FORM OF REGISTRATION RIGHTS AGREEMENT
FORM
OF REGISTRATION RIGHTS AGREEMENT
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REGISTRATION
RIGHTS AGREEMENT (this “Agreement”), dated as of December ___, 2006,
between Royal Spring Water, Inc., a Nevada corporation (the “Company”), and GCA
Strategic Investment Fund Limited (the “Fund”).
1. Introduction.
1.1 Securities
Purchase Agreement. The Company and the Fund have today
executed that certain Securities Purchase Agreement (the “Securities Purchase
Agreement”), pursuant to which the Company has agreed, among other things, to
issue (the “Offering”) up to an aggregate of One Million Two Hundred Fifty
Thousand Dollars ($1,250,000) (U.S.) principal amount of Convertible Notes
of
the Company (the “Notes”) to the Fund or its successors, assigns or transferees
(collectively, the “Holders”). The Notes are convertible into an
indeterminable number of shares (the “Note Conversion Shares”) of the Company’s
common stock par value, $0.001 per share (the “Common Stock”) pursuant to the
terms of the Notes. In addition, pursuant to the terms of the
Securities Purchase Agreement and the transactions contemplated thereby,
the
Company has agreed to issue to the Fund Common Stock Purchase Warrants
exercisable for 500,000 shares of the Company’s Common Stock (the “Warrant
Shares”). The number of Note Conversion Shares and Warrant Shares is
subject to adjustment upon the occurrence of stock splits, recapitalizations
and
similar events occurring after the date hereof.
1.2 Definition
of Securities. The Note Conversion Shares and the Warrant
Shares are herein referred to as the “Securities.”
1.3 National
Market Representation. The Company represents and warrants
that the Company’s Common Stock is currently quoted in the Pink Sheets and
pending listing and trading on the Over-the-Counter Bulletin Board (“OTCBB”)
operated and maintained by the National Association of Securities Dealers
(“NASD”) under the symbol “RSPG.” Certain capitalized terms used in
this Agreement are defined in Section 3 hereof; references to sections shall
be
to sections of this Agreement.
2. Registration
under Securities Act, etc.
2.1 Mandatory
Registration.
(a) Registration
of Registrable Securities. The Company shall prepare and file on or
before the 30th
day following the date hereof (the “Filing Date”) a registration statement (the
“Registration Statement”) to register no less than 3,000,000 shares of Common
Stock covering the resale of the Registrable Securities. The Company
shall use its best efforts to cause the Registration Statement to be declared
effective by the Commission on the earlier of (i) 60 days following the date
hereof, (ii) ten (10) days following the receipt of a “No Review” or similar
letter from the Commission or (iii) the first business day following the
day the
Commission determines the Registration Statement eligible to be declared
effective (the “Required Effectiveness Date”).
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Nothing
contained herein shall be deemed to limit the number of Registrable Securities
to be registered by the Company hereunder. As a result, should the
Registration Statement not relate to the maximum number of Registrable
Securities acquired by (or potentially acquirable by) the Holders thereof
upon
conversion of the Notes, or exercise of the Common Stock Purchase Warrants
described in Section 1 above, the Company shall be required to promptly file
a
separate registration statement (utilizing Rule 462 promulgated under the
Securities Act, where applicable) relating to such Registrable Securities
which
then remain unregistered. The provisions of this Agreement shall
relate to any such Registration Statement and any such separate registration
statement as if it were an amendment to the Registration Statement.
(b) Registration
Statement Form. Registrations under this Section 2.1 shall
be on Form X-0, XX0 or such other appropriate successor registration form
of the
Commission as shall permit the disposition of such Registrable Securities
in
accordance with the intended method or methods of disposition specified by
the
Fund; provided, however, such intended method of disposition shall not include
an underwritten offering of the Registrable Securities.
(c)
Expenses. The Company will pay all Registration
Expenses in connection with any registration required by this Section
2.1.
(d) Effective
Registration Statement. A registration pursuant to this
Section 2.1 shall not be deemed to have been effected (i) unless a registration
statement with respect thereto has become effective within the time period
specified herein, provided that a registration which does not become effective
after the Company filed a registration statement with respect thereto solely
by
reason of the refusal to proceed of any holder of Registrable Securities
(other
than a refusal to proceed based upon the advice of counsel in the form of
a
letter signed by such counsel and provided to the Company relating to a
disclosure matter unrelated to such holder) shall be deemed to have been
effected by the Company unless the Holders of the Registrable Securities
shall
have elected to pay all Registration Expenses in connection with such
registration, (ii) if, after it has become effective, such registration becomes
subject to any stop order, injunction or other order or extraordinary
requirement of the Commission or other governmental agency or court for any
reason or (iii) if, after it has become effective, such registration ceases
to
be effective for more than an aggregate of twenty (20) days.
(e) Plan
of Distribution. The Company hereby agrees that the
Registration Statement shall include a plan of distribution section reasonably
acceptable to the Fund; provided, however, such plan of distribution
section shall be modified by the Company so as to not provide for the
disposition of the Registrable Securities on the basis of an underwritten
offering.
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2.2 Incidental
Registration.
(a) Right
to Include Registrable Securities. If at any time after the
date hereof but before the second (2nd) anniversary
of
the date hereof the Company proposes to register any of
its securities under the Securities Act (other than by a registration in
connection with an acquisition in a manner which would not permit registration
of Registrable Securities for sale to the public, on Form S-8, or any successor
form thereto, on Form S-4, or any successor form thereto and other than pursuant
to Section 2.1), on an underwritten basis (either best-efforts or
firm-commitment), then, the Company will each such time give prompt written
notice to all Holders of Registrable Securities of its intention to do so
and of
such Holders’ rights under this Section 2.2. Upon the written request
of any such holder made within twenty (20) days after the receipt of any
such
notice (which request shall specify the Registrable Securities intended to
be
disposed of by such holder and the intended method of disposition thereof),
the
Company will, subject to the terms of this Agreement, use its commercially
reasonable best efforts to effect the registration under the Securities Act
of
the Registrable Securities, to the extent requisite to permit the disposition
(in accordance with the intended methods thereof as aforesaid) of such
Registrable Securities so to be registered, by inclusion of such Registrable
Securities in the registration statement which covers the securities which
the
Company proposes to register, provided that if, at any time after written
notice
of its intention to register any securities and prior to the effective date
of
the registration statement filed in connection with such registration, the
Company shall determine for any reason either not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to each holder and, thereupon, (i) in the case
of a
determination not to register, shall be relieved of this obligation to register
any Registrable Securities in connection with such registration (but not
from
its obligation to pay the Registration Expenses in connection therewith),
and
(ii) in the case of a determination to delay registering, shall be permitted
to
delay registering any Registrable Securities, for the same period as the
delay
in registering such other securities. No registration effected under
this Section 2.2 shall relieve the Company of its obligation to effect any
registration upon request under Section 2.1, nor shall any such registration
hereunder be deemed to have been effected pursuant to Section
2.1. The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 2.2. The right provided the Holders of the Registrable
Securities pursuant to this Section shall be exercisable at their sole
discretion and will in no way limit any of the Company’s obligations to pay the
Note according to their terms.
(b) Priority
in Incidental Registrations. If the managing underwriter of
the underwritten offering contemplated by this Section 2.2 shall inform the
Company and Holders of the Registrable Securities requesting such registration
by letter of its belief that the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering,
then
the Company will include in such registration, to the extent of the number
which
the Company is so advised can be sold in such offering, (i) first securities
proposed by the Company to be sold for its own account, and
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(ii)
second Registrable Securities and securities of other selling security Holders
requested to be included in such registration pro rata on the basis of the
number of shares of such securities so proposed to be sold and so requested
to
be included; provided, however, the Holders of Registrable Securities shall
have
priority to all shares sought to be included by officers and directors of
the
Company as well as Holders of ten percent (10%) or more of the Company’s Common
Stock.
2.3 Registration
Procedures. If and whenever the Company is required to
effect the registration of any Registrable Securities under the Securities
Act
as provided in Section 2.1 and, as applicable, 2.2, the Company shall, as
expeditiously as possible:
(a) prepare
and file with the Commission the Registration Statement or amendments thereto,
to effect such registration (including such audited financial statements
as may
be required by the Securities Act or the rules and regulations promulgated
thereunder) and thereafter use its commercially reasonable best efforts to
cause
such registration statement to be declared effective by the Commission, as
soon
as practicable, but in any event no later than the Required Effectiveness
Date
(with respect to a registration pursuant to Section 2.1); provided, however,
that before filing such registration statement or any amendments thereto,
the
Company will furnish to the counsel selected by the Holders of Registrable
Securities which are to be included in such registration, copies of all such
documents proposed to be filed;
(b) with
respect to any registration statement pursuant to Section 2.1, prepare and
file
with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary
to
keep such registration statement effective and to comply with the provisions
of
the Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement until the earlier to occur of five
(5)
years after the date of this Agreement (subject to the right of the Company
to
suspend the effectiveness thereof for not more than 10 consecutive days or
an
aggregate of 30 days in such five (5) years period) or such time as all of
the
securities which are the subject of such registration statement cease to
be
Registrable Securities (such period, in each case, the “Registration Maintenance
Period”);
(c) furnish
to each of the sellers of Registrable Securities covered by such registration
statement such number of conformed 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 contained in such
registration statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the Securities
Act, in conformity with the requirements of the Securities Act, and such
other
documents, as such seller and underwriter, if any, may reasonably request
in
order to facilitate the public sale or other disposition of the Registrable
Securities owned by such seller; provided, however, if any such
documents are available on the SEC website or another website, the Company
shall
not be required to provide copies of such documents;
G;/GCA
Deals/Royal Springs Water/Registration Rights 1.DOC4
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(d) use
its commercially reasonable best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under
such other securities laws or blue sky laws as any seller thereof shall
reasonably request, to keep such registrations or qualifications in effect
for
so long as such registration statement remains in effect, and take any
other
action which may be reasonably necessary to enable such seller to consummate
the
disposition in such jurisdictions of the securities owned by such seller,
except
that the Company shall not for any such purpose be required to qualify
generally
to do business as a foreign corporation in any jurisdiction wherein it
would not
but for the requirements of this subdivision (d) be obligated to be so
qualified
or to consent to general service of process in any such
jurisdiction;
(e) use
its commercially reasonable best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved
by such
other governmental agencies or authorities as may be necessary to enable
the
seller or sellers thereof to consummate the disposition of such Registrable
Securities;
(f) furnish
to each seller of Registrable Securities a signed counterpart, addressed
to such
seller, and the underwriters, if any, of:
(1) an
opinion of counsel for the Company, dated the effective date of such
registration statement (or, if such registration includes an underwritten
public
offering, an opinion dated the date of the closing under the underwriting
agreement), reasonably satisfactory in form and substance to such seller,
and
(2) a
“comfort” letter (or, in the case of any Person which does not satisfy the
conditions for receipt of a “comfort” letter specified in Statement on Auditing
Standards No. 72, an “agreed upon procedures” letter), dated the effective date
of such registration statement (and, if such registration includes an
underwritten public offering, a letter of like kind dated the date of the
closing under the underwriting agreement), signed by the independent public
accountants who have certified the Company’s financial statement included in
such registration statement, covering substantially the same matters with
respect to such registration statement (and the prospectus included therein)
and, in the case of the accountants’ letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered in
accountants’ letters delivered to the underwriters in underwritten public
offerings of securities (with, in the case of an “agreed upon procedures”
letter, such modifications or deletions as may be required under Statement
on
Auditing Standards No. 35) and, in the case of the accountants’ letter, such
other financial matters, as such seller (or the underwriters, if any) may
reasonably request;
(g) notify
the Sellers’ Representative and its counsel promptly and confirm such advice in
writing promptly after the Company has knowledge thereof:
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(1) when
the Registration Statement, the prospectus or any prospectus supplement related
thereto or post-effective amendment to the Registration Statement has been
filed, and, with respect to the Registration Statement or any post-effective
amendment thereto, when the same has become effective;
(2) of
any request by the Commission for amendments or supplements to the Registration
Statement or the prospectus or for additional information;
(3) of the
issuance by the Commission of any stop order suspending the effectiveness
of the
Registration Statement or the initiation of any proceedings by any Person
for
that purpose; and
(4) of
the receipt by the Company of any notification with respect to the suspension
of
the qualification of any Registrable Securities for sale under the securities
or
blue sky laws of any jurisdiction or the initiation or threat of any proceeding
for such purpose;
(h) notify
each seller of Registrable Securities covered by such registration statement,
at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, upon discovery that, or upon the happening of any event
as a
result of which, the prospectus included in such registration statement,
as then
in effect, includes an untrue statement of a material fact or omits to state
any
material facts required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and
at
the request of any such seller promptly prepare and furnish to such seller
a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, except if such documents are available on
the SEC
or another website, 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;
(i) use
its best efforts to obtain the withdrawal of any order suspending the
effectiveness of the Registration Statement at the earliest possible
moment;
(j) otherwise
use its commercially reasonable best efforts to comply with all applicable
rules
and regulations of the Commission, and make available to its security Holders,
as soon as reasonably practicable, an earnings statement covering the period
of
at least twelve months, but not more than eighteen months, beginning with
the
first full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder;
(k) enter
into such agreements and take such other actions as the Sellers’ Representative
shall reasonably request in writing (at the expense of the requesting or
benefiting seller) in order to expedite or facilitate the disposition of
such
Registrable Securities; and
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(l) use
its commercially reasonable best efforts to list all Registrable Securities
covered by such registration statement on any securities exchange on which
any
of the Registrable Securities are then listed.
The
Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information
regarding
such seller and the distribution of such securities as the Company may
from time
to time reasonably request in writing. The failure to provide such
information shall toll any Default Fee until such information is
provided.
The
Company will not file any registration statement pursuant to Section 2.1,
or
amendment thereto or any prospectus or any supplement thereto (including
such
documents incorporated by reference and proposed to be filed after the
initial
filing of the Registration Statement) to which the Sellers’ Representative shall
reasonably object, provided that the Company may file such documents in
a form
required by law or upon the advice of its counsel.
The
Company represents and warrants to each holder of Registrable Securities
that it
has obtained all necessary waivers, consents and authorizations necessary
to
execute this Agreement and consummate the transactions contemplated hereby
other
than such waivers, consents and/or authorizations specifically contemplated
by
the Securities Purchase Agreement.
The
Fund
agrees that, upon receipt of any notice from the Company of the occurrence
of
any event of the kind described in subdivision (h) of this Section 2.3,
the Fund
will forthwith discontinue the Fund’s disposition of Registrable Securities
pursuant to the Registration Statement relating to such Registrable Securities
until such Fund’s receipt of the copies of the supplemented or amended
prospectus contemplated by subdivision (h) of this Section 2.3 and, if
so
directed by the Company, will deliver to the Company (at the Company’s expense)
all copies, other than permanent file copies, then in the Fund’s possession of
the prospectus relating to such Registrable Securities current at the time
of
receipt of such notice.
2.4 Underwritten
Offerings.
(a) Incidental
Underwritten Offerings. If the Company at any time proposes
to register any of its securities under the Securities Act as contemplated
by
Section 2.2 and such securities are to be distributed by or through one
or more
underwriters, the Company will, if requested by any holder of Registrable
Securities as provided in Section 2.2 and subject to the provisions of
Section
2.2(a), use its commercially reasonable best efforts to arrange for such
underwriters to include all the Registrable Securities to be offered and
sold by
such holder among the securities to be distributed by such
underwriters.
(b) Holdback
Agreements. Subject to such other reasonable requirements as
may be imposed by the underwriter as a condition of inclusion of holder’s
Registrable Securities in the registration statement, each holder agrees
by
acquisition of Registrable Securities, if so required by the managing
underwriter, not to sell, make any short sale of, loan,
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grant
any
option for the purchase of, effect any public sale or distribution of or
otherwise dispose of, except as part of such underwritten registration, any
equity securities of the Company, during such reasonable period of time
requested by the underwriter; provided however, such period shall not exceed
the
150 day period commencing 30 days prior to the commencement of such underwritten
offering and ending 120 days following the completion of such underwritten
offering.
(c) Participation
in Underwritten Offerings. No holder of Registrable
Securities may participate in any underwritten offering under Section 2.2
unless
such holder of Registrable Securities (i) agrees to sell such Person’s
securities on the basis provided in any underwriting arrangements approved,
subject to the terms and conditions hereof, by the Holders of a majority
of
Registrable Securities to be included in such underwritten offering and (ii)
completes and executes all questionnaires, indemnities, underwriting agreements
and other documents (other than powers of attorney) required under the terms
of
such underwriting arrangements. Notwithstanding the foregoing, no
underwriting agreement (or other agreement in connection with such offering)
shall require any holder of Registrable Securities to make any representations
or warranties to or agreements with the Company or the underwriters other
than
representations and warranties contained in a writing furnished by such holder
expressly for use in the related registration statement or representations,
warranties or agreements regarding such holder, such holder’s Registrable
Securities and such holder’s intended method of distribution and any other
representation required by law.
2.5 Preparation;
Reasonable Investigation. In connection with the preparation
and filing of each registration statement under the Securities Act pursuant
to
this Agreement, the Company will give the Holders of Registrable Securities
registered under such registration statement, and their respective counsel
and
accountants for Sellers’ Representative, the opportunity to participate in the
preparation of such registration statement, each prospectus included therein
or
filed with the Commission, and each amendment thereof or supplement thereto,
and
will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and
the
independent public accountants who have certified its financial statements
as
shall be necessary, in the reasonable opinion of such Holders’ and such
underwriters’ respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
2.6 Registration
Default Fee. Other than as a result of actions by the Fund,
if the Registration Statement contemplated in Section 2.1 is (x) not declared
effective by the Required Effectiveness Date or (y) such effectiveness is
not
maintained for the Registration Maintenance Period, then the Company shall
pay
to the Fund the Default Fee specified in Section 10.4 of the Securities Purchase
Agreement.
2.7 Indemnification.
(a) Indemnification
by the Company. In the event of any registration of any
Securities under the Securities Act, the Company will, and hereby does
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agree
to
indemnify and hold harmless the holder of any Registrable Securities covered
by
such registration statement, its directors and officers, each other Person
who
participates as an underwriter in the offering or sale of such securities
and
each other Person, if any, who controls such holder or any such underwriter
within the meaning of the Securities Act against any losses, claims, damages
or
liabilities, joint or several, to which such holder or any such director
or
officer or underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened,
in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, 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, and the Company
will
reimburse such holder and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably incurred
by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding, provided that in no event shall the Company
be
liable in any such case to the extent that any such loss, claim, damage,
liability, (or action or proceeding in respect thereof) or expense arises
out of
or is based upon an untrue statement or alleged untrue statement or omission
or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement
in
reliance upon and in conformity with written information furnished to the
Company by such holder or underwriter stating that it is for use in the
preparation thereof and, provided further that the Company shall not be liable
to any Person who participates as an underwriter in the offering or sale
of
Registrable Securities or to any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to
the
extent that any such loss, claim, damage, liability (or action or proceeding
in
respect thereof) or expense arises out of such Person’s failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
within the time required by the Securities Act to the Person asserting the
existence of an untrue statement or alleged untrue statement or omission
or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus or an amendment or supplement
thereto. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such holder or any
such
director, officer, underwriter or controlling person and shall survive the
transfer of such securities by such holder.
(b) Indemnification
by the Sellers. The Company may require, as a condition to
including any Registrable Securities in any registration statement filed
pursuant to this Agreement, that the Company shall have received an undertaking
satisfactory to it from the prospective seller of such Registrable Securities,
to indemnify and hold harmless (in the same manner and to the same extent
as set
forth in subdivision (a) of this Section 2.7) the Company, each director
of the
Company, each officer of the Company and each other Person, if any, who controls
the Company within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein,
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or
any
amendment or supplement thereto, if such statement or alleged statement
or
omission or alleged omission was made in reliance upon and in conformity
with
written information furnished to the Company through an instrument duly
executed
by such seller specifically stating that it is for use in the preparation
of
such registration statement, preliminary prospectus, final prospectus,
summary
prospectus, amendment or supplement. Any such indemnity shall remain
in full force and effect, regardless of any investigation made by or on
behalf
of the Company or any such director, officer or controlling person and
shall
survive the transfer of such securities by such seller.
(c) Notices
of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving
a
claim referred to in the preceding subdivisions of this Section 2.7, such
indemnified party will, if a claim in respect thereof is to be made against
an
indemnifying party, give written notice to the latter of the commencement
of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 2.7, except to the extent
that
the indemnifying party is actually prejudiced by such failure to give
notice. In case any such action is brought against an indemnified
party, unless in the opinion of the indemnified party’s counsel a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim, the indemnifying party shall be entitled to participate in
and to
assume the defense thereof, jointly with any other indemnifying party similarly
notified, to the extent that the indemnifying party may wish, with counsel
reasonably satisfactory to such indemnified party, and after notice from
the
indemnifying party to such indemnified party of its election so to assume
the
defense thereof, the indemnifying party shall not be liable to such indemnified
party for any legal or other expenses subsequently incurred by the latter
in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of
the indemnified party, consent to entry of any judgment or enter into any
settlement of any such action which does not include as an unconditional
term
thereof the giving by the claimant or plaintiff to such indemnified party
of a
release from all liability, or a covenant not to xxx, in respect to such
claim
or litigation. No indemnified party shall consent to entry of any
judgment or enter into any settlement of any such action the defense of which
has been assumed by an indemnifying party without the consent of such
indemnifying party.
(d) Other
Indemnification. Indemnification similar to that specified
in the preceding subdivisions of this Section 2.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities (but only if and to the extent required pursuant to the terms
of
Section 2.7(b)) with respect to any required registration or other qualification
of securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
(e) Indemnification
Payments. The indemnification required by this Section 2.7
shall be made by periodic payments of the amount thereof during the course
of
the investigation or defense, as and when bills are received or expense,
loss,
damage or liability is incurred.
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(f) Contribution. If
the indemnification provided for in the preceding subdivision of this Section
2.7 is unavailable to an indemnified party in respect of any expense, loss,
claim, damage or liability referred to therein, then each indemnifying party,
in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid
or payable by such indemnified party as a result of such expense, loss, claim,
damage or liability (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the holder
or
underwriter, as the case may be, on the other from the distribution of the
Registrable Securities or (ii) if the allocation provided by clause (i) above
is
not permitted by applicable law, in such proportion as is appropriate to
reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the holder or underwriter,
as the case may be, on the other in connection with the statements or omissions
which resulted in such expense, loss, damage or liability, as well as any
other
relevant equitable considerations. The relative benefits received by
the Company on the one hand and the holder or underwriter, as the case may
be,
on the other in connection with the distribution of the Registrable Securities
shall be deemed to be in the same proportion as the total net proceeds received
by the Company from the initial sale of the Registrable Securities by the
Company to the purchasers bear to the gain, if any, realized by all selling
Holders participating in such offering or the underwriting discounts and
commissions received by the underwriter, as the case may be. The
relative fault of the Company on the one hand and of the holder or underwriter,
as the case may be, on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact
or omission to state a material fact relates to information supplied by the
Company, by the holder or by the underwriter and the parties’ relative intent,
knowledge, access to information supplied by the Company, by the holder or
by
the underwriter and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission,
provided that the foregoing contribution agreement shall not inure to the
benefit of any indemnified party if indemnification would be unavailable
to such
indemnified party by reason of the provisions contained in the first sentence
of
subdivision (a) of this Section 2.7, and in no event shall the obligation
of any
indemnifying party to contribute under this subdivision (f) exceed the amount
that such indemnifying party would have been obligated to pay by way of
indemnification if the indemnification provided for under subdivision (b)
of
this Section 2.7 had been available under the circumstances.
The
Company and the Holders of Registrable Securities agree that it would not
be
just and equitable if contribution pursuant to this subdivision (f) were
determined by pro rata allocation (even if the Holders and any underwriters
were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in
the
immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth in the preceding sentence and subdivision
(c) of this Section 2.7, any legal or other expenses reasonably incurred
by such
indemnified party in connection with investigating or defending any such
action
or claim.
Notwithstanding
the provisions of this subdivision (f), no holder of Registrable Securities
or
underwriter shall be required to contribute any amount in excess of the amount
by which
12
(i)
in
the case of any such holder, the net proceeds received by such holder from
the
sale of Registrable Securities or (ii) in the case of an underwriter, the
total
price at which the Registrable Securities purchased by it and distributed
to the
public were offered to the public exceeds, in any such case, the amount
of any
damages that such holder or underwriter has otherwise been required to
pay by
reason of such untrue or allege untrue statement or omission. 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.
3. Definitions. As
used herein, unless the context otherwise requires, the following terms have
the
following respective meanings:
“Agreement”: As
defined in Section 1.
“Commission”: The
Securities and Exchange Commission or any other Federal agency at the time
administering the Securities Act.
“Common
Stock”: As defined in Section 1.
“Company”: As
defined in the introductory paragraph of this Agreement.
“Exchange
Act”: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission promulgated thereunder.
“Note
Conversion Shares”: As defined in Section 1.
“Notes”: As
defined in Section 1, such term to include any securities issued in substitution
of or in addition to such Notes.
“Person”: A
corporation, association, partnership, limited liability company, trust,
organization, business, individual, governmental or political subdivision
thereof or a governmental agency.
“Registrable
Securities”: The Securities and any securities issued or
issuable with respect to such Securities by way of stock dividend or stock
split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. Once issued such
securities shall cease to be Registrable Securities when (a) 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, (b) they shall have been
distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (c) they shall have been otherwise transferred,
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, (d) they shall have ceased to be outstanding,
13
(e)
on
the expiration of the applicable Registration Maintenance Period or (f)
any and
all legends restricting transfer thereof have been removed in accordance
with
the provisions of Rule 144(k) (or any successor provision) under the Securities
Act.
“Registration
Expenses”: All expenses incident to the Company’s performance of
or compliance with this Agreement, including, without limitation, all
registration, filing and NASD fees, all stock exchange and OTC Bulletin Board
or
other NASD or stock exchange listing fees, all fees and expenses of complying
with securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of
counsel
for the Company and of its independent public accountants, including the
expenses of any special audits or “cold comfort” letters required by or incident
to such performance and compliance, the reasonable fees and disbursements
of not
more than one law firm (not to exceed $25,000) retained by the holder or
Holders
of more than 50% of the Registrable Securities, premiums and other costs
of
policies of insurance of the Company against liabilities arising out of the
public offering of the Registrable Securities being registered and any fees
and
disbursements of underwriters customarily paid by issuers or sellers of
securities, but excluding underwriting discounts and commissions and transfer
taxes, if any, provided that, in any case where Registration Expenses are
not to
be borne by the Company, such expenses shall not include salaries of Company
personnel or general overhead expenses of the Company, auditing fees, premiums
or other expenses relating to liability insurance required by underwriters
of
the Company or other expenses for the preparation of financial statements
or
other data normally prepared by the Company in the ordinary course of its
business or which the Company would have incurred in any event.
“Registration
Maintenance Period”: As defined in Section 2.3.
“Required
Effectiveness Date”: As defined in Section 2.1.
“Securities”:
As defined in Section 1.2.
“Securities
Act”: The Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
“Securities
Purchase Agreement”: As defined in Section 1.
“Sellers’
Representative”: Global Capital Advisors LLC or such Person designated by
Global Capital Advisors LLC as of the time of disposition of the last of
the
Notes held by the Fund (or subsequent Sellers’ Representative).
“Warrant
Shares”: As defined in Section 1.
4. Rule
144. The Company shall timely file the reports required to
be filed by it under the Securities Act and the Exchange Act (including but
not
limited to the reports under Sections 13 and 15(d) of the Exchange Act referred
to in subparagraph (c)
14
5.
Amendments and Waivers. This Agreement may be amended and
the Company may take any action herein prohibited, or omit to perform any
act
herein required to be performed by it, only if the Company shall have obtained
the written consent to such amendment, action or omission to act, of the
holder
or Holders of the sum of 51% or more of the shares of (i) Registrable Securities
issued at such time, plus (ii) Registrable Securities issuable upon exercise
or
conversion of the Securities then constituting derivative securities (if
such
Securities were not fully exchanged or converted in full as of the date such
consent if sought). Each holder of any Registrable Securities at the
time or thereafter outstanding shall be bound by any consent authorized by
this
Section 5, whether or not such Registrable Securities shall have been marked
to
indicate such consent.
6. Nominees
for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of
such
Registrable Securities for purposes of any request or other action by any
holder
or Holders of Registrable Securities pursuant to this Agreement or any
determination of any number of percentage of shares of Registrable Securities
held by an holder or Holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so
elects, the Company may require assurances reasonably satisfactory to it
of such
owner’s beneficial ownership of such Registrable Securities.
7. Notices. Except
as otherwise provided in this Agreement, all notices, requests and other
communications to any Person provided for hereunder shall be in writing and
shall be given to such Person (a) in the case of a party hereto other than
the
Company, addressed to such party in the manner set forth in the Securities
Purchase Agreement or at such other address as such party shall have furnished
to the Company in writing, or (b) in the case of any other holder of Registrable
Securities, at the address that such holder shall have furnished to the Company
in writing, or, until any such other holder so furnishes to the Company an
address, then to and at the address of the last holder of such Registrable
Securities who has furnished an address to the Company, or (c) in the case
of
the Company, at the address set forth on the signature page hereto, to the
attention of its President, or at such other address, or to the attention
of
such other officer, as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding. Each such notice,
request or other communication shall be effective
15
(i)
if
given by mail, four (4) days after such communication is deposited in the
United
States mails with first class postage prepaid, addressed as aforesaid or
(ii) if
given by any other means (including, without limitation, by fax or air
courier),
when delivered at the address specified above, provided that any such notice,
request or communication shall not be effective until
received.
8. Assignment. This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the parties hereto. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are
for
the benefit of the parties hereto other than the Company shall also be for
the
benefit of and enforceable by any subsequent holder of any Registrable
Securities. Each of the Holders of the Registrable Securities agrees,
by accepting any portion of the Registrable Securities after the date hereof,
to
the provisions of this Agreement including, without limitation, appointment
of
the Sellers’ Representative to act on behalf of such holder pursuant to the
terms hereof which such actions shall be made in the good faith discretion
of
the Sellers’ Representative and be binding on all persons for all
purposes.
9. Descriptive
Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for reference only and shall
not
limit or otherwise affect the meaning hereof.
10. Governing
Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
LAWS OF
THE STATE OF NAVADA WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF
LAWS.
11. Counterparts. This
Agreement may be executed by facsimile and may be signed simultaneously in
any
number of counterparts, each of which shall be deemed an original, but all
such
counterparts shall together constitute one and the same instrument.
12. Entire
Agreement. This Agreement embodies the entire agreement and
understanding between the Company and each other party hereto relating to
the
subject matter hereof and supercedes all prior agreements and understandings
relating to such subject matter.
13. Severability. If
any provision of this Agreement, or the application of such provisions to
any
Person or circumstance, shall be held invalid, the remainder of this Agreement,
or the application of such provision to Persons or circumstances other than
those to which it is held invalid, shall not be affected thereby.
[Signature
Page Follows]
16
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized as of
the
date first above written.
ROYAL
SPRING WATER, INC.
By: __________________________
Name: Xxxx
Xxxxx
Title: President
Address:
00000 Xxxxxx Xxxxxx
Xxxxx
000
Xxx
Xxxx,
XX 00000
Fax:
Tel.:
GCA
STRATEGIC INVESTMENT FUND LIMITED
By: _____________________________
Name: Xxxxx
X. Xxxxxx
Title:
Director
Address: c/o
Prime Management Limited
Mechanics
Xxxxxxxx
00
Xxxxxx
Xxxxxx
Xxxxxxxx
XX XX, Xxxxxxx
Fax: 000-000-0000
Tel.: 000-000-0000
17
dated
as of
December
___, 2006
by
and between
Royal
Spring Water, Inc.,
and
GCA
Strategic Investment Fund Limited
