REGISTRATION RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is entered into as of the
day of
,
2006,
by and among, Middle Kingdom Alliance Corporation, a corporation organized
under
the laws of Delaware (the “Company”), and the undersigned parties listed under
Investor on the signature page hereto (each, an “Investor” and collectively, the
“Investors”).
WHEREAS,
the Investors purchased Series A Units, consisting of one share of Company
common stock (“Common Stock”) and five Class A warrants, in a private placement
made in accordance with Section 4(2) under the Securities Act of 1933 prior
to
the Company’s public offering;
WHEREAS,
the Investors also purchased additional shares of the Company’s Common Stock
prior to its public offering;
WHEREAS,
the Investors currently hold all of the issued and outstanding securities of
the
Company; and
WHEREAS,
the Investors and the Company desire to enter into this Agreement to provide
the
Investors with certain rights relating to the registration of the Common Stock,
Class A warrants and Common Stock underlying the Class A warrants held by them;
NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1.
DEFINITIONS.
The following capitalized terms used herein have the following meanings:
“Agreement”
means this Agreement, as amended, restated, supplemented, or otherwise modified
from time to time.
“Commission”
means the Securities and Exchange Commission, or any other federal agency then
administering the Securities Act or the Exchange Act.
“Company”
is defined in the preamble to this Agreement.
“Demand
Registration” is defined in Section 2.1.1.
“Demanding
Holder” is defined in Section 2.1.1.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission promulgated thereunder, all as the same shall
be
in effect at the time.
“Form
S-1” is defined in Section 2.3.
“Indemnified
Party” is defined in Section 4.3.
“Indemnifying
Party” is defined in Section 4.3.
“Investor”
is defined in the preamble to this Agreement.
“Investor
Indemnified Party” is defined in Section 4.1.
“Maximum
Number of Shares” is defined in Section 2.1.4.
“Notices”
is defined in Section 6.3.
“Common
Stock” shall mean common stock of the Company, par value $0.001 per
share.
“Piggy-Back
Registration” is defined in Section 2.2.1.
“Register,”
“registered” and “registration” mean a registration effected by preparing and
filing a registration statement in compliance with the requirements of the
Securities Act, and the applicable rules and regulations promulgated thereunder,
and such registration statement becoming effective.
“Registrable
Securities” means the Common Stock owned or held by Investors, the Class A
warrants owned or held by Investors, and the Common Stock underlying the Class
A
warrants owned or held by Investors. Registrable Securities includes any
warrants, Common Stock or other securities of the Company issued as a dividend
or other distribution with respect to or in exchange for or in replacement
of
such Common Stock, Class A warrants or Common Stock underlying the Class A
warrants. As to any particular Registrable Securities, such securities shall
cease to be Registrable Securities when: (a) a Registration Statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been sold, transferred, disposed
of or exchanged in accordance with such Registration Statement; (b) such
securities shall have been otherwise transferred, new certificates for them
not
bearing a legend restricting further transfer shall have been delivered by
the
Company and subsequent public distribution of them shall not require
registration under the Securities Act; (c) such securities shall have
ceased to be outstanding, or (d) the Registrable Securities are salable
under Rule 144(k) in the opinion of counsel to the Company.
“Registration
Statement” means a registration statement filed by the Company with the
Commission in compliance with the Securities Act and the rules and regulations
promulgated thereunder for a public offering and sale of securities of the
Company (other than a registration statement on Form S-4 or Form S-8, or their
successors, or any registration statement covering only securities proposed
to
be issued in exchange for securities or assets of another entity).
“Release
Date” means the date on which the Common Stock or Class A warrants are disbursed
from escrow pursuant to Section 3 of that certain Securities Escrow
Agreement dated as of [ ],
2006 by
and among the parties hereto and Continental Stock Transfer & Trust
Company.
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“Repurchase
Right” is defined in Section 6.10.2.
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations
of the Commission promulgated thereunder, all as the same shall be in effect
at
the time.
“Underwriter”
means a securities dealer who purchases any Registrable Securities as principal
in an underwritten offering and not as part of such dealer’s market-making
activities.
2. REGISTRATION
RIGHTS.
2.1 Demand
Registration.
2.1.1 Request
for Registration.
At any
time and from time to time on or after the Release Date, the holders of a
minimum thirty percent (30%) interest of the Registrable Securities held by
the Investors or the transferees of the Investors, may make a written demand
for
registration under the Securities Act of all or part of their Registrable
Securities (a “Demand Registration”). Any demand for a Demand Registration shall
specify the number of Registrable Securities proposed to be sold and the
intended method(s) of distribution thereof. The Company will notify in writing
all holders of Registrable Securities of the demand, and each holder of
Registrable Securities who wishes to include all or a portion of such holder’s
Registrable Securities in the Demand Registration (each such holder including
Registrable Securities in such registration, a “Demanding Holder”) shall so
notify the Company in writing within fifteen (15) days after the receipt by
the holder of the notice from the Company. Upon any such request, the Demanding
Holders shall be entitled to have their Registrable Securities included in
the
Demand Registration, subject to Section 2.1.4 and the provisos set forth in
Section 3.1.1. The Company shall not be obligated to effect more than an
aggregate of three (3) Demand Registrations under this Section 2.1.1
in respect of Registrable Securities.
2.1.2 Effective
Registration.
A
registration will not count as a Demand Registration until the Registration
Statement filed with the Commission with respect to such Demand Registration
has
been declared effective and the Company has complied with all of its obligations
under this Agreement with respect thereto; provided, however, that if, after
such Registration Statement has been declared effective, the offering of
Registrable Securities pursuant to a Demand Registration is interfered with
by
any stop order or injunction of the Commission or any other governmental agency
or court or if the prospectus included in such Registation Statement is no
longer effective, the Registration Statement with respect to such Demand
Registration will be deemed not to have been declared effective, unless and
until, (i) such stop order or injunction is removed, rescinded or otherwise
terminated, and (ii) a majority-in-interest of the Demanding Holders
thereafter elect to continue the offering; provided, further, that the Company
shall not be obligated to file a second Registration Statement until a
Registration Statement that has been filed is counted as a Demand Registration
or is terminated or withdrawn.
2.1.3 Underwritten
Offering.
If a
minimum thirty percent (30%) interest of the Demanding Holders so elect and
such holders so advise the Company as part of their written demand for a Demand
Registration, the offering of such Registrable Securities pursuant to such
Demand Registration shall be in the form of an underwritten offering. In such
event, the right of any holder to include its Registrable Securities in such
registration shall be conditioned upon such holder’s participation in such
underwriting and the inclusion of such holder’s Registrable Securities in the
underwriting to the extent provided herein. All Demanding Holders proposing
to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the Underwriter or Underwriters
selected for such underwriting by a majority-in-interest of the holders
initiating the Demand Registration.
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2.1.4 Reduction
of Offering.
If the
managing Underwriter or Underwriters for a Demand Registration that is to be
an
underwritten offering advises the Company and the Demanding Holders in writing
that the dollar amount or number of Registrable Securities which the Demanding
Holders desire to sell, taken together with all other Common Stock or other
securities which the Company desires to sell and the Common Stock, if any,
as to
which registration has been requested pursuant to written contractual piggy-back
registration rights held by other shareholders of the Company who desire to
sell, exceeds the maximum dollar amount or maximum number of shares that can
be
sold in such offering without adversely affecting the proposed offering price,
the timing, the distribution method, or the probability of success of such
offering (such maximum dollar amount or maximum number of shares, as applicable,
the “Maximum Number of Shares”), then the Company shall include in such
registration: (i) first, the Registrable Securities as to which Demand
Registration has been requested by the Demanding Holders (pro rata in accordance
with the number of Registrable Securities which such Demanding Holder has
requested be included in such registration, regardless of the number of
Registrable Securities held by each Demanding Holder) that can be sold without
exceeding the Maximum Number of Shares; (ii) second, to the extent that the
Maximum Number of Shares has not been reached under the foregoing clause (i),
the Common Stock or other securities that the Company desires to sell that
can
be sold without exceeding the Maximum Number of Shares; (iii) third, to the
extent that the Maximum Number of Shares has not been reached under the
foregoing clauses (i) and (ii), the Common Stock for the account of other
persons that the Company is obligated to register pursuant to written
contractual arrangements with such persons and that can be sold without
exceeding the Maximum Number of Shares; and (v) fourth, to the extent that
the Maximum Number of Shares have not been reached under the foregoing clauses
(i), (ii), and (iii), the Common Stock that other shareholders desire to sell
that can be sold without exceeding the Maximum Number of Shares.
2.1.5 Withdrawal.
If a
majority-in-interest of the Demanding Holders disapprove of the terms of any
underwriting or are not entitled to include all of their Registrable Securities
in any offering, such majority-in-interest of the Demanding Holders may elect
to
withdraw from such offering by giving written notice to the Company and the
Underwriter or Underwriters of their request to withdraw prior to the
effectiveness of the Registration Statement filed with the Commission with
respect to such Demand Registration. If the majority-in-interest of the
Demanding Holders withdraws from a proposed offering relating to a Demand
Registration, then such registration shall not count as a Demand Registration
provided for in this Section 2.1.
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2.2 Piggy-Back
Registration.
2.2.1 Piggy-Back
Rights.
If at
any time on or after the Release Date the Company proposes to file a
Registration Statement under the Securities Act with respect to an offering
of
equity securities, or securities or other obligations exercisable or
exchangeable for, or convertible into, equity securities, by the Company for
its
own account or for shareholders of the Company for their account (or by the
Company and by shareholders of the Company including, without limitation,
pursuant to Section 2.1), other than a Registration Statement on Form S-8
or S-4 or (i) filed in connection with any employee stock option or other
benefit plan, (ii) for an exchange offer or offering of securities solely
to the Company’s existing shareholders, or (iii) for a dividend
reinvestment plan, then the Company shall (x) give written notice of such
proposed filing to the holders of Registrable Securities as soon as practicable
but in no event less than twenty (20) days before the anticipated filing
date, which notice shall describe the amount and type of securities to be
included in such offering, the intended method(s) of distribution, and the
name
of the proposed Managing Underwriter or Underwriters, if any, of the offering,
and (y) offer to the holders of Registrable Securities in such notice the
opportunity to register the sale of such number of shares of Registrable
Securities as such holders may request in writing within ten (10) days
following receipt of such notice (a “Piggy-Back Registration”). The Company
shall cause such Registrable Securities to be included in such registration
and
shall use its best efforts to cause the managing Underwriter or Underwriters
of
a proposed underwritten offering to permit the Registrable Securities requested
to be included in a Piggy-Back Registration to be included on the same terms
and
conditions as any similar securities of the Company and to permit the sale
or
other disposition of such Registrable Securities in accordance with the intended
method(s) of distribution thereof. All holders of Registrable Securities
proposing to distribute their securities through a Piggy-Back Registration
that
involves an Underwriter or Underwriters shall enter into an underwriting
agreement in customary form with the Underwriter or Underwriters selected for
such Piggy-Back Registration.
2.2.2 Reduction
of Offering.
If the
managing Underwriter or Underwriters for a Piggy-Back Registration that is
to be
an underwritten offering advises the Company and the holders of Registrable
Securities in writing that the dollar amount or number of Common Stock which
the
Company desires to sell, taken together with Common Stock or other securities,
if any, as to which registration has been demanded pursuant to written
contractual arrangements with persons other than the holders of Registrable
Securities hereunder, the Registrable Securities as to which registration has
been requested under this Section 2.2, and the Common Stock or other
securities, if any, as to which registration has been requested pursuant to
the
written contractual piggy-back registration rights of other shareholders of
the
Company, exceeds the Maximum Number of Shares, then the Company shall include
in
any such registration:
(a) If
the
registration is undertaken for the Company’s account: (A) first, the Common
Stock or other securities that the Company desires to sell that can be sold
without exceeding the Maximum Number of Shares; (B) second, to the extent
that the Maximum Number of Shares has not been reached under the foregoing
clause (i), the securities, if any, including the Registrable Securities, as
to
which registration has been requested pursuant to written contractual piggy-back
registration rights of security holders (pro rata in accordance with the number
of securities which each such person has actually requested to be included
in
such registration, regardless of the number of securities with respect to which
such persons have the right to request such inclusion) that can be sold without
exceeding the Maximum Number of Shares; and (ii) if the registration is a
“demand” registration undertaken at the demand of persons other than the holders
of Registrable Securities pursuant to written contractual arrangements with
such
persons, (w) first, the Common Stock for the account of the demanding
persons that can be sold without exceeding the Maximum Number of Shares;
(x) second, to the extent that the Maximum Number of Shares has not been
reached under the foregoing clause (1), the Common Stock or other securities
that the Company desires to sell that can be sold without exceeding the Maximum
Number of Shares; and (y) third, to the extent that the Maximum Number of
Shares has not been reached under the foregoing clauses (w) and (x), the
Registrable Securities as to which registration has been requested under this
Section 2.2 (pro rata in accordance with the number of Registrable
Securities held by each such holder); and (z) fourth, to the extent that
the Maximum Number of Shares has not been reached under the foregoing clauses
(w), (x) and (y), the Common Stock, if any, as to which registration has
been requested pursuant to written contractual piggy-back registration rights
which other shareholders desire to sell that can be sold without exceeding
the
Maximum Number of Shares.
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2.2.3 Withdrawal.
Any
holder of Registrable Securities may elect to withdraw such holder’s request for
inclusion of Registrable Securities in any Piggy-Back Registration by giving
written notice to the Company of such request to withdraw prior to the
effectiveness of the Registration Statement. The Company may also elect to
withdraw a registration statement at any time prior to the effectiveness of
the
Registration Statement. Notwithstanding any such withdrawal, the Company shall
pay all expenses incurred by the holders of Registrable Securities in connection
with such Piggy-Back Registration as provided in Section 3.3.
2.3 Registrations
on Form S-3.
The
holders of Registrable Securities may at any time and from time to time, request
in writing that the Company register the resale of any or all of such
Registrable Securities on Form S-3 or any similar short-form registration which
may be available at such time (“Form S-3”); provided, however, that the Company
shall not be obligated to effect such request through an underwritten offering.
Upon receipt of such written request, the Company will promptly give written
notice of the proposed registration to all other holders of Registrable
Securities, and, as soon as practicable thereafter, effect the registration
of
all or such portion of such holder’s or holders’ Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any other holder or holders joining in such request as are
specified in a written request given within fifteen (15) days after receipt
of such written notice from the Company; provided, however, that the Company
shall not be obligated to effect any such registration pursuant to this
Section 2.3: (i) if Form S-3 is not available for such offering; or
(ii) if the holders of the Registrable Securities, together with the
holders of any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) at any aggregate price to the public of less than $500,000.
Registrations effected pursuant to this Section 2.3 shall not be counted as
Demand Registrations effected pursuant to Section 2.1.
3.
REGISTRATION
PROCEDURES.
3.1 Filings;
Information.
Whenever the Company is required to effect the registration of any Registrable
Securities pursuant to Section 2, the Company shall use its best efforts to
effect the registration and sale of such Registrable Securities in accordance
with the intended method(s) of distribution thereof as expeditiously as
practicable, and in connection with any such request:
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3.1.1 Filing
Registration Statement.
The
Company shall, as expeditiously as possible and in any event within sixty
(60) days after receipt of a request for a Demand Registration pursuant to
Section 2.1, prepare and file with the Commission a Registration Statement
on any form for which the Company then qualifies or which counsel for the
Company shall deem appropriate and which form shall be available for the sale
of
all Registrable Securities to be registered thereunder in accordance with the
intended method(s) of distribution thereof, and shall use its best efforts
to
cause such Registration Statement to become and remain effective for the period
required by Section 3.1.3; provided, however, that the Company shall have
the right to defer any Demand Registration for up to thirty (30) days, and
any Piggy-Back Registration for such period as may be applicable to deferment
of
any demand registration to which such Piggy-Back Registration relates, in each
case if the Company shall furnish to the holders a certificate signed by the
Chief Executive Officer of the Company stating that, in the good faith judgment
of the Board of Directors of the Company, it would be materially detrimental
to
the Company and its shareholders for such Registration Statement to be effected
at such time; provided further, however, that the Company shall not have the
right to exercise the right set forth in the immediately preceding proviso
more
than once in any 365-day period in respect of a Demand Registration hereunder.
In no event will the holder of Registrable Securities be entitled to receive
a
net-cash settlement in lieu of physical settlement in shares of Common Stock,
regardless of whether the Common Stock is registered pursuant to an effective
registration statement.
3.1.2 Copies.
The
Company shall, prior to filing a Registration Statement or prospectus, or any
amendment or supplement thereto, furnish without charge to the holders of
Registrable Securities included in such registration, and such holders’ legal
counsel, copies of such Registration Statement as proposed to be filed, each
amendment and supplement to such Registration Statement (in each case including
all exhibits thereto and documents incorporated by reference therein), the
prospectus included in such Registration Statement (including each preliminary
prospectus), and such other documents as the holders of Registrable Securities
included in such registration or legal counsel for any such holders may request
in order to facilitate the disposition of the Registrable Securities owned
by
such holders.
3.1.3 Amendments
and Supplements.
The
Company shall prepare and file with the Commission such amendments, including
post-effective amendments, and supplements to such Registration Statement and
the prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective and in compliance with the provisions of the
Securities Act until all Registrable Securities and other securities covered
by
such Registration Statement have been disposed of in accordance with the
intended method(s) of distribution set forth in such Registration
Statement.
3.1.4 Notification.
After
the filing of a Registration Statement, the Company shall promptly, and in
no
event more than two (2) business days after such filing, notify the holders
of Registrable Securities included in such Registration Statement of such
filing, and shall further notify such holders promptly and confirm such advice
in writing in all events within two (2) business days of the occurrence of
any of the following: (i) when such Registration Statement becomes
effective; (ii) when any post-effective amendment to such Registration
Statement becomes effective; (iii) the issuance or threatened issuance by
the Commission of any stop order (and the Company shall take all actions
required to prevent the entry of such stop order or to remove it if entered);
and (iv) any request by the Commission for any amendment or supplement to
such Registration Statement or any prospectus relating thereto or for additional
information or of the occurrence of an event requiring the preparation of a
supplement or amendment to such prospectus so that, as thereafter delivered
to
the purchasers of the securities covered by such Registration Statement, such
prospectus will not contain an untrue statement of a material fact or omit
to
state any material fact required to be stated therein or necessary to make
the
statements therein not misleading, and promptly make available to the holders
of
Registrable Securities included in such Registration Statement any such
supplement or amendment; except that before filing with the Commission a
Registration Statement or prospectus or any amendment or supplement thereto,
including documents incorporated by reference, the Company shall furnish to
the
holders of Registrable Securities included in such Registration Statement and
to
the legal counsel for any such holders, copies of all such documents proposed
to
be filed sufficiently in advance of filing to provide such holders and legal
counsel with a reasonable opportunity to review such documents and comment
thereon, and the Company shall not file any Registration Statement or prospectus
or amendment or supplement thereto, including documents incorporated by
reference, to which such holders or their legal counsel shall reasonably object.
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3.1.5 State
Securities Laws Compliance.
The
Company shall use its best efforts to (i) register or qualify the
Registrable Securities covered by the Registration Statement under such
securities or “blue sky” laws of such jurisdictions in the United States as the
holders of Registrable Securities included in such Registration Statement (in
light of their intended plan of distribution) may request and (ii) take
such action necessary to cause such Registrable Securities covered by the
Registration Statement to be registered with or approved by such other
governmental authorities as may be necessary by virtue of the business and
operations of the Company and do any and all other acts and things that may
be
necessary or advisable to enable the holders of Registrable Securities included
in such Registration Statement to consummate the disposition of such Registrable
Securities in such jurisdictions; provided, however, that the Company shall
not
be required to qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this paragraph 3.1.5 or
subject itself to taxation in any such jurisdiction.
3.1.6 Agreements
for Disposition.
The
Company shall enter into customary agreements (including, if applicable, an
underwriting agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
Registrable Securities. The representations, warranties and covenants of the
Company in any underwriting agreement which are made to or for the benefit
of
any Underwriters, to the extent applicable, shall also be made to and for the
benefit of the holders of Registrable Securities included in such registration
statement. No holder of Registrable Securities included in such registration
statement shall be required to make any representations or warranties in the
underwriting agreement except as required by law and, if applicable, with
respect to such holder’s organization, good standing, authority, title to
Registrable Securities, lack of conflict of such sale with such holder’s
material agreements and organizational documents, and with respect to written
information relating to such holder that such holder has furnished such
information in writing expressly for inclusion in such Registration
Statement.
3.1.7 Cooperation.
The
principal executive officer of the Company, the principal financial officer
of
the Company, the principal accounting officer of the Company and all other
officers and members of the management of the Company shall cooperate fully
in
any offering of Registrable Securities hereunder, which cooperation shall
include, without limitation, the preparation of the Registration Statement
with
respect to such offering and all other offering materials and related documents,
and participation in meetings with Underwriters, attorneys, accountants and
potential investors.
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3.1.8 Records.
The
Company shall make available for inspection by the holders of Registrable
Securities included in such Registration Statement, any Underwriter
participating in any disposition pursuant to such registration statement and
any
attorney, accountant or other professional retained by any holder of Registrable
Securities included in such Registration Statement or any Underwriter, all
financial and other records, pertinent corporate documents and properties of
the
Company, as shall be necessary to enable them to exercise their due diligence
responsibility, and cause the Company’s officers, directors and employees to
supply all information requested by any of them in connection with such
Registration Statement.
3.1.9 Opinions
and Comfort Letters.
The
Company shall furnish to each holder of Registrable Securities included in
any
Registration Statement a signed counterpart, addressed to such holder, of
(i) any opinion of counsel to the Company delivered to any Underwriter and
(ii) any comfort letter from the Company’s independent public accountants
delivered to any Underwriter. In the event no legal opinion is delivered to
any
Underwriter, the Company shall furnish to each holder of Registrable Securities
included in such Registration Statement, at any time that such holder elects
to
use a prospectus, an opinion of counsel to the Company to the effect that the
Registration Statement containing such prospectus has been declared effective
and that no stop order is in effect.
3.1.10 Earnings
Statement.
The
Company shall comply with all applicable rules and regulations of the Commission
and the Securities Act, and make available to its shareholders, as soon as
practicable, an earnings statement covering a period of twelve (12) months,
beginning after the effective date of the Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder.
3.1.11 Listing.
The
Company shall use its best efforts to cause all Registrable Securities included
in any registration to be listed on such exchanges or otherwise designated
for
trading in the same manner as similar securities issued by the Company are
then
listed or designated or, if no such similar securities are then listed or
designated, in a manner satisfactory to the holders of a majority of the
Registrable Securities included in such registration.
3.2 Obligation
to Suspend Distribution.
Upon
receipt of any notice from the Company of the happening of any event of the
kind
described in Section 3.1.4(iv), or, in the case of a resale registration on
Form S-3 pursuant to Section 2.3 hereof, upon any suspension by the
Company, pursuant to a written xxxxxxx xxxxxxx compliance program adopted by
the
Company’s Board of Directors, of the ability of all “insiders” covered by such
program to transact in the Company’s securities because of the existence of
material non-public information, each holder of Registrable Securities included
in any registration shall immediately discontinue disposition of such
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such holder receives the supplemented or amended
prospectus contemplated by Section 3.1.4(iv) or the restriction on the
ability of “insiders” to transact in the Company’s securities is removed, as
applicable, and, if so directed by the Company, each such holder will deliver
to
the Company all copies, other than permanent file copies then in such holder’s
possession, of the most recent prospectus covering such Registrable Securities
at the time of receipt of such notice.
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3.3 Registration
Expenses.
The
Company shall bear all costs and expenses incurred in connection with any Demand
Registration pursuant to Section 2.1, any Piggy-Back Registration pursuant
to Section 2.2, and any registration on Form S-3 effected pursuant to
Section 2.3, and all expenses incurred in performing or complying with its
other obligations under this Agreement, whether or not the Registration
Statement becomes effective, including, without limitation: (i) all
registration and filing fees; (ii) fees and expenses of compliance with
securities or “blue sky” laws (including fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities);
(iii) printing expenses; (iv) the Company’s internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees); (v) the fees and expenses incurred in connection with the
listing of the Registrable Securities as required by Section 3.1.11;
(vi) National Association of Securities Dealers, Inc. fees; (vii) fees
and disbursements of counsel for the Company and fees and expenses for
independent certified public accountants retained by the Company (including
the
expenses or costs associated with the delivery of any opinions or comfort
letters requested pursuant to Section 3.1.9); (viii) the fees and
expenses of any special experts retained by the Company in connection with
such
registration and (ix) the fees and expenses of one legal counsel selected
by the holders of a majority-in-interest of the Registrable Securities included
in such registration. The Company shall have no obligation to pay any
underwriting discounts or selling commissions attributable to the Registrable
Securities being sold by the holders thereof, which underwriting discounts
or
selling commissions shall be borne by such holders. Additionally, in an
underwritten offering, all selling shareholders and the Company shall bear
the
expenses of the underwriter pro rata in proportion to the respective amount
of
shares each is selling in such offering.
3.4 Information.
The
holders of Registrable Securities shall provide such information as may
reasonably be requested by the Company, or the managing Underwriter, if any,
in
connection with the preparation of any Registration Statement, including
amendments and supplements thereto, in order to effect the registration of
any
Registrable Securities under the Securities Act pursuant to Section 2 and
in connection with the Company’s obligation to comply with federal and
applicable state securities laws.
4.
INDEMNIFICATION
AND CONTRIBUTION.
4.1 Indemnification
by the Company.
The
Company agrees to indemnify and hold harmless each Investor and each other
holder of Registrable Securities, and each of their respective officers,
employees, affiliates, directors, partners, members, attorneys and agents,
and
each person, if any, who controls an Investor and each other holder of
Registrable Securities (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) (each, an “Investor Indemnified
Party”), from and against any expenses, losses, judgments, claims, damages or
liabilities, whether joint or several, arising out of or based upon any untrue
statement (or allegedly untrue statement) of a material fact contained in any
Registration Statement under which the sale of such Registrable Securities
was
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained in the Registration Statement, or
any
amendment or supplement to such Registration Statement, or arising out of or
based upon any omission (or alleged omission) to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of the Securities Act or any rule or regulation
promulgated thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration;
and
the Company shall promptly reimburse the Investor Indemnified Party for any
legal and any other expenses reasonably incurred by such Investor Indemnified
Party in connection with investigating and defending any such expense, loss,
judgment, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such expense,
loss, claim, damage or liability arises out of or is based upon any untrue
statement or allegedly untrue statement or omission or alleged omission made
in
such Registration Statement, preliminary prospectus, final prospectus, or
summary prospectus, or any such amendment or supplement, in reliance upon and
in
conformity with information furnished to the Company, in writing, by such
selling holder expressly for use therein. The Company also shall indemnify
any
Underwriter of the Registrable Securities, their officers, affiliates,
directors, partners, members and agents and each person who controls such
Underwriter on substantially the same basis as that of the indemnification
provided above in this Section 4.1.
10
4.2 Indemnification
by Holders of Registrable Securities.
Each
selling holder of Registrable Securities will, in the event that any
registration is being effected under the Securities Act pursuant to this
Agreement of any Registrable Securities held by such selling holder, indemnify
and hold harmless the Company, each of its directors and officers and each
underwriter (if any), and each other person, if any, who controls such selling
holder or such underwriter within the meaning of the Securities Act, against
any
losses, claims, judgments, damages or liabilities, whether joint or several,
insofar as such losses, claims, judgments, damages or liabilities (or actions
in
respect thereof) arise out of or are based upon any untrue statement or
allegedly untrue statement of a material fact contained in any Registration
Statement under which the sale of such Registrable Securities was registered
under the Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained in the Registration Statement, or any amendment
or
supplement to the Registration Statement, or arise out of or are based upon
any
omission or the alleged omission to state a material fact required to be stated
therein or necessary to make the statement therein not misleading, if the
statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by such selling holder expressly
for use therein, and shall reimburse the Company, its directors and officers,
and each such controlling person for any legal or other expenses reasonably
incurred by any of them in connection with investigation or defending any such
loss, claim, damage, liability or action. Each selling holder’s indemnification
obligations hereunder shall be several and not joint and shall be limited to
the
amount of any net proceeds actually received by such selling holder.
4.3 Conduct
of Indemnification Proceedings.
Promptly after receipt by any person of any notice of any loss, claim, damage
or
liability or any action in respect of which indemnity may be sought pursuant
to
Section 4.1 or 4.2, such person (the “Indemnified Party”) shall, if a claim
in respect thereof is to be made against any other person for indemnification
hereunder, notify such other person (the “Indemnifying Party”) in writing of the
loss, claim, judgment, damage, liability or action; provided, however, that
the
failure by the Indemnified Party to notify the Indemnifying Party shall not
relieve the Indemnifying Party from any liability which the Indemnifying Party
may have to such Indemnified Party hereunder, except and solely to the extent
the Indemnifying Party is actually prejudiced by such failure. If the
Indemnified Party is seeking indemnification with respect to any claim or action
brought against the Indemnified Party, then the Indemnifying Party shall be
entitled to participate in such claim or action, and, to the extent that it
wishes, jointly with all other Indemnifying Parties, to assume control of the
defense thereof with counsel satisfactory to the Indemnified Party. After notice
from the Indemnifying Party to the Indemnified Party of its election to assume
control of the defense of such claim or action, the Indemnifying Party shall
not
be liable to the Indemnified Party for any legal or other expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof other
than reasonable costs of investigation; provided, however, that in any action
in
which both the Indemnified Party and the Indemnifying Party are named as
defendants, the Indemnified Party shall have the right to employ separate
counsel (but no more than one such separate counsel) to represent the
Indemnified Party and its controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the
Indemnified Party against the Indemnifying Party, with the fees and expenses
of
such counsel to be paid by such Indemnifying Party if, based upon the written
opinion of counsel of such Indemnified Party, representation of both parties
by
the same counsel would be inappropriate due to actual or potential differing
interests between them. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, consent to entry of judgment or effect any
settlement of any claim or pending or threatened proceeding in respect of which
the Indemnified Party is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Party, unless such judgment or
settlement includes an unconditional release of such Indemnified Party from
all
liability arising out of such claim or proceeding.
11
4.4 Contribution.
4.4.1 If
the
indemnification provided for in the foregoing Sections 4.1, 4.2 and 4.3 is
unavailable to any Indemnified Party in respect of any loss, claim, damage,
liability or action referred to herein, then each such Indemnifying Party,
in
lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid
or payable by such Indemnified Party as a result of such loss, claim, damage,
liability or action in such proportion as is appropriate to reflect the relative
fault of the Indemnified Parties and the Indemnifying Parties in connection
with
the actions or omissions which resulted in such loss, claim, damage, liability
or action, as well as any other relevant equitable considerations. The relative
fault of any Indemnified Party and any Indemnifying 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 such Indemnified Party or such Indemnifying
Party and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
4.4.2 The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 4.4 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 Section 4.4.1. The
amount paid or payable by an Indemnified Party as a result of any loss, claim,
damage, liability or action referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 4.4, no holder of Registrable Securities shall
be required to contribute any amount in excess of the dollar amount of the
net
proceeds (after payment of any underwriting fees, discounts, commissions or
taxes) actually received by such holder from the sale of Registrable Securities
which gave rise to such contribution obligation. 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.
12
5.
UNDERWRITING
AND DISTRIBUTION.
5.1 Rule
144.
The
Company covenants that it shall file all reports required to be filed by it
under the Securities Act and the Exchange Act and shall take such further action
as the holders of Registrable Securities may reasonably request, all to the
extent required from time to time to enable such holders to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144 under the Securities Act, as such Rules
may be amended from time to time, or any similar Rule or regulation hereafter
adopted by the Commission.
6.
MISCELLANEOUS.
6.1 Other
Registration Rights.
The
Company represents and warrants that no person, other than a holder of
the
Registrable Securities, I-Bankers
Securities,
Inc.,
Newbridge
Securities Corp. and Westminster
Securities
Corp.
or its
designees has any right to require the Company to register any shares of
the
Company’s capital stock for sale or to include shares of the Company’s capital
stock in any registration filed by the Company for the sale of shares of
capital
stock for its own account or for the account of any other person.
6.2 Assignment;
No Third Party Beneficiaries.
This
Agreement and the rights, duties and obligations of the Company hereunder may
not be assigned or delegated by the Company in whole or in part. This Agreement
and the rights, duties and obligations of the holders of Registrable Securities
hereunder may be freely assigned or delegated by such holder of Registrable
Securities in conjunction with and to the extent of any transfer of Registrable
Securities by any such holder. This Agreement and the provisions hereof shall
be
binding upon and shall inure to the benefit of each of the parties and their
respective successors and the permitted assigns of the Investor or holder of
Registrable Securities or of any assignee of the Investor or holder of
Registrable Securities. This Agreement is not intended to confer any rights
or
benefits on any persons that are not party hereto other than as expressly set
forth in Article 4 and this Section 6.2.
6.3 Notices.
All
notices, demands, requests, consents, approvals or other communications
(collectively, “Notices”) required or permitted to be given hereunder or which
are given with respect to this Agreement shall be in writing and shall be
personally served, delivered by reputable air courier service with charges
prepaid, or transmitted by hand delivery, telegram, telex or facsimile,
addressed as set forth below, or to such other address as such party shall
have
specified most recently by written notice. Notice shall be deemed given on
the
date of service or transmission if personally served or transmitted by telegram,
telex or facsimile; provided, that if such service or transmission is not on
a
business day or is after normal business hours, then such notice shall be deemed
given on the next business day. Notice otherwise sent as provided herein shall
be deemed given on the next business day following timely delivery of such
notice to a reputable air courier service with an order for next-day delivery.
13
To
the
Company:
Middle
Kingdom Alliance Corporation
000
Xxxxx
Xxxxxxx Xxxxxx
Xxxxx
000
Xxxxxxx,
XX 00000
Attn:
Xxxxx X. Xxxxxxxx, Esq.
Tel:
(000) 000-0000
Fax:
(000) 000-0000
with
a
copy to:
Cozen
X’Xxxxxx
The
Army
& Navy Club Building
0000
X
Xxxxxx, XX, Xxxxx 0000
Xxxxxxxxxx,
XX 00000
Attn:
Xxxxx X. Xx Xxxxxxx
Tel:
(000) 000-0000
Fax:
(000) 000-0000
To
an
Investor, to:
High
Capital Funding LLC
000
Xxxxx
Xxxxxxx Xxxxxx
Xxx
000
Xxxxxxx,
XX 00000
Xxxxx
X.
Xxxxxxxx
000
Xxxxx
Xxxxxxx Xxxxxx
Xxx
000
Xxxxxxx,
XX 00000
Xxxx
X.
Xxxxxx
000
Xxxxx
Xxxxxxx Xxxxxx
Xxx
000
Xxxxxxx,
XX 00000
Xxxxxxx
Xxxxxx Xxxxxxxxx III Family Trust
000
Xxxxx
Xxxxxxx Xxxxxx
Xxx
000
Xxxxxxx,
XX 00000
14
Xxxxxx
International Limited
c/o
Stonehage SA
Puits
Godet 12
X.X.
Xxx
000
0000
Xxxxxxxxx
Xxxxxxxxxxx
Attention:
Xxxxxxx Xxxxx
Supreme
Ocean Development Limited
x/x
XXX
Xxxxxxxx (XXX) Xxxxxxx
0xx
Xxxxx,
Xxxxxx Building
P.O.
Box
933
Road
Town
Tortola
British
Virgin Islands
Attention:
Xxxxx Xxx Xxxxx Xxx
MTP
Holdings Ltd.
Xxxx
000,
Xxxx Xxxx Xxxxx
000
Xxxxxxx Xxxxx Xxxx
Shanghai
200021, P.R. China
Xxxxx
Xxx
Xxxxx Xxx
00-0000
Xxxxxxx Xxxxxx
Xxxxxxxx
Xxxx
Xxxxxxx
X0X 0X0
Xxxxxx
Xxxxxxx
Xx
Cathay
Forest Products Corp.
0000
Xxxxx Xx., Xxx 0000
Xxxxxxx,
Xxxxxxx
Xxxxxx
X0X 0X0
6.4 Severability.
This
Agreement shall be deemed severable, and the invalidity or unenforceability
of
any term or provision hereof shall not affect the validity or enforceability
of
this Agreement or of any other term or provision hereof. Furthermore, in lieu
of
any such invalid or unenforceable term or provision, the parties hereto intend
that there shall be added as a part of this Agreement a provision as similar
in
terms to such invalid or unenforceable provision as may be possible and be
valid
and enforceable.
6.5 Counterparts.
This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original, and all of which taken together shall constitute one and
the
same instrument.
6.6 Entire
Agreement.
This
Agreement (including all agreements entered into pursuant hereto and all
certificates and instruments delivered pursuant hereto and thereto) constitute
the entire agreement of the parties with respect to the subject matter hereof
and supersede all prior and contemporaneous agreements, representations,
understandings, negotiations and discussions between the parties, whether oral
or written.
15
6.7 Modifications
and Amendments.
No
amendment, modification or termination of this Agreement shall be binding upon
any party unless executed in writing by such party.
6.8 Titles
and Headings.
Titles
and headings of sections of this Agreement are for convenience only and shall
not affect the construction of any provision of this Agreement.
6.9 Waivers
and Extensions.
Any
party to this Agreement may waive any right, breach or default which such party
has the right to waive, provided that such waiver will not be effective against
the waiving party unless it is in writing, is signed by such party, and
specifically refers to this Agreement. Waivers may be made in advance or after
the right waived has arisen or the breach or default waived has occurred. Any
waiver may be conditional. No waiver of any breach of any agreement or provision
herein contained shall be deemed a waiver of any preceding or succeeding breach
thereof nor of any other agreement or provision herein contained. No waiver
or
extension of time for performance of any obligations or acts shall be deemed
a
waiver or extension of the time for performance of any other obligations or
acts.
6.10 Remedies.
6.10.1 Specific
Performance.
Each of
the parties acknowledges and agrees that the other parties would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the parties agrees that the other parties shall be entitled
to an injunction or injunctions (without the necessity of posting a bond or
other security) to prevent breaches of the provisions of this Agreement and
to
enforce specifically this Agreement and the terms and provisions hereof in
any
action instituted in any court of the United States or any state or other
foreign court or governmental body having jurisdiction over the parties and
the
matter, in addition to any other remedy to which they may be entitled, at law
or
in equity.
6.10.2 Repurchase
Obligation.
In the
event that the Company breaches its obligations under Section 2 or
Section 3 of this Agreement, the Investors shall have the right to cause
the Company to purchase the Registrable Securities that were the subject of
such
breach (the “Repurchase Right”), as follows:
(a) In
the
event an Investor wishes to exercise its Repurchase Right, the Investor shall
notify the Company in writing of the alleged breach of Section 2 or
Section 3 and the Registrable Securities that were the subject of such
breach.
(b) In
the
event that the Company does not remedy or cure such breach within thirty
(30) days of the receipt of the written notice set out in
Section 6.10.2(a) above, then the Company shall be irrevocably obligated to
purchase from the Investor the Registrable Securities that were the subject
of
such breach. The closing of such repurchase shall take place within
sixty (60) days of such notice.
(c) The
purchase price for the Registrable Securities to be repurchased pursuant to
the
exercise of this Repurchase Right shall be equal to the average of the closing
prices for the applicable Registrable Securities for the last 20 trading days
prior to the day that the closing of the repurchase of such Registrable
Securities is to occur hereunder.
16
(d) If
the
Company is unable to purchase all Registrable Securities required to be
purchased hereunder due to legal or contractual restrictions (as evidenced
by
the opinion letter of outside counsel to the Company acceptable to the Investors
which shall attach the relevant law, regulation and/or contract), Registrable
Securities shall be repurchased (on a pro rata basis from the holders of the
Registrable Securities based upon the Common Stock equivalents) from time to
time within thirty (30) days after such legal or contractual restriction is
lifted, to the extent the Company is legally permitted to do so, and the
obligations of the Company under this Section 6.10.2 will be a continuing
obligation until the Company’s repurchase of all such Registrable Securities.
(e) On
each
date (including any subsequent purchase closing date if multiple purchases
result from the application of Section 6.10.2(d)) that a purchase is to
occur hereunder, the closing shall occur at the Company’s principal office. At
the closing, to the extent applicable, the Investor shall deliver the
Registrable Securities being sold, duly endorsed in blank, accompanied by such
supporting documents as may be necessary to pass to the Company good title
to
the Registrable Securities, free and clear of all liens (other than restrictions
under applicable securities laws). In consideration therefor, the Company shall
deliver to the Investor immediately available funds equal to the aggregate
purchase price as determined hereunder. If the Company fails to purchase the
Registrable Securities on any closing date, it shall pay interest to each
Investor for the period commencing on the date of such closing and ending on
the
date such purchase is made equal to the lesser of the US dollar prime rate
by
Citibank N.A. for such period (broken down to shorter periods if relevant)
plus four percent (4%) or the maximum amount permitted under applicable
law.
(f) At
any
time prior to the sale of any Registrable Securities under this
Section 6.10.2, the Investor may withdraw its notice, without impairing its
right to exercise its rights pursuant to this Section 6.10.2 at a later
date.
6.11 Remedies
Cumulative.
In the
event that the Company fails to observe or perform any covenant or agreement
to
be observed or performed under this Agreement, the Investor or any other holder
of Registrable Securities may proceed to protect and enforce its rights by
suit
in equity or action at law, whether for specific performance of any term
contained in this Agreement or for an injunction against the breach of any
such
term or in aid of the exercise of any power granted in this Agreement or to
enforce any other legal or equitable right, or to take any one or more of such
actions, without being required to post a bond. None of the rights, powers
or
remedies conferred under this Agreement shall be mutually exclusive, and each
such right, power or remedy shall be cumulative and in addition to any other
right, power or remedy, whether conferred by this Agreement or now or hereafter
available at law, in equity, by statute or otherwise.
6.12 Governing
Law.
This
Agreement shall be governed by, interpreted under, and construed in accordance
with the internal laws of the State of Delaware applicable to agreements made
and to be performed within the State of Delaware, without giving effect to
any
choice-of-law provisions thereof that would compel the application of the
substantive laws of any other jurisdiction.
17
6.13 Waiver
of Trial by Jury.
Each
party hereby irrevocably and unconditionally waives the right to a trial by
jury
in any action, suit, counterclaim or other proceeding (whether based on
contract, tort or otherwise) arising out of, connected with or relating to
this
Agreement, the transactions contemplated hereby, or the actions of the Investor
in the negotiation, administration, performance or enforcement hereof.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
18
IN
WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to
be executed and delivered by their duly authorized representatives as of the
date first written above.
|
|
||
|
By:
|
||
|
Xxxxxxx X. Xxxxxxxxx III, CEO |
||
|
INVESTORS
|
||
|
High Capital Funding LLC
By:
|
||
|
Xxxxx X. Xxxxxxxx |
||
|
Xxxx X. Xxxxxx |
||
|
Xxxxxxx
Xxxxxx Xxxxxxxxx III Family Trust
By:
Xxxxxxx X. Xxxxxxxxx
III
|
||
|
Xxxxxx
International Limited
By:
Xxxxxxx Xxxxx
|
||
|
Supreme
Ocean Development Limited
By:
Xxxxx Xxx Xxxxx
Xxx
|
||
|
MTP
Holdings Ltd.
By:
|
||
|
Xxxxx
Xxx Xxxxx
Xxx
|
||
|
Xxxxxxx
Xx
|
||
19
