Look at March 13th filing of prospectus...
PROSPECTUS SUPPLEMENT NO. 4
Filed Pursuant to Rule 424(b)(3)
(to Prospectus Dated May 14, 2007)
File No. 333-140934
Southwest Casino Corporation
12,663,389 Shares
Of
Common Stock
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This Prospectus Supplement No. 4 to Form SB-2 supplements the prospectus dated May 14, 2007 relating to the 12,663,389 shares of common stock of Southwest Casino Corporation that may be offered for sale for the account of several stockholders of Southwest Casino Corporation, their respective pledgees, assignees or successors-in-interest, as stated under the heading “Plan of Distribution” in the original prospectus.
This Prospectus Supplement No. 4 is being filed to update the original prospectus with respect to developments in Southwest Casino Corporation’s business that have occurred since the date of the original prospectus and to include in the prospectus Southwest Casino Corporation’s Current Report on Form 8-K filed March 13, 2008. This Prospectus Supplement No. 4 is not complete without, and may not be delivered or utilized except in connection with, the original prospectus, as previously supplemented. This Prospectus Supplement No. 4 is qualified by reference to the original prospectus, except to the extent that the information contained in this Prospectus Supplement No. 4 supersedes the information contained in the original prospectus as previously supplemented.
Recent Developments
Attached to this Prospectus Supplement No. 4 and incorporated by reference in it is the Current Report on Form 8-K of Southwest Casino Corporation filed with the Securities and Exchange Commission on March 13, 2008.
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The common stock offered involves a high degree of risk. We refer you to “Risk Factors,” beginning on page 3 of the original prospectus.
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Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus Supplement No. 3 is truthful or complete. Any representation to the contrary is a criminal offense.
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The date of this Prospectus Supplement No. 4 is March 13, 2008
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 7, 2008
SOUTHWEST CASINO CORPORATION
(Exact name of registrant as specified in its charter)
Nevada
000-50572
87-0686721
(State or other jurisdiction
(Commission
(IRS Employer
of incorporation)
File Number)
Identification No.)
2001 Killebrew Drive, Suite 350, Minneapolis, MN
55425
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code 952-853-9990
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below)
o Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a.12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFT 240.13e-4(c))
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Item 1.01 Entry into a Material Definitive Agreement
On March 7, 2008, Southwest Casino and Hotel Corp. (“Southwest Casino & Hotel”), a wholly owned subsidiary of Southwest Casino Corporation, entered into a series of eight promissory notes with Crown Bank of Minneapolis, Minnesota. Under the promissory notes, Crown Bank loaned Southwest Casino & Hotel an aggregate $1.55 million. Each of the Notes accrues interest at a floating rate of prime plus 1.5 percent (currently 7.5%), with a minimum interest rate of 7.0 percent. Under the Notes, Southwest Casino & Hotel will make monthly payments of interest only from April 11, 2008 to January 11, 2009. Beginning February 11, 2009, Southwest Casino & Hotel will repay the outstanding principal balance and accrued interest in 12 equal monthly installments with the final payment due January 11, 2010. Southwest Casino & Hotel may prepay any outstanding amounts under the Notes at any time without premium or penalty.
Each of the eight promissory notes is co-signed by a shareholder of Southwest Casino Corporation. Each of these co-signers is fully obligated to Crown Bank and individually liable for the principal amount and any accrued and unpaid interest and costs outstanding under the co-signed note. As a condition to entering into the Notes, Crown Bank required each of James Druck, Chief Executive Officer, Thomas Fox, President and Chief Operating Officer, and Jeffrey Halpern, Vice President of Government Affairs of Southwest Casino Corporation to increase their previously existing $150,000 personal guarantees of Southwest Casino & Hotel’s outstanding $450,000 line of credit to $250,000 and extend those guarantees to cover both the line of credit and the eight promissory notes through their respective repayment terms.
The promissory notes contain customary events of default, including, without limitation, payment defaults, insolvency or bankruptcy, death or incompetency of a co-signer, business termination, misrepresentation, monetary judgment defaults and other material changes.
In consideration of co-signing the promissory notes, on March 10, 2008 Southwest Casino Corporation issued five-year fully exercisable warrants to purchase an aggregate of 2,300,000 shares of its common stock at an exercise price of $0.39 per share to the shareholder co-signers. Each co-signer received a warrant to purchase one share of Southwest Casino Corporation common stock for each $1.00 in principal amount of the promissory note co-signed by that shareholder. In consideration of the increase in the amount and extension of the term of their respective guarantees, Mr. Druck, Mr. Fox and Mr. Halpern each received warrants to purchase one share of Southwest Casino Corporation common stock for each $1.00 of guarantee, or 250,000 shares. The $0.39 per share exercise price of these warrants represented the average closing market price of one share of Southwest Casino Corporation’s common stock over the 5 trading days preceding the closing of the loan. Warrant holders also received the right to have the shares of Southwest Casino Corporation common stock purchasable upon exercise of their warrants included in any registration statement that Southwest Casino Corporation may file in the future (“piggy-back rights”) under the terms of a separate Registration Rights Agreement.
In further consideration of co-signing the promissory notes, Southwest Casino Corporation also entered into a Pledge Agreement with the co-signers and guarantors under which it pledged its shares of Southwest Casino and Hotel Corp. to the co-signers and guarantors to secure any liabilities or obligations they may occur under the promissory notes. The co-signers’ and guarantors’ right to recovery under the Pledge Agreement is limited to the actual costs paid by the co-signers or guarantors and subject to a prior security interest in the membership interests of North Metro Harness Initiative, LLC owned by Southwest Casino & Hotel, as well as the terms of the North Metro Harness Initiative, LLC Member Control Agreement.
Southwest Casino Corporation, the co-signers, and Messrs. Druck, Fox and Halpern also entered into a Contribution Agreement dated March 7, 2008. Under the Contribution Agreement, Southwest Casino
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Corporation agreed to reimburse to any co-signer or guarantor any amount paid in connection with the promissory notes for reason other than Southwest’s inability to pay. If Southwest is unable to repay the notes, each of the co-signers and Mr. Druck, Mr. Fox and Mr. Halpern agreed in the Contribution Agreement to indemnify each other so that any payments made by co-signers or guarantors will be made in proportion to the original principal amount of the promissory note co-signed or personal guarantee given to the total amount of all promissory notes and loan guarantees.
Southwest Casino & Hotel intends to use the proceeds from the loan transaction for general working capital, including additional membership contributions to North Metro Harness Initiative, LLC if required under the terms of the construction financing for that facility or agreed to between the members of North Metro Harness Initiative. Southwest has reserved from the proceeds of the loan $97,000, which Southwest estimates based on the current interest rate is the amount of the interest-only payments due under the notes through January 11, 2009, to make those interest payments.
The descriptions of the Promissory Notes, Pledge Agreement, Contribution Agreement, Personal Guaranties of Mr. Druck, Mr. Fox and Mr. Halpern, the Warrants and the Registration Rights Agreement above are qualified in their entirety by reference to the Form of Promissory Note, Pledge Agreement, Contribution Agreement, form of Personal Guaranty by Mr. Druck, Mr. Fox and Mr. Halpern, form of Warrant and form of Registration Rights Agreement filed as Exhibits 10.1, 10.2, 10.3, 10.4, 4.1 and 4.2 respectively, to this Current Report on Form 8-K and are incorporated in this Form 8-K by this reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
See the disclosure under Item 1.01 of this Current Report on Form 8-K.
Item 3.02 Unregistered Sales of Equity Securities
See the disclosure under Item 1.01 of this Current Report on Form 8-K.
The warrants issued to the shareholders who co-signed the promissory notes totaling $1.55 million described above under Item 1.01 of this Current Report on Form 8-K were issued by Southwest Casino Corporation in reliance upon exemptions from the registration requirements under the Securities Act of 1933, as amended, including Regulation D and Section 4(2), and applicable state securities laws. With regard to the reliance upon the exemptions under Regulation D and Section 4(2) under the Securities Act, Southwest Casino Corporation made certain inquiries of the shareholder guarantors to establish that the issuance of the warrants qualified for these exemptions from the registration requirements. No underwriting commissions or discounts were paid with respect to the issuance of the Warrants.
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Item 9.01 Financial Statements and Exhibits
(c) Exhibits.
Exhibit No.
Description
Method of Filing
4.1
Form of Warrant issued March 10, 2008 issued by Southwest Casino Corporation
Filed herewith
4.2
Form of Registration Rights Agreement dated March 10, 2008 between Southwest Casino Corporation and warrantholders
Filed herewith
10.1
Form of Promissory Note among Southwest Casino & Hotel Corp., Crown Bank N.A. and co-signers entered into March 7, 2008.
Filed herewith
10.2
Contribution Agreement among Southwest Casino & Hotel Corp., co-signers and guarantors dated March 7, 2008.
Filed herewith
10.3
Stock Pledge Agreement dated March 7, 2008 among Southwest Casino Corporation, co-signers and guarantors.
Filed herewith
10.4
Form of Amended and Restated Personal Guaranty by James Druck, Thomas Fox and Jeffrey Halpern, officers of Southwest Casino Corporation, dated March 7, 2008 for the benefit of Crown Bank
Filed herewith
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* Pursuant to Item 601(b)(2) of Regulation S-B, the registrant agrees to furnish, supplementally, a copy of any exhibit or schedule omitted from any as filed exhibit to this report to the Securities and Exchange Commission upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SOUTHWEST CASINO CORPORATION
Date: March 13, 2008
By:
/s/ Thomas E. Fox
Name:
Thomas E. Fox
Title:
President
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SOUTHWEST CASINO CORPORATION
CURRENT REPORT ON FORM 8-K
EXHIBIT INDEX
Exhibit No.
Description
Method of Filing
4.1
Form of Warrant issued March 10, 2008 issued by Southwest Casino Corporation
Filed herewith
4.2
Form of Registration Rights Agreement dated March 10, 2008 between Southwest Casino Corporation and warrantholders
Filed herewith
10.1
Form of Promissory Note among Southwest Casino & Hotel Corp., Crown Bank N.A. and co-signers entered into March 7, 2008.
Filed herewith
10.2
Contribution Agreement among Southwest Casino & Hotel Corp., co-signers and guarantors dated March 7, 2008.
Filed herewith
10.3
Stock Pledge Agreement dated March 7, 2008 among Southwest Casino Corporation, co-signers and guarantors.
Filed herewith
10.4
Form of Amended and Restated Personal Guaranty by James Druck, Thomas Fox and Jeffrey Halpern, officers of Southwest Casino Corporation, dated March 7, 2008 for the benefit of Crown Bank
Filed herewith
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* Pursuant to Item 601(b)(2) of Regulation S-B, the registrant agrees to furnish, supplementally, a copy of any exhibit or schedule omitted from any as filed exhibit to this report to the Securities and Exchange Commission upon request.
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Exhibit 4.1
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK PURCHASED UPON EXERCISE OF THIS WARRANT MAY BE TRANSFERRED WITHOUT (I) THE OPINION OF COUNSEL SATISFACTORY TO SOUTHWEST CASINO CORPORATION THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933 AND APPLICABLE STATE LAW; OR (II) SUCH REGISTRATION. IN ADDITION, THE UNDERLYING SHARES OF COMMON STOCK ARE SUBJECT TO RESTRICTION AND RIGHTS OF REDEMPTION CONTAINED IN THE COMPANY’S AMENDED AND RESTATED ARTICLES OF INCORPORATION, AS THE SAME MAY BE AMENDED FROM TIME TO TIME.
SOUTHWEST CASINO CORPORATION
WARRANT TO PURCHASE SHARES OF COMMON STOCK
Void after 4:00 p.m., Minneapolis, Minnesota time on March 9, 2013
This warrant (“Warrant”) certifies that (“Holder”), is entitled to purchase, subject to fulfillment of the terms and conditions in this Warrant (including, to the extent required, the approval of all state and federal regulatory authorities having jurisdiction over Southwest Casino Corporation (the “Company”)), from the Company at any time before 4:00 p.m. Minneapolis time on March 9, 2013 (the “Exercise Period”), shares of Common Stock of the Company (“Common Stock”) at the purchase price of $0.39 per share. The number of shares of Common Stock Holder will receive upon exercise of this Warrant and the price to be paid for a share of Common Stock may be adjusted from time to time as stated in this Warrant. The shares of Common Stock deliverable upon exercise of this Warrant are sometimes referred to as “Warrant Shares” and the purchase price of each share of Common Stock under this Warrant is sometimes referred to as the “Exercise Price.” The term “Warrant” as used in this Warrant includes any warrants issued in exchange for, substitution for, and replacement of this Warrant or into which this Warrant may be divided or exchanged.
Section 1. Exercise of Warrant. Subject to the provisions of this Warrant (including, but not limited to, the approval of all state and federal regulatory authorities that have jurisdiction over the Company), this Warrant may be exercised at any time by the presentation and surrender to the Company of this Warrant with (1) the Purchase Form attached as Exhibit A, duly executed by the Holder, and (2) payment, in cash, by wire transfer to an account of the Company, or by certified or official bank check payable to the order of the Company, of the Exercise Price payable for the Warrant Shares being purchased (payment must include all applicable federal and state taxes). If the Holder purchases less than all of the Warrant Shares, the Company will execute and deliver to the Holder a new Warrant evidencing the right of the Holder to purchase the balance of the shares purchasable under the Warrant Shares on the terms provided in this Warrant.
As soon as practicable after the exercise of this Warrant and payment of the Exercise Price, the Company will cause to be issued in the name of and delivered to the Holder, or as the Holder may direct, a certificate or certificates representing the number of Warrant Shares purchased. The Company may require that the certificate or certificates contain a legend substantially as follows:
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“The securities represented by this certificate (i) have not been registered under the Securities Act of 1933, as amended, or any state securities laws; (ii) may not be sold, offered for sale, or transferred in the absence of either an effective registration under the Securities Act of 1933, as amended, and under the applicable state securities laws, or an opinion of counsel for the Company that such transaction is exempt from registration under the Securities Act of 1933, as amended, and under the applicable state securities laws; and (iii) a holder of the securities will be required to comply with all federal and state rules and regulations regarding gaming operations applicable to the Company and its subsidiaries and may be required to sell the securities to the Company or otherwise dispose of the securities if continued ownership of the securities by the holder may result in a violation of applicable rules or regulations or the disapproval, modification, loss or non-renewal of any contract or license or other consent or approval related to the gaming operations of the Company or any subsidiary of the Company.”
Section 2. Reservation of Shares. The Company agrees that, at all times until the expiration of this Warrant, it will reserve for issuance and delivery upon exercise of this Warrant the number of shares of its Common Stock required for issuance or delivery upon exercise of this Warrant.
Section 3. Assignment or Loss of Warrant. This Warrant is issued subject to the following terms, conditions, and limitations:
3.1 Assignment/Transfer of Warrant. This Warrant is not assignable or transferable unless accompanied by a favorable opinion of counsel satisfactory to the Company, as stated in Section 6 of this Warrant; except that it may be transferred according to the terms of the will of the Holder, or the law of intestate succession, upon the death of the Holder. Any assignment must be made by surrender of this Warrant to the Company with a Form of Assignment acceptable to the Company and duly executed and with funds sufficient to pay any transfer tax; whereupon the Company, without charge, will execute and deliver a new warrant in the name of the assignee named in the instrument of assignment and this Warrant will be promptly canceled.
3.2 Loss of Warrant. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction, or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant if mutilated, the Company will execute and deliver a new Warrant of like tenor and date to the Holder or such Holder’s designee.
Section 4. Rights of the Holder. The Holder, by virtue of this Warrant, is not entitled to any rights of a stockholder in the Company, either at law or in equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent stated in this Warrant.
Section 5. Registration Rights. The shares of Common Stock issuable upon exercise of this Warrant are subject to the registration rights stated in the separate Registration Rights Agreement between the Company and the Holder dated the same date as this Warrant.
Section 6. Anti-Dilution Provisions.
6.1 Issuance of Dividends and/or Stock Splits. If, before this Warrant is exercised or expires, the Company declares and issues any shares of its Common Stock as a stock dividend or subdivides the number of outstanding shares of its Common Stock into a greater number of shares, the
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then applicable Exercise Price will be proportionately reduced and the number of shares then purchasable under this Warrant will be proportionately increased. Conversely, if the Company reduces the number of outstanding shares of Common Stock by combining shares into a smaller number of shares (e.g. reverse stock split), the then applicable Exercise Price will be proportionately increased and the number of shares of Common Stock then purchasable under this Warrant will be proportionately decreased. Any dividend paid or distributed upon the Common Stock in securities convertible into shares of Common Stock will be treated as a dividend paid in Common Stock to the extent that shares of Common Stock are issuable upon the conversion of such convertible security.
6.2 Fractional Shares. No fractional shares or script representing fractional shares of Common Stock will be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon any exercise of this Warrant, the Company will pay to the Holder an amount in cash equal to that fraction multiplied by the market value of a full share of Common Stock on the day of exercise, as determined in good faith by the Company.
6.3 Reclassification, Reorganization or Merger. In case of any reclassification, capital reorganization, or other change of outstanding shares of Common Stock of the Company (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of an issuance of Common Stock by way of dividend or other distribution or of a subdivision or combination), or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which the Company is the continuing corporation and which does not result in any reclassification, capital reorganization, or other change of outstanding shares of Common Stock), or in case of any sale or conveyance of all or substantially all of the assets of the Company to another corporation, the Company shall cause effective provision to be made so that the Holder shall have the right thereafter, by exercising this Warrant, to purchase the kind and amount of shares of stock and other securities and property receivable upon that reclassification, capital reorganization, or other change, consolidation, merger, sale or conveyance as may be issued or payable with respect to or in exchange for the number of shares of Common Stock of the Company purchasable upon the exercise of this Warrant had that recapitalization, capital reorganization, or other change, consolidation, merger, sale or conveyance not taken place. Any such provisions shall include provision for adjustments, which shall be as nearly equivalent, as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section 5 will similarly apply to successive reclassifications, capital reorganizations, changes of shares of Common Stock, and to successive consolidations, mergers, sales or conveyances.
Section 7. Transfer to Comply With the Securities Act. This Warrant and the Warrant Shares or any other security issued or issuable upon exercise of this Warrant may not be transferred without (i) the opinion of counsel satisfactory to the Company that such transfer may lawfully be made without registration under the Federal Securities Act of 1933, as amended (the “Securities Act”), and applicable state law; or (ii) such registration. Each certificate representing Warrant Shares or other securities issued upon exercise of this Warrant may bear a legend substantially as set forth in Section 1 above.
Section 8. Representations and Warranties of Holder. The Holder represents and warrants to the Company the following:
8.1 Holder is an “Accredited Investor” as defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Act”).
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8.2 As a sophisticated investor, the Holder has such knowledge and experience in financial business matters that the Holder is capable of evaluating the merits and risks of the prospective investment in the Warrant and the Warrant Shares.
8.3 The Holder recognizes that an investment in the Warrant and the Warrant Shares of Common Stock involves a high degree of risk, that transferability and resale is restricted and that the Holder could sustain a loss of Holder’s entire investment the Warrant and the Warrant Shares.
8.4 In connection with the acquisition of the Warrant, the Holder represents and warrants that the Holder intends to acquire the Warrant and the Warrant Shares for investment purposes and not with a view to or for resale in connection with any distribution of the Warrant or the Warrant Shares, and agrees that the Holder will not sell or assign the Warrant or the Warrant Shares without registration under all applicable securities laws or appropriate exemption from applicable registration requirements. The Holder understands and acknowledges that neither the Warrant nor the Warrant Shares have been registered under the Securities Act nor applicable state securities laws and therefore will not be freely transferable. The Holder also understands and acknowledges that the Company is under no obligation to register the Warrant or the Warrant Shares.
Section 9. Survival of Representations and Warranties. The representations and warranties set forth in Section 6 above will survive the exercise of the Warrant.
Section 10. Applicable Law. This Warrant is governed by and must be construed in accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, this Warrant has been duly executed by the undersigned as of March 10, 2008.
SOUTHWEST CASINO CORPORATION
By:
Its:
Accepted and agreed to:
Holder
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EXHIBIT A
PURCHASE FORM
To be signed upon exercise of Warrant.
The undersigned, the Holder of the attached Warrant (the “Warrant”), irrevocably elects to exercise the purchase right represented by the Warrant for, and to purchase under the Warrant, of the shares of Common Stock of Southwest Casino Corporation (the “Company”) to which the Warrant relates and makes payment of $ ($ per share) for those shares in cash or by certified check, which payment is included with this Purchase Form. The undersigned requests that a certificate representing the shares purchased be delivered to the undersigned at the address stated below:
(a) The shares of common stock purchasable upon exercise of the attached Warrant (the “Warrant Shares”) have not been registered under the Securities Act of 1933, as amended (the “Act”) or applicable state securities laws and are being issued by the Company under exemptions from such registration requirements. Neither the Securities and Exchange Commission nor any state securities division has made an independent determination that the Securities are exempt from registration. Any representation to the contrary is a criminal offense.
(b) The Warrant Shares are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Company’s Articles of Incorporation and Bylaws, the Act and the applicable state laws, pursuant to registration or exemption therefrom, and, if applicable, upon receipt of the prior written approval of the Colorado Limited Gaming Control Commission, South Dakota Commission on Gaming and such other state regulatory authorities as may have jurisdiction.
(c) The undersigned Holder represents, warrants, and agrees that (i) the Company has made no representations as to the value of the Warrant Shares; (ii) the Holder has been provided with the opportunity to ask such information of the Company’s management and to obtain such information regarding the Company, its business and affairs as the Holder deems necessary or appropriate in determining to accept the Securities under the terms and conditions of this Agreement; (iii) the Holder is accepting the Warrant Shares for Holder’s own account, for long-term investment and without the intention of reselling or redistributing the Warrant Shares, (iv) the Company has no obligation to register the Warrant Shares; and (v) any transfer of the Warrant Shares is restricted by applicable state and federal securities laws and will be further restricted by a restrictive legend placed on the certificate(s) representing the Warrant Shares.
Dated:
(Signature)
Address:
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EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
SOUTHWEST CASINO CORPORATION, a Minnesota corporation (“Southwest”), and (“Investor”) enter into this Registration Rights Agreement (“Agreement”) effective March 10, 2008 (Investor and each other Investor listed on Schedule 1 to this Agreement are referred to collectively as the “Investors”).
BACKGROUND
A. Southwest and Investor have entered into a Subscription Agreement and Letter of Investment Intent (the “Subscription Agreement”), under which Investor has subscribed to purchase warrants (the “Warrants”) to acquire shares of Southwest common stock, par value $0.001 (the “Common Stock”) by co-signing with Southwest a promissory note for a bank loan to Southwest.
B. As a condition to the obligations of the Investors under the Subscription Agreement, Southwest has agreed to grant the registration rights with respect to the shares of Common Stock issuable upon exercise of the Warrants on the terms and conditions stated in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Southwest and the Holders hereby agree as follows.
Section 1. Definitions. The following terms have the following meanings in this Agreement:
1.1 “Holders” means the (a) the Investors, each of whom is a party to this Agreement, and (b) any subsequent legal or beneficial owner of the Warrants or shares of Common Stock issued upon exercise of the Warrants, who has become a party to this Agreement in accordance with Section 11.9 of this Agreement.
1.2 “Person” means an individual, partnership, limited partnership, corporation, business trust, limited liability company, association, joint stock company, trust, unincorporated organization, joint venture or other entity of whatever nature.
1.3 “Registrable Common” means (a) any shares of Common Stock issued or issuable upon exercise of the Warrants, and (b) any share of Common Stock issued as a dividend, stock split, reclassification, recapitalization or other distribution with respect to or in exchange for or replacement of the Warrants or any shares of Common Stock issuable upon exercise of the Warrants. Registrable Common does not include shares of Common Stock (x) that have been effectively registered under the Securities Act and sold by a Holder in accordance with that registration, (y) that have been sold by a Holder under Rule 144, or (z) for which registration under the Securities Act is no longer required for the immediate public distribution of as a result of the provisions of Rule 144.
1.4 “Register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and the declaration or ordering of the effectiveness of that registration statement.
1.5 “Rule 144” means Rule 144 promulgated by the Commission under the Securities Act, as the rule may be amended from time to time, or any successor to Rule 144.
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1.6 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated from time to time under the Securities Act.
Section 2. Registration Rights.
2.1 If Southwest determines to prepare and file a registration statement under the Securities Act (other than a registration on a Form S-8 or similar form, or a registration on a form that does not permit the inclusion of shares by its security holders), then Southwest must give written notice of its determination to all record Holders of Registrable Common (a “Participation Notice”) at least 30 days before filing that registration statement. Upon the written request of a Holder of Registrable Common given within 15 days after receipt of a Participation Notice, Southwest will, except as provided in this Agreement, include in that registration statement all shares of Registrable Common for which a Holder requests registration. If any registration under this Section 2.1 is underwritten in whole or in part, Southwest may require that the Registrable Common requested for inclusion in the registration statement under this Section 2.1 be included in the underwriting on the same terms and conditions as the securities otherwise being sold through the underwriters.
2.2 Nothing in this Agreement prevents Southwest from, at any time, abandoning or delaying any registration Southwest initiates. Southwest must bear all expenses related to the abandonment or delay of a registration.
2.3 If, in the judgment of Southwest’s managing underwriter of an underwritten registration, the inclusion of any or all of the Registrable Common requested for inclusion in the registration under this Section 2 would interfere with the successful marketing of the shares of Common Stock offered by Southwest or would negatively impact the trading market of the Common Stock, then the number of Registrable Common included in the registration under this Section 2 may be reduced pro rata (by number of shares) among the Holders and any other shareholder with pari passu registration rights requesting inclusion in the registration, or eliminated completely.
2.4 The right of any Holder to include Registrable Common in any underwritten registration under this Agreement is conditioned upon Holder’s full participation in the underwriting and the inclusion of Holder’s Registrable Common in the underwriting. All Holders proposing to distribute their securities through the underwriting must (together with Southwest and any other selling shareholders) enter into an underwriting agreement in customary form with the underwriter or underwriters selected.
2.5 Southwest is not obligated to effect or take any action to effect, any registration under Section 2.1 more than 2 times.
2.6 Nothing in this Agreement restricts Southwest from, at any time, granting registration rights on the same or different terms to any other holder or acquirer of Southwest securities.
Section 3. Registration Procedures. Subject to the terms of this Agreement, if Southwest is required by the terms of this Agreement to include shares of Registrable Common in a registration under the Securities Act, Southwest will do the following:
3.1 Filing. Prepare and file with the United States Securities and Exchange Commission (the “Commission”) a registration statement that includes the shares of Registrable Common to be included in the registration in accordance with Section 2, and use its commercially reasonable efforts to cause the registration statement to become and remain effective for a period as may be reasonably necessary to effect the sale of such securities, not to exceed 6 months;
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3.2 Period of Effectiveness. Prepare and file with the Commission any amendments to the registration statement or supplements to the prospectus in the registration statement that may be necessary to keep the registration statement effective for a period as may be reasonably necessary to effect the sale of the Registrable Common, not to exceed 6 months;
3.3 Copies. Furnish to the Holders participating in the registration and to the underwriters of the securities being registered a reasonable number of copies of the registration statement, preliminary prospectus, formal prospectus and other documents as the Holders and underwriters may reasonably request in order to facilitate the public offering of the Regsitrable Common included in the registration;
3.4 Blue Sky. Use its commercially reasonable efforts to register or qualify the Registrable Common covered by the registration statement under the state securities or blue sky laws of those jurisdictions that participating Holders reasonably request in writing within 20 days after the original filing of the registration statement, except that Southwest will not for any purpose be required to execute a general consent to service of process or to qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified;
3.5 Notification. Notify the Holders participating in the registration, promptly after Southwest receives notice, of the time when the registration statement becomes effective or a supplement to any prospectus forming a part of the registration statement has been filed;
3.6 Amendment Notice. Notify the Holders participating in the registration promptly of any request by the Commission for the amending or supplementing of the registration statement or prospectus or for additional information;
3.7 Update. Prepare and promptly file with the Commission and promptly notify the Holders of the filing of any amendment or supplement to the registration statement or prospectus as necessary to correct any statements or omissions if, at the time when a prospectus relating to the securities is required to be delivered under the Securities Act, any event has occurred that causes the prospectus or any other prospectus then in effect to include an untrue statement of a material fact or omit to state any material fact necessary to make the statements in the prospectus, in light of the circumstances in which they were made, not misleading;
3.8 Stop Orders. Advise the Holders participating in the registration, promptly after Southwest receives notice or otherwise becomes aware, of the issuance of any stop order by the Commission suspending the effectiveness of the registration statement or the initiation or threatening of any proceeding for that purpose. Southwest must then promptly use its best efforts to prevent the issuance of any stop order or to obtain the withdrawal of any stop order that has been issued; and
3.9 Compliance Issues. Southwest must provide to Holders participating in the registration a copy of any amendment or supplement at least 2 business days before filing. Southwest must not file any amendment or supplement to the registration statement or prospectus to which a majority in interest of the Holders participating in the registration have reasonably objected on the grounds that the amendment or supplement does not comply in all material respects with the requirements of the Securities Act unless, in the opinion of counsel for Southwest, the filing of the amendment or supplement is reasonably necessary to protect Southwest from any liabilities under any applicable federal or state law and the filing will not violate applicable law.
Section 4. Furnish Information. It is a condition precedent to the obligations of Southwest to include any Holders shares of Registrable Common in a registration that the Holder must furnish to
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Southwest any information regarding itself, the Registrable Common held by the Holder, and the intended method of disposition of the Registrable Common as required to effect the registration of the Holder’s Registrable Common.
Section 5. Expenses. With respect to the inclusion of Registrable Common in a registration as requested under Section 2.1 of this Agreement (except as otherwise provided in Section 2), Southwest will bear the following fees, costs and expenses: all registration, filing and NASD (or exchange) fees, printing expenses, fees and disbursements of counsel and accountants for Southwest, fees and disbursements of counsel for the underwriter or underwriters of the securities included in the registration (if Southwest or selling security Holders are required to bear these fees and disbursements), all internal Company expenses, all legal fees and disbursements and other expenses of complying with state securities or blue sky laws of any jurisdictions in which the securities to be offered are to be registered or qualified, and the premiums and other costs of policies of insurance against liability (if any) arising out of the public offering. All fees and disbursements of any legal counsel, accountants or advisors for the selling security Holders, underwriting discounts and commissions and transfer taxes relating to the shares included in the offering by the selling security Holders, and any other expenses incurred by the selling security Holders not expressly included above, must be borne by the selling security Holders.
Section 6. Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Agreement.
Section 7. Indemnification. In the event that any Registrable Common is included in a registration statement in accordance with Section 2 of this Agreement:
7.1 Indemnification by Company. To the fullest extent permitted by law, Southwest will indemnify and hold harmless each Holder of Registrable Common that is included in a registration statement under the provisions of this Agreement, the Holder’s directors, officers, partners, shareholders and legal counsel and any underwriter (as defined in the Securities Act) for the Holder and each Person, if any, who controls the Holder or the underwriter within the meaning of the Securities Act, from and against, and will reimburse the Holder and the underwriter and controlling Person with respect to, any and all loss, damage, claims or liability (collectively, “Losses”), joint or several, to which any of them may become subject under the Securities Act, state securities laws or otherwise, and Southwest will pay to each Holder, director, officer, partner, shareholder, legal counsel, underwriter or controlling person any legal or other costs or expenses reasonably incurred by that person in connection with investigating or defending any Loss, insofar as the Losses are caused by any untrue or alleged untrue statement of any material fact in the registration statement, any prospectus in the registration statement or any amendment or supplement to the registration statement, or arise out of or are based upon the omission or the alleged omission to state in the registration statement a material fact required to be stated in the registration statement or necessary to make the statements in the registration statement, in light of the circumstances in which they were made, not misleading; provided, however, that Southwest will not be liable to the extent that any Loss arises out of or is based
