REGISTRATION RIGHTS AGREEMENT
REGISTRATION
RIGHTS AGREEMENT dated as of April 30, 2008 (this "Agreement") by and between
INFOSMART GROUP, INC., a California Company (the "Company"), and PROFESSIONAL
OFFSHORE OPPORTUNITY FUND, LTD. and PROFESSIONAL TRADERS FUND, LLC (the
“Investor”).
W I T N E S S E T H :
WHEREAS,
the Investor owns or has the right to purchase or otherwise acquire shares
of
the Common Stock (as hereinafter defined) of the Company; and
WHEREAS,
the Company and the Investor deem it to be in their respective best interest
to
set forth the rights of the Investor in connection with the registration of
such
Common Stock under applicable securities laws; and
WHEREAS,
the execution and delivery of this Agreement is a condition to the Securities
Purchase Agreement to be provided by the Investor to the Company on the date
hereof;
NOW,
THEREFORE, in consideration of the premises and mutual covenants and obligations
hereinafter set forth, the Company and the Investor hereby agree as
follows:
Section
1. Definitions.
As
used
in this Agreement the following terms shall have the following
meanings:
(a) “Closing
Date” means April 30, 2008, or such other date when the Securities Purchase
Agreement and other Transaction Documents1
were
executed by the Company and the Investor.
(b) "Commission"
means the Securities and Exchange Commission or any other Federal Agency at
the
time administering the Securities Act.
(c) "Common
Stock" means the common stock, no par value, of the Company.
(d) "Exchange
Act" means the Securities Exchange Act of 1934 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.
(e) "Investor"
means Professional Offshore Opportunity Fund, Ltd. and Professional Traders
Fund, LLC and includes any successor to, or assignee or transferee of, any
such
person who or which agrees in writing to be treated as an Investor hereunder
and
to be bound by the terms and comply with all applicable provisions hereof.
(f) "Other
Shares" means at any time those shares of Common Stock which do not constitute
Primary Shares, Warrant Shares or Registrable Shares.
(g) "Primary
Shares" means at any time the authorized but unissued shares of Common Stock
held by the Company in its treasury.
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All
Capitalized Terms not otherwise defined herein shall have the meaning ascribed
to them in the Securities Purchase Agreement of even date
herewith.
(h) "Registrable
Shares" means shares of Common Stock now or hereafter held by the Investor,
whether acquired or acquirable pursuant to or in connection with the Warrant,
the Secured Convertible Debenture or any other agreements in connection with
this transaction and the Transaction Documents. As to any particular Registrable
Shares, once issued, such Registrable Shares shall cease to be Registrable
Shares when (i) they have been registered under the Securities Act, the
registration statement in connection therewith has been declared effective
and
they have been disposed of pursuant to such effective registration statement,
(ii) they are eligible to be sold or distributed pursuant to Rule 144 within
any
consecutive three month period without volume limitations, or (iii) they shall
have ceased to be outstanding.
(i) “Registration
Statement” means any registration statement of the Company relating to the
registration for resale of Registrable Securities (in an amount permissible
under the Rule 415 Interpretive Position, unless waived by the Investor) that
is
filed pursuant to the provisions of this Agreement.
(j) "Rule
144" means Rule 144 promulgated under the Securities Act or any successor rule
thereto.
(k) "Securities
Act" means the Securities Act of 1933 or any successor Federal statute, and
the
rules and regulations of the Commission thereunder, all as the same shall be
in
effect from time to time.
(l) "Secured
Convertible Debentures" means the Secured Convertible Debentures that the
Company has the option of entering into with Professional Offshore Opportunity
Fund, LLC. and Professional Traders Fund, LLC. for the principal amounts of
$4,400,000 and $600,000, respectively, pursuant to Section 2 of the Securities
Purchase Agreement.
(m) "Warrant"
means each Warrant dated the date hereof issued by the Company to the
Investor.
(n) “Warrant
Shares” means the Common Stock underlying the Warrant that will be issued upon
the exercise of the Warrant.
Section
2. Registration.
(a) Mandatory
Registration of Warrants.
Not
later than forty-five (45) days following the date hereof, the Company shall
file with the SEC a registration statement to register for resale all the
Warrants and the Warrant Shares (the “Warrant Registration Statement”). In
addition, the Company may include in the Warrant Registration Statement an
amount of shares of common stock that the Company deems necessary to pay the
Investors’ interest on the Debenture. The date that the Warrant Registration
Statement is filed shall be referred to as the “Warrant Filing Date.” The
Company shall have the Warrant Registration Statement be declared effective
by
the SEC on or prior to one hundred twenty (120) days after the Closing Date.
Following notification that the SEC has no further comments on the Warrant
Registration Statement, the Company shall use its best efforts to request with
the Commission an acceleration of the effective date of the Warrant Registration
Statement to within five (5) days of such notification.
All
of
the sections and provisions discussed herein shall apply directly to the Warrant
Registration Statement as well as any other Registration Statement that is
required to be filed to register any other Registrable Securities. Specifically,
with respect to failure to timely file the Registration Statement and/or failure
to get the Registration Statement effective and/or keep the Registration
Statement effective in the time periods provided shall similarly apply to the
failure to file the Warrant Registration Statement and failure to get the
Warrant Registration Statement deemed effective and failure to keep the Warrant
Registration Statement effective pursuant to the applicable time
period.
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(b) Mandatory
Registration of Shares Underlying Convertible Debentures.
Not
later than forty-five (45) days following the date of the Company’s Notice of
Restructure (as defined in the Securities Purchase Agreement), the Company
shall
prepare and file with the SEC a Registration Statement (the “Debenture
Registration Statement”) or Registration Statements (as necessary) on Form S-1
(or, if such form is unavailable for such a registration, on such other form
as
is available for such a registration), covering the resale of all Registrable
Securities that will be issuable by the Company to the Investor upon the
prospective conversion of the Secured Convertible Debentures and in connection
with the prospective payment of interest on the convertible debentures, which
Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the Securities Act, such Registration Statement also covers
such indeterminate number of additional shares of Common Stock as may become
issuable upon stock splits, stock dividends or similar transactions. The Company
shall have the Debenture Registration Statement be declared effective by the
SEC
on or prior to one hundred twenty (120) days after the Notice of Restructure.
Following notification that the SEC has no further comments on the Debenture
Registration Statement, the Company shall use its best efforts to request with
the Commission an acceleration of the effective date of the Warrant Registration
Statement to within five (5) days of such notification.
Section
3. Notwithstanding
anything to the contrary herein, the Company and the Investor intend that the
number of shares to be registered in the Registration Statements contemplated
by
this Agreement shall be pursuant to Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended or interpreted
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
(collectively “Rule 415”) and any interpretative positions of Rule 415 by the
SEC. If the number of shares registered in the Registration Statement is less
than the Registrable Shares, the balance will be registered in a second
registration statement and any necessary subsequent registration statements
as
soon as permitted by securities laws. And, in the event that any Registrable
Shares are excluded from the Registration Statement due to the interpretation
of
Rule 415, the Registrable Shares included in each registration statement shall
be allocated among all investors pro rata based on the total number of
Registrable Shares proposed to be included in the registration
statements.
(a) If
the
Warrant Registration Statement or the Debenture Registration Statement covering
the Registrable Securities required to be filed by the Company pursuant to
Section 2(a) or (b) hereof is not filed on or before forty-five (45) days from
the Closing Date or on or before forty-five (45) days from the date of the
Company’s Notice of Restructure, respectively, then the Company shall pay the
Investor the sum of two percent (2%) of the principal amount of the Loan or the
Secured Convertible Debenture, whichever is applicable, and not as a penalty,
for each thirty (30) calendar day period, pro rata, until the Registration
Statement is filed (“Filing Liquidated Damages”). Such Filing Liquidated Damages
shall be paid in cash and shall not exceed 10%.
Notwithstanding
the foregoing, the amounts payable by the Company pursuant to this Section
shall
not be payable to the extent any delay in the filing of the Registration
Statement occurs because of an act of, or a failure to act or to act timely
by
the Investor. The damages set forth in this Section 3 shall continue until
the
obligation is fulfilled and shall be paid within five (5) business days after
each thirty (30) day period, or portion thereof, until the Registration
Statement is filed. Failure of the Company to make payment within said three
(5)
business days shall be considered a default.
The
Company acknowledges that its failure to have the Registration Statement filed
timely will cause the Investor to suffer damages in an amount that will be
difficult to ascertain. Accordingly, the parties agree that it is appropriate
to
include in this Agreement a provision for liquidated damages. The parties
acknowledge and agree that the liquidated damages provision set forth in this
section represents the parties' good faith effort to quantify such damages
and,
as such, agree that the form and amount of such liquidated damages are
reasonable and will not constitute a penalty. The payment of liquidated damages
shall not relieve the Company from its obligations to register the Common Stock
and deliver the Common Stock pursuant to the terms of this Agreement and the
Subscription Agreement.
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(b) The
Company shall have the Warrant Registration Statement be declared effective
by
the SEC on or prior to one hundred twenty (120) days after the Closing Date
and,
in the event of a Restructure, the Company shall have the Debenture Registration
Statement for the shares convertible under the Convertible Debenture filed
with
the SEC on or prior to forty-five (45) days from the Notice of Restructure
(the
“Filing Date”), and effective with the SEC within one hundred twenty (120) days
from the Notice of Restructure. Following notification that the SEC has no
further comments on the Warrant Registration Statement, the Company shall use
its best efforts to request with the Commission an acceleration of the effective
date of the Warrant Registration Statement and/or the Debenture Registration
Statement to within five (5) days of such notification. If the Warrant
Registration Statement is not declared effective by the SEC before one hundred
twenty (120) days after the Closing Date and/or the Debenture Registration
Statement covering the Registrable Securities required to be filed by the
Company pursuant to Section 2(b) hereof is not declared effective before one
hundred twenty (120) days after the Notice of Restructure, then the Company
shall pay the Investor the sum of two percent (2%) of the principal amount
of
the Loan or the Secured Convertible Debenture, whichever is applicable, and
liquidation value of the warrants for each 30 day period, as liquidated damages,
and not as a penalty, for each thirty (30) calendar day period, pro
rata,
until
the Warrant Registration Statement and/or the Debenture Registration Statement
is declared effective (“Effectiveness Liquidated Damages”). Such Effectiveness
Liquidated Damages shall not exceed 10% and shall be paid in cash. In the event
of a “full review” of any Registration Statement by the SEC, the one hundred
twenty (120) day period to get such Registration Statement effective shall
become one hundred fifty (150) days.
If
the
Debenture Registration Statement covering the Registrable Securities and the
Warrant Registration Statement covering the Warrant and Warrant Shares required
to be filed by the Company pursuant to Sections 2(a) and (b) hereof is declared
effective, but after the effective date the Investor's right to sell is
suspended,
then
the Company shall pay the Investor the sum of two percent (2%) of the principal
amount of the Loan or the Secured Convertible Debenture, whichever is
applicable,
and the
liquidation value of the Warrant for each thirty (30) calendar day period,
pro
rata, following the suspension until such suspension ceases (“Suspension
Liquidated Damages”). The Company shall pay the Suspension Liquidated Damages in
cash, or at the Investor’s sole option, in common stock at the average closing
bid price of the common stock for the five (5) trading days immediately
preceding the payment date. The Suspension Liquidated Damages shall not exceed
10%.
Notwithstanding
the foregoing, the amounts payable by the Company pursuant to this Section
shall
not be payable (i) to the extent any delay in the effectiveness of the
Registration Statement occurs because of an act of or a failure to act or to
act
timely by the Investor, or (ii) due to cut-backs in the number of Registrable
Securities for exceeding registration limitations imposed by the Commission
pursuant to Rule 415 of the Securities Act. The damages set forth in this
Section shall continue until the obligation is fulfilled and shall be paid
within five (5) business days after each thirty (30) day period, or portion
thereof, until the Registration Statement is declared effective or such
suspension is released. Failure of the Company to make payment within said
five
(5) business days shall be considered a default.
The
Company acknowledges that its failure to have the Warrant Registration Statement
declared effective within one hundred and twenty (120) days following the
Closing Date, the Debenture Registration Statement declared effective within
one
hundred and twenty (120) days following the Notice of Restructure or to permit
the suspension of the effectiveness of the Warrant Registration Statement or
Debenture Registration Statement will cause the Investor to suffer damages
in an
amount that will be difficult to ascertain. Accordingly, the parties agree
that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to
register the Common Stock and deliver the Common Stock pursuant to the terms
of
this Agreement and the Securities Purchase Agreement.
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(c) The
Company agrees not to include any other securities in this Registration
Statement except securities holding currently effective resale or piggyback
registration rights as disclosed in the Securities Purchase Agreement between
the Company and the Investors or as disclosed in filings that the Company has
made with the Commission as of the date hereof without Investor's prior written
consent. Furthermore, the Company agrees that it will not file any other
Registration Statement for other securities until ninety (90) calendar days
after the last required Registration Statement for the Registrable Securities
is
declared effective and all Registrable Securities.
(d) Piggyback
Registration.
Without
limiting the obligations set forth in this Agreement, until the sooner of the
date whereby an exemption from registration is available under Rule 144 of
the
rules and regulations of the Securities and Exchange Commission, as amended,
promulgated pursuant to the Securities Act or the date that all of the
Conversion Shares have been sold if the Company at any time proposes for any
reason to register Primary Shares, Registrable Shares, Warrant Shares or Other
Shares under the Securities Act (other than on Form S-4 or Form S-8 promulgated
under the Securities Act or any successor forms thereto), it shall give written
notice to the Investor of its intention so to register such Primary Shares,
Registrable Shares, Warrant Shares or Other Shares at least 30 days before
the
initial filing of such registration statement and, upon the written request,
delivered to the Company within 20 days after delivery of any such notice by
the
Company, of the Investor to include in such registration Registrable Shares
(which request shall specify the number of Registrable Shares proposed to be
included in such registration and shall state that such Investor desires to
sell
such Registrable Shares in the public securities markets), the Company shall
cause all such Registrable Shares to be included in such registration on the
same terms and conditions as the securities otherwise being sold in such
registration; provided,
however,
that if
the managing underwriter advises the Company that the inclusion of all
Registrable Shares requested to be included in such registration would interfere
with the successful marketing (including pricing) of the Primary Shares,
Registrable Shares or Other Shares proposed to be registered by the Company,
then the number of Primary Shares, Registrable Shares and Other Shares proposed
to be included in such registration shall be included in the following order:
(i) if
the
Company proposes to register Primary Shares, or Primary Shares and Other Shares:
First,
the
Primary Shares; and
Second,
the
Registrable Shares and Other Shares requested to be included in such
registration (or, if necessary, such Registrable Shares and Other Shares
pro rata
among
the holders thereof based upon the number of Registrable Shares and Other Shares
requested to be registered by each such holder); or
(ii) if
the
Company proposes to register Other Shares pursuant to a request for registration
by the holders of such Other Shares (other than pursuant to Section 2
hereof):
First,
the
Other Shares held by the parties demanding such registration; and
Second,
the
Registrable Shares and Other Shares (other than shares registered pursuant
to
Section 2(c)(1) hereof) requested to be registered by the holders hereof (or,
if
necessary, pro rata
among
the holders thereof based on the number of Registrable Shares and Other Shares
requested to be registered by such holders).
5
Section
4. Preparation
and Filing.
If
and
whenever the Company is under an obligation pursuant to the provisions of this
Agreement to effect the registration of any Registrable Shares, the Company
shall as expeditiously as practicable:
(a) prepare
and file with the Commission a registration statement with respect to such
Registrable Shares and use its best efforts to cause such registration statement
to become effective and, upon the request of the holders of a majority of the
Registrable Shares being registered thereunder, keep such registration statement
effective for a period of up to one hundred twenty (120) days or until the
distribution contemplated in the registration statement has been completed;
provided,
however,
that
(i) such 120-day period shall be extended for a period of time equal to the
period the holders of Registrable Shares refrain from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company; and (ii) in the case of any registration
of Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Shares are sold, provided that Rule 415, or any successor rule
under
the Securities Act, permits an offering on a continuous or delayed basis;
and provided further
that
applicable rules under the Securities Act governing the obligation to file
a
post-effective amendment permit (in lieu of filing a post-effective amendment
which (I) includes any prospectus required by Section 10(a)(3) of the Securities
Act or (II) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement) the
incorporation by reference, in the registration statement, of information
required to be included in (I) and (II) above to be contained in periodic
reports filed pursuant to Section 13 or 15(d) of the Exchange Act.
(b) prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the
Securities Act with respect to the disposition of all securities covered by
such
registration statement.
(c) use
its
best efforts to register or qualify such Registrable Shares under such other
securities or blue sky laws of such jurisdictions as the Investor reasonably
requests and do any and all other acts and things which may be reasonably
necessary or advisable to enable the Investor to consummate the disposition
in
such jurisdictions of the Registrable Shares owned by the Investor; provided,
however, that the Company will not be required to qualify generally to do
business, subject itself to general taxation or consent to general service
of
process in any jurisdiction where it would not otherwise be required to do
so
but for this paragraph (e) or to provide any material undertaking or make any
changes in its By-laws or Articles of Incorporation which the Board of Directors
determines to be contrary to the best interests of the Company or to modify
any
of its contractual relationships then existing;
(d) furnish
to the Investor holding such Registrable Shares such number of copies of a
summary prospectus, if any, or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and
such
other documents as such Investor may reasonably request in order to facilitate
the public sale or other disposition of such Registrable Shares;
(e) without
limiting subsection (e) above, use its best efforts to cause such Registrable
Shares to be registered with or approved by such other governmental agencies
or
authorities as may be necessary by virtue of the business and operations of
the
Company to enable the Investor holding such Registrable Shares to consummate
the
disposition of such Registrable Shares;
(f) notify
the Investor holding such Registrable Shares on a timely basis at any time
when
a prospectus relating to such Registrable Shares is required to be delivered
under the Securities Act within the appropriate period mentioned in subparagraph
(a) of this Section 3, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and, at the request
of
the Investor, prepare and furnish to such Investor a reasonable number of copies
of a supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the offerees of such shares, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
6
(g) subject
to the execution of confidentiality agreements in form and substance
satisfactory to the Company, make available upon reasonable notice and during
normal business hours, for inspection by the Investor holding such Registrable
Shares, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained
by
the Investor or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of
the
Company (collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information (together
with the Records, the "Information") reasonably requested by any such Inspector
in connection with such registration statement. Any of the Information which
the
Company determines in good faith to be confidential and of which determination
the Inspectors are so notified, shall not be disclosed by the Inspectors unless
(i) the disclosure of such Information is necessary to avoid or correct a
misstatement or an omission in the registration statement, (ii) the release
of
such Information is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction or (iii) such Information has been made generally
available to the public; the Investor agree that they will, upon learning that
disclosure of such information is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company, at the Company's expense,
to
undertake appropriate action to prevent disclosure of the Information deemed
confidential;
(h) use
its
best efforts to obtain from its counsel an opinion or opinions in customary
form
addressed to the Company and any selling shareholders;
(i) provide
a
transfer agent and registrar (which may be the same entity and which may be
the
Company) for such Registrable Shares and a CUSIP number for all such Registrable
Shares, in each case not later than the effective date of such registration;
(j) issue
to
any underwriter to which the Investor holding such Registrable Shares may sell
shares in such offering certificates evidencing such Registrable Shares;
(k) list
such
Registrable Shares on any national securities exchange on which any shares
of
the Common Stock are listed or, if the Common Stock is not listed on a national
securities exchange, use its best efforts to qualify such Registrable Shares
for
inclusion on the automated quotation system of the National Association of
Securities Dealers, Inc. (the "NASDAQ"),
or
such
other national securities exchange as the holders of a majority of such
Registrable Shares shall reasonably request; and
(l) subject
to all the other provisions of this Agreement, use its best efforts to take
all
other steps necessary to effect the registration of such Registrable Shares
contemplated hereby.
Each
holder of the Registrable Shares, upon receipt of any notice from the Company
of
any event of the kind described in Section 3(f) hereof, shall forthwith
discontinue disposition of the Registrable Shares pursuant to the registration
statement covering such Registrable Shares until such holders' receipt of the
copies of the supplemented or amended prospectus contemplated by Section 3(f)
hereof, and, if so directed by the Company, such holder shall deliver to the
Company all copies, other than permanent file copies then in such holder's
possession, of the prospectus covering such Registrable Shares at the time
of
receipt of such notice.
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Section
5. Expenses.
All
expenses (other than underwriting discounts and commissions relating to the
Registrable Shares, as provided in the last sentence of this Section 5) incurred
by the Company in complying with this Agreement, including, without limitation,
all registration and filing fees (including all expenses incident to filing
with
the Financial Industry Regulatory Authority, Inc. “FINRA”), fees and expenses of
complying with securities and blue sky laws, printing expenses, fees and
expenses of the Company's counsel and accountants, shall be paid by the Company;
provided,
however,
(i) all
underwriting discounts and selling commissions applicable to the Registrable
Shares and Other Shares shall be borne by the holders selling such Registrable
Shares and Other Shares, in proportion to the number of Registrable Shares
and
Other Shares sold by each such holder and (ii) provided however the Company
shall not be liable or responsible to pay the fees of Investor’s attorney for
the review of any registration statement.
Section
6. Indemnification.
(a) In
connection with any registration of any Registrable Shares under the Securities
Act pursuant to this Agreement, the Company shall indemnify and hold harmless
the holders of Registrable Shares, each underwriter, broker or any other person
acting on behalf of the holders of Registrable Shares and each other person,
if
any, who controls any of the foregoing persons within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint or
several (or actions in respect thereof), to which any of the foregoing persons
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out
of or are based upon an untrue statement or allegedly untrue statement of a
material fact contained in the registration statement under which such
Registrable Shares were registered under the Securities Act, the Exchange Act
or
any preliminary prospectus or final prospectus contained therein or otherwise
filed with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Registrable Shares, 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 or, with respect to any prospectus, necessary to make
the
statements therein in light of the circumstances under which they were made
not
misleading, or any violation by the Company of the Securities Act or state
securities or blue sky laws applicable to the Company and relating to action
or
inaction required of the Company in connection with such registration or
qualification under such state securities or blue sky laws; and shall reimburse
the holders of Registrable Shares, such underwriter, such broker or such other
person acting on behalf of the holders of Registrable Shares and each such
controlling person for any legal or other expenses reasonably incurred by any
of
them in connection with investigating or defending any such loss, claim, damage,
liability or action; provided,
however,
that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or action (including any legal or other expenses
incurred) arises out of or is based upon an untrue statement or allegedly untrue
statement or omission or alleged omission made in said registration statement,
preliminary prospectus, final prospectus, amendment supplement or document
incident to registration or qualification of any Registrable Shares in reliance
upon and in conformity with written information furnished to the Company through
an instrument duly executed by the holders of Registrable Shares or their
counsel or underwriter specifically for use in the preparation thereof;
provided further,
however,
that
the foregoing indemnity agreement is subject to the condition that, insofar
as
it relates to any untrue statement, omission or alleged omission made in any
preliminary prospectus but eliminated or remedied in the final prospectus (filed
pursuant to Rule 424 of the Securities Act), such indemnity agreement shall
not
inure to the benefit of any Investor, underwriter, broker or other person acting
on behalf of holders of the Restricted Shares from whom the person asserting
any
loss, claim, damage, liability or expense purchased the Restricted Shares which
are the subject thereof, if a copy of such final prospectus had been made
available to such person and such Investor, underwriter, broker or other person
acting on behalf of holders of the Registrable Shares and such final prospectus
was not delivered to such person with or prior to the written confirmation
of
the sale of such Registrable Shares to such person.
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(b) In
connection with any registration of Registrable Shares under the Securities
Act
pursuant to this Agreement, each holder of Registrable Shares shall severally
and not jointly indemnify and hold harmless (in the same manner and to the
same
extent as set forth in the preceding paragraph of this Section 5) the Company,
each director of the Company, each officer of the Company who shall sign such
registration statement, each underwriter, broker or other person acting on
behalf of the holders of Registrable Shares and each person who controls any
of
the foregoing persons within the meaning of the Securities Act with respect
to
any statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein or otherwise filed with the
Commission, any amendment or supplement thereto or any document incident to
registration or qualification of any Registrable Shares, if such statement
or
omission was made in reliance upon and in conformity with written information
furnished to the Company or such underwriter specifically for use in connection
with the preparation of such registration statement, preliminary prospectus,
final prospectus, amendment, supplement or document; provided,
however,
that
the maximum amount of liability in respect of such indemnification shall be
limited, in the case of each Seller of Registrable Shares, to an amount equal
to
the net proceeds actually received by such Seller from the sale of Registrable
Shares effected pursuant to such registration.
(c) Promptly
after receipt by an indemnified party of notice of the commencement of any
action involving a claim referred to in the preceding paragraphs of this Section
5, such indemnified party will, if a claim in respect thereof is made against
an
indemnifying party, give written notice to the latter of the commencement of
such action. The failure of any indemnified party to notify an indemnifying
party of any such action shall not (unless such failure shall have a material
adverse effect on the indemnifying party) relieve the indemnified party on
account of this Section 5. In case any such action is brought against an
indemnified party, the indemnifying party will be entitled to participate in
and
to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be responsible for any legal or other
expenses subsequently incurred by the indemnified party in connection with
the
defense thereof; provided,
however,
that if
any indemnified party shall have reasonably concluded that there may be one
or
more legal or equitable defenses available to such indemnified party which
are
additional to or conflict with those available to the indemnifying party, or
that such claim or litigation involves or could have an effect upon matters
beyond the scope of the indemnity agreement provided in this Section 5, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party (but shall have the right to participate
therein with counsel of its choice) and such indemnifying party shall reimburse
such indemnified party and any person controlling such indemnified party for
that portion of the fees and expenses of any counsel retained by the indemnified
party which is reasonably related to the matters covered by the indemnity
agreement provided in this Section 5. If the indemnifying party is not entitled
to, or elects not to, assume the defense of a claim, it will not be obligated
to
pay the fees and expenses of more than one counsel with respect to such claim.
(d) If
the
indemnification provided for in this Section 5 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any
loss,
claim, damage, liability or action referred to herein, then the indemnifying
party, in lieu of indemnifying such indemnified party hereunder, shall
contribute to the amounts paid or payable by such indemnified party as a result
of such loss, claim, damage, liability or action in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the
one
hand and of the indemnified party on the other in connection with the statements
or omissions which resulted in such loss, claim, damage, liability or action
as
well as any other relevant equitable considerations. The relative fault of
the
indemnifying party and of the indemnified party 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 indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. In no event shall
contribution obligations of this Section 5(b) exceed the net profits from the
offering received by such holder after deducting underwriting fees, discounts
and commissions. No person guilty of fraudulent misrepresentation shall be
entitled to contribution from any person.
9
Section
7. Information
by Investor.
The
Investor shall furnish to the Company such written information regarding the
Investor and the distribution proposed by the Investor as the Company may
reasonably request in writing and shall be reasonably required in connection
with any registration, qualification or compliance referred to in this
Agreement.
Section
8. Exchange
Act Compliance.
With
a
view to making available to the Investor the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the Commission may at any
time
permit an Investor to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-1 (or such other
Registration Statement as is available), the Company agrees, on and after
becoming subject to reporting obligations under the federal securities laws,
to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144, at all times after one hundred twenty (120) days after the effective
date of the first registration statement filed by the Company for the offering
of its securities to the general public;
(b) file
with
the Commission in a timely manner all reports and other documents required
of
the Company under the Securities Act and the Exchange Act; and
(c) furnish
to any Investor, so long as the Investor owns any Registrable Shares, forthwith
upon request (i) a written statement by the Company that it has complied with
the reporting requirements of Rule 144 (at any time after ninety (90) days
after
the effective date of the first registration statement filed by the Company),
the Securities Act and the Exchange Act (at any time after it has become subject
to such reporting requirements), or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any Investor
of any rule or regulation of the Commission which permits the selling of any
such securities without registration or pursuant to such form. Notwithstanding
anything to the contrary in this Section, so long as the Company makes all
required filings under the Exchange Act, it shall be deemed to comply with
this
Section without any further action or notice to the Investors.
Section
9. No
Conflict of Rights.
The
Company shall not, after the date hereof, grant any registration rights which
conflict with or impair the registration rights granted hereby.
Section
10. Termination.
This
Agreement shall terminate and be of no further force or effect when there shall
no longer be any Registrable Shares outstanding; provided that Sections 5 and
6
shall survive any termination of this Agreement.
Section
11. Successors
and Assigns.
This
Agreement shall bind and inure to the benefit of the Company and the Investor
and, subject to Section 13, the respective successors and assigns of the Company
and the Investor.
10
Section
12. Assignment.
Each
Investor may assign its rights hereunder to any purchaser or transferee of
Registrable Shares; provided, however, that such purchaser or transferee shall,
as a condition to the effectiveness of such assignment, be required to execute
a
counterpart to this Agreement agreeing to be treated as an Investor whereupon
such purchaser or transferee shall have the benefits of, and shall be subject
to
the restrictions contained in, this Agreement as if such purchaser or transferee
was originally included in the definition of an Investor herein and had
originally been a party hereto. Notwithstanding any assignment, the Company
shall not be obligated to file a post-effective amendment to any registration
statement for the purpose of amending the selling security holder table to
such
registration statement to reflect an assignment until the Company is required
to
do so under applicable securities laws.
Section
13. Entire
Agreement.
This
Agreement and the other writings referred to herein or therein or delivered
pursuant hereto or thereto, contain the entire agreement among the Investor
and
the Company with respect to the subject matter hereof and supersede all prior
and contemporaneous arrangements or understandings with respect thereto.
Section
14. Notices.
All
notices, requests, consents and other communications hereunder to any party
shall be deemed to be sufficient if contained in a written instrument delivered
in person or sent by telecopy, nationally-recognized overnight courier or first
class registered or certified mail return receipt requested, postage prepaid,
addressed to such party at the address set forth below or such other address
as
may hereafter be designated in writing by such party to the other parties:
if
to the
Company, to:
5th
Floor,
QPL Industrial Building
000-000
Xxxxxx Xxxx
Xxxxx
Xxx, Xxxx Xxxx
with
a
copy to:
Xxxxxxxxxx
& Xxxxx, LLP
00000
Xxxxxxxx Xxxxxxxxx
Xxxxx
000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn:
Xxxxx Xxxxx
Telephone:
000-000-0000
Fax:
000-000-0000
if
to the
Investor, to:
Professional
Offshore Opportunity Fund, Ltd.
℅
Professional Traders Management, LLC
0000
Xxx
Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx,
Xxx Xxxx 00000
Telephone:
000-000-0000
Fax:
000-000-0000
Attention:
Xxxxxx Xxxxxx
11
with
a
copy to:
Xxxxxx
& Jaclin, LLP
Attn:
Xxxx Xxxxx
000
Xxxxx
0 Xxxxx, Xxxxx 000
Xxxxxxxxx,
Xxx Xxxxxx 00000
Telephone:
000-000-0000
Fax:
000-000-0000
All
such
notices, requests, consents and other communications shall be deemed to have
been delivered (a) in the case of personal delivery or delivery by telecopy,
on
the date of such delivery, (b) in the case of dispatch by nationally-recognized
overnight courier, on the next business day following such dispatch and (c)
in
the case of mailing, on the third business day after the posting thereof.
Section
15. Modifications;
Amendments; Waivers.
The
terms
and provisions of this Agreement may not be modified or amended, nor may any
provision be waived, except pursuant to a writing signed by the Company and
the
holders of at least a majority of the Registrable Shares then outstanding.
Section
16. Counterparts.
This
Agreement may be executed in any number of counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
Section
17. Headings.
The
headings of the various sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be a part of this
Agreement.
Section
18. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York applicable to contracts made and to be performed wholly
therein.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
12
[SIGNATURE
PAGE TO REGISTRATION RIGHTS AGREEMENT]
IN
WITNESS WHEREOF,
the
undersigned have executed and delivered this Agreement as of the date first
set
forth above.
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By:
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|
Name:
Xxxxxx Xxxx
|
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|
Title:
Chief Executive Officer
|
||
|
PROFESSIONAL
OFFSHORE OPPORTUNITY
|
||
|
FUND,
LTD.
|
||
|
By:
|
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|
Name:
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|
Title:
|
||
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PROFESSIONAL
TRADERS FUND, LTD.
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By:
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Name:
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||
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Title:
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13
