof and provide each Holder with a copies
of all such documents proposed to be filed (other than those
incorporated by reference) and the opportunity to comment thereon.
The Company shall not file a Registration Statement or any such
prospectus or any amendments or supplements thereto to which the
Holders of a majority of the Registrable Securities shall
reasonably object in good faith.
(d) In the event that the
Company fails to (i) file the Registration Statement with the
SEC by the date that is sixty (60) days from the closing date
of the Merger, (ii) use its commercially reasonable efforts to
have the Registration Statement declared effective by the SEC by
the date that is 120 days after the Filing Date, or (iii) use
its best efforts to maintain the effectiveness of the Registration
Statement thereafter until the Expiration Date, then the price at
the Series A Stock may be converted into shares of Common Stock
shall be reduced as set forth in the Certificate of
Designations.
3. Covenants of the
Company with Respect to Registration .
The Company covenants and
agrees as follows:
(a) If any stop order shall
be issued by the SEC in connection therewith, the Company shall use
its commercially reasonable efforts to obtain promptly the removal
of such order. Following the effective date of the Registration
Statement, the Company shall, upon the request of any Holder,
forthwith supply such reasonable number of copies of the
Registration
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Statement, preliminary prospectus and
prospectus meeting the requirements of the Securities Act, and any
other documents necessary or incidental to the public offering of
the Registrable Securities, as shall be reasonably requested by any
Holder to permit such Holder to make a public distribution of such
Holder’s Registrable Securities. The obligations of the
Company hereunder with respect to any Holder’s Registrable
Securities are subject to such Holder’s furnishing to the
Company such appropriate information concerning such Holder, such
Holder’s Registrable Securities and the terms of such
Holder’s offering of such Registrable Securities as the
Company may reasonably request in writing;
(b) Prepare and file with the
SEC such amendments and supplements to such Registration Statement
and the prospectus used in connection with such Registration
Statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such Registration Statement;
(c) Notify the Holders as
promptly as reasonably possible (and, in the case of (i)(A) below,
not less than five (5) business days prior to such filing):
(i)(A) when a prospectus or any prospectus supplement or
post-effective amendment to a Registration Statement is proposed to
be filed; (B) when the SEC notifies the Company whether there
will be a “review” of such Registration Statement and
whenever the SEC comments in writing on such Registration Statement
(in which case the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders
that pertain to the Holders as a Selling Stockholder or to the Plan
of Distribution, but not information which the Company believes
would constitute material and non-public information); and
(C) with respect to each Registration Statement or any
post-effective amendment, when the same has been declared
effective; (ii) of any request by the SEC or any other Federal
or state governmental authority for amendments or supplements to a
Registration Statement or prospectus or for additional information
that pertains to the Holders as Selling Stockholders or the Plan of
Distribution; (iii) of the issuance by the SEC of any stop
order suspending the effectiveness of a Registration Statement
covering any or all of the Registrable Securities or the initiation
of any proceedings for that purpose; (iv) of the receipt by
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
(v) of the occurrence of any event or passage of time that
makes the financial statements included in a Registration Statement
ineligible for inclusion therein or any statement made in 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 the prospectus, as the
case may be, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not
misleading.
(d) Upon the occurrence of
any event contemplated by Section 3(c)(v) above, as promptly
as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the affected Registration
Statements 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, no Registration Statement nor any prospectus
will contain an untrue statement of a material fact or omit to
state a material fact
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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, however , that the Company may delay the filing of
any supplement or amendment to any Registration Statement or
suspend the use or effectiveness of any Registration Statement if
(i) the Board of Directors of the Company (the “
Board ”), in the exercise of its good faith
judgment, reasonably concludes that, in the absence of such delay
or suspension, the Company will be required under state or federal
securities laws to disclose a corporate development the disclosure
of which is not otherwise required and would have a material
adverse effect upon the Company, and (ii) the Company promptly
thereafter delivers to the Holders a certificate (the “
Certificate ”), signed by the Chief Executive
Officer of the Company, stating that in the good faith judgment of
the Board it would be detrimental to the Company or its
stockholders for a supplement or amendment to the Registration
Statement to be filed in the near future or to continue the use or
effectiveness of the Registration Statement. Upon delivery of the
Certificate, the Company’s obligation under this
Section 3(d) shall be deferred for a period not to exceed
sixty (60) days from the date of delivery of the Certificate
(the “ Suspension Period ”). No more than
two (2) such Suspension Periods shall occur in any eighteen
(18) month period. The Company may extend the Suspension
Period for an additional thirty (30) consecutive days with the
written consent of the holders of a majority of the Registrable
Securities registered under the applicable Registration Statement,
which consent shall not be unreasonably withheld.
(e) Use its best efforts to
register and qualify the securities covered by such Registration
Statement under such other securities or blue sky laws of such
jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions;
(f) Cause all such
Registrable Securities to be listed on each securities exchange on
which similar securities issued by the Company are then
listed;
(g) Provide a transfer agent
and registrar for all Registrable Securities and a CUSIP number for
all such Registrable Securities, in each case not later than the
effective date of such registration;
(h) Use its best efforts to
furnish, at the request of any Holder, on the date that such
Holder’s Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to
this Agreement, if such securities are being sold through
underwriters, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an
underwritten public offering, addressed to the underwriters and to
the Holders and (ii) if appropriate, a letter, dated such
date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters and to
the Holders (to the extent the then-applicable standards of
professional conduct permit said letter to be addressed to the
Holders).
(i) The Company shall pay all
costs, fees and expenses in connection with the Registration
Statement filed pursuant to Section 2 hereof including,
without limitation, the
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Company’s legal and accounting
fees, all registration, qualification, listing and filing fees,
printing expenses, escrow fees, and blue sky fees and expenses;
provided, however , that each Holder shall be solely
responsible for the fees of any counsel retained by such Holder in
connection with such registration and any transfer taxes or
underwriting discounts, commissions or fees applicable to the
Registrable Securities s
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