REGISTRATION RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT (this “Agreement”)
is
made and entered into as of August 8, 2006 by and among XXXXXXXX.XXX,
INCORPORATED, a Nevada corporation (the “Company”),
and
the persons and entities who are signatories hereto (the “Holders”).
Background
WHEREAS,
the
Company and the Holders have entered into, among other documents, that certain
Promissory Note, dated August 8, 2006 (the “Promissory Note”); and
WHEREAS,
pursuant
to the Promissory Note, the Holders were issued warrants to purchase an
aggregate of 75,000 shares of the Company’s Common Stock at an exercise price of
$1.00 per common stock share (the “Warrant Shares”). The Company hereby intends
to provide for piggyback registration rights to the Holders for up to 37,500
shares of common stock of such Warrant Shares under terms and conditions stated
hereunder.
The
parties agree as follows:
1. Certain
Definitions.
As used
herein, the following terms shall have the following respective
meanings:
"Commission"
shall
mean the Securities and Exchange Commission or any other Federal agency at
the
time administering the Securities Act.
"Restricted
Stock" shall
mean the Warrant Shares, the certificates for which are required to bear the
legend set forth in Section 2 hereof.
“Registrant”
shall
mean the Company or the Public Company Successor, as applicable.
"Securities
Act" shall
mean the Securities Act of 1933, as amended, or any similar Federal statute,
and
the rules and regulations of the Commission thereunder, all as the same shall
be
in effect at the time.
2. Restrictive
Legend.
The
Warrant Shares and each certificate representing such Restricted Stock and,
except as otherwise provided in Section 3 hereof, each certificate issued upon
exchange or transfer of any such securities shall be stamped or otherwise
imprinted with a legend substantially in the following form:
“THE
SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A REGISTRATION STATEMENT WITH
RESPECT THERETO IS DECLARED EFFECTIVE UNDER SUCH ACT, OR THE COMPANY RECEIVES
AN
OPINION OF COUNSEL FOR THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT IS AVAILABLE.”
3.
Notice
of Proposed Transfer.
Prior
to any proposed transfer of any Restricted Stock (other than under the
circumstances described in Section 4 hereto, the holder thereof shall give
written notice to the Registrant of its intention to effect such transfer.
Each
such notice shall describe the manner of the proposed transfer and, if requested
by the Registrant, shall be accompanied by an opinion of counsel satisfactory
to
the Registrant to the effect that the proposed transfer may be effected without
registration under the Securities Act, whereupon such holder shall be entitled
to transfer such securities in accordance with the terms of its notice. All
Restricted Stock transferred as above provided shall bear the legend set forth
in Section 2, except that such securities shall not bear such legend if (i)
such
transfer is in accordance with the provisions of Rule 144 (or any other rule
permitting public sale without registration under the Securities Act) or (ii)
the opinion of counsel referred to above is to the further effect that the
transferee and any subsequent transferee (other than an affiliate of the
Registrant) would be entitled to transfer such securities in a public sale
without registration under the Securities Act.
4. Piggyback
Registration for up to Thirty Seven Thousand Five Hundred Restricted Stock
Shares.
(a) Should
the Holders or any of them exercise and pay the exercise price for 37,500 of
the
Warrant Shares prior to August 8, 2007 and if the Registrant at any time
subsequent to six (6) months from execution of the Promissory Note and prior
to
August 8, 2007 and proposes to register any of its securities under the
Securities Act for sale to the public, whether for its own account or for the
account of other security holders or both (other than a registration statement
on Form-S-4, Form S-8 or other limited purpose form and other than any
registration statement that might be filed by the Company within six (6) months
of the execution of the Promissory Note), then in each instance, the Registrant
will give written notice to all holders of Restricted Stock of its intention
so
to do, provided,
however, that
for
the purposes of this sentence, the Registrant shall treat the holders hereof
in
the same manner and in
pari passu
with all
other holders of unregistered capital stock of the Registrant who (i) have
registration rights with respect to such stock or (ii) presently or at any
time
hereafter are officers, directors, or 5% shareholders of the Registrant, or
any
affiliate, successor, or assign thereof. Upon the written request of any such
holders, given within 20 days after the date of any such notice, to register
up
to thirty seven thousand five hundred (37,500) shares only of its Restricted
Stock (which request shall state the intended method of disposition thereof),
the Registrant will use its best efforts to cause the Restricted Stock as to
which registration shall have been so requested to be included in the securities
to be covered by the registration statement proposed to be filed by the
Registrant all to the extent requisite to permit the sale or other disposition
by the holders (in accordance with its written request) of such Restricted
Stock
so registered. The Registrant may withdraw any such registration statement
before it becomes effective or postpone the offering of securities contemplated
by such registration statement without any obligation to the holders of any
Restricted Stock.
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(b) In
addition to those Warrant Shares provided piggyback registration rights pursuant
to Section 5 (a), above, should the Holders or any of them exercise and pay
the
exercise price for 37,500 of the Warrant Shares prior to expiration of same
and
if the Registrant at any time subsequent to six (6) months from execution of
the
Promissory Note proposes to register any of its securities under the Securities
Act for sale to the public, whether for its own account or for the account
of
other security holders or both (other than a registration statement on Form-S-4,
Form S-8 or other limited purpose form and other than any registration statement
that might be filed by the Company within six (6) months of the execution of
the
Promissory Note), then in each instance, the Registrant will give written notice
to all holders of Restricted Stock of its intention so to do, provided,
however, that
for
the purposes of this sentence, the Registrant shall treat the holders hereof
in
the same manner and in
pari passu
with all
other holders of unregistered capital stock of the Registrant who (i) have
registration rights with respect to such stock or (ii) presently or at any
time
hereafter are officers, directors, or 5% shareholders of the Registrant, or
any
affiliate, successor, or assign thereof. Upon the written request of any such
holders, given within 20 days after the date of any such notice, to register
up
to thirty seven thousand five hundred (37,500) shares only of its Restricted
Stock (which request shall state the intended method of disposition thereof),
the Registrant will use its best efforts to cause the Restricted Stock as to
which registration shall have been so requested to be included in the securities
to be covered by the registration statement proposed to be filed by the
Registrant all to the extent requisite to permit the sale or other disposition
by the holders (in accordance with its written request) of such Restricted
Stock
so registered. The Registrant may withdraw any such registration statement
before it becomes effective or postpone the offering of securities contemplated
by such registration statement without any obligation to the holders of any
Restricted Stock.
5. Registration
Procedures.
If and
whenever the Registrant is required by the provisions of Section 4 hereof to
use
its best efforts to effect the registration of any shares of Restricted Stock
under the Securities Act, the Registrant will, as expeditiously as
possible:
(a) prepare
and file with the Commission a registration statement with respect to such
securities and use its best efforts to cause such registration statement to
become and remain effective for the period of the distribution contemplated
thereby (determined as hereinafter provided),
(b) prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be
necessary to keep such registration statement effective for the period specified
in Section 5 (a) above and as to comply with the provisions of the Securities
Act with respect to the disposition of all Restricted Stock covered by such
registration statement in accordance with the sellers' intended method of
disposition set forth in such registration statement for such
period;
(c) furnish
to each seller such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons may reasonably request in order to facilitate the public sale or other
disposition of the Restricted Stock covered by such registration
statement;
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(d) use
its
best efforts to register or qualify the Restricted Stock covered by such
registration statement under the securities or blue sky laws of such
jurisdictions as the sellers of Restricted Stock;
(e) immediately
notify each seller under such registration statement at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus contained
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein not misleading in the light of the circumstances then existing;
and
(f) use
its
best efforts to furnish, at the request of any seller, on the date that
Restricted Stock is delivered for sale pursuant to such registration: (i) an
opinion dated such date of counsel representing the Registrant for the purposes
of such registration, and (ii) a letter dated such date from the independent
public accountants retained by the Registrant.
In
connection with each registration hereunder, the selling holders of Restricted
Stock will furnish to the Registrant in writing such information with respect
to
themselves and the proposed distribution by them as shall be necessary in order
to assure compliance with Federal and applicable state securities laws or as
the
Registrant may reasonably request.
6.
Expenses.
All
expenses incurred by the Registrant in complying with Section 4 hereof,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel and independent public accountants
for the Registrant, fees of the National Association of Securities Dealers,
Inc., fees of transfer agents and registrars, but excluding any Selling
Expenses, are herein called "Registration
Expenses".
The
Holders will pay all Registration Expenses in connection with each registration
statement filed pursuant to Section 4 hereof.
7.
Indemnification.
In the
event of a registration of any of the Restricted Stock under the Securities
Act
pursuant to Section 4 hereof, the Registrant will indemnify and hold harmless
each seller of such Restricted Stock thereunder and each underwriter of such
Restricted Stock thereunder and each other person, if any, who controls such
seller or underwriter within the meaning of the Securities Act, against any
and
all losses, claims, damages, expenses or liabilities, joint or several, to
which
such seller or underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained
in
any registration statement under which such Restricted Stock was registered
under the Securities Act pursuant to Section 4, any preliminary prospectus
or
final prospectus contained therein, or any amendment or supplement thereof,
or
arise out of or are based upon 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, and will reimburse each such seller, each
such underwriter and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, expense or action;
provided,
however,
that the
Registrant will not be liable in any such case if and to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made
in
conformity with information furnished by such seller, such underwriter or such
controlling person in writing specifically for use in such registration
statement or prospectus.
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In
the
event of a registration of any of the Restricted Stock under the Securities
Act
pursuant to Section 4 hereof, each seller of such Restricted Stock thereunder,
severally and not jointly, will indemnify and hold harmless the Registrant
and
each person, if any, who controls the Registrant within the meaning of the
Securities Act, each officer of the Registrant who signs the registration
statement, each director of the Registrant, each underwriter and each person
who
controls any underwriter within the meaning of the Securities Act, against
all
losses, claims, damages, expenses or liabilities, joint or several, to which
the
Registrant or such officer or director or underwriter or controlling person
may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages, expenses or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of
any
material fact contained in the registration statement under which such
Restricted Stock was registered under the Securities Act pursuant to Section
4,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon 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, and will
reimburse the Registrant and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, and provided,
however,
that
such seller will be liable hereunder in any such case if and only to the extent
that any such loss, claim, damage or liability arises out of or is based upon
an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information pertaining to such
seller, as such, furnished in writing to the Registrant by such seller
specifically for use in such registration statement or prospectus; provided,
further, however,
that the
liability of each seller hereunder shall be limited to the proportion of any
such loss, claim, damage, liability or expense which is equal to the proportion
that the public offering price of the shares sold by such seller under such
registration statement bears to the total public offering price of all
securities sold thereunder, but not to exceed the proceeds received by such
seller from the sale of Restricted Stock covered by such registration statement.
Promptly
after receipt by an indemnified party hereunder of notice of the commencement
of
any action, such indemnified party shall, if a claim in respect thereof is
to be
made against the indemnifying party hereunder, notify the indemnifying party
in
writing thereof, but the omission so to notify the indemnifying party shall
not
relieve it from any liability which it may have to any indemnified party under
this Section 7. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the announcement thereof,
the indemnifying party shall be entitled to participate in and, to the extent
it
shall wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 7 for any legal expenses subsequently incurred by
such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however,
that, if
the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified party shall have the right to select
a separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
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Notwithstanding
the foregoing, any indemnified party shall have the right to retain its own
counsel in any such action, but the fees and disbursements of such counsel
shall
be at the expense of such indemnified party unless (i) the indemnifying party
shall have failed to retain counsel for the indemnified person as aforesaid
or
(ii) the indemnifying party and such indemnified party shall have mutually
agreed to the retention of such counsel. It is understood that the indemnifying
party shall not, in connection with any action or related actions in the same
jurisdiction, be liable for the fees and disbursements of more than one separate
firm qualified in such jurisdiction to act as counsel for the indemnified party.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees
to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. If the indemnification provided for in the
first
two paragraphs of this Section 7 is unavailable to or insufficient to hold
harmless an indemnified party under such paragraphs in respect of any losses,
claims, damages or liabilities or actions in respect thereof referred to
therein, then each indemnifying party shall in lieu of indemnifying such
indemnified party contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities or actions in
such proportion as appropriate to reflect the relative fault of the Registrant,
on the one hand, and the sellers of such Restricted Stock, on the other, in
connection with the statement or omissions which resulted in such losses,
claims, damages, liabilities or actions, as well as any other relevant equitable
considerations including the failure to give any notice under the third
paragraph of this Section 7. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Registrant, on the one hand, or by the
sellers of such Restricted Stock, on the other, and to the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The
Registrant and the sellers of Restricted Stock agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by
pro
rata
allocation (even if all of the sellers of Restricted Stock were treated as
one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as
a
result of the losses, claims, damages, liabilities or action in respect thereof,
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
and the immediately preceding paragraph, the sellers of such Restricted Stock
shall not be required to contribute any amount in excess of the amount, if
any,
by which the total price at which the Restricted Stock sold by each of them
was
offered to the public exceeds the amount of any damages which they would have
otherwise been required to pay by reason of such untrue or alleged untrue
statement of omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. The indemnification of underwriters provided for in this
Section 7 shall be on such other terms and conditions as are at the time
customary and reasonably required by such underwriters.
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8. Rule
144 Reporting.
From
and after the date hereof, the Registrant agrees with the holders of Restricted
Stock as follows:
(a) The
Registrant shall make and keep public information available as those terms
are
understood and defined in Rule 144 under the Securities Act, at all times from
and after 90 days following the effective date of the first registration of
the
Registrant under the Securities Act of an offering of its common stock to the
general public.
(b) The
Registrant shall file with the Commission in a timely manner all reports and
other documents as the Commission may prescribe under Section 13(a) or 15(d)
of
the Securities Exchange Ac of 1934, as amended (the “Exchange
Act”)
at any
time after the Registrant has become subject to such reporting requirements
of
the Exchange Act.
(c) The
Registrant shall furnish to such holder of Restricted Stock forthwith upon
request (i) a written statement by the Registrant as to its compliance with
the
reporting requirements of Rule 144 (at any time from and after 90 days following
the effective date of the first registration statement of the Registrant for
an
offering of its common stock to the general public), and of the Securities
Act
and the Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of
the
Registrant and (iii) such other reports and documents so filed as a holder
may
reasonably request to avail itself of any rule or regulation of the Commission
allowing a holder of Restricted Stock to sell any such securities without
registration.
9. Miscellaneous.
(a)
The
rights arising under Section 4 shall terminate on the fifth anniversary of
this
Agreement, or if earlier, when (i) the holder of the Restricted Stock is no
longer an "affiliate" as used in Rule 144 and (ii) the holder of the Restricted
Stock is permitted to sell all Restricted Stock then held by it pursuant to
Rule
144(k).
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(b) All
covenants and agreements contained in this Agreement by or on behalf of any
of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.
Without limiting the generality of the foregoing, the registration rights
conferred herein on the holders of Restricted Stock shall inure to the benefit
of any and all subsequent permitted holders from time to time of the Restricted
Stock for so long as the certificates representing the Restricted Stock shall
be
required to bear the legend specified in Section 2 hereof.
(c) All
notices, requests, consents and other communications hereunder shall be in
writing and shall be mailed by generally recognized overnight courier, postage
prepaid, to the holder of the Restricted Stock at its, his, or her address
set
forth in the records of the Registrant and to the Registrant at its principal
place of business or, in any case, at such other address or addresses as shall
have been furnished in writing to the Registrant (in the case of a holder of
Restricted Stock) or to the holders of Restricted Stock (in the case of the
Registrant).
(d) This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Nevada.
(e) EACH
PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEVADA OR
OF
THE UNITED STATES OF AMERICA FOR THE STATE OF NEVADA AND HEREBY EXPRESSLY
SUBMITS TO THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES
THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT
THE
SUCH COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY CONSENTS
TO
THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT,
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN SECTION 9(C)], SUCH SERVICE
TO BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.
(f) This
Agreement and the Warrant constitute the entire agreement of the parties with
respect to the subject matter hereof and may not be modified or amended except
in writing.
(g) This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
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of page left intentionally blank]
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IN
WITNESS WHEREOF,
the
parties hereto have executed this Registration Rights Agreement as of the date
and year first written above.
| XXXXXXXX.XXX, INCORPORATED | |||
| By: /s/ Xxxx Xxxxxxxx | |||
|
Xxxx Xxxxxxxx
|
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| Chief Executive Officer |
| Holders | |||
| By: /s/ Xxxxxx Xxxxxxx-Xxxxxxxx | |||
|
Xxxxxx Xxxxxxx-Xxxxxxxx
|
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|
|
| By: /s/ Xxxx Xxxxxxxx | |||
|
Xxxx Xxxxxxxx
|
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