REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (this “Agreement”)
is
made and entered into as of June 29, 2007, by and among ProElite, Inc., a New
Jersey corporation (the “Company”),
on
the one hand, and the purchasers signatory hereto (each such purchaser, a
“Purchaser”
and
collectively, the “Purchasers”)
and
Hunter World Markets, Inc. (“Hunter”),
on
the other hand.
This
Agreement is made pursuant to the Securities Purchase Agreement, dated as of
the
date hereof among the Company and the Purchasers (the “Purchase
Agreement”),
the
Placement Agent Agreement between Hunter and ProElite, Inc. dated June 25,
2007
(the “Placement
Agreement”).
The
Company, and the Purchasers hereby agree as follows:
1. Definitions.
All
capitalized terms not defined herein shall have the same meanings as set forth
in the Placement Agreement.
As used
in this Agreement, the following terms shall have the following
meanings:
“Advice”
shall
have the meaning set forth in Section 6(c).
“Closing”
means
the earlier of (i) the date upon which $25 million of Units have been sold,
or
(ii) July 31, 2007, subject to extensions by the Company and the Placement
Agent
upon notice to the then subscribers. One or more closings may be held from
time
to time in the Company’s discretion. Notwithstanding the foregoing, any funds
raised by the Placement Agent shall be subject to closing in Placement Agent’s
sole discretion.
“Commission”
shall
mean the Securities and Exchange Commission.
“Common
Stock”
means
the Company’s common stock, par value $0.0001 per share.
“Effectiveness
Date”
means,
with respect to the Registration Statement required to be filed hereunder,
the
earlier of (a) ninety (90) days after the Filing Date and (b) the fifth trading
day following the date on which the Company is notified by the Commission that
the Registration Statement will not be reviewed or is no longer subject to
further review and comments.
“Effectiveness
Period”
shall
have the meaning set forth in Section 2(a).
“Event”
shall
have the meaning set forth in Section 2(b).
“Event
Date”
shall
have the meaning set forth in Section 2(b).
“Exchange
Act”
means
the
Securities Exchange Act of 1934, as amended, or any successor Federal statute,
and the rules and regulations of the Commission promulgated thereunder, all
as
the same shall be in effect from time to time.
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“Filing
Date”
means,
with respect to the Registration Statement required to be filed hereunder,
forty-five (45) days after the date of the Closing.
“Holder”
or
“Holders”
means
the holder or holders, as the case may be, from time to time, of Registrable
Securities.
“Indemnified
Party”
shall
have the meaning set forth in Section 5(c).
“Indemnifying
Party”
shall
have the meaning set forth in Section 5(c).
“Losses”
shall
have the meaning set forth in Section 5(a).
“Person”
means
any
individual, association, corporation, estate, limited liability company, limited
partnership, partnership, venture or other entity.
“Placement
Agent”
shall
mean Hunter World Markets, Inc.
“Placement
Agent Warrant”
means
the five-year warrant issued to the Placement Agent to purchase Common Stock
of
the Company equal to 100% of the number of shares included in the Units sold
in
the Company’s private placement offering, exercisable at $7.00 per share.
“Plan
of Distribution”
shall
have the meaning set forth in Section 2(a).
“Prior
Offering Shares”
means
securities issued to certain investors and the Placement Agent in connection
with the Company’s last private placement offering on October 3,
2006.
“Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
“Prospectus”
means
the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by the Registration Statement,
and
all other amendments and supplements to the prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
“Registrable
Securities”
means,
as to this Agreement only, all of the Shares, Warrants, Prior Offering
Shares and the Placement Agent Warrants, held together with any shares of Common
Stock issued or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing, it being
understood that upon exercise, the holder of the Warrants and the Placement
Agent Warrants will receive shares of the Common Stock of the Company.
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“Registration
Statement”
means
the registration statements required to be filed hereunder, including (in each
case) the Prospectus, amendments and supplements to the registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated
by reference in the registration statement.
“Rule
415”
means
Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same purpose and
effect as such Rule.
“Rule
424”
means
Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same purpose and
effect as such Rule.
“Securities
Act”
shall
mean the Securities Act of 1933, as amended.
“Selling
Shareholder Questionnaire”
shall
have the meaning set forth in Section 3(a).
“Shares”
shall
have the meaning set forth below.
“Strategic
Investors”
mean
corporate or individual investors that, in addition to the investment they
make
in the Company through the purchase of securities offered in the Company’s
private placement offering for a minimum of $25 million and a maximum of $60
million, add value to the Company’s business and to the Company.
“Transaction
Documents”
mean
this Agreement, the escrow agreement entered into by and between the Company
and
Xxxxx Fargo Bank, N.A., the Placement Agreement, the Purchase Agreement, the
Warrants and the Memorandum.
“Units”
mean
the
units sold to the investors for $7.00 per unit in the Company’s private
placement offering as contemplated by the Company’s private placement
memorandum, dated June 28, 2007. Each Unit consists of one share of Common
Stock
(a “Share”)
and
one-half of a 5-year warrant (each full warrant a “Warrant”
and
“Warrants”
in
the
plural) to purchase one share of Common Stock.
“Warrants”
shall
have the meaning set forth above.
2. Registration.
(a) On
or
prior to the Filing Date, the Company shall prepare and file with the
Commission, and in accordance with the Securities Act and all applicable
regulations promulgated thereunder, the Registration Statement covering the
resale of all of the Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement required
hereunder shall be on Form S-1 (or such other form as may be appropriate).
The
Registration Statement required hereunder shall contain (except if
otherwise
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directed
by the Holders) substantially the “Plan of Distribution” attached hereto as
Annex A. Subject to the terms of this Agreement, the Company shall use its
best
efforts to cause the Registration Statement to be declared effective under
the
Securities Act as promptly as possible after the filing thereof, but in any
event not later than the Effectiveness Date, and shall use its best efforts
to
keep the Registration Statement continuously effective under the Securities
Act
until the date when all Registrable Securities have been sold or may be sold
pursuant to Rule 144 of the Securities Act without volume restrictions as
determined by the counsel to the Company pursuant to a written opinion letter
to
such effect, addressed and acceptable to the Company’s transfer agent and the
affected Holders (the “Effectiveness
Period”).
(b) If:
(i) a
Registration Statement filed or required to be filed hereunder is not declared
effective by the Commission on or before the Effectiveness Date, except where
such failure to register is as a result of a cutback mandated by the Commission
in a written comment to the Company pursuant to Rule 415 (provided that in
the
event of such cutback, the Prior Offering Shares shall have priority over the
other forms of Registrable Securities and the other forms of Registrable
Securities shall have priority over any securities issued to Strategic
Investors) or (ii) after a Registration Statement is first declared effective
by
the Commission, it ceases for any reason to remain continuously effective as
to
all Registrable Securities for which it is required to be effective, or the
Holders are not permitted to utilize the Prospectus therein to resell such
Registrable Securities, for in any such case under this clause (ii), 20
consecutive calendar days but no more than an aggregate of 30 calendar days
during any 12 month period (which need not be consecutive trading days) (any
such failure or breach being referred to as an “Event,”
and
for purposes of clause (ii) the date on which such Event occurs, is exceeded,
or
for purposes of clause (ii) the date on which such 20 or 30 calendar day period,
as applicable, is exceeded being referred to as “Event
Date”),
as
Purchasers’ exclusive remedy, on each such Event Date and on each monthly
anniversary of each such Event Date (if the applicable Event shall not have
been
cured by such date) until the applicable Event is cured, the Company shall
pay
to each Holder an amount in cash, as liquidated damages and not as a penalty,
equal to 1% of the aggregate purchase price paid by such Holder pursuant to
the
Purchase Agreement for any Registrable Securities then held by such Holder.
The
liquidated damages pursuant to the terms hereof shall apply on a daily pro-rata
basis for any portion of a month prior to the cure of an Event, as the parties
to this Agreement have agreed that the precise amount of damages in such
circumstances would be extremely difficult to calculate accurately and believe
that such amount is a reasonable estimate under the circumstances existing
at
this time. Notwithstanding anything herein to the contrary, if an Event or
the
continuation of an Event is caused solely as a result of an act or omission
by a
Holder, the Company shall not be liable to pay liquidated damages to such Holder
that otherwise would result on account of such Event or continuation of an
Event.
(c) Notwithstanding
the foregoing subsection 2(b), no liquidated damages shall be owed by the
Company, with respect to the Registrable Securities that can be sold under
Rule
144 of the Securities Act without regard to any volume of trading limitations.
3. Registration
Procedures.
In
connection with the Company’s registration obligations hereunder, the Company
shall:
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(a) Not
less
than five trading days prior to the filing of the Registration Statement or
any
related Prospectus or any amendment or supplement thereto, the Company shall,
(i) furnish to the Holders copies of any disclosure relating to the Holders,
including but not limited to the entire Selling Shareholder and Plan of
Distribution sections which sections shall be subject to the review of such
Holders, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary,
in the reasonable opinion of respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities shall reasonably object in good faith, provided that the Company
is
notified of such objection in writing no later than two trading days after
the
Holders have been so furnished copies of such documents. Prior to any filing
relating to the Registration Statement, each Holder agrees to furnish to the
Company a completed Questionnaire in the form attached to this Agreement as
Annex B (a “Selling
Securityholder Notice and Questionnaire”)
within
five trading days of written request by the Company.
(b) (i)
Prepare and file with the Commission such amendments, including post-effective
amendments, to the Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement continuously
effective as to the applicable Registrable Securities for the Effectiveness
Period and prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all of
the
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented
or
amended to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably practicable to any comments received from the Commission with respect
to the Registration Statement or any amendment thereto and, as promptly as
reasonably practicable, upon request, provide the Holders upon request true
and
complete copies of all correspondence from and to the Commission relating to
the
Registration Statement; (iv) comply in all material respects with the provisions
of the Securities Act and the Exchange Act with respect to the disposition
of
all Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by
the
Holders thereof set forth in the Registration Statement as so amended or in
such
Prospectus as so supplemented; and (v) take all other actions as may be
reasonably necessary or appropriate in furtherance of the matters required
by
this Section 3(b).
(c) Notify
the Holders of Registrable Securities to be sold as promptly as reasonably
practicable and (if requested by any such Person) confirm such notice in writing
promptly 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) when the Commission notifies the Company whether there will be a
“review” of the Registration Statement and whenever the Commission comments in
writing on the Registration Statement (the Company shall upon request provide
true and complete copies thereof and all written responses thereto to each
of
the Holders); and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
during the period of effectiveness of the Registration Statement for amendments
or supplements to the Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission or any other federal or
state governmental authority of any stop order suspending the
effectiveness
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of
the
Registration Statement covering any or all of the Registrable Securities or
the
initiation of any Proceedings for that purpose; (iv) 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 (v) of the occurrence of any event or passage of time that makes
the financial statements included in the Registration Statement ineligible
for
inclusion therein or any statement made in the Registration Statement or
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, 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 light of the circumstances under which they were made, not
misleading.
(d) Use
commercially reasonable efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of the Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) Furnish
to each Holder, without charge and upon request, at least one conformed copy
of
the Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference to the extent requested by such Person, and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.
(f) Promptly
deliver to each Holder, without charge and upon request, as many copies of
the
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request in
connection with resales by the Holder of Registrable Securities. Subject to
the
terms of this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto, except
after
the giving of any notice pursuant to Section 3(c)
until
the Company has delivered the Advice and either the supplemented prospectus
or
the amended Registration Statement as contemplated by Section 6(c).
(g) Prior
to
any resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling Holders
in connection with the registration or qualification (or exemption from the
Registration or qualification) of such Registrable Securities for the resale
by
the Holder under the securities or Blue Sky laws of such jurisdictions within
the United States as any Holder reasonably requests in writing, to keep the
Registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things reasonably
necessary to enable the disposition in such jurisdictions of the Registrable
Securities covered by the Registration Statement; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified, subject the Company to any tax in any
such
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jurisdiction
where it is not then so subject or file a general consent to service of process
in any such jurisdiction.
(h) If
requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
to
be delivered to a transferee pursuant to the Registration Statement, which
certificates shall be free, to the extent permitted by the Purchase Agreement,
of all restrictive legends, and to enable such Registrable Securities to be
in
such denominations and registered in such names as any such Holders may
request.
(i) Upon
the
occurrence of any event contemplated by Section 3(c)(v),
as
promptly as reasonably possible, prepare a supplement or amendment, including
a
post-effective amendment, to the Registration Statement or a supplement to
the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. If
the
Company notifies the Holders in accordance with clauses (ii) through (v) of
Section 3(c)
above to
suspend the use of any Prospectus until the requisite changes to such Prospectus
have been made, then the Holders shall suspend use of such Prospectus. The
Company will use its best efforts to ensure that the use of the Prospectus
may
be resumed as promptly as is practicable. The Company shall be entitled to
exercise its right under this Section 3(i)
to
suspend the availability of a Registration Statement and Prospectus, subject
to
the payment of partial liquidated damages pursuant to Section 2(b),
for a
period not to exceed 60 days (which need not be consecutive days) in any
12-month period.
(j) Comply
with all applicable rules and regulations of the Commission.
(k) The
Company may require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially owned by
such
Holder and, if required by the Commission, the person thereof that has voting
and dispositive control over the Shares. During any periods that the Company
is
unable to meet its obligations hereunder with respect to the registration of
the
Registrable Securities solely because any Holder fails to furnish such
information within three trading days of the Company’s request, any liquidated
damages that are accruing at such time as to such Holder only shall be tolled
and any Event that may otherwise occur solely because of such delay shall be
suspended as to such Holder only, until such information is delivered to the
Company.
(l) The
Company shall use its best efforts as soon as practicable following the Closing
of the Company’s private placement offering to apply for and diligently attempt
to become listed on listing of its shares for trading on the Nasdaq Stock Market
or the American Stock Exchange.
4. Registration
Expenses.
All
fees and expenses incident to the performance of or compliance with this
Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The
fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and
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filing
fees (including, without limitation, fees and expenses with respect to filings
required to be made with the trading market on which the Common Stock is then
listed for trading), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is reasonably requested by the
holders of a majority of the Registrable Securities included in the Registration
Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company, (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and expenses
of all other Persons retained by the Company in connection with the consummation
of the transactions contemplated by this Agreement. In addition, the Company
shall be responsible for all of its internal expenses incurred in connection
with the consummation of the transactions contemplated by this Agreement
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit and the fees and expenses incurred in connection with the listing of
the
Registrable Securities on any securities exchange as required hereunder. In
no
event shall the Company be responsible for any broker or similar commissions
or,
except to the extent provided for in the Transaction Documents, any legal fees
or other costs of the Holders.
5. Indemnification.
(a) Indemnification
by the Company.
The
Company shall, notwithstanding any termination of this Agreement, indemnify
and
hold harmless each Holder, the officers, directors, agents, managers, members,
partners, shareholders and employees of each of them, each Person who controls
any such Holder (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted
by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable attorneys’ fees)
and expenses (collectively, “Losses”),
as
incurred, arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any Prospectus
or
any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus
or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (i) such
untrue statements or omissions are based solely upon information regarding
such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use
in
the Registration Statement, such Prospectus or such form of Prospectus or in
any
amendment or supplement thereto (it being understood that the Holder has
approved Annex A hereto for this purpose) or (ii) in the case of an occurrence
of an event of the type specified in Section 3(c)(ii)
through (v), the use by such Holder of an outdated or defective Prospectus
after
the Company has notified such Holder in writing that the Prospectus is outdated
or defective. The Company shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding of which the Company is aware in
connection with the transactions contemplated by this Agreement.
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(b) Indemnification
by Holders.
Each
Holder shall, severally and not jointly, indemnify and hold harmless the
Company, its directors, officers, agents and employees, each Person who controls
the Company (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, agents or employees of
such controlling Persons, to the fullest extent permitted by applicable law,
from and against all Losses, as incurred, to the extent arising out of or based
solely upon: (i) such Holder’s failure to comply with the prospectus delivery
requirements of the Securities Act or (ii) any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading (A) to the extent,
but
only to the extent, that such untrue statement or omission is contained in
any
information so furnished in writing by such Holder to the Company specifically
for inclusion in the Registration Statement or such Prospectus or (B) to the
extent that (x) such untrue statements or omissions are based solely upon
information regarding such Holder furnished in writing to the Company by such
Holder expressly for use therein, or to the extent that such information relates
to such Holder or such Holder’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement (it being understood that the
Holder has approved Annex A hereto for this purpose), such Prospectus or such
form of Prospectus or in any amendment or supplement thereto or (y) in the
case
of an occurrence of an event of the type specified in Section 3(c)(ii)
through (v), the use by such Holder of an outdated or defective Prospectus
after
the Company has notified such Holder in writing that the Prospectus is outdated
or defective. In no event shall the liability of any selling Holder hereunder
be
greater in amount than the dollar amount of the net proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct
of Indemnification Proceedings.
If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an “Indemnified
Party”),
such
Indemnified Party shall promptly notify the Person from whom indemnity is sought
(the “Indemnifying
Party”)
in
writing, and the Indemnifying Party shall have the right to assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to
the
extent that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have prejudiced the Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (ii) the Indemnifying Party shall have failed promptly to assume
the
defense of such Proceeding and to employ counsel reasonably satisfactory to
such
Indemnified Party in any such Proceeding; or (iii) the named parties to any
such
Proceeding (including any impleaded parties) include both such Indemnified
Party
and the Indemnifying Party, and such Indemnified Party shall reasonably believe
that a material conflict
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of
interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense thereof and the reasonable
fees and expenses of one separate counsel shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of
any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party
from
all liability on claims that are the subject matter of such Proceeding.
Subject
to the terms of this Agreement, all reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred
in connection with investigating or preparing to defend such Proceeding in
a
manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten trading days of written notice thereof to the
Indemnifying Party; provided, that the Indemnified Party shall promptly
reimburse the Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is not entitled
to
indemnification hereunder, determined based upon the relative faults of the
parties.
(d) Contribution.
If a
claim for indemnification under Section 5(a)
or
5(b)
is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as
a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission
of a
material fact, has been taken or made by, or relates to information supplied
by,
such Indemnifying Party or Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in this Agreement, any reasonable attorneys’ or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d)
were
determined by pro rata allocation or by any other method of allocation that
does
not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
5(d),
no
Holder shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the proceeds actually received by such Holder from the
sale of the Registrable Securities subject to the Proceeding exceeds the amount
of any damages that such Holder has otherwise been required to pay
by
-10-
reason
of
such untrue or alleged untrue statement or omission or alleged omission, except
in the case of fraud by such Holder.
The
indemnity and contribution agreements contained in this Section are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties.
6. Miscellaneous.
(a) Remedies.
In the
event of a breach by the Company or by a Holder, of any of their obligations
under this Agreement, each Holder or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law and under
this
Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and each Holder
agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense
that
a remedy at law would be adequate.
(b) Compliance.
Each
Holder covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement.
(c) Discontinued
Disposition.
Each
Holder agrees by its acquisition of such Registrable Securities that, upon
receipt of a notice from the Company of the occurrence of any event of the
kind
described in Section 3(c),
such
Holder will forthwith discontinue disposition of such Registrable Securities
under the Registration Statement until such Holder’s receipt of the copies of
the supplemented Prospectus and/or amended Registration Statement or until
it is
advised in writing (the “Advice”)
by the
Company that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company will use its best efforts to ensure that
the
use of the Prospectus may be resumed as promptly as it practicable. The Company
agrees and acknowledges that any periods during which the Holder is required
to
discontinue the disposition of the Registrable Securities hereunder shall be
subject to the provisions of Section 2(b).
(d) Piggy-Back
Registrations.
If at
any time during the Effectiveness Period there is not an effective Registration
Statement covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account under the Securities Act of any
of
its equity securities, other than on Form S-4 or Form S-8 (each as promulgated
under the Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with the stock option
or
other employee benefit plans, then the Company shall send to each Holder a
written notice of such determination and, if within fifteen days after the
date
of such notice, any such Holder shall so request in writing, the Company shall
include in such registration statement all or any part of such Registrable
Securities such Holder requests to be registered, subject to
customary
-11-
underwriter
cutbacks applicable to all holders of registration rights. In such event, the
provisions of Section 3
shall
apply to such a registration.
(e) Amendments
and Waivers.
The
provisions of this Agreement, including the provisions of this sentence, may
not
be amended, modified or supplemented, and waivers or consents to departures
from
the provisions hereof may not be given, unless the same shall be in writing
and
signed by the Company and Holders of at least 66% of the then outstanding
Registrable Securities.
(f) Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be made in accordance with the provisions of the
Purchase Agreement.
(g) Successors
and Assigns.
This
Agreement shall inure to the benefit of and be binding upon the successors
and
permitted assigns of each of the parties and shall inure to the benefit of
each
Holder. Each Holder may assign their respective rights hereunder in the manner
and to the Persons as permitted under the Purchase Agreement or, in the case
of
Hunter, to (i) any principal, shareholder, director or officer of any such
entity, (ii) to any spouse, ancestor, descendant of any person referred to
in
clause (i), or (iii) any trust established for the benefit of any person
referred to in clause (i) or clause (ii), or (iv) any person or entity
controlling, controlled by or under common control with Hunter.
(h) Execution
and Counterparts.
This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature
is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
(i) Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be with the internal laws of the State of California,
without giving effect to the principles of conflicts of law.
(j) Cumulative
Remedies.
The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
(k) Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be
hereafter declared invalid, illegal, void or unenforceable.
-12-
(l) Headings.
The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
(m) Independent
Nature of Holders’ Obligations and Rights.
The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be responsible
in
any way for the performance of the obligations of any other Holder hereunder.
Nothing contained herein or in any other agreement or document delivered at
any
closing, and no action taken by any Holder pursuant hereto or thereto, shall
be
deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be entitled
to
protect and enforce its rights, including without limitation the rights arising
out of this Agreement, and it shall not be necessary for any other Holder to
be
joined as an additional party in any proceeding for such purpose.
[SIGNATURE
PAGES FOLLOW]
-13-
IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as
of the date first written above.
|
By:
Name:
Title:
|
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
-14-
PURCHASER’S
SIGNATURE PAGE TO PROELITE, INC. REGISTRATION RIGHTS AGREEMENT
|
ABSOLUTE
RETURN EUROPE FUND
By:
Name:
Title:
|
[SIGNATURE
PAGES CONTINUE]
-15-
PURCHASER’S
SIGNATURE PAGE TO PROELITE, INC. REGISTRATION RIGHTS AGREEMENT
|
ABSOLUTE
OCTANE FUND
By:
Name:
Title:
|
[SIGNATURE
PAGES CONTINUE]
-16-
PURCHASER’S
SIGNATURE PAGE TO PROELITE, INC. REGISTRATION RIGHTS AGREEMENT
|
ABSOLUTE
EAST WEST FUND
By:
Name:
Title:
|
[SIGNATURE
PAGES CONTINUE]
-17-
PURCHASER’S
SIGNATURE PAGE TO PROELITE, INC. REGISTRATION RIGHTS AGREEMENT
|
ABSOLUTE
ACTIVIST MASTER FUND
By:
Name:
Title:
|
-18-
ANNEX
A
PLAN
OF DISTRIBUTION
The
Selling Shareholders (the “Selling
Shareholders”)
of the
common stock (“Common
Stock”)
of
ProElite, Inc., a New Jersey corporation (the “Company”)
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
Shareholders 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 entered into after the date of this
prospectus;
|
|
·
|
broker-dealers
may agree with the Selling Shareholders to sell a specified number
of such
shares at a stipulated price per share;
|
|
·
|
a
combination of any such methods of
sale;
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise; or
|
|
·
|
any
other method permitted pursuant to applicable law.
|
The
Selling Shareholders may also sell shares under Rule 144 under the Securities
Act of 1933, as amended (the “Securities
Act”),
if
available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Shareholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Shareholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. Each
Selling Shareholder does not expect these commissions and discounts relating
to
its sales of shares to exceed what is customary in the types of transactions
involved.
-19-
In
connection with the sale of our common stock or interests therein, the Selling
Shareholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The Selling
Shareholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Shareholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The
Selling Shareholders 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 or
discounts under the Securities Act. Each Selling Shareholder has 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 certain fees and expenses incurred by the Company
incident to the registration of the shares. The Company has agreed to indemnify
the Selling Shareholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because
Selling Shareholders may be deemed to be “underwriters” within the meaning of
the Securities Act, they will be subject to the prospectus delivery requirements
of the Securities Act. In addition, any securities covered by this prospectus
which qualify for sale pursuant to Rule 144 under the Securities Act may be
sold
under Rule 144 rather than under this prospectus. Each Selling Shareholder
has
advised us that they have not entered into any agreements, understandings or
arrangements with any underwriter or broker-dealer regarding the sale of the
resale shares. There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the Selling
Shareholders.
We
agreed
to keep this prospectus effective until the earlier of (i) the date on which
the
shares may be resold by the Selling Shareholders without registration and
without regard to any volume limitations by reason of Rule 144 of the Securities
Act or any other rule of similar effect or (ii) all of the shares have been
sold
pursuant to the prospectus or Rule 144 under the Securities Act or any other
rule of similar effect. The resale shares will be sold only through registered
or licensed brokers or dealers if required under applicable state securities
laws. In addition, in certain states, the resale shares may not be sold unless
they have been registered or qualified for sale in the applicable state or
an
exemption from the registration or qualification requirement is available and
is
complied with.
Under
applicable rules and regulations under the Exchange Act, any person engaged
in
the distribution of the resale shares may not simultaneously engage in market
making activities with respect to our common stock for a period of two business
days prior to the commencement
-20-
of
the
distribution. In addition, the Selling Shareholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases
and
sales of shares of our common stock by the Selling Shareholders or any other
person. We will make copies of this prospectus available to the Selling
Shareholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale.
-21-
ANNEX
B
SELLING
SECURITYHOLDER NOTICE AND QUESTIONNAIRE
The
undersigned beneficial owner of common stock (the “Common
Stock”),
or
warrants for Common Stock, of ProElite, Inc., a New Jersey corporation (the
“Company”),
(the
“Registrable
Securities”)
understands
that the Company has filed or intends to file with the Securities and Exchange
Commission (the “Commission”)
a
registration statement on Form S-1 (or such other form as may be appropriate)
(the “Registration
Statement”)
for
the registration and resale under Rule 415 of the Securities Act of 1933, as
amended (the “Securities
Act”),
of
the Registrable Securities, in accordance with the terms of the Registration
Rights Agreement, dated as of June 29, 2007 (the “Registration
Rights Agreement”),
among
the Company and the Purchasers named therein. A copy of the Registration Rights
Agreement is available from the Company upon request at the address set forth
below. All capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Registration Rights Agreement.
Certain
legal consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus. Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Registration Statement and the related
prospectus.
NOTICE
The
undersigned beneficial owner (the “Selling
Securityholder”)
of
Registrable Securities hereby elects to include the Registrable Securities
owned
by it and listed below in Item 3 (unless otherwise specified under such Item
3)
in the Registration Statement.
-22-
QUESTIONNAIRE
The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
|
1.
|
Name.
|
||||
|
(a)
|
Full
Legal Name of Selling Securityholder
|
||||
|
(b)
|
Full
Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities Listed in Item 3 below are
held:
|
||||
|
(c)
|
Full
Legal Name of Natural Control Person (which means a natural person
who
directly or indirectly alone or with others has power to vote or
dispose
of the securities covered by the questionnaire):
|
||||
|
2.
|
Address
for Notices to Selling Securityholder:
Telephone:
______________________________________________________________________________________________________________________
Fax:
____________________________________________________________________________________________________________________________
Contact
Person:
___________________________________________________________________________________________________________________
|
||||
|
3.
|
Beneficial
Ownership of Registrable Securities:
|
||||
|
(a)
|
Type
and Number of Registrable Securities beneficially
owned:
|
||||
|
4.
|
Broker-Dealer
Status:
|
||||
|
(a)
|
Are
you a broker-dealer?
|
||||
|
Yes
|
¨
|
No
|
¨
|
||
|
Note: If
yes, the Commission’s staff has indicated that you should be identified as
an underwriter in the Registration
Statement.
|
|||||
-23-
|
(b)
|
Are
you an affiliate of a broker-dealer?
|
||||
|
Yes
|
¨
|
No
|
¨
|
||
|
(c)
|
If
you are an affiliate of a broker-dealer, do you certify that you
bought
the Registrable Securities in the ordinary course of business, and
at the
time of the purchase of the Registrable Securities to be resold,
you had
no agreements or understandings, directly or indirectly, with any
person
to distribute the Registrable Securities?
|
||||
|
Yes
|
¨
|
No
|
¨
|
||
|
5.
|
Beneficial
Ownership of Other Securities of the Company Owned by the Selling
Securityholder.
|
||||
|
Except
as set forth below in this Item 5, the undersigned is not the beneficial
or registered owner of any securities of the Company other than the
Registrable Securities listed above in Item 3.
|
|||||
|
(a)
|
Type
and Amount of Other Securities beneficially owned by the Selling
Securityholder:
|
||||
|
6.
|
Relationship
with the Company:
|
||||
|
Except
as set forth below, neither the undersigned nor any of its affiliates,
officers, directors or principal equity holders (owners of 5% of
more of
the equity securities of the undersigned) has held any position or
office
or has had any other material relationship with the Company (or its
predecessors or affiliates) during the past three years. State any
exceptions here:
|
|||||
|
State
any exceptions here:
|
|||||
The
undersigned agrees to promptly notify the Company of any inaccuracies or changes
in the information provided herein that may occur subsequent to the date hereof
at any time while the Registration Statement remains effective.
-24-
By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 6 and the inclusion of such
information in the Registration Statement and the related prospectus. The
undersigned understands that such information will be relied upon by the Company
in connection with the preparation or amendment of the Registration Statement
and the related prospectus.
IN
WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice
and Questionnaire to be executed and delivered either in person or by its duly
authorized agent.
|
Dated: ________________
|
Beneficial
Owner
By:
Name:
Title:
|
PLEASE
FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND
QUESTIONNAIRE,
AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:
-25-
