REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of November
5, 2002 and entered into by and between Xxxxx Educational Systems, Inc., a
Delaware corporation (the "Company"), on the one hand, and Xxxx Xxxxx, Li Ming
and Lio Lingxiao (the "Sellers"), on the other hand, with reference to the
following:
A. In order to induce the Sellers, to enter into the Share Exchange
Agreement (as defined below) and to consummate the transactions contemplated
thereby, the Company has agreed to provide the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the closing under the Share Exchange Agreement (the "Closing").
The parties to this Agreement, intending to be legally bound hereby,
agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
"Affiliate" has the meaning ascribed to that term in Rule 12b-2 of the
General Rules and Regulations promulgated under the Exchange Act.
"Common Stock" means the common stock, par value $0.001 per share, of
the Company.
"Demand Holders" means the Sellers holding at least 50% of the shares
of Common Stock issued at the Closing to the Sellers pursuant to the Share
Exchange Agreement and the Sock Purchase Agreement.
"Demand Request" has the meaning ascribed to that term in Section 3.1.
"Demand Registration" has the meaning ascribed to that term in Section
3.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" means the Sellers and their Affiliates.
"Person" means an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Piggyback Registration" has the meaning ascribed to that term in
Section 3.2.
"Prospectus" means the Prospectus included in any Registration
Statement, as amended or supplemented by any Prospectus supplement and by all
other amendments, and supplements to such Prospectus, including post-effective
amendments, and all information incorporated by reference in such Prospectus.
"Registrable Securities" means any shares of Common Stock acquired by
the Sellers by virtue of the Share Exchange Agreement and the Stock Purchase
Agreement, or any stock split or combination, stock dividend or similar event in
respect of any of such shares; provided, however, that shares of Common Stock
that are Registrable Securities shall cease to be Registrable Securities upon
the sale thereof pursuant to an effective Registration Statement or pursuant to
Rule 144 (or successor rule) under the Securities Act; and provided, further
that shares of Common Stock that are Registrable Securities shall continue to be
Registrable Securities upon their transfer in a private transaction exempt from
the registration requirements of the Securities Act to a person who is already a
party to this Agreement (or an affiliate of any party to this Agreement) or a
transfer of Registrable Securities in accordance with Section 11 to a party who
becomes a party to this Agreement by agreeing in writing to be bound by the
terms of this Agreement, such agreement to be in form and substance reasonably
satisfactory to the Company.
"Registration Expenses" means all registration and filing fees, fees
with respect to filings required to be made with the National Association of
Securities Dealers, Inc. (the "NASD"), fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of one
counsel for the underwriters or sellers of Registrable Securities in connection
with blue sky qualifications of the Registrable Securities under the laws of
such jurisdictions as the managing underwriters or holders of a majority of the
Registrable Securities being sold may reasonably designate), printing expenses
and distribution expenses associated with the preparation and distribution of
any Registration Statement, any Prospectus, and amendments or supplements
thereto, all fees and expenses associated with the listing of any Registrable
Securities on any securities exchange or exchanges, and fees and disbursements
of counsel for the Company and its independent certified public accountants,
out-of-pocket expenses of underwriters customarily paid by the issuer to the
extent provided for in any underwriting agreement (but specifically excluding
any Selling Expenses).
"Registration Statement" means any Registration Statement of the
Company filed under the Securities Act (including pursuant to Rule 415
thereunder), including the Prospectus forming a part thereof, amendments and
supplements to such Registration Statement, including post-effective amendments,
and all exhibits to and all information incorporated by reference in such
Registration Statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations thereunder, all as the
same shall be in effect at the time.
"Selling Expenses" means, with respect to the Holder, all underwriting
discounts, selling commissions and stock transfer or documentary stamp taxes, if
any, applicable to any Registrable Securities registered and sold by the Holder,
and all fees and disbursements of any counsel for the Holder (other than any
counsel fees expressly constituting a Registration Expense as defined in this
Agreement).
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"Share Exchange Agreement" means the Share Exchange Agreement dated as
of the date hereof, entered into by the Company, Halter Capital Corporation,
Xxxxx Xxxxxx and the Sellers.
"Stock Purchase Agreement" means the Stock Purchase Agreement dated as
of the date hereof among Halter Capital Corporation, Xxxxx Xxxxxx and the
Sellers.
"Underwritten Offering" means an offering registered under the
Securities Act in which securities are sold to an underwriter, whether on a
"firm commitment", "best efforts" or other basis, for reoffering or resale to
the public.
2. Securities Subject to this Agreement. The only securities entitled
to the benefits of this Agreement are the Registrable Securities.
3. Registration of Registrable Securities.
3.1 Demand Registration.
(a) Demand. Subject to the other provisions of this Agreement, the
Demand Holders shall have the right, exercisable by making a written request (a
"Demand Request") to the Company (which request shall specify the aggregate
number of shares of Registrable Securities requested to be registered), to
require that the Company effect the registration in accordance with the
provisions of the Securities Act with respect to the resale of any of the
Registrable Securities held by the Demand Holders. Upon receipt of the Demand
Request, the Company shall use its best efforts to effect, at the earliest
practicable date, the registration (a "Demand Registration") under the
Securities Act of the Registrable Securities that the Company has been so
required to register by the Demand Holders to provide for public resale thereof.
(b) Effective Registration Statement. A registration requested pursuant
to this Section 3.1 shall not be deemed to have been effected unless a
Registration Statement with respect thereto has become effective; provided,
however, that if, after a Demand Registration has become effective, (i) the
offering of Registrable Securities pursuant thereto is suspended, blocked by any
stop order, injunction or other order of the SEC or any governmental agency or
court, or withdrawn (except a Demand Registration withdrawn under Section 6(a)),
or (ii) the Registrable Securities are not sold to the public thereunder as a
result of the conditions to closing specified in the purchase agreement or
underwriting agreement entered into in connection with such Demand Registration
not being satisfied other than by act of omission of the Demand Holders, such
Demand Registration will be deemed not to have been effected.
(c) Selection of Underwriters. The Demand Holders shall have the sole
right to select, after consultation with the Company, the underwriter or
underwriters, if any, of the Registrable Securities so to be registered.
(d) Priority in Requested Registration. If the managing underwriter, if
any, of the Demand Registration advises the Company in writing that, in its
opinion, the number of shares of Registrable Securities and other securities of
the Company requested to be included in such offering exceeds the number that
can be sold in such offering at the offering price acceptable to the Demand
Holders, the Company shall include in such registration (1) first, the
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Registrable Securities requested by the Demand Holders to be included in the
Demand Registration pursuant to Section 3.1(a); and (2) second, to the extent
that such securities of the Company may be included without affecting the
offering price of the Registrable Securities referred to in clause (1), in the
opinion of such managing underwriter, any other securities of the Company held
by persons having rights to participate in such Demand Registration that are
non-preferential to the Demand Holders in accordance with their agreements with
respect thereto.
(e) Limitations on Demand Registration. Notwithstanding the foregoing,
the Company shall not be required to file a Registration Statement for a Demand
Registration under any of the following circumstances: ( i) within 180 days
after the effectiveness (within the meaning of Section 3.1(b)) of a Registration
Statement filed in connection with an underwritten public offering of securities
of the Company;
(ii) if the Company has effected two Demand Registrations pursuant to
this Section 3.1;
(iii) the Company promptly delivers written notice ("Prior Registration
Notice") to the Demand Holders making the Demand Request that it has filed and
is using reasonable efforts to have declared effective, or at the time of
receipt of the Demand Request is required to file, or has delivered a Piggyback
Notice (as defined in Section 3.2) with respect to, a Registration Statement
pursuant to Section 3.2 ("Prior Registration Rights"); provided, however, that
the Company may postpone the filing of a Registration Statement pursuant to a
Demand Request for a period of no longer than (1) 180 days after the effective
date of the Registration Statement filed pursuant to the Prior Registration
Rights, if such Registration Statement was filed before the date of delivery of
the Prior Registration Notice or within 60 days thereafter and, in either case,
becomes effective within 120 days after the date of delivery of the Prior
Registration Notice; (2) 120 days after the date of delivery of the Prior
Registration Notice, if such Registration Statement was filed before the date of
delivery of the Prior Registration Notice or within 60 days thereafter but, in
either case, does not become effective within such 120-day period; or (3) 60
days after the date of delivery of the Prior Registration Notice, if such
Registration Statement was not filed before the date of delivery of the Prior
Registration Notice and is not filed within 60 days thereafter; or
(iv) if there exists at the time, material non-public information
relating to a merger, acquisition, disposition or financing transaction
involving the Company, which, in the reasonable opinion of the Board of
Directors, should not be disclosed, any other provisions of this Agreement to
the contrary notwithstanding, the Company's obligation to file a Registration
Statement, or cause such Registration Statement to become and remain effective
(whether under this Section 3.1 or under any other provision of this Agreement),
shall be suspended for a period not to exceed 90 days (and for a period not
exceeding, in the aggregate, 180 days in any 12-month period);
(v) the Company has effected a Demand Registration pursuant to this
Section 3.1 within the previous (6) months.
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3.2 Piggyback Registration.
(a) Right to Include Registrable Securities. If the Company at any time
proposes to register the offering and sale of shares of Common Stock under the
Securities Act by registration on any form other than Forms S-4 or S-8 (or any
successor forms thereto) whether or not for sale for its own account, it shall
each such time give prompt written notice ("Piggyback Notice") to the Holders of
its intention to do so and of the Holders' rights under this Section 3.2. Upon
the written request of the Holders received by the Company within 30 days after
the giving of any Piggyback Notice (which request shall specify the Registrable
Securities intended to be disposed of by the Holders and the intended method of
such disposition), the Company shall use all reasonable efforts to include in
such registration ("Piggyback Registration") all Registrable Securities that the
Holders have so requested be included in such Piggyback Registration to permit
the disposition by the Holders of such Registrable Securities; provided that (i)
if such registration involves an underwritten public offering, the Holders must
sell Registrable Securities to the underwriters selected by the Company on the
same terms and conditions as apply to the Company; and (ii) if, at any time
after giving notice of its intention to register any securities pursuant to this
Section 3.2(a) and prior to the effective date of the Registration Statement
filed in connection with such registration, the Company shall determine for any
reason not to register such securities, the Company shall give written notice to
the Holders and, thereupon, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not its
obligation to pay Registration Expenses pursuant to Section 7). No registration
effected under this Section 3.2 shall relieve the Company of its obligations to
effect registrations upon request under Section 3.1.
(b) Priority in Piggyback Registrations. If a Piggyback Registration is
an Underwritten Offering and the managing underwriter thereof advises the
Company in writing that, in its opinion, the number of shares of Registrable
Securities requested or proposed to be included in such offering exceeds the
number that can be sold in such offering without materially affecting the
offering price of any such securities, the Company shall include in such
registration (1) first, if such registration is initiated by the Company or the
Demand Holder proposing to register any of its Common Stock or Registrable
Securities, such Common Stock or Registrable Securities proposed to be sold by
the Company or the Demand Holder; and (2) second, to the extent that such
Registrable Securities and other securities may be included in such registration
without materially affecting the offering price of the securities referred to in
clause (1), in the opinion of such managing underwriter, the Registrable
Securities requested by the Holders (other than the Demand Holder) to be
included in such Piggyback Registration pursuant to Section 3.2 (a) and any
other securities of the Company held by persons having rights to participate in
such Piggyback Registration that are non-preferential to the Holders pro rata
among all such holders on the basis of the total number of Registrable
Securities and other securities, requested by each such holder to be included
therein.
4. Other Agreements.
(a) During the term of this Agreement, the Holders shall if requested
by the managing underwriter or underwriters in an Underwritten Offering and
provided the Company is then in compliance with the terms of this Agreement,
agree not to effect any public sale or distribution of securities of the Company
of the same class as the securities included in such Registration Statement,
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including a sale pursuant to Rule 144 under the Securities Act, except as part
of such underwritten registration, during the 7-day period prior to, and during
a period of up to 120 days beginning on, the closing date of each Underwritten
Offering made pursuant to such Registration Statement, to the extent timely
notified in writing by the Company or the managing underwriter or underwriters.
5. Registration Procedures.
In connection with the Company's obligations under Section 3, the
Company shall use its best efforts to effect such registration to permit the
sale of such Registrable Securities in accordance with the intended method or
methods of distribution thereof, and pursuant thereto the Company shall as
expeditiously as practicable:
(a) prepare and file with the SEC under the Securities Act a
Registration Statement with respect to such Registrable Securities which shall
state that the Registrable Securities are covered thereby, and use its best
efforts to cause such Registration Statement to become effective and to remain
effective; provided, however, that the Company may discontinue any registration
of Registrable Securities being effected pursuant to Section 3.2 at any time
before the effective date of the Registration Statement relating thereto;
(b) prepare and file with the SEC such amendments and supplements, if
any, to such Registration Statement and the Prospectus used in connection
therewith as may be necessary to (1) keep such Registration Statement effective
until the earlier of (a) 180 days after the effectiveness thereof or (b) the
completion of the distribution under such Registration Statement, and (2) comply
with the provisions of the Securities Act applicable to it with respect to the
disposition of all securities covered by such Registration Statement during such
period in accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement;
(c) furnish to the Holders and each underwriter (if any) such number of
copies of such Registration Statement (including exhibits), each amendment and
supplement thereto, the Prospectus included in such Registration Statement or
filed with the SEC (including each preliminary Prospectus), and each amendment
and supplement thereto as the Holder and underwriter may reasonably request to
facilitate the disposition of the Registrable Securities owned by the Holder and
covered by such Registration Statement;
(d) use its best efforts to (1) register or qualify such Registrable
Securities under the securities or "blue sky" laws of such jurisdictions as the
Holder or the managing underwriter (if any) may reasonably request; (2) keep
such registrations or qualifications in effect for so long as such Registration
Statement is in effect; and (3) take any and all other reasonable actions that
may be necessary or appropriate to enable the Holders or other securities of the
Company covered by such Registration Statement and each underwriter (if any) to
consummate the disposition in such jurisdictions of the relevant Registrable
Securities and other securities of the Company; provided, however, that the
Company shall not be required to (a) qualify generally to transact business as a
foreign corporation in any jurisdiction where it would not otherwise be required
to qualify but for the requirements of this Section 5, (b) subject itself to
taxation in any such jurisdiction; or (c) consent to general service of process
in any jurisdiction;
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(e) (1) at any time when a Prospectus relating thereto is required to
be delivered under the Securities Act, notify the Holders when it becomes aware
of the occurrence of any event as a result of which the Prospectus (as then
amended or supplemented) contains any untrue statement of a material fact or
omits any fact necessary to make the statements therein, in the light of
circumstances under which they were made, not misleading; and (2) at the request
of the Holders, as promptly as practicable thereafter, prepare in sufficient
quantities and furnish to the Holders and each underwriter (if any) a reasonable
number of copies of a Prospectus supplemented or amended so that, as thereafter
delivered to the offerees or purchasers of such Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or omit to
state any fact necessary to make the statements therein, in the light of the
circumstances then existing, not misleading;
(f) use its best efforts to cause all such Registrable Securities
covered by such Registration Statement to be listed or approved for trading on
any securities exchange or inter-dealer quotation system, if any, on which
similar securities of the Company are then listed or approved for trading, if
the listing of such Registrable Securities is then permitted under the rules of
such exchange or inter-dealer quotation system;
(g) enter into and perform its obligations under customary agreements
relating to the registration, including an underwriting agreement in customary
form;
(h) subject to the execution of confidentiality agreements customary
for transactions of this type, in form and substance satisfactory to the
Company, (1) make reasonably available for inspection by the Holders, any
underwriter (if any) and any legal counsel, accountant or other agent retained
by the Holders or any underwriter, all financial and other records, relevant
corporate documents, and properties of the Company, (2) cause the Company's
directors, officers, employees, counsel and independent public accountants to
supply all information reasonably requested by, and to respond to inquiries
from, the Holders or any such underwriter, legal counsel, attorney, accountant
or agent in connection with such Registration Statement, in each instance to the
extent that such information is reasonably necessary in the opinion of such
person to conduct a reasonable investigation within the meaning of the
Securities Act, and (3) give such person a reasonable opportunity to participate
in the preparation of the Registration Statement and any amendment thereto;
(i) with respect to Underwritten Offerings, use its best efforts to
obtain an appropriate opinion from counsel for the Company and a "cold comfort"
letter from then Company's independent public accountants, each in customary
form and covering such matters of the type customarily covered by opinions of
counsel and cold comfort letters in similar registrations;
(j) promptly notify the Holders and each managing underwriter (if any)
and, upon request by any such person, confirm such advice in writing, (1) when
such Registration Statement, the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to such Registration
Statement or any post-effective amendment thereto, when the same has become
effective, (2) of the issuance by the SEC of any stop order suspending the
effectiveness of such Registration Statement or the initiation of any proceeding
for such purpose, or (3) of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of such
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose; and
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(k) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such Registration Statement or any
post-effective amendment thereto.
The Company may require the Holders to furnish to the Company such
information regarding the distribution of such securities as the Company may
from time to time reasonably request in writing; provided, however, that such
information shall be used by the Company only to the extent necessary for, and
in connection with, such registration.
The Holders agree that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 5(e)(1) hereof, the
Holders shall forthwith discontinue disposition of such Registrable Securities
until the Holders' receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 5(e)(2), or until it is advised in writing
(the "Advice") by the Company that the use of the Prospectus may be resumed, and
has received copies of any additional or supplemental filings which are
incorporated by reference in the Prospectus, and, if so directed by the Company,
the Holders shall deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in the Holders' possession, of the
Prospectus covering such Registrable Securities current at the time of receipt
of such notice. In the event the Company shall give any such notice, the time
periods regarding the maintenance of the Registration Statement in Section 5(b)
shall be extended by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 5(e)(1) to and including
the date when the Holders shall have received the copies of the supplemented or
amended Prospectus contemplated by Section 5(e)(2) or the Advice.
6. Withdrawal.
(a) If any Holder disapproves of the terms of any offering, the sole
remedy of such Holder shall be, in its discretion, to withdraw such Holder's
Registrable Securities and other securities of the Company therefrom by giving
written notice to the Company and any managing underwriter (if any). The
Holder's Registrable Securities and other securities of the Company so withdrawn
from the offering also shall be withdrawn from registration. If the Holder
withdraws all Registrable Securities from the offering, the Company may withdraw
the registration, and if such registration was commenced pursuant to a Demand
Request, such registration shall nevertheless be counted as a Demand
Registration effected hereunder; provided, however, that such registration shall
not be so counted if (a) the withdrawal was based on the Company's failure to
comply in any material respect with its obligations hereunder, or (b) the price
at which the Registrable Securities may be sold pursuant to the Demand
Registration is not acceptable to the Holder.
(b) If as a result of the priority provisions of Sections 3.1(d) and
3.2(b), any Holder is not entitled to include all of the Holder's Registrable
Securities in a registration that the Holder has requested to be included, then
after the delivery to the Holder of notice thereof from the Company, the Holder
may elect to withdraw his request to include the Holder's Registrable Securities
in such registration ("Withdrawal Election"); provided, however, that a
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Withdrawal Election shall be irrevocable and, after making a Withdrawal
Election, the Holder shall no longer have any right to include the Holder's
Registrable Securities in the registration as to which such Withdrawal Election
was made.
7. Expenses of Registration. All Registration Expenses incurred in
connection with any registration of Registrable Securities held by the Demand
Holders in accordance with Section 3.1 shall be borne by the Demand Holder. All
Registration Expenses incurred in connection with any registration of securities
initiated by the Company in accordance with Section 3.2 shall be borne by the
Company. All other Registration Expenses incurred other than the foregoing
(including in connection with any Piggyback Registration exercised with respect
to a Demand Registration) shall be borne pro rata by holders of the respective
securities being registered. All Selling Expenses relating to Registrable Shares
registered on behalf of any person shall be borne by such person.
8. Indemnification.
(a) Indemnification by the Company. The Company shall indemnify and
hold harmless, with respect to any Registration Statement filed by it, to the
fullest extent permitted by law, each Holder, its officers, directors,
employees, agents and general or limited partners, and each other person, if
any, who controls the Holder within the meaning of the Securities Act
(collectively, "Holder Indemnified Parties") against all losses, claims,
damages, liabilities and expenses, joint or several, (including reasonable fees
of counsel and any amounts paid in settlement effected with the Company's
consent, which consent shall not be unreasonably withheld) to which any such
Holder Indemnified Party may become subject under the Securities Act, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions or proceedings in respect thereof) are caused by (1) any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement in which such Registrable Securities were included as
contemplated hereby or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (2) any untrue statement or alleged untrue statement of
a material fact contained in any, preliminary, final or summary Prospectus,
together with the documents incorporated by reference therein (as amended or
supplemented if the Company shall have filed with the SEC any amendment thereof
or supplement thereto), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or (3) any violation by the Company of any federal or
state law, rule or regulation applicable to the Company relating to action of or
inaction by the Company in connection with any such registration; and in each
such case, the Company shall reimburse each such Holder Indemnified Party for
any reasonable legal or any other expenses incurred by any of them in connection
with investigating or defending any such loss, claim, damage, liability,
expense, action or proceeding; provided, however, that the Company shall not be
liable to any such Holder Indemnified Party in any such case to the extent that
any such loss, claim, damage, liability or expense (or action or proceeding,
whether commenced or threatened, in respect thereof) arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in such Registration Statement or amendment thereof or supplement
thereto or in any such preliminary, final or summary Prospectus in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any such Holder Indemnified Party relating to such Holder Indemnified
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Party expressly for use in the preparation thereof, and provided, further, that
the Company shall not be liable to any such Holder Indemnified Party with
respect to any preliminary Prospectus to the extent that any such loss, claim,
damage, liability or expense of such Holder Indemnified Party results from the
fact that such Holder Indemnified Party sold Registrable Securities to a person
to whom there was not sent or given, at or before the written confirmation of
such sale, a copy of the Prospectus (excluding documents incorporated by
reference) or of the Prospectus as then amended or supplemented (excluding
documents incorporated by reference) if the Company has, prior to the
confirmation or completion of such sale, furnished copies thereof to such Holder
Indemnified Party in compliance with Section 5 and the loss, claim, damage,
liability or expense of such Holder Indemnified Party results from an untrue
statement or omission of a material fact contained in such preliminary
Prospectus which was corrected in the Prospectus (or the Prospectus as amended
or supplemented). Such indemnity and reimbursement of expenses obligations shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Holder Indemnified Parties and shall survive the transfer of such
securities by such holder.
(b) Indemnification by the Holders. The Holder of Registrable
Securities participating in any registration hereunder shall severally and not
jointly indemnify and hold harmless, to the fullest extent permitted by law, the
Company, its directors, officers, employees and agents, and each person who
controls the Company (within the meaning of the Securities Act) (collectively,
"Company Indemnified Parties") against all losses, claims, damages, liabilities
and expenses, joint or several (including reasonable fees of counsel and any
amounts paid in settlement effected with such holder's consent, which consent
shall not be unreasonably withheld) to which any Company Indemnified Party may
become subject under the Securities Act, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions or proceedings
in respect thereof) are caused by (1) any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement in which
the Holder's Registrable Securities were included or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (2) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary, final or summary Prospectus, together with the documents
incorporated by reference therein (as amended or supplemented if the Company
shall have filed with the Commission any amendment thereof or supplement
thereto), or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading to the extent, but only to the extent, in the cases described in
clauses (1) and (2), that such untrue statement or omission is contained in any
information furnished in writing by the Holder to the Company expressly for use
in the preparation thereof, provided, however, that the aggregate amount which
the Holder shall be required to pay pursuant to this Section 8(b) shall be
limited to the dollar amount of proceeds received - less expenses associated
with the sale of Registrable Securities and other securities of the Company by
the Holder upon the sale of the Registrable Securities and other securities of
the Company - pursuant to the Registration Statement giving rise to such claim.
Such indemnity obligation shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company Indemnified Parties
(except as provided above) and shall survive the transfer of such securities by
the Holder.
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(c) Conduct of Indemnification Proceedings. Promptly after receipt by
an indemnified party under Section 8(a) or 8(b) of written notice of
commencement of any action, suit, proceeding, investigation or threat thereof
made in writing with respect to which a claim for indemnification may be made
pursuant to this Section 8, such indemnified party shall, if a claim in respect
thereto is to be made against an indemnifying party, give written notice to the
indemnifying party of the threat or commencement thereof; provided, however,
that the failure to so notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party except to the extent
that the indemnifying party is actually prejudiced by such failure to give
notice. If any such claim or action referred to under Section 8(a) or 8(b) is
brought against any indemnified party and it then notifies the indemnifying
party of the threat or commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other indemnifying party similarly notified, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party. After notice
from the indemnifying party to such indemnified party of its election so to
assume the defense of any such claim or action, the indemnifying party shall not
be liable to such indemnified party under this Section 8 for any legal expenses
of counsel or any other expenses subsequently incurred by such indemnified party
in connection with the defense thereof other than reasonable costs of
investigation unless (i) the indemnifying party has failed to assume the defense
of such claim or action or to employ counsel reasonably satisfactory to such
indemnified party or (ii) in the reasonable judgment of any indemnified party a
conflict of interest is likely to exist, based on the written opinion of
counsel, between such indemnified party and the indemnifying party or any other
of such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay reasonable fees and expenses of
such additional counsel. The indemnifying party shall not be required to
indemnify the indemnified party with respect to any amounts paid in settlement
of any action, proceeding or investigation entered into without the written
consent of the indemnifying party, which consent shall not be unreasonably
withheld. No indemnifying party shall consent to the entry of any judgment or
enter into any settlement without the consent of the indemnified party unless
(1) such judgment or settlement does not impose any obligation or liability upon
the indemnified party other than the execution, delivery or approval thereof,
and (2) such judgment or settlement includes as an unconditional term thereof
the giving by the claimant or plaintiff to such indemnified party of a full
release and discharge from all liability in respect of such claim for all
persons that may be entitled to or obligated to provide indemnification or
contribution under this Section 8.
(d) Contribution. If the indemnification provided for in this Section 8
is unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or 8(b), then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, liabilities or expenses (or actions or proceedings in respect
thereof) referred to in Section 8(a) or 8(b) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the indemnified party on the other in connection with the statements,
omissions, actions or inactions which resulted in such losses, claims, damages,
liabilities or expenses. The relative fault of the indemnifying party and 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 the indemnified party, any action or
inaction by any such party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement, omission,
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action or inaction. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses (or actions or
proceedings in respect thereof) pursuant to this Section 8(d) shall be deemed to
include any reasonable legal or other expenses incurred by such indemnified
party in connection with investigating or defending any such action or claim
(which shall be limited as provided in Section 8(c) if the indemnifying party
has assumed the defense of any such action in accordance with the provisions
thereof) which is the subject of this Section 8(d). 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 was not
guilty of such fraudulent misrepresentation. Promptly after receipt by an
indemnified party under this Section 8(d) of written notice of the commencement
of any action, suit, proceeding, investigation or threat thereof made in writing
with respect to which a claim for contribution may be made against an
indemnifying party under this Section 8(d), such indemnified party shall, if a
claim for contribution in respect thereto is to be made against an indemnifying
party, give written notice to the indemnifying party in writing of the
commencement thereof (if the notice specified in Section 8(c) has not been given
with respect to such action); provided, however, that the failure to so notify
the indemnifying party shall not relieve it from any obligation to provide
contribution which it may have to any indemnified party under this Section 8(d)
except to the extent that the indemnifying party is actually prejudiced by the
failure to give notice. Notwithstanding anything in this Section 8(d) to the
contrary, the Holder shall not be required pursuant to this Section 8(d) to
contribute any amount which exceeds the dollar amount of the proceeds received -
less expenses associated with the sale of Registrable Securities and other
securities of the Company - by the Holder from the sale of Registrable
Securities and other securities of the Company in the offering to which the
losses, claims, damages, liabilities or expenses of the indemnified parties
relate.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
If indemnification is available under this Section 8, the indemnifying
parties shall indemnify each indemnified party to the fullest extent provided in
Sections 8(a) and 8(b), without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 8(d). The provisions of this Section 8(d) shall be
in addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract, shall remain in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party, and shall survive the transfer of securities by any such
party.
(e) Indemnification and Contribution of Underwriters. In connection
with any Underwritten Offering contemplated by this Agreement which includes
Registrable Securities, the Company and the Holder shall agree to customary
provisions for indemnification and contribution (consistent with the other
provisions of this Section 8) in respect of losses, claims, damages, liabilities
and expenses of the underwriters of such offering.
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9. Current Public Information. With a view to making available the
benefits of certain rules and regulations of the SEC which may permit the sale
of Registrable Securities to the public without registration, the Company agrees
to use its best efforts to:
(a) file with the SEC in a timely manner all reports and other
documents required of the Company under the Exchange Act after the Company
becomes subject to the reporting requirements of such act; and
(b) furnish to each Holder, during the term of this Agreement,
forthwith upon request (i) if true, a written statement by the Company that it
has complied with the current public information and reporting requirements of
Rule 144 under the Securities Act and the Exchange Act to which it is subject
and (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.
10. Participation in Underwritten Registrations. In the case of any
underwritten registration under Section 3.1, or in the case of a registration
under Section 3.2, if the Company determines to enter into an underwriting
agreement in connection therewith, (1) all shares of Registrable Securities or
other Securities of the Company to be included in such registration shall be
subject to such underwriting agreement, which shall be in customary form
(including representations and warranties of the Holders solely with respect to
the identity of the Holders, the shares to be sold and the intended form of
disposition), and (2) no person may participate in any such registration unless
such person (a) agrees to sell such person's securities on the basis provided in
such underwriting arrangement and (b) completes and executes all questionnaires,
powers-of-attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
11. Transfer of Registration Rights. The rights to cause the Company to
register Registrable Securities of the Holders and keep information available
granted to the Holders by the Company hereunder may be assigned by any Holder
(i) to any partner or shareholder of the Holder or (ii) to other transferees or
assignees; provided, that the Company is given written notice by the Holder at
any time of or within a reasonable time after said transfer, stating the name
and address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being assigned and the transferee
or assignee agrees in writing to be bound by the terms of this Agreement, such
agreement to be in form and substance reasonably satisfactory to the Company.
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12. Nominees for Beneficial Owners. If Registrable Securities are held
by a nominee for the beneficial owner thereof, the beneficial owner thereof may,
at its election, be treated as the holder of such Registrable Securities for
purposes of (i) any action by holders of Registrable Securities pursuant to this
Agreement and (ii) any determination of number of Registrable Securities held by
any holders of Registrable Securities contemplated by this Agreement. If the
beneficial owner of any Registrable Securities so elects, the Company may
require reasonable assurances of such beneficial owner's ownership of such
Registrable Securities.
13. Representations and Warranties. The Company represents and warrants
to the other parties as follows:
(a) The execution, delivery and performance of the Agreement have been
duly authorized by the Company.
(b) This Agreement constitutes a valid and binding obligation of the
Company enforceable in accordance with the terms, except as enforceability
thereof may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditor's rights and by general principles of equity.
(c) The execution, delivery and performance by the Company of this
Agreement do not and will not require the authorization, consent, permit or
approval of, or declaration to or filing with, any court, regulatory or public
body or governmental authority not already obtained or made, or result in the
creation of any lien, security interest, change or encumbrance upon the capital
stock of the Company.
14. Miscellaneous.
(a) Amendments and Waivers. Except as otherwise provided herein, no
alteration, modification, amendment, change or waiver of any provision of this
Agreement shall be effective or binding on any party hereto unless the same is
in writing and is executed by the Company and the Holders representing at least
50% of the Registrable Securities then remaining; provided, however, that with
respect to a particular Registration Statement filed pursuant to Section 3, a
waiver or consent to departure from the provisions of this Agreement regarding
only such Registration Statement and the offering covered thereby may be given
by the Holder, except that no such waiver or consent shall operate to affect
adversely the rights hereunder of any other holder of Registrable Securities.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or courier guaranteeing overnight delivery:
(i) if to the Holder as set forth on the signature page hereto or, at
the most current address given by
such holder to the Company; and
14
(ii) if to the Company:
Intsys Shares Ltd.
Flat K 12/F International Industrial Centre
2-8 Kwei Tei Street
Fo Tan Shatin
Hong Kong
Attention: President
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three days after
being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day if timely delivered to
a courier guaranteeing overnight delivery.
(c) Term. This Agreement shall terminate and cease to be of any further
force or effect on the fifth anniversary of the date of this Agreement;
provided, however, that the indemnification and contribution rights and
obligations shall not terminate and shall continue forever; and provided,
further, that with respect to any particular party to this Agreement, this
Agreement shall terminate and cease to be of any further force or effect on the
first date which that party ceases to hold any Registrable Securities.
(d) Successors and Assigns. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, permitted assigns, heirs,
executors and administrators of the parties hereto, provided that any such
successors, permitted assign, heirs, executors and administrators shall have
agreed in writing to be bound by the terms and conditions of this Agreement.
(e) Remedies. Each party hereto acknowledges that in the event of any
breach of this Agreement by such party, the other parties hereto (1) would be
irreparably and immediately harmed by such breach, (2) could not be made whole
by monetary damages, and (3) shall be entitled to temporary and permanent
injunctions (or their functional equivalents) to prevent any such breach and/or
to compel specific performance with this Agreement, in addition to all other
remedies to which such parties may be entitled at law or in equity.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate 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. (g) Governing Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of California applicable to agreements made and to be performed in
California without regard to principles of conflicts of laws.
(h) Severability. Each provision of this Agreement shall be considered
severable, and if for any reason any provision that is not essential to the
effectuation of the basic purposes of the Agreement is determined by a court of
competent jurisdiction to be invalid or unenforceable under existing or future
applicable law, such invalidity shall not impair the operation of or affect
15
those provisions of this Agreement that are valid. In that case, this Agreement
shall be construed so as to limit any term or provision so as to make it
enforceable or valid within the requirements of any applicable law, and in the
event such term or provision cannot be so limited, this Agreement shall be
construed to omit such invalid or unenforceable provisions.
(i) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no representations, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company hereby. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter and cannot be changed or terminated orally.
(j) Construction. As used in this Agreement, unless the context
otherwise requires (i) references to "Sections" are to sections of this
Agreement, (ii) "hereof', "herein", "hereunder" and comparable terms refer to
this Agreement in its entirety and not to any particular part of this Agreement,
(iii) the singular includes the plural and the masculine, feminine and neutral
gender includes the other, (iv) "including" or "Includes" shall be deemed to be
followed by the phrase "without limitation", and (v) headings of the various
Sections and subsections are for convenience of reference only and shall not be
given any effect for purposes of interpreting this Agreement.
16
This Agreement is executed and delivered by the parties hereto to be
effective as of the date first above written.
XXXXX EDUCATIONAL SYSTEMS, INC.
By:
------------------------------
Name:
Title: President and Director
SELLERS:
---------------------------------
Fang Dehou
---------------------------------
Li Ming
---------------------------------
Lio Lingxiao
