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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is entered into as of
February 26, 2014, by and between Scientific Industries, Inc.,
a Delaware corporation (the "Company"), and Fulcrum, Inc., a
New Jersey corporation (the "Stockholder").
WHEREAS, a condition to the sale by the Stockholder to
the Company of certain of the Stockholder?s assets pursuant to
the Agreement is that the Company provide certain rights to
register under the Securities Act, under certain conditions,
the Common Shares received by the Stockholder as part of the
sale consideration,
NOW THEREFORE, IT IS HEREBY AGREED that:
1. Definitions.
As used herein, the following terms shall have the
following meanings ascribed to them below:
"Affiliate" means any Person that has a relationship
with a designated Person whereby either of such Persons
directly or indirectly controls or is controlled by or is
under common control with the other. For this purpose
"control" means the power, direct or indirect, of one
Person to direct or cause direction of the management and
policies of another, or any act with respect to the
securities of the Company, whether by contract, through
voting securities or otherwise.
"Agreement" means the Asset Purchase Agreement between
the Company, the Stockholder, James Maloy, and Karl Nowosielski,
dated as of the date hereof.
"Common Shares" shall mean the shares of Common Stock
issued to the Stockholder pursuant to the Agreement.
"Common Stock" shall be the Company's authorized common
stock, as constituted on the date of the Agreement, any stock
into which such common stock may thereafter be changed and
any stock of the Company of any other class, which is not
preferred as to dividends or assets over any other class of
stock of the Company issued to the Stockholders of shares of
such common stock upon any re-classification thereof.
"Company Registration Expenses" shall mean bills or
invoices (other than Selling Expenses) incident to the
Company?s performance of or compliance with the Agreement
including, without limitation, all registration, filing fees,
fees and expenses of compliance with securities or blue sky
laws, word processing, duplicating and printing expenses,
messenger and delivery expenses, fees and disbursements of
counsel for the Company and all independent public accountants
including the expenses of any audit and/or "cold comfort"
letter, if applicable, and other Persons retained by the
Company.
"Controlling Person" shall have the meaning set
forth under Section 15 of the Securities Act.
"Exchange Act" means the Securities Exchange Act
of 1934, as amended.
"Excluded Form" means a Form S-4 or Form S-8, pursuant
to the Securities Act or any similar or successor form then
in effect.
"Indemnified Party" shall mean a party who is entitled
to indemnification under Section 8 of the Agreement and shall
refer either to (a) the Company, and (b) its directors, officers,
agents, counsel, advisors and Controlling Persons, if any.
"Person" means a corporation, an association, a
partnership, a limited liability company, a joint venture, a
trust, an organization, a business, an entity, an individual,
a government or political subdivision thereof or a governmental
body.
"Register, registered and registration" means a
registration effected by preparing and filing a Registration
Statement on a form approved by the SEC other than an Excluded
Form in compliance with the Securities Act and the declaration
of effectiveness ordering the effectiveness of such Registration
Statement.
"Registrable Securities" means the Common Shares and such
additional shares of Common Stock by way of stock dividend or
stock split, or in connection with a combination, recapitalization,
share exchange, consolidation or other reorganization of the
Company. As to any Registrable Securities, once issued, such
securities shall cease to be Registrable Securities when (i) a
Registration Statement with respect to the sale of such securities
shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such
Registration Statement, (ii) they shall have been sold to the
public pursuant to Rule 144 (or any successor provision) under
the Securities Act, (iii) they shall have been otherwise
transferred but new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the
Company and subsequent disposition of them shall not require
registration or qualification of them under the Securities Act
or any similar state law then in force, or (iv) they shall
have ceased to be outstanding.
"Registration Statement" means one or more registration
statements of the Company on any form other than an Excluded
Form under the Securities Act registering all of the Registrable
Securities, including any amendments or supplements thereto.
"SEC" means the Securities and Exchange Commission or any
other governmental body at the time administering the Securities
Act.
"Securities Act" means the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the Registrable Securities
registered, all fees and disbursements of counsel for the
Stockholder and the expense allowance payable or which is to be
paid to any placement agent or
any of their respective Affiliates or associates pursuant to
the placement agent agreement or to any underwriter of the
Registrable Securities.
"Stockholder" or "Stockholders" shall also include those
persons who agree to become bound by the provisions of the
Agreement in accordance with Section 5 hereof.
2. Registration.
2.1. If the Company shall determine to prepare and
file with the SEC a registration statement relating to an
offering to commence no earlier than a date one year from the
date hereof for its own account or the account of others
under the Securities Act of any of its equity securities
(other than a Registration Statement on an Excluded Form),
then the Company shall send to each Stockholder holding
Registrable Securities that have not been covered by a
registration statement that has been declared or ordered
effective (each, an ?Eligible Stockholder?), written notice
of such determination and if, within 15 business days after
receipt of such notice any such Eligible Stockholder shall
so request in writing, the Company shall include in such
registration statement the Registrable Securities requested
by the Eligible Stockholders to be so included. Such written
notice shall state the intended method of disposition of the
Registrable Securities by such Eligible Stockholder. If an
Eligible Stockholder decides not to include all of its
Registrable Securities in any registration statement thereafter
filed by the Company, such Eligible Stockholder shall
nevertheless continue to have the right to include any
Registrable Securities in any subsequent registration statement
or registration statements as may be filed by the Company with
respect to offerings of its securities, all upon the terms and
conditions set forth herein, to the extent all Registrable
Securities held by such Stockholder have not been covered by
a registration statement that has been declared or ordered
effective by the time of such subsequent registration.
2.2 If the registration statement under which the
Company gives notice under this Section 2 is for an underwritten
offering, the Company shall so advise the Eligible Stockholders
of Registrable Securities. In such event, the right of any
such Eligible Stockholder to be included in a registration
pursuant to this Section 2 shall be conditioned upon such
Eligible Stockholder?s participation in such underwriting
and the inclusion of such Eligible Stockholder?s Registrable
Securities in the underwriting to the extent provided herein.
All Eligible Stockholders proposing to distribute their
Registrable Securities through such underwriting shall enter
into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting
by the Company. Notwithstanding any other provision of the
Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of
shares to be underwritten, the number of shares that may be
included in the underwriting shall be allocated, first, to
the Company; and second on a pro rata basis, to the Eligible
Stockholders and any other shareholders of the Company
exercising registration rights based on the total number of
Registrable Securities sought to be registered in such
registration by the Eligible Stockholders and such other
shareholder of the Company.
2.3 If any Eligible Stockholder disapproves of
the terms of any such underwriting, such Eligible Stockholder
may elect to withdraw therefrom by written notice to the Company
and the underwriter, delivered at least ten (10) business days
prior to the effective date of the
registration statement. Any Registrable Securities excluded
or withdrawn from such underwriting shall be excluded and
withdrawn from the registration. The estate and family
members of any Eligible Stockholder and any trusts for
the benefit of any of the foregoing persons shall be deemed
to be a single "Eligible Stockholder," and any pro rata
reduction with respect to such "Eligible Stockholder" shall be
based upon the aggregate amount of shares carrying registration
rights owned by all individuals and trusts included in such
?Eligible Stockholder,? as defined in this sentence.
2.4 The Company shall have the right to terminate
or withdraw any registration initiated by it under this Section
2 prior to the effectiveness of such registration whether or not
any Eligible Stockholder has elected to include securities in
such registration.
3. Registration Procedures.
3.1 If and whenever the Company is required by the
provisions hereof to effect or cause the registration of any
Registrable Securities under the Securities Act as provided herein,
the Company shall, as expeditiously as possible:
3.1.1 before filing a Registration Statement or
prospectus or any amendments or supplements thereto, the Company
shall furnish to the Stockholders copies of all such documents
proposed to be filed.
3.1.2 prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to such
Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration
Statement effective, true and correct during the Registration
Period meaning the period commencing with the effective date
and ending on the earlier of (i) the sale of all Registrable
Securities covered thereby, (ii) the date upon which the
Stockholders may sell the Registrable Securities, without
volume limitations, pursuant to Rule 144, or (iii) the
expiration of 18 months after the effective date of the
Registration Statement or such shorter period as shall be
necessary to complete the distribution of the securities
covered thereby, and to comply with the provisions of the
Securities Act with respect to the sale or other disposition
of all Registrable Securities covered by such Registration
Statement during such period in accordance with the intended
methods of disposition by the Stockholders in such
Registration Statement.
3.1.3 furnish to each Stockholder whose Registrable
Securities are included in the Registration Statement and each
underwriter of the securities being sold by the Stockholders
such number of copies of such Registration Statement and of
each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus
included in such Registration Statement (including each
preliminary prospectus), in conformity with the requirements of
the Securities Act, and such other documents, as such counsel and
underwriter may reasonably request, in substantially the form in
which they are proposed to be filed with the SEC, in order to
facilitate the public sale or other disposition of the Registrable
Securities owned by the participating Stockholders. The Company
shall furnish to each Stockholder which requests (i) a copy of
any request to accelerate the effectiveness of any Registration
Statement or amendment thereto, (ii) on the date of effectiveness
of the Registration
Statement or any amendment thereto, a notice stating that
the Registration Statement or amendment has been declared
effective, and (iii) such number of copies of a prospectus,
including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Stockholder
may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such Stockholder.
3.1.4 use reasonable commercial efforts to (i) register
and qualify the Registrable Securities covered by the Registration
Statement under such other securities or ?blue sky? laws of such
jurisdictions in the United States as each Stockholder who holds
Registrable Securities being offered 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 reasonably 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 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 qualify to do business
in any jurisdiction where it would not otherwise be required
to qualify but for this Section 3.1.4;
3.1.5 subject to Section 3.1.4, use its reasonable
commercial efforts to cause such Registrable Securities covered
by such Registration Statement to be registered with or
approved by such other governmental agencies or authorities as
may be reasonably necessary to enable the participating
Stockholders to consummate the disposition of its Registrable
Securities;
3.1.6 notify the participating Stockholders at any
time when a prospectus relating to its Registrable Securities is
required to be delivered under the Securities Act, of the
Company?s becoming aware that the prospectus included in the
related Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing, and promptly prepare and furnish
to the participating Stockholders and each underwriter a
reasonable number of copies of a prospectus supplemented
or amended so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading in
the light of the circumstances then existing;
3.1.7 otherwise use its reasonable commercial
efforts to comply with all applicable rules and regulations
of the SEC;
3.1.8 if the Common Stock is listed on the American
Stock Exchange, another national securities exchange, the
Nasdaq Stock Market, or on the NASD Over-the-Counter Bulletin
Board, as the case may be, the Company shall use its reasonable
commercial efforts to cause all such Registrable Securities
covered by such Registration Statement to be listed on the
American Stock Exchange, other national securities exchange,
on the Nasdaq Stock Market, or on the NASD Over-the-Counter
Bulletin Board, as the case may be (if such Registrable
Securities are not already so listed), if the listing of
such Registrable Securities is then permitted under the
rules of such exchange or market;
3.1.9 in the case of an underwritten offering,
enable the Registrable Securities to be in such denominations
and registered in such names as the underwriters may request
at least two business days prior to the sale of the
Registrable Securities;
3.1.10 cooperate with the Stockholders who hold
Registrable Securities being offered to facilitate the
timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities
to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or
amounts, as the case may be, as the Stockholders may
reasonably request and registered in such names as the
Stockholders may request;
3.1.11 notify the Stockholders of any stop order
threatened, to the knowledge of the Company, or issued by
the SEC and take all actions reasonably necessary to prevent
the entry of such stop order or to remove it if entered;
3.1.12 make available for inspection by one firm
of attorneys and one firm of accountants or other agents
retained by the holders of a majority of the Common Shares
(collectively, the "Inspectors") based on the number of shares
of Common Stock owned by the Stockholders, pertinent financial
and other records, and pertinent corporate documents and
properties of the Company, as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the
Company's officers, directors and employees to supply all
information which any Inspector may reasonably request
for purposes of such due diligence;
3.1.13 instruct the Company's transfer agent to
remove the restrictive legend on the stock certificates
after effectiveness of the applicable Registration Statement
and provide with the cooperation of the Stockholders, any
required legal opinions at the Company?s sole expense.
3.2 In connection with the registration of the
Registrable Securities, each participating Stockholder shall
furnish to the Company in writing such information and
documents regarding it and the distribution of its
securities as may reasonably be required to be disclosed
in the Registration Statement in question by the rules and
regulations under the Securities Act or under any other
applicable securities or blue sky laws of the jurisdictions
referred to in Section 3.1.4 above, or as may otherwise be
reasonably requested.
4. Registration Expenses.
In connection with any registration of Registrable
Securities pursuant to Section 2, the Company shall, whether
or not any such registration shall become effective, from
time to time promptly pay all Company Registration Expenses.
Such expenses shall not include any Selling Expenses other
than reasonable fees and expenses of one counsel selected by
holders of a majority of the Eligible Securities included in
the Registration Statement.
5. Indemnification.
5.1 The Company shall, and hereby does, indemnify,
to the extent permitted by law, each Stockholder from and
against all losses, claims, damages, liabilities and expenses,
joint or several, to which any such Indemnified Party may
become subject under the Securities Act, the Exchange Act and
all rules and regulations under each such Act, at common law
or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any Registration
Statement as contemplated hereby or any omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary,
final or summary prospectus, together with the documents
incorporated by reference therein (as amended or supplemented
if the Company shall have filed with the SEC, any amendment
thereof or supplement thereto), or any omission or alleged
omission to state therein a material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading, or (iii) any violation by the
Company of any federal, state or common law rule or regulation
applicable to the Company and relating to action of or
inaction by the Company in connection with any such registration
including the failure to deliver any document required herein
to be delivered, to a Stockholder; and in each such case,
the Company shall reimburse each such Indemnified Party for any
reasonable legal or other expenses incurred by any of them in
connection with investigating or defending any such loss,
claim, damage, liability, expense, action or proceeding;
provided, however, that the Company shall not be liable to
any such Indemnified Party insofar as such losses, claims,
damages, liabilities, expenses, actions or proceedings are
caused by any untrue statement or alleged untrue statement
or material omission made in reliance on or in conformity
with any information furnished under Section 5.2 to the
Company by or on behalf of any Indemnified Party or as a
result of the failure of the Indemnified Party to furnish a
prospectus to a purchaser.
5.2 In connection with any Registration Statement
in which any Stockholder is participating, such participating
parties shall furnish to the Company in writing such information
as shall be reasonably requested by the Company for use in
any such Registration Statement or prospectus and shall
indemnify, to the extent permitted by law, the Company, its
officers and directors and each Person, if any, who controls
the Company within the meaning of Section 15 of the Securities
Act, against any losses, claims, damages, liabilities, expenses,
actions or proceedings resulting from any untrue statement or
alleged untrue statement of a material fact or any omission
or alleged omission of a material fact with respect to
information expressly requested by the Company and required
to be stated in the Registration Statement or prospectus
or preliminary prospectus or any amendment thereof or
supplement thereto, or necessary to make the statements
therein not misleading, but only to the extent that such
untrue statement or omission with respect to information
expressly requested by the Company is made in reliance on
or in conformity with any information so furnished in
writing or to be furnished under this Section 5.2 by such
participating Stockholder expressly for use therein.
5.3 Any Person entitled to indemnification under
the provisions of this Section 5 shall (i) give prompt notice
to the Indemnifying Party of any claim with respect to which
t seeks indemnification, and (ii) unless in the reasonable
judgment of counsel for such Indemnified Party a conflict
of interest between such indemnified and indemnifying parties
may exist in respect of
such claim, permit such Indemnifying Party to assume the
defense of such claim, with counsel reasonably satisfactory
to the Indemnified Party; and if such defense is so assumed,
such Indemnifying Party shall not enter into any settlement
without the consent of the Indemnified Party if such
settlement attributes liability to the Indemnified Party
and such Indemnifying Party shall not be subject to any
liability for any settlement made without its consent.
In the event an Indemnifying Party shall not be entitled,
or elects not, to assume the defense of a claim, such
Indemnifying Party shall not be obligated to pay the fees
and expenses of more than one law firm for all parties
indemnified by such Indemnifying Party hereunder in
respect of such claim, unless in the reasonable judgment
of any such counsel a conflict of interest may exist
between such Indemnified Party and any other of such
Indemnified Parties in respect to such claim.
Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of
any Indemnified Party and shall survive the transfer of
such securities by such Indemnified Party.
5.4 If for any reason the foregoing indemnity
is unavailable, then the Indemnifying Party shall
contribute to the amount paid or payable by the Indemnified
Party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party and
the Indemnified Party as well as any other relevant equitable
considerations. Notwithstanding the foregoing, no Stockholder
shall be required to contribute any amount in excess of the
amount such Stockholder would have been required to pay to
an Indemnified Party if the indemnity under Section 5.2 was
available. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
5.5 An Indemnifying Party shall make payments
of all amounts required to be made pursuant to the foregoing
provisions of this Section 5 to or for the account of the
Indemnified Party from time to time promptly upon receipt
of bills or invoices relating thereto or when otherwise
due and payable.
6. Transfer of Registration Rights.
If and to the extent that any Stockholder sells or
otherwise disposes of Registrable Securities in any
transaction that does not require registration under the
Securities Act (other than a transaction exempt under Rule
144), the rights of the Stockholder hereunder with respect
to such Registrable Securities shall be assignable to any
transferee of such Registrable Securities; provided, however,
that such transferee agrees in writing to be bound by all
the terms and conditions of the Agreement.
7. Miscellaneous.
7.1 The registration rights provided to the
Stockholder of Registrable Securities hereunder shall
terminate on the date there shall no longer be any outstanding
Registrable Securities; provided, however that the provisions
of Section 5 hereof shall survive any termination of the
Agreement.
7.2 All notices, offers, acceptance and any other
acts under the Agreement shall be in writing, and shall be
sufficiently given if delivered to the addressees in person,
by Federal Express or similar receipted overnight delivery,
or by facsimile or e-mail delivery followed by a copy sent
by Federal Express or similar receipted overnight delivery,
as follows:
If to the Company:
Scientific Industries, Inc.
70 Orville Drive.
Bohemia, New York 11716
Facsimile No.: 631-567-5896
Attention: Ms. Helena R. Santos
Chief Executive Officer
With a copy to:
Reitler Kailas & Rosenblatt LLC
885 Third Avenue, 20th Floor
New York, NY 10022
Facsimile No.: (212) 371-5500
Attention: Leo Silverstein, Esq.
If to a Stockholder, at such address as such Stockholder shall
have provided in writing to the Company or such other address
as such Stockholder furnishes by notice given in accordance with
this Section 7.2.
7.3 The rights and obligations herein shall
inure to the benefit of and be binding upon the successors
and assigns of each of the parties hereto.
7.4 This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the parties hereto have executed
this Registration Rights Agreement as of the date first set
forth above.
COMPANY:
SCIENTIFIC INDUSTRIES, INC.
/s/ Helena R. Santos
By: ________________________________
Name: Helena R. Santos
Title: Chief Executive Officer
STOCKHOLDER:
FULCRUM, INC.
/s/ James S. Maloy
By: ________________________________
Name: James Maloy
Title: President
