REGISTRATION RIGHTS AGREEMENT
Registration
Rights Agreement (the “Agreement”),
dated
as of September
12, 2006,
by and
between Homeland Security Network, Inc., a corporation organized under the
laws
of State of Nevada, with its principal executive office at 000 Xxxxx Xxxx Xxxx,
Xxxxx 0000, Xxxxxxxxxx, XX 00000 (the “Company”),
and
eFund Capital Partners LLC., a Delaware limited company with its principal
office at 000 X. Xxxxx Xxxx., Xxxxx 000, Xxxx Xxxxx, XX 00000 (the “Holder”).
Whereas, in
connection with the Investment Agreement by and between the Company and the
Holder of even date herewith (the “Investment
Agreement”),
the
Company has agreed to issue and sell to the Holder an indeterminate number
of
shares of the Company’s Common Stock, .001 par value per share (the
“Common
Stock”),
to be
purchased pursuant to the terms and subject to the conditions set forth in
the
Investment Agreement; and
Whereas, to
induce
the Holder to execute and deliver the Investment Agreement, the Company has
agreed to provide certain registration rights under the Securities Act of 1933,
as amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the “1933
Act”),
and
applicable state securities laws, with respect to the shares of Common Stock
issuable pursuant to the Investment Agreement.
Now
therefore, in consideration of the foregoing premises and the mutual covenants
contained hereinafter and other good and valuable consideration, the receipt
and
sufficiency of which are hereby acknowledged, the Company and the Holder hereby
agree as follows:
Section
1. DEFINITIONS.
As
used
in this Agreement, the following terms shall have the following
meanings:
“Execution
Date”
means
the date first written above.
“Person”
means
a
corporation, a limited liability company, an association, a partnership, an
organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
“Holder”
means
EFund Small Cap Fund, a Nevada limited partnership.
“Potential
Material Event”
means
any of the following: (i)
the
possession by the Company of material information not ripe for disclosure in
a
Registration Statement, which shall be evidenced by determinations in good
faith
by the Board of Directors of the Company that disclosure of such information
in
the Registration Statement would be detrimental to the business and affairs
of
the Company, or (ii)
any
material engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected
by
disclosure in a Registration Statement at such time, which determination shall
be accompanied by a good faith determination by the Board of Directors of the
Company that the Registration Statement would be materially misleading absent
the inclusion of such information.
“Principal
Market”
shall
mean The American Stock Exchange, National Association of Securities Dealer’s,
Inc. Over-the-Counter electronic bulletin board, the Nasdaq National Market
or
The Nasdaq SmallCap Market whichever is the principal market on which the Common
Stock is listed.
“Register,”
“Registered,”
and
“Registration”
refer
to a registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis (“Rule
415”),
and
the declaration or ordering of effectiveness of such Registration Statement(s)
by the United States Securities and Exchange Commission (the
“SEC”).
“Registrable
Securities”
means
(i)
the
shares of Common Stock issued or issuable pursuant to the Investment Agreement,
and (ii)
any
shares of capital stock issued or issuable with respect to such shares of Common
Stock, if any, as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise, which have not been (x)
included
in a Registration Statement that has been declared effective by the SEC or
(y)
sold
under circumstances meeting all of the applicable conditions of Rule 144 (or
any
similar provision then in force) under the 1933 Act.
“Registration
Statement”
means
a
registration statement of the Company filed under the 1933 Act covering the
Registrable Securities.
All
capitalized terms used in this Agreement and not otherwise defined herein shall
have the same meaning ascribed to them as in the Investment Agreement.
Section
2. REGISTRATION.
(a)
The
Company shall have provided a draft of the Registration Statement covering
the
Registrable Securities to the Holder. The Company shall, as soon as is
practicable, but not later than three hundred sixty five calendar days following
the Execution Date, file with the SEC a Registration Statement or Registration
Statements (as is necessary) on Form SB-2 (or, if such form is unavailable
for
such a registration, on such other form as is available for such a
registration), covering the resale of all of the Registrable Securities, which
Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon stock splits, stock dividends or similar transactions. The Company shall
initially register for resale five hundred million shares
of
Common Stock which would be issuable on the date preceding the filing of the
Registration Statement based on the closing bid price of the Company’s Common
Stock on such date and the amount reasonably calculated that represents Common
Stock issuable to other parties as set forth in the Investment Agreement except
to the extent that the SEC requires the share amount to be reduced as a
condition of effectiveness..
(b)
The
Company shall use commercially reasonable efforts to have the Registration
Statement(s) declared effective by the SEC within 90 calendar days following
the
filing of the Registration Statement on Form SB-2..
(c)
The
Company agrees not to include any other securities in the Registration Statement
covering the Registrable Securities without Holder’s prior written consent which
Holder may withhold in its sole discretion, except for shares issued to
employees or consultants whose agreements require such registration.
Furthermore, the Company agrees that it will not file any other Registration
Statement for other securities except for S-8 Registration Statements, until
thirty calendar days after the Registration Statement for the Registrable
Securities is declared effective by the SEC.
Section
3. RELATED
OBLIGATIONS.
At
such
time as the Company is obligated to prepare and file a Registration Statement
with the SEC pursuant to Section 2(a), the Company will effect the registration
of the Registrable Securities in accordance with the intended method of
disposition thereof and, with respect thereto, the Company shall have the
following obligations:
(a)
The
Company shall use commercially reasonable efforts to cause such Registration
Statement relating to the Registrable Securities to become effective within
90
calendar days following the filing of the Registration Statement on Form SB-2
and shall keep such Registration Statement effective until the earlier to occur
of (i)
the date
as of which the Holder may sell all of the Registrable Securities without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto); or (ii)
the date
on which (A)
the
Holder shall have sold all the Registrable Securities; and (B)
the
Holder has no right to acquire any additional shares of Common Stock under
the
Investment Agreement (the “Registration
Period”).
The
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any 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, in light of the circumstances in
which
they were made, not misleading. The Company shall use its best efforts to
respond to all SEC comments within seven business days from receipt of such
comments by the Company. The Company shall use its best efforts to cause the
Registration Statement relating to the Registrable Securities to become
effective no later than three business days after notice from the SEC that
the
Registration Statement may be declared effective. The Holder agrees to provide
all information which it is required by law to provide to the Company, including
the intended method of disposition of the Registrable Securities, and the
Company’s obligations set forth above shall be conditioned on the receipt of
such information.
(b)
The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and
the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
be
necessary to keep such Registration Statement effective during the Registration
Period, and, during such period, comply with the provisions of the 1933 Act
with
respect to the disposition of all Registrable Securities of the Company covered
by such Registration Statement until such time as all of such Registrable
Securities shall have been disposed of in accordance with the intended methods
of disposition by the Holder thereof as set forth in such Registration
Statement. In the event the number of shares of Common Stock covered by a
Registration Statement filed pursuant to this Agreement is at any time
insufficient to cover all of the Registrable Securities, the Company shall
amend
such Registration Statement, or file a new Registration Statement (on the short
form available therefor, if applicable), or both, so as to cover all of the
Registrable Securities, in each case, as soon as practicable, but in any event
within 30 calendar days after the necessity therefor arises (based on the then
Purchase Price of the Common Stock and other relevant factors on which the
Company reasonably elects to rely), assuming the Company has sufficient
authorized shares at that time, and if it does not, within 30 calendar days
after such shares are authorized. The Company shall use commercially reasonable
efforts to cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof.
(c)
The
Company shall make available to the Holder whose Registrable Securities are
included in any Registration Statement and its legal counsel without charge
(i)
promptly
after the same is prepared and filed with the SEC at least one copy of such
Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits, the prospectus included in such Registration Statement (including
each preliminary prospectus) and, with regards to such Registration
Statement(s), any correspondence by or on behalf of the Company to the SEC
or
the staff of the SEC and any correspondence from the SEC or the staff of the
SEC
to the Company or its representatives; (ii)
upon the
effectiveness of any Registration Statement, the Company shall make available
copies of the prospectus included in such Registration Statement and all
amendments and supplements thereto; and (iii)
such
other documents, including copies of any preliminary or final prospectus, as
the
Holder may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities.
(d)
The
Company shall use commercially reasonable efforts to (i)
register
and qualify the Registrable Securities covered by a Registration Statement
under
such other securities or “blue sky” laws of such states in the United States as
any Holder reasonably requests; (ii)
prepare
and file in those jurisdictions, such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may
be
necessary to maintain the effectiveness thereof during the Registration Period;
(iii)
take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and
(iv)
take all
other actions reasonably necessary or advisable to qualify 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 (x)
qualify
to do business in any jurisdiction where it would not otherwise be required
to
qualify but for this Section 3(d), or (y)
subject
itself to general taxation in any such jurisdiction. The Company shall promptly
notify each Holder who holds Registrable Securities of the receipt by the
Company of any notification with respect to the suspension of the registration
or qualification of any of the Registrable Securities for sale under the
securities or “blue sky” laws of any jurisdiction in the United States or its
receipt of actual notice of the initiation or threatening of any proceeding
for
such purpose.
(e)
As
promptly as practicable after becoming aware of such event, the Company shall
notify each Holder in writing of the happening of any event as a result of
which
the prospectus included in a Registration Statement, as then in effect, includes
an untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein,
in
light of the circumstances under which they were made, not misleading
(“Registration
Default”)
and
use all diligent efforts to promptly prepare a supplement or amendment to such
Registration Statement and take any other necessary steps to cure the
Registration Default, (which, if such Registration Statement is on Form S-3,
may
consist of a document to be filed by the Company with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as defined below) and to
be
incorporated by reference in the prospectus) to correct such untrue statement
or
omission, and make available copies of such supplement or amendment to each
Holder. The Company shall also promptly notify each Holder (i)
when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (the Company will prepare notification of such effectiveness
which shall be delivered to the Holder on the same day of such effectiveness
and
by overnight mail), additionally, the Company will promptly provide to the
Holder a copy of the effectiveness order prepared by the SEC once it is received
by the Company; (ii)
of any
request by the SEC for amendments or supplements to a Registration Statement
or
related prospectus or related information, (iii)
of
the
Company’s reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate, (iv)
in the
event the Registration Statement is no longer effective, or
(v) if
Registration Statement is stale as a result of the Company’s failure to timely
file its financials or otherwise. The Company acknowledges that its failure
to
cure the Registration Default within ten business days will cause the Holder
to
suffer damages in an amount that will be difficult to ascertain. Accordingly,
the parties agree that it is appropriate to include a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties’ good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. It is the intention
of
the parties that interest payable under any of the terms of this Agreement
shall
not exceed the maximum amount permitted under any applicable law. If a law,
which applies to this Agreement which sets the maximum interest amount, is
finally interpreted so that the interest in connection with this Agreement
exceeds the permitted limits, then: (1)
any such
interest shall be reduced by the amount necessary to reduce the interest to
the
permitted limit; and (2)
any sums
already collected (if any) from the Company which exceed the permitted limits
will be refunded to the Company. The Holder may choose to make this refund
by
reducing the amount that the Company owes under this Agreement or by making
a
direct payment to the Company. If a refund reduces the amount that the Company
owes the Holder, the reduction will be treated as a partial payment. In case
any
provision of this Agreement is held by a court of competent jurisdiction to
be
excessive in scope or otherwise invalid or unenforceable, such provision shall
be adjusted rather than voided, if possible, so that it is enforceable to the
maximum extent possible, and the validity and enforceability of the remaining
provisions of this Agreement will not in any way be affected or impaired
thereby.
(f)
The
Company shall use commercially reasonable efforts to prevent the issuance of
any
stop order or other suspension of effectiveness of a Registration Statement,
or
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify the Holder who holds Registrable Securities being sold
of
the issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such
purpose.
(g)
The
Company shall permit the Holder and one legal counsel, designated by the Holder,
to review and comment upon a Registration Statement and all amendments and
supplements thereto at least seven business days prior to their filing with
the
SEC, and not file any document in a form to which such counsel reasonably
objects. The Company may request to shorten the Holder’s review period and the
Holder will, if possible, attempt to comply with the accelerated review period.
The Company shall not submit to the SEC a request for acceleration of the
effectiveness of a Registration Statement or file with the SEC a Registration
Statement or any amendment or supplement thereto without the prior approval
of
such counsel, which approval shall not be unreasonably withheld.
(h)
At the
request of the Holder, the Company shall cause to be furnished to such Holder,
on the date of the effectiveness of a Registration Statement, a legal opinion,
in form and substance reasonably acceptable to Holder’s counsel, dated as of
such date, of counsel representing the Company for purposes of such Registration
Statement.
(i)
The
Company shall make available for inspection by (i)
the
Holder and (ii)
one
legal counsel and one firm of accountants or other agents retained by the Holder
(collectively, the “Inspectors”),
at
the Holder's expense, all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the
“Records”),
as
shall be reasonably deemed necessary by each Inspector, and cause the Company’s
officers, directors and employees to supply all information which any Inspector
may reasonably request; provided,
however, that each Inspector shall hold in strict confidence and shall not
make
any disclosure (except to a Holder) or use of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a)
the
disclosure of such Records is necessary to avoid or correct a misstatement
or
omission in any Registration Statement or is otherwise required under the 1933
Act, (b)
the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or
(c)
the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. Each Holder agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental
body
of competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential.
(j)
The
Company shall hold in confidence and not make any disclosure of information
concerning a Holder provided to the Company unless (i)
disclosure
of such information is necessary to comply with federal or state securities
laws, (ii)
the
disclosure of such information is necessary to avoid or correct a misstatement
or omission in any Registration Statement, (iii)
the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv)
such
information has been made generally available to the public other than by
disclosure in violation of this Agreement or any other agreement. The Company
agrees that it shall, upon learning that disclosure of such information
concerning a Holder is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt written notice to such Holder
and allow such Holder, at the Holder’s expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, such
information.
(k)
The
Company shall use commercially reasonable efforts to maintain designation and
quotation of all the Registrable Securities covered by any Registration
Statement on the Principal Market. If, despite the Company’s best efforts, the
Company is unsuccessful in satisfying the preceding sentence, it shall use
commercially reasonable efforts to cause all the Registrable Securities covered
by any Registration Statement to be listed on each other national securities
exchange and automated quotation system, if any, on which securities of the
same
class or series issued by the Company are then listed, if any, if the listing
of
such Registrable Securities is then permitted under the rules of such exchange
or system. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 3(k).
(l)
The
Company shall cooperate with the Holder to facilitate the prompt preparation
and
delivery of certificates (not bearing any restrictive legend) representing
the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case
may
be, as the Holder may reasonably request.
(m)
The
Company shall provide a transfer agent for all the Registrable Securities not
later than the effective date of the first Registration Statement filed pursuant
hereto.
(n)
If
requested by the Holder, the Company shall (i)
as soon
as reasonably practical incorporate in a prospectus supplement or post-effective
amendment such information as such Holder reasonably determine should be
included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the
offering of the Registrable Securities to be sold in such offering; (ii)
make all
required filings of such prospectus supplement or post-effective amendment
as
soon as reasonably possible after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii)
supplement or make amendments to any Registration Statement if reasonably
requested by such Holder.
(o)
The
Company shall use commercially reasonable efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may
be
necessary to consummate the disposition of such Registrable
Securities.
(p)
The
Company shall otherwise use commercially reasonable efforts to comply with
all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
(q)
Within
one business day after the Registration Statement which includes Registrable
Securities is declared effective by the SEC, the Company shall deliver to the
transfer agent for such Registrable Securities, with copies to the Holder,
confirmation that such Registration Statement has been declared effective by
the
SEC.
(r)
At or
prior to the date of the first Put Notice (as that term is defined in the
Investment Agreement) and at such other times as the Holder may reasonably
request, the Company shall cause to be delivered, letters from the Company’s
independent certified public accountants (i)
addressed to the Holder that such accountants are independent public accountants
within the meaning of the 1933 Act and the applicable published rules and
regulations thereunder, and (ii)
in
customary form and covering such financial and accounting matters as are
customarily covered by letters of independent certified public accountants
delivered to underwriters in connection with public offerings.
(s)
The
Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Holder of Registrable Securities pursuant to
a
Registration Statement.
Section
4. OBLIGATIONS
OF THE HOLDER.
(a)
At least
five calendar days prior to the first anticipated filing date of a Registration
Statement the Company shall notify the Holder in writing of the information
the
Company requires from each such Holder if such Holder elects to have any of
such
Holder’s Registrable Securities included in such Registration Statement. It
shall be a condition precedent to the obligations of the Company to complete
the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Holder that such Holder shall furnish in writing
to
the Company such information regarding itself, the Registrable Securities held
by it and the intended method of disposition of the Registrable Securities
held
by it as shall reasonably be required to effect the registration of such
Registrable Securities and shall execute such documents in connection with
such
registration as the Company may reasonably request. Each Holder covenants and
agrees that, in connection with any sale of Registrable Securities by it
pursuant to a Registration Statement, it shall comply with the “Plan of
Distribution” section of the current prospectus relating to such Registration
Statement.
(b)
The
Holder, by such Holder’s acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of any Registration Statement hereunder, unless
such Holder has notified the Company in writing of such Holder’s election to
exclude all of such Holder’s Registrable Securities from such Registration
Statement.
(c)
The
Holder agrees that, upon receipt of written notice from the Company of the
happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e), such Holder will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Holder’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or the first
sentence of 3(e).
Section
5. EXPENSES
OF REGISTRATION.
All
expenses, other than underwriting discounts and commissions and other than
as
set forth in the Investment Agreement, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printing and accounting fees, and fees and disbursements of counsel for
the Company shall be paid by the Company; provided, however, that nothing in
this Section 5 shall obligate the Company to pay the expenses or fees of
Inspectors or counsel to the Holder.
Section
6. INDEMNIFICATION.
In
the
event any Registrable Securities are included in a Registration Statement under
this Agreement:
(a)
To the
fullest extent permitted by law, the Company will, and hereby does, indemnify,
hold harmless and defend each Holder who holds such Registrable Securities,
the
directors, officers, partners, employees, counsel, agents, representatives
of,
and each Person, if any, who controls, any Holder within the meaning of the
1933
Act or the Securities Exchange Act of 1934, as amended (the “1934
Act”)
(each,
an “Indemnified
Person”),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, attorneys’ fees, amounts paid in settlement or expenses, joint
or several (collectively, “Claims”),
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto (“Indemnified
Damages”),
to
which any of them may become subject insofar as such Claims (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 in a
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other “blue sky” laws of any jurisdiction in which the Holder has requested
in writing that the Company register or qualify the Shares (“Blue
Sky Filing”),
or
the omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which the statements therein were made, not misleading,
(ii)
any
untrue statement or alleged untrue statement of a material fact contained in
the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii)
any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act,
any
other law, including, without limitation, any state securities law, or any
rule
or regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, “Violations”).
Subject to the restrictions set forth in Section 6(c) with respect to the number
of legal counsel, the Company shall reimburse the Holder and each such
controlling person, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable expenses incurred
by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i)
shall
not apply to a Claim arising out of or based upon a Violation which is due
to
the inclusion in the Registration Statement of the information furnished to
the
Company by any Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto; (ii)
shall
not be available to the extent such Claim is based on (a)
a
failure of the Holder to deliver or to cause to be delivered the prospectus
made
available by the Company or (b)
the
Indemnified Person’s use of an incorrect prospectus despite being promptly
advised in advance by the Company in writing not to use such incorrect
prospectus; (iii)
any
claims based on the manner of sale of the Registrable Securities by the Holder
or of the Holder’s failure to register as a dealer under applicable securities
laws; (iv)
any
omission of the Holder to notify the Company of any material fact that should
be
stated in the Registration Statement or prospectus relating to the Holder or
the
manner of sale; and (v)
any
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the resale of the Registrable Securities by the Holder
pursuant to the Registration Statement.
(b)
In
connection with any Registration Statement in which a Holder is participating,
each such Holder agrees to severally and jointly indemnify, hold harmless and
defend, to the same extent and in the same manner as is set forth in Section
6(a), the Company, each of its directors, each of its officers who signs the
Registration Statement, each Person, if any, who controls the Company within
the
meaning of the 1933 Act or the 1934 Act and the Company’s agents (collectively
and together with an Indemnified Person, an “Indemnified
Party”),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
or
Indemnified Damages arise out of or are based upon any Violation, in each case
to the extent, and only to the extent, that such Violation is due to the
inclusion in the Registration Statement of the written information furnished
to
the Company by such Holder expressly for use in connection with such
Registration Statement; and, subject to Section 6(c), such Holder will reimburse
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Claim; provided,
however,
that
the indemnity agreement contained in this Section 6(b) and the agreement with
respect to contribution contained in Section 7 shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of such Holder, which consent shall not be unreasonably
withheld; provided, further, however, that the Holder shall be liable under
this
Section 6(b) for only that amount of a Claim or Indemnified Damages as does
not
exceed the net proceeds to such Holder as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf
of
such Indemnified Party and shall survive the resale of the Registrable
Securities by the Holder pursuant to the Registration Statement. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus were corrected
on a timely basis in the prospectus, as then amended or supplemented. This
indemnification provision shall apply separately to each Holder and liability
hereunder shall not be joint and several.
(c)
Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section
6
of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person
or
Indemnified Party shall, if a Claim in respect thereof is to be made against
any
indemnifying party under this Section 6, deliver to the indemnifying party
a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party
so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as
the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to
be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the Indemnified Person or Indemnified Party, the representation
by
counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding. The indemnifying party shall
pay
for only one separate legal counsel for the Indemnified Persons or the
Indemnified Parties, as applicable, and such counsel shall be selected by the
Holder, if the Holder are entitled to indemnification hereunder, or the Company,
if the Company is entitled to indemnification hereunder, as applicable. The
Indemnified Party or Indemnified Person shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or Claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the Indemnified Party or
Indemnified Person which relates to such action or Claim. The indemnifying
party
shall keep the Indemnified Party or Indemnified Person fully appraised at all
times as to the status of the defense or any settlement negotiations with
respect thereto. No indemnifying party shall be liable for any settlement of
any
action, claim or proceeding effected without its written consent, provided,
however, that the indemnifying party shall not unreasonably withhold, delay
or
condition its consent. No indemnifying party shall, without the consent of
the
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such Claim. Following indemnification as provided for hereunder,
the
indemnifying party shall be surrogated to all rights of the Indemnified Party
or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure
to
deliver written notice to the indemnifying party within a reasonable time of
the
commencement of any such action shall not relieve such indemnifying party of
any
liability to the Indemnified Person or Indemnified Party under this Section
6,
except to the extent that the indemnifying party is prejudiced in its ability
to
defend such action.
(d)
The
indemnity agreements contained herein shall be in addition to (i)
any
cause of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii)
any
liabilities the indemnifying party may be subject to pursuant to the
law.
Section
7. CONTRIBUTION.
To
the
extent any indemnification by an indemnifying party is prohibited or limited
by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided,
however,
that:
(i)
no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6; (ii)
no
seller of Registrable Securities guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution
from any seller of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (iii)
contribution
by any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
Section
8. REPORTS
UNDER THE 1934 ACT.
With
a
view to making available to the Holder the benefits of Rule 144 promulgated
under the 1933 Act or any other similar rule or regulation of the SEC that
may
at any time permit the Holder to sell securities of the Company to the public
without registration (“Rule
144”),
the
Company agrees to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144;
(b) file
with
the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains
subject to such requirements (it being understood that nothing herein shall
limit the Company’s obligations under Section 5(c) of the Investment Agreement)
and the filing of such reports and other documents is required for the
applicable provisions of Rule 144; and
(c) furnish
to the Holder, promptly upon request, (i)
a
written statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (ii)
a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii)
such
other information as may be reasonably requested to permit the Holder to sell
such securities pursuant to Rule 144 without registration.
Section
9. NO
ASSIGNMENT OF REGISTRATION RIGHTS.
The
rights under this Agreement shall not be assignable.
Section
10. AMENDMENT
OF REGISTRATION RIGHTS.
Provisions
of this Agreement may be amended only with the written consent of the Company
and Holder. No such amendment shall be effective to the extent that it applies
to less than all of the Holder of the Registrable Securities.
Section
11. MISCELLANEOUS.
(a)
Any
notices or other communications required or permitted to be given under the
terms of this Agreement that must be in writing will be deemed to have been
delivered (i)
upon
receipt, when delivered personally; (ii)
upon
receipt, when sent by facsimile (provided a confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii)
one day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If
to the
Company:
000
Xxxxx
Xxxx Xx., Xxxxx 0000
Xxxxxxxxxx,
XX 00000
000-000-0000
fax
With
Copy
to:
Xxxxxxx
Xxxxxx, Esq.
0000
Xxxxxxxxxx Xx.
Xxxxxxx
Xxxxx, XX 00000
If
to the
Holder:
EFund
Capital Partners, LLC
000
X.
Xxxxx Xxxx., Xxxxx 000
Xxxx
Xxxxx, XX 00000
000-000-0000
fax
Each
party shall provide five business days prior notice to the other party of any
change in address, phone number or facsimile number.
(b)
Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as
a
waiver thereof.
(c)
The laws
of the State of California shall govern all issues arising from or related
to
this Agreement without regard to the principles of conflict of laws. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the, County of Los Angeles, for the adjudication
of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. If any provision of this Agreement
shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other
jurisdiction.
(d)
This
Agreement and the Transaction Documents constitute the entire agreement among
the parties hereto with respect to the subject matter hereof and thereof. There
are no restrictions, promises, warranties or undertakings, other than those
set
forth or referred to herein and therein.
(e)
This
Agreement and the Transaction Documents supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
(f)
The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof. Whenever required by the context
of this Agreement, the singular shall include the plural and masculine shall
include the feminine. This Agreement shall not be construed as if it had been
prepared by one of the parties, but rather as if all the parties had prepared
the same.
(g)
This
Agreement may be executed in two or more identical counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
(h)
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
*
* *
SIGNATURE
PAGE OF REGISTRATION RIGHTS AGREEMENT
Agreed
as
of the date first written above.
EFUND
SMALL CAP FUND, LP
By:
/s/
Xxxxxxx Xxxxx
Xxxxxxx
Xxxxx, Managing Member
By:
/s/
Xxxxx Xxxxxx
Xxxxx Xxxxxx, President
