REGISTRATION RIGHTS AGREEMENT
Exhibit
10.3
This
Registration Rights Agreement (“Agreement”), dated as of June __, 2007, is made
by and between AFTERSOFT GROUP, INC., a Delaware corporation (“Company”), and
the
investors identified on Schedule A (each such investor is an “Investor,” and all
such investors are, collectively, the “Investors”).
RECITALS
A. WHEREAS,
In
connection with the Securities Purchase Agreement by and among the parties
hereto of even date herewith (the “Securities Purchase Agreement”), the Company
has agreed, upon the terms and subject to the conditions contained therein,
to
issue and sell to the Initial Investors Units consisting of common stock and
warrants to acquire common stock.
B. WHEREAS,
To
induce the Initial Investors to execute and deliver the Securities Purchase
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;
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and the Investors hereby agree as
follows:
1. Definitions.
(a) As
used
in this Agreement, the following terms shall have the following
meaning:
(i) “Business
Day” means any
day
that is not a Saturday, Sunday, or legal holiday in the State of New York when
commercial banking institutions are required to be closed.
(ii) “Closing
Date” means the date of this Agreement.
(iii) “Investor”
and “Investors” have the meaning set forth in the preamble to this Agreement. An
“Initial Investor” is deemed to be such Investor who purchases securities
pursuant to the Securities Purchase Agreement and not a transferee.
(iv) “Potential
Material Event” means any of the following: (a) possession by the Company of
material information not ripe for disclosure in a Registration Statement (as
defined below), 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 (b) 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
(v) “Register”,
“registered” and “registration” refer to a registration effected by preparing
and filing a Registration Statement or Statements in compliance with the
Securities Act and pursuant to Rule 415 under the Securities Act or any
successor rule providing for offering securities on a delayed or continuous
basis (“Rule 415”), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the “SEC”).
(vi) “Registrable
Securities” means such securities comprising the Units, including the Common
Stock and Warrant Shares issued or issuable upon exercise of the Warrants (as
such terms are defined in the Securities Purchase Agreement).
(vii) “Registration
Statement” means a registration statement of the Company under the Securities
Act.
(viii) “Rule
144” means Rule 144 promulgated under the Securities Act or any other similar
rule or regulation of the SEC that may at any time permit the Investors to
sell
securities of the Company to the public without registration (“Rule
144”).
(b) Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement.
2. Registration.
(a) Mandatory
Registration.
The
Company shall, on the date six (6) months from the later
of
the (i) closing of the Securities Purchase Agreement or (ii) the SEC’s having
declared the registration statement on Form SB-2 (File No. 333-140758) (or
any
amendment thereto) effective
(the
“Mandatory Registration Date”), file with the Commission a Registration
Statement (the “Mandatory Registration Statement”), no later than thirty (30)
days from such Mandatory Registration Date (the “Mandatory Filing Date”),
covering the resale of all of the Registrable Securities for an offering to
be
made on a continuous basis pursuant to Rule 415. The Mandatory Registration
Statement required hereunder shall be on Form S-1, Form SB-2 or Form S-3 (as
the
Company may then qualify to use), except if the Company is not then eligible
to
register for resale the Registrable Securities on Form S-1, Form SB-2 or Form
S-3, in which case the Mandatory Registration Statement shall be on another
appropriate form in accordance herewith. The Mandatory Registration Statement
required hereunder shall contain the Plan of Distribution, attached hereto
as
Annex A (which may be modified to respond to comments, if any, received by
the
Commission). The Company shall use its best efforts to cause the Mandatory
Registration Statement to become effective, no later than one hundred twenty
(120) days after the Mandatory Filing Date, (the “Mandatory Effectiveness Date”)
and remain effective as provided herein. The Company shall use its best efforts
to cause the Mandatory Registration Statement to be declared effective under
the
Securities Act.
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The
Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section
2:
(1) in
any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance, unless the Company is already subject to service
in
such jurisdiction and except as may be required by the Securities Act;
or
(2)
during
the period starting with the date sixty (60) days prior to the Company’s
estimated date of filing of, and ending on the date six months immediately
following the effective date of, any registration statement pertaining to
securities of the Company (other than a registration of securities in a Rule
145
transaction, or with respect to an employee benefit plan), provided that the
Company is actively employing in good faith all reasonable efforts to cause
such
registration statement to become effective.
(b) Filing
Default Damages.
If the
Mandatory Registration Statement is not filed on or prior to the Mandatory
Filing Date, then the Company shall pay to the Investors holding Registrable
Securities, for each thirty (30) day period of such failure (or any portion
thereof) and until the date a Mandatory Registration Statement or Demand
Registration Statement (as the case may be) is filed and/or the Registrable
Securities may be sold pursuant to Rule 144(k), as the case may be, an amount
in
cash, as liquidated damages and not as a penalty, equal to two (2%) percent
of
the Purchase Price paid by the Investors for the Units. The maximum liquidated
damages shall be equal to 15% of the Purchase Price. If the Company fails to
pay
any partial liquidated damages pursuant to this Section
2(b)
in full
within five (5) days of the date payable, the Company shall pay interest thereon
at a rate of 15% per annum (or such lesser maximum amount that is permitted
to
be paid by applicable law) to the Investors, accruing daily from the date such
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full.
(c) Effectiveness,
Etc. Default Damages.
If a
Mandatory Registration Statement is not declared effective by the Commission
on
or prior to the Mandatory Effectiveness Date, or the Commission declared any
such Registration Statement effective, but the Investors of Registrable
Securities cannot sell such Registrable Securities thereunder, for any reason
or
no reason, then the Company shall pay to the Investor, for each thirty (30)
day
period (or any portion thereof) until the Registration Statement is declared
effective (or the Investors in Registrable Securities can sell thereunder,
as
the case may be), an amount in cash equal to one (2%) percent of the Purchase
Price paid by the Investors for the Units, up to a maximum of 15%.
Notwithstanding the foregoing, the Company shall not be responsible to pay
any
penalties if the delay in effectiveness is the result of any comment relating
to
Rule 415, provided that the Company is working diligently to cause such
effectiveness.
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3. Obligation
of the Company.
In
connection with the registration of the Registrable Securities set forth in
Section 2 above, the Company shall cause each of the following:
(a) Keep
the
Registration Statement continuously effective at all times until the earliest
of
(i) the date when the Investors may sell all Registrable Securities under Rule
144(k) without volume limitations, or (ii) the date the Investors no longer
own
any of the Registrable Securities (collectively, the “Registration Period”),
which 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 the light of the circumstances
under which they were made, not misleading;
(b) Prepare
and file with the SEC such amendments (including post-effective amendments)
and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to keep the Registration
Statement effective at all times during the Registration Period, and, during
the
Registration Period, and to comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities of the Company
covered by the Registration Statement until the expiration of the Registration
Period;
(c)
Notify
Investors (and, in the case of Section 3(c)(i)(A) below, not less than one
(1)
Business Day prior to such filing) and (if requested by any such person) confirm
such notice in writing no later than one (1) Business Day following the day
(i):
(A) when a prospectus or any prospectus supplement or post-effective amendment
to the Registration Statement is proposed to be filed; (B) whenever the SEC
notifies the Company whether there will be a “review” of such Registration
Statement; (C) whenever the Company receives (or a representative of the Company
receives on its behalf) any oral or written comments from the SEC with respect
to a Registration Statement (copies or, in the case of oral comments, written
or
oral summaries of such comments shall be promptly furnished by the Company
to
counsel appointed by the investors (“Investors’ Counsel”)); and (D) with respect
to the Registration Statement or any post-effective amendment, when the same
has
become effective; (ii) of any request by the SEC or any other federal or state
governmental authority for amendments or supplements to the Registration
Statement or the prospectus or for additional information; (iii) of the issuance
by the SEC of any stop order suspending the effectiveness of the Registration
Statement covering any or all of the Registrable Securities or the initiation
of
any proceedings for that purpose; (iv) if at any time any of the representations
or warranties of the Company contained in any agreement (including any
securities purchase agreement) contemplated hereby ceases to be true and correct
in all material respects; (v) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any jurisdiction,
or the initiation or threatening of any proceeding for such purpose; and (vi)
of
the occurrence of any event that to the knowledge of the Company makes any
statement made in the Registration Statement or the prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to the Registration Statement,
the prospectus or other documents so that, in the case of the Registration
Statement or the prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be
stated therein or necessary to make the statements therein, in the light of
the
circumstances under which they were made, not misleading. In addition, the
Company shall furnish Investors’ Counsel with copies of all intended written
responses to the comments contemplated in clause (C) of this Section not later
than one (1) Business Day in advance of the filing of such responses with the
SEC so that the Investors shall have the opportunity to comment
thereon;
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(d) Furnish
to the Investors (i) promptly after the same is prepared and publicly
distributed, filed with the SEC, or received by the Company, one (1) copy of
the
Registration Statement, each preliminary prospectus and the prospectus, and
each
amendment or supplement thereto, and (ii) such number of copies of a prospectus,
including a preliminary prospectus, and all amendments and supplements thereto
and such other documents, as the Investors may reasonably request in order
to
facilitate the disposition of the Registrable Securities owned by the
Investors;
(e) Use
all
diligent efforts to (i) register and/or qualify the Registrable Securities
covered by the Registration Statement under such other securities or blue sky
laws of such jurisdictions as the Investors may reasonably request, (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 at all times during the
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualification 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 (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(f), (B) subject itself
to general taxation in any such jurisdiction, (C) file a general consent to
service of process in any such jurisdiction, (D) provide any undertakings that
cause more than nominal expense or burden to the Company or (E) make any change
in its charter or by-laws or any then-existing contracts, which in each case
the
Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders;
(f) As
promptly as practicable after becoming aware of such event, notify the Investors
of the occurrence of any event of which the Company has knowledge, as a result
of which the prospectus included in the Registration Statement, as then in
effect, includes any untrue statement of a material fact or omits to state
a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (“Registration Default”), and use all diligent efforts promptly to
prepare a supplement or amendment to the Registration Statement or other
appropriate filing with the SEC to correct such untrue statement or omission,
and any other necessary steps to cure the Registration Default, and deliver
a
number of copies of such supplement or amendment to the Investors as the
Investors may reasonably request;
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(g) As
promptly as practicable after becoming aware of such event, notify the Investors
(or, in the event of an underwritten offering, the managing underwriters) of
the
issuance by the SEC of any notice of effectiveness or any stop order or other
suspension of the effectiveness of the Registration Statement at the earliest
possible time;
(h) Notwithstanding
the foregoing, if at any time or from time to time after the date of
effectiveness of the Registration Statement, the Company notifies the Investors
in writing of the existence of a Potential Material Event (“Blackout Notice”),
the Investors shall not offer or sell any Registrable Securities, or engage
in
any other transaction involving or relating to the Registrable Securities,
from
the time of the giving of notice with respect to a Potential Material Event
until the Investors receive written notice from the Company that such Potential
Material Event either has been disclosed to the public or no longer constitutes
a Potential Material Event; provided,
however,
that (a)
the Company may not so suspend the right to such holders of Registrable
Securities for more than three (3) ten (10) day periods in the aggregate during
any 12-month period (“Blackout Period”) with at least a ten (10) Business Day
interval between such periods, during the periods the Registration Statement
is
required to be in effect, or (b) that if such Blackout Period exceeds the
permitted ten (10) day periods, the Company shall pay damages of 1% of the
cost
of all common stock then held by the Investors for each fifteen (15) day period
or portion thereof, beginning on the date of the suspension;
(i) Cooperate
with the Investors to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request and registration in such names as the Investors
may request; and, within five (5) Business Days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company
to
deliver, to the transfer agent for the Registrable Securities (with copies
to
the Investors) an appropriate instruction and opinion of such counsel, if so
required by the Company’s transfer agent; and
(j) Take
all
other reasonable actions necessary to expedite and facilitate distribution
to
the Investors of the Registrable Securities pursuant to the Registration
Statement.
4. Obligations
of the Investors.
In
connection with the registration of the Registrable Securities, each Investor
shall have the following obligations;
(a) 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 the Investor that the Investor shall timely furnish 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 be reasonably required to effect the registration of such Registrable
Securities and shall timely execute such documents in connection with such
registration as the Company may reasonably request.
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(b) The
Investor, by such Investor’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 the Registration Statement hereunder;
and
(c) The
Investor agrees that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in Sections 3(g), 3(h) or 3(i)
above, the Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until the Investor receives the copies of the supplemented or amended
prospectus, or notice, contemplated by Sections 3(g), 3(h) or 3(i) and, if
so
directed by the Company, the Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate
of
destruction) all copies in the Investor’s possession, of the prospectus covering
such Registrable Securities current at the time of receipt of such
notice.
5. Expenses
of Registration.
(a)
All
reasonable expenses incurred in connection with Registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation,
all
Registration, listing, and qualifications fees, printers and accounting fees,
the fees and disbursements of counsel for the Company shall be borne by the
Company.
(b) Except
as
otherwise provided for in Schedule 5(b), the Company has not previously entered
into any agreement granting any registration rights with respect to any of
its
securities to any person.
Except
as
otherwise provided for in this Section 5, and without limiting the generality
of
the foregoing, without the written consent of the Investors, the Company shall
not grant to any person the right to request the Company to Register any
securities of the Company under the Securities Act unless the rights so granted
are subject in all respects to the prior rights in full of the Investors set
forth herein, and are not otherwise in conflict or inconsistent with the
provisions of this Agreement or the Purchase Agreement.
6. Indemnification. After
Registrable Securities are included in a Registration Statement under this
Agreement:
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(a) To
the
extent permitted by law, the Company will indemnify and hold harmless, the
Investor(s), the directors, if any, of the Investor(s), the officers, if any,
of
the Investor(s), each person, if any, who controls Investor(s) within the
meaning of the Securities Act or the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) (each, an “Indemnified Person”), against any losses,
claims, damages, liabilities or expenses (joint or several) incurred
(collectively, “Claims”) to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, 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 contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or 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 the 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 Securities Act, the Exchange Act, any state securities law or
any
rule or regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being
collectively referred to as “Violations” or individually a “Violation”). The
Company shall reimburse the Investor(s) 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) shall not (i) apply
to
any Claims arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information furnished to the Company by or on behalf
of any Indemnified Person expressly for use in connection with the preparation
of the Registration Statement or any such amendment thereof or supplement
thereto, if such prospectus was timely made available by the Company pursuant
to
Section 3(b) hereof; (ii) with respect to any preliminary prospectus, inure
to
the benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(b) hereof; (iii)
be
available to the extent such Claim is based on a failure of the Investors to
deliver or cause to be delivered the prospectus made available by the Company;
or (iv) apply to 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. The Investor(s) will indemnify the Company, its
officers, directors and agents (including legal counsel) against any claims
arising out of or based upon a Violation which occurs in reliance upon and
in
conformity with information furnished in writing to the Company, by or on behalf
of such Investor(s), expressly for use in connection with the preparation of
the
Registration Statement, subject to such limitations and conditions set forth
in
the previous sentence. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
or indemnified party.
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(b) Promptly
after receipt by an Indemnified Person under this Section 6 of notice of the
commencement of any action (including any governmental action), such Indemnified
Person 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, assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person, as the case may be; provided,
however,
that an
Indemnified Person shall have the right to retain its own counsel with the
reasonable fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person and any other party represented by such counsel
in such proceeding. In such event, the Company shall pay for only one separate
legal counsel for the Investor(s) selected by the Investor(s). 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 under this Section 6, except to the extent
that the indemnifying party is prejudiced in its ability to defend such action.
The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due
and
payable.
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
(a) 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; (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities
who
was not guilty of such fraudulent misrepresentation; and (c) 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.
8. Reports
under Exchange Act.
With a
view to making available to the Investors the benefits of Rule 144, the Company
agrees to use its reasonable best efforts 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 Exchange Act;
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(c) furnish
to the Investors so long as the Investors own Registrable Securities, promptly
upon request, (i) a written statement by the Company that it has complied with
the reporting requirements of Rule 144, the Securities Act and the Exchange
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 solely if unavailable
by XXXXX, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration; and
(d)
at
the
request of any Investor of Registrable Securities, give its transfer agent
irrevocable instructions (supported by an opinion of Company counsel, if
required or requested by the transfer agent) to the effect that, upon the
transfer agent’s receipt from such Investor of:
(i)
a
certificate (a “Rule 144 Certificate”) certifying (A) that such Investor has
held the shares of Registrable Securities which the Investor proposes to sell
(the “Securities Being Sold”) for a period of not less than (1) year and (B) as
to such other matters as may be appropriate in accordance with Rule 144 under
the Securities Act, and
(ii)
an
opinion of counsel acceptable to the Company (for which purposes it is agreed
that the initial Investor’s Counsel shall be deemed acceptable if such opinion
is not given by Company Counsel) that, based on the Rule 144 Certificate,
Securities Being Sold may be sold pursuant to the provisions of Rule 144, even
in the absence of an effective Registration Statement,
the
transfer agent is to effect the transfer of the Securities Being Sold and issue
to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the transfer agent’s books and records (except to the extent any such
legend or restriction results from facts other than the identity of the
Investor, as the seller or transferor thereof, or the status, including any
relevant legends or restrictions, of the shares of the Securities Being Sold
while held by the Investor). If the transfer agent requires any additional
documentation at the time of the transfer, the Company shall deliver or cause
to
be delivered all such reasonable additional documentation as may be necessary
to
effectuate the issuance of an unlegended certificate.
9. Miscellaneous.
(a) Registered
Owners.
A person
or entity is deemed to be a holder of Registrable Securities whenever such
person or entity owns of record such Registrable Securities. If the Company
receives conflicting instructions, notices or elections from two or more persons
or entities with respect to the same Registrable Securities, the Company shall
act upon the basis of instructions, notice or election received from the
registered owner of such Registrable Securities.
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(b) Rights
Cumulative; Waivers.
The
rights of each of the parties under this Agreement are cumulative. The rights
of
each of the parties hereunder shall not be capable of being waived or varied
other than by an express waiver or variation in writing. Any failure to exercise
or any delay in exercising any of such rights shall not operate as a waiver
or
variation of that or any other such right. Any defective or partial exercise
of
any of such rights shall not preclude any other or further exercise of that
or
any other such right. No act or course of conduct or negotiation on the part
of
any party shall in any way preclude such party from exercising any such right
or
constitute a suspension or any variation of any such right.
(c) Benefit;
Successors Bound.
This
Agreement and the terms, covenants, conditions, provisions, obligations,
undertakings, rights, and benefits hereof, shall be binding upon, and shall
inure to the benefit of, the undersigned parties and their heirs, executors,
administrators, representatives, successors, and permitted assigns.
(d) Entire
Agreement.
This
Agreement contains the entire agreement between the parties with respect to
the
subject matter hereof. There are no promises, agreements, conditions,
undertakings, understandings, warranties, covenants or representations, oral
or
written, express or implied, between them with respect to this Agreement or
the
matters described in this Agreement, except as set forth in this Agreement
and
in the other documentation relating to the transactions contemplated by this
Agreement. Any such negotiations, promises, or understandings shall not be
used
to interpret or constitute this Agreement.
(e) Assignment. The
rights to have the Company register the Registrable Securities pursuant to
this
Agreement may be assigned by the Investor(s) to any transferee or assignee
(the
“Transferee”), only if: (a) the Transferee is an Accredited Investor under
Regulation D not in competition with the Company; (b) the Company receives
a
legal opinion in form and substance satisfactory to the Company that the
proposed transfer complies with federal and state securities laws and does
not
adversely effect the validity of the transactions executed (or to be executed)
under this Agreement and the Purchase Agreement under federal and state
securities laws; (c) the assignment requires that the Transferee be bound by
all
of the provisions contained in this Agreement, and the Investors, the Company
and the Transferee enter into a written agreement, which shall be enforceable
by
the Company against the Transferee and by the Transferee against the Company,
to
assign such rights; and (d) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws. Prior
to the assignment the Company shall have the right to perform its own due
diligence regarding the Transferee and have the right to approve the assignment,
provided that such approval shall not be unreasonably withheld. In the event
of
any delay in filing or effectiveness of the Registration Statement as a result
of such assignment, the Company shall not be liable for any damages arising
from
such delay.
(f) Amendment.
Any
provision of this Agreement may be amended and the observance thereof may be
waived (either generally or in a particular instance and either retroactively
or
prospectively), only with the written consent of the Company and the Investors.
Any amendment or waiver effected in accordance with this Section 9(f) shall
be
binding upon the Company and any subsequent Transferees.
11
(g) Severability.
Each
part of this Agreement is intended to be severable. In the event that any
provision of this Agreement is found by any court or other authority of
competent jurisdiction to be illegal or unenforceable, such provision shall
be
severed or modified to the extent necessary to render it enforceable and as
so
severed or modified, this Agreement shall continue in full force and
effect.
(h) Notices.
Notices
required or permitted to be given hereunder shall be in writing and shall be
deemed to be sufficiently given when personally delivered (by hand, by courier,
by telephone line facsimile transmission, receipt confirmed, or other means)
or
sent by certified mail, return receipt requested, properly addressed and with
proper postage pre-paid (i) if to the Company, at its executive office and
(ii)
if to the Investors, at the address set forth under its name in the Purchase
Agreement, with a copy to its designated attorney, or at such other address
as
each such party furnishes by notice given in accordance with this Section 9(h),
and shall be effective, when personally delivered or delivered via a nationally
recognized overnight courier, upon receipt and, when so sent by certified mail,
five (5) Business Days after deposit with the United States Postal
Service.
(i) Governing
Law.
This
Agreement shall be governed by the interpreted in accordance with the laws
of
the State of New York without reference to its conflicts of laws rules or
principles. Each of the parties consents to the exclusive jurisdiction of the
federal courts of the State of New York in connection with any dispute arising
under this Agreement and hereby waives, to the maximum extent permitted by
law,
any objection, including any objection based on forum
non coveniens,
to the
bringing of any such proceeding in such jurisdictions. Each
of
the parties hereby waives a trial by jury in any action, proceeding or
counterclaim brought by either of the parties hereto against the other in
respect of any matter arising out of or in connection with this
Agreement.
(j) Consents.
The
person signing this Agreement on behalf of each party hereby represents and
warrants that he has the necessary power, consent and authority to execute
and
deliver this Agreement on behalf of that party.
(k) Further
Assurances.
In
addition to the instruments and documents to be made, executed and delivered
pursuant to this Agreement, the parties hereto agree to make, execute and
deliver or cause to be made, executed and delivered, to the requesting party
such other instruments and to take such other actions as the requesting party
may reasonably require to carry out the terms of this Agreement and the
transactions contemplated hereby.
(l) Section
Headings.
The
Section headings in this Agreement are for reference purposes only and shall
not
affect in any way the meaning or interpretation of this Agreement.
12
(m) Construction.
Unless
the context otherwise requires, when used herein, the singular shall be deemed
to include the plural, the plural shall be deemed to include each of the
singular, and pronouns of one or no gender shall be deemed to include the
equivalent pronoun of the other or no gender.
(n) Execution
in Counterparts.
This
Agreement may be executed in any number of 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 telephone line facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement. A facsimile
transmission of this signed Agreement shall be legal and binding on all parties
hereto.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
13
(i) IN
WITNESS WHEREOF,
the
parties have caused this Agreement to be duly executed by their respective
officers thereunto duly authorized as of the day and year first above
written.
COMPANY:
AFTERSOFT
GROUP, INC.
By:
_________________________________
Name:
______________________________
Title:________________________________
INVESTORS:
[____________________________________]
By:_________________________________
Name:_______________________________
Title:________________________________
[____________________________________]
By:_________________________________
Name:_______________________________
Title:________________________________
Schedule
5(b)
The
Company has not granted any other registration rights to any other person as
of
the date of this Agreement; however, the Company is in the process of
registering approximately 71,250,000 shares of Common Stock pursuant to that
certain registration statement on Form SB-2 filed on February 16, 2007 (File
No.
333-140758).
Schedule
1
ANNEX
A
Plan
of
Distribution
The
Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which
the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker/dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker/dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker/dealer as principal and resale by the broker/dealer for
its
account;
|
|
·
|
an
exchange distribution in accordance with the Rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
settlement
of short sales;
|
|
·
|
broker/dealers
may agree with the Selling Stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
|
·
|
a
combination of any such methods of sale;
and
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker/dealers
engaged by the Selling Stockholders may arrange for other brokers/dealers to
participate in sales. Broker/dealers may receive commissions from the Selling
Stockholders (or, if any broker/dealer acts as agent for the purchaser of
shares, from the purchaser) in amounts to be negotiated. The Selling
Stockholders do not expect these commissions to exceed what is customary in
the
types of transactions involved.
The
Selling Stockholders may from time to time pledge or grant a security interest
in some or all of the shares of common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock from time to time under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act of 1933 amending the list
of
Selling Stockholders to include the pledgee, transferee or other successors
in
interest as Selling Stockholders under this prospectus.
A-1
The
Selling Stockholders and any broker/dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker/dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions under
the
Securities Act. The Selling Stockholders have informed the Company that it
does
not have any agreement or understanding, directly or indirectly, with any person
to distribute the Common Stock.
The
Company is required to pay all fees and expenses incident to the registration
of
the shares. The Company has agreed to indemnify the Selling Stockholders against
certain losses, claims, damages and liabilities, including liabilities under
the
Securities Act.
A-2
EXHIBIT
A
SELLING
STOCKHOLDER QUESTIONNAIRE
Aftersoft
Group, Inc.
c/o
Gersten Xxxxxx LLP
000
Xxxxxxxxx Xxxxxx - 0xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Ladies
and Gentlemen:
I
acknowledge that I am a holder of securities of Aftersoft Group, Inc. (the
“Company”).
I
understand that I will be named as a selling stockholder in the prospectus
that
forms a part of the registration statement on Form [SB-2] (or other applicable
form) that the Company will file with the Securities and Exchange Commission
to
register under the Securities Act of 1933, as amended, the securities I expect
to sell. The Company will use the information that I provide in this
Questionnaire to ensure the accuracy of the registration statement and the
prospectus.
|
Please
answer every question.
If
the answer to any question is “none” or “not applicable,” please so
state.
|
| 1. |
Name. Type
or print your name exactly as it should appear in the Registration
Statement.
|
____________________________________________________
|
2.
|
Manner
of Ownership of Shares:
|
Individual
_______ Community Property ________ Tenants
in Common _______
Joint
Tenants with Rights of Survivorship ________ Corporate
________
|
Partnership
______ Trust ________ Other
___________________________
|
|
3.
|
Contact
Information. Provide
the address, telephone number and fax number where you can be reached
during business hours.
|
Address:
_______________________________________________________________
_______________________________________________________________
Phone: _______________________________________________________________
Fax:
_______________________________________________________________
|
4.
|
Relationship
with the Company. Describe
the nature of any position, office or other material relationship
(if any)
that you have had with the Company during the past three
years.
|
_____________________________________________________________
Exhibit
1
_____________________________________________________________
|
5.
|
Organizational
Structure.
Please indicate or (if applicable) describe how you are organized.
|
|
(a)
|
Are
you a natural
person?
(if
so, please xxxx the box and skip to Question 5)
|
¨
Yes ¨
No
|
|
|
(b)
|
Are
you a reporting
company
under the 1934 Act?
(if
so, please xxxx the box and skip to Question 5)
|
¨
Yes ¨
No
|
|
|
(c)
|
Are
you a majority-owned
subsidiary
of
a reporting company under the 1934 Act?
(if
so, please xxxx the box and skip to Question 5)
|
¨
Yes ¨
No
|
|
|
(d)
|
Are
you a registered
investment fund
under the 1940 Act?
(if
so, please xxxx the box and skip to Question 5)
|
¨
Yes ¨
No
|
If
you
have answered "no" to all of the foregoing questions, please describe: (i)
the
exact legal description of your entity (e.g., corporation, partnership, limited
liability company, etc.); (ii) whether the legal entity so described is managed
by another entity and the exact legal description of such entity (repeat this
step until the last entity described is managed by a person or persons, each
of
whom is described in any one of (a) through (d) above), (iii) the names of
each
person or persons having voting and investment control over the Company's
securities that the entity owns (e.g., director(s), general partner(s), managing
member(s), etc.).
Legal
Description of Entity:________________________________________________________
Name
of Entity(ies) Managing Such Entity (if any):
_____________________________________
___________________________________________________________________
___________________________________________________________________
Name
of Entity(ies) Managing such Entity(ies) (if any):
_________________________________
___________________________________________________________________
___________________________________________________________________
Name(s)
of Natural Persons Having Voting or Investment
Control
Over the Shares Held by such Entity(ies):
______________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
Exhibit
2
|
6.
|
Ownership
of the Company’s Securities.
This question covers your beneficial ownership of the Company’s
securities. Please consult the Appendix
A
to
this Questionnaire for information as to the meaning of “beneficial
ownership.” State the number of shares of the Company’s common stock that
you beneficially owned as of the date this Questionnaire is
signed:
|
No.
of Shares of Stock _______________
|
7.
|
Acquisition
of Shares.
Please describe below the manner in which you acquired your shares
of
Common Stock of the Company including, but not limited to, the date,
the
name and address of the seller(s), the purchase price and pursuant
to
which documents (the “Acquisition
Documents”).
Please forward such documents used to acquire your shares as provided
below.
|
|
8.
|
Plan
of Distribution.
I
have reviewed the proposed “Plan of Distribution” attached to this
Registration Rights Agreement as Annex
A,
and agree that the statements contained therein reflect my intended
method(s) of distribution or, to the extent these statements are
inaccurate or incomplete, I have communicated in writing to one of
the
parties listed above my signature to any changes to the proposed
“Plan of
Distribution” that are required to make these statements accurate and
complete. ¨ (Please
check the box if you have made any changes to Annex
A)
|
|
9.
|
Reliance
on Responses.
I
acknowledge and agree that the Company and its legal counsel shall
be
entitled to rely on my responses in this Questionnaire in all matters
pertaining to the registration statement and the sale of any shares
of
common stock of the Company pursuant to the registration
statement.
|
|
10.
|
NASD.
The National Association of Securities Dealers, Inc. (“NASD”)
may request, in connection with their review of the Registration
Statement
and Prospectus under the Securities Act of 1933, as amended, that
the
Company inform them of the names of all persons who purchased securities
from the Company, together with any affiliations with the NASD of
such
purchasers. In order to aid the Company in responding to such request,
the
undersigned furnishes the following
information:
|
Exhibit
3
PART
A: DETERMINATION OF RESTRICTED PERSON STATUS:
Please
check all appropriate categories.
The
undersigned is:
|
___
|
(i)
a broker-dealer;
|
|
___
|
(ii)
an officer, director, general partner, associated person1
or
employee of a broker-dealer (other than a limited business
broker-dealer)
2;
|
|
___
|
(iii)
an agent of a broker-dealer (other than a limited business broker-dealer)
that is engaged in the investment banking or securities
business;
|
|
___
|
(iv)
an immediate family member3
of
a person described in (ii) or (iii) above. Under certain circumstances,
if
the undersigned checks this category, he/she/it may be able to participate
in New Issue (as that term is defined in NASD Rule 2790 or Section
3(a)(11) of
the Securities Act of 1934) investments. The Company may request
additional information in order to determine the eligibility
of the
undersigned under this Restricted Person
category;
|
|
___
|
(v)
a finder or any person acting in a fiduciary capacity to a managing
underwriter, including, but not limited to, attorneys, accountants
and
financial consultants;
|
|
___
|
(vi)
a person who has authority to buy or sell securities for a bank,
savings
and loan institution, insurance company, investment company, investment
advisor or collective investment account4
(including a private investment vehicle such as a hedge fund or an
offshore fund);
|
|
___
|
(vii)
an immediate family member of a person described in (v) or (vi) above
who
materially supports5,
or receives material support from, the
undersigned;
|
|
___
|
(viii)
a person listed or required to be listed in Schedule A, B or C of
a Form
BD (other than with respect to a limited business broker-dealer),
except
persons whose listing on Schedule A, B or C is related to a person
identified by an ownership code of less than 10% on Schedule
A;
|
|
___
|
(ix)
a person that (A) directly or indirectly owns 10% or more of a public
reporting company listed, or required to be listed, in Schedule A
of a
Form BD or (B) directly or indirectly owns 25% or more of a public
reporting company listed, or required to be listed in Schedule B
of a Form
BD, in each case (A) or (B), other than a reporting company that
is listed
on a national securities exchange or is traded on the Nasdaq National
Market, or other than with respect to a limited business
broker/dealer;
|
1 A person “associated with” a broker-dealer includes any natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by a broker-dealer, any partner, director, officer or sole proprietor of a broker-dealer.
2 A
limited
business broker-dealer is any broker-dealer whose authorization to engage
in the
securities business is limited solely to the purchase and sale of investment
company/variable contracts securities and direct participation program
securities.
3 The
term
“Immediate family” includes the investor’s: (i) parents, (ii) mother-in-law or
father-in-law, (iii) husband or wife, (iv) brother or sister, (v) brother-in-law
or sister-in-law, (vi) son-in-law or daughter-in-law, (vii) children, and
(viii)
any other person who is supported, directly or indirectly, to a material
extent
by an officer, director, general partner, employee, agent of a broker-dealer
or
person associated with a broker-dealer.
4 A
“collective investment account” is any hedge fund, investment corporation, or
any other collective investment vehicle that is engaged primarily in the
purchase and/or sale of securities, investment clubs (groups of individuals
who
pool their money to invest in stock or other securities and who are collectively
responsible for making investment decisions) and family investment vehicles
(legal entities that are beneficially owned solely by immediate family members
(as defined above)) are not considered collective investment
accounts.
5 The
term “material” support” means directly or indirectly providing more than 25% of
a person’s income in the prior calendar year or living in the same household
with a member of one’s Immediate family.
Exhibit
4
|
___
|
(x)
an immediate family member of a person described in (viii) or (ix)
above.
Under certain circumstances, if the undersigned places a check
next to
this category, he/she/it may be able to participate in New Issue
investments. The Company may request additional information in
order to
determine the eligibility of the undersigned under this Restricted
Person
category;
|
|
___
|
(xi)
any entity (including a corporation, partnership, limited liability
company, trust or other entity) in which any person or persons
listed in
(i)-(x) above has a beneficial interest6;
or
|
___ None
of
the above categories apply and the undersigned is eligible to participate in
New
Issue securities.
6 The
term
‘beneficial interest” means any economic interest such as the right to share in
gains or losses. The receipt of a management or performance based fee
for
operating a collective investment account, or other fee for acting in
a
fiduciary capacity, is not considered a beneficial interest in the account;
however, if such fee is subsequently invested into the account (as a
deferred
fee arrangement or otherwise), it is considered a beneficial interest
in that
account.
Exhibit
5
PART
B: DETERMINATION OF EXEMPTED ENTITY STATUS:
The
undersigned is:
|
___
|
(i)
a publicly traded entity (other than a broker-dealer or an affiliate
of a
broker-dealer, where such broker-dealer is authorized to engage
in the
public offering of New Issues either as a selling group member
or
underwriter) that is listed on a national securities exchange or
traded on
the Nasdaq National Market or is a foreign issuer whose securities
meet
the quantitative designation criteria for listing on a national
securities
exchange or trading on the Nasdaq National
Market;
|
|
___
|
(ii)
an investment company registered under the Investment Company Act
of 1940,
as amended;
|
|
___
|
(iii)
a corporation, partnership, limited liability company, trust or
any other
entity (including a private investment vehicle such as a hedge
fund or an
offshore fund, or a broker-dealer organized as an investment partnership)
and
|
(A)
the
beneficial interests of Restricted Persons do not exceed in the aggregate
10% of
such entity; or
(B)
such
entity limits participation by Restricted Persons to not more than 10% of
the
profits and losses of New Issues;
|
___
|
(iv)
an investment company organized under the laws of a foreign jurisdiction
and
|
(A)
the
investment company is listed on a foreign exchange or authorized for sale
to the
public by a foreign regulatory authority; and
(B)
no
person owning more than 5% of the shares of the investment company is a
Restricted Person;
|
___
|
(v)
(A) an employee benefits plan under the U.S. Employee Retirement
Income
Security Act of 1974, as amended, that is qualified under Section
401(a)
of the Internal Revenue Code of 1986, as amended (the “Code”)
and such plan is not sponsored solely by a broker-dealer, (B) a
state or
municipal government benefits plan that is subject to state and/or
municipal regulation or (C) a church plan under Section 414(e)
of the
Code;
|
|
___
|
(vi)
a tax exempt charitable organization under Section 501(c)(3) of
the
Code;
|
|
___
|
(vii)
a common trust fund or similar fund as described in Section
3(a)(12)(A)(iii) of the Securities Exchange Act of 1934, as amended,
and
the Company
|
(A)
has
investments from 1,000 or more accounts, and
(B)
does
not limit beneficial interests in the Company principally to trust accounts
of
Restricted Persons; or
|
___
|
(viii)
an insurance company general, separate or investment account,
and
|
(A)
the
account is funded by premiums from 1,000 or more policyholders, or, if a
general
account, the insurance company has 1,000 or more policyholders, and
(B)
the
insurance company does not limit the policyholders whose premiums are used
to
fund the account principally to Restricted Persons, or, if a general account,
the insurance company does not limit its policyholders principally to Restricted
Persons.
Exhibit
6
Please
acknowledge that your answers to the foregoing questions are true and correct
to
the best of your information and belief by signing and dating this Questionnaire
where indicated below. Please return the completed executed questionnaire
via
fax
to
Xxxxx
Xxxxxxxx, c/o Gersten Xxxxxx LLP 212-980-5192 as soon as
possible.
If
at any
time you discover that your answer to any question was inaccurate, or if any
event occurring after your completion hereof would require a change in your
answer to any questions, please immediately contact Xxxxx Xxxxxxxx c/o Gersten
Xxxxxx LLP at 212-752-9700.
|
Date:
|
, 2007 | ||
|
(Print
name of selling stockholder)
|
|||
|
By:
|
|||
|
(Signature)
|
|||
|
Name:
|
|||
|
(Print
name)
|
|||
|
Title:
|
|||
Exhibit
7
APPENDIX
A
|
1.
|
Definition
of “Beneficial Ownership”
|
|
(a)
|
A
“Beneficial Owner” of a security includes any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship
or otherwise has or shares:
|
|
(1)
|
Voting
power which includes the power to vote, or to direct the voting of,
such
security; and/or
|
|
(2)
|
Investment
power which includes the power to dispose, or direct the disposition
of,
such security.
|
Please
note that either
voting
power or
investment power, or
both, is
sufficient for you to be considered the beneficial owner of shares.
|
(b)
|
Any
person who, directly or indirectly, creates or uses a trust, proxy,
power
of attorney, pooling arrangement or any other contract, arrangement
or
device with the purpose or effect of divesting such person of beneficial
ownership of a security or preventing the vesting of such beneficial
ownership as part of a plan or scheme to evade the reporting requirements
of the federal securities acts shall be deemed to be the beneficial
owner
of such security.
|
|
(c)
|
Notwithstanding
the provisions of paragraph (a), a person is deemed to be the “beneficial
owner” of a security, if that person has the right to acquire beneficial
ownership of such security within 60 days, including but not limited
to
any right to acquire: (A) through the exercise of any option, warrant
or right; (B) through the conversion of a security; (C) pursuant
to the power to revoke a trust, discretionary account or similar
arrangement; or (D) pursuant to the automatic termination of a trust,
discretionary account or similar arrangement; provided, however,
any
person who acquires a security or power specified in paragraphs (A),
(B)
or (C) above, with the purpose or effect of changing or influencing
the
control of the issuer, or in connection with or as a participant
in any
transaction having such purpose or effect, immediately upon such
acquisition shall be deemed to be the beneficial owner of the securities
which may be acquired through the exercise or conversion of such
security
or power.
|
Exhibit
8
